STAFF NEWS & ANALYSIS
Illegitimate Stock Markets Back Hillary
By Daily Bell Staff - November 01, 2016

The Stock Market Has a Favorite in the Election  … On the evening of Sept. 26, two interesting things happened. First, Hillary Clinton won a decisive debate victory over Donald Trump in the first presidential debate, as judged by prediction markets (and later, by polls). Second, financial markets abruptly experienced large, abnormal swings.  Economists Justin Wolfers and Eric Zitzewitz have documented this extraordinary convergence in a new paper, titled “What do financial markets think of the 2016 election?” – Bloomberg

This Bloomberg article actually questions conclusions regarding stock market support for Hillary, but adds: “So Wolfers and Zitzewitz make a strong case.”

Indeed the study has attracted a lot of attention, though one of the reasons is obviously because it is a pro-Hillary study and apt to be picked up by the mainstream media.

The larger question, of course, is why equity markets would find an anti-freedom, pro-war candidate attractive.

More:

The most likely explanation is that financial markets think a Clinton victory would be good for the economy ….

We saw some of the opposite happen when stock markets plunged on Friday, immediately after an announcement by FBI Director James Comey that the agency was reviewing new evidence in a probe related to its investigation of Hillary Clinton’s use of a private e-mail server while she was secretary of state.

Why would markets not like Trump? Well, it’s pretty obvious. Trump’s mercurial temperament, unconventional ideas and lack of governing experience would create large doubts about the direction of all sorts of government policy — just the sort of thing that makes investors uneasy.

This really doesn’t make much sense. On almost every front, Bill and Hillary Clinton’s actions over decades have been inimical to freedom. If investing and trade thrive in free-market environments, then markets should not reflect a pro-Clinton bias.

The reason that markets are pro-Clinton is probably because markets – especially stock markets – are not expressions of free markets. That sounds strange because stock markets, especially, are seen as expressions of capitalism.

Of course “capitalism” is not necessarily an appropriate nomenclature but that’s an article for another day.

The point is that corporations and the stocks that offer investment opportunities are not necessarily any more legitimate than central banks. Neither corporations nor central banks are “normal” expressions of a free-market system.

Central banks fix the price and value of “money” via interest rate manipulation. This price fixing has the force of law. If you don’t obey – or agree – you can end up in prison.

Corporations are artificial entities that the founders of the US greatly feared. (See here and here). Before the Civil War corporations were almost non-existent.

Corporations are also the outcome of government force. They are in existence because of intellectual property laws, corporate personhood, monopoly central banking and regulations that prop them up.

Without significant government support, modern corporations would not exist and neither would their “stocks.”

The titanic nature of modern corporations is the outcome of government manipulation. The “investment” opportunities presented by such quasi-government monopolies would not be viable in a normal free-market environment.

People simply don’t realize how distorted modern economies are. They are entirely artificial creations, dependent on state-enforced central banking and industrial monopolies.

And this is why “stock markets” prefer the Clintons in  this election cycle. It’s because large industries depend on government to sustain their artificial competitive advantages.

One can certainly speculate what a real free-market would look like within the context of stock markets. Probably such markets would be a good deal smaller and oriented toward a select clientele rather than a mass audience of “investors.”

Most people would make their living in the trades or in others ways that were directly in demand. Societies would probably be more agrarian-based – as they used to be. Savings would gradually appreciate in value as technology brought down the price of goods and services on a regular basis.

The stampeding of savers into stock markets is surely an unnatural occurrence. It has been promoted because those who control stock markets and their corporations want people to feel that their net worth is tied up in the current system.

Ironically, this system does not provide much wealth to the average individual. Most people in the West are relatively impoverished and times are growing more difficult not less so. Middle classes seem to be shrinking rather than expanding.

Conclusion: Many people in the West and certainly in the US would be glad to see real entrepreneurism flourish in the context of companies aligned with a fully competitive marketplace. Stocks and stock markets would still exist of course, but they would reflect a bias toward freedom rather than fascism.

 

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  • venkat

    I deem this silly. The investors are all institutions. This media play won’t scare individuals to change how they wish to vote in anger 🙂

  • ALPHAMEG

    Not silly at all. The Central Banks are manipulating all markets for the past 8 years. ALL MARKETS. Otherwise under the present system Gold would be $3,000 – $7,000 per ounce, should the markets perform as they did in 1960’s and 1970’s. Right on DB.

    • Hey you

      You’re correct. Not silly at all. Maybe sinister but not silly!

      Watch gold in the next year. The gold price could become silly!

  • esqualido

    “The larger question, of course, is why equity markets would find an anti-freedom, pro-war candidate attractive. The most likely explanation is that financial markets think a Clinton victory would be good for the economy.” That is a bit of a non-sequitur: the correct answer would be “because it suits the military-industrial-complex”, which is anything but the general economy, which suffers from investment going into billion dollar B-2 bombers, or $200 million/copy F-35 fighters, or thousands of bombs destroying everything in their path. The MSM and the financial press have a lot to answer for, and if Hilary is President, we can expect no more action than under Eric Holder.

  • rahrog

    None of the world’s “paper” markets in any way shape or form are indicative of reality.

  • apberusdisvet

    To anyone who follows the financial channels with any regularity, it has become patently obvious that the DJIA is mostly influenced, not by fundamentals, but by actions of the FED and the Plunge Protection Team. For at least the past 5 years, corporate quarterly reports showing increased earnings per share in the absence of true demand, prove that financial engineering is the rule and not the exception. This is especially true of the TBTF banks which if bound by GAAP rules, would be technically insolvent. So too would the FANG group fail any analytical scrutiny, and any other corporation that has used the essentially free money from the FED for stock buy-backs to artificially boost EPS. Unfortunately, even though the once very large number of J6P traders/investors have left the market, all the pension funds and managers of 40lk funds have not. When the crash comes, it will be devastating.

  • mctrnr1951

    That “article for another day” will be a good thing. Please don’t back-burner it for too long…

    • Samarami

      Bell, for some (sorta) good reason (I suppose), has elected to eliminate access to the old “Daily Bell Glossary”. I wanted to post the link for “Corporatism”. So, ran into this one at Caleb Jones — not totally viable, but close:

      http://calebjonesblog.com/its-not-capitalism-its-corporatism/

      Sam

      • mctrnr1951

        Thanks, Samarami.

        The DB Glossary, which I thought a great and valuable asset to the website, is missed.

  • Praetor

    Another reason to vote Trump, if you vote. The continuation of the present system of things. The elimination of the middle glass and the expansion of a richer more powerful Oligarch. With the end result being, TPTB and their slaves of poor and utterly destitute individuals. This is why they won’t Hillary!!!

  • Samarami

    This has to be one of the funnest quadrennial bread-and-circus events ever in the place called “U.S.”. Fun, because it’s the first time true freedom has poked its ugly head above the sand and glared fixedly at the thieves and crowd manipulators. State-sanctioned media types cannot tolerate skepticism in the hands of the hoi polloi. It’s down-right dangerous.

    The internet reformation is upon us in spades. I have no way of predicting just how successful governmentalism will be in obstructing the free flow of information. All I can be relatively certain of is that attempts will be made — regardless of who “wins” the various positions of grand wizardry.

    Egregious attempts. “We” cannot continue to tolerate individuals capable of discerning collectivism from individual choice. That must be stopped. Sam

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