Bill Bonner – Page 2 – The Burning Platform

The Biggest Fools on the Planet—–Reflections On A University Graduation Day

Guest Post by Bill Bonner

Gassy Hacks and Big Quacks

Today, we recall the “commencement” at the end of four years at the University of Vermont. The university itself is imposing and a little intimidating. The rest of the world works in warehouses or common office spaces. Academia labors in hallowed “halls” and prestigious “centers.”

vermont The path to the hallowed halls of the University of Vermont

Photo via hercampus.com

People in the Main Street world work for profits… and are subject to market economics. The professoriate is above it all; no profit and loss statements… no profit motives or incentive bonuses… and (for those with “tenure”) no chance of getting fired, no matter how incompetent, irrelevant, or wrong they are. The private sector depends on output and results; academia harbors gassy hacks who may never produce much of anything at all.

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The ceremony on Sunday opened with the procession of the university luminati, led by bagpipers of the St. Andrews Society. Ordinary people – even presidents of the United States of America – wear common coats and ties; the academic elite are gussied up with all manner of robes, funny hats, cowls, tassels, honors… and a line of capital letters following their names like baby ducks behind a waddling quack.

“All that brainpower… working on our Justin… it must have done him some good,” parents say to themselves. Then, they have their doubts. Justin seems to think that “diversity” is what really matters, that Bernie Sanders has the right idea, and that eating gluten is a sin.

Privately, they wonder if they haven’t just been the biggest fools on the planet, spending more than $100,000 to put their boy through four years of brainwashing, with no visible improvement in his critical thinking. But this is no time to say anything. It’s too late. So, they take their seats, along with thousands of others. At least, those were the dark thoughts gathering in our mind as we sat in a plastic chair on the green, waiting for the festivities to begin.

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Are Investors Idiots?

Submitted by Bill Bonner of Bonner & Partners (annotated by Acting-Man’s Pater Tenebrarum),

Black-and-Blue Crash Alert Flag

Let us begin the week “on message.” The Diary is about money. Today, we’ll stick to the subject. Old friend Mark Hulbert has done some research on the likelihood of a crash in the stock market.

Ye olde tattered Crash Alert flag… should it be unfurled again?

Writing in Barron’s, he points out that the risk – or, more properly, the incidence – of crashes, historically, has been very small:

“[…] consider that the 1987 and 1929 crashes were the two worst one-day plunges since the Dow Jones Industrial Average was created in 1896. Given that there have been more than 32,000 trading sessions since then, the judgment of at least this swath of history is that in any given six-month period, there is a 0.79% chance of a daily crash that severe.

And there’s no reason to believe that the frequency of future crashes will be significantly higher. Xavier Gabaix, a finance professor at New York University, has derived a crash-frequency formula that he believes captures a universal trait of all markets, not just equity markets or those in the U.S. According to that formula, the odds of a 12.8% crash in any given six-month period are 0.92%, almost as low as the actual frequency in the U.S. stock market over the last century.

This means that the average investor over the last three decades has believed a severe crash to be more than 24 times more likely than U.S. history would suggest, and that investors currently believe the risks to be 28 times more likely.”

Whoa! Are investors idiots, or what? Maybe not. Your editor is among those who happily over-estimate the risk of a crash. He expected one in 1998…and again in 1999…and when it came in 2000, he was as surprised as anyone.Then, prices went up again. And again, he raised the old black-and-blue Crash Alert flag. In 2005… in 2006… in 2007… finally, in 2008, he got what he expected. And now that the market has recovered again, he expects another one.

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100 Years of Mismanagement

Guest Post by Bill Bonner

Lost From the Get-Go

There must be some dark corner of Hell warming up for modern, mainstream economists. They helped bring on the worst bubble ever… with their theories of efficient markets and modern portfolio management. They failed to see it for what it was. Then, when trouble came, they made it worse. But instead of atoning in a dank cell, these same economists strut onto the stage to congratulate themselves.

Keynes The scalawag himself. Keynes provided governments with the “scientific” fig leaf fore interventionism that economists had previously denied them. The cost in terms of economic and technological progress is incalculable.

Photo via MIT Press

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The War On Cash——–Control, Tax, Confiscate

Guest Post by Bill Bonner

Control, Tax, Confiscate

BALTIMORE – Harvard economist Larry Summers is a reliable source of claptrap. And a frequent spokesman for the Deep State.

To bring new readers up to speed, voters don’t get a say in who runs the country. Instead, a “shadow government” of elites, cronies, lobbyists, bureaucrats, politicians, and zombies – aka the Deep State – is permanently in power.

22_summers_560x375 Larry Summers – the man with a plan for everyone. An economist whose economic theorizing is truly abominable crap (more on this in an upcoming post), a reliable, crypto-fascist, bought and paid for evil intellectual in the service of the Deep State. His “policy proposals” all have one thing in common: they are apodictically certain to restrict economic progress and individual liberty.

Photo credit: Fabrice Coffrini / AFP / Getty Images

Put simply, it doesn’t matter which party is in power; the Deep State rules. Want to know what the Deep State is up to now? Read Larry Summers.

“It’s time to kill the $100 bill,” he wrote in the Washington Post (another reliable source of claptrap).

The Deep State wants you to use money it can easily control, tax, and confiscate. And paper currency is getting in its way.

France has already banned residents from making cash transactions of €1,000 ($1,114) or more. Norway and Sweden’s biggest banks urge the outright abolition of cash. And there are plans at the highest levels of government in Israel, India, and China to remove cash from circulation.

Deutsche Bank CEO John Cryan predicts that cash “probably won’t exist” 10 years from now. And here is Mr. Summers in the Washington Post:

“Illicit activities are facilitated when a million dollars weighs 2.2 pounds as with the 500 euro note rather than more than 50 pounds, as would be the case if the $20 bill was the high denomination note.”

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The Case for Outlawing Cash

By Bill Bonner, editor, The Bill Bonner Letter

Investors are losing confidence…

They’re probably losing confidence in corporate managers, for instance.

Who wants to own stock in companies run by numbskulls who buy back shares in their companies at record prices just before a major selloff?

Or maybe they’re wondering whether the world’s $200 trillion in total debt (roughly 300% of total output) can possibly be paid back?

Or maybe they’re beginning to puzzle out how scammy and fraudulent the Fed’s policies are.

But watch out! Reeling from the jabs of the last two weeks, expect a strong counterattack from the zombies and their allies.

Some Fed governor will come forth – maybe even Janet Yellen – and tell us not to worry about a return to more “normal” interest rates anytime soon.

We’re way too far into the weird to get anywhere near normal now. And surely Wall Street shills will be in the news explaining how markets become unreasonably fearful from time to time. They will tell investors that it is time to hunt for bargains.

Dow 25,000! Why not?

And they may be right. There’s bound to be an inflationary blow-off waiting somewhere ahead.

Stocks will soar. But not before they crash.

Retiring Another “Barbarous Relic”

In the meantime, watch your rear: There’s a serious counterattack coming.

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Why We’d Welcome a Depression

Guest Post by Bill Bonner

Connecting the Dots

DUBLIN – Dow down 252 on Wednesday – or 1.5%. Chevron, Apple, and Goldman Sachs leading the retreat. The press blamed China, North Korea, oil, and “geopolitical concerns.”

So far this year, the Dow has lost 3% of its value [ed. note: as of Thursday’s close it has lost a little over 5%]. Let’s see… We believe it is headed for a 50% loss. So, at this rate… we’ll be there by June!

A less than joyous start to the new year: the DJIA has so far delivered its worst first trading week since at least 1900. That’s the year 1900 in case you were wondering – click to enlarge.

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The Episcopalian’s Guide to Airport Security

Guest Post by Bill Bonner

No-One Told Us

It is warm in Paris. But rainy and dark. We have come into the Café Poussin for coffee…and for a little morning cheer. We watch the people come and go… we listen to the friendly banter with the bartender… we read the news.

tsa toon 6 Airport security – now with consumer choice

Cartoon by Tim Kelly

On Thursday, the U.S. stock market wiped out Wednesday’s gains. The Dow dropped 253 points – or about 1.5% [ed. note: and on Friday, it dropped another 367 points, or 2.10%]. Thinking it over, investors must have decided that Janet Yellen’s rate hike was not such good news after all.

The DJIA, daily – maybe the rate hike isn’t as awesome as at first thought… – click to enlarge.

“New era starts as reverse repurchase drains $105 billion from system,” declares the Financial Times. In a reverse repurchase – or “reverse repo” – agreement the Fed borrows reserve funds overnight from banks in exchange for Treasurys it holds on its balance sheet. The rate it pays for these loans helps set a “floor” under short-term interest rates.

Hmmm… let’s see if we can figure this out. Money comes into the system… prices rise. Money goes out of the system… prices…

OMG! Why didn’t anyone tell us?!

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Central Bankers Are Upsetting God’s Applecart

Guest Post by Bill Bonner

Fools or Knaves?

[ed. note: this article was written shortly before the ECB decision was announced, so the deposit facility rate mentioned in it is still the old one; it has been reduced to – 30 bps in the meantime]

BALTIMORE – Thursday is the big day. Mario “whatever it takes” Draghi is expected to goose up stock markets with more stimulus measures. On the table is more QE… and further cuts to the key lending rate.

creation The good Lord adds jerks to the mix to keep things interesting … we’re happy to report the operation was a success. It may actually have been a tad too successful.

Cartoon by Gary Larson

The Chinese feds are also supposed to come forward with another gift to asset holders. According to the Wall Street Journal, the expectation is for something targeting property purchases and another interest rate cut (which would make it cut No. 7 since last November).

China’s central bank administered one-year benchmark lending rate – click to enlarge.

And yesterday, Fed chair Janet Yellen told the Economic Club of Washington:

“Were the FOMC [the Fed’s policy setting committee] to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly to keep the economy from significantly overshooting both of our goals. Such an abrupt tightening would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.”

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QUOTE OF THE DAY

“Truth is as hard to confront as it is to suppress. Even in the 21st century truth does not expose herself readily. She hides as easily in a mountain of information as a desert of ignorance.”

Bill Bonner

ISIS Is a Monster of Our Own Creation

Guest Post by Bill Bonner, Chairman, Bonner & Partners

PARIS – Paris was calm last night.

We walked across the River Seine…

Pausing to take this photo of the Eiffel Tower along the way.

Screen Shot 2015-11-19 at 11.56.45 AM

We were living in Paris in 2003 when President George W. Bush and his team decided to attack Iraq.

Our misgivings were recorded in the Daily Reckoning e-letter we were writing at the time. As we put it:

The U.S. invasion was arguably the best thing that ever happened to jihadists. It challenged them. It forced them to grow and adapt. Like an oversupply of antibiotics in a New Delhi hospital, U.S. interference has wiped out the weakest of the terrorists and forced others to mutate into much more lethal varieties.

The war in Iraq led to dozens of experiments and innovations — in the art of insurgency as well as in organizational skills and management. What was just a handful of nut-job jihadists a few years ago, under pressure from the U.S. military, has become far more powerful and much less amateurish.

But the worst thing that could come from an aggressive attack, we warned, would be victory. It would encourage even more stomping around where we have no business.

We reported that the French had wisely, in our view, decided to stay out of it and suggested that Americans might be better off out of it too.

This view so infuriated readers that thousands canceled their free subscriptions. One wrote to say he hoped the U.S. would “bomb Paris on its way to Baghdad.”

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What’s Next: Deflation, Inflation, Or Hyperinflation?

Submitted by Bill Bonner via Bonner & Partners (annotated by Acting-Man.com’s Pater Tenebrarum),

Divided Opinions

We are not the only publishers to offer opinions. And not the only ones with alternative points of view. So, to answer these questions, let’s look first at the range of opinions on offer…

First, there is “the authorities must know what they are doing… besides, I have more important things to think about” camp. This is by far the largest group: hoi polloi. The masses. The lumpenproletariat.

border collie

Saved by the border collie

There may be some grumbling and kvetching. But most people count on the feds to manage the economy, foreign policy, the future, and the government. They expect mistakes from time to time. But they also believe the system can be trusted to produce an acceptable, although perhaps not always ideal, outcome.

And if not, God help them. Because the difference between the outcome if they bothered to think about it and the outcome if they didn’t is the same. They have no ability to influence public policy… and not much room to maneuver in their private lives.

They get salaries, pensions, Social Security. They need jobs, mortgages, student loans, and medical insurance. They have little capital to invest or protect. They depend so heavily on “the system” that they can’t afford to believe there is something deeply wrong with it. They go along. They get along.

sheeple

Going along, getting along…

Continue reading “What’s Next: Deflation, Inflation, Or Hyperinflation?”

End The Fed

Submitted by Bill Bonner of Bonner & Partners (Annotated by Acting-Man.com’s Pater Tenebrarum),

A Dismal Share

The Dow fell back below 17,000 on Wednesday, after Wal-Mart warned that it was having trouble selling things to people with no money – at least online. Its e-commerce efforts don’t seem to be paying off as quickly as it hoped. Why?

A bad day for WMT on the heels of a bad year for WMT – neither do its customers have enough money to buy stuff, nor is WMT able to keep its margins intact while raising the salaries of low-skilled workers (which it has done preemptively to head off even greater demands) – click to enlarge.

There are about 100 million people in the U.S. who earn about the same average wage as the people of Argentina, Estonia, or Bosnia-Herzegovina. Here’s President Reagan’s former budget advisor David Stockman in the Daily Reckoning:

“[A]ccording to the Social Security Administration’s wage records, there were 100 million workers who held any kind of paying job during 2013, who earned a collective total of just $1.65 trillion that year. That amounts to the incredibly small sum of just $16,500 per average worker. And not for a small slice of the labor force but fully two-thirds of all Americans with a job.”

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Inside Janet Yellen’s Brain at 4 a.m …

Guest Post by Bill Bonner

No Return to Sanity

GUALFIN, Argentina – Poor Janet Yellen. Usually, we reserve our pity for the poor, the downtrodden, and the hopeless. But today, we spare a thought for the clueless… and feel Yellen’s pain. Markets are tense. Investors seem to be holding their breath. Everyone is waiting to see what the Fed will do.

There must be hundreds of thousands – if not millions – of well-educated adults sitting on the edges of their seats… eager to hear what this rather ordinary functionary will say.

Try to spot the patsy/ fall guy…

Photo credit: Mark Wilson / Getty Images

Will Janet Yellen proudly put the Fed on the side of the angels, announcing that she and her crew have decided to move the Fed’s key interest rate to a more normal level… regardless of how much it costs the cronies?

Will she admit that the Fed’s ZIRP and its three QE programs have been failures? Or that they have shifted trillions of dollars toward the rich while leaving Main Street poorer? Will she beg forgiveness for such errant policy decisions over such a long time and vow publicly never to interfere with the market again? No, she won’t.

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The Rich, The Poor, & The Trouble With Socialism

Authored by Bill Bonner (of Bonner & Partners), illustrated by Acting-Man’s Pater Tenebrarum,

Rich Man, Poor Man

Poverty is better than wealth in one crucial way: The poor are still under the illusion that money can make them happy. People with money already know better. But they are reluctant to say anything for fear that the admiration they get for being wealthy would turn to contempt.

“You mean you’ve got all that moolah and you’re no happier than me?”

“That’s right, man.”

“You poor S.O.B.”

We bring this up because it is at the heart of government’s scam – the notion that it can make poor people happier. In the simplest form, government says to the masses: Hey, we’ll take away the rich guys’ money and give it to you. This has two major benefits (from an electoral point of view). First, and most obvious, it offers money for votes. Second, it offers something more important: status.

…and ending up moping.

After you have food, shelter, clothing, and a few necessities, everything else is status, vanity, and power. Extra money helps us feel good about ourselves… and attract mates. It’s not just the money that matters. It’s your relative position in society. From this point of view, it does as much good to take away a rich person’s money as it does to give money to a poor person.

Either way, the gap closes. Never, since the beginning of time up to 2015, has government ever added to wealth. It has no way to do so. And no intention of doing so. All it can do is to increase the power, wealth, or status of some people – at others’ expense.

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