Warren Buffet famously said, “Only when the tide goes out do you discover who’s been swimming naked.” The point of this metaphor is that in economic downturns you learn who has been taking excessive risks. Another way of putting it is that in easy times, everyone can be a hero or a genius. This has been the case for the American financial system for over thirty years. As long as credit money kept expanding, everyone had a chance to look like a financial genius.
This explains the prevalence of people in the financial media who somehow get everything wrong but maintain their status as experts. The most notable of this sort is Jim Cramer who has made a career out of being outlandishly wrong. Paul Krugman wrote a column for years about the economy, despite never being right about it. These are two famous examples, but the commentariat is littered with these types. As long as the arrow kept going up, being wrong was good money.
The trouble is that the entire financial industry is built on this premise. Being wrong comes with no penalty, because wrongness rarely comes with a cost. Sure, the MegaBrain Capital Fund might not perform as well as random guessing, but because the arrow always goes up, even the bad bets pay off. This also means anyone spouting random gibberish can present himself as an expert. Tens of thousands of mortgage payments, maybe hundreds of thousands, rest on this assumption.
The main reason for this, of course, is the United States has been both the global mint and the global bank since the 1980’s. You can see it in the markets. From 1985 to the present, the DJIA has increased by about nine percent per year. That includes the many busts that were backstopped by the global bank. From 1965 to 1985 the markets suffered a long bear market, after the long twenty-year bull market that kicked off after the end of the Second World War.
Another way to think about it is the American stock market boomed by about ten percent per year when the rest of the world was in rubble. Europe was literally in rubble after the war. Much of it was controlled by communists. China was a feudal, agrarian society trying to implement Marxist-Leninism. Japan only stopped glowing after that long bull market ended. In other words, the American economy and the equities markets had a great run when there was no global competition.
Somehow, as if by magic, equities had a run like the post war decades, despite the hollowing out of the economy. The run has also been longer. The twenty-year post-war boom ran out of steam even though Asia was not online yet, just because Europe was starting to recover. We have experienced a forty-year run while at the same time the American economy transitioned from inventing things and making them to driving each other around in Ubers.
It turns out that if the mint can make as much money as it likes, being the only mint on earth anyone values, and they give what they mint to the only banking system anyone values, the people in this system can do no wrong. For decades it has been like being at a casino with an endless line of credit. Not only that, but the dealers would also occasionally give you some insider information on the decks. It is not hard to look like a genius when you are playing with house money.
That world is coming to an end. The shock therapy we are seeing is not just a bluff to get better tariff deals. It is in anticipation of the fact that the world is shifting from where the dollar dominates all global trade to one where local currency arrangements will often be preferred over the dollar. If you want to buy from China, it will mean doing so in their currency, not dollars. The same is true for other major trading countries. The Russians have been the proof of concept for this approach.
This does not mean the dollar collapses or people revert to carrying sacks of gold while riding to town on their donkey. The primitive use of shiny bits of metal as currency only comes back if we enter a dark age. What is happening instead is a change in how the world views dollars and more importantly, dollar denominated debt. That means the days of unlimited credit money is coming to a close. The dollar and dollar denominated debt will reconnect with the American economy.
This is all bad news for the flim-flam men who dominate the financial services industry as it means being wrong once again comes with risk. The bad bets from MegaBrain Capital Fund no longer just mean a lower return. Those bad bets now put the firm in jeopardy and get the smart guys fired for making those bad bets. Swimming naked will now come with the risk of the tide going out and staying out. Like the fox in the hen house, risk is returning to the money game.
What is about to happen to the financial sector is like what we see happening with the government sector. The tens of thousands of people who do not do anything necessary will be let go, and that includes the experts in the media. In a world where risk is real, no one will tolerate a television clown dispensing bad advice, unless he is in a fright wig and wearing floppy red shoes. The clowns will back in the circus while the serious men do the serious work.
This is the end of America’s long holiday from reality. Playing make believe in government, finance or the media is no longer possible. Making money will not be about finding clever ways to get that sweet sweet credit money, but about inventing things, improving things and making things. That will not leave a lot of room for diversity experts or chattering skulls. Those people can be put to work in the new factories and repair shops, perhaps sweeping the floors.
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There is a lot of truth in this post but we are not going to depart the fake world and enter a real one unless Jews are stripped of their control of the media and women can’t vote and control HR. While we hate the fake world, they thrive in it. For many women, if it feels real, it is real. Speaking of the tribe, Autotraker has a system that lets you trade like a politician. Their most famous is the Pelosi tracker. One of their most successful ones is the contra Cramer traker. They recommend the opposite of everything… Read more »
Trump advised people to buy stocks shortly before he paused the tariffs and the stock market shot up 10%. He is such a nice guy.
I don’t think we have the social capital to make the sacrifices that need to be made. And why would we? The flooding of the 3rd world here has eroded any sort of bond we have as a people. Once their grills and F-150s double in price, Normie is going to turn on Trump and I just don’t see the guy having the guts to forge ahead. We’re in a bad place as a people, not enough want to forgo instant gratification for long-term health and we’ve grown too accustomed to cheap trinkets and endless credit. Collapse and ultimate separation… Read more »
The hysterical democratic flattery with which the news media constantly assure hoi polloi that “you decide” (as if the individual vote could make any difference now) can only demoralize anyone who grasps what is really going on.
JS
Hooray
I am not a fan of Jamie Dimon but he did a decent interview about the trade issue on CNBC.
Thus proving that at least a significant faction of the elites are on board with the changes to our financial order.
Those favoring keying Tesla’s may eventually come with real costs.
Leftist economist Yanis Varoufakis has also provided some interesting analysis of the tariff/trade war. Check him out on youtube.
There was a great syndicated columnist in the local business paper whose name was Malcolm Berko. I guess he was a stockbroker out of the Tampa Bay area. He was way ahead of the curve when it came to pointing out the very problems we talk about on these kinds of pages about economics. One of the things that stuck with me was how he used to point out that the inflation rate was a bunch of BS. He often liked to point out the difference between the BS official inflation rate and the actual street inflation when it comes… Read more »
Krugman is not just wrong about economics. That is the least of his problems. Krugman declared that America has a white ethnic problem and that whites, correctly understand that their power is going away. He declared that Whites are not the future, but that Bill de Blasio is the future. Bill de Blasio miscegenated with a black and his children hate him and hate Whites. That aside, Z-Man alludes to the next real major battle. The media that is going to howl will be the pump network that fills the airwaves since the early 90s keeping boobus throwing money into… Read more »
It’s long past due that cnbc and their lead barking carney, Cramer, disappeared – talk about worthless has beens. Plus, that sob was a huge covidian and advocating the government and military force the vax on everyone. There’s also something similar about him and krugman (along with being wrong about most things), but it’s probably just coincidental…
Big problem: not enough engineers. We don’t graduate enough. Most of them are foreigners who are going home. And even if we get rid of DEI in engine schools, the public schools don’t emphasize STEM enough to produce the smart kids who can fill the seats.
Engineering hasn’t been valued in recent decades. An engineer — if he’s fortunate enough to land a job — starts at what? $60k? A “financial engineer” can start at 120k, 150k, 200k (depending on the school he earns his grad degree from and the firm where he gets hired).
“Most of them are foreigners who are going home.” Let’s hope they’re going home. We should encourage them to GTFO for the sake of American employees and national security. While we’re at it, let’s stop filling our universities with foreigners. We’ve got smart kids of our own.
AI will solve much of this. It is already happening. The bigger issue is energy production and distribution. We will need to expand both and that cannot be done by robots.
“The public schools don’t emphasize STEM enough to produce the smart kids who can fill the seats.” I get what you’re saying about DEI, but there have been plenty of smart kids with good credentials who don’t get into top universities. They’re teaching remedial math at Harvard for God’s sake. Why? Because “marginalized” black and brown students can’t do the work. Meanwhile, white males, in particular, have been short-changed by the entire education system. It wouldn’t take long to turn that around.
Thirty+ years ago most “engineering work” was tech work that was performed by high school grad White boys trained on the job. Griggs v. Duke power ended that pipeline. In an average month my entire firm does about 10 hours of real engineering work. The rest of it? Paperwork, boilerplate engineering, and meetings. Paperwork, boilerplate engineering, and meetings. Paperwork, boilerplate engineering, and meetings.
“We have experienced a forty-year run while at the same time the American economy transitioned from inventing things and making them to driving each other around in Ubers.” The one is connected to the other and is not a paradox. The hollowing out of the real economy and the immiseration of the American masses has been inextricably tied to the buoyant fortune of finance capital. This is in contrast to the period from 1945 to around 1973 — referred to by the French as Les Trente Glorieuses, when everyone’s fortune was in the ascendant. Western capitalism turned cannibalistic after that,… Read more »
Related: Judge Nap and his “Judging Freedom” show has been pushing 3 things for years now:
#3 was hyped as “economic uncertainty”. Really designed to scare old people. The odd thing is though….I think he scared them too much. I think he always knew it was a scam and he wants to do whatever he can to reinflate his own personal stock portfolio.
So no more gold ads. Very weird tell.
How are will the USG pay back the $37 trillion ($37,000,000,000,000.00) in federal debt?
They won’t.
One of the most bizarre things about all of this that I still can’t wrap my head around is that so many tens of millions of people have been wrong for so long, they have created an artificial reality for themselves. I always had a very basic, Ben Franklin understanding of this stuff. Buy low, sell high. Stay out of debt. Save money and compound interest. Don’t burn money on stupid shit, only spend it on things of value. In the late 1990s and early 2000s, I had CDs that were 5-7%. There was not much money in them, but… Read more »
I suspect you may be a bit too optimistic here, Z.
In the 90s, when some contrary opinions were allowed on TV, there were some vigorous debates on NAFTA/free trade. At the time I was just learning the subject, but thought the protectionist (Buchanan, Perot, et al) side made sense.
One thing that struck me at the time was the general arrogant and belittling demeanor of the free traders towards the protectionists. After all, the free traders and globalism were the glorious future, while the protectionists were thought of as frightened and stuck in the past.
As it’s said many times here, Pat Buchanan was right.
Billy strings is an interesting phenomenon: https://youtube.com/watch?v=tirsBNeCR_8&si=nt05rVTysgLnfiai After COVID I swore off public events not because of fearing sickness but contempt of the crazies. I still may never fly again. But I’m crawling out from my rock to go see this guy this spring. he is a hell of a picker, flawlessly precise and even more innovative than Tony rice, but this music is very conservative and safe. I remember groups like McGraw gap, the bluegrassholes, and Larry keel experience were doing this before strings was even born. it feels too like an artificial extension of the Grateful Dead which… Read more »