It’s Over

3 July, 2015–A global bear market of Grand Supercycle dimension is underway, accompanied by a deflationary depression that will destroy values in:

U.S. Stocks
European Nation Stocks
Asian Nation Stocks
Emerging Nation Stocks
Corporate Bonds
Municipal Bonds
Commercial Paper
Sovereign Debt
Commercial Real Estate
Residential Real Estate
Iron Ore
Scrap Metal
Almost any tradable asset

There is no reference point for the extent of the calamity ahead. Declines of 90% will occur in most of the markets listed above. Those who lived through the Great Depression of the 1930s will have gotten a taste, but only a mild one, of what is in store for investors. The standard response to these comments will be disbelief, a natural sentiment reflecting the complacency which always precedes financial crises.

The general rise in prices of the last few years is over. Some markets are already on their way to severe loss. All asset classes will join the rout shortly. The downside movement will be persistent, at times violent, for some time to come. The only asset that will hold up, and actually increase in value will be the U.S. Dollar, a universally hated holding.

I speak carefully. This is a time to pay attention.



No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.

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The History of History

This election was lost four and five and six years ago not this year. They dident start thinking of the old common fellow till just as they started out on the election tour. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickled down. Put it uphill and let it go and it will reach the driest little spot. But he dident know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night anyhow. But it will at least have passed through the poor fellow’s hands. They saved the big banks but the little ones went up the flue.

—Will Rogers,
Tulsa Daily World, Dec. 5, 1932

Rogers could have written that column yesterday, don’t you know. When you think about it, you come away certain that smart people have this compulsion to be stupid  every hundred years or so. I take some comfort in the notion that no matter what, we do tend to survive.

Now, about coming back stronger than ever, I’m not so sure. A great nation is allowed a certain number of screw ups. But eventually the burden of subpar leadership sends it into something less than its former self. I’m thinking about Rome, here.  Nobody knew it then, but it was downhill for a very long time after Marcus Aurelius, the empire’s last good leader, passed from the scene in 180 AD.

Charles Hugh Smith publishes, the seventh most read alternative financial blog in CNBC’s survey. Smith has recently been writing a series on the collapse of nations. Collapse, he says, is a process that gets underway when certain factors are present in the system. These are his nine dynamics of decay:

  1. Complacency and intellectual laziness
  2. Profound political disunity
  3. Rise of unproductive complexity
  4. Those bearing the sacrifices opt out/quit
  5. Decay of effective leadership
  6. Rise of bread and circuses social welfare and entertainment to distract/placate restive citizenry
  7. Decline of wealth-producing capacity—status quo living off financial trickery
  8. Sclerosis—status quo controlled by vested interests
  9. Resource depletion/environmental damage

Michael Graham touched on many of these in his book, The Fall of the Roman Empire. Even a cursory look will tell us that these dynamics are in play around the globe today.

Smith’s series on collapse is worth taking seriously. It is a process, not an event,  that usually takes many years to completely play out.

The financial markets are presently signaling a severe bear market, and the most likely form of it is a crash that bottoms with the 7 year cycle due to bottom a year from now, then a rally like the 1929-30 bear market rally, and then a slow motion withering away of the economy that could take a decade before it made a final bottom.

This would be very similar to the collapse in the thirties, when Will Rogers was entertaining Americans with his homespun commentary. The difference is that the trend today is one degree greater, so we will need to be prepared for a very long subpar era.

How, exactly to do this? I don’t know. Seneca got up every morning and prepared himself to lose everything, figuring if he could accept that outcome life would not be troublesome, however it turned out.



A sad note:

Dick Diamond, long time friend and  mentor, passed away last week. Too good a guy went too soon. Dick was the quintessential journeyman trader. No fuss, no big ego, just amazing consistency. For over fifty years, he made money almost every day the market was open. I’d like to be that good some day. Rest in peace, good  friend.

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The Contrarian Case

Half of suckerhood is not realizing that
what you don’t like might be loved by
someone else (hence by you, later), and
the reverse.


Veteran traders know the market twists minds: The crowd is still scared silly in the early stages of a bull market. Prices go up slowly. Investors rush for the exits on any rumor or shaky news, causing violent mini-crashes that reinforce the fear, keeping people out.

But the crashes halt above the previous lows, and pretty soon stocks are inching up again. Eventually, years into a great bull market, the crowd catches on to the fact that they should have been buying those little dips. That’s about the time dips start making lower lows.

When stocks start down in a new  bear market, the crowd will hang on because they don’t recognize that the situation has reversed. The market is now inching down, periodically exploding upwards like the 286 point rally in the Dow Jones Industrial Average last Thursday, which soared on the rumor that Greece would get bailed out again. The violent rallies reinforce optimism , keeping people from selling.

I don’t know if we will have new highs again, but, as a trader, I’ve been seeing a change in the day-to-day behavior of the market in the last several months. There is universal agreement on the outlook: it’s rosy. Despite this, the market has been in a trading range since the beginning of December, managing only a couple of modest new highs along the way.

I think this is another time when a big change in direction is in the offing. Investor sentiment is sending the message. Whenever  the data on sentiment reaches extremes of optimism or pessimism, you want to stop doing what everybody else is doing and start thinking about going the other way.

It is not a perfect strategy. The sentiment extremes in 2000 got us out of the market only to see it reverse after a wimpy sell off , come back and make new highs. But sentiment and valuation remained in dangerous territory, so we stayed in cash. The big drop in ’07-09 did generate sentiment that was negative enough to suggest some kind of bottom was in place, but valuations remained high and there was no serious liquidation, so we again stayed put in cash.

What did we miss being out of stocks? From the 2000 top to the present, the market has risen about 50%. The DJI topped around 12,000 back then and is around 18,000 now. That’s about 3.5% a year, not an especially robust move, and the valuations and debt in the system are more extreme by half. Not worth the risk. Statistically, the market is more overvalued and investor sentiment is more outlandishly optimistic than at any time since the British market top in 1720. Paradoxically, the same people, as consumers and workers, are not so sanguine. Cognitive dissonance about their investments, skeptical empiricism about the economy.

I’m looking for a big, big bear market that will result in a major oversold that will look like 1974, when the Dow bottomed at 576. The liquidation was massive and sentiment was the most negative since 1932. Stocks were selling below replacement value. From that oversold period to 2000 the market increased in value by a factor of twenty. Veteran investors that went against the crowd and bought had almost no risk, got terrific dividends and the market made them wealthy. We are waiting for such an occasion.

In 1932 Edward Angly published a small book titled, Oh Yeah? It was a compendium of newspaper headlines, pundit commentary and pronouncements by the nation’s leading bankers and politicians. Everything they said between the secondary top in
April 1930 and the final bottom in ’32 was wrong. Not that they were intentionally lying. They just didn’t know and, in uncertainty, they defaulted to how they felt or how they thought they should feel. They were bravely optimistic in the face of a system that was breaking down and, after the market had lost 89% of its value, they advised people to be prepared for worse.

I expect the same sort of well meaning dissembling to be the order of the day for some time to come. Hence, Cindy and I will disbelieve everything we read or hear about the economy and the market. We will remain in cash until the news and public pronouncements are forecasting total disaster (which will already be the case). That, together with a cheap, cheap, cheap market will entice us to reinvest.



No one should consider any part of this presentation as a recommendation to buy or sell any securities whatsoever.

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American Pie

 Having reached the beginning, starting
toward a new ignorance

–Jack Gilbert

Tony  likes Barbara. Tony is a bartender at Mazzaletti’s at 80 Pine St. in Lower Manhattan. Barbara and her husband have  a restaurant in Florida. Tony comes down to Florida one winter, bartends at a joint nearby, and he and Barbara are semi together. It is an agreeable arrangement to which Barbara’s husband does not object on account of it gives him space for certain arrangements of his own.

Winter ends and Tony does not go back to Mazzaletti’s because the horses at Gulfstream are more reliable than the nags at Aqueduct.  It’s now a couple of years that Tony did not return to the place of his birth, and on a Sunday he and Barb are at the track when the season’s long shot wins going away in the eighth, and Tony had a bet on of unusual size.

Driving home with the dough, Barb says, “Something small, maybe breakfast and lunch and you wouldn’t have to work nights.” Before long, Tony is a restaurateur. The new circumstance suits him. Business is good. His bar customers and their friends are regulars. He wonders why he didn’t think of this before.

He does not let on that he thinks being a business owner is something special until one of the breakfast eaters, a real estate guy, tells him about a property out on Route 60. A grand old house on a busy intersection were the city is growing, an ideal location for a fine dining establishment. A chop house, maybe, like Gallagher’s, or Toots Shor’s. Bring some class to town. It begins to feel right, except for where to get the cash.

A local banker, former habitué of Tony’s bar, senses opportunity. By giving Tony a mortgage on the property the banker assures himself of a prime table whenever he wants and a feeling of proprietorship when he hangs out at the bar, which would be polished mahogany with leather seats. It is an image that uplifts him. The deal is done and now Tony is hustling for the day he opens wearing a tux at the door.

There were glitches. Planning and zoning required more plumbing. A lot more. One week before getting a CO, the city informs Tony the dirt around the house that is to serve as a parking lot has to be paved. This is a big hit. The bank money has been used. Tony calls Uncle Vinnie who runs the numbers for the mob in Queens. Uncle Vinnie fronts Tony for twenty large, taking back a note secured by the lunch joint. The paving gets done and the new place opens to fab reviews.

It is a heady time. Everybody in town is coming to eat and drink. Tony feels very good. Then, six months into the operation, Tony realizes that as much food is going out the back door as is being served in the dining room. The bartenders, all old pros at the game, are working light scams, skimming some of the proceeds at the bar. Tony is familiar with this situation, having been an employee himself. He sets about correcting things.

A fancy restaurant has lots of moving parts and it takes concentration to keep the cash flow flowing in the right direction. Tony gets a handle on the deal, but then, a year on, Florida goes into the biggest recession since the thirties and Tony is in a world of hurt.

Soon, the dining place can’t cover it’s nut with the bank or with Uncle Vinnie. The bank takes back the restaurant, and Uncle Vinnie, with apologies, assumes ownership of the breakfast joint. Barb breaks off the semi relationship. Decides life in the fast lane is not a good proposition for her. It is time for Tony to duck out.

If he asks himself how it would have been if he had just hung onto the first joint, sold it a few years later for a good piece of change, he might see that he could be retired now. But overreaching is not something you plan on. It just happens.

Word is, Tony went South and is working the outside bar at the Holiday Out in Islamorada. The American dream is on  hold.



This is a work of fiction. Any resemblance to anyone living is purely coincidental

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Gazing At My Navel

We call upon the Author to explain

–Nick Cave

She was seated at the end of a table with nine other people. She could not make up her mind what to order. The waitress came back to her three times before she decided. When I say the woman was fat, I mean that, situated in profile, directly in my line of sight, she appeared as a great oak stump, with a hundred inch girth that made it necessary for her to sit out in the aisle, enormous belly pressed against the table. Her husband, sitting on her left with his back to me, was not quite as fat, but with his T shirt riding half way up his back and his pants more off than on, the crack of his ass clamored for attention.

For nearly an hour I compulsively stared at the couple with unfettered disgust. Finally, finished with their meal, they rose and lumbered out of the courtyard where we were having our brunch. Eventually, I thought about other things.

That was Sunday. On Monday, my friend Kay sent me an e-mail: “Have you watched David Foster-Wallace’s Kenyon College commencement address?” No. But it was early, so I Googled and watched it.

Foster-Wallace spoke about education, and he held that the cliché that education was supposed to teach you how to think was wrong. The purpose of a liberal arts education, he posited, was to teach you that you had an option to think in other ways than your default setting. Without being conscious of it, we naturally think as though we are the center of the universe and everything that happens around us is happening to us or for us.

That twenty-two minute speech rocked me. I got it that my obsessive focus on the fat folks the day before had nothing to do with them. It was all about me. It began when I realized that we would not get our food order taken until the woman made up her mind. I knew that when she finally did, an order for ten meals was going to go in before ours, together with the orders of everyone who came in after us whose waitperson wasn’t held  up by the fat lady’s dithering. I was indignant about being so outrageously inconvenienced and, sure enough, it was a full hour from the time we sat until our food arrived.

I spent that hour  constructing a vile mental picture of the fatties’ lives. I imagined that the lady’s dilemma was that she was deciding whether to order a four egg cheese omelet with hash browns, bacon, sausage, biscuits and gravy or some other calorie laden offering.

I imagined that they would go home and loll on the couch watching daytime TV while gorging on pop tarts and ice cream. I imagined that, oh, never mind, you get the picture. My self-centered default setting raged and I did a great job of character assassination on people I knew nothing about. Pathetic, right? Worse. We had just come from church where I, a deacon, had assisted in the Sacrament of Holy Communion, distributing bread and wine to my fellow congregants. Obviously, I left my kindness and generosity of spirit in the sanctuary that morning.

Foster-Wallace’s argument was that an educated mind should give one a perspective that is broader than the default “it’s all about me” stance. Had I been thinking outside of myself, I might have recognized, the minute we got to the restaurant, that our church services had just gone to summer hours, letting us out at 11:00 instead of 10:30, allowing the place to fill up before we got there. Slow service was already built into the outing, so best idea was to relax and enjoy the time with Cindy.

It would have been best if I had not given the heavyweights any thought at all. Or, be empathetic, perhaps, imagining that the lady’s difficulty was because she was miserable being obese and was struggling desperately to talk herself into ordering poached eggs and dry toast. Almost any line of thinking other than the one I chose would have been healthier. Turning my impatience (why am I not getting my way right now?) into a silent rant was just wrong.

Excuse me for foisting this essay on you. I posted it so I could stare at it from time to time. Remind myself not to be such a prick. Character building is hard.



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The Revolution Imperative

The unique species of historical event we call a revolution
occurs when everything changes at once

–Michael Holquist

Here comes everybody

–James Joyce

Lets see, what do we hate today? Institutionalized sleaze in government via lobbying and campaign finance? Corruption in the corporate sector? Blatant abuse of trust on Wall Street? Cheating in sports? The mendacity of politicians? Cheating in public school systems? Presidents of Universities making multi-million dollar salaries, jacking up tuitions while heavily indebted students get teaching assistants at class instead of professors?

We despise it all, but we get up everyday and go about our business without doing anything to change it. Vote? For whom? The least slimy of the slimeballs on the ballot, that’s all. It’s a tiresome circumstance and our circumstance is to wish it away. Good luck with that.

At coffee, last week, my friend John says, “I just read your blog and I’m depressed.” Excited, is what he ought to be. If you re-read my last essay (and numerous others over the recent past), you might conclude, as I do, that the global financial structure is verging on collapse. “Grexxit,” the term coined for Greece’s probable default on its $430 billion in debt and exit from the European Union, is just the opening salvo of the entire globe coming to terms with truth: We are all broke. This is when something good can happen.

There is no fixing the system. It has to be uprooted and leveled, a complete teardown. Why? Because the people in the power centers today are making it big by screwing the rest of us. We can depend on them paying lip service to change while they work their scams with impunity.

Socionomics hypothesizes that social mood drives behavior in a pattern of rises to excess, corrections that clean out the excesses, to be followed by the next phase of advance. At peaks in social mood the markets are overdone, and behavior is decidedly undone. Power aggregates to ever smaller cohorts of greedy sociopathic types with little in the way of a moral compass. 1929 was that type of top. The subsequent crash took 89% of the value out of the Dow Jones Industrial Average, and many companies went out of existence, mostly outfits in which the managements had been managing for their own benefit exclusively.

The ensuing decade saw the elimination of much of the misfeasance in the financial, business and political system. The rebuilding that followed was sound, greatly benefitting the broad population for the next half century. Eventually, starting in the 1980s, excesses appeared and the grinding denigration of the system got underway.  Now, eighty-three years later, we are back in the same condition as we were in ’29, only worse by far.

There have been three bear markets since 1932: 1937-41, 1966-73, and 2007-09. None of these were deep enough or severe enough to do the job like the 1929-32 episode, either domestically or globally. The 2007-’09 crash looked like it had a chance, but the central bankers of the world took it upon themselves to interfere with the natural rhythm of social behavior by printing money by the boatload. They and we will live to regret it. We are now far worse off in every respect than we were at the last top.

There must be a reckoning. It will be severe beyond my ability to imagine. The market should lose most of its value–unfortunate. But we will also get rid of most of the sociopaths in the corporate, financial and political system because when everything changes to the extent anticipated by the Wave Principle, we will no longer just complain and go about our business.

As in the past, severe losses in the markets and the economy will galvanize society. It will be a revolution. We will then, finally, demand and get significant change. The Koch brothers, with their cohort of billionaires will not be able to ram their toady candidates down our throats. The broader population will hold sway at the ballot.

The process will be painful, extremely so for some. But it will be a damn sight better than continuing down the road of systematic destruction of the middle class the nation has been on.

There is no way to plan for this revolution because there is no way of knowing in advance what the catalyst will be or how it will play out. It’s more a matter of being alert, not panicking, and being flexible and adaptable to whatever changes the circumstances demand. See you on the ramparts.



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“Move along, nothing to see here”

“Eventually, the final refuge of speculation is to abandon
historically reliable measures wholesale, resting faith
instead on the advent of some new era in which
the old rules simply don’t apply…”

—John Hussman

In her New York Times article this week, Suzy Hansen writes, “Economic crises in modern countries are not always easy to see; the suffering doesn’t reveal itself everywhere.” She is right of course. Her article is about the severe economic problems in Greece, where a casual stroller in Athens will see the cafes full, shops still open and automobile traffic clogging the streets. Only someone who lives in Athens can tell you that the college graduate sitting in the café for hours is unemployed and has no future; that the elderly man sitting with him lost his pension and has been nursing that same beer all day. The street view is a mirage.

Nothing like that going on in the U.S., of course. Or is there? Again, if there are problems, they are hard to see. Here in Florida, The state has just experienced one of it’s best ever winter tourist seasons. But looking at the following charts, you have to conclude that the visitors are clueless, in denial, or, for the moment, choosing to live as if there were no tomorrow.

Chart #1

mispricing chart 1I don’t think it’s possible to have the market, a proxy for social mood, so out of step with economic fundamentals

Chart #2

mispricing chart #2The Macros, a composite of economic data, do not paint a bullish picture either.

Chart #3

mispricing chart #3

Finally, yikes! Valuations on U.S. stocks have never been higher. Either The economy is going to get a lot better or the market is due for a serious reckoning.

Meanwhile, McDonald’s recently added 62,000 employees in the U.S. and is promising to raise hourly pay to $15 by 2020. Very nice, but they also installed 7,000 automated ordering stations in Europe. So, what’s really going on? Something like this?

McDonalds automated orderingI will bet that they’ll have fully automated stores long before they have all  employees making fifteen bucks an  hour. Hardly good news for the employment picture.

The market situation, to me, suggests that when it breaks it will break big, and probably fast. Something to think about.




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On Troublesome Debt

“How did you go bankrupt?
“Two ways. Gradually, then all of a sudden.”

—Hemingway, The Sun also rises

Not long ago, anthropologist David Graeber was moved to write 260,000 words on debt* after a twenty minute conversation with a lady at a cocktail party.

He was describing his efforts as an activist working for debt forgiveness for Third World countries mired in debt that was impossible to repay. In the late seventies, Citibank, Chase, and other large banks, recipients of huge deposits from Middle Eastern oil countries, were looking for a way to put those funds to work. They sent representatives to Third World countries, selling dictators on taking out loans to develop their economies. The original low rates soon skyrocketed as U.S.  tight money policies sent rates up towards twenty percent. The interest piled up on the loans and, despite best efforts, most of the borrowing countries could not make a dent on the principal of the loans.

The IMF, acting as the big banks’ enforcer (leg breaker), insisted that the countries put severe austerity measures into effect in order to restructure their loans. This caused the economies of these nations to collapse (austerity does that).

Graeber explained that his organization had managed to get the IMF to stop imposing structural adjustment policies, which were doing all the direct damage to the economies, but that the long term goal was debt amnesty. Something along the lines of the biblical Jubilee. “As far as we were concerned, thirty years of money flowing from the poorest countries to the richest was quite enough,” he told her.

 “But, they borrowed the money! Surely one has to pay ones debts,” she replied. The comment rocked him. She held fast to this view, even after being told that the unelected dictators of the borrowing countries funneled most of the money into their private Swiss bank accounts.

For weeks, he couldn’t get it out of his mind. Eventually, he realized that throughout history much of the world has regarded paying ones debts as a moral obligation. In most cultures, not to do so is held to be a shameful sin.

In reality, the statement “One has to pay one’s debts,” according to economic theory, is false. The lender takes a risk when making a loan. A bank, risking depositors’ money, is responsible for setting underwriting standards, evaluating the risk, and setting aside reserves for loans that cannot be repaid due to circumstances beyond the risk parameters.

The borrower is responsible for making best efforts to meet the terms, but, in the event of force majeure, should have the bankruptcy laws available to resolve the losses to both parties. This was not so with the Third World loans. International law overwhelmingly favors the lender. If they wish, the banks can hold sovereign nations responsible forever.

Domestically, the situation is almost the same. Individuals who suffer financial reverses go through hell in the bankruptcy courts. Over the past twenty years the powerful banking lobby has managed to get laws enacted that treat the defaulting borrower like a criminal.

At the same time, underwriting standards for loans are almost as weak as at the top of the real estate bubble in ’07, and bankers are aggressively going after all manner of substandard loans from private individuals.

When the market breaks again, the downward pressure on the economy will be greatly exacerbated by millions of low grade loans made to individuals who will not be able to meet the terms. The banks, who have engineered this situation, will extract their pound of flesh from their victims while society, generally, will probably think this is OK.

U. S. banks are extraordinarily powerful politically. Banking has the nation’s largest lobbying presence in Washington (it spent $1.4 billion during the 2013-14 election cycle). No surprise, then, that banking legislation is freighted with the conventional view that the borrower who can’t pay is the deadbeat.

A corporation that goes into bankruptcy has made a good business decision. An individual who can’t pay for falling into hard times is a moral degenerate. It is a hard wired conviction, thousands of years old. Next week is Give Your Son of a Bitch Wall Street Banker a Hug week. Be sure to do your part.



* DEBT: The First 5,000 Years, David Graeber,
Melville House Publishing: May 2011

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The Truth Problem

Since Plato, Western thought and the theory of knowledge
have focused on the notions of True-False; as commendable
as it was, it is high time to shift the concern to
Robust-Fragile, and social epistemology
to the more serious  problem of Sucker-Nonsucker.

—NN Taleb

The Governor of Texas was bragging. No surprise, it being a native Texan’s propensity. “Forty-eight percent of all jobs created in America were created in Texas,” Said former Governor Rick Perry in 2009. So now it’s April 2015 and he’s no longer governor. Good thing, unless he wants to tell us layoffs are the Next Big Thing:

Texas layoffs

I don’t mean to be piling on here. Half my family lives in the Lone Star State. Politicians everywhere use any opportunity available to them to take credit for good economic data points, however ephemeral they may be. And, being an oil country dude, Perry was probably unduly optimistic about the staying power of a domestic industry that now requires extreme high prices to be viable.

The oil industry is in the toilet, but that’s not the only problem with employment. The employment report last week was dismal: 93 million employable people are out of the work force. The drop in the unemployment rate, regarded as something to celebrate in Washington, merely reflects a labor force participation rate that has declined to what it was back in 1977, when most households still had only one earner.

The entire nation is beset with a dearth of well paying jobs. Recent payroll jobs reports tell us that the complexion of the US labor force is that of a Third World country. Most of the jobs created these days are lowly paid domestic services.

The bubble in global debt continues unabated. Both lenders and borrowers learned nothing from the collapse in ’07-’08. Global debt is up 40% since 2007 to $199 trillion, and, as a percentage of GDP, it  averages globally 286% now vs. 269% in ’07. Lending standards have also plummeted.  In ’07, just before the crash, about 20% of corporate loans were “covenant lite,” meaning loans without adequate collateral. Today over 60% of lending is high risk.

Meanwhile, The stock market ran up big last week as the fast money crowd celebrated the reality that the Fed will not be raising rates in June. However, the game is getting harder to play. Since late January, the daily chart of the Dow Jones Industrial Average has been tracing out an exhaustion pattern. There may or may not be one more modest new high before the pattern ends and a sharp decline ensues. I don’t know whether this will be the start of a major decline, but it makes no sense here to tempt fate. The economic underpinnings are way too fragile.

At tops like this one, there are two types of participants:

Non-suckers: bankers, brokers, financial advisors and economists who advise their clients to be fully invested. For this they get handsome fees without having any skin in the game.


Suckers: investors who, on their own or on the advice of the non-suckers cluelessly risk their futures in grossly overpriced investments.

The end game for the suckers is pretty awful. Non-suckers with no skin in the game will be fine. Well, they may be driving cabs or serving lattes at Starbucks while surviving in decidedly more modest circumstances after their clients are ruined. But they’ll be fine.



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A wise Man’s Thoughts

The Trader

An essay from In Our Time (1977),
a book by Eric Hoffer.
Posted with permission from Hopewell Publications

It seems strange we know so little of the history of the trader. The trader preceded the cultivator and the herder, and he is probably more ancient than the hunter and the warrior.

The trader and the artist are probably of equal antiquity, and the most uniquely human. There are animal hunters and warriors, and some ant species engage in activities reminiscent of cultivating and herding, but nowhere in the animal world is there anything remotely equivalent to the trader and the artist.

That early man, so naked to the elements and predators, should have survived at all seems miraculous. But the situation becomes doubly miraculous when we find that earliest man was the only lighthearted being in a deadly serious universe, given to playing and tinkering, and exerting himself more in the pursuit of superfluities than of necessities. He had ornaments before he had clothing, and clay figurines before clay pots. From his earliest beginning man was a luxury-loving animal, and the earliest trade was in luxuries. Trade in necessities was a late development.

The trader was probably the first individual. He became an individual not by choice but by circumstances. He was either a straggler left behind, or a fugitive or a sole survivor. Earliest trade was foreign trade, and the trader was a foreigner. Even at present in backward parts of the world most traders are foreigners: Indians in East Africa, Lebanese and Greeks in West Africa, Parsees in India, and Chinese in Southeast Asia. I can see the first trader, and outsider, approaching a strange human group, bearing a gift of something new and desirable, and then going from group to group exchanging gifts.

Considering the trader’s antiquity and the vital role he played in the evolution of civilization, it is difficult to understand the scorn and disdain he evoked in other human types, particularly in the warrior and the scribe. To the warrior who made history and the scribe who recorded it, the trader was the embodiment of greed, dishonesty, cowardice, dishonor, mendacity and corruption in general. Yet it was the trader who first gave weapons to the warrior and the craft of writing to the scribe. Trader’s’ tags and marks of ownership preceded clay tablets and papyrus rolls. Later, when the scribe had made writing so cumbersome and complex that one needed a lifetime to master it, the Phoenician trader moved in to simplify it by introducing the phonetic alphabet.

The age-old enmity between warrior and trader becomes particularly intriguing when seen in the light of recent events which indicate a kinship between the two so close as to make possible and interchange of roles. We have seen German and Japanese warriors become the world’s foremost traders, and Jews foremost warriors.

As to the antagonism between the trader and the scribe: Where the trader is in power, the scribe is usually kept out of the management of affairs, but is given a free hand in the cultural field. By frustrating the scribe’s craving for commanding  action the trader draws upon himself the scribe’s scorn, but he also releases the scribe’s creative powers. It was not a mere accident that the Hebrew prophets, the Ionian philosophers, Zoroaster, Confucius and Buddha made their appearance at a time when the trader was in ascendance. The same is of course true of the beginning of the Renaissance, and of the cultural flowering in modern times.

Where the scribe is in power the trader is regulated and regimented off the face of the earth. In scribe-dominated communist countries the legitimate trader has been liquidated, leaving only the clandestine traders, the true revolutionaries, who undermine and frustrate totalitarian domination.

In free societies, the tug of war between trader and scribe has had beneficent effects. The trader cracked the scribe’s monopoly of learning by diffusing literacy through popular education, while the scribe has been in the forefront of every movement that set out to separate the trader from his wealth. As a result, both learning and riches have leaked out to wider sections of the population.


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