“Plus ca change, plus c’est la meme chose”

There is nothing new under the sun

–Ecclesiastes, 1-4

I am reiterating my call earlier this year for a top in the stock market. So far, The closing high on the Dow Jones Industrial Average occurred on December 31, 2013. I believe the test of the top was accomplished intraday April 4th. If I’m wrong, it won’t be because the conditions are not right.

Tops in the market come when sentiment, momentum and valuation reach outlier levels. These levels have been reached and exceeded over the last couple of years. Given that extreme social mood is expressed in the data, there is no possibility that serious money can be made and kept from these levels. Eventually, it will all be taken away in a crash.

None of the fully invested participants or their advisors believe a crash is imminent at a time like this. Logic tells you it couldn’t happen without being a huge surprise to the hapless crowd. That’s how markets work. Crowd behavior-everyone doing the same thing at the same time-is driven by mood, not rational reflection. So, anyone bothering to think clearly at a time like this can look at past periods in history when the data was similar. The late eighteen hundreds and the late nineteen twenties were similar and both times it ended badly.

Market excesses are only part of what goes on during periods of social mood extremes. The politics of those earlier eras were as repugnant as they are now. Inevitably, the consequence of decades of relative prosperity is voter complacency, opening the way for sociopaths to sneak in the back door of State houses and Congress and we end up with bad government.

Today, big money, big business and big banks buy the votes to get things their way. It is no surprise, then, that voter polls indicate that a majority of voters are disgusted with Washington and don’t see any real possibility of change.

And they’re right. Journalist/author Matt Taibbi pulls no punches. He has spent the last decade digging through the smarmy back rooms of Congress. The results make for some amazing reporting in his three books and countless columns in Rolling Stone. Taibbi is well worth reading, but fair warning, his prose is even more scatological than mine.

Taibbi finds that there are some good guys and gals in congress, but the voting strength is in two groups: ideologues, whose narrow view of the world keeps them from governing with any thought of reasonable compromise, and assholes-politicians bought and paid for by the bigs. There is also the odd ideologue/asshole, and now and then a stupid, stupid, stupid ideologue like Michelle Bachman (godamighty, what does that say about her constituents?). In the aggregate, a useless cohort governs the country today for the benefit of a very few while bullshitting the rest of us.

Dystopian behavior, Taibbi notes, is not confined to one party or the other. This surprised me. Sick of the rip-off on Wall Street, and thinking that Republicans were front running the legislation that legitimized much of their thievery, I broke ranks and voted for Obama on his promise of change.

My confidence was shaken a bit when he retained Summers and Geithner in his cabinet. These guys, Goldman Sachs alums, were part of the problem, as I saw it. Then the shit hits the fan and we bail out the big banks. I was disappointed, but chalked it up to naiveté on Obama’s part.

Wrong. The second thing he did in forming his cabinet was to appoint Eric Holder Attorney General. Holder, as a minor government wonk, it turns out, wrote the document in 1999 that is the basis for Too Fucking Big To Fail. Who the hell Knew? I didn’t until I read Taibbi’s latest book, The Divide, American Injustice in the Age of the Wealth Gap.

As in previous periods such as this, social mood eventually reverses, the market crashes, depression follows, and revolution and radical change follows that. No telling how the revolution part of it plays out, but that is what history says is in store for us.

Solomon had it right.



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

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