The Knockout Blow People Will Not See Coming

Tyler Durden's picture

Submitted by Simon Black of Sovereign Man blog,

Have you ever done something really stupid, just because you were in love? Something you look back on and cringe, thinking “why on earth did I do that?”

Of course. Who hasn’t?

Fear. Love. Panic. Exuberance. Jealousy. Desire. These emotions have tremendous influence over human behavior. And when they kick in, they skew our judgment and cause us to do things that can only be characterized as highly irrational.

In the world of economics and finance, they call this ‘sentiment’. Consumer confidence, business confidence, investor confidence… these are basically emotional readings. Screw the numbers. To hell with the truth. It’s all about how people feel.

It seems crazy, but it’s true. Right now, for example, ‘sentiment’ is telling us that the euro crisis is over. It’s telling us that the debt ceiling is pretty much resolved. And, after taking five years to reach pre-crash levels, it’s telling us that the stock market is once again safe for the average investor.

Yet the numbers tell a completely different story.

In the US, politicians are celebrating their accomplishments that the US unemployment rate has declined to 7.6%.

Of course, the real figures show that the labor force participation rate (effectively the percentage of society that they consider to be in the work force) has just hit a 30-year low. And the economy is failing to create new jobs.

Perhaps most of all, the US debt level this year will hit the danger zone that Greece was in just a few years ago when the European debt crisis kicked off in earnest.

In Europe, the situation is so bad that even the government figures are dismal. Italy is officially in a deep recession. Spain is posting a public deficit over 10% of GDP. The Greek economy shrank (officially) nearly 6% last year. Etc.

Bottom line, the numbers don’t match up with sentiment at all. And this makes for precarious investment conditions.

Over the first quarter of this year, US stock mutual funds reported $52 billion in retail investment inflows, according to market data firm TrimTabs. This is the highest inflow in a decade.

In January of this year, retail investors poured a record $77.4 billion into the stock market. To put this in perspective, the prior record, set in February 2000, was $23.7 billion.

You can probably guess how that turned out. This whoosh of money into stocks happened mere months before the crash.

It certainly seems strange when you stack it all together: on one hand, record high deficits, record high debts, record low labor force participation. On the other hand, record high stock market, record high mutual fund inflows.

Something just doesn’t add up.

Investors are throwing caution to the wind right now... ignoring the basic fundamentals and focusing exclusively on euphoric sentiment. (Or central bank policy).

Some of you may know that I was a competitive fighter for a number of years. I can personally attest, and any boxer will tell you, that it’s the punch that you don’t see coming which knocks you out.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Poqit's picture

Sigh.  I don't disagree with the general point but the US isn't Greece.  You weaken your argument when you make that analogy.

Abraxas's picture

Sometimes you clearly see the punch coming and it still knocks you out, because it's too forceful or too quick. C'est la vie.

Pinto Currency's picture

 

If central banks are going to largely inflate away the debt, it makes sense to hold equities.

The larger question seems to be, what the heck is $100 trillion doing sitting in bonds?

Or, if we look at recently revealed policy of the BIS, IMF, EMU, US & Canadian gov's to seize bank held assets to resolve bank problems, what is ANY money doing sitting in ANY market or deposit account?

francis_sawyer's picture

The 'knockout blow' for SIMON BLACK will be when his timepiece fails to indicate the present time in GSTAAD....

Tango in the Blight's picture

The 'knockout blow' for SIMON BLACK will be when some bum pees on the cardboard box he was planning to spend the night in.

tickhound's picture

To Simon Black, and his fans, there is always a knockout blow.  They just bitch when they aren't the ones who get to deliver it.

Otherwise Simon'd have no problems and "sentiment" would be on par with fundamentals.

Sentiment sux cuz the SONG is written FOR the artist now.  STARBUCKS squashes small coffee shops.  Things like this are goooooooooooood.  See the Dow Jones?  But bad for Simon cuz he ain't Starbucks.  So now he's gonna teach you how to dodge the blow.

what EV.

Most of you just want to be the last man standing.  Nothing else.  You don't want to solve problems.  We could nuke everyone as long as there was real "growth" in the consumer and the middle class... There'd be no problems as long the US remained "competitive." 

Simon thinks boxing is human nature.  And Simon says, "I'll teach you to be a better boxer." 

 

 

markmotive's picture

The history of the Federal Reserve is one designed by the banking elite to subjugate the middle class to a subservient existence.

Stalin would be proud.

http://www.planbeconomics.com/2013/04/documentary-money-banking-and-fede...

Boris Alatovkrap's picture

Central Bank is not for good of peoples!? Boris is feel so betrayal!

(Boris is use sarcasm, not really believe central bank lie and way is beyond feel betrayal.)

NewThor's picture

You know what is good for people?

Laughter.

Oh, Yee Doomers, Cynics, Currencieyests, Goldcrowns, Silversteeds, Big hearts and pure breeds!

I give thee,

comedy.

http://www.youtube.com/watch?v=MTjcEhZv8Gc

^ THOR talks to women: Tanks, Smurfs and Imaginary Girlfriends.

PS. I gave you good eye candy, bitchez.

Bearwagon's picture

I could solve that mystery (of women) for you, but I think we can agree, that you don't want me to, right?

GetZeeGold's picture

 

 

I'd be good with just solving the mystery of the one I'm with.....I ciould care less about the rest of the them.

Bearwagon's picture

Hint: Regardless of whatever she wants to know from you (or wants you to do), a woman would never ask you directly. Instead she will test you for the answer by running you through some setup composed of things like throwing tantrums, to see your reaction, That will tell her, what she needs to know and would never ask you. This perspective should bring some sense into otherwise uncomprehensable female behaviour.

Oldballplayer's picture

Tantrum?

Women don't throw tantrums. Little girls throw tantrums.

That, my young Jedi knights...is the crux of your problem.

Miffed Microbiologist's picture

Actually sometimes they just truly don't know what they want and the tantrum is just a symptom of their own frustration. I did this a lot in my younger years I'm sad to say. When I figured out who I was and what I truly needed the tantrums went away. Sometimes things are deeper than the superficial. It's tough on you because you can't help her find in no matter how hard you try. Try during a tantrum say to yourself " what does she REALLY need." this may help you. Hint: it's not a bucket of Prozac and a polo mallet to the head no matter how much it seems! ;-)

Miffed;-)

DutchR's picture

Thanks NewThor, keep'm cummin!

 

PS. sweet eye candy indeed

Panafrican Funktron Robot's picture

To the fella talking about how the US isn't Greece:  This is correct.  The Greek people have much less debt per person to pay back.  We are way more fucked.

And even setting that aside, they get to live in a country of near perfect weather year around.  Some of us have to live in places like Gary, IN.  

tickhound's picture

Did you know the human head weighs 8 pounds?

And I suppose there's a market somewhere for the book "Stalin, the Federal Reserve, and the price of rice in China."  But I'm not sure why you're pimping it to me.

Did you know that bees and dogs can smell fear?

http://www.youtube.com/watch?v=NqxMlmpB66k 

archon's picture

... or you see it coming, and think it's something other than a knockout punch.  People in New Orleans saw Hurricane Katrina coming for 4 days, they were warned, told to evacuate, all the forecasts said it would be bad, and maybe 100,000 of them didn't do anything.  "Those forecasters are a bunch of doomsayers, they always say that", or "It doesn't look so bad", or "I'll take my chances".  Then the hurricane hits, and everyone's trying to blame someone for not telling them it was coming, or would be so bad, and "boo-hoo, please someone come help me. I stayed because nobody help me..."

tickhound's picture

Huh?  That's not my point at all.

And I don't have a problem with him forecasting the shit sandwich either.  Simon wants a "fair" boxing match.  And he's upset and taking precautions because the fight is fixed and ready to blow.  Hell, I'm upset the fight is fixed.  I know it'll blow.

But he has no problem with the delusion that we should be forced to box in the first place.  He believes in a Competitive Economic Boxing Model that creates winners from the expense of losers... He addresses faulty growth models by never mentioning them.  He supports the general premise.     

His vision is one of humanity forever competing within a scarcity based system... One that still REQUIRES the wage slave... That cyclical consumption game.  And all the while EVERYTHING is pointing us in some other direction.  Automation and technology, finite resources, overpopulation, exponential economic models, pollution, WAR........ 

To me he's just Luddism meets justanothermarketsystem.

THX 1178's picture

The 'knockout blow' for SIMON BLACK will be when his foreign held gold and silver are confiscated by the governments of the nations in which they are held and his reserves of foreign currencies are worthless. Along with his USD. and his property in chile is appropriated by and upswell in communism. That'll be it fo realz./

Jam Akin's picture

The 'knockout blow' for SIMON BLACK will be when an EMP knocks out comms to the call center.

THX 1178's picture

Charlatan writer of vague doomy articles. He may be right and I may agree with him on some points, but he writes nothing we don't already know here at ZH. The Layman's Tyler Durden. Also the Lame-Man's Tyler Durden.

TPTB_r_TBTF's picture

He is one of the Tylers.

 

Simon is very perplexed:

He does not understand why his Tyler pseudonym is popular;

wherease, his Simon alias reaps ridicule.

spankfish's picture

He is one of the Russian oligarchs with a western sounding name...

 

/~({]sacasimnovich off

francis_sawyer's picture

He's army 'special services', a world traveler, author, [now, 'former' boxer], one of the 'Tylers'?...

~~~

[he doesn't always drink beer ~ but when he does he's whistling the 'Old Spice' tune]

Jam Akin's picture

Doubt that "Simon Black" is one of the Tylers francis_sawyer.  "He" was paying Casey for placement before "he" started paying ZH.  I've actually done some of the things that "he" claims to have done.  And "he", in that respect at least, is as full of crap as the proverbial Xmas goose.

I'm sure it makes for a nice diversion from the crushing monotony of the call center in Mumbai for "him" though.

 

Dewey Cheatum Howe's picture

I don't think he works a call center. When the big boys of the gold game are going to his retreats, Peter Schiff was pimping pictures of himself with Ron Paul, Nigel Farange and other big boys from his last sovereign man elbow rubbing hub bub you can bet he is in the network.

Jam Akin's picture

Fraudulent bio against fraudulent bio.

Seize Mars's picture

In Philadelphia, it's fifty bucks.

NoDebt's picture

Nice.  Old "Trading Places" reference when Dan Aykroyd cashes in in his kazillion-dollar watch at the local pawn shop.  Got it.  Carry on, sir.

Key-Rick's picture

You know, it occurs to me that the best way to hurt rich people is by turning them into poor people.

You want me to break something else?

NO!!

funthea's picture

 

+1 for the "Trading Places" references.

 

Go Tribe's picture

Here's a very interesting article about what happened the last time the Fed owned nearly all outstanding Treasuries.

http://seekingalpha.com/article/1321721-here-s-what-happened-the-last-ti.... If we don't get a recession, it's going to be very hard for them to unwind.

 

JeffB's picture

Benjamin Graham pointed out that stocks tended to do poorly in the U.S. during periods of inflation. That goes against our intuitive sense, but then again high inflation causes a lot of instability and other problems for businesses. It makes forecasting more difficult, as well as long term contracts. Interest rates tend to rise. Labor unrest and disruptions increase as unions want torenegotiate wages etc.

Of course long term bonds at or near the nadir of interest rates are even worse in an inflationary environment.

But I think risk is everywhere and the fallout from an economic implosion/explosion will be far reaching for everyone. There may be some people who make out like bandits... including, of course, bandits, but the vast majority will suffer greatly.

 

Arrowflinger's picture

In this case, it is a molasses-slow punch that was telegraphed at least 30 years ago. I saw it and lived accordingly. Now it is a chess game, not a boxing match. Its simple, brutal math. Government tries to suspend math. Math will knock governments senseless.

 

Abraxas's picture

I like the analogy. Only, when elephants fight, the grass gets trampled on, and when elephants make love, the grass gets trampled on. I feel like this clueless ant on the elephant's ass, and hope to god this elephant is not gonna decide to sit down any time soon.

hamstercheese's picture

the elephant is farting right now.  Alot.

Pool Shark's picture

 

 

Classic link. Ill bet u like that alot...

 

Pinto Currency's picture

 

The knockout punch was delivered 100 years ago with central banking and fiat currency.  It was just a matter of time.

funthea's picture

Although the fiat part was only in the last 42 years.

Pinto Currency's picture

 

"Flexible currency" started in 1914.  It was gold-backed fiat money which, of course, provided for monetary inflation and war and could not last.

The final default on gold redemability did happen in 1972 (the first default being FDR's default to the American people in 1933).

 

U4 eee aaa's picture

That was nice of the alot to keep us updated on the elephant's activities

dunce's picture

I was going to make the telegraphed punch analogy, but as usual, someone (you, this time) beat me to it. What i am looking for is a way out of the ring. Many people have seen this coming for the last few years at least and written about it. Most of them get about as much respect as Rodney Dangerfield.

JeffB's picture

What I find even sadder is that the MSM still tends to make fun of the guys who've been shown to be right over and over, and still holds the morons who were shown to be absolutely wrong over and over up on a pedestal.

A couple of examples.

Our resident Nobel laureate in economics, Paul Krugman, who to his credit admitted post-crash:

"How Did Economists Get It So Wrong?"

Similarly, Bernanke was completely blindsided by the crash, repeatedly claiming there was no housing bubble, then reassuring everyone it was contained, and yet he's reappointed as Fed Chairsatan by Obama and named Man of the Year by Time.

 

optionsman's picture

has anyone thought why the punch is so slow? IMHO it is about a way of life, the society set up. It is about a false choice between Capitalism and Socialism. Why? just think why Capitalism was such a successful stage- in absense of full information and in presence of scarce resources only Capitalism system offered proper rewards to those who could guess right (take risk) about some venture. Now information is more available than ever it is also getting less expensive by the minute in addition resources are plenty. so what is the next stage in economic and socio political development? the slow punch is the period of adjustment when all of us accept the new reality ie the punch has already happened ;)

Arrowflinger's picture

Well a lot of the force of the punch is in the 70 million U.S. population of aging boomers. The first 13 inches was slow arriving, but the last inch is disappearing very fast now.  "Retirement" was illusory, survival eclipsed it, and Bernankecide will kill many before their time.