Forget What They Say And Watch What They Do
Via Mark St.Cyr,
Once again we are breaking records on a near weekly basis. Week after week and sometimes daily new never before seen in the history of financial markets record prints. Yet, business people across the spectrum don’t feel it, nor are they buying it.
Should one be worried about this conundrum? Financial mavens say no. In earnest, most seem to insinuate one should “Just buy the all time highs and sleep like a baby.” Then again, that’s what they say all the time do they not?
So what is someone to do that doesn’t believe the hype or the meme “it’s different this time” and can’t get that feeling out of their gut for they know – it truly never is?
You pay attention to when implementations seem to be appearing on a near regular basis that can separate you from your money with, or by the force, of law. e.g., The “Gates” Are Closing: SEC Votes Through Money Market Reform
You don’t sit down and draft this stuff up when everything is just ducky. You do it when you know or believe: If this shite hits the fan – its gonna get a whole lot worse even faster.
One of the (and I do mean the) most ominous signs I have seen over the last few years where if something were to go wrong the very place that is supposedly the safest in most people’s eyes and where a great bulk of ordinary people’s money is parked; was just quietly approved permission that in the event they deem as “a panic” (my word not theirs) they will put up gates. i.e., Separate you from your money.
This seemingly inconsequential event as is being portrayed by the under reporting of it through out all the media is absolutely breath-taking. The vast majority of people have absolutely no clue, and for all intents and purposes appear to not want too either. This is where things can go bad very, very, quickly in my opinion.
The troubling fact that gives this issue credence as the one you should pay close attention to, is when you also hear in concert heads of state from not only other countries but right here at home where the tenor and tone starts to ring tones of “bail in” i.e., Bail out was how the banks got your money via you tax dollars. Bail in will be how the banks are going to get your money via your deposits. That’s what surely is being proposed or considered should another crisis occur and the banks need to be bailed out – again.
“But they told us they wouldn’t do it again with tax payer dollars!” I can hear you say. Well, I can hear the legal ease laced argument now: “They used depositors dollars, not tax payers. After all – depositors knew the risks that money in a money market account wasn’t really the same as cash in the bank! That’s why we feel comfortable with this bail in approach.”
Maybe some of you reading this understand the difference, however I’ll argue the vast majority that have money in money markets have absolutely no idea let alone they were just legally put behind a gate if need be.
As far as they’re concerned if the markets go haywire, they think they’ve played it safe. You watch the moment in today’s social media fueled populace the hysteria that will take off the moment just a few realize they can’t get their money. If that happens all, and I do mean all bets are off.
Remember that pesky little thing that was drilled into everyone’s head as being the root cause of everything that happened during the crisis? It was a thing called leverage, and too much leverage was a very bad thing.
What have we learned over these 5 years? Wall Street can’t get enough of a
bad good thing. I guess more must make it better, because leverage today is at heights right along with where we are in stock prices: Above where it was in 2007. I guess it’s back to: Nothing to see here folks please just move along and try the brie, it’s superb!
How does one think others will react to their monthly “money market” balances when that other hidden jewel that was reported to be implemented takes effect? You know, the one that will allow the legal “breaking of the buck.”
How will the first people with significant sums (significant is a relative word) feel when they politely inquire on why their “balance” doesn’t seem to quite jive with what they believe it should state?
How do you think they’ll react if it’s during a 3%,5%,10%, out of the blue generic market correction? How about if they then decide screw it – they want it under their mattress only to be informed. “Ah we’re sorry, we
wont can’t do that at this time.” Then what? Again, all bets are off in my opinion.
I discussed in an article not that long ago about how many were missing the point on the “getting in” to this market and forgetting the real issue is about having the ability to “get out.” Many took that as if I was complaining or taking issue as some sulking boy crying wolf and not even a shiatsu ever appearing. It was far from that.
What I see far too often today is nobody either remembers (for they’re new to investing or business overall and didn’t have money at work during the crisis) Or, they’ve bought into the hype that this market is supported by fundamentals that prove not only these levels are “fairly priced and based on sound economic fundamentals” but that pigs can fly because they’re actually legitimate offspring of unicorns.
The issue that needs to be pointed out again, and again, and again is the fact of just how quickly bad things can happen at these heights. And – based on why. i.e., The Federal Reserve’s current interventionist monetary policies.
All the economic numbers touted as “proof positive” why this market is to be believed will be the exact reasoning many will need to embrace when they look at their money market balances and ask themselves, “Huh?”
I’ll never forget during the real panic as the market fell, sometimes in an outright free fall. Suddenly all the people who were touted across the financial media for their stock prowess were facing cameras slack-jawed and dumb founded. Some were even near incoherent in trying to sound as if they knew what was taking place but obviously had no clue.
This wasn’t years after a bull run where people were caught off guard, this was months, and some of it was no further away than the next earnings cycle. The meme right before everything went bad then? “Just buy in at these now even better prices!” Sound familiar?
I remember watching one of the financial shows where Mohamed El-Erian was talking. Although I don’t agree with all his viewpoints, I gained a lot of respect for him that day for the way he honestly answered a question poised by one of the talking heads. A question was posited in reference to what people should be or should have done during one of the panic days. He replied back (I’m paraphrasing to the best of my ability as I can remember) “He hadn’t any idea of what was happening or where it would go or end that day.” He told the story of his wife calling him asking what she should do and the best advice he could think of was to tell her, “to go to the ATM and withdraw as much as you can.” For even he had no idea.
That took great candor on his part to state that in my view. It also was a wake up call to anyone that if the some of the smartest credible guy’s in the business of money and markets didn’t have a clue – what did that say about the rest of them.
Today, these markets are at heights that even a correction down to those previous record levels would feel like the world is coming to an end. And what has been made more clear if one is paying attention?
If there were to be another panic of any sorts access to an ATM may be the least of most people’s problems. But there’s no need to be concerned. The world today is a far more tranquil stable place or environment than it’s ever been. Not only that: “The Fed’s got your back!” Right?
Nothing to see here folks, move along is today’s newest
battle rally cry.
For myself I’m still a believer that opportunity abounds no matter the times if one truly remembers and understands: Some of the greatest opportunities in both one’s personal and business life, is if you can keep you wits about you while everyone is losing theirs. That’s the true reason why you always need to pay attention and have plans of action in place.
Personally, I’m paying even more attention now than I have in recent years for as Andrew Carnegie famously said, “The older I get the less I pay attention to what men say, and pay more attention to what they do.”
I believe watching the fortification or installment of legal “gates” as a barrier to one’s money is far more important than hearing another reason why I need to “buy the all time high” for the gazillionth time. But that’s just me.
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