A Rising (Central Bank) Tide Turns Everyone Into A Genius

Tyler Durden's picture

Authored by Charles Hugh-Smith via OfTwoMinds blog,

Until the system implodes--you're a genius.

So you've ridden the markets higher--stocks, housing, commercial real estate, bat guano, quatloos, you name it--everything you touch turns to gold. What can we say, bucko, other than you're a genius!

It's a market truism that rising tides lift all boats. But that's not the really important effect; what really matters is rising tides turn everyone into a genius--at least in their own minds.

Those of us who have been seduced by the Sirens' songs of hubris know from bitter experience how easy it is to confuse a rising tide with speculative genius. When everything you touch keeps going higher, the only possible cause is.... your hot hand, of course!

Stocks--I'm a genius! Housing--I'm a genius! Commercial real estate--yes, well, I suppose the evidence is overwhelming--it does seem I'm a genius.

The only thing better than buy and hold is buy the dips and hold--and use margin or whatever leverage you have to buy more before the price goes even higher.

What can we say other than: this is the strategy of geniuses. The proof is in the charts:

The S&P 500: margin to the hilt and buy every dip: genius!

Housing in Sweden, Toronto, Brooklyn, West L.A., San Francisco, Seattle, Portland, Shanghai and every other blazing-hot market: borrow more from the shadow banking system, mortgage your house to the hilt, do whatever you have to do to get the down payment and buy another flat: pure genius!

Commercial real estate: everyone who jumped in with all four feet in mid-2009 forward: geniuses!

The source of our collective genius isn't an act of Nature--it's that good old pump inflating every asset bubble on the planet, central banks creating credit-money out of thin air and buying assets hand over fist: stocks, ETFs, bonds, mortgages, and so on.

Central banks have collectively purchased $1 trillion in assets year to date:

The Federal Reserve and the other central banks are playing the role of financial gods, intervening in the interactions of mere mortals to create the illusion of stability.

To this end, the Fed has created trillions of dollars and used this money to prop up delusional asset values (high) and destabilizing interest rates (low).

If we look at a decentralized financial system as a self-organizing ecosystem, we find that the strength of the system lies in the adaptability of the myriad organisms in its many micro-climates. The key strength of a decentralized financial ecosystem, i.e. one not organized as a top-down command economy, is the "genetic diversity" of its many participants. There is not just one dominant species in the ecosystem, but many interdependent species.

In a financial ecosystem, there is not one lender and one class of borrowers, but a huge diversity of lenders, borrowers, creditors and savers, and a wealth of interacting, inter-dependent enterprises.

A centrally planned financial ecosystem is a doomed system. The Fed is the equivalent of an ignorant, hubris-infused agency that seeks to "restore" an ecosystem by flooding it with water and unleashing a single predatory species raised in an unnatural, contrived "factory."

The Fed is wiping out diversity and thus the adaptability of the enterprises that survive its crude flooding and replication of a single predatory species.

The Fed is creating a sickly, vulnerable mono-culture of an economy, one dominated by financial predators which are themselves lacking in genetic diversity.

Just as agencies playing god further degrade the natural systems they claim to be "restoring" with ever-grander interventions, so too is the Fed destroying the U.S. economy with equivalent god-like meddling and ever-more grandiose, ever-more delusional interventions in what were once decentralized, self-organizing systems that naturally sought harmony and stability through the low-level churn of bad bets being written off and over-leveraged speculators going bankrupt.

Put another way: the Fed has taken the risks generated by predatory institutions and policies, and distributed it throughout the entire financial system. This distribution of risk in service of maintaining asset bubbles creates the illusion of stability, low risk and "sure thing" speculation.

Rather than let over-leveraged speculators and institutions reap the consequences of their excesses, the Fed (and other central banks) have loaded the entire system with risk.

Until the system implodes--you're a genius.

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LawsofPhysics's picture

A genius you say? Priced in what exactly?

"Full Faith and Credit"

hedgeless_horseman's picture


"You Gotta Be Johnny On The spot With The Ammo, got it? Or We're Dead."


Zimbabwe was full of this exact same kind of genius...



What is the con?  The con is that economic growth is both good and real.  It is most often neither.  The long con is nominal returns versus real returns. 


What keeps the con going?  Apart from greed?  Money printing.  


Please, understand that if the amount of money in a closed system doubles, the value of each monetary unit halves, and the price of everything, including stocks, increases 100%.



Ghost of PartysOver's picture

For a more current picture look no furhter than Venezuela.  Now that is an impressive return.  Well, until you factor in the currency issue.  https://www.bloomberg.com/quote/IBVC:IND

JRobby's picture

Smells like "The Tech Bubble !!!!"

Cue Up A Graph of "the cyclical fleecing of the sheep"

Greenspazm's picture

So where is the rest of the chart? The interesting part?

Macavity's picture

Love it. Thing is, it is a closed system-- just slightly bigger (all USD vassals), trickier than mainstream economics lets on (far more money creators than fathomable), and it's not just t=0 it's t>=0.

Wang Dang SP's picture

Daddy, can I have a central bank for Christmas?

D3vildog's picture

I'm tring to decide which comes first: whether or not Centeral Bankers will get Carprel Tunnel from adding Zeros or this shit show all comes crashing down.

BigFatUglyBubble's picture

Naw they are good.  They have one of those "drinking birds" over the "P" key.

Consuelo's picture



Blogging furiously with a re-hash of the same 'ole shit since 2008 on a daily basis?


Now that's Genius.   

Soul Glow's picture

I would never refer to a trickster as a genius.  Clever, cunning, sure, but genious implies creativity.  There is nothing creative about the accounting mechanisms used by banks, nor is it genious to conjour up a debt load of monsterous proportions.  Sure let's give them credit in instigating the largest wealth gap ever known, and fooling the common people they have the best interests of humankind in mind, but this is no magic, and merely smoke and mirrors.

Creativity is deeper than just illusions.  Creativity stands the test of time.  It is "Chinatown" or The Beatles catalougue.  It is Monet's depth, and Bach's power.  It is Hemingway's wit, it is Tesla's inovation.  What it is not is the lies that bankers tell to fold an economy in on itself to better a sliver of the population.  Genius lies not in the destruction of something but in its creation.

So no, there is no award to be given to the bankers.  Cold dark nights, gullitines, yes, but no medals of merit.

Seasmoke's picture

The Tribe doesn't believe in the truth.

BigFatUglyBubble's picture

There's a chinese guy in the documentary "Inside Job" (reccomended btw) and he says something like "why should a financial engineer make 10x more than an actual engineer?  An engineer builds bridges, a financial engineer builds dreams.  But in this case (2008 crisis), those dreams turned out to be nightmares."

Snaffew's picture

maybe they are just running these markets up prior to a major asian military conflict.  Whatever...the lunacy continues.

illuminatus's picture

It's turned me into a complete asshole for listenig to the above crap for the last 7 years.

hedgeless_horseman's picture


It's nice to have a place like ZH where we fit in, however, if I have to be honest about it, I was an asshole long before all of this.

SeuMadruga's picture

Hang on a couple of years, the pendulum might be just about to turn in our favor !

VWAndy's picture

 85 billion a month buys a lot of bunny rabbits and sunshine. When they pull the rug out again we gonna find a smoking whole where the economy once was.

vegas's picture

What would you suggest the alternative was Chuck, do the opposite and be an idiot so I can say I lost money like you? Markets make everybody look like a genius for 15 minutes no matter what you do. Until it stops working Chuck, what do you do?



NO QANA's picture

As they say timing is everything. Vegas, and Russian Roulette.  Enron was a good bye once too.......

Bastiat's picture

Somehow those charts remind me of that famous line from Fear and Loathing in Las Vegas:

"When it comes to that fantastic note where the rabbit bites its own head off, throw the radio into the bathtub."

foxenburg's picture

"everything you touch turns to gold..."


except gold.


which turns to shit.

VWAndy's picture

 At least start thinking in barter terms folks. This fiat logic is pure insanity and its going to get a large % of people into deep shit. The only way to protect youre livelyhood is to control as much of it as possible. 

  Its all about the producers they are the only ones that matter.


NO QANA's picture

Riding phallus.... fed blue pill style

Snaffew's picture

whacky ass trading in the markets today...a lot of sharp moves in both directions.

NO QANA's picture

One Does not simply time the the market without expecting the whole bubble to burst. Ned Stark I think he lost his head.

bobdobolina's picture

Genius is defined as doing the same crazy thing over and over again. Including creating an asset bubble in 2005-2008 and again in 2017.

bardot63's picture

I can guarantee a market crash by Friday--60-70% crash.   I just have to put $1,000 in an S&P fund today.   Never fails. 

Blankfuck's picture

All Genius! Fed reseve Fuckers, Goldman Sachs Fuckers, Central Bank Fuckers, Elite Fuckers, CEO Fuckers, Political Fuckers---Just buy any Fucking dip!-----All Genius! Fed reseve Fuckers, Goldman Sachs Fuckers, Central Bank Fuckers, Elite Fuckers, CEO Fuckers, Political Fuckers---Just buy any Fucking dip!-----All Genius! Fed reseve Fuckers, Goldman Sachs Fuckers, Central Bank Fuckers, Elite Fuckers, CEO Fuckers, Political Fuckers---Just buy any Fucking dip!-----All Genius! Fed reseve Fuckers, Goldman Sachs Fuckers, Central Bank Fuckers, Elite Fuckers, CEO Fuckers, Political Fuckers---Just buy any Fucking dip!-----

Let it Go's picture

One indication of just how messed up and flawed the global markets have become is reflected in the way central banks across the world are now buying stocks. This has become a part of their response to correcting the forces of past excesses.

One thing is clear, the central bank's large foray into stock ownership represents more than just a moral hazard and in many ways, it paves the path for a liquidity crisis in our future. More on this subject in the article below.


Austrian Peter's picture

"It's a market truism that rising tides lift all boats. But that's not the really important effect; what really matters is rising tides turn everyone into a genius--at least in their own minds."

It happened to me in 2000.  I rode the 1995-2000 stock market rise here in UK and thought I was some kind of financial genius - then the Dot-com tumble came and I got out, but not after some nasty losses - Marconi comes to mind - lost £2k on this one and it hurt.  Learned my lesson though - now I'm all cash and gold with a little agri and utilities.  Need to learn by our mistakes, but the FED will never learn - Phds are bred that way.