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Guest Post: Everything You Know About Markets Is Wrong?

Tyler Durden's picture





 

Submitted by Eric L. Prentis,

The financial elite—using academe for intellectual cover—want you to believe that markets are efficient, as defined by the Efficient Market Theory (EMT). My research strikes down this hoary old EMT economic dogma, used by duplicitous bankers and hedge fund managers to con US politicians and 99% of Americans.

The Efficient Market Theory (EMT) is a significant foundation theory in economics. Prove the EMT wrong, and economics becomes largely an empty shell. Therefore, the EMT is the most important fundamental issue in economics and for America.

US politicians mistakenly use EMT based economic theories to pass laws favorable to Wall Street. First causing and now worsening the credit crisis. Examples of credit crisis enabling legislation include:

  • Gramm–Leach–Bliley Financial Services Modernization Act of 1999
  • Commodity Futures Modernization Act of 2000
  • Bankruptcy Abuse Prevention and Consumer Protection Act of 2005
  • Jumpstart Our Business Startups (JOBS) Act of 2012

Three tenets define the EMT.

  • The first tenet—that markets are in equilibrium and if unexpected events cause disequilibrium, it is only temporary because markets are self-equilibrating—is disputed in the literature. A stock market always in equilibrium and efficient is impossible because traders have different endowments, beliefs and preferences. In addition, arbitrage costs throw markets out of equilibrium.
  • The second tenet—that stock prices “fully reflect” all information—has long been challenged in the literature, with many inconsistencies reported. Tenet number two goes on to say asset prices properly represent each asset’s intrinsic value, and as a result, prices are always accurate signals for capital allocation. Researchers in behavioral economics find fault with this EMT assumption, because it does not account for human nature and inherent herding behavioral instincts of market participants. EMT theorists—Eugene F. Fama and Burton G. Malkiel—claim assuming market equilibrium is close enough to reality, and that research into EMT tenet two contests only the semi-strong form of efficiency. That is, where earning higher returns than the stock market, with lower risk, is not achievable by knowing all publicly available information. EMT theorists continue to support the EMT and say, “If you want to do better than stock market returns, you have to take on more risk than the stock market.”
  • EMT tenet number three is most important—that is, stock prices move randomly or are uncorrelated with, if not independent of the prior period’s price change. Therefore, earning higher returns than the stock market, with lower risk, is impossible to achieve using only past prices (i.e., technical analysis stock trading rules or stock charts). Empirically prove EMT tenet number three wrong— because it tests the weak form of market efficiency—and the EMT is wrong, period!

EMT theorists specify two methods to test EMT tenet number three. The first method is statistical inference. Calculate serial correlation coefficients of stock price changes. If the serial correlation coefficients are zero or close to zero, this supports assuming serial independence in the price data. Therefore, one can infer that technical analysis stock trading rules cannot work. The second method requires using a technical analysis stock trading rule predictive model that forecasts the future, based solely on past prices—where expected profits are greater and risk lower than they would be under a naïve buy-and-hold policy.

 

Research that supports the EMT makes one-or-all of the following mistakes:

  • Using the wrong data—Systemic market risk and random unsystemic risk make up individual company stock price movements. As much as 50% of a company’s stock price actions are random unsystemic risk variations associated with the internal circumstances within that particular company. The remaining 50% of a company’s stock price movements represent the systemic risk of the overall market. The random unsystemic risk is the chaotic portion of the stock price data—that if removed leaves only the systemic market risk of the overall market, which may then be analyzed. Most EMT research studies day-to-day stock price movements of individual companies, which is mistaken. Granted, this unsystemic and systemic, day-to-day individual company data look random, but it is the wrong data to analyze to determine overall, long-term market trends.
  • Using the wrong method to analyze the data—Most researchers use statistical inference to test tenet number three. However, there is a serious problem with using statistical inference to test whether stock price data are independent. That is, it is difficult to distinguish between a rootless series and one where the systemic quality is faint. Research shows that five-thousand years of data are needed to identify independence in stock price data using statistical inference. However, these data do not exist. Consequently, statistical inference is not the correct method to use to test tenet number three.
  • Jumping to mistaken conclusions based on half-truths—Statistical inference tests using day-to-day individual company data report serial correlation coefficients that are close to zero. This supports assuming serial independence in the price data. Therefore, one can infer that tenet number three is valid. Unfortunately, this proves nothing of the sort. Analyzing the wrong data over an inadequate number of years simply gives a false positive.

 

What day-to-day stock price movements are for individual companies is the wrong research question. Instead, we want to know what the overall stock market is doing over the long term. The correct way to look at market data follows.

 

Using correct data—Individual company stock price behavior, which includes the randomness of unsystemic risk, is not evaluated. Instead, only systemic market risk is analyzed in my published journal research—please see here and here—by comparing only systemic market risk of two well-diversified S&P 500 Index portfolios. S&P 500 Index portfolio B is for active trading and S&P 500 Index portfolio A is the benchmark portfolio. Focusing only on systemic market risk in the data studied, removes much of the random or chance stock market price behavior of individual companies.

When investing over 1, 2, 3, 4, 5 years or more—day-to-day stock price movements are immaterial to trading success and may be thought of as just daily market chatter. Concentrating on daily price movements of individual company stock or the stock market as a whole is not the correct question. Day-to-day stock price action is volatile. To dampen out this daily chatter and give perspective to what is occurring long-term in the stock market, S&P 500 Index “monthly price data” are used to smooth out stock price volatility.

Monthly price data are important in dampening out day-to-day price movements. However, using last month’s price to predict next month’s price is also not conducive to long-term trend development. To further smooth price variations and focus on systemic stock market risk. Nine and two-month simple moving average (SMA) trend lines are fit to the S&P 500 Index monthly price data for actively managed portfolio B. Smoothing out data volatility, which gives an overall view of the long-term stock market trend. This is the third step in removing much of the random stock market price behavior from the research data.

Focusing only on systemic stock market risk in the monthly data and smoothing stock price volatility using nine and two-month SMA trend lines for the well-diversified S&P 500 Index portfolio B—to lessen random variations—is a major difference between my research and other EMT research in the literature, and a major reason the results are so significant.

My research covers 1871-through-2008, 138 years. All available Standard & Poor’s (S&P) 500 Index data are included in this research study, making it the longest duration and complete in the literature.

 

Using the correct method to analyze the data—Fama’s approved second method for testing the EMT, requires using technical analysis. Fama says to develop and test, over both good and bad economic conditions, a technical analysis stock trading rule predictive model that forecasts the future, based solely on past prices—where expected profits are greater and risk lower than they would be under a naïve buy-and-hold policy.

My empirical research method directly tests stock market price independence of EMT tenet number three, using a new technical analysis stock trading rule predictive model. To test whether expected profits are greater and risk lower than a benchmark naïve buy and hold policy, which Fama calls, “an equally valid scientific method versus statistical inference.”

 

Empirical results—In my US stock market research, the relative maxima and minima stock trading rule S&P 500 Index portfolio B—by $495,360 dollars (i.e., $580,423 - $85,063)—makes +582% more money than buy-and-hold S&P 500 Index portfolio A—and is only 64% as risky over 138 years—from January 1871 through December 31, 2008.

 

The new technical analysis relative maxima and minima stock trading rule predictive model makes substantially more money at significantly less risk than the naïve buy-and-hold policy. EMT theorists say this thorough beating of the US stock market should be impossible to achieve using only technical analysis. Thus, tenet number three and the weak form of the EMT are invalid, making the Efficient Market Theory wrong, period!

 

Discussion

 Neoliberal economic philosophy, starting around 1980 and now mainstream in academe and American politics, promotes laissez-faire economic policies of reducing the size of government, deregulation and privatization of government services. Neoliberal economists base this philosophy on the belief that neoclassical economic theory is correct. That is, that “markets are efficient”—my research shows the EMT is dead wrong.

Gullible US politicians believe that markets are efficient and defer to them. Therefore, US politicians abdicate their responsibility to manage the overall economy, and happily for them, receive Wall Street money. Mistakenly, the primary focus during the 2008 credit crisis is on fixing the financial markets (Wall Street banks) and not the “real economy.” 

Wall Street touts markets as trustworthy and infallible, but that faith is misplaced. Big market players easily manipulate markets. For example, by changing accounting laws so banks no longer have to mark-to-market, High Frequency Trading (HFT) front running, and multinational companies buying back their common stock shares, along with favorable huckstering of stock positions on CNBC—owned by Comcast and General Electric. In addition, Chairman Bernanke, because of his Quantitative Easing II, takes credit for the Russell 2000 Index of small company stocks reaching an all-time high of 860.37.

The Federal Reserve (Fed) talks of added quantitative easing (QE), but this would mainly help the richest 1% of Americans and hurt the “real economy,” with higher gasoline and food price inflation. Unfortunately, QE only helps overinflate the stock and commodity markets by manipulating prices. Despite Fed programs QE I&II and Operation Twist, America is experiencing the worst economic recovery from a recession, ever! President Obama, if he wants to lose the 2012 election, will let Bernanke electronically print more QE money and make the “real economy” worse than it otherwise would be.

The continuing credit crisis is serious—with the world economy poised for a double-dip recession. The current US government policy of increasing the national debt by $5 trillion dollars over the past four years, keeping insolvent banks from going bankrupt, a Federal Reserve zero interest rate policy (ZIRP), causing malinvestment, and monetizing the national debt (which is what tin-pot dictators do just before they are forced to flee the country) with quantitative easing by the Fed, and austerity for the 99% to repay bad bank loans has not worked—and doing more of the same will not work—and defines insanity.

 

The financial elite are using this “cover-up and pray” policy—hoping that rekindled “animal spirits” will bring the economy back in time to save the status quo. This is impossible because the trust is gone. The same sociopaths control the economy. Instead, the financial elite are just protecting themselves with outlandish pay bonuses, based on cooked books; while the “real economy” flounders with high unemployment, unsustainable budget deficits, a struggling real estate market, and low capital formation, crumbling infrastructure and high gasoline and food price inflation.

 

Conclusion—this is what to do:

  1. Reenact the Glass-Steagall Act. Allowing investment banks to speculate with savers’ money is criminal.
  2. The daisy-chained, unregulated $707 trillion dollar OTC Derivatives market will bring down the world economy, when it goes bust. JP Morgan’s recent huge OTC Derivative trading losses are a prelude to this eventuality, with many more instances to come. Start unwinding the OTC Derivatives market now, before it is too late.
  3. Insolvent banks are a drain on the “real economy.” Force insolvent banks to go bankrupt. TBTF is an irrational policy. Allow capitalism to work for the 1%.
  4. Public and private debt to GDP is about 360%, and 30% of Americans are being hounded by bill collectors for unpaid debts. Americans can no longer service their massive debt loads. Allow debt forgiveness for the 99% and institute austerity for the 1%—they can afford it.
  5. ZIRP is destroying capital formation and savers. Allow interest rates to rise, which will increase consumer demand. The Fed’s manipulation of capital markets causes malinvestment—resulting in crippling long-term penalties for the “real economy.”
 


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Mon, 06/11/2012 - 20:50 | Link to Comment reader2010
reader2010's picture

They know lies can become reality if they keep repeating them over and over again.  Nicely said but the proposals won't work, since they have passed all the necessary laws and set up FEMA camps for those that demand the real change.  Instead, give up your Empire citizenship and move out. 

Mon, 06/11/2012 - 20:51 | Link to Comment Michael
Michael's picture

The market will be taken advantage of in whatever state it is in. Quote me on it.

Mon, 06/11/2012 - 21:20 | Link to Comment veyron
veyron's picture

Except when its a market for ... STDs

Tue, 06/12/2012 - 00:16 | Link to Comment Precious
Precious's picture

Capitalism is dead.  For Americans, Greenspan killed it and Bernanke buried it.  

Time to move on.  There are no longer any free markets in the developed world.

There are only pigs telling the rest of the animals on the farm what to do.

Tue, 06/12/2012 - 01:30 | Link to Comment JOYFUL
JOYFUL's picture

..."Capitalism is dead.  For Americans, Greenspan killed it and Bernanke buried it."

Greenspan and the rest of the Koterie of "Objectivist|neo-liberal\neo-con\neo-trot" Khazarian Kooks embalmed "Kapitalism", and then set it loose as the zomby-fied, flesh-eating market manipulatin Monster that roams the Merikan heartland today.

As yu are clearly an aficianado of JRR, please go back and read the parts about the corruption of the Stewards of Gondor and the Kings of Rohan...then yu will better understand the role of the Greenspan and the whisperers*...and who works for whom.

*...'Kolonel House' be in the house when Tolkien set out to document the history of the fallen lands...Kolonel's Special Spices still poison the peeple today, through the ministrations of the usurers and their toadys to-day.

Tue, 06/12/2012 - 06:40 | Link to Comment TWSceptic
TWSceptic's picture

"Capitalism is dead.  For Americans, Greenspan killed it and Bernanke buried it.  "

 

They raped it, tortured it, killed it, urinated on the corpse, buried it, dug it back up, put their hand in the back of the head and made it dance, and then told everyone it's alive!

Mon, 06/11/2012 - 22:26 | Link to Comment bagehot99
bagehot99's picture

Markets ARE efficient when a buyer with a commodity to sell offers his good for sale to all comers. The buyers set the price efficiently. Financial markets are not even slightly the same, and they are manipulated mercilessly. They are rigged to benefit large, connected players at the expense of, umm, everybody else. HFT should be illegal. It has NOTHING to do with buying and selling goods on an open market, and everything to do with making big players bigger through technology investments that ordinary Americans cannot make.

Tue, 06/12/2012 - 02:36 | Link to Comment JOYFUL
JOYFUL's picture

Another mistaken assumption piled onto a massive slag heap of cherished myths...of the Santa Clause variety. There is no firewall between the 'financial' markets and commodity markets, or any other markets/ they're all phony, all rigged, and all belief in the sanctity of any 'markets' is  ideologically driven wishful thinking.

'Markets ARE efficient when a buyer with a commodity to sell offers his good for sale to all comers. The buyers set the price efficiently.'

Umm, sure bud....tho Austrian and Chicago School-boys luv to pretend that there is a way to quantify or explain inherently irrational actions thru their ouji-board subjective analytics...aka "a comprehensive theory for subjective value" -

the only unequivocable fact  in eCONomics  is that any transaction with multiple buyers present has the potential for distortions* of supposed pure trading...the dismal science of economics is especially dismal at accounting for the nature of 'human nature'/ which is a species of activity reflective of the struggle for survival which goes on in all living systems. 

Outside observers of this tendency of Europoids to indulge in cherished myths have developed systems to manipulate and profit from them: the best example of which is "libertarianism" = a wild west style  street lined with false front buildings into which pile dude ranch investors to plunk down their bags of gold dust for a shot of the 'whiskey-like' elixir of the "free" markets....

where 'everybody's a winner'!...\>:except the losers!!!!!!!!!!!!!!!!!

* distortion....a game of serial manipulation of naive investors\shell game onlookers played by sophisticated moneychangers...JPM. Barrick Gold. MFG...and other pillars of Kapitalism. 

edit- all downstrokes gleefully accepted...as further proof of the paucity of power to produce an actual argument that protects yur puppertmasters from the portrait produced!

Tue, 06/12/2012 - 04:22 | Link to Comment NidStyles
NidStyles's picture

Your post is all over the fucking place. You lack a  point and your message wasn't clear or concise enough to interpret one from it. 

 

Why do you allow morons like this to stay Tyler?

Tue, 06/12/2012 - 05:03 | Link to Comment JOYFUL
JOYFUL's picture

Though yu may lack the wit to digest and comprehend the simplest of concepts, and appear to be nothin more than a humorless Camp Fema inductee, there is no reason to suppose that being a moron would cause yu to be eliminated from the mix here Mr Snarly - there's room for everybody under the big tent!

Tue, 06/12/2012 - 23:34 | Link to Comment Flying Tiger Comics
Flying Tiger Comics's picture

Down twinkles. Or indeed Down Syndrome.

Tue, 06/12/2012 - 06:33 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

Allow me to help minus the colorful prose and graceful syntax, for I am another kind of poet...

Here it is in elementary formula format for simple digestion:

Economics = Politics

Economics ? Science

The "free" market is entirely subjective, there is no objective definition.

http://theorwellprize.co.uk/wp-content/files_mf/hajoonchang.pdf

Tue, 06/12/2012 - 07:17 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

There is a world of difference between hypothesis and theory.

"Economics ? Science"... I enjoy your posts Gene, but I take exception when people use economics and science in the same sentence... :)

Tue, 06/12/2012 - 07:29 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

The 'doesn't equal sign' is not allowed for plebs on these boards. Perhaps a contributor can help me out or a kind soul more clever with a keyboard. I can get this part: = just need a line through it.

Tue, 06/12/2012 - 08:14 | Link to Comment BigJim
BigJim's picture

Try this:   =/=

 

Tue, 06/12/2012 - 01:17 | Link to Comment Michael
Michael's picture

Lawyers For Ron Paul Civil Rights (Voting Rights) Lawsuit FAQ
http://www.youtube.com/watch?v=MPt2nlyfmfc&feature=youtu.be

Tue, 06/12/2012 - 01:46 | Link to Comment JOYFUL
JOYFUL's picture

in the interests of a "balanced perspective," and having allowed for enuff time to elapse in mourning for the parties respective of the latest and last 'dirty lowdown' to hit the folks still foolin themselves that there is a "political" solution to the "problem" of Merika's hebraic hijack...

hereeeeeeeeeeeeeeeeee's Jonny:

“Ron Paul, like Alan Greenspan, was heavily influenced by the Russian Jewess ‘Ayn Rand’... Ron Paul, the ‘Libertarian’ who wants to erode all the powers of the Federal Government which protect us from the Rothschild model of laissez faire Capitalism, in the name of ‘freedom’. Ron Paul equates personal freedom with ‘economic freedom’, meaning the ‘freedom’ of the Jewish Capitalists to steal our wealth with their monopolies, pollute our environment with their greed, fill our streets with drug dealers, and rob the nation of all our gold and other wealth in the name of creating ‘sound money’. -Christopher Jon Bjerknes

hey, jus sayin, eh? http://youtu.be/65EoK4OelZU Boz Scaggs\Lowdown

Tue, 06/12/2012 - 01:57 | Link to Comment LowProfile
LowProfile's picture

Seems like there were a lot of troll accounts made about a year ago being activated lately.

At least they're consistent.

Tue, 06/12/2012 - 02:40 | Link to Comment JOYFUL
JOYFUL's picture

hey, I hadn't noticed that...yu could be right!

anybody in par-tic-u=lar?

Tue, 06/12/2012 - 08:39 | Link to Comment Frein
Frein's picture

1) Rand was not a libertarian, she was an objectivist. In fact, she criticized libertarians quite a bit. Both philosophies see personal property as being integral to individual freedom but they are not the same.

2) Government can't give freedon, it can only take it away. Business cannot take away freedom because it can't use force. The government has a monopoly on that.

3) Monopolies are not a result of free markets. A monopoly is a very fragile state for a market and unless supported by government it will eventually crumble. The monopolist has no choice but to keep competing even in the absence of competition or face the threat from new entrants into the market.

4) You're wearing too many tin foil hats and not thinking clearly. If you understood basic economic principles, you'd know this.

Tue, 06/12/2012 - 08:39 | Link to Comment Frein
Frein's picture

1) Rand was not a libertarian, she was an objectivist. In fact, she criticized libertarians quite a bit. Both philosophies see personal property as being integral to individual freedom but they are not the same.

2) Government can't give freedon, it can only take it away. Business cannot take away freedom because it can't use force. The government has a monopoly on that.

3) Monopolies are not a result of free markets. A monopoly is a very fragile state for a market and unless supported by government it will eventually crumble. The monopolist has no choice but to keep competing even in the absence of competition or face the threat from new entrants into the market.

4) You're wearing too many tin foil hats and not thinking clearly. If you understood basic economic principles, you'd know this.

Tue, 06/12/2012 - 10:50 | Link to Comment capitalist bison
capitalist bison's picture

Well said.

Tue, 06/12/2012 - 13:10 | Link to Comment JOYFUL
JOYFUL's picture

... Rand was not a libertarian, she was an objectivist. In fact, she criticized libertarians quite a bit. Both philosophies see personal property as being integral to individual freedom but they are not the same.

I believe that yu have encapulsated the obvious in a manner heretofore not ever quite achieved on ZH. Kongrats. I do not know if there is a prize.

Rand started her peregrination from Trotskyite in Russia to refugee in bourgeois Chicago well before the beginnings of the industrialist-sponsored Mt Perelin gatherings that would lead to the creation of the so-call libertarian philosophy...it therefore STANDS TO REASON(humorless libertarians xcuse the pun>:\)that the very very proprietary, humorless, alphamale Rand was less than enamoured with what she\he saw as a strata of people competing* for her target audience...like her loose contemporary and fellow loonatic L. Ron Hubbard(Scientology TM)Rand wished OBJECTIVISM TM to be unchallenged in the "marketplace" of ideas...and yup...."criticized libertarians quite a bit"....

the rest of yur point by point is so similarly pedestrian, mundane, and stuck in a time warp of pubescent make believe that I simply will not use up the further space here necessary to dispense with it....what I know has no necessary point of reference to yur most dreary 'basic economic principles'...as,

like Cantillon before me, I survey the field of human activity and give precedence to what is observable, not what I need to believe in...no hat, foil or otherwise required...over-educated, under initiated libertarian dupes of the moneypower...foiled agin!...

*is it not endlessly amusing how "kapitalist\"free enterprise"\etc.etc.\pontificators are always aghast at competitive 'threats' to their particular brand of hegemony????  - Sir, yu bear a remarkable resemblance to the dog whom the magnificent magpies Heckle n Jeckle constantly tormented with his own befuddled ex-ist-ent-ial angst...please return here soon for more entertaining vignettes that bring back pleasant memories of my yuth!

Tue, 06/12/2012 - 18:50 | Link to Comment Totentänzerlied
Totentänzerlied's picture

Dressing up your grade-school rhetoric with mind-numbing stylistic abortions of English composition does not excuse you from anything, e.g. intentional near-incomprehensibility. You have told us nothing we did not already know, in particular, we knew you had nothing say, but required many words to say it.

On the scale of trolling, which runs from 0 ("would not be trolled by again") to 10 ("would be trolled by again"), you receive a 1 for name-dropping Cantillon. Your basic research into the subject matter is appreciated, the total lack of comprehension is discounted ex gratia.

Wed, 06/13/2012 - 02:58 | Link to Comment JOYFUL
JOYFUL's picture

Sir yu do me great favor by demonstrating the very point I was making....at yur[collective humorless libertarian]expense....the outrage of the very proprietary, property obsessed brooding n boring libertarian hack is exposed with the mere mention of my major man Richard Cantillon...whose work is not under copyright to the Mises Institute, to yurself, or to any other dupes of the moneypower...

fuss n fume all yu want Mr Wanker, the obsession with grading is merely more evidence of the grade school arrested intellectual development of the mindset yu represent...

libertarians have been used to being attacked n mocked by the max fischer type minions of the MSM here forever, but appear to be slack-jawed n apoplexic as realization begins to dawn upon them that their self professed status as the faux foes of 'the state' is being exposed for the preening n witless lie that it be!....and that a serious challenge to their lazy ascendancy here has been mounted!

To the banner, scions of Durrutti! Down with the phony foes of statism!

Mon, 06/11/2012 - 21:01 | Link to Comment stocktivity
stocktivity's picture

"The daisy-chained, unregulated $707 trillion dollar OTC Derivatives market will bring down the world economy, when it goes bust. JP Morgan’s recent huge OTC Derivative trading losses are a prelude to this eventuality, with many more instances to come. Start unwinding the OTC Derivatives market now, before it is too late."

Ok ...let's unwind $707 TRILLION. I'll take $25 (sorry....can't stop laughing)

Tue, 06/12/2012 - 07:26 | Link to Comment Snidley Whipsnae
Snidley Whipsnae's picture

OTC Derivatives Market = unprecedented quantity of bets by trading desks, none of which can cover the losses they stand to incur... fortunately, most of their bets are with each other so the possibility remains that they may all fail together... Simply wishful thinking on my part but would it not be an act to behold? ... The ten biggest slime ball banksters going down together?

Tue, 06/12/2012 - 08:40 | Link to Comment neversink
neversink's picture


On yur solutions:

1. Reenact the Glass-Steagall Act. I agree. How many politicians say the biggest mistake was revoking the Glass-Stagall Act?? All of them. How many politicians have offered legislation to reenact the G-S Act???? Not one!!!!!! What does this tell you?

4. On allowing debt forgivenes for the 99%. The government should have paid off everyone's mortgage -right or wrong - in the first place, rather than bailing out the banks. If everyone's mortgage had been paid off, then the banks would have gotten their money back from the loans, toxic assets would have gone away, people would have had money to spend, and there would have been no QE or twist!!!!! But No, the people of this country are not too big to fail.... only the banks and AIG. 

Mon, 06/11/2012 - 20:50 | Link to Comment johansen
johansen's picture

Allow debt forgiveness for the 99%...and the committee of 300 will start WWIII

Mon, 06/11/2012 - 20:55 | Link to Comment uno
uno's picture

I expect O to promise student loan debt forgiveness in Sept/Oct timeframe, not that he would follow through (why should that be the first).  Debt forgiveness will be used to get groups fighting each other, politicians love to promise and never deliver.

Mon, 06/11/2012 - 21:41 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

Yeah. Just like he said he promised he would stop the raids on medical marijuana clinics.

 

Suckerz.

Mon, 06/11/2012 - 23:43 | Link to Comment XitSam
XitSam's picture

Yeah. Just like he promised to immediately close Guantanamo.

Suckerz.

Tue, 06/12/2012 - 07:53 | Link to Comment Bob
Bob's picture

And he'd be marching with labor if it came under attack.  LOL. 

Mon, 06/11/2012 - 20:58 | Link to Comment reader2010
reader2010's picture

I thought they have already started that right after 9/11. 

Mon, 06/11/2012 - 21:14 | Link to Comment 10mm
10mm's picture

There gonna do it anyway.Bombs away.

Mon, 06/11/2012 - 20:52 | Link to Comment Bringin It
Bringin It's picture

If wishes were horses

Pigs would ride.

Mon, 06/11/2012 - 21:38 | Link to Comment New_Meat
New_Meat's picture

yep

Mon, 06/11/2012 - 20:53 | Link to Comment Bill D. Cat
Bill D. Cat's picture

Markets are efficient and governments are getting smaller .......

 

... these are not the droids you are looking for ( theatrical arm dismissal for effect ) .

Mon, 06/11/2012 - 23:26 | Link to Comment Bill the Cat
Bill the Cat's picture

Pfthwebt!!!

Mon, 06/11/2012 - 20:54 | Link to Comment lailapa
lailapa's picture

World War III - The first private war in history

Those who won all battles shall lose the war.
Bilderberg Group and the crimes against humanity.

http://eamb-ydrohoos.blogspot.gr/2012/02/world-war-iii.html

Mon, 06/11/2012 - 20:57 | Link to Comment Martial
Martial's picture

"Start unwinding the OTC Derivatives market now, before it is too late."

 

The derivatives market is DESIGNED for endgame

Mon, 06/11/2012 - 22:07 | Link to Comment disabledvet
disabledvet's picture

I agree with this. The point of the derivatives market is to protect us from risk not create it. Some (for want of outrageous pay?) beg to differ? Anywho if the risk is "merely the entire Continent of Europe" I'm sure the only problem is with something called "efficient market theory."

Mon, 06/11/2012 - 20:57 | Link to Comment John_Coltrane
John_Coltrane's picture

I'll believe your thesis dear author if you can tell me one thing:  What is the correct price for a gallon of milk? 

Can't do it can ya?  That's why markets are necessary despite their flaws.  QED

"Laissez Faire Capitalism is worst economic system except for all the others" 

Mon, 06/11/2012 - 21:43 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

Markets are not efficient, as defined by the EMT and are easily manipulated by the big players. Please see my published journal research— here and here.

 

Politicians managing the overall economy should not think markets are sacrosanct.

Mon, 06/11/2012 - 22:14 | Link to Comment disabledvet
disabledvet's picture

EMT is just a way to EXPLAIN market moves moron. Not THE way. Focus your hocus pocus with another truly gullible set. Wall Street itself comes to mind.

Tue, 06/12/2012 - 08:25 | Link to Comment BigJim
BigJim's picture

 Markets are not efficient, as defined by the EMT and are easily manipulated by the big players. Please see my published journal research— here and here.

Politicians managing the overall economy should not think markets are sacrosanct.

Markets may not be efficient. But they're a damn sight more efficient than bureaucrats attempting to set prices for political reasons.

Virtually all the manipulation we're seeing now is a result of government-induced distortions in the price of money - ie, a fiat currency and a cartel of financial institutions that can create almost unlimited quantities of it through leverage. This is because of the regulatory framework, not despite it.

You need to understand the monetary system, Mr. Prentis. Until you do, you're like the architect who tries to analyse why a building falls down.... without having any knowledge of the underlying quickmud.

Tue, 06/12/2012 - 09:07 | Link to Comment Zero Govt
Zero Govt's picture

Eric L.P.

i like the idea of elected representatives though when you actually study the actual process (you should try one day) you realise they're mostly just other peoples (corporate) puppets which is a bit of a bugger regards democracy don't you think?

my other problem is not knowing what another person can do for me better than i can myself. What does your local politician represent for you that you couldn't do for yourself?

My view is Govt is not a representation of the people but an ingrained intrenched self-interested beauracracy intent at expanding its own office with power over the people and by thieving their money. Govt is all about Govt, it hasn't the feintest clue who you are, doesn't give a monkies what you want and if you asked it would give you a form and tell you to get lost.

then there's another problemo, giving politicians the High Horse to "manage the economy". Don't know if you've switched on Reality TV anytime in the past 4 years but every Govt in Europe is bankrupt, nearly every town, State and the US national Govt itself is up Financial Creek without a paddle. Spent themselves into oblivion old boy, no financial discipline or commercial wisdom whatsoever: ignoramus spendaholicus (that's Greek for politician)

So how do you expect these economically illiterate, pea-brained, sloppy windbags to "manage" the commercially disciplined, clever sharp cookies in the private sector when the bloated brats of the public sector is such a f'ing shambles???

Lastly if the free market is not "sacrosanct" can you give a single example in the millions available over the Centuries of where a clueless Govt or piss-headed politician has improved on the free market, any market?

I'm all ears...

PS. I agree with you on EMT regards stocks etc. The stock market has a completely different pricing mechanism to a free market, and it's nothing to do with 'efficiency'"

Mon, 06/11/2012 - 23:11 | Link to Comment Overfed
Overfed's picture

The correct price for a gallon of milk is 2.25 grams of silver.

Tue, 06/12/2012 - 01:26 | Link to Comment Uber Vandal
Uber Vandal's picture

In regards to the correct price for a gallon of milk, regulations strike again:

http://www.referenceforbusiness.com/industries/Agriculture-Forestry-Fish...

However, the government continued to set minimum prices for milk, based on the farm's distance from Eau Claire, Wisconsin, which is in the heart of dairy country. Theoretically, the price was based on how much shipping milk from Eau Claire would cost if supplies were not available locally. Milk for drinking was worth between one and two cents more per gallon for every 100 miles from Eau Claire. Under this policy, farmers in Texas were paid more for milk than Wisconsin dairy farmers. And processors had to pay at minimum a regional price set by government guidelines. Milk has been the only commodity for which the agriculture secretary can dictate the minimum price to be paid a farmer.

Also, California cows ARE NOT happy cows.

Mon, 06/11/2012 - 20:59 | Link to Comment Sophist Economicus
Sophist Economicus's picture

Wow!   What a disjointed article.    From EMT to stock prices to economic policy to poor bumbling politicians to Glass-Steagall to the 99% to FED bashing

And HE PROVED EMT wrong in the article too!

Genius, shear genius.   Glad I was here

LOL

Mon, 06/11/2012 - 21:22 | Link to Comment Boxed Merlot
Boxed Merlot's picture

Everything You Know [About Markets] Is Wrong?...

 

Don't crush that dwarf, hand me the pliers.

Georgie Tirebiter

Tue, 06/12/2012 - 00:46 | Link to Comment OpenThePodBayDoorHAL
OpenThePodBayDoorHAL's picture

I thought it was Porgie who said that, about his entrenching tool. "We're marching marching to Shibboleth, with the Eagle and the Sword (eagle and the sword) SWORD!"

Anyway, Eugene Fama, who invented the Efficient Markets Hypothesis, finally admitted "it's never been an empirical success." 'Nuff said.

Mon, 06/11/2012 - 21:51 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

A great deal of ground is covered in this article, but it holds together if studied carefully. The article is a summary of my published research disproving the EMT. Please see here and here.

Mon, 06/11/2012 - 21:05 | Link to Comment Zero Govt
Zero Govt's picture

Mmmm?! 

interesting article until you became a politician yourself with your 5 Point Plan

you may disagree with Efficient Market Hypothesis but surely you must understand people pretending they can order the market and economy about, like meddling politicians, is as bigger 'No No' as thinking you can explain markets with a single theory ...yes?

the key to the free market is that it's free (of all rules, Govt and political intervention) and free of people 'from above' who think they can resolve non-issues with rules or laws or other worthless philosophical crap like that

hope we're all crystal clear now, we all mind our own business and let the market work its wonders

 

Mon, 06/11/2012 - 21:39 | Link to Comment r00t61
r00t61's picture

The author correctly identifies sociopaths in government, working in concert with powerful monied private interests, in a giant circular continuum of corruption and bribery, as central causes of the the world's economic ills, and then proposes solutions that would require that same sociopathic government to intentionally and deliberately reign in the power and reduce the wealth of the monied interests,

Is this hopium, or did the author forget his /sarc tag?

If he wants to ding EMT or neoliberal eCON, whatever, more power to him.  Me, I'm going to ding his belief in the magical power of government to somehow right wrongs and do good for "the little guy."

As Rothbard once said, "Government is nothing more than a criminal gang, writ large."

Mon, 06/11/2012 - 22:01 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

I do not discuss the ideal of free markets in the article. I only say that markets are not efficient, as defined by the EMT.

 

Elected politicians are charged with managing the economy for the benefit of most people. No one else or nothing else should take their place.

Mon, 06/11/2012 - 22:30 | Link to Comment Matt
Matt's picture

Managing the economy? Please clarify what you mean by "managing".

Also, please share the formula to get +562% returns with 62% risk, thanks.

Tue, 06/12/2012 - 09:23 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

Matt says “Also, please share the formula to get +562% returns with 62% risk, thanks.”

Please see my published journal research— here and here.

Tue, 06/12/2012 - 08:38 | Link to Comment BigJim
BigJim's picture

 I do not discuss the ideal of free markets in the article. I only say that markets are not efficient, as defined by the EMT.

Well, you've got yourself a conundrum then, haven't you Eric? As we don't have anything like a free market, you can't disprove EMT by looking at how our 'markets' operate.

Elected politicians are charged with managing the economy for the benefit of most people. No one else or nothing else should take their place.

Another conundrum! Yes, elected politicaians are charged with managing the economy, which is exactly the problem. They're utterly incapable of doing any such thing, which is why 'nothing' is exactly what should take their place.

The rule of law should keep the markets free by punishing fraud and preventing force. The invisible hand will take care of the rest, far more efficiently than a bunch of political hacks and their chosen technocrats could ever do.

In our majoritarian democracies, the politicians are merely the enablers of what has become a system of negative-sum coercive transfers of wealth between the poltically-favored and the politically not-so-favored. Take away their power to distort markets and you take away the power of the oligarchs who use them as cat's-paws.

Tue, 06/12/2012 - 08:51 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

'Another conundrum! Yes, elected politicaians are charged with managing the economy, which is exactly the problem. They're utterly incapable of doing any such thing, which is why 'nothing' is exactly what should take their place.'

How ‘free’ a market is cannot be
objectively defined. It is a political definition. The usual claim by
free-market economists that they are trying to defend the market
from politically motivated interference by the government is false.
Government is always involved and those free-marketeers are as
politically motivated as anyone. --Ha Joon Chang

'Nothing' is the answer the corpo-fascists would love for you to believe. Unfortunately this has now fully infiltrated 'libertarian' ideology furthering the confusion which is slowly leading to absolute chaos. Market Nihilism I like to call it.

You have to stop and reflect here.

 

Tue, 06/12/2012 - 09:35 | Link to Comment Zero Govt
Zero Govt's picture

there are many free markets humming along day after day, turning over $billions, supplying happy consumers, progressing every year, not a regulation, Law or lawyer in sight

it's called the Black Market

and it works brilliantly as (nature) intended because the free market has its own mechanisms for improving/change. It's called competition and consumer choice. It doesn't need a windbag (politician) to work nor does it require a pompous bunch of frozen turkeys (the legal system) to sort its issues out

if consumers are unhappy they walk, to a competitor. That is the market mechanism. 

and these free markets work around the clock, no pension entitlements, laws or other absolute State bollocks required. In fact they not only work, they work despite the State trying to oppress them, and run rings around the State while they're at it (not a single jail in the West is free of drugs etc)

the free market, taking the piss out of the retarded State for centuries.. and all the better for it

Tue, 06/12/2012 - 09:51 | Link to Comment AnAnonymous
AnAnonymous's picture

Quite a romantic view on the black market.

Tue, 06/12/2012 - 19:54 | Link to Comment Zero Govt
Zero Govt's picture

not romantic at all, reality

the drugs market works day in day out and turnsover $100's of Billions more than pretty much any other market in the 'official' regulated economy

how's the US housing market doing, that public-private partnership of DC and WS ?

despite decades of failed State oppression the drugs supply hasn't had a blip at anytime... the US housing market is a disaster, the healthcare market is an expensive joke, highly regulated pensions and banking industries are falling apart at the seems

drugs just keep on rolling, because it's a free (from Govt) market

Wed, 06/13/2012 - 12:52 | Link to Comment Matt
Matt's picture

And there is no fraud, violence or exploitation in the Controlled Substance Market at all!

Tue, 06/12/2012 - 23:41 | Link to Comment Flying Tiger Comics
Flying Tiger Comics's picture

Black market wonk!

 

That I should live to see the day.

 

The arms trading, whores, drugs and slavery- all just necessary byproducts of the pure market one supposes.

Tue, 06/12/2012 - 11:45 | Link to Comment BigJim
BigJim's picture

 'Nothing' is the answer the corpo-fascists would love for you to believe.

As usual, you conflate a minimal (and essential) role for government preventing force and fraud, with our current full blown oligarch-enabling regulatory regime.

Where's your buddy LetThemEatRand with her usual Statist strawmen? She should be all over this page like a rash.

 

Mon, 06/11/2012 - 21:03 | Link to Comment eddiebe
eddiebe's picture

All the conclusions are of course correct and would be effective, but they have no chance of being implemented because it would reverse the flow of money from the top to the bottom.

Mon, 06/11/2012 - 21:14 | Link to Comment Paul Atreides
Paul Atreides's picture

What if the bottom were all armed, desperate and pissed off?

Mon, 06/11/2012 - 21:23 | Link to Comment Zero Govt
Zero Govt's picture

if the bottom are all armed, desperate and pissed off it's precisely because the rules, laws, legislation and regulation does not work and have taken it into their own hands because the Law has never worked as a system of 'justice'

Feel any benefits from Franken-Dodd yet?

Nor the fuck will you ...2,800 worthless pages of dross if ever there was

The law can't even enforce basic theft Law in the Corzine scandal it's that pathetic and corrupt

Tue, 06/12/2012 - 08:03 | Link to Comment Bob
Bob's picture

Government is like a gun.  It can used for good or evil.  Expecting it to be perfect is as absurd as condemning it as inherently destructive for its inevitable shortcomings and compromises.   

Guns don't kill people.  People do. 

As if we don't know who controls this government or how. 

Hint: It ain't the 99%. 

Tue, 06/12/2012 - 09:27 | Link to Comment Zero Govt
Zero Govt's picture

Yes Govt is like a gun. When it works it is destructive, it's only safe position is not working with the safety catch full-on

Govt is entirely destructive, it's only true source of revenue is productive enterprises and productive people. All other taxes raised is fake wealth hanging off productive wealth

so by its very nature Govt is a mis-direction of productive wealth, from productive people who know how to use it for further/future productive gain into the hands of the unproductive (parasites of society: politicos)

what is wrecking economies from Japan to Europe to America? Govt, the most diabolical and destructive institution ever erected. Govt is garbage, period. 

Tue, 06/12/2012 - 10:24 | Link to Comment Bob
Bob's picture

That's entirely by your definition . . . which relentlessly proves either that you're absolutely right without any qualification whatsoever or that your argument is merely internally consistent. 

Those of us who see power as the threat, rather than the costume it wears, will see it differently from you. 

In this inconveniently gray world, money equals power.  I think you know this.  After all, what harm could a government without money do? 

Yeah, I'm a "statist" I guess. 

My consolation is that I have, in theory at least, some recourse against sociopathic abuse of power/money apart from a shotgun blast to the face of the perpetrator. 

Government is hardly the only predator in the world I know.  Getting rid of it would give us open season for the warlords, regardless of the rhetorical world it happens in. 

The fact that they've managed to corrupt that potentially positive force of government changes nothing about the threat they represent to everybody if left unchecked. 

Mon, 06/11/2012 - 22:17 | Link to Comment msjimmied
msjimmied's picture

If you"ve noticed, they have not mentioned "trickle down" in a very long time.

Tue, 06/12/2012 - 08:17 | Link to Comment Bob
Bob's picture

It's been rebranded with the rhetoric of . . . "Job Creators."  LOL. 

Mon, 06/11/2012 - 21:05 | Link to Comment m111ark
m111ark's picture

There is but one problem, and none of those "solutions" will solve that problem.  Even at that, implement all of them and nothing will change.  You must do the following:

1,  the source of the banksters power is their ability to create money - that must be removed.

2.  Government must SPEND it's own money into existence.  Government MUST NOT ever borrow money.

Now, how many hundreds of years must pass before the majority of Americans can be trusted with printing their own money.  Might not even be us that finally sees the light.

 

 

 

 

Mon, 06/11/2012 - 21:45 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

So, where does government get this money to spend? They do not produce anything of value. Everything they have, they have to take from somebody else, or force people to comply with monopolistic services.

Mon, 06/11/2012 - 22:32 | Link to Comment Matt
Matt's picture

Something tells me allowing Congress to create as much money as they want each year for spending above what they take in, in taxes would have horrible consequences.

Mon, 06/11/2012 - 23:49 | Link to Comment Poor Grogman
Poor Grogman's picture

Governments "spending money into existence" is an ASININE notion.

very closely related to the notion that government can "create wealth"

It is just another form of FIAT money that you are talking about, a fiat money who's creation would soon fall into "independent" hands after the first government abuses were documented.

The answer to the problems of fiat money, is real money, and this can only emerge unhindered from the private sector. Real money would curb the excesses of government by restricting it's ability to borrow and spend thereby preventing it from dominating the economy.

The authors of the constitution understood money and especially fiat money's power to corrupt.

Mon, 06/11/2012 - 21:06 | Link to Comment Fix It Again Timmy
Fix It Again Timmy's picture

Let interest rates rise?  Let us not go there, let us not even think about that......

Mon, 06/11/2012 - 22:03 | Link to Comment HellFish
HellFish's picture

Yeah seriously, instant US debt default.  Sorry the non-ZIRP world is over.

Mon, 06/11/2012 - 21:11 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

i read this whole thing and then i get to "re-enact glass/steagall"!

pretty funny! 

Tue, 06/12/2012 - 01:32 | Link to Comment if
if's picture

Apparently, markets should not exist (ban OTC derivatives).  That amazing conclusion is drawn by applying free market theories to markets carefully regulated for the benefit of a select few.  Which then proves a bandaid is better than capitalism.

Mon, 06/11/2012 - 21:11 | Link to Comment LawsofPhysics
LawsofPhysics's picture

Wait, wait, wait. Where is this "market" they speak of?

Mon, 06/11/2012 - 21:13 | Link to Comment Downtoolong
Downtoolong's picture

The recent debacle of the Facebook IPO stands as an open admission of how broken and faulty our markets are at setting fair and efficient stock prices. The intermediaries now suing the NASDAQ seem to be arguing that they lost money because, if the NASDAQ hadn’t malfunctioned the price of the stock would now be higher (or at least they would have remained above $38 long enough for them to  liquidate their inventory at a profit). That’s like saying that a bad performance of a play means the script is lousy, or that a flat tire on a car implies it is poorly designed. These companies are effectively arguing that the price of Facebook stock could be anywhere now between its low of around $26 to some hopeful high around $60+ depending solely on how well computer controlled HFT was able to manipulate market prices in the first few hours of the IPO launch. If that’s true, it hardly describes a fair market that allocates capital efficiently. And the fact that these firms seem to think their practices represent an acceptable standard of excellence is one scary thing indeed.

Mon, 06/11/2012 - 21:14 | Link to Comment q99x2
q99x2's picture

Wait just one minute.

#1 has to be "Prosecute FRAUD." Without doing that first nothing will change until a total collapse.

#2 Move the current monetary system to an open source bitcoin style closed monetary system.

You do those two things and humanity will make it all the way to a class 2 civilization.

The indirect functions of #2 will remove war, facism, crooked politicians and the elite ruling class. It will also restore an effective democratic process to decision making.

Mon, 06/11/2012 - 21:46 | Link to Comment e_goldstein
e_goldstein's picture

I agree with #1.

You need to have a lot of faith that the power grid will stay up to support #2.

Mon, 06/11/2012 - 21:15 | Link to Comment bigwavedave
bigwavedave's picture

"Forgive me O' Benanke; for I have Borrowed"

Mon, 06/11/2012 - 21:16 | Link to Comment TooBearish
TooBearish's picture

Soros agrees with the author but took 200 pages to droll on and on about "reflexivity"...and this dood does away with EMT in a few paragraphs...brilliant!!!

Mon, 06/11/2012 - 21:16 | Link to Comment Yen Cross
Yen Cross's picture

At First, I thought this post was a joke. Then I realized, I'm a lot smarter than I thought!

Mon, 06/11/2012 - 21:19 | Link to Comment max2205
max2205's picture

Long term = one day hour 5 min 1 min or 1 Nano second?

Please 1986 SPX = 250. That's up I think

Mon, 06/11/2012 - 21:24 | Link to Comment Cabreado
Cabreado's picture

The Conclusion is good, but does not jive with "This is impossible because the trust is gone. The same sociopaths control the economy."

The Great Big Disconnect between rational/humble/Truth and the Self-Absorbed (in Control) is in full play.

So then, the "collapse" is in full swing...

No matter how you thought it would feel.

 

Mon, 06/11/2012 - 21:25 | Link to Comment Unbezahlbar
Unbezahlbar's picture

'If you play the music too loud, you won't hear the train rushing toward you.'

 

That's what my Dad used to say.

Mon, 06/11/2012 - 21:27 | Link to Comment SKY85hawk
SKY85hawk's picture

Your Conclusion is almost complete.  If Glass/Stegall can be re-enacted, then Frank-WTH should be repealed.

I suggest a clear statement that BUY-n-HOLD is dead.  You clearly have put tremendous effort into this writing.

I would like to offer my starve the beast plan for your consideration.  I am unable and unqualified to produce a public product that people would find useful.  If you find some of my ideas to be worth sharing with your audience, feel free to use them as if in the public domaign.

Why not follow "the trend is your friend"?

By that i mean, put some 401-k money in a Roth-Ira every year.

If you're not working, you'd be surprised how much can be transferred each year.  Conversion Taxes get consumed by Deductibles & other stuff.  

!NOT FOR BUY AND HOLD!!!!

THEN study 4 ETFs.  ERX (long energy) ERY (short energy)

                    AND   FAS (long finance) FAZ (short finance)

                              move in opposite directions!

Now, ERY & FAZ are trending up.

I use Bollinger bands to make Buy/sell decisions. 

ie. When ERX's Bollinger is on the low side, ERY's is near the top.  Buy ERX and Sell ERY.   there are times, like now, when ERY is rising and keeps on going.  You can't be right all the time. 

I set Limit Sells at 25% gain for half of each position. 

Use Economic Order Quantities & Take short term profits, frequently.  There's nothing wrong with taking 'small' profits.

When you're over 59.5 you COULD have lots of tax free income!

At 59.5+ you can put in 6,000 also!

STARVE THE BEAST!

There are many other leveraged ETFs, I just like the way these things flow.  

Tue, 06/12/2012 - 08:48 | Link to Comment BigJim
BigJim's picture

The banks are already insolvent, even by the ridiculous double standards that applied to institutions with banking licences before they were suspended to hide the rot.

Re-enacting Glass-Steagal would take away thier remaning capital base and result in instant collapse.... unless of course the Fed stepped in and re-capitalised them. Then we're back where we started.

The problem is the current money-out-of-nothing cartel. Markets will not recover until this regime is dismantled.

Mon, 06/11/2012 - 21:29 | Link to Comment Lucky Guesst
Lucky Guesst's picture

6. Let heads roll, vigilante style justice.

Mon, 06/11/2012 - 21:35 | Link to Comment Marty Rothbard
Marty Rothbard's picture

We don't have a free market.  In a free market, if you make a bad bet, at 40:1 leverage, you go broke.  It's a free market in this way, for you and me.  If we bet it all on heads, and tails comes up, we are in the poorhouse.  This teaches us, and others by example, that betting everything on one throw is not good.  The whole problem, is that in 2008, the TBTF were not allowed to go broke, which would have discharged the debts they generated, when the market cleared the assets of the failed corporations, and the bankruptcy court divided up the remains.  Until these assets are priced, and sold, at prices that people are willing to pay for them, and corporations are allowed to stand or fail on their merits, nothing will change.   Take your choice Obama, and the rest, let the banks die, as they should have, or figure a way to avoid the blame, when people start going hungry.  They can't all be fed with food stamps, because there will not be enough wealth left for the government to steal.  The choice is up to you.

Mon, 06/11/2012 - 21:37 | Link to Comment daveeemc2
daveeemc2's picture

It is difficult to get a man to understand something, when his salary depends on his not understanding that.

Politics is money - PAC committees etc - all money.  Everyone is in perpetual re-election mode, stuff the political war chest so you can be re-elected, all the time.

Want to talk to a politician? Donate to his re-election campaign.

Business wants influence over policy? PAC money first, then we talk.  And their interest is only as rich as your donation.

Based on the above, what gives you the faintest clue that government, clearly in the hands of big business - and especially big finance - really cares about how YOU think the show should be run?

Mon, 06/11/2012 - 21:40 | Link to Comment johnberesfordti...
johnberesfordtiptonjr's picture

One of the best articles ever to appear on Zero. Note the dismal real world failures of academics who promulgated EMT... The Myth of the Rational Market

Mon, 06/11/2012 - 21:56 | Link to Comment Dr. Engali
Dr. Engali's picture

 "Neoliberal economic philosophy, starting around 1980 and now mainstream in academe and American politics, promotes laissez-faire economic policies of reducing the size of government, deregulation and privatization of government services"

Can somebody please point me to a laissez-faire market and a smaller less intrusive government..

The problem is that we have the government and corporations walking hand in hand. To me the government gets too involved with the " managing of the economy". The regulation that the government writes forces industries to consolidate as the cost burdens are too much for a small to mid size company . Why do you think the lobbiysts help write the regulations?
In a laissez-faire market we would have a couple less car companies and a lot less banks. Failure would be an option and the strong hands would pick up the assets from the dead companies. What we have now is a system where the incompetent are rewarded at the expense of the tax payer and the competent. It's the exact opposite of a laissez-faire market.

On one hand the author argues against the effectient market then at the end bullet point number 5 is to allow the effecient market to work and let interest rates rise.
How can you argue for more government "management " in the economy then argue for the markets to be allowed to function when it comes to rates?

Mon, 06/11/2012 - 23:00 | Link to Comment Matt
Matt's picture

Wouldn't free markets inevitably result in monopolies by the successful?

Mon, 06/11/2012 - 23:25 | Link to Comment Dr. Engali
Dr. Engali's picture

The very thing that crushes small businesses like myself is the regulatory requirements and theft through taxation. I don't have fleets of lawyers and accountants other firms have to help me navigate the loop holes. So what are my options? 1)Cut costs, 2)live in less , 3)grow the business , or 4)consolidate with another company. Well I've done one and two, number three is tough in this environment so that leaves me with number four.

If we had a free market number 3) would be a better option because there would be a lot of dead firms out there instead of the walking zombies we have today. A lot of the bad players would be out of the system and there would be a little more confidence in the system.

Tue, 06/12/2012 - 09:57 | Link to Comment AnAnonymous
AnAnonymous's picture

The very thing that crushes small businesses is that you are outcompeted by your competition superiors. Full stop.

Competition is about eliminating the concurrence and includes allocation of resources to decrease the competitiveness of a concurrent.

The fact that you are unable to make as much as functional competition tools like regulatory requirements and taxation shows you are outcompeted.

Funnily enough, in your free market utopia, resources should be allocated to prevent competitors from allocating resources to decrease a concurrent's competitiveness. You watch sports much? You know, the rigged competition scene US citizens use as theatrics to paint competition different from what it is?

Tue, 06/12/2012 - 09:47 | Link to Comment AnAnonymous
AnAnonymous's picture

Free market, or otherwise, are liminar issues.

Competition forms monopoly. It is the stated goal of competition to achieve idealistically a monopoly situation.

Therefore yes, anytime competition is involved, the end goal has to be monopoly.

It can not be otherwise.

Mon, 06/11/2012 - 21:48 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

1. Reenact the Glass-Steagall Act. Allowing investment banks to speculate with savers’ money is criminal.

 

Actually, no it's not. If the saver agrees to allow the bank to speculate, then it's a mutual, voluntary contract. The only thing "criminal" is the FDIC insurance that is backing savers' deposits. AKA: "Moral Hazard".

Mon, 06/11/2012 - 22:00 | Link to Comment johnberesfordti...
johnberesfordtiptonjr's picture

Funny how EMT is still being seriously discussed given that Benoit Mandelbrot (see chaos theory) has proven (mathematically) that it simply isn't true... http://www.youtube.com/watch?v=vxbxXBrOPS8

It's rubbish but it has given academic respectability to every  manner of financial fraud, manipulation, and swindles. All in the name of upholding the all-seeing, all-knowing, and all-deciding "market."

Mon, 06/11/2012 - 22:29 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

Perhaps Mandelbrot’s chaos theory disproves the EMT. However, what makes my research significant is that I follow all the rules, set down by EMT theorists, when disproving the EMT.

Mon, 06/11/2012 - 22:17 | Link to Comment Titan28
Titan28's picture

How do you unwind the $707 trillion OTC derivative debacle? What exactly do you do?

Mon, 06/11/2012 - 23:02 | Link to Comment Matt
Matt's picture

just net out the outstanding, then turn everything else to $0. There, unwind complete.

Mon, 06/11/2012 - 22:27 | Link to Comment epwpixieq-1
epwpixieq-1's picture

There is no ECONOMic reality ( economy comes from economize: do with as few resources as possible ).

There is only EXPENSic reality ( expense: do with as much resources as possible, in order to increase you debt and from that your GDP of course ).

You take the economic pill and you dream whatever you want to dream.

You take the expensic pill, and you will see how deep the rabbit whole is.

And, it is a DEEP one.

Mon, 06/11/2012 - 22:35 | Link to Comment boiltherich
boiltherich's picture

I nearly starved to death a couple of times putting myself back through college a second time for a business degree in Finance from 1993-1996, working usually full time while carrying as much as 16 semester hours per term, in my 30's. 

So, I know already that everything they taught was horse shit.  It was all about the way things are supposed to be, how to read a balance sheet or to value a stock on various ratios, how to regognize a company in trouble, how banking and central banking is supposed to work, but they did not say that the big investing houses have computers that void all of the normal practices.  How when they fuck up the taxpayers get the bill.  How you can have an IQ of 150 and ethics that would make Ghandi proud but in the end the only way you will get wealthy in the game is to marry the boss's daughter, or at least fuck his wife so she stays off his back while he plays internationally. 

Who do I sue to get my money and my life back? 

You know what the worst part is?  Getting that education lifted the coins from my eyes so that I saw what life really is, and I would go back to being a dumb sheep any day of the week, life is short and we will all have to deal with the collapse when it comes, if it comes in our lifetime, but at least the sheeple can sleep at night and not have the nightmares of those who know what is to come.  By the way, I am not a survivalist because that life is worse than no life at all.

Mon, 06/11/2012 - 23:08 | Link to Comment Matt
Matt's picture

You want to sue somebody for not educating you on things that did not exist yet?

HFT pretty much came about in 2006 and didn't get big till 2008.

CDS were probably fairly rare at the time, being in their infancy.

TBTF didn't exist then.

As for issues with immorality and unethical behaviour, that's been around as long as mankind. Maybe Ethics shouldn't be an optional course ...

Mon, 06/11/2012 - 23:32 | Link to Comment Dr. Engali
Dr. Engali's picture

Actually I remember TBTF in the 70s with Chrysler. But as far as the mess we have today LTCM in 1998 really screwed things up big time. They should have let them fail then. That would have taken a lot of risk out of the system.

Mon, 06/11/2012 - 23:51 | Link to Comment billsykes
billsykes's picture

Ah, nothing like a monday at ZH to get the spirits up. 
You make them pay boiltherich, make them all pay.

(This is jack drinking while he cleans his gun in the dark muttering to himself.)

 

 

Tue, 06/12/2012 - 01:10 | Link to Comment potlatch
potlatch's picture

And they didst mock me as I read Plato, and Aristotle, Kant and Rouseau, Husserl and Derrida, on my way to a doctorate in -- roflmao -- philosophy...

 

 

 

mind if I have a wee last laugh here?  just a little one?

 

 

philosophy party at potlatch's house!  we can all read and act out some of Juvenal's farces!

Mon, 06/11/2012 - 23:26 | Link to Comment glass
glass's picture

These snapback hats on sale ut these cheap snapback hats sures 100% quality and long lasting surety on the product. It is made up of 20% acrylic and 80% wool. For the better fitting it has a better grip and fitness. As these hats are mostly used sports lovers, each hat has a moisture absorbing sweat band. Its originality is proven by the switched new era flag and an embroidered major league baseball logo.

Mon, 06/11/2012 - 23:46 | Link to Comment billsykes
billsykes's picture

would work but these are not free markets.  Anyway, buy and hold is so done even if the market does work.

Average person should stay away from stocks and invest in themselves instead, and gold/silver.

 

Mon, 06/11/2012 - 23:46 | Link to Comment skepticCarl
skepticCarl's picture

I could go for debt write-downs where the debtor has zero ability to repay.  But for general debt forgiveness?  Too broad........the cheaters would win again.

Tue, 06/12/2012 - 00:39 | Link to Comment headless blogger
headless blogger's picture

Then they should allow bankrupsy across the board...even for student loans. They can make them difficult to obtain but make it available so that people who truly are burdened have a way out. It is PURE NONSENSE that an individual cannot file bankrupsy on certain debts. Not everyone wants to file bankrupsy because of repercussions, but sometimes it is the only alternative.

I agree about the debt forgiveness, it would be abused AND most likely the Banks and Creditors would be allowed behind closed doors with the politicians to help influence and manipulate any outcomes.

 

Tue, 06/12/2012 - 08:28 | Link to Comment Umh
Umh's picture

The student loan issue is like everything else that politicians try in their attempts to change the world. Because not enough students could afford college or get grants they should be loaned money to go to college. Because no one in their right mind is going to loan money to someone who can declare bankruptcy tommorrow they prohibit bankruptcy on the loans. The problem arises when they can't get a decent job after graduation. The real beneficiary of all this has been the schools, teachers and bankers.

Tue, 06/12/2012 - 09:15 | Link to Comment headless blogger
headless blogger's picture

so-called "good" universities are not teaching anything useful to students in many instances. I went back to school, got straight A's and learned basically nothing (except I learned how to use MS Word).

Tue, 06/12/2012 - 23:47 | Link to Comment Umh
Umh's picture

In my opinon there are very few jobs that cannot be done by someone with a decent high school diploma. Employers ask for more and greater degrees because they are scared to make decisions based on interviews and look for objective reasons not to hire someone. So we now have the race for unneeded degrees to get entry level jobs.

Tue, 06/12/2012 - 00:01 | Link to Comment AUD
AUD's picture

Allow interest rates to rise

This would destroy the bond market, so it can't happen. There is a reason why interest rates have been, more or less, falling for the last 40 years - the bond markets are junk - their price needs to be inflated by government, through the central bank.

Tue, 06/12/2012 - 00:32 | Link to Comment headless blogger
headless blogger's picture

"...their price needs to be inflated by government, through the central bank"

 

THEN we don't need them do we? Anything that needs manipulating needs to be let go.

Tue, 06/12/2012 - 00:01 | Link to Comment stirners_ghost
stirners_ghost's picture

Politicians are the last people you should want to "manage the overall economy". Idiot.

Tue, 06/12/2012 - 08:25 | Link to Comment falak pema
falak pema's picture

who should it be, your mother-in-law?

Tue, 06/12/2012 - 00:04 | Link to Comment icanhasbailout
icanhasbailout's picture

As long as no one important ever gets prosecuted, it doesn't matter a whit what the law is.

Tue, 06/12/2012 - 06:42 | Link to Comment logicalman
logicalman's picture

  "Give me control of a nation's money and I care not who makes it's laws" — Mayer Amschel Bauer Rothschild

Tue, 06/12/2012 - 00:22 | Link to Comment infiniti
infiniti's picture

"my research shows the EMT is dead wrong"

People who can beat the market don't write articles like this. They create a REAL TRACK RECORD, find investors, co-invest, charge fees, get rich, and never have the time or a reason to write articles like this.

I want my 5 minutes back!

Tue, 06/12/2012 - 09:48 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

Socrates said, “To know yourself”—I am an intellectual.

 

I do research on big national issues and try to get it published, often against the wishes of the moneyed interests of which you speak.

Tue, 06/12/2012 - 01:33 | Link to Comment matrix2012
matrix2012's picture

NO WONDER AT ALL!!!

One should read thoroughly below info !!

 

 

"The Rottenschilds have been in control of the world for a very long time, their tentacles reaching into many aspects of our daily lives, as is documented in the following timeline.  However, before you jump to the timeline, please read this invaluable introduction which will tell you who the Rottenschilds are as oppose to who they claim to be.

The Rottenschilds claim that they are  J----- , when in fact they are KHAZARS. They are from a country called Khazaria, which occupied the land locked between the Black Sea and the Caspian Sea which is now predominantly occupied by Georgia.  The reason the Rottenschilds claim to be J----- is that the Khazars under the instruction of the King, converted to the  J-----  faith in 740 A.D., but of course that did not include converting their Asiatic Mongolian genes to the genes of the  J-----  people.

The most wealthy bloodline in the world bar none and the leader of the Ashkenazi J--- in the world today is the Rottenschild family.  As you will see in the timeline, the Rottenschilds have obtained this position through lies, manipulation and murder.  Their bloodline also extends into the Royal Families of Europe, and the following family names:  Astor; Bundy; Collins; duPont; Freeman; Kennedy; Morgan; Oppenheimer; Rockefeller; Sassoon; Schiff; Taft; and Van Duyn."

Read the entire summarized "TWO-AND-A-HALF-CENTURY" TIMELINE here: http://bit.ly/MhkwoV

 

Other related links:

-The History of the “Money Changers” (an illustrated version): http://bit.ly/LHBVoN

-The History of the “Money Changers” (text-only version): http://bit.ly/KCBArR

 

Then some info about the Bilderberg Conference!

 

The Illuminati are a kind of secret world government, their main goal is to create the New World Order (NWO), a fascist-communist global 1984-style dictatorship where every citizen is totally controlled with an implanted RFID chip. One of the exoteric key institutions of the illuminations are the Bilderbergs, for example.

 

Within the illuminati one can distinguish 3 circles:

 

(1) EXOTERIC (OUTER) circle: e.g. Bilderberg Group, Trilateral Commission, Council on Foreign Relations (CFR) and others. Many on this level (e.g. one-time Bilderberg participants) are more or less clueless what's really going on, but their egos are pleased that they are so close to those with the real power.

(2) INNER circle: e.g. regular Bilderberg participants

(3) ESOTERIC circle: e.g. Grand Masters of occult societies. That's where the NWO (New World Order) plans are erected. If these plans are implemented or not depends a lot on whether the outer circle can be convinced.

Back to Bilderberg: in the first decades secrecy was crucial but meanwhile they have become so powerful that that secrecy gets less and less important. Meanwhile we are close to the totalitarian-fascist New World Order, so it's time to accustom the population to the new world order government... MOREOVER, THERE IS ENORMOUS BIOLOGICAL TIME PRESSURE, time is running out for the esoteric circle: ZBIG BRZEZINSKI is 82 years old, HENRY KISSINGER 87 years, and DAVID ROCKEFELLER even 95 years. They have worked many decades for their big goal and have to act (too) fast, which will bring about their downfall.

Read the full here: http://bit.ly/KHpJGw

 

Bilderberg Conference 2009 Participants & some of their connections (graphical illustration)... connecting the dots

http://bit.ly/L1pTZZ

 

Bilderberg Conferences - The Unofficial site: http://www.bilderberg.org/

 

Bilderberg 2012: were Mitt Romney and Bill Gates there? | World news | guardian.co.uk

http://www.guardian.co.uk/world/us-news-blog/2012/jun/05/bilderberg-2012...

 

If one has the further curiosity, following books are good reading as well.

 

TRAGEDY AND HOPE: A HISTORY OF THE WORLD IN OUR TIME (1966) By Carroll Quigley

One should not spare this great book to fill in the explanation vacuum of mankind troubling history during the 19th and 20th centuries.

Professor Quigley was an extraordinarily gifted historian and geo-political analyst. The insights and information contained in his massive study open the door to a true understanding of world history in the nineteenth and twentieth centuries.

It is a work of exceptional scholarship and is truly a classic.

"At Harvard, biochemistry was to be his major. But Harvard, expressing then a belief regarding a well-rounded education to which it has now returned, required a core curriculum including a course in the humanities. Quigley chose a history course, "Europe Since the Fall of Rome." Always a contrary man, he was graded at the top of his class in physics and calculus and drew a C in the history course. But the development of ideas began to assert its fascination for him, so he elected to major in history. He graduated magna cum laude as the top history student in his class.

Tragedy And Hope: A History Of The World In Our Time (1966) By Carroll Quigley

http://bit.ly/xo9I7S (pdf, 5.42 mb)

 

It's quite advisable that one reads the Quigley's work along with below companion guideline.

 

THE NAKED CAPITALIST (1970) by W. Cleon Skousen

Former FBI Agent W. Cleon Skousen’s book THE NAKED CAPITALIST first published in 1970 is described by the author as: “A Review and Commentary on Dr. Carroll Quigley’s (1966) Book: Tragedy and Hope—A History of the World In Our Time.”

Skousen’s book is highly recommended because it helps one understand the more salient issues Quigley has documented and puts Quigley’s monstrosity in perspective. Skousen helps the reader to comprehend what Quigley has written and discern Quigley’s biases.

Grab it here: http://bit.ly/KCjgOm

Finally, here are some more useful refs e.g.: None Dare Call It Conspiracy; Fearful Master; Crossing the Rubicon; The New Babylon; etc. Grab it here: http://bit.ly/IJwmn1 PLEASE READ THROUGH THEN YOU'LL SEE THE WORLD DIFFERENTLY!

 

Tue, 06/12/2012 - 06:27 | Link to Comment falak pema
falak pema's picture

As a history buff I love taking a walk back thru time. Its fascinating to see the patterns of power and power players interplay with their opponents, the seekers of knowledge and social justice.  This interplay is the salt of our western civilization; where kings and Popes have never been able to douse the torch of knoweldge, justice and enlightenent by its obscurantist and slanted dogma.

But I never bought into the perspective of history as an ongoing, ethnically concocted and tentacular occult power game. No way, too many actors for any one blood line to control the sway. If anything the Papal construct and kings of large nations have played their part as there is OVERT continuity in the institutions they built to serve their purpose. But it has always been out in the Open, based on avowed mantras such as "Gods wills it" and " the seven sacrements of the Universal church will save you in after life" and "God and my divine rights of king"....etc. Until we had the nation-state and "we the people" became the new mantra.

Now as Oligarchy post-industrial globally offshore feudalism rears its financial head based on electronic money power and interconnected occult power networks, the conspiracy theory becomes fashionable again. And this will play out like all Empires into the dustbin of history, just as before. So no need to believe that DESTINY has imposed on humanity an evil illuminati to dictate totalitarian serfdom on all of us. Nope, "the fault dear Brutus lies not in our stars that we be the underlings..." And Brutus was an honourable man. So lets never forget him ! 

For those who cross the Rubicon...there is only one true resolution. And destiny is never written in advance, even by the Khazars! 

Not saying conspiracies did not occur amongst the elite, but it was a way of life and what the french king conspired with ottoman Soleiman the Magnificent, to bring down his Hapsburg opponent, his spanish rival neutralised by taking out the Pope and declaring himself sole representative of universal church. And it goes on and on; and the oligarchical thieves rival in their underhand play and it gets them nowhere, as its a zero sum game! Progress only comes from spreading the manure of capital all over the world, not heaping in up in hidden vaults! Even if they be of Montezuma! 

Tue, 06/12/2012 - 22:54 | Link to Comment headless blogger
headless blogger's picture

They are not "heaping it up in vaults" and don't need to since they control the Central Banking systems. Also, you are mentioning people and history over a long continuum. The poster above you is mentioning a more current (last 2 to 3 hundred years) time frame. You cannot compare today's "Elites" with yesterdays Rulers of the dark ages and beyond (just the psycho-weapons and WMD alone change the entire scope). The khazar-jews got their big break into White-Anglo-Saxon World when they were allowed into the Christian/Occult Secret societies for the first time (back in the 1700's before the French and American revolutions). This was about the time that marked a massive shift in the West.

 

Tue, 06/12/2012 - 01:17 | Link to Comment MoneyMagician
MoneyMagician's picture

Lol since when we had Laissez-Faire Capitalism? My understanding is this economy isn't laissez-faire. It's a fascist economy. Glass-Steagal wouldn't have prevented a housing bubble. Sure probably wouldn't have made it as big, but then again, no telling when the Fed would reset interest rates back up to their mean. China has similar Glass-Steagal regulation where investment banks are separated from deposit banks, yet it still had a housing bubble. In fact most of Europe has a housing bubble. Housing bubbles is a result of inflated money supply, where savings have not increased, but instead consumption. Also savings is used for investment, which relates to investment for future consumption versus today based on immediate need, or time preference. You borrow all the money from the future for consumption today, consumption in the future has to drop just as much. However, I do believe that Glass-Steagal shouldn't have been repealed. Fractional reserve banking, which is usually the core problem of most financial problems whether in history, or today. The author is correct on certain things however, interest rates are too low. They are more about preserving the bailed out banks than providing for the economy. This idea that low interest rates spur consumption is just plain ridiculous. When you are broke you are broke, you need to recoup your money, or capital to reinvest for the future production, which allows a real recovery. Zero interest rates are not going to bring back housing market to their peak bubble levels for example.

Tue, 06/12/2012 - 01:27 | Link to Comment matrix2012
matrix2012's picture

I quote here my two favorite warnings from EZRA POUND, said many decades ago yet they're still quite relevant as of yesterday.

 

    “The Nomadic Parasites will shift out of London and into Manhattan. And this will be presented under a camouflage of national slogans. It will be represented as an American victory. It will not be an American victory.

    Until you know who has lent what to whom, you know nothing whatever of politics, you know nothing whatever of history, you know nothing of international wrangles.” — Ezra Pound (1885–1972)

 

“The monopoly of money, or the restriction of its circulation, is merely a variation of this simple form of monopoly. That is all. The stupid fall into the trap. Wars are provoked in succession, deliberately, by the great usurers, in order to create debts, to create scarcity, so that they can extort the interest on these debts, so that they can raise the price of money (i.e., the price of the various monetary units controlled by, or in the possession of, the same autocrats), altering the prices of the various monetary units when it suits them, raising and lowering the prices of the various foodstuffs when it suits them, completely indifferent to the human victim, to the accumulated treasures of civilization, to the cultural heritage.” — Ezra Pound (1885–1972)

Tue, 06/12/2012 - 06:51 | Link to Comment GeneMarchbanks
GeneMarchbanks's picture

The first quote is only accurate if we make a crucial distinction, now here my message might get distorted as I have to resort to the parlance of the psychoanalytic movement, but the point remains nonetheless: It isn't so much a 'Nomadic Tribe' as it is a certain 'type' of person or people that find a way to live off of a culture/civilization without actually being a component of the national ideology. Taking advantage of patterns within society, making shortcuts these are some of the characteristics of a particular type not a specific race.

Tue, 06/12/2012 - 01:41 | Link to Comment Centurion9.41
Centurion9.41's picture

Seriously, what is truly amazing is how strongly the MBA types are still under the influence of this Kool-Aid fed to them during school.

Anyone with a BS that has a good foundation of math & science quickly realizes most business school, and most specifically the practitioners of the Dismal Science are either morons or liars.

Tue, 06/12/2012 - 08:42 | Link to Comment Umh
Umh's picture

This is what makes education hard. You have to sit through classes instructing you in theories you know are incorrect and then remember the incorrect stuff to pass the exams. It's much easier to remember things that are true than to remember random noise like EMH. Institutions like schools and government are so convinced of their correctness that they ruin the very people who need them.

Tue, 06/12/2012 - 01:41 | Link to Comment Centurion9.41
Centurion9.41's picture

Seriously, what is truly amazing is how strongly the MBA types are still under the influence of this Kool-Aid fed to them during school.

Anyone with a BS that has a good foundation of math & science quickly realizes most business school, and most specifically the practitioners of the Dismal Science are either morons or liars.

Tue, 06/12/2012 - 02:05 | Link to Comment LarryDavis
LarryDavis's picture

Are the following scenarios efficient or would they imply an asymmetry of information:

 

Hi, It's Steve Cohen. I was thinking about investing in your business. How is the quarter going?

Hi, Mr. Blankfein it's Senator McConnel. I was thinking about the time your secretary blew me and I was wondering if you could let me have a few of my interns gang bang her?

 

Markets are about as efficient as the caprice and ethics of the people who control them. I've have an informal command of econ but as my understanding of financial chicanery and whatever is left of the markets grows (and it does almost daily with the help of Zero Hedge) I can't help but notice how pathological and psychological the markets are. If you want to understand the "markets" study human INefficiency, what happens when you give sheltered people with marginal IQs control of trillions of dollars, mix in some serial killer case studies and you won't need to use the latest SAS econometrics package for 60gs to make deductions. Fuck all the school shit (random walk tests, price distributions, etc.). Here are some free insights that will not let you down (I will liberate you from your mom's house) see the VIX at 15 or Facebook at 42 go long on the former and short on the latter. 

Tue, 06/12/2012 - 02:11 | Link to Comment LarryDavis
LarryDavis's picture

Did anyone notice the correlation between stock and indices for most of 2011?

Tue, 06/12/2012 - 02:52 | Link to Comment TacticalZen
TacticalZen's picture

Lots of good thoughts. However, the explosion of the OTC derivatives market guarantees an eventual catastrophic implosion on a worldwide basis, and much faster than ever before. They truly poisoned the well we all depend on. Will our new reality look like 1930, 1830 or 500 AD?

Tue, 06/12/2012 - 02:56 | Link to Comment Nukular Freedum
Nukular Freedum's picture

Let me get this straight. You ran a simple moving average crossover system using only two randomly selected (?) moving averages out of an infinite number and you made a lot of money ex of commisions and slippage? This disproves the EMT how?

Tue, 06/12/2012 - 09:56 | Link to Comment Eric L. Prentis
Eric L. Prentis's picture

Please see my published journal research— here and here.

Tue, 06/12/2012 - 02:56 | Link to Comment Nukular Freedum
Nukular Freedum's picture

Let me get this straight. You ran a simple moving average crossover system using only two randomly selected (?) moving averages out of an infinite number and you made a lot of money ex of commisions and slippage? This disproves the EMT how?

Ever heard of "infinite variance"?

Tue, 06/12/2012 - 02:58 | Link to Comment Nukular Freedum
Nukular Freedum's picture

Whoops.

Tue, 06/12/2012 - 03:50 | Link to Comment dcb
dcb's picture

to th writer of this note:

everything you say it correct, but making it out like it's your research is rather funny. the efficient market thing was torn to shreds many, many years ago.

now you are dealing with the topic of cultural hegomony I mention the other day.  this is how  it works, academics and think tanks are used to intellectually justify policies that may have nothing to do with reality, they are usually bought by industry, then they are invited to talk on legislation, or gven a position in policy making. the structure of the system is then devised, securing benefits to the elite. there are many games to this.

Example; industry works very hard to insert complexity, loop holes, then complains the legislation is too costly to implement.

you will really see th e game at work in congressional testimpny. where htey invite everyone with aparticular world view and outside views don't get heard. then the crooked eleted officlas can vote for industry. no body beleives the horse shit they are hearing,, they just nedd some pretened intellectual reson to justify the vote to the electorate.

heck the people don't have to beleive it either, but you will get polls (staying on mesage) sopouting the sme nonsense over and over. and there are a number of really stupid pople out there who then internalize the message.

it is sort of a mass paropaganda effort of business, washington on the people.

There is a term I have invented: I call it a "conspiracy of thought". While there may be no actualy conspiracy by deefinition, but making sure everone involved in the legislation/ regulation/ thought process thinks the same way you ensure the desired outcome. you don't need little cabals to carry out the conspiracy, you just need everyone beleiving (or pretending to believe efficient market) and make all the governors of the federal reserve voting boare think the same way. Notice there are no austrian theory advocates anywhere of any position of authority I can find in the United states. I can find no marxist economists, the republicans veto or fillibuster a labor economist.

All of this represents a conspiracy of thought. then as that way of thinking gets presse in the media, we get cultural hegemony.

Notice how comunism gets demonized. It's just a fucking economic system, it's neither good or evil. in my view of people have frre will to determine that is the system they want to live under it's good. I know dictatorshipts and totalitarian governemnts are bad.

Please excuse typo's: my speel check doesn't work on this site, and as far as I can tell there is no option of spell check for me to select above. I really have a problem with spelling.

Tue, 06/12/2012 - 03:56 | Link to Comment Demologos
Demologos's picture

If I told you there was an all-knowing Force in the universe that controls everything, you would think I'm some kind of nut.  But if I say there is an all-knowing "market" Force that determines everything financial, then I'm a fricken economic genious.  Nothing we have was built by "market" forces.  It was people acting on a need, often the need to survive or resist foreign domination, that built everything we find useful in this world today. 

If we had to wait for an "entrepreneur" to get the financial equivalent of an erection at the thought a profit could be made, we would have no national highway system, no major bridges, no international airports, no aerospace industry, no computer industry, no medical advances, no dense energy sources, etc.  For example, we needed water so we built aquaducts and reservoirs.  No business or corporation could get the financing to do those kind of projects because the payoff is decades long.  Unless people were going to spend the same amount of money in the 30's for water that we spend now for milk.

Things are built when human beings act upon the available natural resources or use well-understood physical properties to get something needed done.  I don't care how big a pile of money you have (or gold and silver for that matter) that "wealth" can't accomplish anything on its own.  Even if some human beings were available to work for a portion of that pile, what they would earn is useless unless there is something else to exchange it for, like food or shelter.

And yes, Glass-Steagall would be the stake in the TBTF vampire's corrupt heart.  They wouldn't dare risk their own money on the phony investment opportunities they market to the mickeys.  Its OPM that gives them the balls to do what they do.  If it was their money, and the taxpayers weren't there to bail them out, you can bet they would be way more careful with it.

 

Tue, 06/12/2012 - 09:02 | Link to Comment AnAnonymous
AnAnonymous's picture

Infrastructures being what they are in Smithian economics, it is better to presume that there was no pay off.

The costs of it was simply absorbed by a third party.

Tue, 06/12/2012 - 10:16 | Link to Comment Demologos
Demologos's picture

Not sure what that means.  Even if the king paid to build the road with gold he mined personally when he was a teenager, there is still a third-party paying:  the king.  I guess if God laid down a level pathway with fallen logs across creeks and crevices, so that people could engage in commerce between two villages without spending a cent on infrastructure, then there would be no cost for a third-party to absorb.  Unless of course, God's time has no value (He does have a lot of it - existing throughout eternity and all).  Otherwise, God is absorbing the cost by spending his time and therefore is the third-party.  Somebody has to be "it" when a job needs to be done.  Its either many people coughing up a little bit for a benefit all can use, or someone doing charity work with their own time and money.

Tue, 06/12/2012 - 04:10 | Link to Comment Tum
Tum's picture

Why is it that every time I read an article based on how lousy free markets are, it's filled with details about which government law, regulation, or manipulation, or a combination of the three, did what to whom and when? Are there only a few sane people left on this planet who see the glaring contradictions?

 

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