What Is Market "Certainty"?

Tyler Durden's picture

From Bill Buckler, author of The Privateer

What Is Market "Certainty"?

Without going into detail, the concept of “market certainty” is obviously impossible. All one can know is that as long as human beings continue to trade the fruits of their labours amongst themselves, a market will exist. The prices that will emerge from these exchanges in the future can never be known because human beings are not inanimate objects, they have the power of thought and the power of choice.

When an institutional investor or market analyst or market regulator talks of “certainty”, they are talking about an ingrained faith that the interventions and manipulations which “worked” in the past to push markets higher will work just as well in the future. They don’t count on the power of thought or of choice. They count on the power of the common denominator in all prices. As long as the government and its banking system retains full control over the money, the “markets” will always have the fuel they need. That is the “certainty” relied upon by those who claim that markets hate “uncertainty”.

What modern markets actually hate is any hint that the ability to conjure up ever larger supplies of “money” might not be connecting to the markets in the manner it once did. What modern markets fear is the ever growing evidence all around them that this is indeed happening. The last Fed Chairman of the era of fixed exchange rates with a US Dollar still redeemable (by governments and central banks only) in Gold was William McChesney Martin. His tenure stretched from 1951 to 1970. Mr Martin is now best known for his job description. He described it as follows: “I’m the fellow who takes away the punch bowl just when the party is getting good.”

Mr Martin did “take away the punch bowl” several times during his tenure. So did Mr Volcker at the end of the 1970s. But no Fed Chairman has done it since. It has long become market “certainty” in the US and everywhere else that it will never be done again. The markets are still trying to convince themselves that the punchbowl will always be there and they will never have to sober up.


One of the few things that we do know - for certain - about the future is that actions have consequences. In the world studied by the physical sciences of inanimate matter, it is possible to predict the future with certainty. That is because the entities being studied ARE inanimate. They have no power to initiate an action so they have no power to vary their reaction to a force which is applied to them. In the field of the study of HUMAN action, the situation is fundamentally different. No “stimulus” will ever produce the same response on entities which have the power of thought and the power of choice.

What the study of HUMAN action can tell us with certainty is that a given action will produce a given consequence. The timing of that consequence and its severity cannot be determined. All that can be known is if that a government has the exclusive power to determine what is used as money and if it uses that power to produce ever increasing quantities of it out of thin air, the days of its functioning as  money are numbered. It has been well said that: “There have always been only two kinds of paper money in the world. Those which are already worthless and those which are going to be.

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Strut's picture

The Market is Certainly Fucked!

vast-dom's picture

"The prices that will emerge from these exchanges in the future can never be known because human beings are not inanimate objects, they have the power of thought and the power of choice." And let's not please rule out the most vital power humans possess, the one which subverted my econ studies and made me shun the discipline: the boundless power of irrationality. And of course stupidity. That variable which subverts many an econ model.

Roger O. Thornhill's picture

It is true about individual irrationality - which I respect greatly. It is what makes life worth living.

Masses of humans (our financial system), though, are herdlike. And herds follow the momentum of the group - like a large ship they do not turn on a dime. Individuals can and will bolt from the herd long before the herd finally changes direction. The system we have before us has a vast (worldwide) inertia to it which should not be discounted, but inertia does eventually play out and wane.

I see the current pattern as just inertia playing itself out until another force effects the system. It is effecting it now, hard to say when it will change the herd's direction again.

RiverRoad's picture

Yes.  Uncle Ben is being forced to recall that Economics is in fact a social science.

francis_sawyer's picture

Market "certainty" is Robot Trader telling you what retail stocks did yesterday...

TideFighter's picture

The PPT & Brian Sackless "trade the fruits of their labour", not human beings trading amongst themselves.

Holy fucking shit, Mr. Buckler, have you been on Mars? 

ArkansasAngie's picture

There is certainty and ... then ... there are black swans.

withnmeans's picture

Governor of Maine is spot on here.    http://news.yahoo.com/gestapo-maine-gov-blasts-massive-expansion-irs-age...


The taxes are about to go up, along with everything else. Weimar Republic anyone ???

yrbmegr's picture

Not if you have health insurance.

AmCockerSpaniel's picture

What happens to ones neighbor will effect you. It's just that way. This will put still more houses on the market.

arnoldsimage's picture

hey tyler... you may want to post this. thanks, arnold. http://youtu.be/IIQl0VtCL4w

holdbuysell's picture

"Only the paranoid survive." - Andy Grove

risk-reward's picture

"What the study of HUMAN action can  NOT tell us with certainty is that a given action will produce a given consequence.


Fixed it for ya'

dwdollar's picture

"What modern markets actually hate is any hint that the ability to conjure up ever larger supplies of “money” might not be connecting to the markets in the manner it once did. What modern markets fear is the ever growing evidence all around them that this is indeed happening."

Is that why the market rips higher on the vaguest rumor of QE3?

Haole's picture

As in A Cabin In The Woods, we are simply being allowed to choose how we die.  There are those who are attempting to circumvent/thwart these forces the best one can but even if one is somewhat successful in protecting one's self when it all comes unglued, what then?  Our best intentions may only cause our own personal unintended concequences, the most savvy of "experts'" speculations nothing but hokus pokus?  I wonder whether the people who run this planet are even confident they have a handle on this thing anymore... What times to be alive.   Or maybe I'm just delusional and in need of re-education...

Quinvarius's picture

Taking away the punchbowl with debt based fiat money after a credit bubble just kills off the fiat completely.  It has no intrinsic value to fall back on.  It has no demand to pay back the debt after the defaults start.  You don't really get a recession.  You get a NDE until the next credit bubble picks up.  If we really have gold, the dollar will stop imploding when it is at teh correct value to be backed by our gold.  Then the economy can recover after the money has stablized. 

TrainWreck1's picture

Market certainty is when the game is rigged.


resurger's picture

Mr. Buckler,

Nice succinct article , but all thoughts and choices of the sheeple will directly lead to the abattoir.

Caviar Emptor's picture

Never underestimate the power of the whining elite. They call their pawns and shills in DC to complain that they can't do business in the US anymore unless they get a free ride and more monetary easing. They get paid off and shut up for a while. But the demands get bigger and bigger and they now have their fingers directly over Ctrl-P. 

What we have is a pure corporate welfare state. Its a degenerate form of capitalism with close parallels to fascism where the state exists to serve the elite and the president serves at the pleasure of the oligarchy. All others? :-) There are many arguments why slavery is the most efficient solution for providing labor. 


"Throughout the last century the attachment of businessmen to free enterprise has weakened dramatically as they discovered they could demand--and receive--short-range advantages from the state. . . . I watched with incredulity as businessmen ran to the government in every crisis, whining for handouts or protection from the very competition that has made this system so productive."

-Former Treasury Secretary William E. Simon


Uncle Remus's picture

The market is most certainly not.

Yamaha's picture

Consequences happen to everyone in private business and those that believe in hard work. It currently doesn't apply to:

1. Banks
2. Long-term Capital & AIG
3. Any Foreign banks
4. Politicians

Certainty is just more of the same behavior -

Snakeeyes's picture

What is certain is that central banks are at their limit of capabilities. They just can't be used to stimulate growth or employment.


And the logical next step when monetary policy fails is ASSET SEIZURES BY GOVERNMENT,


Ah, the evolution of Socialsm to Marxism.

lizzy36's picture

Only certainties in life are death and taxes.

Everything else is a matter of timing, geography and to some degree luck or lack thereof.

The majority of Yanks don't want the bunch bowl removed. They would rather eat themselves to death than consider the restraint. 

So it will be.



FeralSerf's picture

Eat, drink and be merry for tomorrow we die.  (There ain't no free lunches.)

Caviar Emptor's picture


Bailed-Out AIG Wants More Than $30 Million In Taxes Back


New York-based AIG said it filed the lawsuit on Thursday because the statute of limitations on its claims was about to run out. 

 The Internal Revenue Service is run by the Treasury Department, which also owns about 60 percent of AIG common stock, which it has been selling in pieces.

AIG's $182.5 billion bailout was the largest of the financial crisis.




yrbmegr's picture

Uncertainty:  the economic condition of having Democrats in control of the government.

Havana White's picture

Idiot.  The Fox propaganda board for the duped is that way >>

icanhasbailout's picture

"Market certainty" = if you get involved in this market and aren't one of the big players, you can be certain to be screwed hard and often.

Zola's picture

Tyler , i think this is the headline of the week :


Barnier Seeks To Widen EU Rules To Bar Libor Manipulation

"he plans to widen EU rules on market abuse to outlaw the manipulation of the London interbank offered rate" (!!!)


So before it was OK right to manipulate trillions of markets? No criminal prosections ? A law is NEEDED ???

Also, legislating away about bad things doesnt make them go away if there is NO ENFORCEMENT !!!


ebworthen's picture

Exactly.  As long as the LIEbor manipulators remain uncuffed and people like Mozillo and Corzine roam free it is all hollow talk.

GMadScientist's picture

"inanimate matter"

Lulz...stick to pimping paper, putz.

SmoothCoolSmoke's picture

Amen! And I'm sick of business owners moaning about not enough "certainty".  They act like if it is not certain they are only going to make a lot of profits that they will hire people or expand their business. Since when does capitalism = sure profit?  But if you listen to ASSHOLES like Kudlow or Joe "nose up any republican ass he can fine" Kernan or my favorite shit-head, Jack-ass-hole Welch, they just beat the 'certainty" drum incessiantly.

These dicks don't want Capitalism....they want 110% "Corporatism"

Fuclk those fucking fucks.

ebworthen's picture

Central banks providing "liquidity" by robbing taxpayers for the sake of the gamblers on Wall Street obviates any kind of "free market" or consequences for malfeasance.

The moral hazard of incessant inervention that prevents the consequences of bad or immoral decisions is coming home to roost as it must.

No central authority can prevent the billions of choices that will be made as a result of their attempts to jigger choice making.

I hope no economists or TPTB scratch their head over people taking their money out of the Wall Street casino, making strategic defaults on underwater homes, and ending their sense of responsibility, duty, and allegiance to a government and nation that has abandoned them.

Some delusional accolytes will remain, some others will have their assets trapped in the system, but those with half a brain will abandon the system - and the entropy of what has been will change from under the feet of the central planners and crooks of Washington and Wall Street.

Rock will become quicksand and ice will melt; it will be fun to watch as they all deserve to drown.


JR's picture

Norwegian oil executive Oysten Dahle:  “[The Soviet Union] collapsed because it did not allow [market] prices to tell the economic truth.”

The stock market, stable because printed money will always rescue it, is feeding off of failed Keynesianism, printed money, i.e., ZIRP.

And that, according to Hunter Lewis in his 2009 book dedicated to Henry Hazlitt, Where Keynes Went Wrong, is the “heart of Keynes’s argument… that newly printed money can take the place of traditional savings.”

Says Lewis: “It is important to keep in mind that interest rates are a price, the price of borrowed money. They are not only a price; they are one of the most important prices in an economy. All prices are interconnected, but this price in particular affects all other prices.

“Businesses depend on prices to give them the information with which to run the economy. If the price system for interest rates is broken, no part of the price system is unaffected.”

Lewis points out that the Keynesian policy of creating new money to reduce interest rates “ultimately backfires”:

 “[I]njecting money alone in order to bring down one price (interest rates) will as a general rule just raise other prices.” …

“Economist Melchior Palyi was more blunt: ‘Stripped of crypto-scientific semantics, the Keynesian’s medicine is inflation.’”

Says Lewis, “In essence, Keynesianism is the opposite of commonsense economics.”

shovelhead's picture

There IS one economic certainty.

If you continually spend more than you make, sooner or later, you're screwed.

Unless you can steal. Then your OK for a while longer.

Can I get my Nobel in Economics now?

chinaboy's picture

Now we know for certain that the market is manipulated.

Remington IV's picture

I love a bull market when I'm long ... zzzzzzzzzzzzzzzzzzzzzz