Is the stock market rigged? That is to say, are there shadowy hidden forces influencing market prices, in a manner that most investors don’t understand and often aren’t even aware of? The answer to that question is yes. Absolutely and without question, the stock market is rigged. But perhaps not in the way one might think, and not for the reasons one might think. To understand why the stock market is rigged — and what that means exactly — we
Read nowThe stock market was insanely strong last week. And we don’t mean strength within normal boundaries either — as in, “the market had a strong performance” or “the market looks strong.” This was strength well beyond the bounds of normal. It was strength so freakish, the standard explanations cannot account for it. Here is Mark Hulbert, a columnist for MarketWatch, describing the market on May 30: …94% of S&P 500 stocks now trade above their 50-day moving average (according to
Read nowAfter we explained why deflation is coming, some of you wrote in to ask: “What happens to gold if we get deflation?” The short answer is that, in deflationary environments, the value of gold tends to go up, possibly by a lot. We have empirical evidence of this from the 1930s, a decade where gold mining stocks saw stratospheric gains. The price of gold, though fixed by the government, went up in the 1930s too; when President Roosevelt revalued gold
Read nowOn a May 27 video call discussing the U.S. economic outlook, Goldman Sachs tried to dismiss cryptocurrencies in general, and Bitcoin in particular. The Goldman powerpoint slide, which made the rounds on Twitter, was titled, “Cryptocurrencies Including Bitcoin Are Not an Asset Class.” The whole thing was deeply embarrassing — for Goldman Sachs. In fact, the power point bullets advanced against Bitcoin (and crypto) were so lame, they almost seemed like a joke, or a high schooler’s effort to rush
Read now“Deflation World” is coming. For many, if not most, it is going to be a bizarre and disorienting experience. Most investors will fail to understand what is happening, or to process the consequences of what deflation will mean. And many of the “normal” financial relationships investors have come to expect will seem to run backward, like a movie playing in reverse. It is going to get weird. Deflation will be a bizarre experience in part because investors today, of all
Read nowWhen Warren Buffett explained his logic for dumping airline stocks, he was blunt. “It turns out I was wrong,” Buffett said via teleconference at the Berkshire Hathaway annual meeting. “The airline business — and I may be wrong and I hope I’m wrong — I think it has changed in a very major way,” he added. For an investor whose favorite holding period is “forever,” the exit was a big pivot. In 2019, Berkshire Hathaway was one of the biggest
Read nowThe strength of the stock market rebound has been a mystery. (To give you a sneak preview, today we’ll explore a narrative that solves the mystery.) It’s not just that stocks — not all stocks, but a favored group — are showing a kind of bizarre optimism, relative to a catastrophic collapse in the real economy, the ongoing challenges of the pandemic (with a “second wave” on deck), and the inescapable realities of a painful and prolonged recovery. In addition
Read nowPhysical gold has a centralization problem. It tends to gather in centralized places, and be guarded by centralized forces, under the strict administrative control of some centralized political authority. In regard to this topic, Ed Seykota, a legendary trend trader, made a spot-on observation in his late 1980s Market Wizards interview: “Gold tends to be dug up, refined, and then buried again. The geographical entropy of all gold on the planet seems to decrease over time. A lot has been
Read nowThe U.K. government achieved a dubious milestone on Wednesday, May 20. It sold its first ever batch of negative-yield bonds. In 2016 — when Brexit took markets by surprise — a one-month U.K. treasury bill went negative. But May 20 was Britain’s first time for a conventional longer-term bond. The offering was for 3.8 billion pounds worth of three-year gilts (debt securities issued by the British government). The auction was more than twice oversubscribed, with 8.1 billion pounds worth of
Read now“Free money from the Federal Reserve” sounds fantastic for stock prices. Picture a giant firehose of liquidity, just spraying cash in every direction, as the Fed expands its balance sheet by trillions. How could U.S. companies — and stock prices — not benefit from that bonanza? Pretty easily, that’s how. It has to do with the difference between liquidity and solvency, and the rise of “zombie” companies. To explain the difference between liquidity and solvency, we’ll start with these two
Read nowJerome Powell, the Chairman of the Federal Reserve, said extraordinary things in a May 13 speech. And to make sure his points were heard, Powell reiterated them on a May 17 60 Minutes interview. The “extraordinary” part came from the context. Under normal circumstances, a central bank never gives policy advice to the government. Nor does a central bank chief speak of the economy in dire terms. Yet Powell did both of those things, by way of his May 13
Read nowThe novel coronavirus is still a mystery to us. This is surprising given the sheer amount of research and intellectual firepower being thrown at the virus worldwide. In dozens, if not hundreds of countries, doctors and scientists and researchers are working around the clock to figure out what the novel coronavirus truly is — and how it does what it does. And yet, as of now, we still don’t know how the virus really works, or what it is fully
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