GUALFIN, ARGENTINA — Our adventure in the desert was “real news.”
It happened. To us. Close in space and time, with little room for interpretation, it is about as close to the “truth” as we can get.
What you see in the media, by contrast, is mostly “fake news.”
Reuters had this story yesterday:
Most Federal Reserve policymakers think the central bank should take steps to begin trimming its $4.5 trillion balance sheet later this year as long as the economic data holds up, minutes from their last meeting showed…
Provided that the economy continued to perform about as expected, most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the Committee’s reinvestment policy would likely be appropriate later this year,” the Fed said in its minutes.
This is the public spectacle – where tiny and often trivial bits of real news are conflated with vast myths and illusions.
The Fed fiddles with short-term interest rates… President Trump tweets a threat to the Freedom Caucus… the GOP proposes a new health-care plan…
You can’t know what any of these “facts” mean without reference to a huge body of non-facts – beliefs, ideas, and prejudices, many of them absurd.
Remember, a “myth” is not necessarily untrue; it just can’t be tested or disproven.
And since reality is infinitely complex, and a myth can only reflect a small trace of it… no matter how attractive or “true” it is, the myth always leaves out more truth than it describes.
Here at the Diary, we make no pretense of ever knowing the “truth.”
That would be impossible. All we can do is try to identify the most ridiculous myths… and find the most useful one, the one we can believe without getting kicked in the pants.
Imagine you were a Jew in Germany in the 1930s… or a stock market investor in the U.S. in 1929… or a merchant in Mosul, Iraq, in 2003.
In each case, there were plenty of ways to understand what was going on. But the critical narrative was: Time to get out of town.
What is the narrative myth that matters most now?
Our guess: The Trump administration will not drain the swamp. There will be no significant cut in taxes, regulation, entitlements, or spending. No reflation. No boom.
And as for the Fed – it will not trim its balance sheet or ever willingly abandon its “emergency” policies.
Whence cometh this counternarrative?
For the last couple of weeks, we’ve been trying to keep up with events… while also bringing new readers into the conversation.
So far, we’ve focused on revising common myths:
The U.S. is an empire, not a constitutional republic.
Empires follow rules of their own; they don’t act like nation-states.
They are run by an elite of insiders (aka the Deep State), not by the voters.
An empire can’t self-correct… It must continue to its own destruction.
Congress, now under the control of rival Deep State factions, can’t balance the budget or cut spending in any substantial way.
And the Fed can’t allow monetary policy to return to “normal.”
Because the empire, the cronies, and the zombies all depend on artificially cheap credit made possible by the funny-money system that President Nixon put in place in 1971.
This money system is based on credit. And cheap credit goes first to the creditworthy – the rich, big business, big government, Wall Street, and Deep State hangers-on.
The working man puts in an hour of his limited time and gets 25 bucks. The Wall Street insider gets unlimited credit priced below the real rate of consumer inflation.
That’s why almost all income and wealth increases in the 21st century have gone to the top 10%.
And it’s why Americans in the bottom 90% have felt cheated and have turned their lonely eyes to Donald J. Trump.
Mr. Trump can stir things up. He can cause mischief. He can shift power and money from one insider faction to another.
But he can’t change the system.
And neither he nor the Fed can stop the credit cycle. Unlike real money, credit is subject to the credit cycle: It goes up. And it goes down.
This is the “doomsday bug” at the heart of the fake-money system: If credit were allowed to shrink, the whole shebang would collapse.
Is this “true”?
We don’t know. Like anything in the public space, it is more myth than truth. It is seen through a glass darkly, at best. But it may be the myth you should believe now.
If you are an investor, it is “time to get out of town.” The next 10 years are likely to be lean years.
P.S. Friend, colleague, and coauthor of The Bill Bonner Letter Dan Denning gives us more reasons why this might be a good time to “get out of town” below…
BY DAN DENNING, COAUTHOR, THE BILL BONNER LETTER
Editor’s Note: Dan Denning is a leading global market analyst and the newest collaborator on The Bill Bonner Letter. Today, he shows readers why now could be the best time to get out of stocks.
Here’s a word of warning: Don’t make your investment decisions with your animal spirit – especially right now.
The S&P 500 is up just over 10% since the election on November 8. But what’s even more impressive is up until last month, the index simply refused to have any down days of more than 1%.
There was not one down day of more than 1% between October 11, 2016, and March 22, 2017. That’s 116 straight days. The next longest streak in recent memory – 110 days – was all the way back in 1995.
But don’t be at all surprised – and I mean this quite seriously – if we get a single day in April or May where the major indexes drop more than 2%.
The end of the first quarter is always an excellent time for the pros to take profits and rotate into underperforming assets to start the next quarter.
Active managers always want to own the best-performing investments of the previous quarter. They can show clients how good they were. And then they can try and find bargains to start the next quarter.
A big rotation like that could add up to a lot of volatility (that is, lots of up-and-down price movement).
In an age of algorithm trading, it’s incredible how little volatility the markets have seen since Trump was elected.
Volatility is laughably low. It’s almost unnatural for a real market to be this placid.
There was a brief election-related spike in November of last year. But the VIX [Volatility Index] is now back near the lows set in mid-2014.
To the paranoid investor, these are all signs that a big move is coming. Consider yourself warned.
If you’re a trader and you’re sitting on profits, don’t be shy about taking them. The big boys sure won’t hesitate to cash in.
— Dan Denning
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Get in touch at email@example.com. Put “Tech Analyst” in the subject line. That’s your first test.
Our friend Teeka Tiwari just released one of his popular 3-Minute Market Minder videos. This short video shows a potential change in bitcoin, the popular cryptocurrency.
If this change takes place, it could have a huge impact on investors. Teeka tells you all about it and how to prepare.
Watch it here.