Let’s take a look at the market so we can see what happens when the Fed targets higher stock prices. And I don’t just mean that stocks go up, we all understand that. But let’s take a closer look to see just how this happens on an intricate basis. The difference between the market and a casino historically is that the market odds could not be predicted whereas casino odds are known and publicly advertised (i.e. payout rate).
Let’s take last year and this year to date prices of the S&P to see what the odds are of weekly returns. A market without manipulation should be about 50/50 or random. In an extremely robust economy when consumer demand is very high and disposable incomes are rising rapidly you could expect a slight skew to the upside meaning that most companies are doing quite well given all of its constituents are doing very well. Please note, however, we are not in a robust economy. We have a higher sustained level of unemployment (U6) than in the past 50 years at 12.5%. We have a the smallest percentage of people in the workforce in almost 50 years (and that was at a time when many women still did not work outside the home). We have more people taking government payments than any time in history and we have household incomes declining along with consumer demand. So we are far from a robust economy. As such we should see no upside skew to market returns if the market is indeed fair and not manipulated by some exogenous force.
Well here are the numbers and you can replicate this bit of research using Yahoo Finance. I took weekly S&P prices going back to the beginning of 2013. There are 88 weeks in that time period. The amount of up weeks we would expect is around 44 and the amount of down weeks the same. What we actually see is 57 up weeks and 31 down weeks. That means there are almost twice as many up weeks as down weeks. So the odds are almost 2:1 that the market will move up on any given week. Do you see why bankers and traders do not want the money injections and the Fed manipulation to stop? The market has lost all integrity. It is no longer a market. It is a rigged casino. And so you wonder why we are at all time highs despite such poor overall economic health? Well because when the Fed targets an upward moving market the economy is irrelevant. The Fed gives long side investors 2:1 odds to the upside. And that ladies and gentlemen is the new game we call modern markets.
There is a small group of men controlling everything. Even the natural uncertainty of the markets has been overcome by these men. Profits are everything and morals are nothing. These men would righteously call you and I criminals for doing the very same thing and in fact are prosecuting folks like Madoff who ran the exact same scheme as the Fed is now. Using participants funds to fluff the numbers. The Fed’s new market is nothing more than a pyramid scheme. It will carry on successful until the money runs out. As all pyramid schemes do and then it all comes tumbling down. The $64 trillion question is when will the money run out??? Well folks I’ll leave that for you to decide. Until then onward and upward.