The Most Dangerous Market Of Your Lifetime

Investors in equities - those imaginary certificates that signify ownership of a portion of a company or corporation - are giddy.

Stocks are near all-time highs with prosperity and class envy writ large on every tick higher.

Sure enough, these investors are shrewd operators of finance and business, many having earned their degrees from the highest academic schools in the world, the diplomas proudly displayed on the walls of their hedge fund offices and trading areas.

So, why would they possibly be worried about anything, particularly, the value of their holdings?

Simply put, there just aren't enough of them partaking at the font of wealth pouring out of Wall Street. Making matters more complicated and distressed is that the executives of the companies in which their wealth is concentrated have been buying back their shares at an unprecedented rate, making the shares of stock available smaller and smaller, but also boosting the price of those available, traded shares.

It's an easy supply and demand formula: fewer shares available makes them more valuable. In effect, if companies are inclined to take back their shares at inflated prices (a de-issuance, if you will), those remaining shares have to represent the entire value of the company.

Thus, a company could theoretically buy back all the shares but one, leaving that one share of stock to account for the full value of the company. In the case of an Apple or Google or any of the thousands of billion-dollar market cap companies, that one share would be "valued" at some absurd number, like $285 billion.

In such a hypothetical case, the problem arises when the owner of that $285 billion share of stock wished to unload it, convert it to cash or some other assets. Who would be the buyer? And would they actually pay the offered price (the ask) in such an illiquid market?

Obviously, the seller of that massive share of stock might have to offer a discount, and a big one. Instead of $285 billion, the seller might be forced to accept $140 billion, or less, in event of a liquidity crisis, which, incidentally, is what stock buybacks are creating. Since there hasn't been adequate demand for shares since the financial crisis of 2008-09, companies have resorted to buybacks just to keep their companies afloat, many of them becoming less and less profitable over time, making the price of their stock even more ridiculously valued.

When the rush for the exits begins in earnest, the big-time hedgies and fund managers will be bidding directly against each other, each with the same goal, to dump corporate paper assets in exchange for something more sturdy, ostensibly government bonds or hard, cold cash.

The markdowns, margin calls and defaults will be spectacular and this market, this unsustainable fantasy created by zero and negative interest rates, central bank stimulus, and government dumbness and numbness will be exposed to real supply and demand economics in a swan song for greed, manipulation, and wealth concentration.

That this will occur is unmistakable. Everything does not go up in price all the time, forever. The business cycle has not been abolished, neither here in the US, nor in Japan, China, the Eurozone or anywhere else.

Central banks are currently backstopping the entire Ponzi scheme of the stock market with interest rate swaps, repos, direct investment, and options manipulation.

It can't continue forever, though it can continue for a long time. It's a deadly and dangerous game, putting at risk the entire economy of the planet, or, at least that portion of the planet that wants to play along.

Increasingly, the as the musical chairs are being removed one by one, players are opting out and moving elsewhere. Largely, the lower and middle classes aren't playing at all. They're invested in necessities, cash, maybe collectibles, precious metals, and real estate.

Eventually, the sheer volume of trade by the 99% not in the stock market and incensed by government policies which seek to impoverish them further, will outweigh the phony prices for stocks listed on the NYSE and NASDAQ.

The stock market will suffer a severe breakdown at some point. The trick is not to know when that breakdown will occur, but to continue to prepare for its inevitability.

Most will not be prepared. Those who have prepared may or may not proper at the expense of everyone else, because the chaos - political, economic, social - will be astonishing.

The Boy Scouts of America issued their motto many years ago and it applies today: Be Prepared.

Be a Boy Scout.

Wednesday's Washout:
Dow Jones Industrial Average
18,495.66, -37.39 (-0.20%)

NASDAQ
5,204.58, -20.90 (-0.40%)

S&P 500
2,175.49, -6.25 (-0.29%)

NYSE Composite
10,774.98, -29.53 (-0.27%)

Wealth Building Suggestions In The Age Of Idiocy

Here are some pretty simple ideas for building and preserving wealth. When it comes to debt, not all is bad, though excessive debt is a non-starter for most people. Manage debt wisely. Any business will tell you they needed a loan or an equity partner to make money; people aren't very different.

Here are a few suggestions:
1. Buy silver (dollar cost average; buy a certain amount, be it $20 or $2000, per month, regardless of price.
2. Hide silver (self-explanatory) and don't touch it. This is your secret stash, outside the govenment's hands.
3. Find a business you can operate from home, even if it's a little more than just a hobby. Deduct all allowable expenses. I've been telling people to do this for years and the number who have listened and done it approaches ZERO. The tax code makes it easy to deduct substantial portions of your expenses.
4. Read "The Richest Man In Babylon." Follow the book's advice. Here's's a PDF online.
5. Never buy prepared foods at a grocery. Total junk, and a huge ripoff. Cook meals at home.
6. Have a garden. Even a 6x6 garden can produce a significant amount of produce.
7. Never stop learning. Knowledge is power.
8. Spend money like you don't have much. Always ask for a discount or deal.
9. Never, ever hire an investment advisor. If you think you don't know enough about investing, see #7 and educate yourself. The fact that you are reading this post makes you a candidate for being your own investment advisor and money manager.
10. Be a Boy Scout. Their motto is "Be Prepared."
11. Never panic, in either buying or selling situations. Trust your gut.

There are many more...

As far as the markets are concerned, Thursday was a repeat performance (by agents of central bankers) of Wednesday, with early losses rapidly erased and the major averages making a diagonal line from lower left to upper right on the charts.

Truly disturbing behavior from some exceptionally disturbed people.

Viola!
S&P 500: 2,105.26, +5.93 (0.28%)
Dow: 17,838.56, +48.89 (0.27%)
NASDAQ: 4,971.36, +19.11 (0.39%)

Crude Oil 49.15 -0.04% Gold 1,213.10 +0.04% EUR/USD 1.1149 -0.04% 10-Yr Bond 1.81 -1.90% Corn 414.75 -0.12% Copper 2.07 +0.17% Silver 16.00 -0.16% Natural Gas 2.78 0.00% Russell 2000 1,170.58 +0.65% VIX 13.63 -4.01% BATS 1000 20,677.17 0.00% GBP/USD 1.4405 -0.10% USD/JPY 108.9500 +0.08%