By Jason I. Henderson, Ph.D.
Someone has to be living under a rock or have their head extremely deep in the sand to not notice what I am calling “the colossal cacophony ” from all over the globe about the current situation of things.
A few days ago Richard Kivacevich the former CEO of Wells Fargo told FOX business network’s Charles Payne, “Some asset classes are overvalued, like bonds, and the stock market is fully valued, and I don’t think you should be adding to any asset classes at the moment,” What an astonishing statement. When have you ever heard of a good time to get out of the market? For that matter when have you heard of a bad time to get into the market? While Mr. Kivacevich did not say he was getting out of the market, his message was clear not to be putting new money it.
However, Republican nominee, Donald Trump claimed interest rates set by the Federal Reserve are inflating the stock market and recommended 401(k)-holders to get out of equities, just like he did. “I did invest and I got out, and it was actually very good timing,” he said in a phone interview with Fox Business. “But I’ve never been a big investor in the stock market.” He continued; “Interest rates are artificially low. The only reason the stock market is where it is is because you get free money.” Did you catch that? What he means by artificially is the markets are tampered with or rigged.
The markets are rigged? That cannot be. The markets respond to world situations freely without intervention by any governments. So think the ones who are not hearing the colossal cacophony. The markets are rigged.
Let me give you a recent example. When Britain voted to leave the European Union, the stock market fell almost 1000 points in two days. The next four days the stock market made back all the losses or close to it from those two days. Was the crisis over? Did we fix all the problems? Were we all mistaken about the risk? Sure you can take a naive view of what world equities markets did after the vote and conclude that stock prices went down because Brexit might cause all sorts of world economic calamities.
So are we to believe investors who feared the worst from the Brexit vote – suddenly and improbably – within a few days changed their minds and bought stocks by the bucketful turning the market around.
Maybe the popular news media can sell that story to the naive and uninformed masses. On the contrary, the government of Britain and the other governments around the world intervened. They didn’t intervene on behalf of the people. They intervened on behalf of the stock market.
Don’t believe me? These are brief statements credited to German Finance Minister Wolfgang Schaeuble on Wednesday morning by Bloomberg: “Schaeuble: EU Ministers, G-7 Agreed to Avoid Market Chaos. Schaeuble: Measures to Avoid Market Chaos Have Been Successful.”
In case you think those short statements are too vague, consider what Schaeuble had to say before the Brexit vote. According to an earlier Bloomberg story: “Schaeuble said EU policy-makers have safeguards in place to avoid ‘chaotic developments’ should Britons vote to leave the bloc.”
Schaeuble added that, should Britain pull out of the EU, “it’s also clear that then you have to do everything possible to avoid chaotic developments. We are well-prepared for that.
Astonishing. Not only did they rig it, the admitted to doing it. Additionally, they planned in advance to do so. Those government officials might have said; “If the people vote to Brexit, we will Fixit.”
Should the markets have been – let’s find another word for rigged – rescued? Propped up? Kept from hurting themselves? All questions for another time.
However, If you have ever had any doubts about government intervention in our financial markets before, or you are not hearing the colossal cacophony, you won’t have them after reading this article.
Governments are doing nothing for the upper middle class, the middle class or the poor. They are propping up the rich by not allowing any of our financial markets to run their natural course.
I believe they will make a mistake and it will be soon. And it will be very costly to us all. There are ways to not only prepare for such a situation but to take advantage of it. I am doing all I can to protect my family and the ones I care about.