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Wednesday, April 15, 2020

The financialization of the US economy

Encapsulated in a single picture.

The coronavirus death toll in the U.S. — now topping 23,000 — skyrocketed as families continued to huddle in their homes uncertain of what’s next, while an unthinkable number of more than 16 million people have now filed for unemployment amid an economy grappling with the shutdown.

Yet, somehow, the stock market has managed to push higher. In other words, at least those fortunate enough to own stocks had something to smile about. Democratic strategist Justin Horwitz summed up the disconnect with this tweet that went viral across Twitter TWTR, +2.68% :

As you can see, that’s CNBC’s Jim Cramer talking about the rally in the market while the chyron points out the grim reality of the historic job losses.

One commenter captured much of the response on social media by saying, “The Dow is not the economy. It is a giant government sanctioned Ponzi scheme for the wealthy.”

Another pointed to the fact that, according to Federal Reserve data, 84% of stocks owned by U.S. households are held by the wealthiest 10% of Americans — essentially Wall Street vs. Main Street.
The financial industry doesn't lubricate the economy. To the contrary, it is both a huge parasite and a massive anchor that drains more than one-third of ALL corporate profits out of the real economy. To put this in perspective, the total amount of all retail trade profit was $154 billion in 2018. The total amount of all transportation and warehousing profit was $55.6 billion. The total amount of all food, beverage, and tobacco profits was $50.5 billion.

The total amount of financial profit was $448.3 billion, and that almost certainly understates it. If you want to know what is wrong with the economy, the answer is "the transfer of profit to the financial institutions" which is done through ever-expanding debt. This is why either a debt jubilee or mass defaults and the total collapse of the US economy is absolutely inevitable.

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82 Comments:

Blogger JamesB.BKK April 15, 2020 6:10 AM  

The stock market is supposed to be forward looking. These recent price increases are not of a plunge protection nature. It is as good an explanation that punters and fund managers see a v shaped boom - leveraged of course - coming as is one that it's all rigged per standard DNC - Occupy class warfare rhetoric as reported in the snip. Some of future earnings may be legit and some manipulated and engineered, but it's as good a view as any to anticipate that all this super cheap fuel that's being stored up will enable rapid growth and reemployment, potential second waves notwithstanding. Some businesses will fall by the wayside and some will surely change hands, but betting the productive economy purportedly measured by the Dow - and earnings - will rise is at this point as good as betting on collapse. Been reading Stockman long enough to know the dire situation. Debt destruction during the coming bankruptcy and change of managers wave should have salutary effects long term but pain is indeed coming. No telling what it would take for the debt-trapping controllers to give up. They've just levered up all the sovereigns by a bunch. Most, including throughout the US, were already broke spendthrifts.

Blogger Nihil Dicit April 15, 2020 6:31 AM  

That commenter is totally wrong. A Ponzi scheme at least pretends to offer a guaranteed return. The stock market is purely a "yah spends yer money and yah takes yer chances" three-card monte hustle.

Blogger jkmack April 15, 2020 6:47 AM  

The government is printing trillions per week, and physical silver is sold out until you get to 40% and 50% premium of paper prices. You are literally seeing bad money chasing good money. Vox Day has it right I think.
If even 10% of people go from being 'just in time' Suburban consumers to goat milking, chicken raising, producers, eschewing the latest and greatest $1000 thingamabob that is gonna make them loved by women and envied by men, then this economy will deflate.
Preppers have won the argument, now to see if enough people have the fortitude to follow their convictions, or if the siren song of convenience sucks them back in.

Blogger Paulito April 15, 2020 7:07 AM  

Social Security is a classic Ponzi scheme (aka Survivor's Benefit Scheme or Tontine Insurance Scam). The stock market is just a con job.

Blogger Doktor Jeep April 15, 2020 7:09 AM  

I fear that like schools, women's suffrage, and diversity, civilization is going to have to collapse entirely to slough off these institutions and people who will go to the grave with a death grip on their agendas and gibs.

Blogger One Deplorable DT April 15, 2020 7:24 AM  

In light of this image and the recent 'learn to code' meme, I suggest every American change their course in life and learn to trade.

We obviously don't need workers. Sure, maybe a few guys on a farm somewhere. And a few strong empowered women coders to keep the trading servers going. The rest of us? We can all just sit back and trade.

The government can grease the wheels and stir those animal spirits by opening an online trading account for every American, complete with an initial one million dollar deposit to get you started. Just imagine how fast the Dow will climb when those new accounts start trading all that new cash! We can even setup public kiosks for the homeless to trade. Think about it: how long will they be homeless with the Dow skyrocketing to the moon?

Imagine a nation built on trading and quantitive easing. It's easy if you try. I don't know why anyone didn't think of this sooner!

Blogger Gettimothy April 15, 2020 7:49 AM  

@3 Barnhardt called it.

Blogger Robert Browning April 15, 2020 8:08 AM  

But is the coronavirus a cover for the inevitable financial collapse? A way of transferring blame? It sure seems like it.

Blogger Brett baker April 15, 2020 8:11 AM  

I believe a big and underrated part of the 2008 crash was trying to employ more people in the financial sector than it needs.

Blogger RandyB April 15, 2020 8:23 AM  

What do you think 401Ks are?

Blogger d April 15, 2020 8:24 AM  

"The Kingdom of Shylock"

Blogger Jad April 15, 2020 8:28 AM  

Im in for the prepping baby! Just sold my house, moving regional. Will buy again when the property market really tanks, in about 12-18 months.

Blogger Azure Amaranthine April 15, 2020 8:28 AM  

Tick tock.

Blogger Nihil Dicit April 15, 2020 8:29 AM  

OT - Anybody else see the usual suspects are making yet another woke "reboot", this time Dune with a black female Liet-Kynes? Truly the ride never ends.

Blogger sykes.1 April 15, 2020 8:59 AM  

"84% of stocks owned by U.S. households are held by the wealthiest 10% of Americans"

That statement is literally true, but it is also false. Every American with a pension, public or private, is heavily invested in the stock market, albeit indirectly.

Blogger James Dixon April 15, 2020 9:12 AM  

> This is why either a debt jubilee or mass defaults and the total collapse of the US economy is absolutely inevitable.

My money, if I had any to bet, would be on the latter. :(

Blogger John Regan April 15, 2020 9:25 AM  

The degree to which the current regime siphons off the fruit of everyone's efforts, all the time,to the enrichment of the NYC-DC axis is very much underappreciated, for sure. A homestead amendment would cut into that very substantially. Not as good as an out and out jubilee maybe, but not bad compared to the present circumstances.

Blogger Crew April 15, 2020 9:59 AM  

Trump supports main street as far as I can see, so the the financial hegemonists will have to pull out all the stops to defeat Trump, and it seems they are pulling out all the stops.

Blogger Andrew April 15, 2020 10:13 AM  

That commenter is totally wrong. A Ponzi scheme at least pretends to offer a guaranteed return. The stock market is purely a "yah spends yer money and yah takes yer chances" three-card monte hustle.

Not really. Most of the money in the stock market is dumb money (ie. passive investers); ETF's, mutual funds, 401k's, etc.

When the entire middle class shoves their entire savings into the financial markets that they don't understand, the incentives are distorted, monetary policy is distorted, the markets become too big to fail, etc.

Blogger furor kek tonicus ( no need to be racist, Ratchets can Karen better than anybody ) April 15, 2020 10:19 AM  

8. Robert Browning April 15, 2020 8:08 AM
But is the coronavirus a cover for the inevitable financial collapse? A way of transferring blame? It sure seems like it.



who had the motto, "It's the economy, Stupid"?

who wrote a literal love letter to Hillary Clinton during the previous election cycle?

could there be any parties with an ulterior motive in destroying the economy prior to Nov 2020?


15. sykes.1 April 15, 2020 8:59 AM
That statement is literally true, but it is also false. Every American with a pension, public or private, is heavily invested in the stock market, albeit indirectly.



i doubt your ability to read.

no assertion was made about the percentage of Americans who are invested in Tulip Speculation.

Blogger Crew April 15, 2020 10:21 AM  

With New York State and City having by far and away the most cases, can we look forward to NY becoming less important in US affairs?

https://www.worldometers.info/coronavirus/country/us/

Blogger Unknown April 15, 2020 10:30 AM  

For the sake of us financial laymen - what would be the optimal strategy to weather this storm? I'm looking to move my family to the country and would like to protect what has been saved for this endeavor.

Blogger Unknown April 15, 2020 10:37 AM  

The big corporations are getting a bail out, but they don't have to pay any of their employees, because the government is paying them, Thus, their profits are up, because the bail out replaces the income they would have received from selling their goods and services, but since they laid off their employees, their cost for labor is down. What a win win for them. Same income, but less costs equals more profit for them. No wonder the stock market is loving it! And the American taxpayer gets screwed again!

Blogger borsabil April 15, 2020 10:43 AM  

Think on the companies who are doing great and think on the companies that will be sold off at pennies to the dollar. Corona-Chan is Jeff Bezos wet dream come real. Now there's a theoretically unlimited backstop to the entire bond market. The short term play is obvious.

Blogger Jack Amok April 15, 2020 10:53 AM  

Social Security is a classic Ponzi scheme (aka Survivor's Benefit Scheme or Tontine Insurance Scam). The stock market is just a con job.

The stock market is where all the retirement funds end up, so they're the same thing. Boomer 401ks get pay outs only if younger generation 401ks are still paying in.

Blogger Krymneth April 15, 2020 11:10 AM  

Nihil Dicit wrote:Anybody else see the usual suspects are making yet another woke "reboot", this time Dune with a black female Liet-Kynes? Truly the ride never ends.

Ironically, this ipso facto proves the authors deeply don't get Dune to an extent that there's no point in watching it. Dune is already shot through with more than enough diversity points to not need to be buffed up with more. There's massive influence from Islam in there already, not to mention the entire premise of the Bene Gesserit. Odds are the adaptationists are too illiterate to realize this, especially the Islam influences.

Blogger Crush Limbraw April 15, 2020 11:12 AM  

Try explaining that to DaGuvmint employees still on the payroll - but not necessarily working - and forget reasoning with the government retirees.
They have a contract which supersedes all logic, reason or financial realities. As far as they are concerned, DaWorld revolves around them.

Blogger jkmack April 15, 2020 11:18 AM  

@18 then you cannot see very far. This is the ironic thing. Financialisation is supposed to be the mitigation of risk. That is, ostensibly, what the futures and derivative markets are supposed to do. Even freddie and fannie are supposed to recollateralize, in a risk reduced way, loans, allowing banks to put off risk. Instead they all tend toward upping leverage, thus increasing risk and finally depending on government bailouts, meaning tax payer money, meaning your money, from your pocket, to defray risk.

so what was a free market innovation to spread or sell risk, has become another hollowed out lie, which merely allows those that are big enough, to buy a few politicians, lever up, and if they roll snake eyes, after getting billions in profits, they can go, doe eyed to the government and say, 'we need help'.

Why didnt they use a percentage of profits to hedge their risks? Nassim Taleb and friends were able to make 3600% from this unforeseeable tail risk event... are they the smartest guys in the world? Why wouldn't a corporation like Virgin airlines position itself to make huge profits on an event like this and then buy up American and delta and become the kings of air travel? They could have paid 10 or 20 million a year, in years when they are making 150 million plus, a skilled practitioner of the methodology can break even or make 10 or 20% when the tail risk event does not happen, it isnt like it is dead money. They hedge fuel costs, why not global air flight affecting events costs?

What you are seeing is crony capitalism, as it hybridizes and evolves into open socialism, aka boiling the frog slowly. Rent seeking private concerns being subsumed by governments until they are out right owned by the government entity, and then fail spectacularly to the detriment of all.

if Trump were a friend to main street, he would be breaking up these monolithic corporations, deregulating even harder, and reducing government at every opportunity.

Remember the last few weeks when the media starts caterwauling about government shut downs during a budget fight. The government had absolutely no problem destroying millions upon millions of lives with a private sector shutdown, to try and position for an electoral win. Putting Trump on some idiotic pedestal is dumb. It does a disservice to him, and discredits your message.

Blogger dc.sunsets April 15, 2020 11:18 AM  

The stock market is a measure of social mood in real time (where as economic conditions lag changes in social mood, which is why the major stock indexes are "thought" to lead...which is absurd from a causal perspective.)

People of the West steeped for decades in a social mood so euphoric that it drove an unquenchable thirst for wealth in the form of IOU's (the debt bubble) and pathological trust where the sheep invited the wolves to their party (open borders, central banking/banksters, the entire DIET dogma of the ruling Theocracy...Diversity, Inclusion, Equality and Tolerance.)

I updated my DJIA 1928-current monthly chart yesterday. I have arithmetic and semi-log charts, and both reveal otherwise occult truths. FWIW, watch the 13- and 26-week Exponential Moving Averages. If the Dow gets back above them and turns them up, it will be analogous to 1987, when the Dow got below the MONTHLY EMA's briefly but rallied back above them (before they crossed), signalling that the bull had much to run.

The daily chart looked weak to me yesterday. So far the Weekly EMA's are easily holding as overhead resistance. If this continues, the MONTHLY chart will eventually see its EMA's also cross, signaling that we're unequivocally in a monthly downtrend. If that occurs, from THIS ALTITUDE, it's going to get sporty in short order. If the first wave down in a larger bear trend was a minus 34%(!), imagine what's coming.

The Trump Admin has seized control over the Fed's debt-monetizing capability, giving the POTUS and CONgress the same theoretically unlimited spending capability as Japan's government enjoyed these past 30 years. What this means to us remains unknown, but the power to create, from thin air, the ability to buy in the marketplace is catastrophic regardless of who exercises it. If replacing banksters of a certain ancestry with politicians simply turns into vote-buying on a galactic scale, it's bad enough in a homogeneous worker-bee nation like Japan...but in the faction-riven USA it should prove up as Idiocracy to the tenth power.

Blogger Crush Limbraw April 15, 2020 11:19 AM  

Crew - it looks like DaTrumpster might have an Achilles heel - he's a Germaphobe. That could explain his yielding to 'Falsi and Brix'.
If true, maybe the GE stands for Germaphobe Emperor?

Blogger dc.sunsets April 15, 2020 11:29 AM  

@ James Dixon, I used to think, as you do, that default was inevitable. CAN there be massive debt defaults if Team Trump can order the Fed to create the ability out of thin air to purchase unlimited amounts of any and every kind of debt ever issued?

In THEORY, this is the power they recently arrogated. It is what Japan's government did for 30 years, making "The Greenspan Put" look like nothing. All it did was disguise Japan's slow decay. If the USA does this, and every faction demands its "cut," how does that play out? I have no idea, these are uncharted waters.

Americans (and Brits, Frenchmen, etc.,) were all so besotted with euphoria that they invited the PLAYER (in the Parker Bros game Monopoly) to issue unlimited amounts of credit to everyone playing. This is central banking in a nutshell.

It's easy to see what happened. The Player-Banker and his friends got first access to that "created-from-nowhere" buying power and they used it to enrich THEMSELVES, greasing the palms of politicians to obtain legal "rights" to such con artistry, and employing practically all the Ph.D. economists alive to provide an industrial-scale rationalization for what is openly idiotic (for everyone who isn't in on the con game.)

I believe this new twist is just another stepping stone (that I didn't anticipate) on the way to the complete collapse of the USA's monetary system, the fuse of which was lit no later than when its money was unlinked from any consistent physical measure (silver and gold.) Money is supposed to be EXCLUSIVELY a representation of prior productive process. The ability to create something that looks and spends like money without actual production is idiotic, catastrophic and a crime of extraordinary evil.

Perhaps a religious revival is what's coming, and with it will be a repudiation of Satan's Fiat.

Blogger Taignobias April 15, 2020 11:30 AM  

"By their fruits shall ye know them."

I do not understand the world of finance, but I see it prop up evil men and women. I see the crashes that drive people from their homes, the Wall Street focus that takes jobs from the hardworking due to the failures of the idle and foolish, the creeping debt that transfers wealth from the struggling to the corpulent.

This is not of God, who feeds the birds of the air and knows when a single sparrow falls, who causes rain to fall on the righteous and the unrighteous.

Blogger Long Live The West April 15, 2020 11:47 AM  

Would most people here say that 401Ks are a scam?

I'm just about to graduate college and I got my post graduation job. Everyone is pushing for me to max out the 401K matching 'benefit'. But to me it seems like there's too many things that can go wrong. I don't trust that money to be there in 45 years, AND even if it is, hyperinflation or know knows what might make it worthless.

Then on top of this I believe that if I simply put that money into saving for a house right away I'd pay less money on interest and have the same amount in the end. (again, assuming that money is in perfect condition 45 years from now)

I am also pretty good with money. So I don't need to force myself to hide away money in order to avoid living in a cardboard box in the future.

Any advice about any type of investments one should make would be appreciated.

Blogger Section 8A April 15, 2020 11:54 AM  

Cramer still doing the same hustle? After all this time? He was pulling the same stunts 15 years ago, and it had worth thin even back then.

"Every day is a good day to BUY STOCKZ!!!!" ... Booyah!!

Who still watches that nonsense?

Blogger Gen. Kong April 15, 2020 12:31 PM  

John Regan wrote:

The degree to which the current regime siphons off the fruit of everyone's efforts, all the time,to the enrichment of the NYC-DC axis is very much underappreciated, for sure. A homestead amendment would cut into that very substantially. Not as good as an out and out jubilee maybe, but not bad compared to the present circumstances.

That would be a very good step for sure, but before it should come a the complete overthrow of the Wickard decision handed down by the blackrobes in 1940, in which the they ruled the Banana Empire can forbid you from growing food to feed yourself and family - because interstate commerce.

It's a totally converged system. There's no reform for it and it must collapse, with all the rat-bastards in the NYC-DC Axis and the oligarchs they work for out of control (and dangling from posts, trees and gibbets where needed).

Blogger Roddie Piper April 15, 2020 12:40 PM  

We do not have a debt problem, because no one seriously thinks that any of this "debt" is ever going to be repaid. It's not debt, it's a gift of free money from the Federal Reserve.

Money-printing most benefits those closest to the printer, who get the first chance to spend the new money, and most harms those farthest away, who must pay higher prices without a commensurate rise in their incomes.

Under this monetary system, corporations do not compete to produce useful goods and services that people want to buy; they compete to secure a place closer to the money fountain.

So as an investor, ignore everything Vox says about Disney's cratering revenue, and ask yourself, "Will Disney get a bailout?" My magic 8-ball says YES.

Blogger Azimus April 15, 2020 12:49 PM  

Is there any way to know whether the DJIA is an accurate reflection of the stock market as a whole anymore? I mean, I like IBM too, but it doesn't seem like they have THAT important of an impact on our economy.

I guess the bottom line, is that the stock market is a shockingly poor indicator of the real economic engine of the country.

Blogger John Rockwell April 15, 2020 1:06 PM  

Nihil Dicit wrote:OT - Anybody else see the usual suspects are making yet another woke "reboot", this time Dune with a black female Liet-Kynes? Truly the ride never ends.

X-Com also got woke. Bloody hell. They keep on moving into new territory those parasites.

Blogger Crew April 15, 2020 1:19 PM  

@33: The Deep State or the Wall Street Criminals will steal your 401K before you retire.

It's not worth the money.

Blogger Mathias April 15, 2020 1:21 PM  

Yea, and these freaks are doubling down by sabatoging the EIDL loans, first by looting the fund established for it, then by reducing the promised benefit to 1000/employee instead of the full 10,000 grant promised by Trump. 5/6 businesses that need this are sole proprietorships, and they are trying to force people into the much less beneficial PPP program. Sentators are pissed, and things look to blow up today.

Blogger Ominous Cowherd April 15, 2020 1:28 PM  

Unknown wrote:For the sake of us financial laymen - what would be the optimal strategy to weather this storm?
The optimal strategy would be to divest yourself of all financial assets before the storm hits. It's a bit late now. If you sell now, you lock in losses. If you wait, you risk bigger losses. You probably knew that.

Can you put what you have into a down payment on what you want? Can you use it to buy something less than what you want for cash? Maybe you were saving for a quarter section and a fortress. Maybe you could buy 16 acres with a trailer on it for cash. Don't let perfection keep you from good enough.

Try to take delivery of something tangible instead of holding a financial asset. Ultimately, if you can't stand on your asset and defend it, it isn't yours.

Blogger Dole April 15, 2020 1:34 PM  

Great post as usual, thanks Vox.

Blogger Taignobias April 15, 2020 1:44 PM  

I'm only a few years ahead of you, agewise. From where I sit, it seems insane to trust that the present economic house of cards can hold out the 40 years it'll take me to retire, much less 25-30 years after that.

I'd appreciate older and wiser heads' inputs, but I can offer these from my own failures:

1. You're going to lose your job more than once in the next few years, likely through no fault of your own. Budget accordingly.
2. Rent is a sucker's game. Common lease terms make it so that, if you have to move, you still pay monthly until the landlord has a new sucker on the line.
3. Invest in yourself. Skills (and shiny certificates stating that you have them), profitable projects (gardening, crafts, etc), and the like return unexpected dividends.
4. Internalize the differences between "affordable" and "necessary". It's easy to start spending based on what you can afford, instead of spending only on what you need, even as a frugal person. This bites you when #1 comes to pass.

Blogger eldiabloloco April 15, 2020 2:21 PM  

Long Live The West wrote:Would most people here say that 401Ks are a scam?

I'm just about to graduate college and I got my post graduation job. Everyone is pushing for me to max out the 401K matching 'benefit'. But to me it seems like there's too many things that can go wrong. I don't trust that money to be there in 45 years, AND even if it is, hyperinflation or know knows what might make it worthless.

Then on top of this I believe that if I simply put that money into saving for a house right away I'd pay less money on interest and have the same amount in the end. (again, assuming that money is in perfect condition 45 years from now)

I am also pretty good with money. So I don't need to force myself to hide away money in order to avoid living in a cardboard box in the future.

Any advice about any type of investments one should make would be appreciated.


I had this discussion with young CheetoeFinger when he started working a couple of years ago. Rather than specific advice, you are going to need to prognosticate what you individually believe will be the future. That's true of any decision, even the ones you made selecting a career path {Happy with that choice? Answer that one to yourself first.}

My young Cheetoefinger chose to invest in the company 401K only to the extent of the company match. His company matches 5%, so Cheetoefinger plugged in his 5%. And in a Roth, because he's not anticipating favorable tax rates 30 years downstream[in the unlikely circumstance that nothing changes drastically.] His reason is that he didn't want to leave the 5% of his salary on the table.

The rest of his money is being squirreled away while he tries to figure out methods to hedge his bets against The Storm. Probably to include a mix: farm-able real estate, a good set of tools, fixed assets he thinks may work as trade goods[based on where he finds land], and regular investments[stocks, bonds, cash]. In the short term he and MsCheetoefinger are doing better at living below their means than I expected. Cheap apartment, cheap but reliable car, etc.

If he were more of an entrepreneur he would be investing his money and time in himself. One of his friends is a welder, and all of his decisions are revolving around moving his skill set into a freelance business. Cheetoefinger already has cash, so he may invest some getting Cheetoebuddy set up. Right now they are thinking Cheetoefinger could finance the fixed assets for Cheetoebuddy. They are researching the details now.

Until the rules of the game change, he's decided to make financial decisions within the current framework of the economy, and keeping his fingers crossed he can either transition or salvage enough to stay afloat if things go sideways.

In other words, not much different from what peasants had to deal with in the 1500's, or 1800's or 1900's. Just the appearance of more options. And maybe a tad less complete dependence on good weather for the crops.

Blogger Kraemer April 15, 2020 2:26 PM  

I think Big Bear has the right idea. If we all extricate ourselves from the financial system as much as we can, ie reduce the number of dollars cycling through our bank balance, we can cut these parasites out. You can't print goose eggs, after all.

Blogger Paulito April 15, 2020 2:37 PM  

@25 They're both pooled investment schemes but 401ks pay out to your beneficiaries if you die prior to claiming them and classic tontine scams don't.

Blogger Newscaper312 April 15, 2020 2:39 PM  

@Long Lived West
No, 401ks are not a scam, just assume they are not a golden ticket either.
1. You typically have some very conservative investment choices available (useful if need money shorter term). 2. Lowering your taxes by reducing taxable income is rarely a mistake. 3. Setting aside enough just to get the full company match beats ANY normal investment(50% return out the gate?)
Important -- pulling money from 401k for a down payment on first house IS one of the few special cases where you can early withdraw without penalties.
Even if you are totally skeptical about the long term, take a hard look at how it might help you do what you want in next few years. Do check how soon matching company money is fully "vested" where you can get at it.

Blogger Jack Amok April 15, 2020 2:41 PM  

For the sake of us financial laymen - what would be the optimal strategy to weather this storm? I'm looking to move my family to the country and would like to protect what has been saved for this endeavor.

It's a tough call. The safest bet is productive resources (farms and factories) that can provide needed goods at whatever prices look like after the storm. Making something you can sell is the best sort of hedge for either inflation or deflation. It moves with either, maintaining it's value regardless.

But, "safest" isn't risk-free. Productive assets are not liquid, so they can be sitting ducks for any pillaging parties (either the physical mob kind or the tax-and-regulation kind). Possibly going into the mobile fab business might be a good way around this.

Blogger Newscaper312 April 15, 2020 3:06 PM  

@Krymneth
Always new the Arab/Muslim riffs, but
Never noticed this until now:
"Bene Gesserit" => Jesuit? (Female version)

Blogger Andrew F April 15, 2020 3:33 PM  

Similarly, some basic construction/mechanical/electrical skills and the accompanying tools would be useful. You could potentially barter basic car repair or simple carpentry if times were desperate.

Blogger Aeroschmidt April 15, 2020 3:54 PM  

I tried getting financing for a new rental house I want to buy. They're shut down for the foreseeable future. Real estate market crashing to cash only prices... On one hand that sucks for my ability to expand my business but on the other everything is on sale.

Blogger Damelon Brinn April 15, 2020 3:59 PM  

One of my co-workers today said he was taking his car in for some minor work, and a couple of the others leapt to encourage him to finance a new one. Rates are great, and you can get 84 months some places! What could go wrong?

Deflation, if they even know what that is, isn't a consideration for them. Nor is the possibility of a crash that results in loans being called in. All that matters is the loan rate.

Blogger jkmack April 15, 2020 5:19 PM  

@long lived west 401K's are definitely a scam and you should avoid them. if your company is doing a 100% match up to 5% or more, you might go for the match, you might get out break even after fees, but only use the money market, dont put it into any of the mutual funds. after 10 or 15 years you might have enough in it to loan yourself money out of it, which can be handy, but I highly doubt you will be with the same company in 10 years, but who knows, I have a cousin in law that is still with SW airlines after graduating, coming up on 10 years.

You would be better off buying houses and rent to own them, at the lower middle class strata, as they are stable people generally, but have to change jobs often, so you will end up "selling" the same house over and over as the prior owner just walks from the deal.

You can start by buying a starter house, living in it, and diy fix it up, or hire contracters to do it with/for you. just doing one thing at a time as you can afford. after about 5 years of this, you will be a champ, no how to remodel, and know how to find roughed up and abandoned houses that can be remade into very profitable gems. at 10 years you should be profitable enough to be able to go into multi unit housing on a cash basis.

you wont get that kind of return, or the tax benefits, from a 401k.

Blogger James Dixon April 15, 2020 5:46 PM  

> Boomer 401ks get pay outs only if younger generation 401ks are still paying in.

Define payout. Unless a company goes bankrupt their stock still has some value.

> @18 then you cannot see very far.

Entirely possible. But an officially sanctioned debt jubilee isn't something I see happening. Unofficially writing off all the debt when it's defaulted on? Yeah, that's a possibility. But a debt forgiveness I just don't see. So given those two options...

> If the first wave down in a larger bear trend was a minus 34%(!), imagine what's coming.

Well, this is the 20's. We may be reliving the roaring 20's in reverse order.

> CAN there be massive debt defaults if Team Trump can order the Fed to create the ability out of thin air to purchase unlimited amounts of any and every kind of debt ever issued?

Well, you either have defaults or you have massive inflation. Take your pick. But it doesn't look like they're not limiting the purchases to debt.

> Perhaps a religious revival is what's coming, and with it will be a repudiation of Satan's Fiat.

We can hope. God can work miracles. But that's what it will be.

> Would most people here say that 401Ks are a scam?

No. If you think stocks are a sucker's play, put the money in a money market fund. Just put in enough to get the full company match. You can put your money in after taxes and pull it out when the match is vested.

> Any advice about any type of investments one should make would be appreciated.

Unless you expect the complete collapse of our system, stocks are still your best long term option. Just put the money in a total market fund every paycheck and never sell. If you expect the complete collapse of our system, all bets are off.

> Is there any way to know whether the DJIA is an accurate reflection of the stock market as a whole anymore?

It hasn't been for some time. The S&P 500 is better, but still not perfect. Most companies are not traded.

> the stock market is a shockingly poor indicator of the real economic engine of the country.

Of course. Over the short term the two can have little to do with each other. Over the long term that's not the case. The value of a stock will track earnings over the long term.

> The Deep State or the Wall Street Criminals will steal your 401K before you retire.

If you believe that, pull your money out once it's vested. Then you only have to worry about the company match being taken.

> But, "safest" isn't risk-free.

There are no risk-free options in this world. That can't be emphasized enough.

Blogger eclecticmn April 15, 2020 6:52 PM  

2016 GOP convention was in Quicken Loans Stadium. 2016 DEM convention was in Wells Fargo Center. 2020 DEM convention will be in Finserv Arena. MN Vikings play in US BANK stadium. Almost a pattern ...

Michael Hudson has been writing and speaking (youtube) about the financialization and funneling money to the 1%. It is hard to unlearn the crap I have been taught. The book Bailout (Barofsky) makes clear that the US govt exists to protect banskters from citizens, not the other way around. NN Taleb said that in France the govt took over the banks. In the US the banks have taken over the govt.

Blogger Theproductofafineeduction April 15, 2020 7:06 PM  

@33

Yes, it's a scam. In respect to company 401ks, I put exactly what my company will match too but no more.

Blogger Jack Amok April 15, 2020 7:11 PM  

They're both pooled investment schemes but 401ks pay out to your beneficiaries if you die prior to claiming them and classic tontine scams don't.

You can leave Tontine's out of the discussion - they are not ponzi schemes like any typical retirement or life insurance plan. They're just last one standing get's the pot. Not a great idea, but they don't depend on continual inflows.

The Stock Market, pension plans, and 401ks all do. So for that matter does the financial industry itself. Compound interest requires new money constantly.

Blogger gbob April 15, 2020 7:40 PM  

Holy shit. I was never on board with the debt jubilee thing. I see it now. Thanks

Blogger JamesB.BKK April 15, 2020 9:43 PM  

Expectations about actual earnings and actual distributions matter to clearing stock prices. Many games get played but that does not undo this truth. Hasn't social mood tea leaf reading produced correctly twenty of the last two predictions of price declines? Or rather predicted two declines relentlessly for years? EWI kept selecting different indices after the throw over a couple of years ago. Unreliable.

Blogger JamesB.BKK April 15, 2020 9:57 PM  

True. Where there's a real property tax, one does not own real estate but rents it. Property taxes can always be instituted and increased. In particular, this can occur where the voters are sufficiently enthralled or bought and the taxing entity has squandered its earlier (and future) income on money on govt pensions and benefits, crappy schools and insolent school children, socially destructive buses and bus drivers, and lately paying cops to prevent people from engaging in exchanges with others or walking on a beach or parkway.

Blogger James Dixon April 15, 2020 9:59 PM  

> ...but they don't depend on continual inflows. The Stock Market, pension plans, and 401ks all do.

Not really. Growth at the rates we've seen over the past 60 years does.

But the stock market really only depends on the companies making a profit and paying a portion of it out to their shareholders, either by investing it back into the company and increasing it's worth or by paying a dividend.

The bond market really only depends on the companies being able to pay back their debts.

Fun fact, at one time stock dividend yields were higher than bond yields, to compensate the shareholders for the greater volatility of stocks. It looks like we may be in another of those periods. The more things change...

Blogger Jack Amok April 15, 2020 11:52 PM  

Define payout. Unless a company goes bankrupt their stock still has some value.

Don't be dense James, you know what 401k payouts are. The stock gets slowly sold to fund someone's retirement, and as long as the principle grows fast enough to keep up with withdrawls, the fund stays solvent. But if the principle doesn't grow fast enough, the retired Boomer (or Silent) has to start eating too deep into the principle to meet monthly expenses and the fund drains too fast.

Or, if stocks crater (as happened to my older, Boomer, brother) the nice retirement nest egg is more like a hollow shell.

Blogger map April 16, 2020 12:11 AM  

JamesB.BKK wrote:Some businesses will fall by the wayside and some will surely change hands, but betting the productive economy purportedly measured by the Dow - and earnings - will rise is at this point as good as betting on collapse.

I would not rely on the DOW. Use the S$P 500, Nasdaq 100, Russell 2000, Gold, Oil, etc.

The DOW is a problem. It's not capitalization weighted. Its stocks are ranked by stock price. This makes Boeing the largest holding.

Blogger James Dixon April 16, 2020 12:22 AM  

> Don't be dense James, you know what 401k payouts are. The stock gets slowly sold to fund someone's retirement,

Maybe for most folks. Some folks consider the dividends to be the payout and don't touch the principal.

Blogger map April 16, 2020 12:28 AM  

jkmack wrote:then you cannot see very far. This is the ironic thing. Financialisation is supposed to be the mitigation of risk. That is, ostensibly, what the futures and derivative markets are supposed to do. Even freddie and fannie are supposed to recollateralize, in a risk reduced way, loans, allowing banks to put off risk.

Well, options and futures do do that. Hedgers use these tools all of the time to limit risk. Speculators are needed, however, to create liquidity for the hedgers to operate within. To attract those speculators, options and futures allow outsized returns through leverage.

When the US got off the gold standard, three things happened: 1) It became legal to own gold; 2) Financial futures were created; 3) The options markets were created. All three, almost in anticipation of what getting off the gold standard would mean.

Blogger Jack Amok April 16, 2020 12:41 AM  

Maybe for most folks. Some folks consider the dividends to be the payout and don't touch the principal.

Dividend stocks are a much better idea, but... mostly they don't make the numbers work for the typical retirement plan. Note that "typical" != "smart". Most retirement plans assume some capital appreciation, which means some Ponzi scheme mechanics.

"Make your money work for you" requires compound growth, regardless of how anyone tries to manage it. "Have a grandkid who looks out for you" is... not the hip and cool retirement plan these days.

Blogger Raker_T April 16, 2020 12:41 AM  

If you're moving to the countryside to be more self sufficient, I recommend a wooded area, preferably hardwoods. You'll not suffer a cold house in winter, if things get rough. That's very nice, no matter how slow work has been, the house is -always- cozy warm. If the electricity goes out, still warm, because not relying on central H&A. Where there are trees, there is rainfall, generally. It can be sporadic, so no guarantee of growing a garden by rain alone, because it's more difficult for a garden plant to endure a dry spell than a deep root tree. The Appalachian forests have a greater variety of trees than anyplace else in NA. One type for fence posts, another for tool handles, and so on. Jobs pay less around here, so factor that into your plans.

Blogger Jack Amok April 16, 2020 12:42 AM  

I would not rely on the DOW. Use the S$P 500, Nasdaq 100, Russell 2000, Gold, Oil, etc.

they'er all crap. What are you talking about?

Blogger map April 16, 2020 12:45 AM  

jkmack wrote:Why didnt they use a percentage of profits to hedge their risks? Nassim Taleb and friends were able to make 3600% from this unforeseeable tail risk event... are they the smartest guys in the world? Why wouldn't a corporation like Virgin airlines position itself to make huge profits on an event like this and then buy up American and delta and become the kings of air travel?

Virgin does not have that skill set. It would be like them speculating on fuel prices.

Taleb was, I believe, an options market maker so his fund probably buys long-dated out-of-the-money puts that would increase in value as the market crashes and volatility increases. Buying these puts cost money and the investments can expire worthless. To offset these purchases, Taleb may sell short-dated out-of-the-money calls to generate premiums that offset the cost of the puts and bring in some income to keep the operation going. It's a tough balancing act.

Blogger map April 16, 2020 12:50 AM  

dc.sunsets wrote:@ James Dixon, I used to think, as you do, that default was inevitable. CAN there be massive debt defaults if Team Trump can order the Fed to create the ability out of thin air to purchase unlimited amounts of any and every kind of debt ever issued?

In THEORY, this is the power they recently arrogated.


If Trump has done what we think he did, then he has effectively neutered the Fed's ability to use monetary policy to negate fiscal policy. That is, the Fed can no longer raise interest rates to short-circuit tax cuts. This is why the corona virus was engineered: replace the Fed's power to take down the economy.

dc.sunsets wrote:Money is supposed to be EXCLUSIVELY a representation of prior productive process. The ability to create something that looks and spends like money without actual production is idiotic, catastrophic and a crime of extraordinary evil.

Found a fascinating paper on this topic: SILENT WEAPONS FOR A QUIET WAR.

You can look this up online.

Blogger map April 16, 2020 1:04 AM  

Long Live The West wrote:Would most people here say that 401Ks are a scam?

I'm just about to graduate college and I got my post graduation job. Everyone is pushing for me to max out the 401K matching 'benefit'. But to me it seems like there's too many things that can go wrong.


It's very difficult to make money in the stock market as a passive investor. If you started investing in 2001, you would have broken even by 2013 and only started making money in the last seven years. 12 years is an enormous amount of time to be dollar-cost averaging only to see large swings in your wealth until the last seven years showed up.

As of now, you should put in enough in a 401(k) to at least match what the company gives because that is free money and the 401(k) returns are tax free. Furthermore, if you are good at managing money, then you adjust the allocation within the 401(k) to reflect your taste for risk in the market.

If you are not crazy about the market, then you should always be focused on accumulating cash.

Blogger map April 16, 2020 1:07 AM  

Roddie Piper wrote:So as an investor, ignore everything Vox says about Disney's cratering revenue, and ask yourself, "Will Disney get a bailout?" My magic 8-ball says YES.

Vox' bet is correct. If Disney can get bailouts, then it does not need product. And if it does not need product, then it does not need employees. SJW's are pushed to the unemployment line.

Win for Vox.

Blogger JamesB.BKK April 16, 2020 1:39 AM  

Speaking of Boeing, Trump did say he would bail it out if management asked. And suggested by noting that he asked if they would change the name of the 737Max, which he says they say is now the safest plane ever built - a tremendous airplane. As I've noted before Boeing now has an excellent damages defense to the claims of all those airlines that got stilled or jilted on orders. Plus, war. Investing in hubristic national champions is often a solid bet, though not always. I'm betting on Boeing at ca. $155.

Blogger SciVo April 16, 2020 5:31 AM  

@sykes.1:

Every American with a pension, public or private, is heavily invested in the stock market, albeit indirectly.

Ok boomer.

Blogger SciVo April 16, 2020 5:50 AM  

@ Long Live The West:

I'm just about to graduate college and I got my post graduation job. Everyone is pushing for me to max out the 401K matching 'benefit'. But to me it seems like there's too many things that can go wrong. I don't trust that money to be there in 45 years, AND even if it is, hyperinflation or know knows what might make it worthless.

Do you have faith in yourself or not? It so, then you should invest in yourself (hobby to side gig to business); if not, then you shouldn't trust your judgement of how to invest in someone else.

Plan for your retirement to be something that you can do that people will pay for, even when your muscles are weak and your charm is archaic. Paying more for the incarnated intangibles: design, skill, experience & expertise made physical.

Blogger SciVo April 16, 2020 6:06 AM  

@gbob:

Holy shit. I was never on board with the debt jubilee thing. I see it now. Thanks

Once you see it, you can't unsee it: a monster like the Blob, growing endlessly until stopped.

Blogger Ominous Cowherd April 16, 2020 8:27 AM  

Jack Amok wrote:"Have a grandkid who looks out for you" is... not the hip and cool retirement plan these days.
Probably because it begins with ``have a passel of kids.'' Hard to be Yuppie DINKs if you're going that route. Hard to raise kids who will care for you, hard to connect with grandkids, if you are self-centered, too busy for them, oblivious to them.

Even if you aren't a Boomer Yuppie DINK, it's hard to do this in a city apartment. This traditional retirement plan faded as we began to ape the rootless cosmopolitans we allowed to infest our cities.

Blogger James Dixon April 16, 2020 8:56 AM  

> Dividend stocks are a much better idea, but... mostly they don't make the numbers work for the typical retirement plan. Note that "typical" != "smart".

Correct. If you simply buy the market, the income you need normally isn't there unless you have several million dollars accumulated. At $1M, you need 5% to get $50K/year and even most dividend stocks don't pay that much.

But if you get $20K from Social Security then you only need 3% on that $1M to get to $50K, and that is doable. SDY is currently yielding 3.32%. And that's not an unusual yield for SDY or other dividend funds.

Of course if we didn't have Social Security taking 12.4% of your income and were allowed to invest that instead, getting to that several million dollars would be a lot more likely. I've only been able to manage to invest that much a couple of times. Most of the time I was at a 9% investment rate.

> Most retirement plans assume some capital appreciation, which means some Ponzi scheme mechanics.

Yes, but I can't do anything about other peoples' assumptions.

> It's very difficult to make money in the stock market as a passive investor.

I started investing in the late 80's and have lived through Black Monday, the dot.com bubble, and the 2008 financial crisis. That doesn't match what I've seen nor what other people who have been successful have told me.

It can be argued the 1980's and 90's bull market skewed things, but I missed a good chunk of the 80's gains, so I'm not sure that's true.

> 12 years is an enormous amount of time to be dollar-cost averaging only to see large swings in your wealth until the last seven years showed up.

You're probably going to be working for 40 years or more. You'll see multiple bull and bear markets over that time. The 1960's through 1970's stock market was arguably even worse than the 2000's.

> As of now, you should put in enough in a 401(k) to at least match what the company gives because that is free money and the 401(k) returns are tax free.

Exactly. It's free money. And if you put your money in after taxes you can draw it out without a penalty once the company money vests (usually 3-5 years in my experience). There's no reason not to do so. What to put your money in is your decision to make.

I'll freely admit that investing in stocks isn't for everyone. The guy who pretty much invented and built the index fund industry (Jack Bogle, founder of Vanguard) himself said "If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks."

Many (arguably most) people simply aren't up to watching a 20-50% decline in their accounts without selling, which is the worst thing you can do. If you're one of those, stay out of stocks entirely or only put a relatively small percentage of your savings into them.

But if you can dollar cost average continuously, not sell when the market drops by 50%, and only plan on drawing out your earnings in retirement; you should do fine.

If you do decided to invest in stocks most people are best served by a total market index fund like Vanguard's VTSMX. If that's not available, divide the money up between large, mid, and small cap index funds to your taste. Don't try to beat the market, just settle for matching it.

Now, as I said earlier, in the event of a complete collapse of the system those ownership papers (which are what stocks are, you're legally a limited liability part owner of the company) probably won't be honored. So if you expect that you obviously don't want any money in stocks.

Blogger Long Live The West April 16, 2020 11:21 AM  

Thanks for the advice everyone. Gave me some good ideas and things to think about.

Blogger Ominous Cowherd April 16, 2020 11:25 AM  

@78: Sentinel Decision. MF Global

Having any financial assets at all is a dubious strategy. Solomon told us that having more than 1/8th of your assets in any one thing is a bad plan. Putting more than you can afford to lose into financial assets is pure folly.

Blogger SciVo April 16, 2020 11:33 AM  

@ James Dixon:

Many (arguably most) people simply aren't up to watching a 20-50% decline in their accounts without selling, which is the worst thing you can do. If you're one of those, stay out of stocks entirely or only put a relatively small percentage of your savings into them.

Yeah, it just about killed me inside the first time I saw a young couple rationally dedicate themselves to dollar-cost averaging on a broad index, and then pull out precisely when the prices were best, because they happened to start on a downslope, and psychologically couldn't handle the losses.

Now I think everyone should just stay out unless they're playing with someone else's money, since it's just too much to expect a human person to remain objective about his own. It's effectively a carny scam.

Which tells me a lot about anyone that advocates for giving individuals control over investing their Social Security. They either don't know what they're saying, or they do and they're malicious, or maybe they could know except for the Upton Sinclair problem.

Blogger James Dixon April 16, 2020 1:43 PM  

> Now I think everyone should just stay out unless they're playing with someone else's money, since it's just too much to expect a human person to remain objective about his own.

There are people who can handle it. As noted above, I've been investing in broad based funds for over three decades now and never pulled any out. But I'm not most people. My experience should be take as anecdotal, not as a pattern most people can follow.

> Which tells me a lot about anyone that advocates for giving individuals control over investing their Social Security.

I advocate investing it, not necessarily giving the individual control over the investments. Though even a money market account would probably beat Social Security.

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