Today’s market activities really puts the nail in the coffin on market efficiency. We saw the biggest jobs number miss in history today. ‘Experts’ estimates were that we’d see 225K new hires in August. The actual number was 145K. When looking at the history of estimates vs actual this is a 5 standard deviation miss or something that has a probability of 1 in 1.75 million. Needless to say our so called experts are about as far off the mark as to what the state of our economy as one could ever write into the script of a Wayans brothers slap stick comedy. This was such an unprecedented miss that the pundits were unable to find a way to spin this as a positive. Some even tweeted they simply cannot believe this data, like Mark Zandi of Moody’s.
But perhaps the biggest shocker on the day is that the market actually traded higher on this news. That’s right folks, we are told that the very basic and most fundamental element of any decent economy is devastatingly absent from our economy and the market trades higher on this revelation. It is not just irrational and not just absurd, it is criminal. And I’m not speaking hyperbole. What I mean is that at this point it has become so undeniably evident that the markets are being centrally controlled that the entire integrity of the market is destroyed.
A market is an efficient medium of trade, whereby investors allocate finite resources to achieve maximum return. The fact that they are allocating a finite resource is the basis of market efficiency. It means they will allocate where and when they believe an equity is undervalued. If they believe equities are overvalued they will sell or reallocate their resource elsewhere. When resources are no longer finite but infinite the efficiency disappears. The reason is that if I can print money out of thin air it doesn’t matter where I allocate it. All I need to do is to continually print more money and push it into the market and the market will go up. Like a pyramid scheme, as long as I keep printing money and shoving into the market everyone continues to make money. The downside is that when the money stops it all collapses. But worse it takes the rationality out of the market. Because we no longer are making rational choices of allocation but just flooding the market with endless amounts of money. Well for those market participants who are still trying to invest based on rational choices the market becomes a very dangerous place. And that’s where we’re at today.
Central banks around the world, including the Fed (perhaps through Citadel or some other third party broker) are investing into markets around the globe. This is in absolute conflict with the concept of a market. It puts average investors at a disadvantage and also breaches the law against market manipulation. The Fed is not concerned with generating good returns they are interested in protecting the last bastion of hope in what is an otherwise dark economy. The Fed has put all of its eggs in one basket. Their strategy was to prop up stock prices and push down borrowing costs in hope of creating a trickle down recovery. What they’ve actually done is led all money allocators including corporations to direct all investments into the market rather than into capital investments or job creation. So the Fed has actually destroyed any hope of an economic recovery and has also destroyed our capital markets trying to save its flawed strategy.
The Fed needs to be dissolved. It is extremely dangerous to leave our economy in the hands of bankers who answer to no one. Their best interests are not our best interests. We have let this charade go on long enough. It’s time to kill the Fed. Period. Today was perhaps the most disgusting example of “in your face you lowly peasants” we’ve witnessed. “The market will do what we decide the market will do. And we’ve decided the market goes up no matter what rational thought suggests”. This is market manipulation and it is very much criminal activity and needs to be prosecuted. This is not in the name of national security.