14 March 2023

Stocks and Precious Metals Charts - The Fed's Frankenstein - Peak Hubris


"The mechanics of what is happening with money now is fascinating, and seems to be clarifying in my mind.  It is hard to imagine a more inherently ineffective system of capital and resource allocation than crony capitalism.  It is like playing a game in which the rules are rigged to deliver the money in the system to a relative minority of insiders, thereby bankrupting all the other customers.

It is said that in a purely competitive capitalist system, all businesses are vectored to zero profit in a process of creative destruction. As a certain class of participants clearly recognizes this they take every opportunity to corrupt and game the system through fraud.  This is why markets must have regulators.  At times the fraud overcomes the regulation to such a degree that the normal market balances are rendered ineffective and the system passes to a crony capitalist system, if not an outright oligarchy."

Jesse, Crony Capitalism: The Fed's Frankenstein, 17 December 2010

"The real danger comes from encouraging or inadvertently tolerating inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets."

Paul Volcker

"Day by day the money-masters of America become more aware of their danger, they draw together, they grow more class-conscious, more aggressive.  The [first world] war has taught them the possibilities of propaganda; it has accustomed them to the idea of enormous campaigns which sway the minds of millions and make them pliable to any purpose."

Upton Sinclair, The Brass Check

"The undeserving maintain power by promoting hysteria."

Frank Herbert

"For over a decade, low interest rates have allowed venture capitalists to accumulate huge funds to give increasingly unprofitable firms with unrealistic business models increasingly larger valuations.

Over the last year, rising interest rates to combat inflation have meant less free money for science-fiction projects, pressuring investors to change their entire approach and actually fund realistic ventures at realistic valuations with realistically sized funds and deals. Drops in valuations meant smaller checks, which meant smaller deposits at Silicon Valley Bank, and more and more withdrawals as startups ran out of cash themselves. It also meant the bonds SVB bought were now worth less than when purchased, so they’d have to be sold at a loss to generate some liquidity, so that clients could withdraw their deposits.

You would be hard-pressed to find another parasite that has so thoroughly wrecked the body and environment of its host, all while trying to convince the host that it is deserving of praise and further accommodation.

We should ask whether a system that subsidizes a bunch of well-connected, wealthy libertarians as they enrich one another with lottery tickets is truly the only way we can and should develop technology."

Edward Ongweso, Incredible Tantrum Venture Capitalists Threw Over Silicon Valley Bank, March 13,2023

"Greed is a fat demon with a small mouth, and whatever you feed it is never enough."

Janwillem van de Wetering

Stocks came in shaky today, but after a great deal of 'behind-the-scenes' assistance, the Exchange Stabilization Fund was able to provide a jolt of courage to the bulls, who went in buying, at least for a little while.

A late day rally saved the day for a 'bounce.'

The volatility in US Treasuries is almost astonishing.  But I don't suppose we should be surprised by much anymore.

Gold and silver backed off a little bit.

VIX fell.

The Dollar chopped sideways.

Crisis averted?

Perhaps.   Or perhaps we are just sowing the seeds for an even greater and more comprehensive crisis in an increasingly rotten, crony capitalist system.

PPI tomorow.

If the Fed doesn't raise 25 bp at their next meeting we will know that they have either lost their nerve, or that the situation with the financial system is much worse than they have been letting on.

Have a pleasant evening.