By Stephen Pizzo, News For Real
08/24/2015 -- The world’s stock markets are in a
tailspin. Another tailspin. Market crashes, which used to be a
once-every-generation affair, now seem to visit us about once every
seven or eight years.
Why?
Are the world's workers becoming less
and less productive? No, just the opposite, they're working harder,
for longer and for less money every year.
Are companies less profitable? Nope.
Just the opposite there too, for the most part.
So what's up doc?
Blame it on the very technology you're
using to read this now. The Internet, and related networking
technologies, have changed how money in these markets flow.
In the past investors were like herds
of roaming bison, in search for the next green pasture. They were
widely dispersed. Separate herds went off in their own directions,
following their own instincts, in search for their next buffet. Some
did better than others. And, by the time word got out that some other
herd had found a bonanza, by the time the others got there the bounty
had been pretty much consumed.
Which is why those herds of investors
back in the day were considerably less reactionary and more stable
than we see today.
Today what we have is a
hyper-connected, worldwide investing “blob” that moves as a
single herd, able to move en-mass, almost instantly, to exploit a new
real, or imagined, opportunity. They are the investment world's
version of Star Trek's “Borg Collective.”
So one quarter everyone wants to be in
bonds, the next the herd gets a whiff of smoke (a Fed move up on
rates,) and the entire herd stampedes, running mindlessly in all
directions until it comes to a collective agreement on what they
believe the next big opportunity might be. Then they all head to it.
In the short run such behavior creates
it's own affirmation. After all, when everyone whats to buy the same
thing, at the same time, the price of that thing shoots up. And so
the herd is happy and, as long as it stays happy, the price keeps
going up.
But, as they say on Wall Street, “trees
don't grow to the sky,” so, sooner or later the greater-fool theory
breaks down as fewer and fewer buyers are willing to buy at
increasingly ridiculous valuations. And then it crashes.
In the past crash in one market
segment, while unpleasant, was rarely catastrophic to overall market
as there were “other herds” grazing happily there. But no more.
Now all the money heads where the Borg Collective has decided to in
its collective “wisdom.” And why not? Even those who know what's
likely to eventually happen, they also know that, when this mega-herd
moves, prices move up. So why not pocket some sure money while it
lasts?
Of course that's the trick in this new
markets normal; how long to stay with the herd. When to hold-em, and
when to fold-em. In the end way too few fold-em while there's still
money to made. So most of the collective herd panic all at once when
the obvious becomes, well, obvious.
That's it. That's why the market dove a
thousand points at its opening this morning. Of course it will go
back up again. The collective herd, while in panic mode now, is
already on a search for the next market(s) they can pump for all
they're worth.
And remember; resistance is futile.
Those markets will be assimilated, exploited, gutted.
