Friday, July 11, 2014

When Good Money Has Nowhere to Go

Tis Thursday night.

And Thursday nights are just as good as any to get rip roaring drunk as you look upon this once-great society and, after much deliberation and thought, come to the same conclusion you have previous Thursday nights that this country is completely screwed and nothing can be done about it.

By the way, pour me another Rumpie.

Anyway, something that has been bothering my economic mind is why has the stock market constantly been going up?

Naturally logical theories are abound, many of which I subscribed to out of laziness and cynicism, but inevitably that damn thing called "intellectual honesty" gets in the way and makes you want to PROVE your suspicions true.

So off I went to the FDIC where I fully expected to see in the aggregate banking reports TONS, MILLIONS, BILLIONS, nay, TRILLIONS of dollars being flooded into our stock markets because our inept, incompetent, and bail-outtable-affirmative-action case bankers:

1.  Had gotten bail out money that they
2.  Had nowhere to lend because
3.  The economy isn't booming and ergo
4.  There's nowhere left to invest it but the stock market.

So I thought.

But the truth is anything but.

Banks have not been increasing their marketable securities holdings and so the boom in the stock market does not come from there.

This perplexed me because I was sure the bail out money was being parked there.  But since it was not true (now leftists, pay attention to this), I accepted it as fact and looked elsewhere for the real reason for the boom.

My logic led me to two places or "institutions" that could explain the massive cash inflow into the stock market and thus its ludicrous valuation.

1.  The central bank which has been printing off a ton of cash because....WTF not and "where do we put it?"


2.  Profitable non-financial corporations that had nothing better to do with their cash

And shucks howdy if I'm not the Sherlock Holmes of economics!

My first guess about the central bank dropping money into the stock markets proved false.  They're too busy bailing out the parasitic class, welfare bums, bankers, loser liberal arts majors, single moms, and other degenerates *ahem* investing in "government bonds" to invest in the stock market.  Politicians need money to bribe the masses to vote for them, and the wise use of money a la a genuine "investment" doesn't achieve that.  So all that QE money is NOT ending up in the stock market, but the EBT cards of fat, bloviated trailer, ghetto, and barrio fatherless trash the single mom matrix keeps spewing out.  So that money does not boost stock prices as much as obesity rates in the lower classes.

However, I DID find the true cause of inflated stock prices after sampling Apple, Microsoft, and other "cash cows" of the corporate world in their "marketable securities" holdings (read "stocks).  Said holdings have skyrocketed as their profits are up but they have no real genuine NEW investments to reinvest said proceeds.

Since we hate corporations, profits, innovation, success, etc., profitable corporations today face a conundrum:

Do they invest in a new venture?  A new company?  A new innovation?


Do they just "park" the money somewhere in an already existing company with political and cronyistic connections that guarantees them a rate of return?

And now you know (at least in part) why the stock market keeps skyrocketing.

Who, precisely, would invest in a new venture in this county?  What idiot would dare to invest in a virgin endeavor that has no political connections, lobbyists, or other scum to secure the ordainment of the government?

The sad truth is that any genuinely new invention, endeavor, innovation, venture or business faces such obstacles as regulation, taxation, labor law, not to mention corruption, why would you invest in something new?  An old, established, networked, and connected company, with nowhere near the potential, is a more reliable and provides a higher rate of return than some idiotic young go-getter.  Worse still, even if said corporate monies were to be REINVESTED in their own plants, why would they invest here?

Obama and the NLRB effectively nationalized Boeing for daring to set up a plant outside union control.

Seattle just passed a $15 minimum wage.

To hell with the hassle, bother, and politics of setting up a new shop, a new plant, or a new facility.

Corporations would rather just take their trillions and park it in the boring ole stock market where NO NEW INVEMENTS OR COMPANIES ARE MADE, and therefore NO NEW JOBS, but


at least you get a 2% dividend yield.

Again, I no longer care where this country is heading.   Matter of fact, I've so thoroughly thought it through I now fully appreciate and enjoy the suffering Americans have brought upon themselves.

I just want to be like Voltaire and write for posterity.  Enjoy that freaking and well-deserved decline kids.  Enjoy that freaking decline.


Balladeer said...

I would have to agree with sitting back and just taking in the damage this country has done to itself.

And no matter how much people complain I'm sure they'll be all for more of the same in 2016 for Hillary or Elizabeth Warren or Valerie Jarrett or whoever the Democrats pick.

heresolong said...

I've finally decided, after reading your stuff and others for the last couple years, to stop putting money into my IRA and start putting the same amount into gold. I just keep getting this sinking feeling in the pit of my stomach that I'll be losing most of what I currently have for retirement.

Anonymous said...

Good blog, but I hate to see you ENJOYING the pain of other americans as the country declines. Things can be done. I guess you're just not willing to get into all that. (yes im trying to piss you off)

Anonymous said...

I would agree if the raw numbers and facts didn't steer me in a different direction.
FDI since year 2000 has been $2.5 trillion into the US while over the same time period China has only seen $1.2 trillion of FDI. Either the whole world is stupid, or we are just the best of the worst. Either way, I choose America over the alternative.

SRBEL said...

Nice post, but I think you meant bloated, not bloviated.

Kristophr said...

Ignorant git.

Yes, the Fed has been paying Euro central banks to act as a toilet for those Treasury bonds the Russians and Chinese are dumping.

A shadow bank in Belgium was given a huge zero interest loan last month to buy all that paper Putin dumped and to hold it. They pay no interest on the loan, and get a free 2 percent return/bribe from the US Treasury.

And the Fed gets to stealth QE by creating the cash for that ZIRP loan out of thin air.

And all of that thin air cash is crashing back into the US as China and Russia use it to buy up US luxury homes and gold with it.


Kristophr said...


Move your IRA into gold:

Jeremy said...

This is a fantastic post Cappy. It opens up the subject of what does happen when good money has nowhere to go, when regulation destroys investment... It turns the who economy into little more than a ponzi scheme.

Dan said...

I don't think you can tell companies aren't investing in new ideas just because the markets are up. If a company has $1B to invest, it might only take 10M to fund a new venture through early stages which would be a rounding error. For another thing a company investing a certain amount would appear to have its holdings increase if the market goes up, even without additional cash investment. Finally, companies can use their stock to pay employees to do innovative work.

RobertW said...

Wow those are a hell of a lot of profits. I would have guessed, too, that it was crony bailout money.

So the question is, Cap'n, what do you think will trigger a major decline in the markets? (Besides the obvious, like another 9/11)

Based on what you are saying it sounds like they will continue going up indefinitely?

High Arka said...

"What idiot would dare to invest in a virgin endeavor that has no political connections, lobbyists, or other scum to secure the ordainment of the government?"

Exactly; that was my point elsewhere. Socialism. The end-result of all America's "competition" has been the inability to effectively invest without government license.

Eric Mueller said...

The majority of new inventions and companies are being funded through crowd funding sources like Kickstarter. The old stuff is being funded through cronyism, bailouts, and money printing.

Johann said...

In total agreement with you; let the country sink. Spend some time talking with the average American and you know deep down that they deserve what is coming. All their concerned about is their newest app or the newest hipster beer or even the newest nitwit celebrity meltdown. America as we once knew it is gone; the only thing left is a polyglot mass of half wits and egotists. Obama and Biden are the face of the New America and neo Americans are their children.

heresolong said...


I don't see the point in a piece of paper that says I own gold. The fed doesn't appear to have as much gold as they claim and if they choose to nationalize IRAs or even just tax them heavily I lose my investment anyway. They can't take the metal in my safe.

No, I will leave what I have in the market in case the collective people pull their head's out, and I will invest future retirement monies in gold in case they don't. Either way I will at least have something and either way I will have the gold and silver in my possession to be used as I see fit.

Anonymous said...

The merger of corporate and state interests to the detriment of everyone else is fascism.

That's why any 'reform' only ends up further benefiting large corporate interests, further restricts their smaller competitors. All their talk about such 'reform' is nothing but a smoke screen.

The fascist govt/big corporate rulers of the country destroyed the value of the dollar over the years through their central bank. Thus, the increase in wages needed to (somewhat) keep up with this long term theft made US workers less competitive and their jobs were off shored to slave labor countries overseas. (A loss of 97% of the value of the dollar since the Fed was enacted a century ago.) This off-shoring was done in the name of 'free enterprise/capitalism' when the very foundation of the system itself - the money system - is a criminal bankster monopoly with fiat scrip forced on the people ultimately at the point of a gun. The nature of that fascist system has been hidden from the common American people; it is also a fraud.

High Arka said...

Anonymous 8:11, you're correct, and that was my original point about capitalism/socialism/fascism. Capitalists gain sufficient spending power to be able to buy out government and crush smaller competitors, and they inevitably use their control of government to marry it to their businesses, resulting in fascism. The Fed is a "private" bank, yet it exercises governmental powers in order to crush any competition, be it currency or otherwise.

Socio-capitalism is fascism, too. I appreciate how much all you guys love what you think of as "competition," and I share that love, but at least since George Washington murdered farmers in order to obtain a 25% whisky tax, the U.S. has not enjoyed a free economy.