The Persistence of Memory

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Let’s do a bit of a thought experiment, shall we?

Let’s assume that, in some form or fashion, the general “conspiracy theory” (as it were) about the stock market is correct. Let’s assume that the powers that be recognize that a persistent, widespread wealth effect is the only way to keep people calm, and keep themselves in power. Let’s further assume that, in their hearts, the instigators don’t (and can’t) really know where this is all going, but they’re hoping it will all work out. In the words of George Carlin, they are counting on the American Okey-Doke.

Now, honestly, I don’t have visions of a group of thirty rich men sitting around a gigantic circular table at the top of a skyscraper, smoking cigars, chortling villainously, and plotting humanity’s path. I do, however, firmly believe that the central bankers and political leaders of the largest countries were shocked at what happened late in 2008 and have vowed Never Again, not matter the future costs. Perceived prosperity NOW is a more important consideration to them than potential problems LATER. They choose to leave tomorrow to tomorrow, and let’s face it, they are in their sixth year of success, so why should they change?

A succinct symbolic slope of success is shown below, by way of the leveraged S&P 500 bearish ETF, symbol SDS. Take a good, hard look at this chart. In particular, look at how incredibly smooth it is since October 2011. One could lay down a ruler and see hardly any divergence from this path downward (which, let’s remember, is the opposite direction of Stock Wealth, since this is an inverse fund).

0604-sds

Let’s go on to assume that nothing is going to change. The stock market is simply going to keep going up. Slowly, yes, but up nonetheless. The central bankers will, whenever required, create whatever programs, easings, or other actions are needed to keep supporting equities. And, simply stated, the rich will just keep getting richer. What would this all mean?

Well, for one thing, it means there are a lot of people wasting their time. All the stock analysts, all the talking heads on television, all the bloggers, all the financial journalists, and – yep – you and I – really just need to hang it up, put all our investable assets into SPY, and be done with it. And I’m not saying this in a bitter or sardonic tone. I’m serious. If the recent past is indeed our future, we all just need to quit. We’re wasting our time and emotional energy. Every. Single. Day.

For me, of course, this would mean an existential crisis. For most of you, it probably just means an interesting diversion disappears. But what I’ve done my entire life – – the charting, the blogging, the video commentaries – – it’s all about the kind of analysis that would be rendered moot by the aforementioned scenario.

None of us know the reality of the situation. If you accurately predicted five years ago what has, in fact, happened in the market, you would have been considered insane. Thus, the prospect of the exact same reality for the next five years………and the next………..and the next……….seems equally insane. And equally possible.

What I do know, however, is that recent weeks and days – – – – particularly days like yesterday and today – – – really make me wonder what on Earth we’re all doing here. It’s despairing, and between the ECB Thursday morning and the jobs report Friday morning, that despair has every opportunity to blossom into full-blown wretchedness. My love of trading is getting killed, one tick at a time.

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