If markets follow mood, watch out below!

Quotable

For 40 years, the IMF has soldiered on, backed by both parties, plying its new trade — endless transfers of U.S. and Western wealth to bail out failing non-Western and anti-Western nations.

Under DSK, the IMF took on a new role that enchanted Europe.

It joined with the European Central Bank to provide hundreds of billions to bail out Greece, Ireland and Portugal, so these nations would not default on their debts and bring down the European banks that are stuffed full of Greek, Irish and Portuguese bonds.

Through the IMF, U.S. taxpayers are bailing out European nations to save European banks, just as U.S. taxpayers, through the Federal Reserve, secretly bailed out European banks throughout 2009 and 2010.

This is why the socialist Strauss-Kahn was a hero in the capitals of Europe. He was their agent in our capital.

Consider the winners and losers of this globalist racket.

The people of Greece, Ireland and Portugal endure austerity and recession for years, while the European banks are assured 100 cents on the dollar for their bonds. And the deal-makers like DSK are put up at $3,000-a-night hotel rooms, fly first class and get tax-free salaries larger than those of the president of the United States, courtesy of the U.S. taxpayer.

Saturday at the Sofitel, we saw up-close the sense of arrogance and entitlement such privilege induces in our global elite.

Time to shut down the IMF and get back what’s left of our gold.
                                          Pat Buchanan

Commentary & Analysis
If markets follow mood, watch out below!

We are told Germany is booming. If so, why aren’t its consumers happier?

We are told by analysts the US economy is growing and global growth is on track, and likely to weather any surprises. Yet, most people in the US seem pretty darn gloomy. Heck, anyone who owns a house would be, given the hammering that asset has taken. One visits zillow.com (real estate value estimate site) at his peril. I did it the other day, and have had a minor stomach ache ever since.

But I do have a job, assuming one calls what I do a job. And so does my wife. For this I am very thankful. I know many very talented people who don’t have jobs and have few prospects in sight. Despite the growth numbers we see and hear about, my very unscientific, on-the-ground assessment, which may not be exactly economic science (but what is), suggest that a lot of people who have their futures tied to the real world, not the financial one, are anxious at best and downright depressed at worst.

I share those rather unspectacular views to link to this point:

A few months ago I finally got around to reading Bob Prechter’s tome titled “The Wave Principle of Human Social Behavior and The New Science of Socionomics.” If you are into that kind of thing, as I am, you will find it to be excellent.

Mr. Prechter writes [my emphasis]:

“The purpose of this book is to establish the idea that in humans, an unconscious herding impulse impels social mood trends and changes that are specifically patterned according to a natural growth principle and which in turn is the engine of cultural expression and social action.

“…Stock market indexes are important because they record man’s valuation of his own productive enterprise. The fact that valuation follows an intricate Fibonacci-based pattern indicates that there is a single essential cause of that valuation, the social mood that underlies it, and the enterprise that results from it.

“There is some evidence that the cause of this pattern may be the unconscious herding impulse generated by the brain’s limbic system. This impulse determines man’s social mood and is independent of outside influence. Fractal, spiral and Fibonacci phenomena in biology and human perception and mentation suggest a biological basis for the phenomenon.

“Social mood trends represent changes in human attitudes. Changes in social mood trends precede compatible changes in history and culture, indicating that the former causes the latter. Thus, there is powerful evidence that the pattern of mood change produced by the social interaction of men is the underlying engine of the trends of social progress and regress.”

The payoff sentence I think: “This impulse determines man’s social mood and is independent of outside influence.”

If this is true (the more I watch markets and study this stuff I think it is), it means Ben & Co. are following, not leading this parade. Note to Ben: You and your boys’ attempt to brighten social mood through extension of the so-called “wealth effect”, i.e. by using money and credit to boost financial assets, isn’t working either.

That is because mood leads markets, it doesn’t follow them, according to Mr. Prechter.

I said it before in these pages many times, and I will say it again; changes in behavior by real people explain why that so-called stimulus from Ben and Uncle Sam haven’t been all that stimulating (monetary velocity is a direct connection to this change in behavior). This is not a US-only phenomenon; it is global, especially across the industrialized world. It is why Ben is afraid of deflation and why those whose focus in the financial world only are afraid of inflation.

If Mr. Prechter is right about mood leading markets, it adds credence to the idea that what we have seen since the credit crunch in the stock market is simply a bear market rally that fools a lot of people. I think he is right!

S&P 500 Index Weekly:

What is so disconcerting is the fact that almost all markets and asset classes are tightly correlated globally, just as mood seems to be. If there is a big break, global collateral value will vanish across the board and governments have no ammunition left to replace it. But of course, there is one thing that is negatively correlated to all these markets — it’s the US dollar.

How’s that make you feel?