Exploring The “There Is No Box” Concept ( part 4 of 4 )

(Part 1, Part 2, and Part 3 are here)

Me: So now let me get to the heart of the matter as it applies to this example aka: retirement. (Remember I’m talking and using simple math, examples, and constructs to get a point across. As I stated before: I am not a financial adviser.)

Let me start off with a question that proposes a hypothetical yet at the same time makes a very salient point many never contemplate.

If you live to be relatively healthy to the age of let’s say 85 or 90 (and this is now more than norm today than just 20 years ago) and you are able to be productive in an endeavor regardless of what it may be. And, it was something you liked doing, while at the same time generated a sufficient enough income to cover all your expenses. How much, or rather, to use a Wall Street advertising term, “What would be your number?” i.e., how large would your bank account balance need to be all things being equal?

I won’t ask or make you ponder too long for its rhetorical. Basically the answer is Zero.

Now I know, it sounds like heresy at first blush. However, think about it for a moment. Anything over and above the example I gave as in “covered your living expenses” is extra, or a cushion, or safety net. In regards to what it takes to “live on?” As I proposed in the question “you’re still actively earning enough to cover all your expenses” so again, your “number” in the bank is whatever you deem it to be, but is not being used to “live on.” It just sits there idle. Does this construct make sense for now? (participants acknowledge in the affirmative) Great, so let me set up the next example.

So let’s use the age everyone basically uses as a touchstone: 65. Yet, let’s also use a little of the previous example to compliment and put things even more into perspective. If you, as I said earlier, will live a relatively healthy life going out to about 85 or 90 but we change just one thing: You do not engage in any activities that generate income that cover living expenses. You do just what you’ve been sold or told by Madison Ave. and Wall Street. In other words you’ re going to lay on the beach, play golf, and whatever else 7 days a week for the next 20 to 25 years after age 65. Now what’s your “number?” as in how much money you need to do it? $1 million? Far from it. $5MM? Not if you’re going to house it in “safe” harbors. You’ll eat through it far before you reach half say to the expected age of just 75. And that’s considering no turmoil, no set backs, no additional raising of taxes.

Let’s make it $10MM. Sounds like a good number right? And a lot of entrepreneurs see that as attainable. Unless you’re in Silicon Valley where comfort doesn’t set in until after $100MM. Remember, “everyone’s number is different” but its importance remains the same. i.e., “How much you believe you must have.”

I’m not going to ask how many here have any of the above “numbers” currently. That’s a personal matter and none of my nor anyone else’s business. Nonetheless I am going to ask this: Of the two examples I just laid out, which sounds more attainable? Zero in the bank yet – being productive throughout your later years covering your living expenses? Or – having to now double, maybe triple, maybe even exponentially grow what you now have – before your 65?

For some of you that needs to be done within the next few years. As I alluded in the earlier example, let that contemplation really play out in your own mind’s eye. Also, are you secretly or maybe not understanding fully the stresses and pressures you’re putting on yourself, as well as your family in worrying about just that? Some might be internalizing this as an exercise in futility.

I hope you understand what I’m trying to get at here. We allow ourselves to be brainwashed thinking we need or should be striving for one thing, but in the end, we just might be striving for something not worth the paper it’s written on. i.e., Some goal seek-ed Madison Ave., or Wall Street inspired bank balance. Rather, than thinking everything through based on real circumstances or alternatives we can understand deep down within our gut.

Instead of putting on strategies, or thinking through alternative scenarios that are truly relevant to our own individual lives; we head off in one direction told or sold to us, when quite possibly, that direction may be in fact – leading us down the absolute wrong path.

Everyone’s case is different but the general premise is not. Meaning: What is “retirement?” And I don’t mean the Madison Ave,, Wall Street styled version. I mean: Too – you!

Now I’ve covered a lot here and I know some are very skeptical of all this as you should be. But there’s a real reason why I’m so adamant and vociferous on this topic.

Unlike others – I was the poster child of the Madison Ave., Wall Street, version where “Easy St.” was no longer a dream but a reality. Then 2008 happened. And not only did it change the world, but it changed me and my thinking in ways I’m still developing, honing, and putting into real-time use.

I remember vividly just how frustrating, as well as “alone” I felt when trying to figure out not only what to do, but what the heck was going on during the melt down. I can’t begin to tell you how mad I was when speaking or listening to so-called “experts” that I could infer had absolutely no clue of what was happening, let alone what one or I should do.

I also knew others who were by all previous measurements “better off” than I was – frozen with fear. That’s another reason why I say the “number” as in “how much” in your retirement kitty may just be irrelevant. Because if you don’t know yourself what to do, and how you are to go about doing it. $100MM can go to zero almost, if not quicker, than $1MM can depending on just how you have it allocated.

So in an effort to try to figure out this predicament I now found myself in being “retired” during the worst financial crisis since the Great Depression. I concluded; the greatest safety measure one (as in I) could take, as well as one could have too help insure retirement on Easy St. doesn’t turn into homeless on Main St.: is too not think outside the box as to retirement planning. i.e., asset allocation, dividends, etc., etc., But too in fact strategize from the standpoint of “for retirement” there is no box. Or in other words – there is no so-called “retirement” and should never be. And if I thought and strategized from that viewpoint: real workable solutions that made both sense, as well as helped alleviate fear and confusion came rushing in.

So let me know go into what I mean by all this in real life examples…

Too me, the embodiment of this can be summed up in one of my favorite comedians who has since passed: Joan Rivers.

Ms. Rivers is the quintessential example of what I’m trying to get across. Let me ask you this and see if you can answer. When did she retire?

Some might say never. I would argue she retired decades ago. She retired when she decided no one else was going to call the shots or place the direction on what she would ever do going forward. Remember, she was one of the first women hosts in talk shows and was thrown aside in typical Hollywood fashion behind her back as she’s detailed many times. It affected her career as a comedian and much more for years.Then she decided to take control of her own life and run Joan Rivers “the business” according to her rules.

What she did was what I’m also trying to convey – she did things and ran her life doing things that were of interest to her. And, remained not only productive in life, but also, productive in earnings power.

She consistently reinvented herself taking no prisoners or asking anyone for permission. I would argue she was more of a force in both earnings power as well as relevancy in her 80’s than she was in her 50’s. What would it have mattered if she had $50MM in the bank when she was 50? She actively earned far more (as in through her jewelery business, shows, live appearances, etc.)  than what $50MM in some “funds” could generate today in “safe” investments. I’d also argue the “returns” (“safe” means just that as in “cash” equivalent) at today’s rates wouldn’t have covered her current lifestyle. She continually earned year after year far more I’ll venture.

She’s far from the only one. Think of how many people when they decide “retirement” is just some number and eschew it go on for not just years, but for some decades if not right up until the actual day doing what they like or love. Being both productive as well as continuing to earn.

How about a Doctor? A lawyer? A self-employed business owner? ______________(fill in the blank) if retirement isn’t “mandated” many never do.

This whole “retirement” thing as I’ve come to now see it is nothing more than some form of a sham. And the “age” thing even more so.

Retirement as I see it should be more of a reinvention period of one’s self. Not an end, but a new beginning. Regardless of age. And I mean just that – any age.

Let me throw out a few more examples to get you thinking…

An example might be you’re a clerk, or general office staff nearing a mandatory retirement age of 65. Maybe you’re now 57 or what ever. What if you really like working with numbers? Maybe what would be better than trying to bank an additional $4 or $5MM in your 401K over the next 6 or 7 years (yes, I mean to be facetious yet that number may be closer to factual) you start taking classes at night, weekends, whatever – and obtain whatever credentials needed to become a certified accountant and start your own practice? Maybe getting a head start offering services after working hours and going full-time in your own practice at 65?

How about that you’re currently an entrepreneur and want to sell your current enterprise for what ever the reasons. Maybe you’ve just grown disinterested in it for whatever the reasons. But, it won’t generate the “number” Madison Ave. says you need to “retire.” So what! Sell it, get what you feel is equitable and maybe invest in another venture as a limited or working partner or, another business all together from the ground up?

Maybe you own a dirt piling business that has worn on your back and you can’t physically do it any longer because of age or whatever the reason. Maybe you need to start a “dirt consulting” styled business where your expertise is needed, wanted, and can return an income that suits.

I don’t know, but I hope you’re beginning to see my point. You only lock yourself into the proverbial “box” when you keep seeking solutions that deal with the “box” as a construct to begin with. Screw the “box” type thinking and let your imagination soar backed with real pragmatic actions and strategies – and the world of opportunities opens far wider and broader than any lid trying to be pried off on the whole “box” thing to begin with.

That’s where everyone else is focusing and in my way of thinking – losing the battle entirely before they’ve even begun.

This also does one other thing which I believe is a such a crucial aspect to all the above, it may be in itself worth more than all the rest. And it’s this: It puts one squarely in the game of life, at all times, to effectively deal with as well as possibly having advance insights to any oncoming problems others may not see, as to adjust what ever it is you are doing, and not only weather a storm; but also to possibly take advantage of situations that present opportunities that others are frozen in fear to contemplate – let alone act on.

Too me, that’s retirement I can live with. As for the box?

You can have it.

© 2015 Mark St.Cyr

Why This Retail Earnings Season Is Different

This earnings season one sector will be more front and center than most. And that sector is: retail.

It should not only presumed but rather, expected, they’ll be the typical GAAP vs Non-GAAP shenanigans along with the now bemoaned “buybacks” to make a dismal report read like the fictional tale of an earnings juggernaut.

We’ve now come to expect this, and we know how it’s going to be spun across the financial media. So much so many of us over the last few years have paid little attention to the granular that makes up these reports.

It doesn’t take more than a cursory listen when you begin hearing “They missed on both the top and bottom line. Yet: with buybacks, one time non-recurring, or _________(fill in your favorite here.) They now beat by a penny!” to understand it had nothing to do with anything else – but financial engineering.

That being said, I believe paying close attention to this retail earnings reports; especially those of the “big box store” variety, will give far more insight into where we are going from here than probably any earnings season prior of the last few years. Why?

Well if my observations over the last few weeks are correct. What I’ve both noticed as well as couldn’t help but notice is this: It’s getting near impossible for these retailers to hide the fact they’ve cut more staff and other essentials – then they’ve cut prices. Let me explain.

Currently my residence is smack dab in the heartland of the U.S. near Columbus Ohio. Columbus boasts all that one would acquaint with a metropolitan area. There’s upscale dining, retail, etc., etc.

However, it also now boasts one of the country’s top retail shopping areas. e.g., You can pick up your latest bangle or doo-dad at Tiffany’s™, then walk over to Louis Vuitton™ for the perfect bag to carry it home in, after dining at Smith and Wollensky™, then top it all off with ordering a new Tesla™. All within walking distance of each other. And this cornucopia of high-end retailing has just expanded within the last year to near double its size with stores like Saks™ and others.

But this is where any similarities to what one first conjures up when thinking about “retail shopping” ends. The “middle” or the “big box” retailer is far, far, and away from seeing the activity still being witnessed in the high-end spectrum. And being able to see the dichotomies between the two up close and personal has been not only eye-opening – but jaw dropping too say the least.

Within a few miles drive is the local “upscale” mall complex. It has all the expected big box names as anchors such as “Macy’s™, Sears™, JC Penney™ along with its own share of high-end stand alone retailers around the periphery. i.e., Ann Taylor™, Pier One™, etc. etc.

What I noticed since this past holiday season just a little more than 3 months ago is this: Not only are the stores within the mall empty as in void of customers. Some stores have closed and moved out entirely. And I’m not talking about “rolling lease” or “pop up” styled stores. I’m talking about a few national franchises with nationwide footprints.

I went to this mall purposely the other day looking for one where I had shopped just this past January, and walked the mall twice figuring I must be blind and passed them. Only when I finally looked at the directory (their name was still listed) then went to the destination only to find a “pop up” styled business in its place did I realize that in fact – they were gone. (The name is inconsequential for this discussion)

This really piqued my interest as to start paying more attention for this reason: How many brand named stores have you seen over the years where you’ve rarely (if ever) seen a customer in there but understood they are there year after year because its more of a form of “advertising” rather than a pure retail play? i.e., Pottery Barn™ and others fall into this category in my opinion.

I coined the term years ago of “presence advertising” to describe these. In other words, conducting business there is not analogous to paying the help, bills, and rent. Sometimes being present in certain markets was more important to the overall structure than the actual retail dollars provided by a particular location. i.e., Profit generation or expenses aren’t location specific. They’re cumulative.

That said, what does it say when you have these very stalwarts of “presence retailing” packing it up and moving out faster than their peers can pack away their “take an additional 75% off” sales material?

So with this new-found interest I decided to see just what might be happening at some of the other “big box” anchors as well as a few stand alone’s. What I found with my newly sharpened focus was both eye-opening as well as deplorable.

I held a very low bar at what I might find at Sears™ these days and – it was a good thing. The store reminded me more of the what’s come to be known as the “pop up” variety. All the clothing racks seemed to be on the flimsy rolling ubiquitous 4 sided hanger stands. Everywhere hung signs of “CLEARANCE.” It just had the look and feel of desperation. JC Penny™ didn’t fare that much better from my point of view. And this is in a mall that many would consider as “bustling” and “up scale” by today’s standards.

Then I drove over to a local Kohls™. Both my wife and I couldn’t get over the shape of the store. As I said earlier “deplorable” is the word that fits.

Clothes were piled and strewn over displays like a band of raucous teenagers just pulled off an after school prank. Shelves were mixed with differing items. Pants piled on top of shirts, styles mismatched, sizes mismatched, racks of items mismatched, stacks of piled pants from the bottom of displays knocked over and left disheveled in the middle of an isle. And no, I’m not exaggerating for I haven’t even detailed all I saw. This was just the men’s department!

I stood trying to appear nonchalant as I watched 2 frustrated store employees that seemed all of 18 or 20 years old try desperately to figure out how they were going to re-price and restock a display that looked as if someone ransacked it moments earlier. I could hear the frustration in their tones. One couldn’t help but infer from their discussion there was far from enough help and they were fighting a losing battle. And it showed.

Walmart™ was no better. Best Buy™ was pitiful in as far as selection and feel. Especially when someone like myself remembers when they were “the place.”

The problems inherent in both middle as well as lower retailing are quickly becoming more and more self-evident as well as unavoidable. The “wealth effect, ” the “gas price savings” that were explained ad nauseam throughout the financial media in a tone of “just you wait and see, earnings this season are going to be just awesome” will fall flatter on its face than a “Take an additional 50% off the lowest price” sale sign to an empty store.

If what I witnessed is taking place throughout the country all I can say is: Nobody’s buying it – literally.

To paraphrase one of retailing’s most vociferous watchdogs Howard Davidowitz when explaining the current state of retailing and malls: “What’s going on is the customers don’t have the f***ing money. That’s it. This isn’t rocket science.”

He’s absolutely dead on. And, it would appear now with QE (as of this writing) still in the tail lights, along with the possibility (however so slight) that interest rates may rise, so too are the retailers themselves even more “empty pocketed” than their ailing consumers.

For without the financial engineering and Non-GAAP charades to prop up the “earnings beat” while tapping out their own credit lines to “buy back stock” this earnings season just might garner another mantra they once used as a defense to ward off criticism. For this earnings season truly just might fit that moniker of “its different this time.”

We’ll know soon enough.

© 2015 Mark St.Cyr

Exploring The “There Is No Box” Concept ( part 3 of 4 )

(You can find Part 1 and Part 2 here.)

Me: Before I start let me remind everyone so there’s no misunderstandings. e.g, A disclaimer. I am not doling out financial advice on what you should or should not do when it comes to your money and more. I’m speaking here using “big picture” style examples and ideas to get you to think. Nothing more. Although I believe we’re all adults here, in today’s world it bears repeating: For actionable legal or monetary advice – always seek accredited council where applicable. And lest I remind anyone: If it feels like you’re doing something risky, you probably are and need to think it through to its logical conclusion. So with that said let’s go.

My first example uses what many of you have seen countless times on TV and in commercials of one form or another by retirement funds and the like. i.e. What’s your number?

Your “number” is what you think or they’ll “tell you” how much you need to retire. For this example let’s use what seems like the most commonly referenced number: $1 million. Regardless if one thinks that’s too low or high is inconsequential for this thought experiment. It allows for easy math so this will be the mark.

Just a short 5 or so years ago it was considered not too shabby. Today? It’s worth far, far, less in more ways than one. Remember my example previously of receiving 5% annually? That $50K in annual interest income is gone. And to reiterate further, to keep it in a deposit fund at a major bank will now probably cost you. Along with your living expenses now must come directly from this savings depleting it in sizable amounts even further. And as we discussed earlier. This is just the first set of issues. There are more. So as of now this $1MM isn’t what it used to be. Literally. So if we apply thinking “Outside the Box” (OTB) how might we approach this?

Well, we could look for alternative investing vehicles or avenues to provide some form of yield or return. So maybe in OTB you decide to invest in different markets such as High Yield, Biotech which by the way currently are said to be “hot.” And you might say, “Put me into the big techs!” An example of this could be Apple™ and such. Then you might say, “Put me into Emerging Markets” because for what ever the reasons you hear they too are “hot.” Today it would seem if you did just that – you’d be far ahead. Fair enough.

But let me throw this wrench into this mix because you’ve seen it for yourselves. It’s not a fairy-tale…

Out of blue whether it be tomorrow, next week, next month, or next year a financial panic for whatever the reasons happens circa 2008 style. I use the word “style” because who knows how bad it could be. However, for right now let’s use just three examples that are all easily imaginable.

First: It’s only half as bad, and the market corrects down losing only 50% of what the plunge of 2008 was . Or: It falls equivalent in magnitude to the fall of 2008. And lastly – it’s far worse and corrects or falls surpassing the panic of 2008.

So let me set this up further…

There you are in what at first feels like proverbial “Easy St.” portion of life. You’re just getting used to the idea of this “retirement” thing or you’ve been on the “golf course of retirement” for some time when suddenly you hear a news report the markets have fallen “out of blue” some 2%.

As you become concerned you think to yourself, “That’s OK, it’ll come back, and being diversified has been part of my OTB strategy and should insulate me.” And the market continues falling. Now you look at the markets when the reports cross near daily and being down 2% conjures up feelings of “Thank the lord it’s only 2% today.”

As all this is happening you begin calling the 25-year-old “just out of MBA school” bank representative who convinced you to move your funds from a previous bank to theirs. All you get for responses fall into two categories: One – “Hi. This is Jimmy or Sallie your account specialist – I’m not at my desk so……” Or: You do get them on the line and you know instinctively they’re reading from a script. i.e., “There’s no need to panic, remember you’re a “long-term” investor, over the years investing……….” All the while you know both of these people are probably putting far more attention into resurrecting their resume as opposed to your account balances. And that’s just the bank. Calling your “broker” feels more in line with getting through to the DMV than anything else.

You keep telling yourself there’s “reason for concern – but not panic” as you now seem interested in one thing and one thing only: “What level is the market at now?”

You begin watching the financial media far more intensely when suddenly you realize that feeling within your gut you couldn’t put a finger on meant now becomes near crystal clear, “These people have no clue!” (Remember the recommendation that Bear Stearns™ was safe right before it collapsed? Need I say more?)

You watch one famous so-called “expert” after another give advice to buy, hold, whatever and all the markets keep doing – is falling. Sometimes the fall or “drops” warrant “historic” prefixes as they are blurted out across the media.

You’ve done the proverbial OTB thinking and applied what you thought were “reasonable” parameters to help ensure you against another calamity. You’ve allocated yourself into differing funds,  levered against this one, reduced exposure to that one, etc. When it comes to OTB thinking you feel you’ve done far more “thinking” than most. But now it seems all that is happening concerning a “box” is boxing you into a corner with an uneasy realization that all this “Easy St.” living might be anything but.

Maybe you’re one of those that feels all this doesn’t relate to you because “you’re in a pension” of some sorts: only to realize during the worst of these near daily sell offs the subject that seems to be coming up more and more by the talking heads on all the media channels is just how much “damage” and possible “unable to meet current recipients allocated payments” becomes the topic de jure leaving you stupefied as to where this all ends  – and just how you’ll deal with its aftermath.

Suddenly it appears anything you thought previous as “safe” is now questionable at the least. And, in dire straights, at its worst.

What I’ve just outlined is not based in fiction. This is what transpired for many during the initial downturn, and as it gained speed in 2008. As I alluded earlier OTB thinking in nearly all its forms has done nothing to help alleviate your concerns. So now let’s move from OTB to “There is no box.” (TINB) And what do I mean by that exactly? Easy – let’s discuss the “box” known as retirement and shift from how to defend or insulate the “box.” to: there is no retirement.

Now that’s a loaded statement. But what I want to express or better yet articulate is just how you can either retire today or work towards retirement in such a way that if we are ever to relive what transpired just a few years ago, you may in fact become even more confident and reassured that you will not only be better prepared to handle the turmoil, but in fact maybe, just maybe, even prosper. Yet, it takes not OTB thinking to get there, but rather, the viewpoint of TINB to begin with. And why it’s quite possibly the most relevant and important concept you’ll leave here with today.

© 2015 Mark St.Cyr

Exploring The “There Is No Box” Concept (part 2 of 4)

(Part 1 can be found here)

The question below pertains to the “Outside the Box” (OTB)  – “There Is No Box” (TINB) debate within a personal construct.

Participant: What do you mean by “Forget this retirement meme we’ve been inundated with over the last few decades?”

Me: I get this a question a lot, so let me explain it this way because I believe it’s important. Not only in answering sincerely, but rather, that you really get the answer in your gut; for I believe many of you, as I once was, are struggling in many areas where this is the goal or reason for working so hard. And rather than working for your benefit it’s putting pressures that deep down are adding frustration that you may not fully comprehend. What’s worse is, quite possible, “the goal of retirement” you originally set believing it will make life easier down the road may in fact; be the worst thing not only to your life down that road. But maybe to your life currently.

I make this point because so many “motivation” guy’s push this meme hard along with Madison Ave., Wall Street, and the rest.

Being one that actually did it as opposed to those that read in someone’s book, that now wrote a book, so you can buy and read their book, about what they read. I actually reached that goal and lived it now for a decade. So I have what I believe is a little more standing or credibility on such an important subject. But of course that’s for you to decide. So let me start off by making this statement:

Not only is retirement not all that it seems. Rather: it just might be the period of time you’ll detest the most. Let me explain.

I had the good fortune to fulfill a goal I set years ago as to retire young and enjoy my “retirement” years. For those who want the exact age I was 45.

I have now been retired for a decade so I believe it’s important to share with you some of my findings. I also believe it’s just as important for you to hear it from someone who has actually achieved, as well as lived such a big milestone. For it seems the world and I’ll garner many of you here are spending an inordinate amount of day dreaming or contemplation on just how wonderful it’s going to be once you’re able to “retire.”

From personal experience I now know why it’s known within the circle of retirees as “the death sentence.” Because basically, once you do – atrophy will set in faster than they can pile the dirt on you. Regardless of your age. I could spend a week and write a book on it as we speak here but let me express just a few points I believe are important.

Those who view the current idea of “retirement” based on the amount of money you have and such are going to find yourselves well behind not only a curve, but possibly worse, running into a brick wall or dead-end; just when you thought the “yellow brick road” would lead to the land of golf and honey.

Using my earlier examples with the “there is no box” (TINB) construct. Let me apply it to retirement.

Let’s say you’re an entrepreneur and decide to sell your business, and the proceeds are in the neighborhood of $3 to $5 million. Sounds like a great number. And for this discussion it’s far from an exorbitant one. From here life should be great going forward. Or at least that’s what you’ve been told or sold by Madison Ave, Wall St., et al.

Or, let’s say you’re like many and you’re employed in a great position with a sizable 401K or pension benefit due, and you decide now is the time to retire for you now calculate, “I’m now set for life.” Well, that thinking was surely rational 10 years ago, but today? That thinking will lead you to possible ruin.

Since 2008 the idea that “a pension” or “money in the bank” and was basically safe – has been thrown out the window. And if you don’t understand that: you’ve not been paying attention.

Other changes such as you “getting paid interest” on your savings has now changed to “you paying them to hold it.” JP Morgan Chase™ as just one example has implemented a new program that deposits over I believe $350K will now be charged a premium rather than you being paid one. Let that one example sink in for a minute. Just as litle as a few years ago you tried to beat inflation pressures. Now your bank may charge you where inflation may be the lesser of two evils! Talk about “change.”

Let’s use the example I started with. Just a few years ago a conservative interest rate of 5% (I know don’t snicker) on what was once considered a safe investment (e.g., CD’s, Bonds, and such) of $3 million would throw off about $150K for living expenses. Not too shabby of a figure. However, let’s not forget this important caveat: If you were able to accumulate that amount of wealth. You’re probably accustomed, or used to a standard of living based on that type of earnings power. And some of you will inevitably be accustomed to an even higher standard.

All that said using the above example let me bring it to where we stand today. In just the last few years not only does this example not apply – it’s as if it came from the land of make-believe and fairy tales.

Today not only would you not have the above income generated from your money – it would cost you to secure it in places that have now been shown to be not only unstable but quite possibly – unsafe. And if you’re like most, as of right now, all you’ve done mentally is deduct the 5% interest that you once could earn along with the possible fee you’ll need to now pay. But that’s just the half of it. Literally!

You’re now going to have to deduct your living expenses from your original amount. So If you thought (using easy math for examples only) you had $3MM throwing off $150K for expenses: you’re now down $300K just your 1st year! (i.e., the $150 you would have earned plus the now $150 you now need to spend to live.) And every year after the same. So your $3MM basically now is only a “semi-retirement” plan because just on simple math in 10 years – you’re out of money. Now what? And what if you’re now 65 years old? 75? 85? I hope you see my point.

Now before anyone asks because this is where someone inevitably does “Is that what happened too you!?” For the record without going into personal details let me just say this: I’ve been speaking and writing about this because there was no other “motivation” person out there who not only understood the real issues coming ahead for entrepreneurs of all stripes going forward. And what I saw that was far worse – many were doling out such foolish and literal tripe I couldn’t stand it any longer. And I decided to do something about it. So much so where now my thoughts or writings on money and business are carried or referenced by some of the largest and most known media outlets around the globe. That’s an accomplishment for remember I’m not an “investment guy” nor a “Wall Streeter.”

So let’s get back to what this exercise is really about and demonstrate the underlying OTB – TINB thinking in a real-life example or form.

What would be an example of OTB thinking in this example? Well, here are a few as I see them…

  • The obvious is to (as I expressed in my original thesis) make the box bigger by say doubling, tripling, or whatever your original “goal” amount was. i.e. $3MM to say $10MM and so forth.
  • You can decide to move where your expenses will be less but your lifestyle might remain the same. e.g., Move from Manhattan to the Carolina’s. Or, from the U.S. to another country like Costa Rica etc. Again, and so forth.
  • You can decide to “invest” your money in the markets and take “the chance” 2008 type scenarios are no longer an issue hoping “this time is different.” But again what safety have you gained or lost is the bigger question here.

The above are just a few but as you can see there’s an underlying issue that you’re going to search for possible ideas or strategies that are “outside” the proverbial box. That box being “retirement.”

However, if you think about it, and I mean really think about it. (as you should) All the above adjustments, theories, strategies, or tactics associated with dealing with the above so-called “box” does one thing that remains the same every time and that is: You must either give something up you might care for deeply. (i.e., If you love, live, and breath the Manhattan area lifestyle. The Carolina’s regardless of how wonderful are not going to cut it on a day-to-day basis.)

Or, you may be right upon your original retirement goal (e.g., you have your $3MM in hand) and now realize you need double or maybe triple to achieve what you thought just a few years ago. Does thinking “outside the box” help with any of this? Maybe OTB is exactly what now has you “boxed in.” So let’s explore my alternative…

© 2015 Mark St.Cyr

Bubble Confirmed: From Sock Puppets To Action Heroes

There are times when not only truth is stranger than fiction, but also, when serendipity coincides with moments that are branded into the pages of history where they become the allegory of the times. Sometimes its hard to judge or pick just one. Reason being they’ll seemingly come one right after another instead of that just one, almost surreal, moment. I believe we are in one of those “one right after another” moments – punctuated with “the surreal.”

There’s no better illustration of these than the dreaded “front page magazine cover” proclaiming not only that the good times are here. But rather, the far more important underlying premise: they’re here to stay and will only get better! All the while insinuating – to worry about anything is a fool’s errand. i.e., “everything is awesome!”

Time™ has had the unfortunate honor of running more than one of these “everything is awesome” cover stories just before it fell apart. For who can forget their now famous/infamous story regarding housing in 2005 titled “Home $weet Home.” Or, how about their earlier example that ran in February of 1999 depicting Rubin, Greenspan & Summers as: “The Committee to Save the World.”  We all know what happened next in both instances. Awesomeness was not what followed.

They are far from the only one. Barron’s™ has had its share. Although they might not have marked the exact date either “the meme,” or premise of the cover story usually told you all you needed to know. That maybe – just maybe: things were getting a little too far ahead of itself for its own good. And, one would be prudent to see these as warning signs of the times. Just for a reminder here’s the example from March 24, 2008 Barron’s, “Are You Ready for Dow 20,000?” Need I remind anyone what happen next?

So once again here we are in 2015 entering our first earnings quarter without the benefit of QE and the “everything is awesome” meme is deteriorating faster than an Atlanta GDP report and it’s none other than Barron’s that just might once again mark a memorable point in history with their latest cover story piece dedicated to not only a bank, but the banker himself. The story is titled “JPMorgan Rising.” The cover depicts CEO Jamie Dimon with the title “Back On Top.”

Personally, I couldn’t shake the eery feeling that a celebratory cover depicting both a bank as well as its CEO that was saved via taxpayer funds and was one of the central players in the financial meltdown that nearly dragged the entire monetary system down with it just a few years ago. Could once again be the focal point as they are once again vaulted to “back on top” status – to possibly – mark a top.

Surely it’s different this time in history than last. For what made banks iconic as well as worthy of praise in the old days is not what makes them this today. For in days of yore banks once loaned money to reliable worthy souls and businesses, and paid meaningful interest rates on depositors funds. Today you’re nickle and dimed into oblivion with once unimaginable fees which for some also include paying for (wait for it…) the privilege to deposit! All the while your trades and more might be front-run, sold, traded against, who knows what. That and building an earnings report that has the appearance of so much financial engineering it leaves most Non-GAAP devotees enviously wishing: How can we access that loan loss reserve thingy? Brilliant!

Yet, this cover coincides at the exact time the very bank of these bankers (e.g., The Federal Reserve) is possibly whispering to those very entities “Better get the heck outta Dodge because this thing is coming unglued!”

I can’t help but muse how that cover and story will be seen 12 months from now? After all, if what we’ve seen coming out of the banking sector as to how the latest crop of CDS, ABS, MBS, High Yield, carry trades, currency risks, and more that’s been added to their balance sheets in the wake of a Fed. no longer providing the QE to sustain the previous growth. Or worse – might actually (gasp) raise rates sending carry risk and turmoil throughout the entire sector. It might very well be the “next” in a long line of cover story marking points in history.

Who knows what will happen tomorrow. And the old sage of “History doesn’t repeat itself, but it sure does rhyme” is well worth heeding. But when you start seeing history not only rhyme: but take to the stage sporting its own vocal harmonizer and backup dance crew? As I alluded earlier: exercising prudence – might be an understatement.

Which brings me to today’s possibly next installment into the annuls of historic “bubble marking” memes. With a depiction so telling it can be used on its own as an example to explain just how – a picture says a thousand words. And where should it come from? None other than the one place synonymous, along with being the poster child of marking bubbles and manias: Silicon Valley.

Currently Silicon Valley is still believing they are breathing rarefied air, when in fact – they’ve been inhaling their own exhaust.

This is a place that now believes multi-billion dollar valuations are so yesterday. After all we’re talking about “The Valley” where unicorns and rainbows adorn the stationary for Non-GAAP earnings reports. So today the goal of every new or old start-up (whether you can show an actual net profit or not ) is to espouse valuations of tens of billions! Of course that’s regardless if you lose or have a cash burn rate faster than a HFT laser signal can front-run a competitors microwave signal to the exchanges. For in the valley of silicon  “everything is still awesome!”

So just when you thought you’ve seen it all. Where you wonder if there ever could be a moment in time which could rival the current iconic poster-child of the earlier tech boom bubble like the sock puppet mascot of Pets dot com. Comes not only one to rival, but quite possibly to surpass it.

Remember my earlier reference that you should really pay attention and heed when you see the rhyming dancers take to the stage? Well this time it takes a cartoon caricature to what can only be described as “another level” indeed. To wit: VC’s as – Cartoon Super Heroes. Below is a screenshot that comes from the public website CB Insights™.

Photo credit CB Insights™

Photo credit CB Insights™


Now let me make this clear so there’s no misunderstanding. This is not a shot, or call out, of the people depicted. I don’t know them and it’s not about them. After all they might not have even been consulted for this drawing. (and if they weren’t I feel for them) That’s neither here nor there. What I’m directly speaking too is “The meme.”

In other words: it’s all about the get in – get funded – get out fairy tale mentality that’s overly prevalent in Valley land. Where it now seems all you need to do is call up your friendly “Super Hero” of choice and Bammo! Get ready for your own personal venture capital roller coaster ride to the land of billions!

I truly feel this just might be as, if not more so, of an iconic “bubble top” marker than the now infamous sock puppet than anyone in the tech world dares to imagine.

Currently the markets are showing great stress in coming to grips with the reality that QE indeed has ended. All the “fast money” associated with those trillions of dollars made possible by the Fed. has come to an end. (at least as of this writing) The story that was previously acceptable in most VC funding rounds of “someday we’ll actually turn a net profit” will now not only be shunned, but will be replaced with, “Excuse me, but the only story line I want to hear is – Where’s my money?!” And “super-hero” is not what is going to come to mind.

If the stresses now rearing their head within the markets continue I’ll make a prediction.

What you’ll not find more of going forward is VC’s strewn across the skies dawning capes and spandex searching through an ever-expanding universe of start-ups to fund. No. What you’ll find is a lot of the once so-called “wonder companies” that were previously funded desperately seeking additional funding of any type possible. Not to expand, or to buy the next greatest “eye balls for dollars model” to compliment their existing “now desperately seeking eyeballs for dollars” model.

What they’ll be in is a frenzy seeking funding – for their very own survival. Because Non-GAAP “We’re killing it!” earnings reports won’t do the most important thing in a recessionary downturn alongside the reality of no more “free” money.

And what’s the most important thing?

The ability to generate actual net profits garnered from servicing satisfied customers that actually purchased what you made available for sale at margins that in turn pays: the help, rent, and other bills – consistently. Period.

© 2015 Mark St.Cyr

Exploring The “There Is No Box” Concept (part 1 of 4 )

When I’m speaking to a group discussions sometimes turn down a familiar well-worn path. e.g., One person becomes vocal pushing the meme “We need to start thinking out of the box!” as to help bring new ideas, strategies, or tactics as to combat competitive challenges (and more) that now seem to change on a near daily basis.

As a form of unifying agreement will envelope the room it seems I shock many (which I’m known to do) when I rebut, “Doing just that may not only make your situations worse, but as you try to make plans based on “thinking outside the box” you may in fact help create the ideal situation for competitors to move right past you in ways not only you didn’t conceive, but in ways you thought previous impossible therefore creating by your own hands the opportunities for competitors to move in and put you out of business.”

This is when the room will fall silent. Then I’ll proceed to explain my reasoning and why it’s so important to get away from this idea of “thinking outside” and realize that in today’s world more and more “there is no box.”

When I use a few real life examples that are taking place currently the concept truly hits home. And I can see real shifts in perceptions and understanding along with a fresh release of vigor in tackling true creative innovation, as well as forging real competitive advantages that could either leapfrog them ahead of their competitors, or, better yet: create first to market advantages their competition might not even contemplate.

I thought I would transcribe (for they’re in Q & A form) just a few example of this taking place in hopes you might also apply this concept in your own endeavors. These are far from the only examples, but they seem to really grab both the attention as well as make my point clear; for they touch nearly every entrepreneur as well as anyone with the entrepreneurial mindset in one form or another.

Participant: What do you mean the “outside the box” (OTB) thinking could actually do more harm than good? Isn’t that a path more in line with creative solutions than others?

Me: As always here’s my famous response: Well yes, and no.

The issue here is if you think OTB chances are what you’ll proceed to do next without realizing it is only create a bigger box outside the one you’re currently in. Or, in other words what you’ll do is to yes, think outside or bigger than your competitors however, inevitably you’ll only draw another box as large as “you” perceive the new boundaries could or should be.

In the end you’ll limit your thinking based on a box only you conceive. And you will in-turn whether knowing or unknowingly stay within those very boundaries. Which de facto puts you right back to where you. For what if I were to come along and you notice, “My box is even bigger?”

We can do this at near infinitum. You then may argue that it’s a distinction without a difference. i.e., OTB or no box. For if it can go on at infinitum – it’s only semantics. To which I would express: that’s precisely the point. And this is where everyone misses the competitive edge.

When we use the OTB analogy many times what we fail to remember is: there is always a “box” to begin with. So what we do in-turn is take all the aspects from within that first construct – and try to change, delete, enhance, whatever. But, we continue as the point above illustrated “increase the box.”

We’re all working from the same stand point, using the same basic building blocks in the “box” in order to build a better “box.”

If I want to move not only past you, but create some form of first to market advantage and sprint away leaving “you” in the dust. What I need to do or say is “to heck with inside – outside.” And embrace “There is no box.” (TINB)

This leaves you (as well as possibly others) alone in the box thinking there’s less pressure or need to get outside, while at the same time allows me to focus on opportunities anywhere and everywhere because I no longer am tied one way or the other to “a box.” Let me give you a real life example of this taking place today. Uber™.

Uber didn’t “TOB.” They determined leave the box for others and let’s create our own model. Like them or not, agree with their alleged usurpation of taxi laws or not it doesn’t matter. For this example clearly shows while others in the field of transportation were all trying to gain competitive edges, market share, or whatever based on their models. It’s clear they only employed or used strategies or tactics based on those previous models (as in boxes.)

Companies acquired competitors, medallions, infrastructure such as cabs, hiring drivers, etc. This was their “box” per se. And it did nothing more than become a bigger and bigger box depending on who wanted to increase it. Uber came along and said – “there is no box.” They did nothing in accordance on what the industry itself perceived as “barriers to entry.” Or, working within any framework that was clear for all to see within “the box or boxes.”

They acted and performed as if they were never there, or, to paraphrase a movie line: Box? What Box? We don’t need no stinkin’ boxes!

Uber didn’t build a bigger, better, or even a box at all. It said – There is no box – and caught every other competitor in the transportation business flat-footed leaving them to playing catch up if they even can. The first mover advantage that went along with this is also noteworthy. How this all plays out going forward is still up for grabs with surmounting legal issues and hurdles they’re facing currently. But, this is a classic example of no box vs outside of one.

© 2015 Mark St.Cyr

Did The Fed. Just Whisper “Fire” In A Crowded Market?

This past Friday saw what many like myself can only describe as a blatant example of just what’s wrong with both the economy – as well as the markets.

At precisely 15 minutes before the closing bell on Wall Street the now Chair of the Federal Reserve, Janet Yellen gave a press conference detailing further insights into upcoming monetary policy. I guess two days worth of FOMC discussions, along with a press conference detailing all that was discussed immediately after, followed by a question and answer session about all those “insights and decisions” wasn’t enough. For the markets remained red for the week while losing all its post FOMC pop which in itself is an ominous sign.

At first blush some might contend, “Well, that’s a good thing they decided to communicate even more. Best to have any and all the information available as soon as possible. After all: more information is always better for the markets – no?”

Yes it is, however, when it exposes just how cozy (as well as frightened) monetary policy setting has moved from the appearance of setting beneficial policies that help ensure a free and open capitalistic system – to one hell-bent on serving a newer more dominant form of crony styled capitalism rampant within our markets. Where winners and losers are decided solely on their ability to manipulate their bottom line earnings “beat” via access to resources made possible only via the Fed.’s current zero bound stance. (i.e., ZIRP) I don’t believe that was their original intent.

If you were one of the few (i.e., not one of the Wall Street “In crowd”) that watched and listened to that presser on Friday. You were left dumbfounded on just how illogical, as well as contradictory nearly every example given was as to what one should now infer about what the Fed. is going to do next – and when.

So convoluted was both the rational as well as examples given I concluded: there was no other intent for this presser other than to signal the “In Crowd” – You better get the heck out of Dodge because we’ve painted ourselves so deep into a corner this is probably the last time you’ll have a chance as to “paint the tape” in any upcoming quarters. For we might actually have to do what we implied (e.g., raise rates) regardless – just to keep up the appearance that we’ll do what we say. Even if so doing means – creating turmoil. So don’t say “we didn’t warn you.” (i.e., We’ve changed the meaning of “data” so many times now even we can’t figure out what it means or, what we should do any longer!)

Certainly total conjecture on my part. However, if you listened to the rational and explanations given about “data” and “the economy” – nothing made sense. Everything was conflicting not only in the examples but also the tenor and tone. Here are a few examples of what I mean: (I’m paraphrasing) “The economy has improved considerably, that’s why we need to continue the extraordinary measures we’ve been implementing.” Huh?

Or better yet: “We see continuing improvement in the labor force and expect even further improvement.” (as they seemingly disregard the only sector that provided all that month over month, year over year boost in honest job formations, e.g., oil related sectors in States which has now dramatically fallen off a cliff with massive layoffs already announced, as well as the possibly of accelerating further as the price of oil drops ever more.)

And last but surely not least, “We see continued growth in upcoming quarters of GDP.” (As long as you don’t pay any attention to the latest Atlanta Fed.’s report that’s downgraded its GDP forecast from just over 2% which by itself was pitiful, to now just 0.2% faster than one can say “everything was is awesome!”)

The timing of this reprise in conjunction with the latest FOMC’s conference just a week ago was quite instructive in my opinion. I mean, think about it: Fifteen minutes before the closing of the markets on the very day of the quarter ending? Isn’t it just funny how the timing of this presser coincided with allowing for the opportunity as to “paint the tape” if needed? Along with the additional 15 minutes of the later closing futures market as to hedge for Monday’s opening? Again, “if needed” as in – just in case what you heard went against your current positions. The serendipity of that coincidence is an amazingly funny thing – no? I firmly believe this presser was nothing more than a contorted effort by the Fed. to signal what many like myself have been anticipating since the ending of QE just a few months ago: They’ve lost control.

I theorize the Fed. was trying to accomplish two things. One: State for the record publicly as many C.Y.A. statements as possible regardless of how contradictory. And two: Warn (i.e., signal “The In Crowd”) that because they’ve painted themselves into such a tight corner that messaging and more is now a useless exercise. The only way they’re going to be able to adjust going forward or, further intervene within the markets is: If and when a calamity is upon us. Or better said – If, and when the markets fall apart. And “when” just might be a whole lot closer to reality – than “if.”

All one has to do is be willing to look at the “true” data with eyes open and a rational open mind to see what’s taking place. Everything (and I do mean everything) as to what the Fed. said should be taking place via their intervention 6 years ago not only is not. Rather: it’s coming unglued, as well as beginning to run off the rails. Nearly every report released since the ending of QE that was previously always indicating “awesomeness” is now indicating borderline if not outright pathetic-ness.

We are entering out first (yes 1st!) earnings period since QE was halted just a few months ago and what are we beginning to see and hear? All those projections and assurances made by the so-called “smart crowd” that “this time is different” are suddenly changing their tune to “Well you know we’ve had so much improvement surely a pause is warranted.” Sure it is. And they call us “idiots.”

The unemployment rate is and has been an absolute joke having more in common with fairy-tales than anything factual. GDP has gone from poor to worse. And remember when you were told that 5% GDP print wasn’t an outlier but “indicative of the recovery” by the so-called “smart crowd?” How’s that meme working out?

The Dollar is still screaming higher making imports cheaper, and our exports non-competitive. Remember we were told by this very same crowd “we were going to export our way to prosperity soon?” I know, I can barely type as I chuckle also.

Reduction in oil prices were going to put “more money in consumers pockets to spend helping to boost the economy.” Problem is all that “free” healthcare now costs far more than the potential “gas savings.” But hey, don’t complain. For without having to now spend more on healthcare – retail spending would be far, far worse. And this is just a handful of the boatloads of fundamentally flawed data reports we were besieged with by the so-called “smart crowd” ad nauseam as to continue their narrative of “everything is awesome!”

However for the rest of us that have questioned such reports over the years  we’ve been branded as: uninformed – data deniers. Personally I just might go out and get a t-shirt made stating just that. On the front I’ll have: “I’m a data denier – and proud of it!” And on the back it’ll read: “I believe in critical thinking – That’s why you wont see me on CNBC™.”

It’s not just here in the U.S. where the once burgeoning commodity sectors like oil and gas, as well as others such as steel, and more are now getting bludgeoned. The entire shale industry for one is beginning to buckle under the weight of falling prices. Canada is now beginning too feel the effects. And these ripples are far from over – they’re just beginning. Remember oil and such helped insulate Canada from a downturn in housing such as we had here. By the most recent reports that all seems to have now changed. And the implications for our friends to the north could be dramatic.

How about China? That once rejoiced “savior” of the economic world is itself having a harder, and harder time trying to dismiss (as well as cover up) clearly visible signs of economic weakness. Here’s where I’d also like to bring attention to one economic fact squarely staring the world down with implications just as far-reaching as the latest oil carnage. And: with possibility the same effect to the repricing of everything everywhere. This ominous scenario alone seems lost across the financial media.

How can one not derive the implications on the market forces associated with the decision of the Saudi’s to continue pumping at record levels and at lower prices as to help preserve their market share with the added benefit of simultaneously crushing as many as possible competitors: and not see that pretty soon China is going to do, in effect – the very same thing with everything it exports? Once it begins just like with oil – It will crush pricing power (on everything from trinkets to commodities) globally in my opinion.

This is the world the Fed. has wrought with leaving the punchbowl out far too long after everyone at the party was clearly inebriated. Instead of wisely pulling the bowl back and away (at the least in 2012 or there about) while everyone was passed out. They decided it would not only be better to remain – but continued refilling it as the one’s with an affinity for risk gulped more and more down their gullet acquiring shares in any sector they thought provided yield.

And if you’re in Asia? Sectors be damned! It’s a straight Kamikaze spree into the Nikkei™ or better yet, Shanghai Composite™. There you don’t discern. You just buy, buy, buy in way that would make Cramer envious. All while using multiples of margin never before seen in the history of that market. What could possibly go wrong? And I haven’t even mentioned Greece, or The EU.

Again this is what I believe the Fed. has finally come to terms with. The realization that control is no longer an option. It’s been a mirage that’s held up far longer than originally anticipated. The monster has now grown far too big and dangerous while possibly exposing to their dismay – the only way they might have a shot of regaining some stability for future control is to let it fall apart: as they stand by and watch hoping to “thread the needle” for further intervention just in time. Along with trying to have some C.Y.A. assurance to the “In Crowd” that “Hey – we tried to warn you!” if it indeed does exactly that.

At issue is, even if I’m only partly correct. What should scare the heck out of any critical thinking person is: With everything we’ve witnessed over the last 6 years, along with what is now transpiring which is scarier?

A Fed. that may be signalling they’ve lost control? Or, a Fed. that still believes “Don’t worry – we’ve got this!”

© 2015 Mark St.Cyr

New Episode: Insight Uprise™ Audio Series

The newest episode in my audio series Insight Uprise™. Like other projects I’ve done this is in the “No holds barred, quick hitting and to the point” genre. Topics and subject matter will vary.

It’s intended to be straight to the point in both subject matter, as well as delivery, unlike anyone else.

Love it of hate it one thing will be certain: They’ll be no mistaking me – and someone else.

This Episodes Topic: Searching For Productivity


© 2015 Mark St.Cyr in association with StreetCry Media. All Rights Reserved.

Can’t see the audio player? Click here.

A Thought For Today’s Entrepreneur

The only way to be a better boss is to understand: that you are the avatar.

What you do and the way you conduct yourself will be both imitated as well as amplified down your line of subordinates.

If you want your people to be on time; you must be on time. If you want people to go the extra mile; they must see you visibly displaying the same behaviors.

If you say “you trust their judgement” than give them the authority to act on it independently without needing “supervisor approval” first.

It sounds so intuitive, so simple, yet it’s precisely the small things such as these that make all the difference in building a better more dominant brand and/or company far more often – than not.

© 2015 Mark St.Cyr

The Fed’s Trapped In The Corner With An Empty Bucket

It seems before the paint was even dry as to how they’ll proceed after ending QE, a decision was made to apply yet another coat in an attempt to cover any previous “blotches.” The issue that seems lost is: This was their first opportunity to move out from the proverbial “painted themselves into a corner” dilemma, and use any remaining “paint” that could have covered their tracks to instead: go about and lay-down a second coat backing themselves back into the very same corner only this time an even tighter one!

This in-turn provided the markets with the obligatory narrative as well as fuel to then “paint the tape” in a feeding frenzy of HFT induced stop running and price setting action during what’s known in the industry as “Quadruple Witching.” (i.e., when the indexes and more settle prices on a quarterly time period.)

This period of price settlements has always been known for its volatility. However, the price movements within the currency markets alongside were far from ordinary: They were both spectacular – as well as frightening. But don’t look to hear about any of that from the “everything is awesome” financial media channels. All you’ll see there is “Look its a bird. It’s a plane. No Its…Everything is awesome again!” as the markets rallied higher in unison.

In a previous article I opined:

“The Fed. as of today has pulled the plug on QE, and implied it’s time to raise interest rates. All at a time the global economy is showing just how addicted it truly was to the Fed.’s QE policy of “free” money along with near zero interest rates leaving the Fed. with the difficult choice of exactly which policy are they to enact. For both will have dramatically different results.

One is to go back on all they’ve said, admitting they got everything wrong via the signaling that not only will interest rates not be raised; but in addition the possibility for more QE is at the ready, sending critics of the Fed. spiraling into a concerted effort demanding both an audit as well as hearings. Or…

They stick to their guns, signal the intent to raise rates sending the global economy and markets into a tail spin of unraveling carry trades, currency wars and quite possibly a full-blown currency based Armageddon.”

Once again as proved by this latest FOMC decision as well as the following press conference, just when it seemed they would (and needed) to do one or the other: They did a little of both! Again, just when you think the Federal Reserve’s messaging couldn’t get any more muddled, they show beyond all doubt: Oh yes it can!

Not only did they signal they weren’t going to raise interest rates any time soon, they went out of their way to placate the market signalling “patience doesn’t mean impatient” and since they’re now “data dependent” you can rest assured by the latest signalling via the Atlanta Fed. the “data” currently signals: Hike up your glasses and have more punch because the probability of us hiking rates has the chance from zero to none!

And with that some of the most important market segments for both stability as well as liquidity came unglued and swung in price movements showing just how precarious as well as dangerous they’ve truly become. (As well as adulterated I might add)

Following the decision the markets raced higher negating the previous declines to once again inch within spitting distance of never before seen in the history of the market highs. All the while simultaneously the bond markets ran in unison; just as hard, just as fast. This is a warning sign to any veteran trader.

It’s one thing for the perceived “risk off” or “safety trade” of bonds to display some strength during an equity market rally. Especially when that rally is held against a backdrop of deteriorating macro data. There’s always some divergent correlation for, or against, present within the markets regardless. However, to have both markets move (i.e., both meaning all; as in, across the board in both equities as well as long dated and short-term bonds) where everything rose in lockstep? That’s unsettling to say the least in my opinion. And the divergence in common sense price action didn’t stop there.

The U.S. Dollar. That little sheet of paper aka “The worlds reserve currency” (WRC) moved in ways that made one think they were watching a biotech stock that just received FDA approval to then minutes later have it pulled. It was absolutely breathtaking. The dark side of that move also showed just how unstable this market is becoming.

Currencies move in what’s known as “pips” (e.g., 1/100 of 1%) but for simplicity’s sake let’s just say they bounce around up and down in moves of pennies. When they move violently up or down in the equivalent of say dimes and quarters – people take notice. A violent sustained move (i.e., within the course of a full trading day) of just 1 dollar – you’ve got not only traders, but global corporations, as well sovereigns watching with explicit eyes for there is not only the wealth of companies on the line, rather, there may very well be “the wealth of nations.”

So how does one think someone with billions upon billions (if not out right trillions) of monetary exposure felt as they watched the world’s reserve currency swing back and forth gyrating in multiples of dollars? Not in weeks, months, or even days – but hours! All I can say is: Welcome to HFT meets USD. Just remember to buckle up and hold on for dear life – and account balances. This ride is going to be jaw-dropping!

The swings in the currency markets are only now being sorted out as currency traders come to grips with what took place this week. There are reports detailing in graphic display such as this from Zero Hedge™ “Dollar Flash Crashes…” where the Dollar in the most liquid market on the planet is now showing signs it’s no more stable or less prone to manipulation than any penny stock. Don’t look for any solace in that other once perceived equivalent of “liquid” markets U.S. Treasuries either. It seems they too have fallen into the same debacle.

This latest round of index settlements along with the Fed.’s newest mumbled attempt of explicitly straddling the fine line of yes, no, and maybe has shined a spotlight directly on glaring issues for anyone willing to look. Problem is – no one wants too! And it’s not just the Fed. For what happened in the world’s most heavily traded as well as capitalized stock known as Apple®, what took place on Friday’s close should be ringing alarm-bells throughout the S.E.C.

Within the closing minutes shares were pummeled to then only accelerate to once unimaginable selling volume within the remaining seconds of the trading day. The world’s most valuable company had nearly $10,000,000,000.00 (that’s 10 billion!) of its market cap erased in what can only be described as some form of goal seek-ed price peg. (You can view the details as laid out by Nanex™ and reported via ZH  here “The Farce That Is…”

Like those “winners” in the closing moments of the day that became “losers” in nanoseconds we’ll just have to wait and see if this type of activity is not only going to be tolerated, but rather promoted as “good for the markets.” Because as we that question are always quick to be reminded: HFT is “providing necessary liquidity for the benefit of investors everywhere.” Unless you’re the one on the other side of that HFT “liquidity” trade. Then you just provide the liquidity for HFT profit.

It’s one thing to be on the losing side of a trade where everything you thought to be correct based on acumen or assumptions goes against you regardless of how well you thought the odds in your favor. That’s trading. However, when you also have clients money (as in the cumulative world of Hedge Funds, Pensioners, Personal or managed 401K proceeds , et al) on the line – and quicker than you can pop the champagne bottle in a celebration of advice and job well done; the most predatory and parasitic creature to ever gain control over the markets comes in and swipes those perceived profits not only your account but possibly the accounts of “widows and orphans” into theirs in mere nanoseconds? That’s not “trading” or “investing”, or anything else remotely resembling the two. That’s thievery in my book. Plain and simple.

The issue is not only is all this currently being allowed to run unencumbered within the premise of “legal.” But if you dare bring up allegations? You’re met with “you just don’t understand.” Well maybe I don’t. But I do know this: It may be legal – but that doesn’t make it right. And all of the negative aspects associated with it are just beginning to gather more steam. And the consequences could be unimaginable going forward.

How well does one think this is going to go over in the minds of sovereign nations as they sit back over this weekend and contemplate the same happening in the FX market where they have billions upon billions of dollars at risk? Does one think any nation, or let alone group is going to tolerate such “volatility?” Not on your life. And for proof all one needs to watch is the growing onslaught of announcements now coming on a near daily basis as one country after another announces it’s joining China’s formation of an A.I.I.B. (Asian Infrastructure Investment Bank)

The Dollar’s stunning movements along with the reverberations wrought across the currency pairs globally, together with the muddled messaging emanating from the Fed. is going to have everyone (and I do mean everyone) weighing the “new currency market player” vs the now perceived, as well as demonstrated “risks” in staying beholden to the current WRC. And just like in retail I believe currency markets share a very important attribute: Once you allow the customer to perceive, let alone conclude, there’s an alternative to you – the damage to market share may already be inevitable as well as irreversible.

If you want an analogy to weigh the impact of such things and how fast they can turn, all one needs to remember was how just a few years ago there really  was no alternative to: a Blackberry®. Today, Blackberry’s are refereed to as: “What that?” That’s how fast any market can turn. Think I’m off base? How about this one that’s more market centric.

In the same time period as the above example there were these places called “pits” where “traders” would partake and bid prices of buy’s and sell’s in an open forum of publicly witnessed honest price discovery. Today, they’ve all but been replaced by HFT electronic algorithmic trading vehicles where experience in actual trading is eschewed in preference to math and coding prowess. Don’t let this last example go by without really understanding the implication held going forward.

In a way I think it’s fitting to close this article with a few statements given by the recently retired head of the Dallas Fed. Richard Fisher where he expressed his concerns about the markets and more in a recent interview with CNBC™ veteran Rick Santelli.

In it he expressed two points which I feel shows just how precarious as well as outright dangerous the markets have become. In response to questions posed by Santelli two points in my view were both salient if not downright prophetic. The first: “Well, what worries me is how totally lazy investors have gotten, totally dependent on the Federal Reserve and I find this to be a precarious situation.” The second: “Are we vulnerable in my opinion to a significant equity market correction? I believe we are.”

I couldn’t agree more and I’ll add my own last point to his. Not only has the Fed. painted themselves into an even tighter corner – they’ve left no clear path as to now kick the empty can.

What transpires from here is still anyone’s guess. For we truly are in uncharted territory. Again!

© 2015 Mark St.Cyr


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