Month: October 2015

JBTFD Bravado Hails From A Hill Made Of Bull

Nothing gores a story-line for caution or, warnings with Halloween inspired visions of blood and mutilation quite like those put to the horns of the once again, saved via central bank intervention chatter, of non-other than its triumphantly rewarded JBTFD (just by the dip) Bull crowd.

It’s hard to argue caution or, cite reasons for warnings, when you’re in the midst of face-ripping rallies that once again happen day after day. As I implied, it’s hard to talk over the hoof beats currently dancing on what appears to be solid ground. However, that solid ground is precariously close, as within one misstep, of tripping over one’s hoof – and falling off the financial cliff.

Yes, the markets once again rewarded the JBTFD crowd. But (and it’s a very big but) not because it’s a market. This is what takes place in a casino. Confusing financial market expertise and casino gambling is the mistake today’s “bull” crowd keeps making. And just like most gamblers – the odds turn out of your favor just when you believed you had “the” sure-fire system to beat them.

There is an easy generalization that helps one figure out exactly which side of the coin they’re on (i.e., gambler vs expertise)

Gamblers employ systems which they must live and breathe by in order for them to work at their implied rate of efficiency. i.e., If a system states you must bet (or not) if X happens, then, there is no thinking – you bet. Expertise uses intuitive decision-making skills in real-time. A bet or, no-bet can be made indifferent to, or of, a system. I’m well aware of it being a basic or very general example . Yet, it’s a good rule of thumb and reference point for this discussion.

Over the past few weeks the financial markets have been on an absolute rocket ride once again. Triple digit gains have been the headlines and cheers from the financial media. As one peruses many financial sites, blogs, radio and television shows; the name calling of not only Bears, rather, anyone in total who questions this market is being verbally stampeded over. The sheer beating of hoofs, chests, and snorts has been outright deafening.

We are now back to “The Fed’s got your back – so JBTFD” lunacy. And the “Holy Grail” that’s used as proof positive? “Just look at the rally we’re now experiencing off those lows! This market is on fire, solid, new highs coming, get on board!” And a whole lot more. However, there’s a problem the “bull” crowd keep failing to mention…

We’re going up only because we’re coming off a bottom caused by a panic selling so intense, as well as out-of-the-blue in nature, it caused for the very first time in history a halting of all three of the major indexes. This was on August 24th. A mere few weeks ago.

The markets at this time only held for reasons of more jawboning made by central bankers both in the U.S. as well as others. Then, only a week thereabouts later; the markets once again rolled over and were threatening breaking those lows with the possibility of an outright free-fall to even lower lows.

Were it not for the inaction/action of the Federal Reserve as to not follow through on its most anticipated, telegraphed, and expected rate hike in recent memory. The markets were (once again) on the precipice of; an all out rout. Since then it’s been a star-spangled, rip-roaring, rocket-ship ride. And the JBTFD crowd is once again basking in a pool filled with self-congratulatory “expertise” for buying the dip once again.

The issue here is that sooner, rather than later, (for August showed just how fast, hard, and out-of-the-blue reality can strike) it will be revealed in spades just how much one has relied on gambling systems as opposed to financial expertise. Here’s an example.

If the Fed. didn’t (or doesn’t) step in staying on the sidelines – JBTFD doesn’t work because there is no market – only the Fed. And it’s precisely here that lies the conundrum in the JBTFD system. If the Fed. no longer steps in, or worse – steps aside: which “dip” point or “bottom” can be disregarded (as in not bought) in a system? For if the system is to JBTFD – then buying the dip it must do. Period.

Remember, in a system – if X says to do Y for a payout worth Z – there’s no thinking allowed. You execute. And here is where JBTFD “genius” morphs into JBTFD disasters rapidly. It’s inherent in the system. It’s a part of it. You can’t over-ride it or, it’s not a system – it’s just guessing in an elaborate muse. Nothing more. Anyone playing this game that’s been rewarded time after time should pay real close attention to that last line. For it will show its fundamental flaw sooner or later, usually at the worst of all possible times.

Now to the other side of the argument where the bull crowd heralds, “Oh those poor stupid bears (or shorts etc.) Someday their ‘sky is falling’ cries may come true. Till then I’m just going to keep on buying dips horns over hooves till it stops working.” The sheer gloating and more has been overwhelming to say the least. However, let’s put a few things out on the table as to bring back some perspective to all this bull-moo shall we?

One would think that little incident in August never happened. And exactly how did that happen by the way? Oh that’s right China. Suddenly the economy that was to lead the world out of the doldrums spun violently and looked for a brief period it would take down the entire global markets if someone, somewhere, didn’t intervene. And once again it was the Fed. that was first to the front lines to soothe or stem fears. And it only quelled those fears when it punted its rate hike decision.

Since then the markets have once again “flipped the switch” where bad news is good news, and pathetic is down right stellar! And the data reports of the economy as a whole have not disappointed – they’ve been abysmal. So now every weak-point of the economy is seen as “It’s a great time to back up the truck and buy horns over hooves” JBTFD bull argument. That’s not expertise – that’s downright financial suicide.

Lashing one’s yoke to a bandwagon made possible only via the hints, double-speak, whispers, or implied maybe’s announced by Ivory Tower academics as to how the economy is, or how it will do, will turn that Bull riding JBTFD bandwagon into a self-propelled cart pulled over a cliff by a train of JBTFD bulls turned into beasts of burden as far as the eye can see. All of their own doing.

Let’s not lose sight of the fact the current earnings season has been abysmal. Companies that are the backbone stalwarts to show just how well or not the general economy is performing are reporting atrocious earnings as well as outlooks. Caterpillar™ is just one however there have been others as well as more to come.

Sure we’ve had some big tech surprises such as Google™ and Amazon™ however, when it comes to Amazon – retail, it’s core business is not what propelled its earnings or profits. It was its web service sector. Amazon deserves credit for its newest business line. However, what should not be lost on anyone is when it comes to retail – it’s still a laggard for profitability. And retail is where you can judge more of an economy’s overall health. And so far all I’ll say is it’s a good thing that switch has been flipped because retail sales are falling off a cliff. Just look to Walmart™ for even more evidence of this point.

So let’s get back to the inherent flaw contained within the JBTFD “expertise” trading prowess of today’s bull crowd.

Today I contend (still) there is no market without direct Fed. or other central bankers intervention. Regardless of how mighty others might imply their jawboning or bazookas might be. The Fed. currently wields the big gun. Without the Fed. most monetary interventions would be like using a pee shooter against a battleship. They’re ill-suited and not yet up for such a task.

So with that said: With a Fed. currently standing with “egg on its face” for not raising against a backdrop of a politburo such as China’s now heralding GDP figures near triple that of the U.S., ECB and other European leaders jawboning more, and more about how “they” will do what ever it takes. Along with a stock market once again within spitting distance of never before seen in the history of mankind new highs. Who or what’s to say the next time which for all intents and purposes displays a “no-brainer” intervention step by the Fed. just as Bulls once again load up the truck and JBTFD – the Fed. stands pat. Or, worse – does exactly the opposite of what the market expects and has been rewarded doing these last 5 plus years?

Which dip after the first violation does the “expertise” or system of the JBTFD crowd buy then? And if that one fails – which after that? Remember – if it’s a system: you execute. However, as I’ve alluded to many times, that system knows and has been tested using only one side of an equation: QE intervention. Good luck with that when the other side forces its way back into the math.

For those that may doubt the premise of just how flawed and how quickly a system that appeared so fruitful, so dependable, such a money-making machine, can be laid to waste in minutes rather than days, weeks, or months I’ll leave you with the following date as a reminder of just how quickly things can turn: May 6, 2010 otherwise known as “The Flash Crash.”

I tried finding a link to that audio however it seems most have been taken down. I’m assuming it’s since been copyrighted into exclusivity for its prominence in the movie “Floored.” I personally haven’t watched that movie, I was actually trading and listening in real-time during that crash event. And I will tell you this – it’s worth renting or watching just for those few minutes of breathless commentary by Ben Lichtenstein during that period to remind oneself just how fast systems can go the way of insolvency in the blink of an eye.

If one had been applying a JBTFD strategy anywhere during that trading day prior. By the time it would have worked, most, if not all – would be wiped out. As many were. Which is precisely why there’s only a QE market today.

A fundamental based market, constructed by market expertise, business acumen, and careful analysis has not been present ever since. What we have today is nothing more than a liquidity driven casino for JBTFD gambling systems. Sooner or later luck will run out. It’s inherent in the such a system.

And my expertise will only allow me to say two things: Good luck with that – and – you’re gonna to need it.

© 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: Business Hours

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

Can’t see the audio player? Click here.

A Perilous Possibility: Weaponizing The Fed.

The world sits at a very precarious point once again in time. There is a very real possibility, as well as an ever-increasing chance one wrong unintended or misunderstood event could trigger an all out war of global proportions. Yes, I said it, and I don’t take it lightly. Nor do I say it cavalierly. As a matter of fact my blood ran cold just typing it. For the matter at hand, the players involved, the possibilities of doing just the slightest of wrong moves whether intentional or not. At precisely the wrong time; has the inherent risk of triggering world events in ways and at magnitudes not seen since (dare I say) WW2. And if you think that’s hyperbole – you’ve just not been paying attention.

Currently as we sit events that were expressed by the main stream outlets as having no chance of ever happening (implying they weren’t worth contemplating) are not only happening – they’re turning out to be far more dangerous in both their escalation, as well as speed. The only thing rivaling my level for concern are the reasons being touted via both official, as well as media interpretations on why or, what is to be expected. The current double speak, plausible denials, moving of heavy armaments, ships, troop deployments, kinetic engagement, finger wagging from not one, but more than several world military powers has been breathtaking. All this over the course of just two or three weeks. The risks in my opinion for misstep with global ramifications haven’t been this parlous in decades.

One of the real reasons for my concern stems from the players involved. I’m far more concerned and have a greater sense of foreboding when it appears the “intellectual” set are the one’s playing against adversaries or circumstances they themselves only understand through textbooks or debate. i.e., A relative example could be the proverbial college professor that teaches business theory and application yet, has never been outside the walls of academia.

Back in April of 2014 the situation in Ukraine was all the media channels cared about. They touted how X, Y, and Z would be the obvious resolution. (X,Y, and Z represented everything breaking decisively, as well as matter of factually in the U.S.’s favor)  The problem was, anyone with any understanding of what one “thinks” should take place because they “believe” that it should be so; as opposed to actually looking at the situation, the players, the posture, and verifiable resolve through previous actions; it was clear to see the outcome was going to be far different from what the “intellectual” crowd proposed as well as believed.

During that period I wrote an article titled “Why Intellectual Leadership Can Get You Killed” in that article I made one of the following arguments:

“The intellectual prowess of the so-called “smart crowd” can not only be dwarfed by the truly ruthless leader, but can put both themselves as well as their company or followers in grave peril. For intellectuals think out processes far too much. Then do nothing.

They’ll over think why someone would do X, Y, or Z. They put themselves into shoes that don’t fit, then spend more time contemplating if their opponents should be wearing leather vs rubber soles. All the while their opponent laughs running circles around them barefoot.”

That first line could be used to describe the Fed.’s past inaction on rate hikes. For if you listen to the arguments made by the members themselves – over intellectualized the consequences is exactly what describes their reasoning and resulting decision. And the second? You could say the same for just how Ukraine ended. My premise was utterly mocked during this period – today it fits far closer to the ending results than even I dared think. Which is also the basis for my concern today.

Currently the once advocated U.S. involvement in Syria is not only turning into an all out political humiliation, but what might be worse is it’s not coming at the hands of just a perceived or noted adversary. It’s also coming at the hands of another military power that for all intent and purposes is being held up as “a regime we can work with” as they work in concert against U.S. stated warnings to the contrary. I wish this all we had to worry about, but as usual, it’s not.

Since our involvement in Syria (however it was achieved) one of the stated reasons why was for the goal of extinguishing terrorist threats seated there that could eventually turn up here. So far the progress has been seen, as well as reported, to be less than inspiring. Then suddenly not only is the U.S. brushed aside. It was basically told – move aside; and stay aside – while we show how it’s done. Moves like this, by these powers, on this level of stage and engagement are done precisely to test “intellectual” resolve against forceful resolve. A calculus not played for checkers or chess, but for far more dangerous games with onerous consequences.

Add to this the simultaneous display of “Watch this!” alarm bells as Iran launched its newest long-range missile in an apparent thumbing-its-nose enticed provocation to any one caring to watch. All while the U.S. (and supposedly other U.N. bodies) are negotiating a weapons treaty. Forget about “the ink not even dry.” It’s not even fully signed.

Concurrently as all this is playing out, it’s been announced the U.S. is indeed going to send warships to challenge China in an outright confrontation styled game of “who blinks first” to contest their proclamation that both the territory around and of the Spratly Islands is irrefutably theirs.

Who on this earth believes this is the time to do such a provocation? I’ll tell you who: the intellectual set. That’s who. For the belief of “we can handle this” by debating and game playing override what begs clear, common sense, level-headed, outright caution. And that’s a problem on so many levels from my perspective.

The warning signs of danger are flashing everywhere, but they seem to be falling not only deaf ears, but those that might be blind to the speed one misstep could turn every contingency plan – to absolute useless trash. These are the times I believe Mike Tyson summed up best, “Every one’s got a plan – till they get punched in the face.” I’m of the opinion we’re now walking round chin out, and chip shouldered. The problem is someone just might take the shot. And who, where, or why might not be exactly what the intellectual set ever contemplated. And that’s a very big concern.

Then there’s what I stated in title of this article: The Fed. And here’s where things begin to rattle my cage even more. With the current global marketplace intertwined as tightly and as correlated to what happens with the U.S. Dollar as well as outright policy changes or stances by the Fed. The question begs to be answered or asked: Would or could the powers that be look to the Fed. and state (or demand) “Raise rates, drop rates, ___________ (fill in the blank) now!?”

I think it would be crazy not to contemplate the possibilities of such a move out-of-the-blue, unannounced with what is transpiring currently. That’s why I intentionally used the word “weaponize.” For it’s one thing for the Fed. to try to dance the line of the body politic when decisions are being made. It changes into something far different if, or when – they are instructed to do something. Not asked, or advised.

Currently it is more than fair to say the current language, as well as position of where they (the Fed.) believe policy should be heading is all over the board. Again, that’s to say the least. However, all this has to be wrapped up in the assumption the powers that be at the Fed. are making the choices whether one thinks they’re correct or wrong is a side argument.

Wall Street, as well as the global markets are working from the assumption they need to game play what the Fed. and its players are stating. And I’m not saying that’s incorrect – it’s the possibility of that changing overnight by means of some outside dictate which may be demanded that’s the real reason for concern. For it changes everything where the resulting chaos of the markets could make ’08 look like a “good day” compared to what might transpire following such an intervention.

Some will say or argue, “That wouldn’t happen for it would hurt us probably just as much as anyone else. That’s just crazy talk.” And there is a point to that argument. However, I will pose this rebuttal: If that were true; then why do people die in wars and infrastructure destroyed in epic proportions when both sides know exactly that – and do it anyway? This is precisely the way intellectual arguments are at first proposed, then result in consequences the proposers of that intellectual strategy get blindsided. Many times with appalling repercussions. Hence lies the reasoning for my concerns.

Even if we take out all of the above, another overarching possibility that could throw the markets (whether from a misstep or, by design) into an outright tailspin of epic proportions and consequences overnight, fueled by a sudden carry trade unwind within the forex markets which could (if not would) simultaneously crush global equities. All of which could transpire via a HFT fueled algorithmic ignited frenzy brought on by an intentional media headline like: WAR! Think that’s crazy talk? Just look back to August for clues.

With the way the current global markets are now predisposed to HFT – If one wanted to put a hurt on a presumed or proposed adversaries economy; why wait for sanctions to be reimposed or, tightened or, a number of other financial weapons that need to be brought for a vote or, announced or, whatever: when it could be done today through various other means with only a nod-of-the-head.

This is the place we currently find ourselves. And if you own a business, regardless of size, you need to have contingency plans in at least a cursory overview understanding on actions to implement either for yourself, or with your people; for all hard plans usually go out the window the moment they’re needed. But understanding and contingency discussions ahead of time help quell panic during business disruptions.

Circumstances can change rapidly as to what may or, may not be available in as much as operations funding, supply lines, currency exposure, and more. This holds true not only for the global entity, but also for small businesses. You need to be actively thinking “what if” scenarios if your serious about business during times like these. Others won’t understand and that’s fine – they aren’t in business: you are. It comes with the position.

These are the circumstances of the day, and those circumstances have changed with the very real possibility that what was once taken as “We believe we have an idea of what the Fed. may do for the rest of the year.” Is now only part of the equation. With the current military changes, positioning, as well as rhetoric coming from global leaders around the world; what the Fed. may or, may not do or, signal – might be out of their decision-making process altogether. As implausible as this may sound today: It’s a risk that any prudent business person must now consider. Again, regardless of how far-fetched it might appear at first glance.

I’m completely aware all the above will be argued away by many as “crazy talk” and that’s fine. However, seeing around corners or, trying to anticipate circumstances that have real chances for disruption on one’s business is a crucial requirement of any prudent entrepreneur, CEO, or solo-practitioner. There is no alternative – it falls on you. With that said I’ll ask you to ponder one last point.

Back in May of 2014 I wrote an article titled “Will History Record The Ending Of QE As An Archduke Moment?” In that article I proposed why one needed to take prudent steps as to help prepare one’s business to possible global changing consequences that could come from nowhere with blinding speed. Where the consequences could have both local, as well as, global concerns. Again, like many before this was brushed out-of-hand, mocked, and shouted down as some form of “crazy talk” from some kind of “alarmist” or “Chicken Little.”

Today? Since QE did in fact end, not only have the markets around the world sputtered and set off alarms bells; it’s now being widely reported via main stream media channels Russia and the U.S. are now engaging in a proxy war in Syria. Along with Iran who not only is also engaged in direct opposition to the U.S., but is also launching newly developed missiles in open defiance of U.S. concerns. All this while not only is the U.S. sending warships to challenge China’s claims around the Spratly Islands, it’s also been announced we are reversing policy in Afghanistan and staying with troops for who knows how long. And I didn’t even mention NATO jets or bases in other countries saber-rattling against Russian flyby’s. Or the Saudi’s who are also voicing troubling warnings towards Russia.

This has all taken place in the course of two to three weeks. Not months, not years. And it’s seems to be getting worse – not better.

If you started to at least begin taking precautions when I first warned, you would at the least have some form of contingency plan or idea of what preparations you may take if such events did ever take place. Those events have now moved from “possibly” to a razors edge of “highly plausible” if not outright likely.

Bombs are dropped when no one expects. That’s a fact of war. And to not think that somewhere within the bowels of some “think tank” the “intellectual argument” isn’t being made or, considered which involves using the Fed. or a monetary equivalent to act as a first-strike capability weapon is ludicrous. When it comes to the world stage where global entities are out-rightly challenging one and other for supremacy, hegemony, or even respect – all considerations – and I do mean all will be on the table.

The time for contemplating “what if’s” has passed. The time to prepare for “there’s a greater chance than not” is now the prudent policy. Your business now depends far too greatly like it or not to a Fed. policy move. The problem is – the Fed. could be the contingency that drops the first one. And there will be no announcement, no speech, no meeting, no nothing as to preempt its happening. All one can do is plan for the worst – hope for the best. But to ignore the possibility of either could be business suicide. Plain, and simple.

© 2015 Mark St.Cyr

F.T.W.S.I.J.D.G.I.G.T.

 Another installment for the (For those who say I just don’t get it…get this) files…

The other day I wrote an article titled, “Crying Towels: Silicon Valley’s Next Big Investment Op”. In that article I made some pretty bold calls and stated my reasons for them both clearly, as well as bluntly. I didn’t pick such a topic because I want to make friends or some pathetic attempt at click-bait. After all, if I wanted to make friends, the last thing one would do in today’s world of “everything social” is make the case against it. And anyone with headline expertise would see at first glance – my headlines are pretty pathetic if click-bait was what I was after.

Then on Thursday afternoon I was sent a note from a reader that stated I was getting the butt-end of sarcasm (as was Zero Hedge™) from a well-known Silicon Valley aficionado Paul Kedrosky via his Twitter™ feed. Some of the comments were “But the author uses bold and bold italics. It must be true.” Along with others such as, “and he has BEEN A CEO.” I guess the caps meant being retired is a bad thing? And in regards to ZH there were shots like “I only read it for the pictures.” and so on. I would imagine the hilarity of this Twit-storm was had by all. And I have no problem with that. If you’re going to play at this level it comes with the territory. However, let’s look at a few facts and “pictures” to see if there’s anything funny contained within shall we?

One of the main points in my article was contained in this sentence:

“The once emblematic IPO cash-out that lured many is beginning to morph into the loss of IPO dreams that resemble wash-out with every passing earnings cycle.”

Well, if a picture says a thousand words – then maybe a chart can show losses of Billions, to wit:

2015-10-16-TOS_CHARTS

The chart above shows how some of the once “it’s different this time” much-anticipated IPO’s of 2014 have performed as of today. I drew a trend-line in the general area of where the IPO opened and to where it is as of this writing. Not only is the trajectory of that line going in the wrong direction. What’s far worse is everything above it represents loss, as in – “Hey I’m rich let’s buy a ___________!” To: “Oh crap how quick can I list this __________ on Craig’s List™ or Ebay™?”

How about a few more…

2015-10-16-TOS_CHARTS 2

Although Yahoo™ isn’t a recent IPO I thought it was fitting for it went hand in hand (as I’ve stated many times) on the success of its stake and sale of Alibaba™. I don’t know the other companies, I just included them for they are recently IPO, tech based, disrupt-er style in appearance and emblematic of the genre in total that is “The Valley” from my perspective. Maybe the day of launch brought out the champagne bottles, but as you look closely, once again, not only is that trend-line going in the worst of directions – everything above it are what’s known in Wall Street parlance as “Bag holders.” Plain, and simple.

And last but not least, this “photo album” couldn’t be complete without what I stated in that article as “the canary in the coal mine” for Silicon Valley as a whole: Twitter itself. Along with another IPO favorite that came out in the same time frame Pandora™. Again, all heralded as proof positive at the time, “This time it’s different!” To wit:

2015-10-16-TOS_CHARTS 3

I threw in two bonus charts. The lower left is itself the ETF for social media as a whole. I adjusted the chart to fit the same time-frames as the others for a more proper context. And what does the market think of “everything social?” Once again, that trend-line is not going in the right direction for anything that warrants “the hottest sector in all of Silicon Valley.” But wait…there’s more! As in one last chart that sums up pretty much what I’ve been trying to point out these last few years.

The chart in the lower right above is the ETF that represents the Biotech sector. I again fitted the time frame for context. As you can clearly see this sector was like the entire market itself on a rocket-ship ride to Alpha Centauri – until the propulsion system began misfiring. The reason? Fuel shortage as in QE not only being shut off, but none other than Fed. Chair Janet Yellen openly remarked she felt this sector was more or less overheated. The resulting market based “fundamental pricing” ensued with near immediacy. Fundamental as in “The jig is up!”

As eye-opening as the above charts may appear at first glance, they don’t tell the full story; for there’s more to it which also helps give even more context.

I derived the above names not because I knew all these companies. I did like any of you would do and did a quick Google™ query of IPO’s for 2014. And one of the results topping the list was none other than Jim Cramer’s The Street™. A favorite of many budding IPO dreamers.

The title of the article was: “14 IPO’s You Wish You Bought in 2014 And Made A Killing On.” I said to myself, fair enough, let’s take a look for it’s better to know I’m off the mark or, clearly have no idea of what I’m taking about if this article shows me otherwise. It would save me a lot of embarrassment as well as give more credence to the so-called “smart-crowd” in their reasoning of “It’s different this time.” Guess what I found by looking and reading that article? In February (when the article was written) you were looking like an investing genius. e.g., “Hey where’s the champagne to fill this pool because I’m swimming in it?!”

The problem? The sampling of names and charts above are from that article. And all I can say is by looking at the remaining contained within that 14 (which happened to be heavily weighted in Biotech – need I say more?) you aren’t exactly looking for champagne. So the question begs for you to be the judge: Break out more champagne? Or break out “crying towels?”

I’ll only add; it’s far from over in my opinion. As a matter of fact, I’ll contend as I implied in my article – it’s just getting started.

To get a little more insight as to extrapolate what may be coming on the horizon let’s use the “picture” below which is of the ETF: SPY aka known as the most liquid proxy ETF for the S&P 500™. I’m using this as opposed to the traditional index because in today’s market it’s all about how liquid products are behaving as opposed to what can transpire in others.

Screen Shot 2015-10-15 at 3.08.52 PM

As you can see there are two very important features in this chart I’ve highlighted. First: It begins in the left hand corner precisely when the then Fed. Chair Ben Bernanke announced there was no reason to fear (because we were once again rolling over after the previous QE ran out) that QE was now going to be around for a long, long time. And as you can see, the markets never looked back. JBTFD (just buy the dip) became Wall Street parlance ever since and is still wildly accepted as faith.

But then a funny thing happened. To the dismay of Wall Street The Fed. actually had the audacity to follow through on their commitment to end outright QE in Oct/Nov. and guess what happened? That’s right, markets began rolling over into a near free-fall causing alarm-bells to be answered across the Federal Reserve. As a matter of fact the selling did not cease till one Fed. official publicly stated (I’m paraphrasing) “Maybe more QE was an option.” And the markets rocketed back to finish the year once again, at all time new highs on the residual float and year-end annual “paint the tape for bonuses” finishing with a bang. This event is now commonly known as “The Bullard Bottom.”

But once again here lies “that problem” inherent in almost any chart you look at across nearly any index, as well as any “high flyer” that was the direct beneficiary of QE money policy looking for a home.

For most of 2015 – the markets go basically no where unlike their rocket-propelled trajectory when QE was the fuel that lifted all ships. What’s worse is, not only do they go nowhere, but for the first time in years (precisely when there is no longer any QE to make the push ever higher) out of no where – they free fall into sheer panic mode of historic (yes historic) proportions only to be halted coincidentally at the exact same level as “The Bullard Bottom.”

What ensued after was some faith as to JBTFD in an oversold bounce fashion. Then, once again, a problem ensued unlike any seen when QE (or the Fed. put) was ensconced. The markets (here’s that repeating term) once again rolled over and challenged breaking into out right free-fall. What stopped them from continuing? Great economic news? Unrealized GDP growth? Great data points from surveys and more? Far from it.

The reason for the “stick-save” once again was due only by a Federal Reserve punt on rate hikes. i.e., Free money carry trades can continue in earnest. And with all the hoopla and calls of “New highs here we come again!” being boasted across the financial media how far have we risen?

That arrow on the right marks the spot as of this writing. Funny how this years price action in stocks isn’t the same as all the years prior without that little quantity known as QE. And an even bigger issue is the fact; we may only be here because of the knock-on effects during an OPEX closing. For the fuel to rally has been provided only by a massive short squeeze, not based or caused by fundamentals (for every single new data point has been outright pathetic, and disheartening) rather something more akin to panic buying for earnings positioning during an oversold bounce period coinciding during an expiry period. This usually causes major panic buying or selling when they line up accordingly. And I’m of the opinion – this is all this latest “Happy days are here again” rally represents.

So the problem facing the markets from my perspective currently are two-fold. First: If the recent surge in stocks is only a short squeeze of mega proportions (which I’m of the belief that it is) because of an OPEX event. Then the subsequent weeks are quite possibly going to get very, very volatile indeed. Combine this with the never-ceasing uncertainty on just who says what, and when, or why by a Fed. official. All this in concert with an absolute pathetic start to this current earnings reporting period.

As many do, I could have waited till (or if) the markets began free-falling to then write an article like this. This way I would be able to parse my words and implications after the facts with much more brevity. However, that’s not the way to do things in my opinion nor, is it the way one should conduct themselves at this level. I would rather state why I’m saying what I’m saying, and either defend or, bolster the reasons for them as the market is rocketing back up into the “Never been higher in the history of mankind” zone once again. This way I can’t be accused of “cherry-picking” or blatantly trying to cover a flip-flop like some because the winds now appear to be going against their steadfast “informed” argument.

I’ll leave that to you dear reader while posing the following question: Looking at what I argued and presented above which do you think may be the better investment in the not to distant future? Cases of champagne for the steadfast JBTFD crowd that’s currently taking place as of this writing? Or “crying towels” for the same group? And remember…

I didn’t even mention the most overarching disrupt-er of all: China. Or should I say “International developments?”

© 2015 Mark St.Cyr

Crying Towels: Silicon Valley’s Next Big Investment Op.

Nothing focuses the mind more than either the lure of riches or, the loss of them. And there has been no other group caught up more in the lure for riches than: the disruption class.

Disrupting is what it’s been all about over these last few years. However, there’s another disruption on the technological horizon heading right towards Silicon Valley itself, and that brewing storm is – disruption of the disrupt-ers.

The once emblematic IPO cash-out that lured many is beginning to morph into the loss of IPO dreams that resemble wash-out with every passing earnings cycle. For a glimpse into the event horizon that is the future. All one needs to do is look no further than what myself and a few others have dubbed the “canary in a coal mine” of all that’s Silicon Valley: Twitter™.

Nothing against Twitter per sé. What I take issue with is its valuation vs its ability to produce net profits. And that goes not just for Twitter, but everything “social” in general.

I’ve stated from the get-go Twitter is a great, innovative platform. But worth Billions, upon Billions of dollars? Sorry, far from it. One of my assertions has always been; would you pay for it if they charged you? What if charging you meant you could type more than 140 characters? Would that be enough to entice? Usually the answer from my own unscientific (as well as gut) research came back with a resounding no. And here lies the problem that’s symptomatic of many others that will once again come to light and be amplified this earnings cycle. More so than the last in my opinion.

Twitter is (again, in my opinion) a real-time microcosm of what’s about to hit the whole Valley. i.e., A real shite storm, and here’s my reasoning…

There are two issues that are very different for both a company as well as the narrative of a whole industry supported by the wings of such a “canary.” And both of these go a little more than unrealized by those not familiar with them. For it hits right at the heart of how a meme or, a presumptive “It’s different here” attitude takes hold when true business principles, disciplines and more get lost on those desperate to not see their world view crushed. But business in its purest form has a way of doing just that – crushing naive or wishful assumptions.

First I must draw attention to the fact Twitter as well as many around Silicon Valley celebrated the news that Jack Dorsey was to be named as the new CEO. Personally I have no axe to grind with Mr. Dorsey. He seems like a brilliant innovator with great vision. What I do take issue here is; not only is he now CEO at Twitter, but also, at Square™. Another, at face value, brilliant start-up with great further potential. Which is also where lies the problem. Mr. Dorsey is now slave to two masters – and when it comes to business, especially at the levels and headwinds facing the whole disrupting based technology driven platforms – it’s credulous to think one can do both.

I say this because I know first hand just what it takes to be a CEO, for I’ve been one. The other is, I earned my reputation as a turnaround executive because I’ve personally done it more than once, at differing companies, and at sizable valuation levels so it’s not as if I don’t know what I’m talking about.

The only reason any company with potential for either real growth, let alone possible explosive styled growth (which in the Valley is the only metric that still matters) would pick (if not outright beg) an executive that can only devote 50% of their resources to run a once high-flying song bird which desperately needs direction – reeks desperation.

No one else in all the world let alone Silicon Valley was up to the task? A multi-BILLION dollar publicly traded enterprise on the forefront of all that Silicon Valley represents can’t attract any other CEO talent who could devote 100% of their abilities? This makes absolutely no sense what so ever unless: the board, as well as many investors are panic-stricken on just how bad things are behind the scenes and figured; the best they could do was to bring (or convince) a person such as Mr. Dorsey back on as CEO, spin the narrative as much as humanly possible, and pray Wall Street buys it. Literally.

Second: How does Square do the same to that circle where it itself is getting ready to IPO? I can not imagine for the life of me any serious business person, of any stature, that would postulate it would be a good idea to let its CEO devote 50% of their resources away from their now chosen organization at such a critical juncture. Not only that – to then reach back and devote the remaining 50% and try to mend the broken wings on a clearly fumbling entity. Unless – the decisions were all driven by intermingled investors between the two. In other words: This is all about saving stock (or IPO) values or, cashing out valuations. Not about saving or revitalizing a company. Or, for that matter – what Square will or might be after its IPO debut. Something here just isn’t right.

Mr. Dorsey might be a genius and some have used the “Jobs” reference. However, I will stress from a business standpoint – no board worth its weight garnered by true business acumen would even allow Jobs himself to run as CEO two companies at the same time. Period.

The only one’s that would suggest such a plausibility would be on the “investor” side. Again, it’s all opinion and conjecture on my part, but it comes from business experience – not some theoretical book or exercise. I believe it’s the investor class in Silicon Valley that’s showing signs of being completely paranoid and about to go spastic with the possibilities portending them losing their enormous paper wealth created only via “free money” pushed via QE.

Once QE ended, everything changed for Silicon Valley yet, they refused to see it being blinded by “it’s different this time” thinking and belief. Again, I believe Twitter is that microcosm that needs to be watched far more closely for insights into all that’s Silicon Valley than many now are contemplating.

So far Twitter’s share price can’t seem to get back off the ground unless there’s some rumor about either it being a take-over target or, something else. And with that comes something else that shows just how much things are no longer “different this time.” i.e., Lower valuations for longer in public companies mean only one thing: who’s getting fired or laid off first? And that’s what seems to have happened to social media’s best representation of a “canary.”

This is the type of stuff only heard in tales of yesteryear. (I.e., the last dot-com crash) I mean, technological (i.e., coders) staff being let go? The very people responsible for the product and all its innovation, not to say; for the innovation that will be needed to turn around such an entity? Those are the people to go first? 8% of its workforce? You hear announcements like this from legacy companies not – “the hottest space in all of Silicon Valley.”

And this brings on a whole host of other meme shattering, break out the “crying towels” type arguments. For if it can happen there – guess where else it’s going to begin happening? Is ________________ next? Just fill in your current favorite high-flying Non-GAAP social darling on that line – for it’s going to happen at all of them very soon in my opinion. Much sooner than many now even think or ever thought possible.

“Coders” will gladly live in some single bed shared between 8 others apartment somewhere near the Valley. Heck. they’re now reporting stories how one can live in a shipping container on the cheap in San Francisco. Sounds fantastic right? Well, it is. As long as the dreams (and expectations) of landing the dream job in a start-up or similar where riches based in stock options and more are forthcoming or, dangled like carrots in front of wide-eyed dreamers.

There’s nothing wrong with lumping it out with the hope of future pay offs. I did similar things when I was young. It’s a risk reward thing and I champion those willing to take the chance.

However, you know what changes everything? When the meme of “Gonna stay here till I cash-in and then I’ll buy me a McMansion!” turns into the underlying realization that quite possibly – you’re going to end up living in a shipping container! Possibly forever if things don’t change.

Suddenly Mom and Dad’s basement looks like paradise, and the thought of leaving “The Valley” becomes more, and more front of mind with every passing IPO failure or failure to launch. Don’t let this point be lost on you. For it’s a tell-tale sign things are changing deep within when it can be noticed shipping container apartments or, communal type living begins to lose its appeal among this set. For when reality bites – it bites hard.

Now might be the perfect time to take a position in any solid company with the ability to manufacture quality “crying towels” and get them quickly to market. After all: Unicorn tears we’ve all been told are far different from most others. And sales of a good quality product might be more in demand than anyone ever though possible very soon.

© 2015 Mark St.Cyr

The Failure To Act Responsibly Will Be The Addendum To Bernanke’s Memoirs

There was a time not all that long ago if someone asked who was The Chair of The Federal Reserve more than likely you’d get a blank stare or, just a shrug. Today, not only can people (people is a relative term as in; people at least trying to pay attention) name the current Chair, they can also name more than two or three current members. e.g. Fisher, Bullard, Evans, and so on.

This change whether by design or, by happenstance is inconsequential. Either way, what it has done is changed the very fabric, as well as understanding, of how not only the economy is fostered in the U.S. But also – who controls it.

Long gone is the illusion of: an elected body by the citizenry. Today, it’s become demonstrably self-evident the economy is run by an elected body – by the elected. And the consequences of this change is only now beginning to openly reverberate both in amplitude and frequency with every passing day.

Currently as I type this former Fed. Chair Ben Bernanke has just wrapped up a week-long tour of financial media frenzy to promote his book, The Courage To Act: A memoir of a crisis and its aftermath (2015 W.W. Norton & Company). Personally I watched a few. Yet, I could only bear the burden so far. So inspired by the title I myself acted, with courage – and changed the channel.

Listening to the answers to many of the “soft ball” style questions was one thing. Listening to the near sycophantic, vapid, lack of understanding or depth concerning the economy and its relationship as expressed via the capital markets and more by the many that hold themselves out to be “experts?” I just couldn’t take it for more than a few minutes. It was painfully monotonous.

One point that Mr. Bernanke kept referring to, that for me, in many respects was the underlying issue that demonstrates exactly how far beyond the Fed’s mandate as well as its scope not only within the economy, but (and it’s a very big but) how this insertion has adulterated the capitalistic dynamic known as free markets (i.e., printed money via QE and its other programs as to bolster the financial markets) was this…

His assertion, as well as his stated defense for such policy actions was (I’m paraphrasing) “He was disappointed with the lack of policy responses from Washington which left the bulk of the heavy lifting solely on the shoulders of the Fed.”

Well Duh – imagine that. Washington shifting the burden (or setting up the ability to shift blame) to another body or person rather than take the lead themselves. Oh, say it isn’t so!

I mean truly – are you kidding me? What form of academic genius does it take to realize if the Fed. is willingly inserting itself into the economic structure along with remaining at the Zero bound and a willingness, as well as obligingly printing and injecting TRILLIONS of dollars for years into the very fabric of the financial markets propping them up. Washington doesn’t need (nor probably will) to do a single thing? Even if this “propping up” has more in common with a Potemkin Village analogy than any real example resembling a true recovery. Washington is going to say “Hey, stop propping things up making our lives easier. That’s our territory?” Please spare me.

Capital formation has now been replaced with nothing more than front-running schemes. And this has only been made possible not by the courage to act – but rather – the failure to act responsibly.

For years now it’s been clear to anyone who wasn’t some next in rotation “economics expert” in financial media that this juiced up HFT Frankenstein inspired monstrosity borne only to a punch-bowl made available, refilled, and spiked with the monetary equivalent of amphetamines and energy drinks would inevitably turn on its masters. Yet we’re told (now near daily) “They’ve got this!” Sure they do. All this coming from those that couldn’t even see (or anticipate) the obvious responses they would get from Washington.

Who needs a budget when the Fed. is printing and buying? Who needs to cut costs when the Fed. is (repeat former line here)? Who needs to worry about tax legislation when (again cut and paste last line here)? Who needs to argue if your spending too much on this program or that program if (you guessed, rinse repeat). And you could fill a book let alone an article with far too many more.

The issue I take with Mr. Bernanke’s stance is one I take with the whole Ivory Tower cabal. It would seem economics is a profession based solely on “The chicken or the egg” quandary. Everything first and foremost must be presented, formulated, and articulated through this prism. There’s never anything such as 1+1=2.

Here’s a clue to any and all within the Ivory Tower or Ivy League academia using 1+1=2 math.

When you replace the economic policy stewardship of the body politic with actions that can both mask the health of that economy, as well as benefit its donor class, while simultaneously allowing that body politic to defend and deflect criticism stating “It’s not us – it’s them!” Not only are you not going to get any help, you’re going to get something you thought was only meant to be voiced at the schleps, not the Ivory Ivy class.

For proof as well as leaving no room for doubt what Mr. Bernanke was allowing the Fed. to morph into. It was here during the following exchange where “courage” turned into something else in my opinion. For it was stated both clearly, publicly, and forcefully in 2012 exactly what was being expected (as well as insinuated to be continued) from Washington. And it seems today Mr. Bernanke is a little mystified, befuddled or, possibly upset with Washington’s lack of response? Please, it couldn’t have been stated any clearer. They demanded – you acted. Period end of story. No several hundred paged book to explain. No chicken or egg quandary. No Einstein inspired formulations with Rube Goldberg styled flow chart needed to explain. It was all done in elementary fashion: They dictated, The Fed. acquiesced, the results are self-evident: A mess. Again, period. End of story.

As I’ve stated far too many times to count, it’s a purely legitimate argument on both sides with completely reasonable assertions on whether or not the Fed. should have intervened in the ways that it did during the original financial panic and crisis of 2008. Again, there are justifiable reasoning’s on both sides that will (as well as should) be debated for years to come. However, it’s what was allowed as well as fostered and promoted after the original crisis that is not only controversial, but rather – a catastrophe of monetary policy.

When I think of the courage to act when it comes to monetary policy my mind seems to hearken back to times in history when former Chair holders such as Paul Volker raised interest rates in the face of staggering opposition from Washington. He stayed his course and brought inflation back under control. I also think of William Martin Jr. who like very few others understood the hardest job of the Fed. was to not only remind Wall Street, but to articulate those necessities that a responsible Fed’s primary function also included (I’m paraphrasing) “to take away the punch-bowl just as the party gets going” Again, all to Washington’s chagrin. This is not what we have today.

All I’ll use as an example to illustrate how the Fed. has captured itself with a seemingly never-ending resolution more in concert with “The Sorcerer’s Apprentice” (Fantasia/Disney) rather than the “Wizard of Oz” (L. Frank Baum/Geo-M.Hill Co.) is the following:

When the “Great financial crisis” hit the S&P 500™ was bouncing within the 1500 range. After the now referred to “generational low” during the crisis of 666-ish one could as I’ve iterated earlier argue both for, as well as against, the Fed’s insertion with its transfiguration of monetary policy to stabilize the then fragile markets. Again, this debate will go on for decades.

However; exactly what “courage” took place after that? In other words: once the markets regained within 100 odd points of its previous all time highs. What enabled or emboldened the decision to not only leave the “punch-bowl” out, but rather – to continually refill it to surpass those previous highs just shy of an additional 1000 points?! (i.e., 1400’s in April 2012 to 2100’s Nov. 2014) Let it not be lost this happened in 2012 at precisely the same time period of Mr. Bernanke’s appearance before Congress mentioned above.

Today this “failure to act responsibly” has led us to witnessing a failed communication strategy initiated by the then former Chair. An economy that is faltering at every level of unadulterated measurement. A political class that is still enabled as well as emboldened to deflect and deter any criticism, as well as responsibility for their own inaction. An ever-growing Emerging Market crisis fostered by years of ZIRP policy, combined with credit markets, as well as money markets beginning to not only show stress, but beginning to buckle with withdrawal symptoms from the “free money” equivalent only to those experienced by a junkie going cold turkey and a whole lot more.

You can also add to this in the wake of Mr. Bernanke’s exit we now have a Fed. so confused, scared, or reluctant to make the slightest of monetary changes; considerations of international developments, as well as Wall Street unease must now openly be stated. Along with an open admission for the first time in Fed. history (via their Dot Plot) negative interest rates are on the table of discussion. It’s an absolute mess pure and simple. And it’s going to get a whole lot worse – not better in the coming future.

All one needs for proof between “courage” and “failure” is to look back just a mere 30-ish days ago when it appeared as if the markets were once again going to free-fall if the Fed. dared try to move toward the slightest adjustment in relation to normalizing monetary policy. Once again the markets did a spin-on-a-dime and reversed rallying back towards all time highs not on “economic stability” but rather the realization that the Fed. was not only painted into a corner by its own hands, but also boxed, locked, and handcuffed. The continuation of “free money” as well as the resurgence of QE are once again back on the agenda. You just can’t make this stuff up. It’s maddening.

The only brilliant move that appears as more of an act of self-preservation as opposed to anything resembling courage or monetary policy was his decision to get the heck out of Dodge and leave the oncoming disaster to anyone foolish enough to accept it.

After all – you can’t rewrite history as well as reform one’s image if you’re the one that has to clean up the resulting mess in one’s wake. It seems to be working for his own predecessor, he was smart to follow. The one’s who may not be so lucky is not only the current Chair, but rather – all of us.

© 2015 Mark St.Cyr

Profiting At The Bottom Line™

This month’s focus: Stop Saving Your Competitors Salespeople

Sales is a tough job. Tougher than most and pays accordingly. Without sales whether generated via an actual person or via some form of advertising – there is no business. “Elementary” you’ll say of course. However, what gets lost on both many a business as well as salesperson is this: Exactly when is a sale not a good sale when by definition the most important parameter of all sales (e.g., an acceptable net profit) is met? Are not all these sales good sales? And should you ever turn down a “good sale?” The answer may surprise you.

Case Study:  One thing I learned early in my sales career was the undisputed fact there would be customers (as well as potential one’s) that will take advantage of not only the unsuspecting novice, but also the veteran using the “dangling carrot” method of future business. Here is where “hope” meets “hopelessly strung along.” Many a salesperson has fallen prey to the “Quote me a price for usage via the ton!” Only to never receive an order for more than a few pounds. It’s always followed with excuses such as “Don’t worry, you were right there in the bidding process.” Or, “You were close.” Or, “We’re changing things soon throughout the process. Just be patient, at least you’re already In!” and on, and on. Problem is those long-awaited changes or promises seem to always remain just that – long-awaited.

Everything changed when I no longer waited for promises. I demanded the business accompanying the quotes for service. In other words, if someone was quoted by the ton and ordered by the pound – pound pricing is what they received. Unlike most I did not run to management demanding (or begging) for special dispensation for the “promise” a large order was just around the corner. This was usually held under the auspices of: if I didn’t adjust my price this customer has made clear “not only will we ever get another chance to quote. They may stop using me/us all together if we don’t adjust.”

My career as well as sales ranking began to take off in earnest the day I stated to a usually stunned in-silence recipient, “Fair enough. However, you asked for tonnage pricing and haven’t ordered tonnage weights. If there’s anything I can do for you in the future, feel free to call me anytime.” And either headed toward the exit, or, hung up the phone.

Previously I had accepted “dangling carrots” that were never realized because I would settled for the “greens” rather than demanding the whole vegetable which I was promised. Another in similarity happened routinely when a customer who did 10% of his business with me had an “emergency situation” where his 90% vendor supplier couldn’t fulfill an order or promise. Suddenly I would get a call either 1 minute before the end of business. Or worse, 15 minutes before a weekend or holiday. Suddenly my services were the only services that could save the day.

The promise of this now sizable order was enticing especially when it was followed with “And this is your time to shine and maybe get more of the business we’ve talked about!” However, once again the silence was deafening when I followed it up with, “Sounds great! So I’m going to now be of the understanding I will have all that business beginning Monday.” Again, it was when I began demanding that “promised” then and there is where both may sales numbers as well as career took off exponentially.

You see what I had been doing more often than not was not saving or helping out a “customer” in need. I was actually more often than not saving the rear end of my competitors sales person. After all, it was they that could not deliver and were leaving this customer to fend elsewhere. And they were not only getting the bulk of the business – but would get the bulk of it on Monday once again after their lack of fulfillment was recused via my efforts. For it begged the question, a question I now put forth in earnest: “If I’m the one that can help and not your ‘go-to’ supplier, why are they your ‘go-to’ to begin with and not me?”

When the insinuation was clear that I would be more or less returning to “dangling carrot” status I simply but firmly stated “People do business with me for exactly what you’re doing now. When they need something they know I won’t leave them hanging such as your current supplier seems to have done to you. If I were your main supplier I would be aghast at the position they seem to have put you in. I don’t let that happen to my customers especially when I’m their main supplier or considered ‘go-to.’ If you want that type of dedication and loyalty I’m more than gladly to help, but it comes with that level of order size or ‘go-to’ status. And if you’re not willing to change that to me, since I’m the one with the resources to accommodate on such notice, I think it would be best to make further demands back to your supplier and demand they clear the mess they’ve obviously put you in. For in reality, if my proving I’m the company you can count on during an emergency, and that isn’t proof enough; all I’d be doing is saving that salesperson’s/companies rear end. And that’s not good business.”

Lest you think all the above is hog-wash, or, works in principle not in practice I’ll just add this. I went from “just another salesman” to top of my field where my sales were 10 times the average, and went on to run as well as turn around the #2 largest privately held company of its kind in New England following the above principle.

 

© 2015 Mark St.Cyr

Profiting At The Bottom Line™ is a monthly memo, which is pithy, powerful, and to the point. It focuses on innovative techniques and or ideas that you can put to work immediately in your daily or business life.

It’s The Entrepreneur That Saves An Economy – Not The Fed.

Once again via a stunningly dismal monthly “jobs” report we were shown just how inept the Federal Reserve is in its ability to deliver a qualitative as well as quantitative resolution to one of its core mandates. Only if you use the “math” now prevalent (as well as rampant) within economics can one look at any part of it and say “the economy is creating jobs” without bursting out in laughter, or, busting out in tears.

Yet, just when one thinks it couldn’t get any worse, all one needs to hear is an explanation from one of its members as to try to explain such a pitiful report. The reason for so many without jobs? (I’m paraphrasing) “They just don’t want one.” I wish I were making that up, but sadly, that’s their assessment.

The participation rate hit a low not seen since the late 1970’s with a now whopping 94.6 million out of work. However, if one were to listen to the next in rotation tenured economics professor from _____________ (fill in your Ivy League of choice) you would think the jobs market was strong. After all, “We’re at 5.1% unemployment!” As if this was a number one could use in earnest.

This number itself has been so adulterated with adjustments even the Fed. scuttled it’s policy weighting when they originally implied years back somewhere in the 6’s would make certain for a more hawkish monetary policies. Yet, the 6’s came – and went – and QE came, and stayed well past its “sell by date.”

The problem that’s taking place right now within the economy is exactly what you get when you take a free market economy and try to impose a command and control blanket over it: you smother it.

The Ivory Tower academics have no real understanding of what “free” actually entails when it’s expressed through the economy as a whole. The ability to build a better mouse trap, or, solve a previously unsolvable riddle all while charging a price two parties can both bear, profit by, and have satisfaction in the transaction does not, nor ever will take place within a command and control base. Ever.

Free markets allow for competition to find equilibrium as to provide and deliver a service or good someone will pay a fair price for. And yes, even for such an item such as a stock price.

Command and control fosters either the “State” to be the only provider, or, a fostered crony capitalism styled arrangement which is nothing more than another iteration of some communist system in prettier buildings wearing better suits. Harsh? Yes. Off point? Hardly. And that’s the problem.

The great capital formation experiment and enterprise known as Wall Street and its Exchanges, once the envy of the world, has now been transformed into nothing more than a rigged casino where Fed. fueled “hot money” front runs orders in ways so egregious to the principal of fair play; walking into “a den of thieves” would be considered a step up.

Today the entrepreneur is being stifled. Yes, some will point to Silicon Valley and shout “But, but!” however, there too these issues of perversion against the entrepreneur are also made manifest. Unicorns are just that – fictional manifestations claiming to be real to anyone who’ll stay at arm’s length. (i.e., don’t get too close to the books or else!)

Here again, the reality of a market no longer primed and pumped via QE for their long-awaited IPO will find out the hard way their time for “cashing out” has come and went; further crushing many budding entrepreneurs hopes let alone the employees that took “stock options” in lieu of salary.

The funds or individual investors that were sold these fictional based realities (i.e., the can’t tun a net profit via GAAP yet via Non-GAAP they’re killing it!) who bought into the fictional hype will abandon and be far more than hesitant to invest in any future IPO’s let alone stocks in general.

If you think I’m exaggerating just look at Twitter™ or Alibaba™ for clues. For if you missed their original IPO not all that long ago, not too worry. You can buy in now for even less. And it’s just the beginning.

The real issue here is that some other good ideas that would, or could, help the economy foster business formation, encourage hiring and more will be left to dangle and rot on many a branch for discontent doesn’t take place in a vacuum – it happens throughout all sectors when confusion, disillusionment, as well as apathy sets in via mixed messaging from “central command.”

You can’t run or start a business when you can’t rely on what the rules or overarching policies going forward will be. (i.e., The cost of money will be whatever we decide today for tomorrow we might change it back) It wreaks havoc throughout the acutely connected fibers of business.

Businesses don’t stand alone – they depend on each other in differing sectors for supplies, transportation logistics, and so much more. Change a policy haphazardly, or signal a coming change only to not follow through sends ripples and shock-waves down a supply line with unintended as well as unforeseen consequences which can throw some businesses into free fall, and some into out right bankruptcy.

Business people know and understand this intuitively. Ivory Tower academics, intellectuals, and economists are not only clueless, it’s their wanton indignation of these facts that move their policies beyond destructive right into outright dangerous territory for any free market based economy.

The only one’s that can benefit from such a business environment are those that gorge and reward themselves via the availability current Fed. policy fosters. And the name for it is: crony capitalism.

Whether the Fed. wants to admit or not, that’s what their current policy and communication fosters and bolsters which is the antithesis of what the Fed. itself states as its primary objective; for there is no wage growth, no true job creation, no sustainable capital formations, and not stable markets.

The Fed. is killing the economy – not helping it. And as de facto proof I point to their own measurements of achievement. The markets, the labor participation rate, small business formation, wage growth, and on, and on. It’s all pathetic.

The Fed’s QE program has adulterated valuations so much it will be a wonder if we ever get back to a more normalized set of business values let alone their valuations and away from this calamity.

There are entrepreneurs along with CEO’s of companies who are quite literally chomping at the bit to try new or improved innovations – yet don’t dare for either their competitors are being kept alive via cheap money afforded them under current ZIRP policy, or worse, don’t dare hire or spend for who knows if the Fed. will raise out of the blue or announce some new program that runs anathema to basic sound monetary policies.

You don’t invest in cap-ex or hiring for the long-term if you don’t know what the rules might be tomorrow never-mind next year. Period.

If you want to see how and why the U.S. economy was the envy of the world along with the how and why everyone on the planet wanted the opportunity to come here and try for themselves. It can easily be done using this simple yet forgotten example or exercise:

Want an example of crony-capitalism, or, “State” run centrally commanded and controlled? Look no further than any communist or dictatorial country on the planet. What you’ll notice and can’t avoid is this: There are very few if not one sole business or supplier for any given service. The reason? You can’t compete with their favored access to either capital or permitting.

Want an example of a free market? Although they’re almost a relic, pick up any telephone book and look in the back where the businesses are located or, the Yellow Pages™. Look at how many differing as well as different options are available for any given service. Want your septic tank cleaned? There’s usually 10 or more options with names like “Steve’s” or “Dave’s” or Bill’s” and so forth. Need windows for your house? There’s probably 20 or more of those with assorted names. Many I’ll garner are also closer in proximity (as to your neighborhood) than you ever paid attention to previously. It goes on and on.

The issue today happens when “Steve, Dan, or Bill” can’t stay in business because “Conglomerate Septic Enterprises” is allowed to not only provide cheaper pricing afforded to it via relying on its stock narrative (i.e., we make Non-GAAP profits sparkle) rather than having to compete using fundamental business practices. (i.e., making a net profit via 1+1=2 math) “Steve, Dan, and Bill” find themselves either forced out or forced into liquidation only to be sucked up at bargain prices by the “conglomerate” which will finance the acquisition with “free money” available only to it and entities like it. And if it all hits the fan and begins rolling down the hill “Conglomerate” will either be “bailed out” or better yet, “bailed out and government-owned.”

This is just one example of why the economy is mired in quicksand. Entrepreneurs, as well as others are being stymied in what seems a relentless battle against academic theory rather than true business acumen. And the theory that an economy so large, so complex, so diverse as that of the U.S. can be fine tuned, manipulated, and more by some appointed committee that for all intents and purposes never held a position in that economy except for some academic based position is not just maddening – it’s lunacy!

The Fed. needs to stop its meddling. Stop trying to add one more extension to their already over extended Rube Goldberg inspired monetary policies and get the hell out-of-the-way.

If the Fed. is going to do something – do it. If you’re going to say something for clarity – say it – then stop talking. If you’re going to set and announce publicly an objective (such as hitting a specific target value like 6.1 unemployment et al) once it gets hit – do what you stated. Other than that, all the mumbo-jumbo clarifying classifiers for clarity regurgitated one Fed. speaker after another will do nothing more than increase the tension on the economies “parking brake.” Not release it.

Entrepreneurs can and will find ways as to navigate conditions and produce the much wanted as well as needed business formations that bolster a growing environment for business. However, what they won’t do is put their livelihoods on the line where bankruptcy and more can be around every business day when not only do rules change near daily – but goal posts get pulled up and moved at whim.

Adherence to timelines and narratives of an imperfect policy are sometimes far more important than tinkering and dabbling daily in some ill-fated quest for policy perfection.

The Fed. keeps approaching the economy from the viewpoint of a “tinkerer.” Maybe a little more of this, or a little less of that here, or there. Maybe just an adjustment here, or there, and sooner or later it will run like a finely tuned machine. It won’t. That’s the job for the entrepreneur – not the Fed. And the more they “tinker” after every misstep or miscalculation; the more their policy and approach would make even Rube Goldberg blush for the complexity to such a straight forward task.

As I’ve stated many times it’s an open question where both sides have a legitimate argument for the Fed’s original insertion into the markets during the 2008 crisis. However, what is not an open question is their resolve to continue and pump trillions of dollars to incentivize Wall Street’s predator class to find ways of adulterating the capital formation process while forcing savers, retirees, and more to question why every-time they take out their wallet a bulls-eye or laser dot suddenly appears on it from the shadows.

The markets are beginning to show just how tall and flimsy this house of cards built on QE quicksand has grown. And the coming shifting sands have only just begun with onerous consequences for everyone involved. And this all could have been avoided in my opinion if the Fed. had relinquished its insertion into the markets back years ago and had let the markets rise and fall on their own to find its equilibrium.

Entrepreneurs and ideas thrive in that type of environment. Exactly what we so desperately need. Yet, instead, all we have is this crony styled, unicorn imagined monstrosity of all that’s unholy to true business principles.

I’ll finish with one last thought which I’ve been pounding the desk (as well as keyboard) for years to anyone that would listen. However, now I don’t think it needs to be said – it’s coming to fruition in vivid detail I’m afraid sooner as opposed to later which no one will be able to avoid.

“Markets right themselves with pain… That’s Capitalism.
Back room manipulation to avoid that pain only increases the severity of it down the road.”

If one cares to see just how much pain might be in the near future, all one needs to do is look at a chart of one’s favorite major index. For it’s not a pretty picture of health by any stretch of the imagination even if viewed through rose-colored glasses.

The Fed. has created a playing field where now even Unicorns are going to come up lame to only limp past greener pastures on their way to IPO heaven and quite possibly – straight to the glue factory.

© 2015 Mark St.Cyr

In Response To A Query On Selling

I was queried by a publication on what advice I would give to any new, or for that matter, existing salespeople as to the advantages or, disadvantages in today’s world of sales with all its new technological breakthroughs available. i.e., Was it leveling the playing field? Distorting it? Or, something else?

Here was my response:

Technology is great, however, far too many use technology as a crutch to avoid face-to-face meetings where “the fear of rejection” paralyzes them into inaction. The illusion technology can provide that one was “busy” or “did the work” of selling can be easily expressed using the following example: It’s much easier to kid oneself and intellectualize they were “selling” if they send out multiples of “proposals” or “feelers” via email, social media, or whatever that return zero sales; than it is to be face-to-face with one prospect and have their offer declined.

The difference here is this: moving onto the next face-to-face meeting quickly forces one to sharpen their skills, their presentation, to form or articulate their value proposition for better results. Again, the key word is “quickly.”

This is the great “secret” every professional worth their salt knows and has learned many times – the hard way. In other words: I’ll take 1 meeting face-to-face with a qualified buyer (e.g., one who can say yes and write the check) who can tell me no and reject my offerings, against 10,000 or even more electronic “request for proposals” any day of the week. And I’m willing to wager I’ll have a far sizable bank balance at year-end than the other.

I’ve previously expressed the value of this in the statement below.

“The fundamental calculation of personal vs technological selling can be expressed by the following: S2S≠F2F. In other words; screen-to-screen, as in you in front of yours, and a customer in front of theirs, is never equal to the intrinsic dynamism afforded via face-to-face sales meetings. Period.”

When the sales calculus can choose either face-to-face or screen-to-screen interactions far too many choose the latter because it appears, and can be cloaked intellectually as: an easier more productive form of selling. The problem is “easy” work more often than not adds up paying next too – if not – nothing.

© 2015 Mark St.Cyr