YOUGHAL, IRELAND – The week moved along quickly… like a piece of trash in a fast-moving stream.
At the beginning of the week, investors were worrying about an intensifying trade war. By its end, they thought they heard the “all clear,” and convinced themselves that stifling trade either won’t happen or won’t matter.
Of course, we agreed with them, predicting that The Donald would never go “Full Retard” in the trade war.
Unless he can pin the next bear market/recession on the Fed, he will suffer more than anyone. His career, his reputation, and his private fortune – all could go downstream in a downturn.
But now that investors have gotten on board with our point of view, we disembark. Because we’re beginning to wonder: What if the trade war is real, and not merely part of the president’s performance art?
What if he really is foolish enough to risk a major market selloff? And what if his rise to power was not just a fluke, after all, but a signal of a deep, megapolitical shift?
We use that awkward word, “megapolitical,” to describe events and trends that are so big, we don’t see them… and so powerful, we can’t control or direct them. Nobody votes on a megapolitical trend; and very few people see it coming.
As we pointed out yesterday, the U.S. had a nice run, with the largest free-trade zone in the world, the freest markets, and the freest people.
They even “swung their arms more freely” when they walked, noticed French sociologist and political theorist Alexis de Tocqueville. That is what made America great, we believe.
The feds contributed, too – mostly by staying out of the way, leaving people to make their own beds… and lie in them. All wealth comes from win-win deals. The people who make the most of them are the winners.
But the win-win deal is only appropriate in a win-win, positive-sum world. The world of 4,000 years ago was mostly a win-lose, zero-sum world. You couldn’t invest, invent, or innovate to make the pie bigger. If you wanted more, you had to take a piece from someone else.
Today, if you can only get ahead by taking something from someone else, you are either 1) a crook, 2) the government, or 3) you’re in a zero-sum economy.
An ancient, zero-sum world was on display in Poland this week, as archeologists revealed a major find. Tech news website Ars Technica reports:
Sometime between 2880 and 2776 BCE, 15 family members were hastily buried together in a single pit, their shattered skulls telling a story of violent death.
“We know from ethnographic and historical sources that cattle raiding and other forms of livestock theft is very common cross-culturally in pastoral societies,” study co-author Niels Nørkjær Johannsen of Aarhus University told Ars.
“We have every reason to believe that competing communities during this period would have taken another (unrelated) group’s livestock if they got the chance, and would sometimes pursue this as a systematic strategy.”
Sometimes raiders just wanted to swipe a few cattle; other times they wanted to weaken or wipe out a rival group. That might mean killing the men of fighting age and kidnapping the women and children, or it might mean wiping whole communities off the map.
In this case, the raiders apparently considered wholesale slaughter more expedient than taking prisoners.
In the late 20th century, wholesale slaughter was unacceptable to most people. Still, the American heartland began to resemble a zero-sum game.
Real U.S. GDP growth rates – in most of the country – fell to medieval levels, barely positive at all.
After 1975, the average person did not get a significant pay raise.
But the cost of living continued to rise. By the 21st century, the typical man had to work twice as long to buy an average house and an average car as he did in 1975.
Since the hours of the day could not be increased, he could only plausibly keep up by borrowing time from the future (going into debt).
Now, including corporate, private, and government debt, he will schlep, sweat, and tote for seven years to pay off his share… or, at 4% interest, from January to April every year – just to pay the interest!
Zero-sum games – wars, duels, and robberies – have winners… and losers. The average American clearly wasn’t among the winners, so he must be one of the losers, which, of course, he was.
As the years went on, “financialization” meant that more and more wealth went to the financialized classes.
The winners were the rich, the elite, and the insiders, who watched their assets, bonuses, and stock options soar. As we saw yesterday, after 1987, stocks went up three times faster than GDP.
Relatively, the rich got richer and the poor and middle classes lost ground. And by the 21st century, practically 100% of all new wealth created went into the pockets of the top 10%.
Who bothers to think through how it came to be? Who bothers to follow the trail… from the post-1971 fake money… to the post-1987 Greenspan Put… to the post-2008 quantitative easing (QE) and negative real rates… to the Uber IPO… and the steady loss of real, breadwinner jobs throughout the 21st century?
Politics demands basic plots… ones the masses can follow. Good guys versus bad guys. Us versus them.
Besides, Americans were growing old and tired. Who wanted to compete? Instead, they wanted tariffs, walls, and warships to protect them.
To most people, it was simple. The U.S. economy had become a win-lose, zero-sum game… and they were losing. Is it any wonder that they began to think that win-lose deals… with a win-lose leader… were the only way to play?
And now, America’s “light unto the world” has become like a wreckers’ bonfire. It lures ships onto the rocks… especially the USA itself.
TRADING INSIGHT: WHY RISK IT?
Editor’s Note: While we don’t normally dive into trading strategies at the Diary, we enjoy passing along important information to dear readers.
Yesterday, master trader Jeff Clark showed how an ominous pattern forming in the S&P 500 could mean trouble ahead. And today, he shows why it’s a good time to take your money off the table… before all the potential heartbreak ahead…
By Jeff Clark, Editor, Delta Report
As my readers know, we came into this week looking for some bullish action in the stock market. And that’s what we got.
The Volatility Index (VIX) gave us a buy signal, and the CBOE Put/Call ratio (CPC) – a contrary indicator – reached an extreme level of pessimism. So, traders who were ready for it could have bought into Monday’s big decline as the S&P 500 dropped down towards 2,800.
That trade is looking pretty good today – with the S&P all the way back up to 2,884.
But, after three strong rally days, conditions are starting to get a little stretched.
The S&P 500 is bumping into resistance. So, traders who bought on Monday should consider selling as we head into the weekend.
Here’s an updated look at the chart of the S&P 500, along with its various moving averages…
The most concerning part of this picture is that the shorter-term moving averages (MAs) – the 9-day (red line) and 20-day (green line) exponential moving averages (EMAs) are on the verge of crossing below the intermediate-term moving average – the 50-day moving average (blue line).
The last time we saw this “bearish cross” in the moving averages was back in October, just as the market entered a severe correction phase.
Now… it hasn’t happened yet. And, if the S&P 500 can continue to bounce, then maybe we can avoid a bearish cross in the moving averages, and all the potential heartbreak that goes along with it.
But, if you bought stocks on Monday in anticipation of an oversold bounce, then why risk it?
The S&P is up more than 3% in just three trading days. That’s a nice gain. Traders should consider taking it and heading into the weekend with a little less stock market exposure.
– Jeff Clark
P.S. While a 3% profit in three trading days may not sound like a lot, consistently pulling money off the table is better than getting greedy and losing it all. After all, successful traders know how to reduce risk.
And reducing risk is one of the strategies I use to prepare my Delta Report subscribers from market hiccups… and even market crashes. You see, market crashes can be downright catastrophic for investors. But for traders, it’s a whole different ballgame…
The next market crash could be a goldmine for traders… especially those who use my strategy. And on Wednesday, May 22 at 8 p.m. ET, I’ll reveal all the details… along with the exact day I believe the market will crash. Reserve your spot right here.
Household Debt Hits a Worrying Milestone
Household debt increased for the 19th consecutive quarter. The culprits? Credit card and student loan delinquencies. And when it comes to student loans, the crisis has left millions of borrowers unable to buy homes or get married…
Robots Take the Wheel Across U.S. Farms
Robots are taking the wheel on farms across America. And these autonomous farm machines are taking over faster than anyone saw coming. But farmers are embracing this change with open arms. That’s likely because producers are eager to find any edge possible while the U.S.-China trade war is disrupting the industry…
An Ominous Pattern
There’s a dismal pattern forming in the S&P 500… and master trader Jeff Clark shows why, if it plays out, investors are going to be in for some pain later this year.
Today, a mixed mailbag. Readers talk about win-win deals, tariffs on Chinese goods, and why Donald Trump is a socialist at heart…
Let us give a case history of a win-win deal. Banks used to be forbidden to cross state lines: a win-lose deal. We end that practice (a win-win deal) and what happens? The feds let the banks consolidate and reach a size where, without their regulation (a new win-lose deal), they are too big to fail. Let us ask you, which win-lose deal was better? Now, the Feds are into everyone’s back pockets, every industry is consolidating, and that’s what the Feds want. Cronyism is rampant, and every four-lane road from Indiana to Georgia looks the same. With nary a solution in sight, it seems the only way it gets fixed is with utter catastrophe.
Let us posit a win-lose solution: Put arbitrary limits on the size of every flavor of organization (with the exception of manufacturing). Eliminate banks that are too big to fail. Eliminate Walmart. Eliminate McDonald’s. Eliminate the regulations and lobbyists that will, as a result, no longer be necessary. Put the freedom of families and local communities first before the “security” of all. I bet you could go on for at least a week entertaining us with this one.
– Mike B.
Win-win deals cannot be possible when the players are win-lose. Isn’t everybody hiding an ace or two up their sleeves? Aren’t some players more skillful than others? And what about the rules? Some just have thicker skin in breaking them, and others are tolerating it “for the sake of peace and continuation.” Stealing of intellectual property, ah well, let’s not be some whinges. It does not work! It cannot work! There is always a loser. Manufacturers go where the profit is. They do not care if Americans lose their jobs. But, the time is coming when an American, out of a job, won’t be able to afford even the cheap goods.
– Joso L.
We do not need any other country for anything. We are the United States of America. We all are armed and ready for action. We do not need anything from China; if you have anything in your home that is made in China, you are at risk. Look at the drywall. Look at your kids’ toys. Get them out of your kids’ hands… Who cares if it costs more money. Ponder on that.
– Mike W.
I’m from England and I like reading your Diary. However, I do tend to agree with those who caution against dealing with China. A win deal for China is, so it appears, global hegemony. Are you suggesting the U.S. can offer that for cheap goods and claim a win-win deal? As they say, if you sup with the devil, ensure you have a very long spoon. Personally, I’d just decline the invitation.
– John O.
Donald Trump is certainly a socialist at heart. He believes in BIG government, controlling the lives of the majority of people, for the benefit of a handful at the top… just as in the Soviet Union, National Socialist (NAZI) Germany, Communist China, and other so-called “socialist” states.
Oh, he has done some face-saving things like his tax cuts, which ultimately benefit mostly the top 10%. Any deficit to the government, and its beneficiaries in the top 10%, will doubtless be made up by his tariffs, which are ultimately paid, not by other governments, but by taxes to importers, and inflated prices to American consumers. Like all but a handful of socialist rulers, he puts on an image of caring for the little guy, but his actions show that his real concern is his own power over us all.
– Charles B.
Meanwhile, one dear reader sips on some of Bill’s wine…
Here I sit, reading Bill Bonner’s Diary… drinking Bill Bonner’s wine.
– Richard S.
Editor’s Note: Have you heard of the Bonner Private Wine Partnership? It’s a wine club for the truly adventurous. These aren’t the same tired merlots you find at your local supermarket. Members of the Bonner Private Wine Partnership can look forward to only the boldest wines, straight from the vineyards of the Andes Mountains. These wines won’t be for everybody. But they might be perfect for you. Decide for yourself right here.
IN CASE YOU MISSED IT…
One master trader has found the secret to making money no matter which direction the market moves… up, down, or sideways.
He’s even found a way to make money if the market crashes. And, despite what the mainstream media says, that could happen any day now.
On May 22 at 8 p.m. ET, he’s giving all the details during an exclusive presentation. He’ll even reveal the exact date he believes the market will crash this year.
If you follow his strategy, you could pocket a windfall profit while other investors are losing their shirts. Don’t wait…reserve your seat now for this special event.