PORTLAW, IRELAND – The Dow fell another 600 points yesterday. Look for a rebound today. But here’s a helpful trading hint: Don’t buy the dip.
Bloomberg tells us why the pros are getting out:
Stocks in the S&P 500 have dropped in 18 of the 23 days since peaking in September, roughly twice the frequency of the last three corrections.
It’s been such a grind that one of the longest-term technical indicators, the 200-day moving average on the S&P 500, just fell for the first time in 2 1/2 years.
Instead of the pattern traders are used to – one or two nerve-shattering plunges followed by a V-shaped surge – the selling that began three weeks ago has been slower and steadier. One moderately bad day follows another, with fewer breaks. The S&P 500 has declined in 12 of the last 14 days, something that hasn’t happened since March 2009.
Fake money may be unlimited. Technology may be unlimited. Information may be unlimited. But time is not.
And now, time is running out. Time always runs out. For bubbles… booms… technology… and debt. For life itself. Everything.
Cooperation or Force
At the Legacy Investment Summit in Bermuda last week, John Stossel pointed out that there are really only two ways people get along with one another – cooperation or force.
Either they do win-win deals in the private sector… or they are forced into win-lose deals by the public sector. It’s either freedom or slavery.
The two impulses are always present in our traditions and in our DNA. Which one dominates? When does a society become freer? And when do people let themselves get pushed around?
You may say that the choice is ours. But it is not a matter of choice, desire, or moral clarity. Instead, it depends more on technology than on conscious decision. We will see how shortly…
In every society at every point in history, there are always some people who get the upper hand.
They are Vilfredo Pareto’s “foxes,” who control “government” – that is, they have the guns. In the past, they were usually part of a military caste who took power by force.
Today, they prefer fraud, backed by gendarmes. In both cases, they are an elite, useful… and maybe even necessary… but always prone to corruption and parasitism.
Democrat… Republican… Socialist… Liberal… Monarchist… It doesn’t matter what they call themselves, they get away with whatever they can. And what they can get away with is not a matter of choice…
It’s a matter of firepower.
Damned Good Shot
We’ve lived in France, England, Argentina, and… for short periods, Nicaragua. And guess what? We haven’t felt any freer in America than we did in any of the other countries.
There are exceptions and local nuances, of course. But academic studies show the same thing: Between Europe and America, at least (we will leave Argentina and Nicaragua out of it), the level of personal liberty is about the same.
It wasn’t always so. At the founding of the Republic, Americans were appreciably freer than Europeans. Their government was smaller. And it had less authority over them. Why?
This might have been the result of Enlightenment ideas (self-determination, respect for reason and innate liberties, etc.), taking vigorous root in the virgin soil of the New World.
But more likely, it was because the colonists were hardy, financially independent, heavily armed, and dispersed over a vast semi-wilderness. It was very hard for a central government to control them.
Every technology has the potential for bad consequences as well as good ones. Some weigh in on the win-win side. Others are more suitable to win-lose and the Deep State.
The Kentucky long rifle, for example, gave real meaning to the “all men are created equal” promise. Short or tall, dumb or smart, a man armed with a Kentucky (or Pennsylvania) long rifle could easily bring down a tax collector at 200 yards or more.
That’s why an Englishman, returning home after a visit to America on the eve of the American Revolution, warned his countrymen to “settle their affairs” before leaving for the colonies to put down the insurrection. The colonists, he warned, were armed… and they were damned good shots!
But the cannon was a different kind of weapon, more suitable for governors than for the governed. Until the invention of the cannon, a local, independent strongman could hole up in his castle, almost untouchable by the central authorities.
Then, with the development of artillery – which was too heavy and too expensive for private owners – the walls came down and governments grew larger.
The airplane, too, was invented early in the 20th century. By 1917, German airplanes were bombing Britain. And just 30 years later, an airplane – much too expensive for ordinary people – was used to commit the single-biggest war crime of all time… when it dropped atomic bombs on two Japanese cities.
And now… there are computers.
At first, it was believed that information technology would be a liberating influence. But now, we see a grim reality… big data from Google and Facebook is becoming a tool for the elite to monitor, manipulate, and control people.
Technology – and the economic conditions it creates – gives rise to popular morality, not the other way around.
We can see how this works more clearly by looking back at slavery. The practice had been around for thousands of years when suddenly, in the space of a few decades, it was outlawed all over the civilized world.
How come? Was there a sudden burst of virtue? Maybe.
But look at the U.S. The light of moral clarity seems to have gone on only in the northern states, where they had no slaves… and where abolitionism came cheap.
The South, where field hands were still a paying proposition, remained benighted. And isn’t it at least coincidental that slavery went out of fashion in the 19th century, rather than the 17th or 18th centuries?
In earlier times, slave labor was economically competitive with free labor. But after the Industrial Revolution, slave labor was uneconomic. Factories required skilled, motivated workers.
And the more skilled workers became, the harder it was to keep them shackled. Frederick Douglass, for example, was born into slavery in Maryland. To escape, he just hopped on a train bound for Delaware, a free state.
The War Between the States made it very clear which side history was on. The slaves in the South could produce sweet potatoes and cotton by the ton. But the factory workers of the North could make railways, cannon, and repeater rifles!
The Industrial Revolution raised the relative cost of slavery. From then on, unless you were willing to live in poverty and backwardness – like in North Korea – it was better to pay people slave wages than to keep them as chattel slaves.
But what about the Information Revolution?
Does it shift the balance of power towards freedom or slavery? And how do Google and Facebook figure in this story?
Tune in tomorrow!
MARKET INSIGHT: HARD FALL FOR STOCKS
By Joe Withrow, Head of Research, Bonner & Partners
As Bill detailed above, the S&P 500 just experienced its second big drop of 2018…
Today, we put that in perspective and map the year-to-date performance of the S&P 500.
As you can see, the S&P 500 has fallen 9.4% from its all-time high of 2,930 set on September 30. This most recent correction closely mirrors the 10.1% fall that occurred back in February… which also came after the S&P 500 set an all-time high.
There’s no way to know if this is just another blip on the way to a new all-time high for the S&P… or if it’s the start of the 50%-plus crash that Bill Bonner Letter coauthor Dan Denning has been warning about.
But what we do know is that bull markets experience heightened volatility towards the end of their run.
In the run-up to the 2008 crash, the S&P 500 experienced corrections of 6%, 9%, and 10% within an eight-month time frame before the 57% crash came.
And in the run-up to the dot-com crash in 2000 and 2001, the S&P 500 experienced corrections of 11%, 9%, and 9% within a 13-month time frame before the 49% crash came.
Assuming history rhymes – as it typically does – the S&P’s most recent correction is a telltale sign that this bull market is getting long in the tooth.
– Joe Withrow
Apple’s Plan to Fight Fake News
Much has been made of the “fake news” epidemic. Big Tech algorithms feature the most popular posts with no regard for editorial conviction. Apple is trying a new strategy to change that: Fire the algorithms. Hire more people.
Why You Should Own Fewer Stocks… And Hold Them Forever
Most dear readers are looking for ways to be better investors. In this essay, Chris Mayer, one of Bill’s ace stock pickers, reveals one of the best ways to get rich from stocks: buy fewer of them… then forget you ever did.
How People Will Live Forever
In the age of Big Data and artificial intelligence, one tech pioneer is undertaking a radical experiment: crafting a virtual avatar of a human being from personal data. In theory, a person could “live” well beyond their death. Futuristic? Yes. Creepy? Maybe…
In the mailbag, a sampling of opinions: the problem with business today… a looming liquidity crisis… “employment Armageddon”… and what Trump knows better than any president before him…
The problem with businesses today is, “Everybody wants to make a killing instead of a living.” The “American Dream” has become Disney World at our borders – free housing, food, education, and healthcare; credit cards and loans with no limits and no responsibility to pay them off; and winning the lottery.
– James B.
People like E.B. Tucker and Jason Bodner continue to promote this fallacy that a stock market top occurs when everybody – including those on Main Street – is talking about it (and they’re all in the market). That may have been the case in 2000, when 65% of people at that time owned stocks. Today, it’s down to 50%, so these bulls cite that as “under-ownership” of stocks, and expect more people to jump in.
The problem is they are ignoring the most important factor in financial assets: liquidity. Main Street is so indebted, people can barely maintain their standard of living, let alone buy stocks. There are no more people waiting on the sideline. Liquidity is on its way down, with quantitative tightening. Folks as intelligent as Bill Bonner and Dan Denning should be able to dispute and dispel these bulls’ views based on that.
– Stephen L.
When you mentioned AGI (artificial general intelligence) in your takeaway from the Bermuda conference, I thought that, surely, you would deal with the “employment Armageddon” that is just over the horizon. By that, I mean the point at which there won’t be enough jobs for the numbers of workers on a worldwide basis. Three factors are fueling the oncoming meltdown:
The geniuses (sarcasm implied) in universities and tech companies are hell-bent on a race to develop robots and AIs that will replace human workers.
Western, developed nations are already fighting a losing battle to keep “economic migrants” from Central America, Africa, and the Middle East from swamping their borders in search of jobs.
People are breeding babies far faster than new industries can create new jobs.
The end result is inevitable. At some point in the not-too-distant future, the vast majority of human beings will be without jobs and idle. Education won’t help. No human brain can compete with artificial intelligence running billions of times faster.
No human, physical laborer can compete with a tireless robot that can perform its job faster and with more precision, 24 hours a day.
Kurt Vonnegut dealt with this subject over half-a-century ago in his brilliant book, Player Piano. It was required reading in my high school and I would urge anyone who hasn’t read it to do so.
– Dale A.
If there is one thing Trump does understand, it’s access to cheap capital. He built his entire fortune by borrowing OPM (other people’s money) and investing in real estate. The Fed raising rates scares the bejeebers out of him. He understands Obama’s bailout of Wall Street (should have let them fail) has kept the ball rolling all this time.
With the Fed raising rates, the recession – maybe depression – will happen on Trump’s watch, and there is no way he’ll be re-elected. My take? The Republicans will take the House and the Senate in the next couple weeks. Then, they will be blamed for the long-overdue recession, and everything will go to the Democrats in 2020. Socialism will hit us like a North Dakota whiteout.
– Steve B.
I enjoy your daily newsletter and a number of the specialists you have in your financial service. I am an editor of a neurosurgical internet journal that is read in 233 countries. I would like to quote from your newsletter, particularly the entry from October 23, 2018. I would be happy to give you the credit, and tell people how to contact your organization and also subscribe to your newsletter. Thank you.
Editor’s Note: Publishers are welcome to republish Bill’s Diary essays. Bonner & Partners just asks that proper credit be given to the author. A link for new readers to join Bill’s Diary can be found here.
IN CASE YOU MISSED IT…
Take a look at the graphic below…
You may not realize it, but the U.S. is falling way behind the rest of the world in a key technology.
And unless this is corrected soon, it could pose a threat to national security. More here…