JAZZMAN CHRONICLES IN THE AGE OF TRUMP: FEBRUARY 2018.
THE VAMPIRE MARKET
THE NEXT GREAT ECONOMIC COLLAPSE
By Jack Random
Corporate America is having a party. In the age of Trump they get everything they
want and the markets are rallying like it’s never going to
end. All hail the Donald! The Dow Jones Industrial Average climbed
from approximately 20,000 to 26,000 since the election of
Trump. Standard & Poor’s 500 went
from roughly 2,300 to 2,800 and the NASDAQ 100 shot up from
5,000 and change to nearly 7,000. By any
account that is one hell of a rally.
The question is
why? Is the economy truly in such great
shape? The gross national product,
housing starts, corporate profits and employment have all been
on a steady rise since the election of Barack Obama. The price of homes has been on the rise
since 2012.
The overall pattern
of positive economic growth is a steady rise since the collapse
of 2008. But the markets did not begin to
celebrate until the Donald was elected at the end of 2016. CNN describes the Trump rally as “runaway
freight train” [1] and that is exactly what it is. Like the Amtrak passenger train on its
virgin run in Washington state, the markets are rolling faster
than reason can justify and the safeguards to slow it down are
not in place.
Bucking the upward
trend are stagnant wages and personal debt.
Despite the repeated assertions of Trump and his
trumpeters, the Bureau of Labor Statistics estimates real
average hourly wages rose by 0.4 percent in the last year. [2]
That is an increase that even the poor would hardly notice. Market Watch noted that household debt had
surpassed the critical levels of 2008 by August of 2017 and Pew
Research noted that real wages have not moved significantly
since the 1970’s.
What
gives? The numbers do not reveal any
significant divergence except that the Republicans – the
corporate supreme party – now has complete control of
government. While Barrack Obama was
certainly a friend to Wall Street, his replacement is a complete
sellout. Any concerns Wall Street might
have had that the Donald meant what he said about helping
working people – striking down NAFTA, CAFTA and Free Trade
policies – seem to have been alleviated with the passage of time
and tax reform – a massive transfer of wealth to the
wealthy. The White House has worked
overtime eliminating regulations and enforcement of regulations
on both industry and the financial sector.
The watchdogs, the oversight agents
and the regulators are all on vacation and the alchemists are
back in town. Despite the great crash
that signaled the failure of their first massive experiment in
converting crap to gold, they remain confident that the dark art
will work in the long run. They can
create wine from water if only the doubting crowd will turn
their heads and allow them to operate in secrecy. It’s all hocus-pocus anyway so why not go
all the way?
The real question
is: How long can you continue to feed
the markets on the investments of the wealthy alone? The workers have no money to spare. The ever-shrinking middle class is waking up
to the fact that they can hardly make ends meet.
The last time the ordinary people invested in the markets
they got burned and burned badly. They
learned that the small investor is the first to take a hit. They learned that what the markets consider
a correction is enough to knock them out of the market at a cost
of their savings, their college funds, their retirement and
their rainy day fund.
Here’s my
prediction: If the ordinary people take
the bait and come back in the markets, they will almost
immediately be knocked out. That’s how
the money people cash their checks.
That’s where the money comes from.
Only the wealthy can afford to buy back in when the
market bottoms out. When they do they
will own twice what they owned before on the same money.
Donald Trump is right about one thing and one
thing only: The system is rigged. Unfortunately, the system is rigged in his
favor. The tax cut was not the biggest
in history but it was one hell of a bump.
Republicans will have no problem raising contributions
for the midterm elections. If they
succeed in keep control of congress the party will go on but it
cannot go on indefinitely.
It will end when the
people finally decide they’ve been ripped off one too many
times. It will end when they put
leaders in power who are determined to look behind the
curtain. It will end when the voodoo
priests are exposed as charlatans and the alchemists are run out
of town on a proverbial rail. It will end
when the market – built on a foundation of lies – collapses of
its weight.
It ends when the
real world invades the fantasy world where the party goes on
forever. It ends and then the cycle
begins again. The market waits like a
vampire in the shadows of jazz town until the people have
forgotten the danger and are once again willing to stay out
after the witching hour. The market will
once again offer sweet temptation – a party that never ends,
intoxication without a hangover – and the ordinary people will
be pulled into the maze.
I began
writing this piece at the end of January when euphoria was
taking hold. As it stands now on the
fifth of February the Dow Jones Industrial Average has lost some
1,800 points over two trading days.
Realty injected a jolt of caution to all individuals who
were considering investing in the Trump market.
In one fifteen-minute stretch, while the president pimped
his tax reform in some plant in Ohio, the Dow lost seven hundred
points. During those fifteen minutes
careful listeners could hear a great flushing sound. It was the sound of small investors being
flushed from the market at a dizzying loss.
Most analysts delivered the counter-intuitive narrative
that institutional investors were spooked by an incremental rise
in wages. They believe it foreshadows a
rise in inflation and inflation is the death knell of bull
markets. [3]
How ironic is that? A rise in real wages is exactly what the
real economy needs. A proportionate rise
in inflation – the cost of goods – would negate increased wages
while simultaneously stimulating increased interest rates. Increased interest rates would of course
boost the bond market but kill the stock market.
The
market is therefore fully invested in stagnant wages, minimal
inflation, increased corporate profits and low interest
rates. It is a corporate market and its
enemy is the working class. If you work
for a living, why would you invest in a machine that consumes
you like a lump of coal in a hot furnace?
Don’t be a fool. This
is a rich man’s market. It steals your
money and transfers it to the top. It
consolidates wealth and secures power in the hands of the one
percent. The only place reserved for
the small investor is labeled:
Sucker. Stay out of it.
Until they reform the market from
top to bottom by empowering the small investor, reintroducing
regulations with bite and regulators with both the power and the
inclination to use it, this market has no place for the likes of
you or me.
Jazz.
[1]
“Dow 26,000: The stock market is a runaway freight train”
by Matt Egan. January 16, 2018.
[2] “Earnings and Wages:
Bureau of Labor Statistics.”
January 3, 2018.
[3] “Dow Jones
suffers worst fall in two years amid fears of interest rate
rise” by Richard Partington. February 2,
2018.
Jack Random is a retired educator, publisher, essayist,
novelist and the author of the Jazzman Chronicles.
