Beware the Power Lines – Fat Tail Daily | Australian Markets

‘In a world full of genuine uncertainty – where real historical time rules the roost – the probabilities that ruled the past are not those that will rule the future.’

Lars Syll

What if the entire kit-and-kaboodle – $100 trillion price of ‘assets’ worldwide, unsupported by actual world output – out of the blue melts down?

The place’s our Large Acquire then? Let’s go away that query, like an uneaten pizza; we’ll heat it up later.

First, we take a look at why the ‘big picture’ could be so deceptive.

One of the curiosities of right this moment’s asset costs is that shares rose even whereas the Fed was tightening. The Fed started its combat in opposition to inflation in 2022. It raised charges steadily for the subsequent two years…till July of 2024.

However as an alternative of meekly succumbing to the Fed’s larger rates of interest, the Dow hit a low below 30,000 in September of 2022, after which rose 14,000 factors over the subsequent two years. This was not what anybody anticipated, together with us. No analyst we all know noticed it coming.

Their (our) logic was hermetic. The Fed had pushed up stock costs by dropping rates of interest nearly down to zero. However now that inflation was on the unfastened, they’d must raise charges to combat it; they couldn’t rescue a falling market for concern of making it worse.

However anybody who thinks economics is a science should have a Ph.D. or a hedge fund to advertise. The remaining of us understand it’s voodoo. The quantity of inputs is at all times infinite…trigger and impact are by no means clear…and the take a look at outcomes are irreproducible. This is the reason central planning at all times fails…and macro (large image) investing is so treacherous.

“History shows no clear correlation between real prosperity and the keeping of macroeconomic statistics,” writes Reuven Brenner.

You possibly can by no means truly see the ‘big picture.’ As an alternative, you take a look at statistics, similar to GDP growth, unemployment, and inflation, which can be supposed to explain it. However typically, they’re more fraud than reality. GDP figures depend authorities spending as ‘output.’ However the more sources consumed by authorities, the much less actual wealth—priceless items and providers – can be found for everybody else.

The unemployment numbers are equally deceptive. They depend everybody with a job as ‘employed’ – whether or not he works 20 hours or 60, and whether or not he earns minimal wage or a million {dollars}. Decrease unemployment doesn’t imply people are higher off; after all, there was full employment within the Soviet Union.

And inflation? The statisticians don’t merely add up the costs on the grocery store or the latest real estate gross sales. They create ‘models’ that modify costs in keeping with their own cockamamie theories. If this 12 months’s laptop is quicker than final 12 months’s, for instance, they’ll let you know that the price has gone down – regardless that you paid more for it.

Rubbish in. Rubbish out. The statistics are at all times contrived, revised, and largely fictitious. The info is fluid. And the theories – the Phillips Curve, the Fed’s ‘stochastic’ model, Keynesianism, Marxism, Trendy Financial Principle – are at all times imbecilic. Add as many Greek symbols as you need; they’re nonetheless nonsense.