VALUE BOMBS
On May 29th, there was a big push to see the market go down.
The technicians presented a case of an imbalanced market due to the level of participation as a major factor. Then there was commentary about how the expanding range of the market was a form of risk, and how market closes near the top end of that range were a red flag.
Don’t forget the valuation argument that can always linger.
All of the above is absolutely true and absolutely wrong simultaneously.
And the only reason it is wrong is that the market is at new highs.
Let me try my best to explain why and prove it.
In the first geopolitical piece I wrote for the Morgan Report, I noted the statistical phenomenon of the following.
Central Planning Theorem
I’ve observed that regardless of a government’s initial form, whether authoritarian or democratic, the central limit theorem suggests that all governments will inevitably expand in depth and size, leading to what we commonly term ‘big government’, similar to an expanding normal distribution. This illustrates the underlying cause and necessity of the debt-fueled centralization we are experiencing. It follows a common historical pattern seen in the rise and fall of empires. Examples include the fall of the Western Roman Empire in the 5th century, the collapse of the Soviet Union in 1991, and the structural shifts of the American empire. Excessive debt and centralization have historically contributed to the rise and downfall of great powers throughout history.
In the second Morgan Report I expand on the phenomenon.
The longer the new world order is on top of the kingdom, the more you can develop and envelop a complete decoupling of a country’s natural and human resources for the ruling elite. This is why bureaucrats are getting richer and richer. As the economy becomes more undemocratized and centralized, the easier it is to extort this wealth. This is also why government and big industry debt-to-GDP is a good measure of the encroachment on individual liberties, inevitably touching more and more facets of our everyday lives. These measurements can also be used to hedge ourselves for these socially engineered environments.
Seven years ago, I revealed the secret blueprint for global investors who are seeking profit and want to understand economic booms and busts. As a veteran who has lived and invested in Asian markets for over twenty years, I’ve strived to crystallize all my experience into a simple model, something easy to understand and implement, called the Asia Capital Development model (ACD). This model reflects developmental shifts in the economy from the foundation of ‘wartime economies’ the world over.
Reader, you see, all that is happening in the real economy is simply in response to the feedback of the financialized economy, and that is best measured in the market and within the balance sheets of companies as the true indicators of what is happening within this feedback loop.
This means that government economic data is interesting, perhaps from a trend perspective, but anyone with a background in index construction will know that the data can be manipulated. Therefore, to hedge against this, I look at aggregate data from the constituents of the major indices of a country to get a sense of what is really happening.
Proof is in the Market
Since its inception less and less companies will lead the market in the future. We will go from the Magnificent 7,6,5,4,3,2 and 1.
That is true centralization and singularity.
This is how one should quantify the ‘new world order’.
In 1920, Japan had 1,400 banks, and post-WWII it had 64. The US had over 20,000 banks in 1920 but now has around 4,500. Banks are the last stand to the central bank, but the central bank has new tools in their arsenal with the optionality to globally centralize and consolidate into bigger governments akin to trade unions, the EU, UN, and the IMF, a byproduct of this iteration of globalization, otherwise known in Japan as the Washington Consensus. All this consolidation into the new world order requires the ‘great melt-up,’ which I referred to in last month’s publication as the personification of the ‘central limit theorem’ in both the market and the economy.
Last week, I mentioned that the market fake-out would be awash due to the Magnificent 7 leadership.
I also noted that we are getting knee-deep into wars. Everything said has only been amplified this week.
If all you did was just follow this publication, not only would your investing and trading life be simpler, but so would your performance be better.
The reason for this is that I developed my methods in the Asian time zone while being an observer in the Eastern time zone.
How could you maximize an edge and have a nice nap?
Humans are not all the same; some people are just built differently.