[Author’s Note: This information is meant to be entertaining and educational and does not represent a recommendation to make or change investments of any kind.] The Standard & Poor’s 500 index (a.k.a ‘The Market’) may be on the verge of a precipitous decline of 10% or more – that according to technical analysis which in layman’s terms means  “looking at the chart.” In the most recent chart from big charts.com, you can see the support level at just under 2600. If it should break down through that level the implication is that it would drop at least 10% from here. – this is because the line acts as a fulcrum and the first stop would be a level below the line equal to the distance from

I was a financial professional during two prior stock-market bubbles, the ones that ended in 2000 and 2008 respectively. This market acts and looks (on a chart) very much like those bubbles.  The key is the exponential curve common to each of them. As you can see with the example below, the slope gets steeper until it appears to be in “vertical climb,” going almost straight up. That’s the phase we are in now–the vertical climb phase.   In the vertical climb phase–EVERONE is buying: the last retail investors joined in, foreigners are strong marginal buyers, and short-sellers are buying to cover their shorts.   But  as stocks go higher in price, it takes more money to accelerate prices higher. Gravity always wins. The way it

            Well, it’s only fair. After all, Ben Bernanke got to help blow the biggest-ever bubble (real estate bubble), and of course Alan Greenspan could rightfully be called the Lawrence Welk of Central Banking because he was a bubble-blowing machine (technology stock bubble, LBO, commodities, real estate). Now it’s Janet Yellen’s turn. We understand that she might already have “bubble envy,” but just what kind of bubble she will be known for is not yet clear. She has a good start on several potential good ones, though. On her watch, we have 1) a bond bubble that features the highest prices for government bonds in history (which implies that interest rates are at record lows), and she has 2) a

Most people want to talk about Brexit as a rogue event—like the appearance of a comet or a solar eclipse. It should be viewed, though, as an important point on a continuum that marks a transition point in a decades-long global swing toward economic and political integration. Since Reagan and Thatcher and the collapse of communism, we have seen nearly thirty years of increasingly free-market policies with regard to trade, regulation and taxes—this on a global scale. The effects have been to promote economic integration and the financialization of the world.  The financialization is important in that it promotes debt-fueled feudalism—again, on an individual and a national level: the Greeks are an example of how debt leaves a country in servitude to the paymasters; the

In the Economics and Finance classes I teach, the most stimulating class session covers the topic of money. Students express a curious confusion when I introduce a specific riddle, a koan for them to mediate upon. I ask them to explain the statement: “The prices of food, oil, gold, and property often don’t rise at all.” [pullquote align=”full” cite=”” link=”” color=”” class=”” size=””]”One year, for example, the price of gold is 1200 dollars per ounce,” I suggest. “And one year later gold is 1300 dollars per ounce.  If I tell you that gold did not go up, what else could possibly have happened?”[/pullquote] They wonder if I am joking and prepare to rebut my assertion with evidence of consistent increases in the prices of just about

About four months ago, it became clear that very low oil prices and much cheaper gasoline were not a good thing for the stock market. Now, the world’s largest commodity and the global indexes are trading in a near lock-step with correlations over 90%. This is close to cats and dogs living together—until you look at it a little closer; then it only seems slightly bizarre. [pullquote align=”full” cite=”” link=”” color=”” class=”” size=””]The most important concept is that of oil as collateral. Borrowing (and lending) for energy has exploded in the last couple decades[/pullquote] For most individuals and many economists, a higher oil price appears as a tax on the consumer because transportation, heating and energy-sensitive food costs represent a meaningful part of the monthly

[Note: This post is for education and entertainment only. Investment decisions should be made on the basis of suitability and risk tolerance and with the help of a professional.] Investors and planners should be aware of an important phenomenon called the “wealth effect.” The wealth effect occurs when asset prices rise, causing investors, savers, or property owners to feel wealthier. As a consequence of feeling more secure, they revise their spending and business investment budgets higher. Those higher levels then drive jobs, earnings, and asset prices still higher and the process feeds on itself. Sound simple? It is. [pullquote align=”full” cite=”” link=”” color=”” class=”” size=””] When asset prices go down, however, the wealth effect works in reverse: people don’t feel as wealthy, they don’t spend as

One of the more overrated developments of the digital revolution is the concept of “big data” or “data mining.” In the last decade, computing power and easy access to inconceivable amounts of data have combined to create the ability to find meaning in vast amounts of correlations, interpolations, extrapolations, and so forth. According to economist and scholar Dr. Horace Brock of SED, Inc., the tendency toward induction, or using data to project future trends, is a major flaw in today’s research. An example of induction (using oversimplified variables and hypothetical values) might be as follows: “In the past 100 years, we never went into recession within 12 months of having 5% unemployment, therefore, because unemployment was just 5 percent in December, our chances of recession

While most would dismiss the view that the US today is governed as a theocracy, it is not an entirely cynical viewpoint . I do not refer to the resurgence of evangelical Christianity; I suggest that the US believes in and is governed by its unshakeable faith in Capital. To borrow the language of the bible, it is all about Mammon. One proof that free-market capitalism is practiced and preached is the offerings given to share buybacks last year by corporate America: it was an obscene one trillion dollars. When you consider that most of those shares are below their average price for last year, you could say the capital was at least grossly misallocated. Unfortunately, the incentives are perfect for them: buybacks offer high

I am beginning to see Michael Lewis, author of the book that formed the basis for the film, as one of the most important authors of the 21st century. I have only read a few of his books, but I already know him the way I know other very good writers: when I read his books, I despair at the excesses and folly he makes accessible and visible (not everything he covers is simple or overt), and I take hope and inspiration while his protagonists (real people) act as proof that conscience and virtue are still at large in the world. The full title of his book is The Big Short: Inside the Doomsday Machine. It has as a backdrop the events leading up to