Explaining The Unexplainable

While having an impromptu meeting with a few colleagues over coffee this morning the inevitable question of, “Why is it the stock market keeps going up, no matter what?” arose. That’s when all heads turned to me as if I had just insulted someone’s mother.

Here’s how I replied, once again, because, it truly is the only way to explain it. I opined similar back in December, I’ve updated it for today’s events.

So with that said, here is what I gave, via what I named “The equation that it explains it all.” To wit:

“If you were just woken from some form of suspended animation from let’s say 2010 (ancient economic history in today’s terms) then informed of the current state of global political affairs with its: geo-political upheavals, eminent threats of nuclear war, U.S. un-employment (as in 95+million not,) global currency gyrations, interest rate tightening into deplorable data, etc., etc. You would be right to at first be concerned.

Yet today, things like that no longer matter. As a matter of fact, here’s even a few more, ready?

Broken-promised tax relief, along with the same for: healthcare, regulatory reform, and more that was supposedly a “Done Deal” as a result of a national election which empowered a single-side of the political aisle, giving them complete control of all three branches of the government, which they campaigned on, and won on. And it all went from done-deal, to DOA, almost immediately from the start.

Not only could they not agree on anything, but they could not get one (again, not one!) item of that agenda passed nearly a year later, continuing in gridlock, finger-pointing, backbiting, and more. And just in case one forgot? They control all three branches, and we still need to use the term “gridlock” to explain it all. Pathetic is too kind of a term to describe it.

Oh, and the debt ceiling debacle is now even worse, and the total debt has now officially jumped to $20 Trillion aka $20,000,000,000,000.00.

And it doesn’t stop there…

Increased threats from further escalating wars. Threats of major (or further) confrontational skirmishes. Adding of troops (aka Iraq) where troops were supposed to be reduced. GDP of the major global economies not only contracting, but below statistical stagnant. The EU experiment falling apart more by the day with a Brexit already voted and approved, with Italy, and Spain looking to do the same – and soon. Did I mention Greece? I know, that’s all so 2014.

Governments, as well as central banks continue to “balloon” their balance sheets with debt now calculated in $TRILLIONS, some in the 10’s of. And they keep declaring they not only want to do more, but rather “need to do” much, much, more. (think ECB Draghi, BoJ Kuroda, not to mention the Swiss)

And it’s against this backdrop which the Fed. is now openly stating, with dates and amounts, how it is going begin selling their $Trillions back. Oh yeah, and they’re only about a week away from possibly doing that, and raising rates once again. And the #2 at the Fed. just up and resigned out-of-the-blue.

All of the above, once again, “and more”, is concurrently being thrown into-the-teeth of what can only be called further financial uncertainty, (i.e., _________ insert hurricane name and ongoing devastation of choice here.)

I’d list more, but there isn’t enough time, or digital ink to list them all.

Yet, I think I’ve covered 2017. But there’s still 3+ months or so more, and we all know how that can go, right?

So, with that for a backdrop. Nobody would be surprised if your first reaction based on your prior acumen (the ancient history of 7 years ago whether it be in stocks, business, or both) would to become immediately concerned (if not outright panic-stricken) that whatever portfolio, or wealth you may have had in the markets, may be worth far less today than when you were first put to sleep, along with probably becoming ever-the-smaller as you thought about what you might need to do next in order to preserve any that may be left.

That is, till someone explained to you the markets you went to sleep knowing of – are no longer – and the reality of the markets today you could never have dreamed up. Even if they let you sleep another decade or longer.

Today, the markets you once knew of are better described as the “markets.”

To clear up any confusion as to how, or why, the “markets” can now be at “never before seen in the history of mankind highs.” Below is the calculation that explains it all.

For under the rules of: If A = B and B = C, then A = C, you now have the magical formula to understand with Einstein like surety today’s ‘markets.”

If you have any doubt to the soundness of this expression, consider the following:

If a crisis appears (A) The central banks will intervene (B)

If the central banks intervene (B) The “markets” go up (C)

Thus, we need more crisis or chaos (A) To make even more all time “market” highs (C)

That is what “the greatest expression of capital formation the world has ever seen” has devolved into.

I’ve now come to the conclusion that even the term “casino” may no long fit. For these “markets” are no longer working on anything based on statistical math or economic expressions. Or, anything else related to understandable business metrics such as: a company’s value is based on net profits or any such thing.

No, there’s only one word for it now as to explain just how beholden it is to adhering, and repeating the above calculus. And it just so has it, Einstein said it best:


And there you have it. It is, what it is, until it isn’t.

That’s about all there is to it.

No Ph.D required.

© 2017 Mark St.Cyr