Enjoy Dow 20,000 while you can. This CNBC segment is enough of a tell for me.
What all that back and forth inside-baseball means is that the market has been undervalued for some time, the banks that took huge losses in 2008 are putting away some gains forever in order to replace those losses—but these CEOs selling stock might not be that big of a deal because some notes are old and would expire, but also because in the new Wall Street, investments typically have a shelf life of a housefly between buy and sell, and these CEOs aren’t dummies—so clearly they’re not selling low on their own freaking stock, and the guy on the left’s favorite stock is an investment bank that’s a “better business” than the Wells Fargo’s and Bank of America’s of the world, and it’s nowhere near the highs that those banks are at. Got it? No worries—most people don’t, and that’s the point.
My father was a stockbroker for 35 years and he worked from home, so I became familiarized with CNBC growing up. It seemed to be an innocuous financial network with real experts on the surface, but once you moved past the well-crafted segments with knowledgeable insight, there was always a paid shill doing the banks bidding somewhere. As the years grew on, it became more difficult to hide the open bias supposedly feeding you “neutral financial news.” I’d always ask my father why he’d force himself through that nonsense, and his response always was “at least I know what areas our kings are talking about.” So I feel some ability to spot these surrogates after having them provide the background to much of my childhood, and Tony Scherrer of Smead Capital Management activated some sensors within me that have been dormant since I moved out of the house.
As soon as he gets on screen, he blasts the characterization of the “moribund” industry then uses “JP Morgan, Bank of America, Wells Fargo—the three big banks that we own” to set up a good point about those three having net-positive insider acquisitions, which suggests that everyone including the CEO is still bullish on the company stock.
Key words: “three big banks that we own.” The man just declared his bias for all to see. Of course he’s not going to tell you that the market is unhealthy. It’s like that old phrase: “don’t believe anything until it is officially denied.” Scherrer is only one of hundreds of foot-soldiers out pimping Dow 20k to the news networks today. This is a money making opportunity for all parties involved.
There’s also a mountain of minutiae to all this, and of course the real important details are never broadcast to the world, since that would defeat the entire purpose of searching for an edge in the first place, but there’s a clear agenda to pumping up #Dow20k.
“Let’s keep inflating this bubble!”
No one makes money in the stock market unless someone else loses money. That’s just how it works. The banks, having wildly valuable stocks themselves while also being at the center of the action, are natural experts, and they’ve been dumping stock since the election. Granted, some of these stocks have triggers based on dates and a complexity that isn’t worth the headache it would require to delve in to, but the larger trend is clear: now is a worthy time to sell.
put together the following charts which demonstrate a clear trend.
Someone has to lose, and 20,000 is a nice round number that naturally attracts rubes. Now, there is a Darwinian angle all this—the jungle must have losers in order to prosper—but that’s only fair so long as everyone is operating with the proper information, and the big banks have a vested interest in ensuring that doesn’t happen. Hence the rotating cast of characters on financial TV assuring the public that they have a firm grasp on everything, and so long as the pie keeps growing, everyone will benefit. We learned that this wasn’t true in 2008—quite the opposite, and we didn’t do a damn thing to ensure it couldn’t happen again. John Oliver’s dive into auto loans is like a bad cover of the housing crisis. So why should we trust anything they say now?
Financial collapse is almost always precipitated by the bursting of a bubble. For 2008, that was the housing market, as forty years of “four walls and a picket fence” federal policy combined with an era of cheap lending, which was then tossed into the grease fire that is the unregulated securities market. Dow 20,000 is just a random number—as the index has long ceased being an efficient bellwether for the American economy. Bill Gross, bond king, argues that the 2.6% rate on the 10-year Treasury bond is a bigger deal (in a bad way) than 20,000 points on the Dow. The 30-year trend of the bond is pretty clear, as Bloomberg demonstrates in a segment breaking down Gross’s assertion.
The elephant in the room is the president, as Gross explained.
“President-elect Trump tweets and markets listen for now. Trump’s policies may grant a temporary acceleration over the next few years, but a 2 percent longer term standard is likely in place that will stunt corporate profit growth and slow down risk asset appreciation.”
#Dow20k is a marketing ploy aimed at those looking for a quick buck. Technically it hasn’t crossed that plateau yet, as trading is still ongoing as of this writing, which further exposes the absurdity behind making 20,000 a figure with any real meaning. Big bank executives are dumping their own stock, and people who own big bank stocks are going on TV shouting “all is well!” The financial industry is inherently ruthless, but at some point along the way, a handful of incredibly powerful executives decided it would be more than that. Uncertainty exacerbates this reality, and Trump plus #Dow 20k just feels like a moment built for fraud and deceit. Be careful out there folks, the wolves are on the prowl.
Jacob Weindling is Paste’s business and media editor, as well as a staff writer for politics. Follow him on Twitter at @Jakeweindling.