The 10th Man

Level 10 of the Videogame

February 20, 2020

The financial markets are a MMORPG.

That stands for Massively Multiplayer Online Role Playing Game.

This $5 Trillion Market Is Just Getting Started.

Don’t miss out on the ETF revolution. Get going with this must-read report from Jared Dillian.

And on Level 10 of the game, you get to answer the following question:

“If politics and society are so crazy, why is there no volatility in the markets?”

Hey, if you can answer that one, you can have my job.

This is the thing that I come into work every day and think about. This is the thing I get stuck on.

For starters, Trump was supposed to cause volatility with his chaos, and he didn’t. In fact, he crushed volatility.

Now we have commies winning primaries and the market just yawns. One interpretation would be that the commie doesn’t have a chance, but of course he does.

The best answer I can come up with is that the supply/demand dynamics of stocks and bonds are overriding everything.


SIC 2020 Registration Now Open

Past attendees say:

“Best investment conference, by far.”
“Exceptional speakers.”
“The networking was phenomenal.”
Secure your spot now and save $800

The Great Depression

The Great Depression now lives in the realm of forgotten economic statistics. Here’s an economic statistic for you: The stock market went down 89% from 1929–1933.

Ever put any brainpower into what could cause a stock market to go down 89%?

It’s more than just corporate earnings.

It’s more than just the economy.

In 1933, stocks were pricing in… pretty much the end of capitalism.

A general rule of thumb is that whenever stocks go down 50% or more, anywhere in the world, people are very, very pessimistic about their economic system. It just happened in Argentina.

There is a lot of evidence piling up that many Americans simply don’t believe in capitalism anymore. Younger people for sure, but I see it in my age cohort as well.

I have also observed that economic literacy has plummeted. I have been writing about this for the last ten years in The Daily Dirtnap, starting with 100% taxes on AIG bonuses and continuing out from there. It also kinda feels like we have a long way to go.

This $5 Trillion Market Is Just Getting Started.

Don’t miss out on the ETF revolution. Get going with The 5 ETF Trading Strategies You Should Know About Before Investing, from Jared Dillian.

And yet stocks are at all-time highs.

Don’t misunderstand me—I don’t want a recession, because the next recession will almost certainly result in the end of capitalism. I don’t want that just so my puts can go in the money.

But this divergence that we’re experiencing between the stock market and radical politics can’t continue forever. It has to resolve itself somehow, and it probably won’t resolve itself with politics becoming less radical.

Anyone who was born in 1933 is now 87 years old. Anyone who was an adult in 1933 is now 105 years old. There aren’t too many people around who can talk to us about what made a stock market go down 89 percent. I suppose I could go to the library and read old newspapers, but I have never been good with the microfiche.

The Cost of Pessimism

A few weeks ago, we talked about the real, monetary cost of being pessimistic. There have been a lot of reasons to be bearish, especially since 2015. The market levitates.

There is a belief that persists in the financial community that bearish market pundits must be naked short and getting their faces ripped off all the time. That isn’t necessarily true. I suspect most of them are like me. They think that the stock market is dumb and have found other ways to make money that don’t involve stocks.

It hasn’t been easy. The S&P 500 is the only game in town, and there’s no volatility in anything else, either.

I wrote this recently:

If Bernie wins, there are going to be some trades to put on. Maybe I should sell these ideas, but they are pretty straightforward:

  • Stocks down
  • Dollar down
  • Bonds up
  • Gold up
  • Oil up

Of course, this is what should happen, but what should happen hasn’t happened in a really long time, so the prognostication is pointless.

As I mentioned earlier in the piece, Argentina took a 50% digger on a Peronist government, but maybe EM and DM are different.

And I can think of a few scenarios where stocks would go up on a Bernie presidency, except for the fact that he would explicitly want them to go down.

In the old days, you didn’t have to overthink things. Socialist president, stocks go down, easy as pie. Everything is so hard now.

The conventional wisdom was blown out of the water in 2016. It will probably get blown out of the water again.

No Politics Allowed

I will never endorse a candidate, but I will say that The 10th Man is in favor of any candidate that is good for markets.

Notice I didn’t say the candidate that will make markets go up. I’m sure you all know the difference between being pro-market and pro-business.

Slim pickings out there. I spend most of my time wondering if the uniforms will be chartreuse or butterscotch.

If you want to hear some more opinions on what awaits the stock market and economy if either Trump, Sanders, or Bloomberg win the election, you should consider attending the SIC 2020. Looking at the faculty, I’m pretty blown away (read all about the speakers here). There are some heavy hitters on the list, and you should definitely hear what they have to say.

You are in luck, you can still get priority pricing, but it won't last much longer! In my book, paying less for stuff you’d want to buy anyway is one of the most financially savvy things you can do. So register today and join me and the rest of the Mauldin Economics crew in Scottsdale!

Jared Dillian


Get Thought-Provoking Contrarian
Insights from Jared Dillian

Discuss This


We welcome your comments. Please comply with our Community Rules.


Page 1 of 2  1 2 > 

Brian Struchtemeyer

Feb. 23, 5:42 p.m.

“If politics and society are so crazy, why is there no volatility in the markets?”

The “insightful” Chuck Prince quote from 2007—You know it by heartburn: “as long as the music is playing, you’ve got to get up and dance.”—has everyone long in the market slapping their tambourine, singing like a gospel choir, and ignoring all else with the premeditation of the three wise monkeys.

Jim Gargano

Feb. 22, 4:08 p.m.

If you think Bernie only wants to send us as left as England you don’t know him. He talks democratic socialism but his heart pounds for communism. Of course he won’t get that because even if he was president he has a whole congress and the biggest corporate empire on earth standing in his way but make no mistake about what he actually wants. He WANTS communism and there is no doubt about that.

Victor Monty

Feb. 21, 12:21 p.m.

I wish you’d stop calling Bernie a commie. You have no idea what commies are like. I do. Bernie, IF he was to have his way might take us as far left as England. Long way from England to Cuba.

Ty Thompson

Feb. 20, 5:18 p.m.

Sociopaths want control no matter what, some are open about it like Fabians, others will go corporatist regulatory capture, socialism or whatever gets the job done. These are the people running things now, see Soros, Clinton and Bloomberg as to where things are going, GOT in real life. This is why we have “woke” capitalism now, they’ll take a loss if it means more control.

Feb. 20, 5:13 p.m.

I loved your post on “Dating and 650 credit score”. I sent it to nieces, nephews and siblings, I’ve never received so many great/funny responses… THANKYOU.

My real question is the meaning of BONDS UP? is the price of bonds up or the interest rate up… meaning bond value down?
love your articles

Feb. 20, 3:09 p.m.

It would be more of a concern if we had capitalism in this country. What we have is best described as “crony capitalism” facilitated by a tax system that favors the owners of wealth. John Mauldin’s
tax proposals of a few years ago would have been far better than the current mess, but he must have known that the chances of any sensible taxation were no better than a snowball in hell. Corporate governance, like its sibling in DC, is too remote from the reality of most people.
FWIW I own stocks and a few bonds.

Feb. 20, 2:48 p.m.

I remember by grandfather (by report of my Mother) saying with real fear, “If Franklin Roosevelt wins this election (1932) the United States of America will be destroyed by bolshevism.”  Not very prescient, but sincerely terrified of a menace constructed entirely from id-level fear an and horror. 

The end of capitalism if Bernie is elected? Maybe, although a Bernie vs McConnell matchup would be like watching Attila and the Huns play rugby against a pickup team of third graders. 

But Bernie doesn’t seem necessary—the “friends” of capitalism are doing a pretty good job of dooming capitalism with no-limit deficits, epistemological tribalism, and the destruction of the possibility of anyone actually being able to know—or communicate—testable truth about anything. 

We can have a sort of capitalism in a kleptarchy, or a different sort of regulatory boxed-in capitalism organized and regulated by idealists and bureaucrats.  The latter is stifling and the former is capitalism organized by and for the benefit of gangsters.  Which is worse—Leon Trotsky or Al Capone?  Do you prefer being robbed and murdered by gangsters or mugged and taxed by bureaucrats? 

As Keynes would probably say had the long run not already got him, this sucker is going down.

Feb. 20, 2:46 p.m.

If you haven’t already read it, The Great Depression: A Diary By Benjamin Roth is an incredible read on the psychology of investors during that time period.  Give it a try…

jack goldman

Feb. 20, 1:59 p.m.

“If politics and society are so crazy, why is there no volatility in the markets?”

Your level 10 video game, and the stock market, are not correlated to society or politics. Your level 10 stock market game is directly correlated to the US Federal Reserve bank policies and interest rates. Rates up, stocks down, rates down, stocks up. Here we are at the lowest interest rates since 1940 and in some cases in all of recorded history. Think Negative Rates. This is not possible when real money like gold or silver is used. This is only possible when there is a global Ponzi scheme correlated exclusively and only to the debt bubble. The market is not real and does not respond to reality. The market is a massive debt bubble and responds to debasement, being debased at 7% a year since 1966. If we had silver and gold money this would not be possible. The Fed, not the public or politicians, control stocks. As long as the Fed is in control, which Bernanke says they are, it’s all up.  Yellen said the Fed has it right, never a collapse ever again. The fake debt bubble will ALWAYS be re-inflated forever. Go long stocks, get the free “money” which is computer credits, printed by the Fed for free. Like Marty Zweig would always say on Wall Street Week, don’t fight the Fed. It’s all just a game but what a game. Good luck to us all.

Feb. 20, 1:24 p.m.

“I will never endorse a candidate…”
But you are getting more explicit and even a little belligerent re: dems, in your tweets.  Yes?

Page 1 of 2  1 2 >