- By Bill Bonner
Is Donald Trump broke yet?
We don't know. But at the end of the first quarter, investors held about $24 trillion in stocks. Now, stocks are down about 10%...leaving the rich $2.4 trillion less rich.
Good bonds have generally gone up. Junk bonds have gone down. And real estate? It takes longer to react. Real estate is not 'marked to market' immediately. Prices are discovered slowly.
The 'wealth' created in the Third Stage of this boom was largely phony. It came as the Fed pumped counterfeit credit into the system. Under-priced credit gave the gamblers, schemers and cronies the wherewithal to manipulate markets and bid up their own assets.
All that whining and complaining about how the 1% were getting rich...
All those calls for more regulation and redistribution to solve this 'problem'...
All that claptrap about how capitalism always made the rich richer and the poor poorer...
All a total waste of time and a fraud. Capitalism is innocent. This was an inside job - a crime committed by the cronies and their enablers in government. It was their way, not only of giving themselves trillions of dollars' worth of other peoples' money, but also holding onto the power, status and wealth they've accumulated over the last 3 decades. They have no more interest in solving this 'problem' than a wolf wants to solve the problem of too many fat sheep.
But don't worry. A real bear market will take care of it!
Yesterday, the Dow bounced up more than 400 points...and then reversed in the final hour, ending the day down 204 points. Who knows where it will go next. But markets rarely go anywhere in a straight line. Instead, like a cat with a mouse, they toy with investors before administering the coup de grace.
Some readers were disappointed that we didn't get our Crash Alert message out sooner. But it's not a trading signal. It warns of a 50% crash...not a 10% sell-off. And if we are right, we are just at the beginning of it, not the end. What you've seen so far was just the cat's first pounce.
Besides, our readers shouldn't be trading at all...and certainly never on the basis of an indicator like this - even if it is our own. It is just one of many different ideas, analyses, and research that you should use to form your own opinions and make your own investment decisions.
And remember, this is the Great Zombie War. It didn't start last week. It won't be over this week. The zombies, their allies the cronies, and their enablers in government are all fighting to protect what isn't theirs...that is, they want to hold onto their ill-gotten gains. They won't give up easily.
The rich got richer because the fix was in. Since 1987 central banks have used their power to keep asset prices up. From an economic perspective, it makes no sense, of course. Central banks have no way of knowing what assets are worth. They have no real reason to want to see stocks more expensive. The market is supposed to 'discover' the correct price; they're not supposed to be rigged by professors of finance appointed to the Federal Open Market Committee.
But like marijuana in college: everybody does it. Here comes the Bank of China, working hard to rig the markets of the Middle Kingdom. Bloomberg:
China fell back on its major levers to stem the biggest stock market rout since 1996 and a deepening slowdown, cutting interest rates for the fifth time since November and lowering the amount of cash banks must set aside.
The one-year lending rate will drop by 25 basis points to 4.6 percent effective Wednesday, the Beijing-based People's Bank of China said on its website Tuesday, while the one-year deposit rate will fall a quarter of a percentage point to 1.75 percent
But the cronies love it. With the bid from the federales under the market, the rich - owners of assets - could take chances and grow richer. They figured they couldn't lose.
That's how The Donald got so rich - making big bets on rising property prices.
Trump has gone bankrupt 4 times. You'd never want to trust him with your personal finances. But he might be just the man to head the US government. He's got the experience we need in Washington!
Trouble is, just when Americans are looking for someone with the Midas Touch, Mr. Trump's fabulous fortune might turn from gold to dross. His public disclosures are thin. But his business practices - big bets, high leverage - are well known. At the bottom the last crisis, he was said (by us) to be 'the poorest man in the world,' with a net worth of MINUS $100 million.
Who knows what will happen when we get a real crash. Mr. Trump might have to declare bankruptcy a 5th time!
When this sell-off intensifies Mr. Trump, Wall Street, the 1% and the rich, generally, will all lose money. The feds' fictitious capital will go back where it came from - nowhere. The rich won't be so rich...and the poor (relatively) won't be so poor...and all the people kvetching about the unfairness of it all can go back to updating their Facebook status.
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.