This week I have been calling people I have work with on a regualr basis and talking to them about the stock market.
The market is very broken. It is not working right. If it were a car I would say it is making a very strange noise a noise that tells us something is seriously wrong.
I have decided it is time to sell. Time to get out. It feels like Pompeii the week before the people became plaster casts for future tourist attractions.
For months and months I have had a dizzying sensation that I can only describe as ‘money going up’, leaving. It was as if a vacuum was being created on the ‘level’ for lack of a better word, of where I exist.
I translated the image in my intuition into a Google search, “where is the money going?” And indeed it is going away. You may, or may not, want to use the same search and read the first few pages. Those pages read like a poem of betrayal. The money is going away from the people.
And so now I hear a strange noise. A noise from the stock market. It is a grinding noise, one that tells even the most untrained that this machine, this vehicle is very very broken.
If you wish to understand how it is broke, if you wish to look under the hood, you will probably need to increase your vocabulary.
Terms you will need to get your mind around:
Credit Default Swaps: This is when a buyer of an ‘investment’ receives ‘credit protection’. Now the word credit here is really used to express RISK or DEBT protection. So lets say you were trying to sell me a big bundle of other peoples debt, like sub prime loans, or stock in a company that is not well balanced, and I said, oh, I can not buy that for my retirement fund, and you the seller would say, Oh, don’t worry about the risk, because we can insure the risk for you. We call it a swap because if we called it insurance it would have to be regulated and we would be required to actually have the at least a smidgen money to pay you on hand, so we call it a swap and we do not have to prove to anyone we can actually pay what we promise. So I say.. Oh! How wonderful the risk is insured! I will take two!
An interesting thing about Credit Default Swaps is that you do not have to have a real interest in what you are insuring. It is like I take out a life insurance policy on your husband. So I can place a ‘bet’ that a company will fail and I will profit. I can profit from a loss that I really have no stake in.
Credit Default Swap losses are in the trillions. I have to admit I have no idea, no usable concept of what a trillion is. Emotionally I understand it to be a very large number. A big number like a black cloud, about the size of the cloud that might have blocked the sun from shining on the earth and all the dinosaurs died. About the size of that cloud. That is my emotional understanding of a trillion. It is too big to be kind to creation.
Another term or practice to maybe understand is Over Night Lending. I call is Cash Spackle
This is the money that banks push around between each other so they are able to meet the minimum requirement of cash on hand, or companies use to make payroll. It is like spackle, it is used to patch cracks in cash flow. It is like Oil in the car, it smooths the movement of the money machines, like banks. For the first time banks do not trust each other to repay and now do not lend to each other. Without this oil, this overnight lending, the money machines are squeaking and seizing up.
Mark to Market, this term is about lack of true or known value. Value is usually based on what something can sell for. I have a 8 year old Honda Civic. It can be given a value based on recent sales of similar cars. So on my personal asset sheet I list its value at, lets say $4,000. But big banks are holding assets that have no known value, closed strip malls, vacant buildings, and who knows what else. But it gets more abstract than that. Like financial instruments, that are based on other instruments that are based on a concept of money or value. I don’t understand this exactly yet. But it is financial instruments many times removed from real value.
When you have time, pick a financial article and google the terms you do not understand. Don’t fall into confusion, increase your vocabulary and move with confidence past it.
And so I ask you, do you hear a strange noise? Is it time to sell?
If you close your eyes what do you imagine when you think of the Stock Market?
And please, don’t let the big boys confuse you. Expand your vocabulary, begin to learn the words they are saying and then you can begin to build an understanding to dance with your intuition.
