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2.25.2015 Financial Intelligence Report Bookmark

Social Bubbles

Mania’s and bubbles have been around for centuries. Probably the most famous one of old was the “tulip” mania of the 1600’s.  At the peak of tulip mania, in March 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble.  Basically what happed was that the Dutch had become quite wealthy via new trade opportunities and people had more cash than ever before. So when the rare flower bulbs first showed up, “everyone that’s anyone” had to have one to show how cool they were. There were many tales of people trading family farms and homes for a single bulb. Of course it all went terribly bad as all bubbles do, and many lost their entire life’s savings.

Social Bubbles

Mania’s and bubbles have been around for centuries. Probably the most famous one of old was the “tulip” mania of the 1600’s.  At the peak of tulip mania, in March 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble.  Basically what happed was that the Dutch had become quite wealthy via new trade opportunities and people had more cash than ever before. So when the rare flower bulbs first showed up, “everyone that’s anyone” had to have one to show how cool they were. There were many tales of people trading family farms and homes for a single bulb. Of course it all went terribly bad as all bubbles do, and many lost their entire life’s savings.

But what is important about that situation; isn’t that a bunch of people did something stupid…it’s that a “mania” had been created BECAUSE of newfound wealth. As soon as the living standard of the area got to the point where people moved from scrimping to support their families to a time where they had leisure time and extra dollars, they created “social bubbles.”   In other words, because trade through Amsterdam to the Asian countries has been so lucrative, the merchants displayed their wealth through big houses and vast flower gardens. When they started buying tulips, the masses tried to emulate them, and would stop at nothing to “make believe” they were wealthy.

The tulip mania is one of the more well known periods where people collectively went nuts, but this is NOT something new. In 1841 a book was published called the “Extraordinary Popular Delusions and the Madness of Crowds”. It looked at the phenomenon of people going nuts “en-mass” on a societal level. Examples were the economic bubbles, alchemy, crusades, witch-hunts, prophecies, fortune-telling, magnetisers (influence of imagination in curing disease), shape of hair and beard (influence of politics and religion on), murder through poisoning, haunted houses, popular follies of great cities, popular admiration of great thieves, duels, and relics, etc.

Because we all seem to think we’re so highly intelligent in this day and age, people look at the tulip mania, or the witch hunts or any other “mob” mentality as silly. It’s dismissed as something that only happened in years gone by, by less educated people. To that I say “Bullchip”.  In many ways our mob mentality- social media mania is not only alive and well, it is considerably bigger than any previous mass delusion ever witnessed.

There has always been an infatuation with Hollywood stars. There’s been musical “groupies” since the days of Moses. There’s always been a segment of the population that simply becomes engulfed in some fad or craze. But from where I sit, I see levels of it that border on the insanity of the Tulips. Consider the smart phone addiction. No matter how you slice it or dice it, when people without the means to really be buying 600 dollar phones find a way to trade it out  and up every several months as a new “iphone’ hits the market, there’s a mania going on. How many people do you see every day with their faces glued to those little screens? It’s uncountable. It’s everywhere.

 Many are the polls saying that a significant portion of our teens say they couldn’t live a day without their phone, with a disturbing number saying they’d rather be dead. I can’t tell you the number of times I’ve been to restaurants, only to see 4 people sitting in a booth, and each one staring at an LCD screen instead of interacting with the folks around them.  Can you think of one other product than the tulips of 1634 Holland that holds such power over the masses?

Consider the “selfie”. A selfie is a photo you take of yourself, or yourself with a group of people. At first it was simply a way of sharing a shot of your new “do” or outfit, it has morphed into a major driving force of our youth. Many teens say they take  15 to 20 selfies a day, and entire industries have been spawned over them. There’s now selfie sticks that hold the camera “out away from you” for a better shot. There’s software that helps improve the look of your face and skintone. There’s entire networks and companies based on storing and sharing these pictures. There’s web sites that charge a monthly fee for “consulting’ about taking the best picture of yourself.  Then of course we have the whole “sexting” thing, where everyone and their brother are posting or sending naked photo’s of themselves.

Is that not a mania? It most certainly is. While I think it’s perfectly normal and worthy to take photo’s at events like birthdays, vacations,  and holidays etc…. I tend to think that if you need to take 20 selfies of yourself and post them on facebook every day, you’ve got some issues. But yet it is the NORM now. Just Monday there was a headline on Business Insider that read…”.An Oregon man was fatally struck and killed by an Amtrak train as he posed for a selfie on the tracks”.  So this guy was so self consumed with taking a picture of himself to share with “all his friends” that he forgot the basics of “stay off the tracks??”  Are you kidding me  “Social media’ has become a bubble.

And the ramifications for not being “in” the social bubble are many and extreme. While I use facebook business for certain updates about the market, my personal page is a dying relic. I simply don’t use it. Yet when I say that to certain people they look at me like I just killed the Pope. They cannot understand nor believe that someone can go through their day or week or in my case months, without posting some worthless gibberish to my facebook page.  So powerful is the social craze that the incidence of teen suicide over not being popular on Facebook is at astounding levels.

So what’s it all mean in the big picture? In past mania’s it was generally tied to bubbles concerning the economy  as in the Tulip mania or the Mississippi mania or South Sea Bubble. But this isn’t truly an economic bubble at heart. People aren’t doing social media to show that they can “afford” a tulip, or the money they’re making shipping goods to Asia. This is much more self centered, like a giant “look at me” folks.  But with that comes some very unhealthy problems.

While some might argue that the only danger is that we are seeing people think they really have 200 or more friends, while in reality they might only have a true relationship with a handful of people they interact with. I don’t think that’s the biggest issue.  While it might boost their ego’s thinking a large mass of folks are their “friends”, and the reality of it not being true could indeed “damage” some folks, I don’t think that’s the biggest fall out. Likewise the lack of productivity experienced by virtually every company as employees sneak off to check their friends on facebook instead of producing the latest company report. We’ve been battling that since the advent of E-mail. Much higher up the food chain is the idea of cyber bullying. Even the meekest person who would never confront someone face to face can turn into the most vile of evil witch when sitting behind the comfort of a keyboard. Horrible things are indeed said about other people, whether true or not. So that’s obviously a consideration in this current “mania”.  

But to me the biggest issue concerning this social craze is the incredible lack of privacy people are apparently so comfortable to express. These people don’t seem to care that by posting about what they’re doing, where they’re going, who they like, who they disagree with, what they own, what they want, etc, is now out in the public domain. But not only that, the more and more that youngsters are conditioned that it’s okay to share every single detail of your personal life, they are always more accepting of “big brother” snooping on them.  That’s the part that ruffles my feathers.

Each time there’s a new video sharing company people flock to it and get all excited about posting their photo’s and video’s, yet they don’t tend to think a second about who might want to use that information for less than upright reasons. On one hand I literally laugh out loud when some “tough guy” commits a crime and then posts all about it on his facebook page or on his twitter account. The cops have been using facebook, twitter, snapchat, and dozens of other sites to hunt up leads and evidence for years. I think you have to be truly “algae stupid” to commit a crime and then post it on your social media.

Because people have been so perfectly okay with giving up their privacy, big brother and the Corporatists have wasted no time bringing out ever more products that will share your data with anyone that pays them to get it. Have you ever noticed that when you search for something on google, the next 20 web sites you visit have ads running on them for that very thing you searched? I was reminded of that again today, as I had built a custom kitchen island, and wanted to look for a place that would cut and ship custom granite. Over the past week, every site I visit has ads on it for companies that sell DIY granite.

It gets annoying, but that’s only marketing. They see what you’re looking for and then respond with places that will sell it to you.  Bothersome but not dangerous. However, lets say I wasn’t looking for DIY granite, but instead was looking for child porn, or women to cheat with, or ways to blow up buildings? See, someone has that search, and in the right hands it could present a big problem.

Along with social media being everywhere and at all times, we get into the “internet of everything”. This push to make everything we see or touch interactive with the Internet, is spawning products that should make everyone slow down a bit and think about the ramifications. Last month it was learned that certain Samsung TV’s now have the ability to listen to your conversations, record them and then ship them off to a “third party”. A 46-page privacy policy which is now included in all newly purchased Samsung Smart TVs states that voice recognition technology “may capture voice commands and associated texts” in order to “improve the features” of the system.

Now think about this for a minute. The TV’s record any conversations that it interprets as voice recognition for supposedly “better response” at finding the channels and shows you like. But it includes a camera for face recognition and logs a record of things you’ve watched, web sites you’ve opened and emails you’ve read.   Samsung says flat out that THIRD PARTIES will be able to view this stuff.

So lets say you’re having an argument with your wife. You say some ugly things, she says some ugly things. There’s a 3rd party that can review all that folks. Anything you think you are telling your spouse in the privacy of your own home is now no longer private.  Talk about big brother in your living room.

 Just this week we learned about a new “talking Barbie” doll that’s coming out in the fall. It comes with voice recognition and WIFI. The idea being that your child can talk to it, and it will talk back to her with some intelligence. The problem however is that everything this doll hears will be uploaded to the cloud and “analysis” done on it to “help provide a better realistic response” that’s meaningful and up to date.  Think about that for a second.  On the surface that sounds “oh so cool” but is it? It’s one thing to have your little daughter say hi to this Barbie and the doll responds with her name and a neat saying like “Hi Jasmine, thanks for playing with me today”. It’s something much different when you’ve just disciplined your child and she’s mad at you…so she tells Barbie “my mommy’s rotten, she treats me bad, she hates me”.  That’s going to the cloud. Other people are going to see it. How soon before child welfare shows up at your door to remove your kid from an “abusive” atmosphere??

Don’t get me wrong folks. I’m not against social media as a whole, in fact if not for things like twitter we’d never get any information out of areas where Governments don’t let people speak freely. Small business is a big beneficiary of facebook pages and the like. Used properly, it’s an exciting tool in a lot of ways. But unfortunately because of the “mania” of social contact and  this unnatural need for being connected “24/7” it has given the Corporate elites and the Government a look into every single aspect of your lives.

Lack of privacy is the single biggest problem we face with this social media,  24/7, smart phone bubble. It’s almost impossible to avoid at this point, so just be smart about things. Don’t ever post anything that you wouldn’t want seen by a priest or a judge comes to mind. As ever more people continue to share every aspect of their lives, you can bet Uncle Sam and the spooks at the NSA are going to willingly gobble it up. Don’t make their job any easier folks, guard your personal info…it’s all you really have.

The Market…

Yesterday and today was what used to be called the “Humphrey-Hawkins” meeting between the Fed chairman (woman) and the Congress. While decades ago it might have been a meaningful exchange, today it is no more than a public posturing by politicians trying to make a point about their pet topics.  But the market tends to listen in on these make believe meetings, hoping to glean some info about what the Fed’s might or might not do with monetary policy.

So Tuesday Yellen had her prepared statement and then fielded questions from the gallery. The take away was that “yeah, rates will be rising, but we’re in no big hurry to make it happen”.  That’s all that Wall Street wanted to hear and “boom” up we went to notch another all-time high in the belt.

How utterly ridiculous is it that after 6 years of stimulus, buy backs, work programs, bail-outs, zero interest rates and a dozen other gimmicks, the economy is still so fragile that a stupid 0.25% rate hike has everyone shivering in their boots? Very. But of course the lunacy runs much deeper than that. In a real world, the economy would have been left to crash, wipe out the excesses, place pain where it was deserved, and we’d have rebounded into a new real recovery. Instead, no one wanted to let anyone fail except the middle class. The banks and the Corporatists were well taken care of, which simply caused our Zombie economy.

I have to give the Fed’s credit where due. They are masters at pulling rabbits out of their hats. Just when you think they’ve exhausted every gimmick they can think of to keep the plates spinning, they come up with something new. Bravo.

I won’t bore you with all the details, you’ve heard them all enough times. Just suffice it to say that when 33 of 38 economic readings miss their estimates in the space of just ONE MONTH, you can pretty much guess the market isn’t where it’s at because of “smoking growth”. It’s there because the Central planners want it there.

I tend to think they’re going to play their charades until they’re ready for the next global edition of “Bretton Woods”  In other words when they give up on this current system knowing it has failed,  and “reset” things for a new economic system.

But for now this system is still in play, and when the final bell rang, we were up 15 on the DOW, an pretty flat on the S&P and NASDAQ. That’s pretty much what we figured the day might look like as they digested yesterdays push higher and dealt with Yellen.

So what now? Once again the market looks and feels heavy and tired. The volume is horrible, and except for the “individual” who continues to buy up boatloads of E-mini futures each time the market looks soggy (this morning someone bought 13 rounds of 500 to 800 contracts each time within 15 minutes. I can assure you mom and pop aren’t behind that)

I’m thinking we might gain a bit more into the weekend, but I don’t expect much. I think the market has some work to do here just backing and filling from the gains it has already gotten. But rest assured this market is skating on the thinnest of ice. We simply do not belong “up here”.
Good luck with your trading and we’ll see you all on Sunday.

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