We argued on Monday that now everybody is expecting a bear market, it’s unlikely we’ll see one arrive anytime soon.
In fact, with everybody on the bearish side of the boat, we think one final, painful, cathartic hurrah may be in order. A meltup – before the meltdown.
The US stockmarket (S&P 500) is now pushing up against 2,940, a summit it has struggled to hold on multiple occasions. Bloody October last year and the more recent Cold War intensity in Spring and late July ruined investors’ appetite, but now it looks like they’re hungry once more:
Source: The Market Ear
(Click to enlarge)
With high-risk investments like bitcoin holding the $10k level (and the broader altcoin market bouncing today), I’m becoming more confident we’ll see a sharp and sudden move higher. Jerome Powell’s statement at Jackson Hole today may be the catalyst for such a “bloodrush” – let’s watch.
In the meantime, let’s have a look through the mailbag (your thoughts on my scribblings always welcome: [email protected]).
“A damn shame”, a “****ing waste”…
I have long believed that the problem with bureaucracy is its lack of incentive – or rather that the only incentive is to ensure your department becomes ever larger and more complex; this being the only way you can ensure yourself more salary, resources and thus power.
To my mind the answer is a return to the system (or a modern equivalent) that pertained to the British Navy of the C18th and C19th. You might well have been impressed, forced into the force, but you fought hard.
Certainly the ‘negative’ incentive for doing so was the possibility of capture and/or death, or at the least a flogging, if you didn’t. On the other hand, everyone down to the powder boy got prize money if you won.
As suitable incentives today I would suggest a percentage of any monies saved on a project successfully and efficiently completed. Instead of funds withheld in the next funding round, if the annual allocation has not been fully spent, some should be retained for the next project and some should be disbursed in bonuses to the staff.
However, should work be done poorly or in a defective or negligent manner, the culpable staff should be fined or, in extreme cases, dismissed.
I am aware that the suggestion may be considered shocking, but it is symptomatic of public service that it expands and simultaneously is inclined to become less effective.
I really feel for those public servants who desire to do a good job and expend economically the taxes with which their fellow citizens provide them, but find the effort to do so is like trying to kayak up the rapids.
Bureaucrats are frequently vilified (including – I’ll admit – by me) but they have little chance of reform until rationality – “common sense” – is brought to the system.
I, for one, would welcome the introduction of flogging as a punishment against bureaucrats found abusing taxpayer funds! But all joking aside, it’ll be interesting to see if the rationality referred to by the reader is injected into the system when the alternative is to become a vassal of a greater power.
Imagine if cabinet ministers were pressed into service…
My thoughts on ramping up military spending:
What a ****ing waste!
Imagine if the world had learned its lesson in 1945 and had instead spent since then all its military budgets – cumulatively gazillions in today’s money – on education, R&D, renewable energy, recycling materials, tackling global problems, building beautiful buildings rather than blowing them up… Imagine what that world might look like now.
Is it naïve of me to think that our countries would be better off if we had fewer ambitions overseas? If we simply traded with resource-rich countries rather than regime-changing and invading them? If we spent less on disastrous military adventures, and more on teachers and schools? We could start, right now, by ending the crippling sanctions on Venezuela and buying their oil and accepting that, hey, if Venezuelans want to vote for a socialist president, it’s none of our damn business.
The West complains about “Russian aggression” but it was the western allies that sponsored an invasion of Russia no sooner than WW1 – the war to end all wars, apparently – had ended. It is the West that has been positioning troops and missiles on Russia’s borders, not the other way round. Is it any surprise that Russia is hostile to the West, when you see how hostile the West has been to Russia? Mutual distrust is hardly a surprise in this scenario, but it is surely something that can be resolved by diplomacy carried out in good faith. If we could make peace with the IRA after decades of bombs, surely we can make peace with Russia, a country that has never attacked the UK.
Am I being naïve? I don’t think so. Remaining neutral hasn’t exactly been a bad thing for Switzerland – now the richest country in the world per capita. Meanwhile perfidious Albion carries on with her failed schemes overseas, and ignores the growing number of people sleeping rough on her streets.
It’s a damn shame.
While it may sound cynical, nations competing against one another for economic and military advantage has occurred all throughout history and won’t be going away anytime soon.
I’m sceptical that the government spending “gazillions” on “beautiful buildings” and R&D for the sake of R&D, would result in much other than a whole lot of white elephant projects. Publicly allocated capital differs from privately allocated capital in that those which allocate it have no skin in the game.
Don’t get me wrong, this applies to defence spending too. There are plenty of white elephant projects created by the military – in peacetime. But in a war or Cold War, when nations compete for survival against one another, military innovation leads to great advances in technology which afterwards can be brought into the public domain and enrich our lives. (I’ve a theory that the constant military threat that lingers over South Korea and Israel is why both countries are so technologically innovative, but that’s for another letter.)
The fact you can read this very email is a product of this military innovation. If the Soviets and the US hadn’t been at each other’s throats, the Advanced Research Projects Agency Network, ARPANET, would never have been created. And if we didn’t have ARPANET, we wouldn’t have the internet.
It’s for this reason that I am incredibly cautiously optimistic on the technological advances we’re going to see over the course of Cold War II. Hopefully we don’t all get nuked before we can appreciate the fruits of the gigantic military budgets the future holds.
That’s all for this week. Monday’s Capital & Conflict will be a little different from the usual – but in a good way.
Have a great weekend!
All the best,
Boaz Shoshan
Editor, Capital & Conflict
Category: Market updates