The Equation That Explains it All
Imagine you have just woken up from 2010 and been informed of the current state of global political affairs and upheavals, US employment, global currency gyrations, 0% interest rates, threats of escalating wars, threats of a major confrontational war, GDP of the major global economies contracting, governments (and central banks) with debt calculated in trillions (all financed at near or below 0%), the Fed about a week away from raising rates into what can only be called ‘uncertainty,’ and much, much more.
Nobody would be surprised if you were concerned that whatever portfolio or wealth you had in the markets may be worth far less today than when you went to sleep, and probably becoming ever smaller as you wondered what you needed to do in order to preserve what was left.
That is, until someone explained that the markets you knew when you went to sleep no longer exist, and the reality of the markets today you could never have dreamed up—even if they let you sleep another decade.
To clear up any confusion as to how or why the ‘markets’ can now be so fantastical after the resounding ‘no’ vote in Italy, where the entire EU experiment is now seriously undermined, below is the calculation that explains it all.
For under the rules of “if A = B and B = C, then A = C,” you have the magical formula to today’s ‘markets.’
St. Cyr concludes that even the term ‘casino’ may no longer fit. These ‘markets’ aren’t working on anything based on statistical math or economic expressions, or anything else related to understandable business metrics, such as a company’s value being based on net profits.
There’s only one word to explain how beholden the market is to repeating the above calculus. Einstein said it best: “Insanity.”