We have seen “flash crashes” from time to time. We first saw the entire market flash crash 1,000 points 2 years ago and since then we have seen it many times in individual stock issues. The latest was yesterday with two utilities (you know, the widow and orphan stocks) NEE and American Electric Power. These dropped over 50% in less than 1 minute and wiped out roughly $60 billion worth of market cap during this “1 minute”. No one (except of course those whose stop losses got hit) really seems to care…because the stocks mostly recover and “normally” end the day down only a few percentage points…”so what’s the harm?”
“One of these days” (as Jackie Gleason was fond of saying)…the flash crash scenario will appear and not be “repaired.” One of these days a flash crash will happen, all at once with everything you own and everywhere you look! It will be stocks, bonds, commodities…everything…everywhere. Yes, yes, I am being overly dramatic again. But think about it, why wouldn’t it happen? How can it even not happen? With the backdrop of a banking system that is flat a**ed broke and sovereign governments over levered and staying afloat by just printing money, how can a total collapse of everything financial not happen?
But here’s the thing, while nobody really cares about it now, what will happen when we a flash crash isn’t so “neatly” repaired? What happens when a company like IBM or International Paper or McDonalds gets smashed and …well…doesn’t just bounce back to a small loss on the day? Do you really want the answer to this question? Can you handle the real truth? When and once a company that is as large as IBM, as plain vanilla as International Paper and as commonly visited as McDonalds gets “flash crashed,” people are going to start scratching their heads (they should be already with the latest 2 utility companies today). Do you see what I am getting at here? With no news at all, a major company and pillar of the economy can lose 50% or more of its value in 1 minute or less? How is this even possible in the real world?
…And this is something that instills confidence? …In a world that runs and goes forward only based on “confidence?” Whoever is running this show has and is definitely leaving some loose ends to flap in the breeze. If I was running a scam or a Ponzi scheme like the current one I would surely never allow stupid mistakes like a utility company to lose 50% of its value in 1 minute or less to ever happen. Even the densest of the bunch will ask questions and more than likely exit the game.
It’s as if they are “testing” to see how stupid or gullible people really are. They lower interest rates to 0% and watch to see how many leave their money in the bank. Then they allow rogue trading programs to decimate supposedly “safe” stocks that people have been goaded into buying because there is no “income” anywhere else. Do they not think that even Fred Flintstone and dim witted Barney Rubble can’t figure out that gold and silver that pay no interest are better choices than Dollars, Yen, Euros or Pounds that also pay no interest? I get it, they want people to spend their money but some people just won’t do it as they have a “saver” mentality. The need to get velocity turned up. They won’t get it with a weak economy and scaring the wits out of people.
People are not stupid. Sometimes they may be a little slow but, once they know that they’ve been had…they won’t play the game anymore. And this is where we are headed. People only need to see so many flash crashes of “names” that have no business flash crashing and Joe farmer and his wife Jane will not play the game anymore. They will decide using common sense as follows…I can’t get interest in banks, I can’t get interest in bonds, I thought I could get interest in utilities but…but…but I just heard of one that dropped over 50% in 1 minute…forget about “return on capital, I just want return OF capital!” Yes, via “policy” the owners of the casino are telling you to exit and then immediately purchase precious metals.
Laugh or boo or whatever you’d like, this is merely human nature. I’ve seen it a thousand times during my career, people will not put up with the bull crap of flash crashes in things that they invested in thinking that they are “safe” in the first place. These are not people who were looking to “shoot the lights out,” no, these are people who worked their butts off to save money and don’t want to lose it. Yes, they would like “some” interest but too bad, that’s no longer available…
So, do you see where this leads to? “Where” exactly that any person with half a brain will end up putting their money? You know, the person who has given up on making interest and is only concerned with “return” of capital or in other words retaining value or purchasing power? Yes, that is correct. Exactly where TPTB have and are trying their damndest to scare you and everyone else away from, precious metals. The harder they try to scare people away, the more they are luring people in with “policy.”