The Farce
A couple of months ago one of my closest friends in the business spontaneously described the financial markets as “The Farce.” I took to it immediately and from that day on pretty much every morning our first conversation over Bloomberg begins with “so how’s the farce today?”
Long time readers know that I am under no illusions that the markets were ever “free” in our investment lifetimes. Let’s be real. A small group of 12 Central Planners determine the most important price signal in the economy, ie interest rates. They admittedly use this tool to manipulate behavior and markets. So in some ways the financial markets as long as we have had fiat money and the Federal Reserve has always been a farce in the near-term.
That said, the prior farce is very distinct from the current farce. At least in those days interest rates would manipulate behavior but beyond that basic macro backdrop the Central Planners allowed markets to generally do whatever they wanted until in their infinite wisdom they decided to pull the plug. Ever since the banksters blew up the world in 2008, our Central Planners clearly made a decision that a new playbook was needed. They needed to manage markets much more aggressively in order to “save the system” and restore confidence to the ponzi scheme that is the global financial system. This increased manipulation was obvious to anyone paying attention in the markets, but investment managers were so terrified they justified it and largely continue to do so.
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