Markets: How They Churn, Not Earn

Just sitting back in a moment of extreme cynicism this morning, after looking at the futures which are hinting to S&P 500 this week may close out around 2,075, plus or minus 20, I think we need to have us a discussion about “churn.”

Now, everyone knows what churning is in the dairy sense.  You take heavy cream (like whipping cream from the store) beat the snot out of it.  And at first you’ll get whipping cream.

But if you keep going, you will also get butter.  Toss in some food coloring and salt and…

In the financial world, churning is a little different.  A management firm gets a big pile of money to invest, and then then invest long or short in this, or that, and the market does its thing.

Except people don’t realize how easy it is to wrap investment policy people around their fingers, especially when done in a mahogany-line foxhole and immediately followed by a big dinner out or a delicious catered lunch.

When (eventually) the client wakes up to realize that they aren’t making what buying a shoebox full of bonds 5-years ago would have made, they then play something akin to client musical chairs.

The people who make out are the brokerage firms which front-run everyone, but because the SEC is too crooked to call computerized skinning of the client the same (net) as a human broker trading ahead of a client as criminal, everything goes along fine.

Churning is when the client funds go in and out, long or short, when there’s really no need to.  Again, the object is to make commissions for all the money people and for the clients, too bad.

So let’s say the S&P closes around 2,075 today (plus or minus 20).

Last week, we closed at 2,077 and change.

On July 24th, we closed at 2,079.65.

A little further?  How about April 17: 2,081.16

Well, then, how about December 5th of last year? 2,075.37.

Now the shocker.  September 1st, 2000 the S&P 500 was at 1,520.77.

Hold ‘er right there, Ure:  1,520.77 is less than the 2,075 you’ve gone off on.”

Well, no.  Because if you believe that my financially ignorant friend, you’ve been sucked into the fairytale that Wall Street, the Fed, Congress, and the White House all want you to believe.

Because when you use the authoritative Minneapolis Fed inflation calculator  (here, try it sometime).


So there you have it.  (This is the kind of stuff I tell subscribers about all the time, too…)

America – land of the brave, home of the free, which has listed to all the free-trade bullshit and torn down our borders has – on an inflation adjusted basismade a slight negative return on on the S&P over the past OMG FIFTEEN FREAKING YEARS.

Sure, there will be those who claim that “Ure’s wrong.  He doesn’t include dividends.”


I’ll include dividends if you include bankruptcies.  And if you include the one other reality the crooks in Washington and Wall Street conceal (CHURN:  Commissions times turnovers times fees), I think you’ll understand what  and how it is that America is now at an economic break-point.

When people are working harder, longer, and not getting anything additional in return, it becomes what the great sociologist Joseph Tainter describes as the “marginal rate of return on additional effort falls below zero.”  Historically, he notes, that’s when countries break-up.

So between now and elections, expect some “hugely useful crisis.”  Because without it, a revolution at the polls is likely and a few like Donald Trump are sensing the shift in the herd and are willing to give ‘em what they haven’t had for at least 15-years.

Socioeconomic honesty. 

And if goes back 55-years if you want to talk poverty rates and 65-years if you want to talk about working households on one job-holder in a family.

The Magician’s Spell

Can be seen in Producer Prices just out:

The Producer Price Index for final demand advanced 0.2 percent in July, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices rose 0.4 percent in June and 0.5 percent in May. On an unadjusted basis, the final demand index moved down 0.8 percent for the 12 months ended in July, the sixth straight 12-month decline. (See table A.)

In July, the increase in the final demand index can be traced to prices for final demand services, which climbed 0.4 percent. In contrast, the index for final demand goods edged down 0.1 percent. Within intermediate demand, prices for processed goods moved down 0.2 percent, the index for unprocessed goods fell 2.9 percent, and prices for services advanced 0.2 percent.

You will notice how very assiduously the most dangerous word in the world was not used?

Allow me to elucidate:  What’s a word that describes the conditions where :”the final demand index moved down 0.8 percent for the 12 months ended in July”?

Here’s the word…  DEFLATION

But wait, how bad can it be?

Well, over here at the Federal Reserve website H.6 Money stocks report, we see the include in unadjusted M2 in the past year has been what? 5.77%/.

Now add up 5.77% (monetary inflation) plus falling producer prices of .8 and you can see where the real deflation problem is on the order of 5.6% and yes, that in a nutshell is why gold has gotten its butt kicked, too.

There.  Need even more hard reality?  Dow futures are down 40…so another churn ‘em and burn ‘em period lies ahead.  Emphasis on lies because if every since calculation about your financial life is not adjusted to the national theft of wealth called “inflation” you are just more meat for the lions.

New Hampshire Failing National IQ Test

Apparently there’s no outrage against political aristocracies,, nor is lying about classified emails a sin, according to the latest democratic polls out of New Hampshire where H. Clinton is still showing in the 30-some percent range.

The (sometimes right-leaning) Washington Times reports a majority of Americans now support a criminal investigation into her behavior.

The WT, though, obviously didn’t get the memo:  This is no longer a democratic republic, nor “One Nation under God” anymore.  Good grief, how could they have missed it?

It’s been in the headlines for years.  Illegals are legals in sanctuary cities, gender bending marketing is promoted in single-digit classrooms, and voting machines are still not sufficiently robust.

So a tisk-tisk to the Washington Times this morning for daring to report that the majority of Americans are questioning the paradigm. 

Trust me:  A new “national crisis” will be along shortly.  The Aristocrat Party (which owns both sides of Congress, too) will stomp on anyone (like Trump) who rocks their boat.

Which is why is is so important that New Hampshire continue to fail the National IQ test.  They’re doing a fine job of it, so far…

And with a campaign fund larger than many city budgets, Hillary ought to be able to buy her way out of whatever charges are leveled with enough left over to fool additional states as well.

All in favor of  English language only IQ test in  order to vote, say aye!

All those in favor of restricting voting to only those people who filed a tax return, say aye!

Drought to ‘Depart?

USA Today is hinting at a major weather pattern shift that could bring massive rains and mudslides.

Here’s a worse problem:  Look up the research on active fault lines and the word “lubricity.”  Seems a year or longer after massive rains, the water works down and lubricates what?

Justice Delays Is…

…justice denied.  So this story of 13-years for a crime he didn’t commit goes in that folder.

Not that this has anything to do with for-profit prisons, but I wonder sometimes.


Markets: How They Churn, Not Earn — 1 Comment