(Back at the Ranch)  If you’re wondering why the market is about flat in the futures market this morning, it is because of a lack of news.

I have a theory of markets and news that is pretty simple:  Markets go where they will based on economics and returns on investment.  But the daily news gives markets an excuse to do things that are mainly rational.

Over the weekend, we saw a good bit of hand-wringing.  Stories like how a U.S. interest rate increase could “trigger a global debt crisis” and how Yale Nobel Laureate Robert Shiller says stocks are significantly overpriced and that raises the risk of a global recession.

You know this tune, I’m sure.  Mainstream thought wasn’t around back when our Peoplenomics Trading Model went short the week ending July 3…and yet now that the market is down 7.3% in our Model, along come the great headliners, which is fine, I suppose.

We’re waiting for data, too, after all.  And there is plenty of it this week.

For one, tomorrow will bring retail sales, Empire state, and industrial production numbers.  Which means we could get a kick up, or down, depending on those.

Then Wednesday, even before the Fed meeting/announcement on rates in the afternoon, we will see the consumer price index.

I hate to argue with great brains (like Shiller) but in my view of things, stocks are not overpriced.  If anything, they may be underpriced.

Here’s why:

Suppose I gave you $100,000 and said “Here, live on this for five years.”  How would you do it?

One approach might be to simply put it into a bank…a big one like Bank of America.  Unfortunately, a regular savings account there is paying all of 0.01% as of this morning.  Check my math here, but is that even a monthly cheeseburger?  Nope.

So we then look at bonds.

According to the US Treasury website here, as of May of this year the I series bonds were paying what?

I Bond Earnings Rate of 0.00% includes a Fixed Rate of 0.00%

As bad as that may sound, there is a key distinction now between a bank and the Treasury. Banks have been quietly changing their “terms of service” so that money put in a bank is no longer your money.  It is instead  a loan to the bank which means you loan the bank money which is slightly insane.

But, you see, it gets things ready for a Euro-style bail-in, although I’m hoping we still have a while longer before that shows up.  Like 18-48 months.  But, we shall see.

Now let’s look at a stable $200-billion class stock like, oh, Wal-Mart.  As you can see over here, the trailing (and forward) 12-month dividend yield is running about 3%.

With all due respect to the learned Harvard Professor, I’m not sure how Wal-Mart (and many other good dividend stocks) can be assessed as highly over priced when competitive money pays  (let me check here…) sh-t.

Money is like water.  It flows to places depending on relative yield to the money’s owner.

The Fed will make a decision on rates Wednesday.  But as long as stock yields are this far above prevailing interest at banks and fixed income products, there’s no great “over-pricing of stocks” so much as there is a “huge underpricing of bonds.”

So here are the three outcomes for Wednesday:

1.  Fed raises a quarter (25 basis points).  Markets panic as bonds drop in price as yield rises.

2.  Fed raises a tenth (10 basis points).  Market is stable, people (except us) scratch their heads.

3.  Fed hold steady.  The meme goes through the assembled multitude “Oh my God!  The Fed can’t even raise rates!”  As which point the market will collapse to our 1850 down to 1800-S&P level by mid November.

As a bonus, if the Fed holds and markets drop, the Schmita charlatans will claim victory, having confused greatly the difference between the Word of God and the Word of the Fed.

In the meantime, Asia was down a bit overnight.  But Europe is about flat and market marketers will prognosticate like crazy, using weasel-words so they are all proclaim their greatness.

We’ll just “run by the numbers” and laugh at the folly or humans.

Speaking of Folly

Kentucky Clerk Kim Davis Says Licenses Being Issued Without Her Authority.  Which is fine.  She is not the law of the land.

She is, however, entitled to her opinion, but doesn’t have the right to impose it on others.

People often get wrapped around the axle on things like this.  Hot, emotional, and so forth.  But The Law is what it is and it everything from great religious documents, we have only to look at how the Law is usually pretty good.

It matters little to us whether it is broken by some self-proclaimed expert in Washington, or a local self-appointed dispenser of values.

People who don’t enforce the laws as they are written, though, get called out in Kentucky more so than they do in Washington…which is a folly worth noting.

Media-Induced Dissonance

It’s a subtle thing, but the mass media has gone down a dangerous road, already hewn  by Congress.

You see, in Washington, one of the worst traits of corrupted democrazy is the “mixing of laws” which happens all the time.  A law comes along, like a border law, or whatever.  And a section is added having to do with house, something else on transportation, a directive on gas laws, a commemoration on this, and….well…you get the idea.  Eventually there can be several hundred items in a law, all having nothing to do with its title.

This is a terrible habit and impediment to clear thinking.  It’s like asking an airplane pilot to take off safely from LAX while at the same time having him or her control the freeway onramp signals on the 101 in Burbank.  The one doesn’t have anything to do with the other.  So let’s toss in making scrambles eggs at the same time, while we’re at it.

See how missions, roles, and all that gets screwed up?

I happened to look at Google News this morning and here’s how the media is screwing with your head, perhaps inadvertently:

image

The headline is about Trump and Carson.  But wait!  Who is that in the Picture?  Why that’s Bernie, isn’t it?

And this is how the Big Controls work.  Write Trump, mention Carson, show Bernie.  At least in this feed. 

If American Media was more objective,  and less supportive of comparative journalism, we would see more stories that a single candidate-focused and actually hold their feet to the fire on tough issues.  Like immigration from Syria where we know Obama’s number is 10,000 and we’re guessing Bernie’s number would be bigger.

But instead of positions, the mish-mass in media leads to dissonance and that is how America can (and has been) led astray.

Similarly, the way the media stream works, stories like “Cruz puts religious agenda over women’s liberties” show up in RSS feeds without the note on the source page that shows it is an opinion piece written by a woman who is an English senior…

Oh well…

Egypt Kills Mexican Tourists

The future of borders will be on the menu for Peoplenomics readers tomorrow.  So as background, not only is the Coping section this morning a must-read, but so is this bit about how Egypt kills people who are in prohibited border areas.

Coping: Dancing on the Edge of Anarchy, Trolls
Coping: My Calculator is My Sword