Shanghai Expo or Stock Market Rally: Which is the Bigger Richer Party?

Tonight we’ll be up on the 50th floor of the new Pullman hotel with a spectacular view of the Expo running along the Huang Pu River for the opening ceremony of the Shanghai Expo. The mania and money in Shanghai is a sight to behold quite reflective of the economic boom energy and riches in the air all around and knowing the Chinese, the event will be as impressive as one could imagine and more. Yes the rich are richer than ever and while that’s nice for them, it is also a stark reminder of the fragile state of global economics.

Bearish analysts seem to keep mistakenly discounting the fact that there are plenty of people out there in both China and the United States with plenty of money. They’re spending it. They’re enjoying their lives. The “have nots” are suffering and struggling more than ever. More importantly, approximately 100 million Americans have joined the ranks of the struggling “have nots” which is a fundamental and deeply disturbing shift in the state of the American society and culture which includes 40 million Americans on food stamps. Authors such as Nicholas Taleb and Malcolm Gladwell eloquently remind us of the power of random probability much more so than we wish to believe. Simply being in the right place at the right time or wrong place at the wrong time along the time line of happenings in the society around you is completely out of your control, an uncomfortable but not new reality.

Rallying stock markets facing a myriad set of unstable conditions doesn’t make sense to most. While the financial underpinnings of European Union collapse, airlines feeling a 2 billion dollar loss from the volcanic ash cloud and an assortment of other powerful instabilities have markets teetering on the edge of the cliff, the markets and media simply slap on the blinders and manage the news. It just doesn’t make a lot of sense until you understand why. It’s their game, not everyone’s game. Who’s game do you think it is? They designed it. They make and modify the rules to suit their own interests and they are playing it. Do you expect to understand when you don’t even have the rule book? Wall Street, with GS leading the march, has become not much more than a private club and playground for the power rich, a symbol of all that both wonderfully good and miserably bad about capitalism and free markets. Be careful out there.

Expect market volatility to increase in the coming weeks and don’t forget to laugh every time another advisor says for the 10th time “we’re really overdue for a pullback here”. We’re happy to see that yes, gold is lining up with the dollar as a safe haven asset as the financial instabilities unravel. There are many who would also like oil to be even more of an asset store than it is but that will drive the price of oil up which in my analysis, the fragile world economy cannot afford. The scenario of rising interest rates worldwide continues.

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