Dear Diary,

The Dow fell hard on the first real day of trading in 2015 – down 331 points, or 1.9%.

And US crude oil fell below $50 a barrel, as pumpers kept on pumping to try to keep up with their debt service costs.

We don’t know if this heralds bad things for investors in the year ahead. But it reminds us that, in the struggle between Mr. Market and Ms. Janet Yellen, Mr. Market will have his way – eventually.

Most likely, the “buy the dip” reflex of last year will assert itself again.

US stocks will go back up. For a while.

But they must go down sometime. And when they head down in earnest, Ms. Yellen will panic. She will promise investors more money… and set the stage for the final act of this economic tragicomedy

The Road to “Hormegeddon”

“Marx was right,” we explained at a dinner party last night.

“What must happen will happen. Macroeconomics and politics are path dependent. Once on the road to ‘hormegeddon’ you don’t get off. There are no ‘solutions.'”

This view proved as unpopular in Paris as it is with our own dear readers. Objections followed. We are a clever race; surely we can find our way out of our oversized debts without a crash or depression.

Larry Summers thinks so. He and 5,000 other economists spent the weekend in Philadelphia, offering diagnoses and prescriptions.

Oh, dear reader, what an opportunity. So many economists in one place. The quacks were heard as far away as Baltimore and New York.

Larry Summers said he foresaw a long period of stagnation in the developed world. But he felt that this was an economic ailment… like psoriasis or ADD… and that he was qualified to treat it.

Other economists disagreed. Summers’s diagnosis was wrong, they said. The developed nations were not in a prolonged period of stagnation. Thanks to the drugs already administered by others of their métier, the economy was recovering.

Another great triumph for man! Mission accomplished.

The Truth Behind Abolition

“Mankind has been able to surmount enormous problems,” replied our Parisian host.

“Take slavery. It was around for thousands of years. But in the 19th century, people came to realize it was not honorable or just. By collective and conscious action, slavery was eliminated.”

“Ah, but you are wrong.” (We were ready for him.) “Slavery was not abolished because man was suddenly more enlightened… or more Christian. It was abolished because the Industrial Revolution made it no longer profitable.

“People had, as you say, thousands of years in which they might have done away with it. They did so only when it was convenient. That is, only when it no longer paid.

“You can see that by looking at the history of America’s War Between the States. Slavery never paid in the northern states, because the land doesn’t lend itself to large-scale field crops.

“So, the northerners were mostly against slavery. It was a righteous and uplifting opinion the Yankees could hold at no cost to themselves.

“In the border states slavery barely paid. The cost of keeping slaves was high. They could easily run off to the North. So, people had mixed feelings about it.

“That was true even in Virginia, where Richmond was the capital of the Confederacy. Robert E. Lee freed his slaves – partly out of high-mindedness and partly, we suppose, as an economy move.

“But in the Deep South slavery was still a profitable way to grow cotton and tobacco. If you were opposed to slavery, you had to give up the opportunity to run a large, profitable plantation, with a huge mansion and lavish Scarlett O’Hara parties.

“Naturally, most people were in favor of slavery there.”

What Goes Up…

Our dictum: A man comes to believe what he must believe when he must believe it.And today, if he is a conscientious, right-thinking citizen in a developed economy, he must believe six impossible things before breakfast and another half-dozen after dinner.

He must believe that 5,000 economists crowded into a hotel in Philadelphia can do what no single economist has ever done: improve an economy.

He must believe that money can be created out of thin air… dead presidents brought to life by electronic shocks… and that this money can make other people wealthier, if is it distributed correctly.

He must believe new wealth can be created with neither sweat nor savings, but by the grace of monetary “stimulus” and enlightened central bank management.

He must believe that he and others can borrow to their hearts’ content and never have to pay it back.

And he must believe that markets go up… and never come down.

These things cannot remain true forever. But will they appear to be true in 2015?


If that is so, should an investor forget the truth?

Tune in tomorrow.