Says Alan, “The Herd Is Restless”

“We herd sheep, we drive cattle, we lead people.
Lead me, follow me, or get out of my way.”

― General George Patton

“Greetings from Maine while out land yachting!” writes in reader Alan F. Land yachting, also known as dirtboating, is the act of zipping across land in a wheeled vehicle powered by wind through the use of a sail. It is usually practiced on a flat stretch of beach.

“Aren’t loans,” Alan asks, “the bread and butter of the banking industry?” Then continues:

In my opinion, holding a portfolio of comparatively low interest loans will not nearly be compensated for by a rising spread of captive capital, especially as ever-savvy consumers are demanding a better return on their money. The herd is restless.

We’re pleased you took the time while out landing to write to us… or consider our thoughts on banking…

Click here to learn more

The herd… We’re restless. (Source: nzgabriel)

Today, the markets are writhing slightly downward. The Dow is about a half point low. The S&P and Nasdaq are humming about -1%. In other words, still sideways more or less. With some anxiety.

“On the plus side,” says Nick Colas of DataTrek Research, “corporate earnings season may help investor confidence somewhat, just given current oversold conditions and reduced expectations. That should help equities keep their footing, but until we see 2-year and 10-year yields start to decline we think traders and investors should remain wary of expecting too much from this rally.”

The 10-year Treasury yield jumped to 4.1%. And we at the Agora Companies shake our heads again at volatility. Investor confidence is always a beast, and a clumsy one at that.

“You have this phenomenon going on,” comments Agora founder, Bill Bonner. “You can’t analyze it the same way you can analyze a financial cycle because it’s largely psychological. It’s group think. It’s a collective impulse.”

Our guest this week on The Wiggin Sessions, James Howard Kunstler, calls it “Mass Formation Psychosis” or simply, if less eloquently, “mind-f*ckery.” Kunstler explains:

The idea comes from Dr. Matias Desmet, who is a clinical psychologist and a statistician from the University of Ghent in Belgium. The cause of “Mass Formation Psychosis” – I’m paraphrasing– is a society in which people feel terribly disconnected and suffer from terrible anxiety. And that predisposes them to be psychologically manipulated.

I would say that the source of middle class anxiety is implied by the Long Emergency. They apprehend that our economy is in trouble. They apprehend that the middle class is in terrible distress. They’re terribly worried about where this is taking us, and they can see a lot of disorder, destruction and terrible problems ahead. But their anxieties are not being articulated by our leadership.

To reiterate à la Alan F: The herd is restless.

We remember having a conversation with the producer of IOUSA ten years ago. Her name was Sarah. She said she’d read our material and it started to jive with her own thoughts. “I knew something was wrong,” Sarah told me, a Canadian transplant to Los Angeles, “but I could never put my finger on it.”

“You end up with a situation where empires inevitably go bad,” Bill Bonner summarized. “Then you look to try to find out how they’re going bad, why they’re going bad, when they’re going bad. And that’s what you do. And you still don’t really know, but you can see the patterns repeating themselves.”

It’s the money. And when the money goes bad, people move to the extremes.

Addison Wiggin

Addison Wiggin

Addison Wiggin is founder and executive publisher of Agora Financial LLC, an independent economic forecasting and financial research firm. He and Bill Bonner began writing the firm’s flagship Daily Reckoning in the midst of the tech boom and bust. It was one of the first widely distributed email newsletters on the Internet. The publication’s critical eye on finance and economics continues today. He’s also creator and editorial director of Agora Financial’s daily missive The 5 Min. Forecast.

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