By Jaime Ortega.
How the underground market will collapse the stock market – an alternative view
Most economic analyst mention how risky securities and cheap fiat currency creation will doom the financial markets through speculative trading. I myself believe derivatives will play a major role in creating major market dislocations that will make the bond market and the US Dollar falter on its artificial obligations as interest rates continue to rise over 3% and alternative foreign markets players securitize their currency with collateralize assets and new investments. But there’s another creeping monster that lurks the financial markets underestimated and rarely mentioned in most financial mainstream and independent channels that will be a key player in the next collapse.
Demand and supply create market pricing through equilibrium points in micro economic terms, which grant consumer goods a value which can be sold in a major exchange. Throughout the years, major corporations have created exchanges to understand the performance of their assets based on different average composites. Banks then sell these contracts in the form of options, futures and stocks, and find investors in hedge-funds who will participate in new bull markets where they will swap interest rates with insurance at modest premium payments.
Over-infatuation and greed, keep investors reselling long term and short term contracts with or without securitization with high and low default risks to turn them into profitable paybacks. As interest rates rise, borrowing becomes more difficult and small business start to slow down production cost as cash inflows stagnate. If demand is high, they raise prices as the economy becomes expensive, but fewer goods are sold relative to lower prices. Now the super-wealthy – the one percent who owns over 70% of US asset — might be under the preconception the average Joe is having a hard time participating in a market were the rule of market value determines the price of goods and services, but that assumption could turn into a fatal miscalculation on behalf of private banks and other hedge-funds.
Before I start with my points, I want to create new definitions for the economy. 1) Prime markets is what I consider to be part of major exchanges. When a regular retail store sells IPhone in its store, the price set by national demand represents part of these prime markets. 2) An IPhone sold at market price is what I consider a Prime-Good. Prime goods are sold in prime markets at market price. These prime goods are the result of what cause inflation in asset prices. These two points are where Fortune 500 companies invest billions of dollars to expand liquidity, representing the balance sheets of most major players in Wall Street. Wall Mart, is an example of a prime-market corporation that sells prime goods and participates in a major exchange.
Now these prime markets during times of inflation and slow economic growth give rise, to what I call Under-Markets-Values or UMV’s. UMV’s are the absolute nightmare of corporate America and the IRS. UMV’s represent modern day mercantilism and will doom modern day corporatism like a toxic disease without symptoms. In the movie “War of World’s” the twist was humans did not kill the alien invaders, but bacteria, a smaller life form! These markets are formed slowly as unemployment rises, and the value of goods and services increase. UMV’s are any goods sold which bypass prime-markets and prime-goods to counter inflationary rates which are not regulated in exchanges.
Now what exactly forms the family of UMV’s?
The first I call erratic-goods. These goods derive from manufacturers but are sold at wholesale price, in a retail store. Erratic-goods bypass market value. For example, an erratic-good will be a Hershey’s chocolate bar sold at a 99Cent store for $1, while in Wall-Mart that same exact item is sold for $2.50 at prime market value.
There is also under-goods. These goods derive normally from small businesses which are their own manufacturers and can compete and take away from the value of regular prime market goods. For example, a chocolate bar called Barons is purchased at $1, whereas the well-known Godiva chocolate bar is sold at Wall-Mart for $4 at prime-good market price. Godiva helps increase Wall-Marts stock every time it’s sold for prime-market value at the store, but its hurt when another under-good with the same quality is not sold in a major market where Wall Street investors participate.
There are also mirror-goods. These goods derive from mostly foreign-manufacturers which mimic a specific good or brand, and are sold for a much more affordable price during times of recession. These generic goods are cancerous to many large financial participants, and are unregulated or regulated by the state. As an example, pharmaceutical giants like Pfizer and Bayern, are losing terrain to foreign generic companies which produce the same exact anti-biotics for an affordable price they can’t manage to compete against. It’s the same with perfumes and cologne companies in the prime-markets, they are losing stronghold to these generic companies who produce mirror-goods.
Now, there’s another set of goods which I call sub-goods. And these goods are very toxic to the major exchanges controlled by financial corporations. Now a sub-good is a good which is any good bought in a prime market as a prime good, but then resold in another alternative market for a slightly lower depreciation rate. Let’s take for example a guy who earns low income buys a polo shirt in a retail shop that cost $60 at prime market value. He then wears the shirt, for 3 days, and because he is low in cash decides to resell the shirt for $50 to another interested buyer. Now that buyer keeps the shirt for 3 weeks and then resells it for $30 to another buyer. So the actual item passed through 3 different exchanges and totals the value of $140. So Asset 1 = $60, Asset 2 = $50 and Asset 3 = $30. It’s no different than the banking principle of Fractional Reserve Lending, but this time by Sub-Goods asset exchanges under UMV’s. An IPhone bought in A1 for $1000 might be exchanged over A7 times in its lifetime.
Now, inflation clearly affects lower income consumer purchasing power in major exchanges because these cannot participate in the exchange of goods and services sold at prime market value. If I earn minimum wage and the prices property is high among other sectors of the economy, I will hardly afford to purchase A1 Item, so I am way more likely to purchase that same item at A4 or look for an erratic good, an under-good or mirror-good sold in UMV’s to counter inflationary rates.
Now one, may wonder what this might mean to the economy. What it means is stagnant economies tend to move in different directions when monetary pressure, inflation and low borrowing rates are applied. Rational economics rules the underworld of consumerism as greed and despotism rules Wall Street. Today major corporations increase their supply inventory in demand goods, not knowing that a large portion of average consumers, will wait to obtain those goods as UMV’s. These create a massive problem, as demand goods start to surplus the inventory of most companies – thus why many mall shops keep closing down at record highs –it’s no coincidence. These surplus goods, don’t sell at inflationary market price, but sell in sub-markets were inflation is less noticeable. Under these circumstances, corporate balance sheets lose billions of dollars every year, so they have to invest money into securities and speculative assets as they cannot keep up competing with the more liquid UMV’s sold under the radar of Wall-Street. Such moves make demand to shift from prime-exchanges in wall-street into a form of OTC transactions for the average Joe that corrodes large company book profits.
Most Americans hardly own any assets, but the ones that hold little equity, own a larger amount of consumer goods than utility assets like cars or houses – cars and houses are mostly loaned, so these are liabilities and not asset for the average Joe. These consumers are exploring new venues to avoid inflationary prices, by doing so, they venture into unknown markets that Wall-Street investors cannot profit. This principle was exactly the downfall of the music industry in the 90’s.
In the 90’s, the music industry profited largely on inflationary cost set arbitrarily by investors which made music unaffordable for the average consumer. CD’s costed a lot of money, and the major record giants grasped a firm monopoly on the music industry without lowering prices – prices constantly went up on music records. When computers started to come with CD Writing technology, and NAPSTER came into the scene, UMV’s, changed the entire music market. A combination of affordable bootlegged mirror-goods and free downloads completely wrecked the profits of many record companies. The same can be said with the movie industry. This is exactly what is happening with most goods today –but the major difference is that UMV’s are taking over almost each sector through different online technologies– there is now alternative markets where goods can be sold for much lower prices to accommodate against inflationary curves.
That means that if one iPhone is resold to four different people, that same IPhone has taken the profit of 3 different Iphone’s sold by Wall-Street players like Wall-mart or the IPhone Store. If billions of these sub-assets continue the same trend above in different sectors of the economy, then overall loses of corporate giants will be humongous and eventually crash the stock market.
This is why alternative speculative assets like bitcoin were created. Just as bitcoin was created to counter fiat currency and the middle man as a rational response to regulate fiat currency, UMV’s are also destroying the asset base of consumerism sold in major Wall Street exchanges at current market value. The average consumer is moving away from consuming goods that derive from prime markets, and they are now shifting to UMV’s to surf inflation. UMV’s are anti-inflationary weapons of the average minimum wage consumer to navigate in times of slow growth.
Financial analyst in the market don’t understand the real bull market is now happening under the radar, not in major exchanges or OTC’s derivatives where manipulated interest rates keep major companies afloat borrowing credit to subsist. Unintentionally, Wall-Street has created a modern day bazaar system — a flea market of alternatives which will erode the base of corporate America. The rise of craigslist, e-bay, Amazon prime, Wish, 99cent store, Savers, Goodwill, Big Lots, and many other companies are going to doom Wall-Street players which are hooked with borrowing to purchase risky securities. Antiquated baby boomer corporate unrealism will fail to the real economy, a more fair market as we saw with the music industry. The average consumer is stuffed with credit to his guilds, and have the unique ability with UMV’s to one up the market every time they transact and trade bypassing the corporatist world hooked on the FED — Add to the equation crypto-currencies and the reemergence of alternative sovereign nations bonding and trading with new currency to smash the overhyped US dollar, and it’s night-night for Wall Street and its surrogates.
