The Markets Have Become Casinos

Finance U Public Finance U
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Originally published at: The Markets Have Become Casinos – Peak Prosperity

Welcome to this episode of Finance U.

This week Paul and I discussed the fractured oil markets, Inflation, the AI bubble, and Gold and silver.

Oil markets, or should I say ““markets,”” are increasingly divorced from reality. Instead, the price for oil seems to be running on narratives vs fundamentals.

This appears to be the result of heavy-handed oil futures shorting by a very large player (wink, wink, who could it be?).

Price discovery has been replaced by price setting. However, the downstream products from oil such as diesel and gasoline are priced as if oil were ~$130/barrel.

Someday, we suspect, the price setting will crash into reality and the price oil will violently adjust higher. This will then drag long-term interest rates higher, which will be something of a double whammy for the economy and financial markets.

Iran has two powerful cards to play: the Strait of Hormuz and time.

All Iran has to do is wait the US out and let the eventual oil shortages work their magic on the US economy.

Inflation

The July CPI came in, and it was, as usual, a howler.

The BLS had the temerity to post that heating oil had gone down by -1.7% in July when the wholesale price had gone up by +35% in the month of July.

In this age of universal deceit, what data can we trust from the US government? Jobs reports? Oil data? Anything?

Government debt and monetary intervention, along with the possibility of oil shortages, could combine to create a second, potentially larger inflation wave. This would mirror the ‘double hump’ inflation of the 1970’s and 1980’s.

Everybody needs to be prepared for vastly higher inflation, as it seems unthinkable that the US government will do anything different from what it has always done and continues to do: deficit spend.

““Markets””

Markets are beginning to look more like casinos than mechanisms for price discovery. Bullishness is at extreme levels, valuations are at record levels, and the vast majority of investors seem to think these are permanent conditions.

Maybe. But it would be a first in history.

The AI boom is now mainly a self-reinforcing financial loop where companies invest, borrow, and commit spending to each other in a highly confusing circular fashion. When it becomes this difficult to figure out who owes whom what, that’s a red flag.

Paul recommends that people approaching or in retirement consider taking profits, building several years of income reserves, and avoiding the need to sell assets during a major downturn. Patience, he argued, is particularly valuable when market euphoria reaches extreme levels.

 

Timestamps

00:00 — Oil Markets Defy Reality
02:25 — When Narrative Replaces Truth
04:32 — Who Is Selling Millions of Barrels at Dawn?
07:10 — Algorithms, Passive Investing and the Casino Market
10:31 — Iran Has Time on Its Side
13:39 — Oil Price Suppression Meets Physical Shortages
16:58 — The Economics of Price Manipulation
20:60 — Diesel, Inflation and the Cost of Everything
22:17 — The CPI Inflation Reality Check
27:25 — Losing Trust in Markets and Government
34:21 — Debt, Inflation and the Next Inflationary Wave
38:19 — When Markets Become Casinos
47:23 — The AI Bubble and Financialization Machine
51:51 — Gold, Silver and the Next Bull Market
54:15 — Bonds, Rising Yields and the Yen Carry Trade
58:36 — The Financialization of Everything

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I think we’re all missing a key point of this propaganda producing administration. What’s actually happening is every time Trump, or other officials, float out a big lie, we see the markets respond. The algorithms are weighting these official comments as facts and trading accordingly. Trump isn’t talking to the public, he’s talking to the computers. We’re literally living in a Star Trek episode.

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Re: Casino markets.

I think there’s a certain element of that, but I have been trying to mentally digest the question:

What happens when someone has access to large sums of money, but none (or few) of your worldviews to the point that they are existentially opposed?

For example, I don’t think it would naturally occur to me to take well functioning businesses in society, get a bank loan collateralized based on the free cash balance of the business, then go in there, loot the business and sell it shelled out - yet for some people, this is not only possible, but desirable. In my mind, this is only a variation of piracy.

In video games, I’ve come across multiple times where there’s an “infinite money glitch”. Since our money is just debt (or future promises), is there a club of people who’ve figured out the infinite money glitch?

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I was going to make a funny AI picture of Chris and Paul but my son stopped me. He said “you don’t want to be that person who’s always putting up dumb AI stuff.” I’m listening to him.

Of course, if someone wants me to…

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I’ll watch the video later, but that recommendation has been on my mind a lot. I in addition to the conservative portfolio is some PSLV and PHYS. I know you, as in Chris is unable to answer the question, but maybe some others might have some thoughts on the metal “stocks”. @davefairtex thinks I’m a goldbug, but I still believe we have a lot more long term growth.

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What are you guys talking about? Health Insurance costs are down 33% over the last 4 years. /sarc

https://x.com/charliebilello/status/2087899486861369376?s=61&t=Mwt6vB5qMDygkHDLxH9PhQ

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I think ‘markets’ have been casinos for a long time. But now, the dealer is calling red and black just before the ball drops and only the dealer’s friends can move their bets while everyone else plays by “no more bets”.

Price discovery is dead. Price setting is in.

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Employer I retired from, this was actually a true statement. My corporate insurance went way down… at the same time the deductible and co-pay went way up. If you measured the insurance cost alone, yes it went down. Measured my cost in a typical year, they went way up. first year they did that crap, they presented us with several different plans. Several co-workers started working on spreadsheets to try and make sense of it running different scenarios. Bottom line, we were getting screwed, under the false pretense of saving us money.

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I gather that 1929 was kicked off on purpose because people/businesses had accumulated enough money so they didn’t need to be so dependent on banks. Well, that had to end by shrinking the money supply.

I wonder if part of the jist of the other thread is that $100 pcm is “trading tips” money, yet cards are played close on that score. $30 is great for a twitter summary and a familiar Sunday round trip through some stats on money, FX, vaccine injuries and yoghurt. But at $100, I would be disappointed. Sorry, but I would.

The UK “Commie Model” becomes self serving and bloated.
The US “Capitalist Model” becomes self serving and bloated.

How do we win? Any system is out for itself and its participants.

In the UK, anyone can go to a hospital and doesn’t need to worry about the money. You might just get treated like shit on a shoe though.

In the US, if you go you better have the kind of insurance that only the public sector or companies in the 70s offered. You’ll be treated like a prince (as the more on the bill the better) but, to the extent that you don’t have a gold plated policy, you won’t have a house to go back to. As I don’t understand it!

Ah. Here we are. Yes, there was a transition time. Probably from Boomer to Gen X. As the Boomers retired (having had all the gold) they enshittified everything so their pensions got maxxed and everyone else got shafted on their wages, insurance and standard of living. Boomers get to romanticise the American Dream and the “capitalism” that they experienced. Except it’s different now. It’s abusive and shit.

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As a late boomer, I agree …I weep for the debt and dependency burden we are gifting to our children…

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I love the “THIS IS FINE” meme on this one. I have a 3-dimensional wood carving version of that meme sitting right in front of my desk. It perfectly captures the current zeitgeist.

Those BLS stats, and Chris Wright’s recent statements about how much oil is going through the Strait of Hormuz (…NOT), are so Orwellian it’s hard to believe. That book was supposed to be a warning, not a @#$%ing instruction manual…

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What would Marcus Aurelius say is the intrinsic nature of “Markets” now? Pure Propaganda? Farts?

According to DeepSeek, the legs of the 3 legged Ding 鼎, and the 4 legged 鼎( which represents the Emperor’s Authority) represent the Assistants to the Emperor upon whom the Emperor relies.

I had thought that the 3 legs of the 3 legged 鼎 represent the 3 elements of successful governance, according to Confucius, namely, Food 食， Arms 兵, and Belief (or Ideology) 信。

In contrast Machiavelli maintained that the “Secret Sauce” of governance was “Good Arms, Good Laws, Good Fortune (Luck)”.

Machiavelli didn’t seem to recognize the importance of Propaganda…. The problem is that Propaganda can become disconnected from Reality….Propaganda is a 鼎 with wheels, but no brakes?

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This was a great call. I listened to it as I was mowing under my garden fence, putting down weed paper to cover with woodchips, and putting the fence back. (Premier1 electric chicken fence works fantastic for gardens and you can put it up and move it around easily - even a single woman - LOL.)

I have been thinking on so many of the things lately that were touched upon. I was on a work related call tonight where someone claimed that a decision a large company made was driven by the market and market-related. I laughed and told him to remind me to debate whether anything is driven by the market anymore with him when I next see him in person. I found myself then thinking more about not only how much I hope I get my garden infrastructure finished this year for next year, but also how long is it actually going to take me to pay off my house - and can I do it before SHTF or not. I’ve been looking at the price of silver thinking that I wouldn’t mind buying more, but also about whether or not I should be making an investment in energy by buying more shares of Dominion Energy. I received a notice about a stockholders meeting to discuss/vote on a merger with another big energy company. I was also thinking about the medical insurance thing because I feel like I pay out the nose and all I do is pay for that premium PLUS all my medical bills with the high deductible. All the discussion about lower premiums and higher deductibles. . . nailed it! But when I think about saying screw it, I already pay for my own healthcare. . . then something happens like recently happened in our family where my nephew was diagnosed with AML Leukemia at 37. I don’t know if he was vaxxed, but it’s a heck of a blow for a young man. Then I realized that I know another young man the same exact age who is fighting a stage 4 cancer, but he was most likely vaxxed. Since when do 30 something year old men get cancer like this?

There is so much insanity in our world today. Some days it’s hard to understand how to navigate all the stress, much less the medical and financial parts of our lives. I have so many awful stories about medical care in my family right now. I went to an appointment with my son to see his “treating physician” for a concussion he received back in October. Why workers comp would send him to see a physician just because they have a “certificate in sports medicine” and not education in head or traumatic brain injuries is beyond me. The stories I can tell. I will tell you that the insurance company refused to let him change physicians until I went on that appointment and started asking questions about this doc’s qualifications to treat a concussion, asked why had a referral to a neurologist taken so long, and what were they doing to stay up on the latest evaluation techniques and treatments for TBI’s. The dr didn’t answer my questions, but got up and walked out. Five minutes later a “nurse manager” came into the room and informed us that that doctor would no longer be treating my son and the appointment was over. So she fired herself just because I wanted to know her qualifications - because she wasn’t actually qualified to treat him. I’ve already been doing the research and footing the bill for alternative treatments. So when someone said it doesn’t matter what kind of health insurance you have or if you have universal health coverage or socialized health coverage because you might be treated like crap . . . they were 100% correct!

I keep saying this is a crazy world we live in. . . and circumstances continue to reinforce this. I’m not sure I would retain my sanity if it wasn’t for this tribe of people supporting each other here. All of you are the BEST!

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I used to spit ball ideas with an educated hillbilly friend on the topic of “Where America went Wrong?” (I like Hillbillies as they are Courageous.)

He seemed to be fixated either on “The Vietnam War” since he is a Baby Boomer; or, The JFK assassination.

I’m not sure…. One could probably throw in President Obama’s decision to adopt Propaganda and concomitant “Nudge Units”?

The great Michael Yon (Sobek) would probably argue that the Downfall of my once Great Country is probably the result of a decades-long subversion and Process War, like the clearing of the Native Americans in the 19th century?

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The great Michael Yon’s (Sobek’s) paradigm of very long, decades-long “Process Wars” bends the concept of “Knowledge” as it suggests that the “Elites”, whoever, of whatever “They” are, have “Known” for a long time, and, perhaps, “They” have always “Known” The Who, The What, and “The When”, and “The Why”?

If you think about it, it’s not really “Human”, and not really Of-this-World?

Sobek’s recent video re: “Track Down: End of the World” touches, obliquely on this Occult topic.

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My (English) Mum reckons that the decline of British Society started with the acceptance of and (generous) support given to teenage single mothers.

Then it was downhill from there as some parts of society realised they didn’t need to ever do a days work. Just get pregnant at or just after school. Jumping into the protective net of social security net, rather than falling into it.

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It might be interesting if Chris Martenson could get Bill Cosby on “The Show” to talk about how “The Welfare State” has affected “The Black Community”?

While in prison, Bill Cosby recommended to me a book about the Jazz artist “John Coltrane” entitled “Chasing the Train”. I read it.
If I remember correctly, John Coltrane got his break not from the insensitive, feckless Government, but rather from someone who was handing out free musical instruments to black kids. John Coltrane made his Choice: the Saxophone….

In the UK, doesn’t the word “Jazz” mean pornography?

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Only in the context of a porn magazine. You’d say a “Jazz Mag”. Mind, I’ve not heard it said since the 90s. Though porn mags probably started to dwindle after that. That’s probably why.

I don’t think it is anything to do with jazz music. It is probably related to the word “jizz”, which I will let you look up yourself!

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US 30 year bonds not looking well.

https://x.com/elerianm/status/2088019625388728607?s=12

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“Things we need will get more expensive. Things we want will go down in price.” = Inflation in expenses. Deflation in assets.

The worst of both worlds.

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