Organizational Modalities Indicates Probable Trends

When investment banks reorganized into commercial bank holding companies to take the TARP funds, they traded the alpha and beta risks for the gamma risk.

Being too big to fail and the highly leveraged, unregulated organizational type indicated the probability of the Great Recession (and the gamma risk) we are now experiencing long before it presented.

At the outset of the organizational changes made to bank regulation that allowed for horizontal and vertical integration of the industry and markets (networking the externalities), political economists who raised red flags were villified by both Democrats and Republicans as anti-free-market doommongers.

These political economists were merely identifying a technical indicator, an organizational typology: consolidation of industry and markets that, by recognition of the empirical evidence, always causes (indicates) the recessionary trend (and the necessary management of the systemic risk) we are in now.

There is a very clear cause-effect relationship. Getting to the Great Recession was no random walk.

The alpha and beta risk is so well commanded and controlled in the short and intermediate term by being too big to fail that the only probable risk is gamma. Managing the gamma predicts a merger (consolidation) of public and private function into an organizational typology with predictable trend indicators.

Macro sector consolidation to manage the sytemic risk immediately indicates that too big to fail is a confirmed efficiency to be conserved. This is the leading, trend indicator suggested by organizational type.

Intervention of the gamma risk will be managed co-operatively, indicating the recessionary trend will be long and slow with public authority now in a position to take the blame for the negative effects of the trickle-down economics of a consolidated capital.

The organized modality indicates a money flow. The flow is the relative trend, the probable path, of the economy. Since the organizational type necessitates a trickle down flow, the strength or weakness of the recovery will be determined by "control" of that flow. That is what this modality is intended to do--control the gamma risk intervention and the distributional value of the accumulation.

How the accumulated value is distributed determines what balance sheets and income statements look like and when. So the organized modality not only indicates the probable strength of the macro economic trend, but the valuations of sectors and markets over time. It has a market timing determinant.

Whether from the public or private sector, or both, command of the economy from the top down will have a mean frequency of both time and money. The small investor needs to keep in mind, however, the ability to be unpredictably arbitrary and capricious is not only an emblem of power but a means of technical manipulation.

Being able to dictate what the technicals look like tends to position investors to fall for false indicators.

In the short term epspecially, small investors looking for that technical hedge on the risk are easy victims to the law of large numbers. Flash trades and large volumes at the last minute of trading can present false indications. The frequency distributions can be arbitrarily distorted till the favorable condition for the consolidation presents for execution. While the short term indicators look noisy in retrospect, the long term may present as a normal distribution.

Organized consolidation of the capital allows for this trending by directive. Goldman Sachs predicting that energy prices will retrace record levels, for example, sets up a trage. It positions investors for surprising reversals all dependant on their position at any particular time.

While the aggregate position, the threshold, that triggers an execution to consolidate the accumulated value has the appearance of being a legitimately organized process of self-determination (a pluralistic, free-market mechanics), the director is always the probable winner with the risk almost entirely eliminated. Being "free" of risk is the stock in trade of hedge funding with a large volume of capital (the law of large numbers).

The law of large numbers can also act positively from the bottom up. It is a trend the current organizational mode does not indicate occurring anytime soon but would do much to facilitate the time of recovery. The money used to drive futures contracts at the top would drive the recovery from the fundament if it were used as liquidity at the root instead of waiting for it to inadequately trickle down, with or without a gamma risk intervention. The price of energy would then be fundamentally driven, but not at a rate that delivers that magnified, exponential hedge-fund return that entails high gamma risk and indicates support of the deflationary trend. Rather, the profit on the demand pressure very simply indicates recovery.

Goldman Sachs' prediction for energy prices indicates support of the recessionary trend, largely determined by the organizational modality.

The small investor will be sure to hear big financial analysts, and pop media analysts generally, touting indications of recovery, but it is a way to position the retail investor for a trage consolidation.

Given the indicated organizational modality, the recovery will not be indicated till the retail volume has been consolidated. At that threshold, the capital has no where to go to make a profit but to finance the fundament and economic recovery. It is the classical model of capitalism in which markets are allowed to consolidate and the long wave shows a normal distribution. While the process looks "largely" normal, unfortunately this modality operates at the very highest cost to the vast majority to provide, to finance, the benefit.

Energy prices will not, then, retrace peak levels at the time of recovery as Goldman Sachs suggests. Prices will be generally deflated. The peak price of energy indicates deflation given the organizational model in operation, and will consolidate the value positioned for recovery.

Weak energy prices, and a gamma risk that controls the speculative demand--a public-private organizational modality, will signal a near-term recovery.

Peak energy prices will not be an indicator of recovery.

Surprise!

It is absolutely critical the small investor understand that market sentiment (the irratonal exuberance) is driven to absurdity by non-free-market forces.

The historical tendency to attract investment and overvalue assets to an absurdity is an organizational problem.

For example, grappling with healthcare reform, providers want to talk about everything but price. If controlling the cost is the goal, it is necessary to talk about the price, not just lifestyle choices and the accumulation of capital needed to drive technological innovation.

Talking about everything but the price rigs (organizes) the market to command it.

If, for example, consumers talk about "organizing" a healthcare co-operative, the consumer empowers a democratic organizational typology in which to demand the price in a disinflationary, free-market fashion instead of the inflationary command-model fashion that accumulates value and deflates the economy.

The determining variable is the organizational modality.