 Mark Thornton has a special offer for fans of minor issues, a free copy of Murray Rothbard's famous work, Anatomy of the State. This is a limited time offer, so act fast. Get yours today at Mises.org slash Issues Free. Hello and welcome to another episode of the Minor Issues Podcast. I'm Mark Thornton at the Mises Institute. Well, this week we learned that famed investor James Channos shut down his hedge fund, and we are looking at markets reaching record highs. Channos specialized in shorting stocks, stocks that he felt were overvalued. What are investors supposed to make of these two seemingly contrasting stories? Should we be bullish with markets, or should we remain bearish because of concerns about the economy? Channos was famous for shorting Enron stock in the early 2000s, making big profits on the stock collapse and failure. Austrians have looked to Channos as a mini hero of some sort because unlike most short sellers who are very secretive in what they do, Channos was bold and very public about his positions on stocks. Austrians, for example, recognized the need for short selling in markets. Channos was very public, often lashing out at companies for their fraudulent accounting behavior. Austrians recognized that short selling is necessary to keep markets quote honest, unquote. And of course, this is all the more important but dangerous in an era when the Federal Reserve is the big elephant in the room. The banning of short selling and the public hatred of short selling goes all the way back to England in 1630 where short selling was outlawed after tulip mania. People back then as people do now often are confused and think that short selling actually causes stocks to crash or whole markets to crash. In reality, most short selling is mere hedging, not betting and is market neutral. In other words, people who are selling stocks short are making their bets with people who are going long or are bullish on those same stocks or markets. There's literally almost no way I can think of where short selling can actually be the cause of a stock or market collapse. People who are fearful of short selling are really tilting at windmills instead of looking at the real cause of market volatility and what you might think of is fraudulent behavior and that is the Federal Reserve. Should we be surprised that channels shut down his short selling hedge fund? The answer is no, short selling is always dangerous and you're likely to lose money, especially when markets are generally headed higher, even if it's just in nominal terms. And no, we shouldn't be surprised because of the generally good advice of not fighting the Fed. The Fed is, after all, the big elephant in the room. It moves nominal numbers, whether it's the price of gasoline and food or whether it's the price of real estate and stock market prices. The Fed has been in more or less a continuous bailout mode at least since the 1990s and that's even worse today. And finally, we shouldn't be surprised about the fund being shut down because markets, after all, are at all-time highs. The NASDAQ stock market is up 15 times since the great financial crisis and is at a record all-time high. The Standard & Poor's 500 index is up way more than five times and is also at a new record high. Short sellers since the great financial crisis have been creamed, devastated, and in this case simply put out of business. Given all that, should we therefore assume that markets are headed forever higher? Well, the answers there are also no. You want to follow the good general market advice of buying low and selling high. So that would mitigate against this idea that markets are headed ever higher. And no, we shouldn't assume that the markets are headed ever higher because the leadership in stock markets has been incredibly narrow. And I'd like to bring some attention to what is called the Magnificent Seven Stocks. These include Amazon, Apple, Microsoft, Google, Tesla, Nvidia, which is of course hooked into artificial intelligence chips, and Meta or Facebook. These are the big technology companies that benefit from a low interest environment and have benefited tremendously since the great financial crisis and even before. My own guesstimates, just eyeballing the numbers of these companies and overall performance indicates that they are more than 75% year to date or over the last year. And also, again, my guesstimates are eyeballing the numbers as a share of the market. And in this case, the market being the Standard & Poor's 500 or S&P 500 indicate that those seven stocks now account for more than 30% of the overall value in the S&P 500. The other 493 stocks now make up less than 70% of that overall market, which represents the overall corporate marketplace in the United States. So these seven companies have grown to represent an enormous share. And their share, of course, is at an all-time high, higher than any seven stocks have been in history. And also, we would say that no, this should not lead to the assumption, at least, that markets are headed ever higher. They obviously could go higher still. But I would like to note that the Fed is or seems to be less restrictive in its monetary policy, less hawkish than is typically portrayed in the media. And the Fed is also seemingly more accommodative towards interest rates or more dovish. In other words, just because they've raised interest rates doesn't mean that they're being incredibly hawkish in the interest rate environment than is commonly portrayed in the media. This could actually be a sign, and many stock investors have indicated to me that this is a sign, not of good news for stock markets, but of bad news for stock markets. And I ask you to take that with a high degree of caution. This has been another episode of the Minor Issues Podcast. I'm Mark Thornton at The Mises Institute.