In 40 years of watching markets closely, I have never seen more dangerous conditions than exist in the stock market today
Meanwhile, however, I showed a set of charts recently that indicated only U.S. markets are surpassing their highs set years ago. All other major global markets are still below their all time highs. In most cases by a wide margin. The U.S. markets have entered yet another self-fueled momentum feedback loop, driven by leveraged speculation and sponsored by Central Banks. Greenspan admitted recently that the stock market is the key to maintaining the illusion-formerly-known-as-the-economy, and Bernankenstein is a disciple of the same school of thought. As long as the Dow is making new highs, the Idiocracy won't question the status quo. Upon reversal, the masses at large will once again be awoken from their narcoleptic food coma, a day late and many dollars short.
Ground Zero for Globalization
Here in Vancouver, where I am visiting for the week, is one of the only real estate markets in the world that has not corrected significantly in the past decade. This perpetually over-heated market has been well bid by a constant stream of immigrants from Asia. Back in the late 1990s, the immigrants were from Hong Kong - gaining a foothold in Canada to hedge their bets against what would happen with the 1997 hand-over from Britain to China. Then, after that, there was an influx of Taiwanese immigrants hedging their bets against threats from Mainland China which was (is) flexing its nationalistic powers. Lately though, there has been a surge in wealthy immigrants from Mainland China. China of course is the epicenter of globalization. It turns out that the people who would best know what is going on at the ground zero of globalization are voting with their feet and wallets. Apparently, they don't share the view that the status quo is politically and economically sustainable and they are hedging their bets in Canada (and other Pac Rim nations).
Importing Poverty, One Container At a Time
Getting back to the point of this post, the signs of economic instability are ubiquitous. There is no cause to believe that the poorest wage slaves on this planet will continue to subsidize the Westernized consumption-oriented lifestyle indefinitely. They consume less, so that we can have more. Meanwhile, only a society of abject morons outsources its jobs and entire industries, all while asserting that the key to a vital economy is low prices at WalMart. This is all due to yet another false dichotomy economists have created between employees and consumers, that I wrote about recently. Meanwhile, these elites who come up with these "theories" are clueless about what it's like to live at the lower end of the wage scale. "Nickel and Dimed: On (Not) Getting By in America" gives an eye-opening account of what it's like to live hand to mouth in today's economy. The bottom line is that this ongoing consumption binge, enjoyed by fewer and fewer, is merely a product of low interest rates which in turn are dependent upon wage deflation imported from the Third World now infecting developed world economies. It's blood money - manifested in ultra-cheap loans and ultra-cheap crap. Without low interest rates, the developed world's multi-decade consumption binge would end instantly. For their part, Third World factory slaves have zero probability of attaining a developed world lifestyle thanks to globalization. It was never more than a cleverly disguised Ponzi scheme. The developed nations were just lucky enough to be the first ones in.
When Ponzi Schemes Fail
Clearly, it's one thing to lie to others, but something altogether more pathetic to lie to oneself. Therefore, the only people who believe this can continue at this juncture, are the morally bankrupt fools who blithely assume that there will always be an endless supply of Third World wage slaves willing to work for nominal wages to subsidize a way of life for others, that they themselves can never attain. The key assumption is believing that the developing nations won't figure out that the developed world is already bankrupt. It's that self-serving and non-questioning assumption, that will make all the difference. Moreover, as I wrote here, when Ponzi schemes fail, comes the dawning realization that not everyone can get their money out, because there is no money - there are only counterparties. The impact of that realization will vary by asset class, but for over-inflated, liquidity-driven risk assets, clearly today's prices will not be obtained by all sellers. Anyone going into this without knowing who is their counter-party - and their ability to pay while under duress - will be finding out the hard way.
Atlas Shrugged, Indeed
What is more likely at this juncture? That the global 1% elite who control 40% of global wealth and whose billionaire ranks have grown 10 fold since 1987, will sulk into hiding because they feel the don't get the respect they deserve? Or that instead, the wage slaves of globalization - the ones who make everything - realize that they drive the global ponzi and yet there is nothing in it for them, so they revolt. At that point, the robber barons of the day would realize that their grand empires are merely castles in the sky propagated by slave labour, and all of Rand's boisterous acolytes would of course be instantly reduced to newly minted wage slaves. In reality, there's no need for a worker's revolt. All it will take is a stock market collapse, to reveal the fact that the global economy is no more than a massive house of cards. In any case, the entire Atlas Shrugged Fairy Tale was simply to assuage the conscience of the Lost Boys of the Idiocracy, for what they did to their own country. I've said before, this is the Angel Heart society - running around killing people and then trying to figure out who keeps doing it. We know how the story ends - with dawning realization and an elevator ride into the abyss...
Angel Heart, Indeed...
Let me get this straight, at Foxconn factories, they install safety nets around the buildings because people are dying to get out. But at Bain Capital factories, they install prison fences, because people are dying to get in...The lies a vulture capitalist has to tell himself so he can look himself in the mirror...