Monday, May 11, 2015

Going Out of Business: End Game for Globalization

Multinational corporations decimated the middle class and in doing so destroyed their end market. During the housing bubble 2000-2007, this fact was obscured by massive household debt accumulation. During this post-Lehman bubble (2009-now), this fact was obscured by massive sovereign debt accumulation and the one-time liquidation 'dividend' thrown off by industrial arbitrage - which now resides in offshore bank accounts via the "fake wealth effect".

Historically unprecedented profit margins due to mass outsourcing are only "good" if they are sustainable. In aggregate of course they were never sustainable since they cannibalized revenue aka. the middle class.

We've now reached the very late phase where only massive stock buybacks temporarily buoy prices while insiders exit, leaving the usual bagholders holding a larger share of a dying asset class aka. stocks. 100% ownership of a zero value asset.

Multinational corporations are experiencing declining revenues at the peak of the business cycle with interest rates still not normalized after six years.

The last stage of Globalization.

A mild glimpse into the future:
During 2008, GDP dropped 3%, profits dropped 50% aka. 17:1 leverage:

Corporate profits as % of GDP

The 2008 wake-up call was ignored.