Monday, March 19, 2018

Overinvested In Uncreative Self-Destruction

Today's frat boys just admitted last week that ~40 years of  shipping the economy overseas has NOT led to creative destruction. There's nothing creative about it...

Even the most vociferous champion of free trade is now onboard with China tariffs. In other words, the barn door is now finally closing, the horses haven't been seen for years...

"Kudlow is "going to follow the president's lead or he would not have been offered the job or he couldn't take the job."

"I must say as somebody who doesn't like tariffs, I think China has earned a tough response not only from the United States," Kudlow said 

Over on UFO-central, that other Reagan-era ardent proponent of free trade, has yet to recant: Stockman gives an excellent blow-by-blow dissection of Amazon's Potemkin business model, but still manages to miss the forest for the trees. Like all of today's apologists for greed, overriding belief in the jobless consumer prevents him from seeing global capitalism self-destructing in real-time. After all, bankrupt companies are one thing, bankrupt ideologies can be a little harder to face...

This is the REAL reason why Amazon's Potemkin business model is a problem:

Retail bankruptcies and defaults hit a peak last year, soaring past records set during the recession, and things could get even worse this year, according to the credit-ratings agency S&P Global Ratings.

"We believe defaults in 2018 could match or exceed last year's record level," S&P Global Ratings analyst Robert Shulz wrote in a recent report that identified 20 retailers at risk of defaulting.

It was inevitable that today's mega dunces would create a profitless intermediary, aka. Amazon, between China and the U.S. - to provide a 'frictionless' conduit for cheap junk drop shipped to yuppy doorsteps. To complete their delusional economic utopia fully bypassing the U.S. economy to the benefit of the jobless consumer. In doing so, by necessity they conflated recycled capital with income - the inevitable consequence of an economy based upon Supply and Debt versus Supply and Demand. 

In the event, the frat boys on Wall Street inadvertently created a retail wrecking ball called "Amazon" that for 24 years has been devoid of profit margin and hence free to go about decimating the real economy, under the auspice of 'creative destruction'. In other words, were it not for the performance chasing growth-momentum algos and speculators, this shell company representing the efficient frontier of global bankruptcy would have imploded a long time ago.

But since it didn't implode, it went about its time imploding the economy while taking up an ever-greater share of stock market market cap. Which is how today's dunces overinvested in momentum collapse.

Wall Street's perpetual growth model - embedded in every discounted cash flow model - is off by a minus sign...