Interesting Times Have Arrived

Yesterday, the Hindenburg Omen was triggered.  It's a technical signal indicating a major divergence between the number of stocks at or near new highs v.s. the number of stocks making new lows.  The Hindenburg Omen has preceded every major crash of the past 30 years, with only a couple of situations where it didn't trigger or triggered a false positive.  In other words it's a necessary but not sufficient condition for a market 'event'.  I view it as the sign of an unhealthy market in which fewer and fewer stocks are holding up the market, until eventually there is no place left to hide.  (Bob Lang on RM.com indicated the signal was fired, although I have not been able to confirm by another source).

Deflation #Winning !

Deflation is stalking this economy relentlessly.  This article confirms that paradoxically, the "deflation pulse" has intensified ever since the Fed announced "QE Eternity".  Key markers are the strength in the dollar and weakness in commodities.  In other words, the Fed's hope for reflation is stalling.  Wall Street of course, has been trained like Pavlov's dog and therefore assumed that reflation would axiomatically occur, no questions asked.  So they took the Fed announcement in September as the latest opportunity to pile into risk assets, especially stocks, as financial leverage indicated by margin levels, reached a 16 month high.  

Captain Titanic

 

Congratulations to the new very old Captain of the Titanic.  When Obama took office his first term, he had nothing to lose.  The economy was in shambles, the markets were down 60% and overall confidence was low.  Today, four years later, he has nothing to gain.  The market is at a multi-year high running on fumes and he has once again bullshitted his way to another election victory, by making hollow promises he has no ability to keep.

The markets celebrated today (below) by tanking unceremoniously, across the board and breaking down through the key trend line on heavy volume.  Wall Street has figured out that taxes next year will be higher than they are this year, so they are taking profits ASAP.  Last one out is a rotten egg.  

The Only Way Forward

I just read this Der Spiegel article saying that Total Capitalism Destroyed America.  Exactly.  "Total Capitalism" aka. Supply Side Economics destroyed America.  That said, Total Socialism has likewise destroyed much of Europe.  I am not going to pen a long winded article defending that statement, when all we need to do is turn to the front page of any newspaper to see in real-time the clusterfuck that has become Europe.  And of course, total Communism killed Communism.  It turns out that people don't want to work for free - go figure.  Meanwhile in China, total Fascism is killing Fascism, as anarchy is on deck for the Middle Kingdom...

The Party of War Gets Monkey Hammered

Full disclosure: Since I can't vote, I make bets instead.  I lost a lot of money betting against the incumbent last night, because historically, the incumbent loses U.S. elections in a bad economy.  Not so last night.  Meanwhile, I told my American wife she needs to write in Ron Paul or I am moving back to Canada.  So she voted for Obama.  Women...

Here is why in my non-political view I lost money last night or otherwise why the Republican Party just threw away what should have been a cake walk election.

Both Sides Against The Middle

Some Facts that unfortunately were left out of the recent election campaign:
Q: Which one of these two candidates has a plan to reduce the debt     A:  neither.
Q: Which one has a plan to even slow the growth in the debt?  A: neither
Q: Which one has even discussed a plan on how to staunch the decline in middle class income (above)?

A: Suffice to say that Romney's Bain Capital and other vulture capitalist firms were an overwhelming driver of the middle class liquidation.  Meanwhile, Obama & Co. turned a blind eye to the carnage that occurred on their watch.  In addition, Obama did nothing to reform Wall Street after 2008, which is by far his largest failure as President.  

Q: How many jobs were created during Obama's term?  A: 5 million
Q: How much did National debt increase under Obama? A: $5 trillion
Q: How much did each job cost?  A: $1 million ($5 trillion/5 million)
Q: What was the most honest statement made in the entire election? A: Joe Biden who said that "The Middle Class was Buried in the last 4 years".  I guess he looked at the chart above and decided to tell it like it is.  His own party laughed it off as a "gaffe".
That's what the truth represents in American politics - a big gaffe.

The real (rhetorical) question is how did all of these lamestream media buffoons jointly decide to turn their backs on the most important issues of the day and otherwise convert the entire election into a reality tv  circus?  The answer is in the $800 million spent on campaign ads which lined the pockets of the various media whores.  It used to be that the media were the watchdogs of democracy - those days are long gone.  Media loyalty is now paid for up front, in cash.

Last Question:
Who would you rather have as President, a guy who is expert at outsourcing jobs and industries and played a direct major role in the outsourcing of the United States.  Or a guy who let Wall Street off the hook for 2008 and who also thinks that spending $1 million per job is evidence of a good economic track record ?

We don't know which Harvard educated buffoon is going to win this election (results coming in as I write), but judging from the chart above, we know who already lost.

Canadian Real Estate Collapse (Probability: 99.999%)

Just to prove that the Idiocracy is in no way a strictly American phenomenon, let's look up North to my home country where the Real Estate boom is finally coming to its predictable bad ending.  This article in the Vancouver Sun says the situation is "eerily similar to the U.S. circa 2006".  No shit.  Unfortunately, that's not the real problem.  The real problem is that it's not 2006.

The Idiocracy Is Waking Up

No sooner had I penned my diatribe on the Climate Change denialists, than BusinessWeek of all publications bludgeoned the Idiocracy with its own piece on inconvenient reality (below).  All it took was sinking half of New Jersey and NYC under water.  As I said in my rant, one day they will magically decide to switch from non-belief to grudging acceptance even though the underlying facts have been largely the same all along.  Granted I assumed it would take a few more Sandy's, Irene's, and Katrina's to ground and pound the Idiocracy into final submission.  So this forces a major paradigm in thinking, because BusinessWeek is obviously a conservative mainstream publication.  As we see, the buffoonish over-confidence of the Idiocracy is merely a thin facade of willful ignorance that crumbles at a moment's notice.  This should come as no surprise given that the comfort seeker's of the day change their beliefs like a 13 year old girl changes her blouse.  Therefore as over-confidence yields to trepidation, it will be only a matter of time before we reach the Point of Recognition.  Each round of revelations will expose yet more decadence, further eroding confidence.  It's only a matter of time before there is common acknowledgement that the country is bankrupt and can no longer afford military bases in 140 countries and never-ending military blunders.  But the underwear will get truly stained when the frogs in boiling water, stewed in a hot gumbo of junk food and junk culture, wake up to the fact that their real incomes, now back at 1996 levels, are falling into oblivion, and that the country's key jobs, industries and intellectual property have been permanently given away to foreign countries. The ignition spark will be the dawning realization of having elected yet another game show host President who can't manage his way out of a paper bag. At that point, all hell will break loose.

Of course, not everyone gets it yet, especially cynical old fucks whose only goal is to continue plundering the planet and their grandchildren to maintain their morally bankrupt lifestyle at all costs.  Wait until the Lost Boys of the Idiocracy are released into the wild, then these geriatrics will finally confront the Frankenmonster they have created.

Yes, it's time for Friday night charts...

President of The Grand Delusion

This is an open letter to Obamney and Robama the next President of the United States.

As you know, there are significant problems facing the United States at this juncture, so I wanted to take this opportunity to point out the key issues.

The biggest problem with the United States right now is people like you
Both of you (and most others) seem to be under the  ongoing delusion that the current way of life is scalable and sustainable even though you have been warned several times and several ways that it's neither.  In general the Westernized consumption-oriented lifestyle is no longer sustainable, as indicated by total debt levels approaching several multiples of GDP across all Western nations, all of which are attempting desperately to maintain the status quo.

More specific to the U.S., this belief that the country can at the same time cut taxes to the lowest level of any Western nation, fund a Social Security and Medicare deficit, and increase or maintain military spending at wartime levels indefinitely, is totally unfounded.  This entire package of foolishness is bundled under the aegis of Supply Side Economics aka. Trickle Down economics aka. Voodoo Economics.  With effective tax rates down around 20%, the delusion of being able to cut tax rates further to grow the economy enough to offset the direct reduction in tax revenue, is mathematically impossible i.e. requiring a 5:1 growth multiplier.  This strategy has been deployed for 30 years now.  Thirty years ago, the national debt was $1 trillion, today it's $16 trillion.  That's a 9% compound annual growth rate in debt in an economy growing at 2%.  Does that sound sustainable to you?  If it does, then you are not qualified to be a 3rd grade teacher, much less President.

Some Things Have To Go
In a Democracy, that means a little bit of everything has to go.  Right now, the U.S. is borrowing 8% of GDP to garner a growth rate of 2%.  We live in the largest credit expansion in human history which explains why interest rates remain at historically low levels i.e. there is a lot of money in very few hands and that money is seeking a return on capital.  In the days to come that desire for a return on capital will morph into a desire for a return of capital at which point historically low interest rates will revert to the mean or above and then the ability to sustain unlimited deficits will be substantially curtailed.  Even if the U.S. is capped at its current debt level, elimination of the deficit implies an 8% reduction in GDP assuming a 1:1 multiplier.  If one factors in a collapsed credit and stock market, that multiplier will grow exponentially.  Which means a lot more things will go.

Just to recap history: for most of the last century, the U.S. and other Western nations were in the unique position of having advanced economies with steady growth.  Now however, the rest of the world wants what we have and they are willing to work a lot harder than us, to obtain our standard of living.  Therefore in a world competing for scarce resources, mathematically that means their standard of living will rise and ours will fall.  Granted, we have used every device known to man to forestall this equalization, not the least of which was borrowing from poor countries to prop up our bloated standard of living at their expense.  However, only a fool would assume that they will go along with that program indefinitely, when they realize we have no capacity to repay them on prior loans much less new ones.

In summary, I don't expect two power hungry megalomaniacs to heed these facts and logic.  I also realize that we live in a society that is programmed to want ever more materialism,  money, and power, which means that neither of you has any plan that would include adopting a lifestyle involving accepting less.  Therefore, according to the law of diminishing returns of debt which we see playing out in real time, whoever wins this next election will find out the hard way that there is a lot more to being a leader than a winning smile and a set of constantly recycled campaign slogans.  In short, it's very likely that this next election will have two losers instead of just one.

Another Inconvenient Reality

No blog or conspiracy theorist could conjure up a more ironic scenario than a hurricane that works its way all the way up the East Coast and deposits its greatest impact on downtown Manhattan aka. The Financial District aka. Wall Street.