Sunday, August 28, 2011

Class Warfare - The 10,000 Day War

Excellent article on the true state of affairs in America - that is, for the subset of humanity that still cares about facts, data and reality:

I therefore don't expect the glassy-eyed Tea Party Ayn Randers to assimilate any of these facts.  They are too busy buying gold, excoriating Bernanke (can't say I disagree on that point), and otherwise dreaming of the imminent return to Little House on the Prairie.

Dude, where's my Economy?
The new Tea Party vernacular is to speak in terms of the top % of Americans as the job creators v.s. all the rest of us, lowly and unworthy job holders.  Unfortunately, facts and reality dictate that the country club class have destroyed far more jobs than they could ever hope to create.   Capital in the digital age moves at the speed of light to wherever it can gain the highest return, totally oblivious to any notion of patriotism.  Likewise plants and manufacturing facilities uproot and move from one sweatshop third world locale to another in the mere prospect of squeezing pennies from ludicrously low wages.  
The true story is that through pervasive and relentless outsourcing these "job creators" liquidated the American middle class.  And they didn't just outsource the jobs, they outsourced entire industries.  Firms such as Nike for example, do not make shoes.  They design, market and sell shoes, leaving the manufacturing to firms in other countries.  It was the path of least resistance, and the path of highest profits to swap out $15/hour labour in the U.S. for $.50/hour labour in China.  Likewise for just about every other manufacturing-based industry in America.  The Nikes of the world take a product that costs $7 to manufacture and turn around and sell it for $70, reaping a massive windfall profit.  That makes firms like Nike, Starbucks, Apple etc. mere middle-men between the ultimate producer and the ultimate consumer.  In other words, instead of slapping a swoosh on the side of that shoe, the manufacturers can just slap a generic white bar on the side and cut costs by 80% - voila, welcome to the new new economy.  Once the new era of consumer thrift fully takes hold and consumers balk at paying $70 for over-hyped shoes that are no better than those in the bargain bin, expect S&P profits to fall off a fucking cliff, taking millions of redundant middle management jobs along with them.  And yet, the Great Bernank is constantly scratching his head, saying he does not know why so few jobs are being created - really, you have no idea?  Can someone with three degrees really be so oblivious to the fact that we just outsourced the entire fucking economy?

Speaking of which, not withstanding the advice of Goldman Sachs, at last week's annual Fed Jackson Hole Circle Jerk, Bernanke capitulated to the fanatical gold bugs and Tea Partiers by foregoing the much anticipated launch of yet another round of market manipulation aka. QE3.  It turns out that leading Republican candidate Rick Perry's accusing Bernanke of treason and indicating he should be hanged if he launches QE3, made the Bernank somewhat circumspect.  And as I have said before, the only thing gold bugs fear more than QE3, is no QE3 i.e. without further monetization of debt their entire thesis of hyperinflation goes out the window, along with their rationale for piling into gold.  Let's see how the yellow metal holds up in the face of a long overdue dollar rally...What was really odd about Friday, is that gold, stocks and Treasuries all rallied after the QE3 non-news was announced, meaning there were a lot of hedges unwinding causing traditional correlations to break down.  Longer term (i.e. coming weeks), someone is going to be on the losing side of this monetary policy capitulation and (full disclosure) my money is on gold and stocks to be the real losers once the smoke clears from Friday's massive unwind. 

The Elliot Waves indicated that we are likely going to see at least one more decent sized tanking in the stock market in coming weeks before we see any major counter-trend rally.   That counter-trend rally, if it occurs, will be the last chance to sell stocks anywhere near recent highs, prior to all hell breaking loose.