Saturday, September 29, 2012

The Globalized Slave Economy

Using the data from the Global Wealth Pyramid, below is a percentiled wealth distribution bar chart, similar to the one I created last week for the U.S.:

Global Distribution of Wealth:

"Who Wants to Be a Millunaire?"
It's staggering to realize that the top 1% have over twice as much wealth as the bottom 90% and obviously that surplus in wealth is entirely dependent upon ongoing (low cost) resource extraction from the world's poorest nations and ultra low cost slave labour.  Whereas, I called the U.S. pyramid scheme a lottery, this globalized fiasco is definitely a Ponzi Scheme, the difference being that in a lottery you have a chance of winning, albeit miniscule.  In a true Ponzi Scheme no one makes it out of the bottom unless they get adopted by Angelina Jolie and she has about 50 kids already.

Ponzi Squared
It's also staggering to realize that the U.S. pyramid scheme is actually embedded within the 10/82 stack on the right hand side i.e. it's a Ponzi within a Ponzi.  So most Americans living in the global penthouse are essentially live-in servants to the ultra-wealthy.   Meanwhile the developed nations are so bloated and cynical right now that we willfully believe the morally bankrupt econo-rags and "esteemed" economists telling us that this globalized human catastrophe is the best economic model possible for ending world poverty.  It's always amazing how much patience one can have for failed economic models when others are doing the suffering, and the next Davos Summit is around the corner.

Limit Down:  Margin Call For Atlas
The only good news is that Ponzi Schemes always fail, and this one will be no exception.  It's clearly already staggering under the weight of its own bloated excess.  And when it inevitably collapses in on itself, the magnitude of the resulting crater will make 2008 a fond memory by comparison.  Predictably though, as soon as it collapses, all of the Ayn Randists will come crawling out from under their rocks to tell us it was due to all the unaffordable social programs.  Taking a look at the chart above however, the only visible "social" program is non-consensual anal fornication.

Am I My Brother's Keeper?  Obviously Not.
Between the sodomizing pedophiles, born again ultra-hypocrites, grotesque mega churches, glassy eyed credit card collecting Sunday morning Televangelists, ultra violent Jihadis multiplying like gerbils, and all of the sanctimonious hypocrites in between - the guilt-recycling business that is organized religion, stood by and let this happen.  Case in point, now there is a Presidential Candidate whose cult allows him to make hundreds of millions outsourcing workers, stash the money in offshore tax-free bank accounts, then brag breezily that "I like being able to fire people who provide services to me", as if destroying someone's life is his personal on/off switch - yet he's not allowed to drink coffee.  That is religion in a nutshell.  Sorry if that offends you, but my religion is Reality - we have no church and very few members.  If there is a God, it can't be impressed with how we have we have squandered our endowment and turned our backs on the overwhelming majority, all while taking the Lord's Name In Vain.


Friday, September 28, 2012

BTFD: Fool Me Five Times - Shame on Me

Back in early 2008, the VIX (options fear gauge) was in an uptrend and I said that if it breaks out above the triple top, then Wall Street will shit a brick.  We know what happened next.

Bernanke and Draghi, the new Cheech and Chong
Today, we face a similar yet far more ominous scenario, instead of uptrending - indicating increasing investor anxiety - the VIX has been downtrending to multi-year lows indicating increasing investor complacency in the face of far greater risk than what we faced in 2008 i.e. systemic, sovereign failure v.s. bank failure.  All due, I might again add, to Central Banks' unrelenting injections of monetary dopium that have literally stoned the markets into oblivion - the markets have been "hot boxed" by Bernanke and Draghi.  And need I state the obvious point that when the breakout occurs above that downtrend line, there will be a lot more stained underwear and bricks for the patio:

Meanwhile, this was an important day for Wall Street, because it's the last day of the third quarter and therefore the last chance for large investors to notify hedge funds of redemptions before end of year.  No surprise, it was an up day as funds tried to squeeze out the last few pennies to mark-up the quarter.  And given the oft-cited massive underperformance of hedge funds this year, you can expect that not a small amount of money will be flowing out of stock market-oriented funds into "alternative strategies" like perhaps selling VIX option premia, as some morons illustrated above have been doing ad infinitum - which as we saw in 2008, worked great until they walked away leaving all of us holding the bag.  

So, it's a key juncture for the market because the remaining surviving hedge funds appear to have gone all in after the QE3 announcement, yet they will be facing off against their less fortunate hedge fund brethren who right about now will be getting notified that their new job is as night manager at Arby's, thereby requiring them to liquidate their remaining stock inventory into a low volume, overbought market.  

All In
Below is the ISE call/put ratio showing a major reach for upside call options coinciding with Bernanke's latest shock and awe.  The 10 day moving average (yellow line) reached a multi-year high - Booyah Skidaddy !:

Speaking of low volume, below is an update on our picture perfect bearish rising wedge, which now meets all of the "ideal" specifications - reversal of prior trend, three touches of upper trend line, two reaction lows, converging trend lines, low volume, overlapping waves etc.  As we see in the lower pane, volume had been trending ever lower to multi-year lows, but then recently it spiked up again.  Unfortunately for the little piggies on Wall Street it's increasing on the downside, which is not a good sign for hedge funds and skynet computer bots who now have to figure out who gets out the door first...and let's face it, these types are not known for their civility...

p.s. It's not just the markets that are stoned at this juncture.  The overwhelming preoccupation of the typical man-boy into this inferno is who won the fucking game last night.  Present company excepted of course...unless, you are reading this after the fact...

Wednesday, September 26, 2012

Then There Were None

I just read this pathetic apology for Private Equity given by ZeroHedge, and I almost shit an Ayn Rand.  This post is Exhibit A that you can have all of the best facts and data in the world, but without judgement you're just a cub bear playing with his dink.  The apology centers around blaming public pensions for investing in private equity funds as an asset class, therefore giving public sector employees no right to criticize private equity firms.  Dare I state the obvious that public sector employees are not portfolio managers and don't control day-to-day asset allocations?  And apparently ZH who constantly deride Bernanke's "repressive" 0% interest rate regime, which has impoverished millions of retirees, doesn't see the connection with pension funds crowding into non-traditional investments i.e. "private equity".
First off, let's dispense with the bullshit, "private equity" used to be called leveraged buyout (LBO), but the industry got such a bad reputation for gutting the U.S. that they rebranded themselves so that the Lost Boys of the Idiocracy wouldn't look as stupid for defending the industry.  Secondly, need I state the always-omitted most obvious fact that public employees would be the last ones to say anything about outsourcing private sector employees, since (Federal) public jobs can't be legally outsourced in the first place - duh!!!  In other words, you are far more likely to get a visceral opinion on LBO outsourcers by asking the guy wearing the orange bib at Home Depot, who took a 60% reduction in pay and benefits from his job in the factory v.s. asking someone who is fat and happy working for the Federal Government knowing their job can't be outsourced.   Now that I think about it though, that's the most likely reason for anyone wanting Mitt Romney as President - he is an expert at outsourcing so now he can outsource what's left of the middle class i.e. the public sector workers.  Brilliant !  And if the millions of Americans in the private sector who have already been outsourced are not the most vociferous critics, perhaps it's because they are too busy subsisting and don't have the time to write a blog or otherwise blow smoke up everyone's ass (I know, mea too culpa).  Let's face it, that "unsuccessful" part of America is largely hidden from world view.  We don't want potential immigrants to realize that the "American Dream" is really just a lottery, after all...

Having not grown up in the U.S., I can tell you how it works in the entire world outside the U.S. Instead of getting rid of industries, governments are actually focused on gaining new industries - that's right it's a new concept.  How do these apologists for Private Equity think that Asian nations gained so many U.S. industries?  Hint: it wasn't because they wanted to be American.  It was because they were not focused on quarterly earnings statements and because they didn't want an entire nation of Starbucks baristas.  Or go ask the Germans what it took for the past 20 years as they held onto their manufacturing base even as every Anglo-American economist excoriated successive German Governments for not taking the easy path and adopting the 'American Model'.  In the end Germany is already vindicated for making the effort (and yes less profit in the interim) to become more competitive, focusing on high-end manufacturing and otherwise preserving their middle class.

Globalization Has Already Failed the Majority on This Planet AND The Majority in the U.S.
Globalization has already turned the U.S. economy into a lottery and permanently offshored hundreds of entire industries, yet apologists for the Globalized Ponzi Model are still debating whether or not that is a bad thing.  So let me put this whole discussion in a way that any Simple Jack can understand - it's only "ok" when they outsource everyone else's job, but when they come for your job, suddenly it's not such a great fucking idea anymore.  Apparently some people have to find out the hard way...

The End Game For the Marketing Based Economy - No One Needs a Middle Man
Ironically, the best recent example of why not to take outsourcing to its maximum limit comes from none other than ZeroHedge.  As one would expect, it was only a matter of time before the Chinese manufacturers cloned American designed products (i.e. created a parallel assembly line) and started selling them directly to consumers, bypassing the middleman e.g. Apple and other shell marketing companies.  After all, the foreign companies have the intellectual property, they have the manufacturing know-how, what else do they need - a brand logo?  Stay tuned for future events when consumers buy everything directly from foreign suppliers, causing U.S. corporate profits to collapse like a cheap tent.

The Angel Heart School of Ayn Rand Management [Revisited]
For those outside the U.S. I have no doubt it's impossible to reconcile the poverty statistics already baked into reality and the continuing denialism of the U.S. Corporate Class not wanting to make the connection between mass outsourcing and the nascent jobless depression.  And I can tell you that it all boils down to latent guilt that this generation can't bring itself to admit that they auctioned off their own country - they did it.  So they will continue to make up excuses and reinvent all new Voodoo Economic theories until the last day when Louis Cypher (aka. reality) shows up and forces them to own up to this overwhelming catastrophe.

P.S. I'll have an MBA and a coke to go - keep the change...
Lastly, as far as private equity aka. leveraged buyouts go, like any leveraged investment they work great until they don't work at all.  In other words as long as the economy is expanding and cash flows are staying the same or growing then the model works.  However, as soon as the economy stalls out, these will be the first companies to fail because they have high contractually fixed interest costs and therefore once cash flows decline below interest costs (or usually before, when debt covenants are breached), then they are bankrupt.  Again, for the greedbots investing in these things (debt side or equity) it's all about timing and incentives - and  suffice to say, no one is getting paid to think long-term.  Or put it another way, I guess the ADHD Twitter generation defending the always "efficient allocation of capital" has already forgotten 2008 when global investors were gobbling up Goldman's subprime CDO's which only had the shelf-life of about 3 months before they imploded - now that's high finance !  

Monday, September 24, 2012

Dopium Overdose

As one would expect of a massive Ponzi Scheme collapsing in real-time, the model has become self-cannibalizing.  Of course, the crushing impacts of reverse growth have been felt all along at the bottom of the pyramid.  Next came the liquidation of the middle class, over the course of the past three years.  Finally now there are signs of distress all the way at the top.

As the headlines constantly remind us, the Days of Rage are just getting started globally and here in the U.S. with last Fall's playful Occupy Wall Street warm-up.  As I mentioned recently, Hedge Funds are now struggling for their own survival, as somehow all of the massive monetary dopium injected into markets these past years, is no longer moving the needle.  No surprise, this hedge fund underperformance directly correlates with the withdrawal from the markets of small investors who historically were the feed bait for "well informed" hedge funds.  Once hedge funds could no longer front run the retail investor, then it became a matter of fund against fund in a zero sum game, leading to major underperformance in 2011 and again this year.  

Similarly, in past months, under the radar - since nobody gives a damn about Wall Street layoffs except to cheer, investment banks across Wall Street have been "right sizing" their own staff.  You can't beat the irony of Wall Street firms having to turn the knife on themselves and start imposing on themselves the same annihilation that they have imposed on the rest of the country.  Another key factor is that as long as the small investor was in the mix, there were plenty of pump and dump opportunities to keep both the investment banks and their hedge fund brokerage customers fat and happy.  Now that it's everyone for themselves however, investment banks will be keeping their best "information" to themselves and their own proprietary trading desks (aka. speculators).  This no doubt is the key factor in why hedge fund returns have become increasingly correlated, as these funds start duplicating one another and otherwise adding leverage as a proxy for true differentiated performance (aka. alpha).  And at the risk of stating the obvious, this increasing hedge fund correlation presents a major risk to the markets in the event of another adverse 'event'.

Lastly, and the key point of this post - if all of this monetary dopium is no longer helping Wall Street, then clearly it's no longer working on any level and Dr. Bernankenstein's hope for more trickle down voodoo economics is not going to work this time.  

Sunday, September 23, 2012

Bernanke's Bargain

In my last post I asserted that the policy of "Extend and Pretend" is a Faustian Bargain and that the bill is now long overdue.  Here's what I mean...

Saturday, September 22, 2012

Mass Complacency @Max Risk

This (Brief) Suspension of Reality Sponsored By Global Central Banks, iPhoney5, ESPN, South Park and The Kardashians.

The Policy of "Extend and Pretend" Employed Since 2008 Is Merely a Faustian Bargain - The Bill Is Past Due, But We Seem To Have Conveniently Forgotten Our Side of the Bargain

How Much Will It Cost:   How Much Do We Have...

The VIX Options Volatility (Fear) Gauge:  
Fear has left the building (far right) - back down to the same level it was at the market's all time high in October 2007.  The major spike up is the 2008 Lehman crisis.

Never Cry Brown Swan Event
As anyone can see from the title of this blog, my core prediction is that a market collapse is inevitable and imminent.  Some would say that it's a cop out to say this could occur at "any time" without being more specific.  However, in fairness to me, predicting the collapse of the global economy down to the last minute is essentially an impossible task.  Some would say that it's a fool's errand to make such an attempt at all, but my primary assertion is that the risks at this juncture far outweigh the rewards and it's better to be prepared in advance.  Bear in mind however, that this risk:reward posture is the exact opposite of what global central banks want people to believe.  They need people to believe that rewards far outweigh risks so that they can stimulate the "animal spirits", levitate the markets, and thereby invoke the "trickle down" wealth effect wherein the minority of wealthy people who still own assets buy their baubles and otherwise shower bread crumbs on the masses.

Business As Usual
Coming out of the 2008 debacle, or what I call the "test", I fairly quickly became bearish again on the economy and markets, because it was clear that all policy-makers had done after 2008, was a massive damage control operation which merely papered over (literally) the underlying problems.  As we all know, amazingly there have been no major structural changes to the markets in the intervening period and they haven't even put in place the Volcker Rule to prevent banks from speculating with depositor money.  Also, as we know, certain banks took the opportunity to become even larger - and therefore "Too Bigger To Fail".    The definition of insanity is to keep doing the same (stupid) things over and over again, expecting a different result.

Time is Not On The Side of Comfort Seekers Hiding From Reality
Therefore, I have viewed the passage of time to be a major liability for the global markets because 1) it was allowing the underlying imbalances (speculation, carry trades, debt accumulation etc.) to resume their upward trend again - which they have and 2) because it would lead to an overwhelming widespread complacency in the markets, media and public that somehow all of the underlying issues have been resolved.  As I commented recently, there is nothing like a rising stock market to make everyone feel fat and happy, obviously disproportionately so those who actually gain from the rise in wealth.  Just the fact that the European debt crisis has magically disappeared from headlines in recent weeks - despite the fact that there has been no underlying structural changes made to the over-leveraged nature of the debt impaired economies - is Exhibit A of complacency at this juncture.  

Exhibit B is the VIX chart above which shows that stock market (options VIX) volatility is back down to a level last seen at the all time stock market high in 2007.  And it has revisited this level several times in the past few weeks.  Could it go lower?  Certainly, but the all time low in the past fifteen years was ~10 whereas the high was ~80.  So according to the VIX we have about 4 more points of anxiety easing potential, versus 65+ points of "oh shit, not again !" potential.

Massive Dopium - What Could Go Wrong?
I will spare you my usual diatribe, but I have littered this blog with posts indicating that the amount of fiscal and monetary stimulus being applied is unprecedented in U.S. and World history.  So the analogy I would give of the world economy is that of a morbidly ill patient whose sole rehabilitation program involves ever-larger doses of morphine to mask the underlying deteriorating condition.  How else can we look at it?  Should we assume that adding more 'easy money' to the world economy will incentivize less borrowing and otherwise resolve the underlying debt problem?

Dude, Where's My Market?
Another key reason for concern at this juncture is the fact that the markets due to the overwhelming takeover by High Frequency Trading (HFT) computers, are in a very fragile state.  The prices that exist today in an extremely low volume environment dominated by HFT bots trading back and forth with each other on millisecond boundaries, are not necessarily the prices that will exist when motivated real sellers come to the market with large blocks of stock to sell.  As we found out during the 2010 Flash Crash, the "market" as it were, disappeared rather abruptly.  

BTFD - So Says Don Hays
For those looking for a good counterpoint argument to my bearish thesis, this is your lucky week.  Yesterday, Don Hays, one of the most respected market advisors, gave some (very rare) free advice.  He sees the market having 10% (max) near-term downside with 30% upside thereafter i.e. a new all time high in the markets within 12 months.  Most people on Wall Street subscribe to Don Hays' advisory so you can assume that what he said yesterday has already been fully digested by Wall Street.  Also, a 10% downside, 30% upside scenario is IDEAL from the hedge fund perspective.  First, it gives some initial downside which they can use to monetize their hedges and thereby gain a relative edge on the underlying market.  At that point, being freed of the hedges, they take the 30% rocket ride higher into year end BIG BONUS time.  Perfect.

The End of the World Only Comes Once - And You Can't Make Any Money Off Of It
Before I rebut his thesis, keep the most important factoid in mind, which is that when it comes to the markets, the media takes its cue from Wall Street who in turn pay these advisory services like Don Hays for their market advice.  Wall Street's time horizon is the current bonus season (i.e. 3 months) and as ZeroHedge just indicated, due to this year's unusual Central Bank induced head fakes and sector rotations, The Street is now fighting for its own survival.  Therefore, they are only tuned into those strategies that can make the most amount of money in the least amount of time and tuned out to the larger macro risk hanging over the world economy like a Damocles Sword.  So unlike 2007 when everyone on Wall Street had a plan on how to profit from the demise of subprime, today despite macro risks which are 10x higher, no one has a macro-based profit plan and hence are oblivious to the risk.

Don Hays' main bull thesis is based on monetary stimulus, market sentiment and valuation.  

1) Monetary Stimulus - my rebuttal on this one is above i.e. prescribing more of the same "go juice" that got us into this mess, is at best a short-term strategy that will inevitably end catastrophically.  What better proof that Central Banks have these people conditioned like Pavlov's Dog to reflexively salivate whenever stimulus is added. 

2) Valuation - as in earnings relative to stock prices.  These valuations are predicated on earnings estimates which can change at a moment's notice.  Market strategists base their market predictions on earnings predictions; however, when the market tanks, they just revise down their earnings projections in light of new "economic conditions" i.e. it's a circular reference.  Meanwhile, profit margins are at their highest point in U.S. history so to assume stocks are "cheap" is to assume that profits are not mean reverting, which (un)fortunately, they are.

3) Sentiment - I just showed in the chart above that market sentiment is extremely complacent and he somewhat agrees.  However, he thinks that one little spike in anxiety will be enough to engender another run higher in the markets.  His fatal error is using the past 50 years of data as his baseline which includes the largest artificially inflated economic expansion in human history, without any comparison.  Suffice to say, that when the real buying opportunity arrives, few people will have the capital and fewer still will have the desire to own stocks.

Thursday, September 20, 2012

The U.S. Lottery

The top 1% of Americans have twice as much wealth as the bottom 80%.  

The top 10% control 73% of wealth ~ three quarters of the country.  

All You Need to Know...

In my last post I asserted that the U.S. "Ownership Society" is actually just a (not so) cleverly disguised lottery.  In this post, I wanted to show graphically what I mean.  So, I took this pie chart wealth distribution data and turned it into the percentiled chart that you see above.  On the left, the bottom percentiles, on the right are the top percentiles by population.

Shhh, don't tell anyone, it's a secret
Being a lottery, the key for the various policy-makers, media spin-masters and corporate slave masters who keep this shit rig together, is to constantly brainwash the wage enslaved masses that they too can one day join the 10% or 5% or 1% of Americans who actually have (all of the) positive net worth.  Because when the day comes that people decide that there is no chance they can "win" and therefore it's no longer worth playing, well then the game will end, most abruptly.  More to the point, recent studies show that "socialist" countries such as Canada and many across Western Europe, now enjoy more upward mobility than the U.S.  And as the article states, the depth of poverty in the U.S. is the distinguishing factor.

No Wealth = Subsistence = 3rd World 
As we see, over half the U.S. has zero or negative net worth which implies no buffer against adversity and therefore a subsistence way of life.  As one would expect, due to relentless industrial arbitrage aka. "free trade", a substantial number of Americans are becoming an extension of the Third World only living in the U.S. v.s. overseas.  Bear in mind that these figures are from 2007, so the trend has only worsened in the meantime.  Having no capital or store of wealth means that the current generation has inadequate resources to bootstrap the next generation to a better way of life, ensuring an endless cycle of poverty.

It's Either a Lottery or a Slave Society - I Can't Make Up My Mind
And given that they have no wealth, it should come as no surprise that Mitt Romney's "47%" pay no taxes i.e. you can't get blood from a stone and most of these people work at (multiple) minimum wage jobs or are elderly and worked their entire lives.  These are the people who do the heavy lifting and make businesses run day to day, so that people at the top of the Ponzi Scheme can continue living the dream.  So for the vast majority of people the price of the lottery ticket is 40 years of grueling, unrewarded hard work with nothing at the end to show for it, except some politician telling them they are worthless, literally.

Don't Worry About the Middle Class, There Isn't One
When you add in the Federal Government Debt which equates to ~$50k/person, then 80% of Americans have negative net worth and are technically bankrupt.  Meanwhile the job destroyers who outsoured their way to the top of the wealth pyramid, unfortunately offshored entire industries, making the long awaited jobs recovery a never-ending delusion.  

The American Pipe Dream
When you break it down per person it gets even more ludicrous.  Here is a pie chart showing the share of American wealth per person between the 80% and the 1% (i.e. based on the percentages above, it's a 183:1 ratio).  

Is this a Great Fucking Lottery, or What?

P.S. Some people say that posts like this are "Class Warfare" and UnAmerican.  Not at all, similar to the winding down war in Afghanistan, I recognize that the class war is well over and the troops are coming home.   

Now the real wars can begin.

Wednesday, September 19, 2012

Here We Go Again

Mark Hulbert who I sometimes agree with, sometimes not, just penned an article on Apple saying that it was the Enron (latent catastrophe) of our time.  Now granted that's an extreme comparison given Enron's outright fraud, but it's certainly not an exaggeration to say that Apple is the most overbought, overbelieved stock of this era.  And we know from vast experience what happens when the iconic stock or investment of each era implodes.  Worse yet, given its outsized market capitalization, what happens to Apple will impact the entire market i.e. it's not leading the market, it is the market.  The stock just crossed $700 and its market capitalization is now $658 billion.  Each $1 increase in the stock price equates to almost $1 billion in market cap and since the iPhone 5 launch less than one week ago, the stock has tacked on an additional $30 billion in market cap all thanks to an extra row of icons on the screen.  

"Those Jobs are Going Boys, And They Ain't Coming Back..."
Anyone who doubts my Ponzi thesis is watching the Kardashians 24 x 7.  When a glorified gadget company can gain in a week a value greater than the GDP of over one hundred  countries, then the Ponzi is in sudden death overtime.  On a related note, one clueless presidential candidate is now excoriating almost half of eligible voters for being free loaders even though he made his personal fortune through downsizing and outsourcing aka. "private equity".  You can't make this shit up.  I am constantly amazed that so few people make the connection between outsourcing the economy and the fact that there are so few jobs now available.  That's because they were brainwashed into believing they are in an "ownership society", or what's otherwise known as a "lottery".  So that day of dawning recognition - that the better part of the economy is now gone and never coming back - is in the not too distant future and the underwear will be mighty stained at that juncture, that's for damn sure.  

We've Seen This Movie Before, Five or Six Times, We Have A Decent Idea How It Ends...
I have been highly skeptical of Apple since last Spring because a key reason I started this blog in the first place was to avoid getting sucked into another "bubble".  I got conned during the DotCom era, but since then, we have seen the housing bubble (2003-2006), commodities bubble (2007), gold bubble (2011) and now this latest Apple rocket ride.  One thing all of these bubbles had in common is that they were inflated by excessive monetary stimulus.  Granted the Dotcom bubble had other amplifying factors, but recall that Greenspan had his foot on the pedal coming out of the 1998 Asian Currency Crisis and he kept interest rates low straight into the "Y2K" date change event i.e. in case computers stopped working.  Fast forward and as one would expect in a deflationary liquidity trap, Bernanke's latest stimulus is stymied by the burgeoning cash-only economy, so his only recourse is to stoke the "animal spirits" i.e. encourage speculators to move out of low yielding assets (aka. Treasuries) and into risk assets.  Therefore, it should come as no surprise that the boyz on the Apple message boards are getting a tad rowdy, because as we have all learned several times in the past decade, greed truly is blindness and Bernanke just handed out some really dark shades.

Apple: The Leading leading indicator
More importantly, from an overall social mood perspective, Apple, having relative strength, is the leading indicator for risk appetite in the stock market.  The stock market in turn represents society's overall risk appetite and optimism.  The correlation between the stock market and social mood is well documented and is the basis of Elliot Wave Theory.  For those who eschew financial "astrology", scientists have found that they can use general Twitter posts to predict the stock market.  So the Arab Spring that coincided with the early 2011 market high and the Occupy Wall Street movement that manifested after the 2011 summer meltdown, were likely no coincidence in terms of timing.  Getting back to Apple i.e. the leading indicator of the leading indicator, and glancing at the chart above, the resurgent Arab Fall and various other nascent geopolitical dislocations will likely soon have a lot more gas poured on their fire.

Tuesday, September 18, 2012

Occupy Wallshington v2.0

Apparently Wall Street's Tokyo Rose and other apologist haven't gotten the message yet.  They still think that OWS is unclear on its goals.

While I am not an official member of Occupy Wall Street, using basic principles of commonsense and decency it's not hard to come up with a relatively immutable set of reforms that need to be considered.

And as you can guess from the title it's not just Wall Street that will be "a-Changin'":

1) Reinstate the Glass-Steagall law which was implemented during the 1930s and strictly separated banking from speculation.  It worked just fine for over 60 years.

2) Implement a Flat Tax of 30% on income above $150k.  Honest people already pay that amount anyway

3) End the IRS Offshore Tax Amnesty Program.  All offshore bank account holders should be given 90 days to move the money back to the U.S. paying all past due taxes and penalties, or lose citizenship.

4) Fire Ben Bernanke.  Central Banksters need to learn that the money supply is not Wall Street's candy store.  Given that we just came through the worst financial crisis in 60 years, one would have thought that they would realize that inventing clever new ways to give speculators more leverage, is a bad idea.

5) Implement true campaign finance reform and eliminate the SuperPac idiocy.  This may require a constitutional amendment, since the Supreme Court just proved that it's now part of the (political) problem as well.

6) Force the Government to adopt the findings of its own bipartisan deficit commission (which it hasn't).

7) No more bailouts.  If speculators and banksters take risk then they need to deal with the consequences.  

8) Impose a 30% immediate tariff on China and other export mercantilist countries e.g. those countries that have no environmental or labor protections.  As I have said before, a nation that trades openly with other nations which have no environmental or labor protections, will itself end up with no protections i.e. through industrial arbitrage.  

Those are just a few basic common sense policies, which if adopted would start moving the U.S. back to being a real country again, rather than the latent special-interest-group controlled clusterfuck that it has become.

I have no doubt that all of the above policies will eventually be implemented, because they make too much obvious sense.  It's just a question of how long it takes and how bad things have to become before we get there...

Monday, September 17, 2012

Wall Street to OWS - Get A Job!

Occupy Wall Street marked its one year anniversary today.  In the intervening period, the only thing the whores on Wall Street have learned is that business as usual is perfectly acceptable and there are no repercussions for their ongoing greed and malfeasance.  To them it's as if 2008 and the massive bailouts never even happened.

Just today, "Money Honey" Maria Bartiromo from CNBS, in her role as Wall Street Mouthpiece tells Occupy Wall Streeters, to just get a job already.  I apologize for the advertisement - someone has to pay for the rivers of bullshit emanating from that station...

Below is my take on her keen "observations"  (Mac10 is my alias):

"...a year ago just a few blocks away. All to protest what they call income inequality and what they describe as corporate greed..."

Mac10: They being the human race outside of Wall Street

" year later after hundreds of arrests, property destruction,sleeping on the streets let's tally up what has been accomplished by the movement - not much...."

Mac10:  That's right, nothing has changed.  It's business as usual.  Apparently the powers that be, never got the message, so we just have to try harder this next time.  In the meantime, bear in mind, that when real change does come to town, no one will be listening to your screeching bullshit.

"my suggestion was to try and get a job..." 

Mac10:  Wow.  You like it rough huh?   Well suffice to say that not everyone can make a living lying on their back, honey muff...

"...if this movement has a problem with business go to washington and get the laws changed...."

Mac10: Let's see - if you don't like laws created in Washington as quid pro quo for having their campaigns financed by Wall Street, then go to Washington to get those laws changed?  Am I getting that right? 


"even though occupy wall street seemed to have galvinized thousands to protest the movement's numbers have been steadily declining" 

  Mac10:  That's right, everyone went out to get jobs, but couldn't find any, because the greedy pricks that you have as guests on your show, outsourced all the jobs.  Meanwhile, last year was just a warm-up, because when the movement really gets rolling, membership will be numbered in the millions, not the thousands.


" is worth mentioning one other thing as occupy wall streeters have been protesting, the financial index is up 29%.  It's clear that if banks were all the things occupy wall street accused them of being those stocks would not be soaring"

Mac10:  ?  Where to begin...Let's see, nothing has changed, therefore financial stocks are still making obscene profits...BUT, if Wall Street Banks were in fact truly greedy, then those higher profits should translate into lower stock prices?   Well at least that puts to rest any debate as to why she works at CNBS (i.e. it's not for her investing acumen).

And here is the most egregious video of all.  Interactive Brokers made a commercial advertising their trading platform, by mocking the OWS protests...

Saturday, September 15, 2012

Ponzi Supernova: Full Retard x 11

As depicted by the theme of this blog, we are now witnessing geopolitical/economic/environmental meltdown in real-time.  It's an accelerating train wreck that has the public paralyzed - frogs in boiling water.  Their only recourse is American Idol, South Park and Faux News 24x7. 

No sooner had I written my most recent diatribe against the alpha males who bulldozed their way to the top by repeating the same moronic strategies over and over again, than I am presented with yet more mind boggling examples.

First off, with respect to Monetary Policy, I was remiss in not pointing out the most egregious (albeit obvious) aspect of the latest policy moves.  Which is the constantly overlooked fact that monetary policy - cheap money - got us into this mess in the first place.  Once again, it's the signature of the Idiocracy to believe that the way to get out of a problem is to just apply MORE of the same bad policy that caused the problem to begin with.  As a reminder, both the ECB (via OMT) and the Fed (via QE3) this past week declared that they will print as much money as necessary to resolve these ongoing debt problems that were created by easy money.  

With respect to Fiscal Policy, that Full Retard moment has been building for years across all Western Nations.  However, the recent climactic moment occurred when none other than Larry Summers - Dean of Harvard and a key architect of the 2008 meltdown, said that the best way for the U.S. to get out of debt is to borrow MORE money.  

I try not to get too political since I have outright disgust for the two party pseudo-democratic system, but when Mitt Romney indicated that his election platform involves yet another tax cut for the wealthy, I almost shit a brick.  Bush's tax cut from a decade ago is still baselined into the recurring deficit and requires ongoing borrowing i.e. it's a tax cut paid for by America's grandchildren.  And apparently paying for 60% of the Federal budget (borrowing the rest) is just too much burden for today's 'taxpayer'.  So, they need a bigger break.  Leave aside the fact that the wealthy, including Romney himself, already pay a lower tax rate than the middle class and they keep their real money in offshore bank accounts paying 0% tax.  Meanwhile, lest we forget, Bernanke's latest lubing of the stock market (and all risk assets) is a direct income benefit to the wealthy and a commodity inflation tax on the middle class.

The Economist Goes Mad Magazine
Speaking of insanity, the subject that spawned this latest diatribe - geopolitics.  Just this week "The Economist", in examining the recent spate of Anti-American protests across the entire Muslim world, declared that the best response for the U.S. was to interfere MORE in the region.  So again, the best response to a failed policy leading to widespread anarchy, poverty and disillusion is to just double down on the same bad policy.  To be specific, "The Economist", which is ostensibly an economics-oriented magazine devoted an entire article giving glib armchair general advice on how the U.S. should provide military support to the rebels in Syria.  I didn't realize that the pencil necked geeks at "The Economist" were military strategists.  Of course, the same magazine was a proponent of U.S. involvement in Libya where the U.S. embassy was just blown up.  Who knew that intervention could have such high and immediate ROI?  And dare I state the obvious, but if a Danish cartoon or homemade video on YouTube can cause a billion Muslims to go apeshit, then stay tuned for a lot more cartoons and homemade videos...

Wow, this shit is melting down in real time and the only thing preventing public acknowledgement of the fact is the new season of NFL football commanding attention.  Also redirecting attention away from reality is the impending election to determine which of two Harvard buffoons will be the best spokeman for the 14,000 special interest groups operating in D.C.

Lastly, with respect to iPhoney 5 (really 6, but who's counting), as expected, the Idiocracy really, really wants one:

Friday, September 14, 2012

Patience - The Deflation Freight Train Is On The Way

If this (below) were a stock, would you buy it?  I would.  It's a thirty year uptrend (although only 20 years are shown), and it appears to be on the verge of going parabolic.  Granted parabolic blow-offs ALWAYS end badly, however, on a 30 year scale the height of the blowoff top could be very large indeed.  

It's actually an inverted chart of long-term (30 year) treasury yields, which if you believe anything and i mean anything on the internet, it's about to collapse imminently due to Ben Bernanke's most recent actions i.e. yet again, everyone expects imminent hyperinflation.

Unfortunately, when it really counts, the Idiocracy never gets it right and whenever there is consensus on anything, prudence dictates to believe and/or do the exact opposite.  The masses are looking down the tracks expecting inflation, even as the deflation express is boring down on them from the other direction.

The Global Credit Bubble is Collapsing
As I have said before, what the above chart really shows is that despite his grandest efforts, Ben Bernanke - student of the Great Depression is losing the global battle against deflation.  Granted that is not an intuitive conclusion, given that he has monetized $3 trillion in debt with another $1 trillion on the way.  Except, the only problem is that the U.S. bond market is $35 trillion, the global market is $82 trillion, and annual issuance of Federal Debt alone is +$1.1 trillion.  

If Bonds Collapse, Why Wouldn't Treasuries Collapse Too?
Ah yes, the ultimate recurring question.  If something is going to collapse, everyone wants/needs it to be Treasuries.  Unfortunately, I don't write this blog based on what I want, I base it on reality.  The chart above is exhibit A.  Exhibit B is the tsunami of cash that will be heading straight for the Treasury market on the other side of the Minsky Moment which is long overdue - and yes will coincide with the blow-off top in the inverted chart above.  Exhibit C is Japan which has twice the magnitude of debt (relative to GDP) as the U.S. and has been monetizing debt off and on for 15+ years, but is still in deflation.  Exhibit D is the fact that Treasuries continue to trade inverse to the stock market i.e. they are the ONLY risk off U.S. asset  Exhibit E is the fact that in 2008, Treasuries were the only (U.S.) asset that increased in value  Exhibit F is probably the most important factoid which is that in extreme deflation, real yields could be heading higher while nominal yields are going lower.   Exhibit G is the overwhelming consensus across the Idiocracy that Treasuries must collapse sooner rather than later (and are no doubt betting that way).  Ok, this is getting get the point.  

What is Bernanke Really Afraid Of?
I have been a harsh critic of Bernanke's all along, for his role as primary dopium dealer to Wall Street.  That said, I do believe that tapping Wall Street's vein is his means, not his ends.  This guy really understands deflation and he knows that if he loses this battle (and he will), then we are all fucked company in a way few of us really want to understand.

The scariest chart on the internet is below.  What this chart shows plain as day is that despite all of the hand wringing and hyperbole over inflation, the velocity (circulation) of money is collapsing.  This means that while there are more dollars in circulation, each one is sitting idle longer and longer and therefore the Fed is pushing on the proverbial string - or as I say, pounding sand up their ass.

Fabricated Rally - Now in Sudden Death Overtime
So for some reason, the vast majority are only considering the consequences if Bernanke succeeds, which they automatically assume he will.  That in itself is unfounded belief, since ever-increasing stimulus has been applied in the past decade and all it does is boost risk assets, each time for shorter duration.  I updated the chart below to show all of the various monetization programs that have occurred in this cycle - on top of 0% interest rates.  It's plain as day on the chart that every time the markets stall out, one or more Central Banks throws more cash at risk assets in a vain attempt to force them higher.  It's clearly a lurching uptrend with each leg higher of shorter duration despite ever more stimulus being applied i.e.  the marginal impact of each dollar/Euro of stimulus is clearly diminishing.  Moreover, this time around, the (HFT) machines substantially priced in the current stimulus, yet volume is just now spiking (lower pane), indicating that hedge funds desperate to make up for lost time, are now embracing the rally.  So unlike past market rallies where hedge funds were first and small investors were last (aka. buying at the top).  This time, small investors stayed away, machines were first in and hedge funds are showing up late.  Lastly, but most importantly, Central Bankers have no control over the most important variable of all - the output gap.  As expected, it's a subject that to date is seldom discussed or even acknowledged, but in the fullness of time when the Idiocracy realizes that their ephemeral jobs are more important than their ephemeral gold/silver profits, it will be the leading cause of stained underwear.


Thursday, September 13, 2012

Ponzi Supernova

The Global Ponzi is going supernova in every direction - geopolitical, economic, domestic politics, socio-cultural - you name it.  In every direction, the extremes of reasonability are being tested to the maximum.  And why wouldn't they be given that the same brute force strategies that worked this far, are being recycled over and over again, each time with more assertion.  Nowhere is this strategy more apparent than with the "alpha males" who sit atop most corporations and nation states.  These are men who bulldozed their way to the top not with talent or insight or wisdom, but with pure aggression and determination.  Of course, this type of behaviour is not new, but what differentiates this era from all previous is that this has been the longest uninterrupted economic expansion in human history.  It has also been one of the least volatile due to the massive over-use of fiscal and monetary stimulus which has artificially smoothed the business cycle and otherwise unduly rewarded leveraged financial strategies and risk taking.  Contrary to ingrained popular belief however, each passing day of massively accumulating economic imbalances only makes the model less stable and less sustainable.

Careful What You Wish For
In most other periods in history, historians have had to parse the tea leaves to divine the underlying motives for various actions and events.  Not so, this era.  The Idiocracy is blunt and crass about its motives.  Probably the most cynical recent example was the hanging of Saddam Hussein in 2006 for gas attacking Kurdish civilians during the 1980s Iran/Iraq war, during a time when he was being actively supported by the U.S. military and using mustard gas procured from the U.S.  And his primary liaison with the U.S. during the Iran/Iraq war was Donald Rumsfeld working for Reagan and then became Secretary of Defense under George W. Bush....Therefore, given the prevailing level of cynical transparency of motives, it's in no way difficult to predict the future course of events (beyond the immediate timing), because it's clear that the Alpha Dogs at the top only know how to keep doing the same thing over and over again until it fails catastrophically.  Consider the U.S. war in Afghanistan.  The 1980s Soviet fiasco in that region was still in living memory, the CIA having been a catalyst in the outcome of the war.  Yet, that factoid didn't stop U.S. war hawks at the behest of the Neo Cons from blundering straight into it, with hardly a second thought.  And what the hell happened to the "Powell Doctrine", Colin Powell's post Gulf War checklist for going to war?  In historical terms, that "suggestion list" had the shelf life of about :15 minutes.  Powell was Bush's Secretary of State at the initiation of both the Iraq and Afghanistan entanglements, yet almost every tenet of his self-named doctrine was (and still is) violated.

The Obvious is not Obvious to the Idiocracy
The latest example is Netanyahu in Israel.  Here is a guy who on paper and on TV thinks and acts like he is the smartest guy on the planet.  He puts on a hell of show, I have to admit.  Yet, for all that, he is a clueless fucking moron - a danger to himself and everyone around him.  Even today, as U.S. embassies are lighting up across the Middle East like the Fourth of July, Netanyahu is doing his level best to corner Obama and otherwise coerce the U.S. into backing Israeli action in Iran.  This is the latest careful what you wish for moment.  Apparently the brilliant Netanyahu doesn't realize that Iraq and Afghanistan are still smoldering embers just waiting to burst back into flame at any moment.  He also doesn't see the connection between a desperate Syria, cornered Iran, and otherwise melting down Arab world in need of a common enemy at which to direct society's growing pent up rage.  A Democrat-leaning friend (also Israel supporter) just told me that he agrees with the consensus (on the right) that Obama is anti-Israel.  To which, I said that George W. Bush who started two lingering conflagarations in the region and embraced Israel purely out of Born Again Messianism, was no friend to Israel.  But apparently that history lesson playing out in real time, is still not obvious.

Bernanke - World's Greatest Alchemist
Finally, back to my favourite subject the illusion-formerly-known-as-the-economy.  Mitt Romney, yet another alpha male who outsourced his way to the high life, in a fit of terminal dumbness, made the comment a few weeks ago that he would fire Bernanke, if elected.  So guess what Bernanke just did today - he lit a fucking fire under the stock market to the tune of over a trillion dollars of new funny money, which (in theory) guarantees Obama will get re-elected.  Apparently, Romney hasn't picked up on the obvious fact that Obama's popularity ratings are 99% correlated to the stock market and that (short term at least) Bernanke controls the stock market - duh !!!  And I say this is all in theory, because Bernanke, is this era's ultimate example of an over confident fool who has convinced himself (and most everyone else) that subsidizing financial speculation over and over again, carries no risk.  Monetary stimulus inflated both the DotCom bubble and the housing/subprime/Lehman bubble and here we go again it's inflating yet another massive disconnect between economic reality and fantasy.  In each of the prior cases, the economy and markets barely survived, yet somehow this South Park addled society didn't get the fucking message and therefore needs to be wiped out entirely before it learns the lesson once and for all.  There is no free lunch.  

All of this shit show is again, packaged under careful what you wish for, because all of these Neo Cons, Corporate CEOs, Wall Street hedge fund managers, Central Banksters and political con men are just alpha males doing what got them to the top i.e. the same thing over and over again, each time with more force...until such time as it blows up in their faces.  And biologists will be the first to tell us that in a "game changing" adverse scenario when the societal deck gets shuffled, alpha males are the least resilient, presumably because they are not used to stress - having delegated that artifact of success down to the rest of us.

P.S. No, I am not getting bullish on the market - given the latest Bernanke stimulus - even between now and election time.  If there was ever a time to pull the plug on this clusterfuck that would surprise the most people, it would be 




Wednesday, September 12, 2012

iPhoney World

Today's headlines brought to you by iPhoney 5...

Euros to be printed in 4-ply rolls - soft and cushiony
In the main story of the week, Europeans are deciding how much money they will print to allow insolvent nations that borrowed too much money, to borrow more money but at lower interest rates.  This way, they can incentivize these nations to stop borrowing so much.  This program will allow all Europeans to assist these insolvent nations in their over-spending spree.  In line with socialist principles, the costs will be very equally distributed via flat tax, otherwise known as inflation.  In his best imitation of Manuel from Fawlty Towers, Spain's PM Rajoy is now telling everyone that his country doesn't need the money - Que ?

More dollars printed in 4-ply rolls
In related news, U.S. Fed. policy makers meet tomorrow to decide how much money they will print to maintain the illusion of U.S. solvency.  To date, they have printed $2.8 trillion, however, that is not deemed enough, since the government is still borrowing $1.1 trillion and has borrowed $5 trillion in the past 4 years.  So the Federal Reserve is behind in its money printing.  Fed Chairman Ben Bernanke is expected to once again admonish politicians that they are spending way too much money and if they don't become more responsible, he will print less money for them in the future.  Meanwhile, politicians fret that they are heading for a fiscal cliff which would mean that they would be automatically required to balance the budget and otherwise live within their means.  The 'fiscal cliff' which used to be called 'fiscal responsibility' (before it was rebranded by the Idiocracy), is causing a major crisis for the markets and other special interest groups.

At long last, iPhoney 5 - life can begin !
Lastly, after a year's wait, Apple introduced iPhoney 5 which would have been iPhoney 6, except last year's version was dubbed iPhoney 4S since it was identical to the iPhone 4.  The latest version is slightly thinner and slightly larger, but otherwise identical to the previous iPhoney's.  At the  official unveiling, one Apple engineer enthused that the iPhone is this generation's space program:
"Just as the space program made quantum leaps from Mercury to Gemini to Apollo, each iteration of the iPhone is a major leap forward.  Forty three years ago, Neil Armstrong stepped onto the moon.  Today, after only a year of design and development, we added an extra row of icons".
In a swipe at Obama, another engineer chimed in - "We made this".  But a sly reporter called him out when he said "Wasn't this actually made by underpaid wage slaves in China?".  The engineer was offended and confused, since he was Asian American.  The first engineer retorted: "Technically that's true, but we came up with the idea of another row of icons - Steve Jobs is dead, you know".  At which point, the entire room full of uber geeks bowed its head in reverent silence.

While the new phone was announced yesterday, it won't go on sale for a two more weeks, but already tent cities are forming outside Apple stores to get the new phone.  The price on the black market for the iPhoney 5 has reached $6,000, whereas the price of the iPhone 4 has plunged to $1.50 since it is now technologically obsolete, having only four rows of icons.  (Coincidentally, $1.50 is the manufacturing cost of both phones).

FYI, Apple has asked consumers over 40 years of age to stay away from the stores for a few weeks, or risk humiliation by asking all of the uber Geeks if they work there, while mumbling incoherently why this fucking store has no cashier.  As always, Apple employees will be camouflaged as consumers and randomly milling around the store.

Straight to 11
In a rare agreement, the ECB, Fed and Apple have decided that if their current LTRO/ESM/QE/iPhoney 3,4,5,6,7 programs don't get the economy going, then they are all jumping straight to 11:

Sunday, September 9, 2012

Mutual Assured Destruction

One of the early doctrines of the U.S.-Soviet Cold War was the concept of Mutual Assured Destruction (M.A.D.).  This took root during the great armament build-up of the '50s and '60s when both sides were trying to outdo each other on the size and quantity of megaton warheads.  By the end of the build-up phase, combined they could destroy the entire planet many hundreds of times over.  So you could say that M.A.D.  was a crude if not automatic doctrine for that era.  Eventually it yielded to softer doctrine such as detente, to alleviate the underlying tensions.

Not to belabor the history lesson, but the key implicit benefit of the M.A.D. doctrine was that it would prevent a "sane" nation from going all in against their opponent, knowing full well that if the other side had nothing left to lose, they would blow up the planet.  During that M.A.D. era (~1950-1980) there were many skirmishes between both sides - aka. proxy wars (Korea, Suez, Vietnam, Six Day War, Yom Kippur War etc. etc.); however, both sides were very careful to avoid direct military confrontation.  The Cuban Missile Crisis was close enough.   

M.A.D. Class Warfare
Now apply that same doctrine to the stealth class warfare that has been ongoing in the U.S. for the past 30+ years.  Apparently the history lesson was not assimilated by today's 1% wealthy/political class, because they appear to be under the delusion that class warfare is a figment of the imagination and/or commie leftists.

All denialism aside, the fact remains that the 1% already went all in against the middle class, short of the burial ceremony.  In other words they already crossed the point of no return.

But of course they are obscenely oblivious to that fact.  How else to explain the Obama campaign touting its 3+ year "recovery" that buried the middle class in debt, outsourced 5 million jobs and otherwise only benefited top wage earners.  They can't even do basic fucking math.  And how about the Republicans running with a mega-millionaire candidate who made his fortune "right sizing" the middle class, keeps most of his money offshore, and only pays 15% tax on the money he keeps in the U.S.?  Totally oblivious.

(What's Left of) The Middle Class Doesn't Need the Job Destroyers
Given that this system still retains some vestiges of democracy however diluted by special interest groups, the fact remains that the 1% "job destroyers" still require the implicit buy-in of the middle class, especially in the event of any future "adverse" market events.  Yet, under the doctrine of Mutual Assured Destruction, they have foolishly left the middle class with only one remaining rational option - which is to wait until the next "event" and pull the plug on this entire shit show.

P.S. on the subject of QE 3x (or whatever version we face currently), there has been a lot of debate as to whether or not the Wizard-o-Bernank is finally out of bullets.  ZH had a couple of articles here and here and I saw a similar discussion in Barron's.  I will just inveigh with some basic math that if the Federal Government is going to continue running $1.3 trillion dollar deficits (aka. new bond issuance), then Fed monetization programs equal to that amount are not stimulative, they simply prevent new bonds being issued into the private market.  Any amount of monetization less than the deficit would in fact be contractionary, as new bonds will enter the private market and "crowd out" other investments.

Friday, September 7, 2012

Let Them Eat Stocks

Not pretty -  Lurching to a top with overlapping waves.  
I guess $7 trillion+ of combined monetary/fiscal stimulus doesn't buy what it used to...

The amount of b.s. flying around these days due to the election, is out-of-control.  Apparently the only thing still made in the U.S.A. is bullshit.  

The most egregious lies being told, of course, surround the economy - each side telling their version of the untruth while reality is assiduously avoided.  The fact remains that both political parties want to avoid the truth regarding this pseudo-recovery because both sides have special interest groups and political interests face down in the public trough. 

Happy Belated Labor Day
Just today, another monthly jobs report that was far below expectations - the latest reminder that all of the money being wasted on Extend and Pretend, is completely bypassing the middle class.  

Let's Do Some Reality-Based Accounting
Going back to 2007, prior to the collapse, GDP was $14 trillion and the Federal Deficit was $400 billion.  

Then came the collapse, which wiped out 9 million jobs and took the stock market down 57% from the top.

So the question on the table is what was the ROI from the trillions spent on this "recovery"?

GDP - National Income Fully Recovered and Then Some
GDP in 2011 was $15 trillion, roughly $1 trillion more than in 2007

Stock Market - almost fully recovered
As of this writing, the stock market has recovered ~87% of its losses from the crash (chart above).  Granted when you compare this 2009 rally to the 2003-2007 rally there is no comparison.  That one was a smooth uptrend with minor pullbacks on steadily rising volume.  This one has been a lurching clusterfuck as the Wall Street junky vomits on itself every few months while waiting for the next round of monetary dopium.  Notice volume in the lower pane - collapsing like a cheap tent as real buyers exit and leave the HFTs to cannibilize themselves...

Only 4 million jobs recovered - still missing 5 million

The (ongoing) Fiscal Cost (not counting monetary dopium)
The recurring deficit, increased by $900 billion (from $400 billion to $1.3 trillion)
The total debt increased $5 trillion during the period

Inquiring Minds Want to Know - How Many Jobs Does $900 Billion Buy?
So instead of the net new 4 million jobs that have been created, how many jobs should have been created given the expansion in the deficit?  At $50k apiece, $900 billion equates to 18 million jobs if paid for directly.   I realize that many consider it  socialism to buy jobs outright, so apparently the best alternative is to just throw the money down the shit hole instead.  

Therefore, the ROI in terms of jobs for this "recovery" is $.22 on the dollar (i.e. $.78 loss).  And we all know where the rest of the money went...

One Man's Loss is Another Man's Gain
As usual, the stock market gained on today's bad jobs news, because thanks to all of the "lazy laid off people", Wall Street can now expect some more dopium from the Bennie Bernank next Thursday.  The Bernank and his cohort at the global central banks don't know that financial leverage is an extremely dangerous short-term proxy for real economic growth.  That lesson lies in front of them.

Is this a great fucking economy or what ?