Minsky, History, Reality v.s. Bernanke, Wall Street, Politicians

I noticed my stats had fallen off, so I thought there must be an NFL playoff game going on that I wasn't aware of. But then I realized it was just another Obama press conference where he was going out of his way to incite gun owners into an apoplectic fit of rage, all so he could appease his "base", none of whom own any guns. Nothing like hosing down a wild fire with gasoline...

Then I took a gander at another "alternative" blog, where they are talking about "Collapse Fatigue".

Collapse Fatigue? What the fuck is that? Is that where we get tired of thinking about reality so we take up another hobby, like lawn bowling...?

Sovereign Debt, The New Subprime

I just watched this commencement speech by Michael Burry who was one of the speculators that made millions off of the subprime crisis.  The UCLA dork introducing him starts out by saying that Queen Elizabeth asked the London School of Economics why nobody predicted the 2008 financial crisis.  Then he goes on to say that  Burry was one of the few people who actually foresaw the crisis.  I am sure being a Professor in the Economics Department, the introducer desperately needs to believe that "no one saw the collapse coming",  however, unfortunately it's all complete bullshit of course, because everyone knew in the latter stages of that era that the housing boom was going to end very badly.  But like deer in headlights,  everyone essentially froze up and pretended that the unsustainable  would continue indefinitely.  Sound familiar?...

A Conspiracy of Dunces

In case other countries are wondering how American workers became Third World wage slaves in their own country - below are step-by-step instructions.
(Warning: Do Not Try This At Home):

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...

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.

This Time Will Be Different

[Update: August 27th, 2012]

Central Banksters meet in Jackson Hole this week to debate another round of monetary dopium.  Wall Street is making the usual (self) destructive threats as to what will happen if they don't get their next fix on time.

Historically the Fed doesn't act this close to an election, so the junkies on Wall Street may be forced to go cold turkey...

When I say things will be different, I am talking about the public's inevitable "response" to the ongoing greed-orgy at Main Street's expense.  No surprise, the overpaid gamblers on Wall Street and their proxies in Washington are oblivious to the seething rage lurking just below the surface - a dry tinderbox that they keep feeding...merely in need of a random spark...

Nothing has Changed
Just last week (under the radar), it was announced that the Volcker Rule, intended to put an end to banks speculating with depositors' money, has now been pushed back to the end of this year.  Meanwhile, full implementation won't be due until July, 2014, almost two years from now !  In other words, best case scenario (assuming it ever happens), it will take over 5 years from the depths of the largest bailout in U.S. history to finally get Wall Street to stop gambling with public money.  Wow, anyone who calls me a pessimist  at this juncture, either has a frontal lobotomy or is free-basing Prozac...

[Original Post: May 10, 2012]

Spectacle 2012: Peak Denial

What good is a collapsing global financial system without spectacle to distract the masses from the catastrophe unfolding in plain view.  Something for everyone...except reality of course.

But we have to thank politics for giving us our best spectacle of 2012 - Robama v.s. Obamney.  The world breathlessly awaits to see which of these Harvard drones will be chosen as the face and voice of the 14,000 special interest groups operating in D.C.

The Idiocracy's Checklist for Financial Collapse

Let's review the Idiocracy's checklist to ensure all preparations have been made:

1) Market controlled by front-running HFTs, causing random meltdowns and stock crashes

- Check

2) Investors anaesthetized by monetary dopium ("Operation Twist") and hence oblivious to risk

- Check

3) Impending global recession

- Check

4) Make-believe U.S. recovery sponsored by (more) government borrowing

- Check

5) Intractable European debt crisis getting worse with each passing moment

- Check

6) Financial news media with its head fully lodged in the financial industry's ass

- Check (night vision goggles all around)

7) Politicians campaigning full time and ignoring reality

- Check

8) All finance industry laws and incentives leading up to 2008 still fully in place

- Check

9) All policy-makers, finance industry executives and other buffoons contributing to 2008 still fully in place
- Check

10) Fully outsourced economy, ensuring absolutely no job creation whatsoever

- Check

11) Rigged banking system and interest rate setting mechanism (Liebor)

- Check

12) Massive post-2008 consolidation of the banking sector, creating banks that are too bigger to fail 

- Check

What else?  Another war?  Let's see if Iran is available, fall back on Syria.  Or, lazy man's approach, just keep drone attacking Pakistan until that shit blows back in our face. 

Ok, we are ready.  All signs point to yes !!!

BTFD - It's Walmart's World, We Just Live In It

It's extremely a propos, and eerie that the top performing stock making its all time high right now is Walmart.  No company has benefited more from the outsourcing of the U.S. middle class than Walmart.  When was the last time Walmart made a multi-year high ?  The week Lehman collapsed - September 20th, 2008...

Market View:

BTFD until the SHTF

Buy the Fucking Dip [BTFD] - that's Wall Street's mantra these days.  And why not, it's worked well for most of the past three years, save for a couple of notable market meltdowns.  As I have said before, Central Bank liquidity programs are payoffs for large institutions to look the other way to risk.  Therefore, not withstanding worsening fundamentals in Europe, here in the U.S., and in China, I have yet to find one stock analyst saying that stocks are an outright sell.  Small investors, on the other hand, having just gotten unfriended by the Facebook IPO, are selling big time...

Don't Worry, Be Happy !!!

Don't Worry, Be Happy
That's the public service message from the world's Central Banks to all of us in the general public, and especially to Wall Street.

When Bernanke embarked upon Quantitative Easing, three years ago in early 2009, he said at the time that the new policy (of printing money) would have unintended consequences.  In Donald Rumsfeld's terminology, "unknown unknowns".  

MELTDOWN

We are on the verge of the long awaited financial meltdown. Here is roughly how I see things playing out from here:

1) Stock market tanks (Timing: One day to 3 months, most likely 1-6 weeks): the market has been in denial for a long time, but time is running out ...

- The stock market is the key as it directly represents investor/consumer confidence - once it goes, everything else will collapse like dominoes

Strategy: Cash and/or Index puts

2) Credit market seizure (Timing: One day to 3 months, most likely 1-6 weeks in conjunction with stock market tanking): The credit crisis has been slowly spreading and panic has been contained. I expect things to come unglued very soon...

3) Fed Panics and Drops Rates to Near Zero (Timing: One day to 3 months, in conjunction with credit/stock market tanking)

Strategy: Avoid exotic derivatives (due to counter-party risk). Avoid long-term Treasuries, Corporates or Munis

4) Commodity Market collapse (Timing: One day to 3 months, most likely 1-6 weeks in conjunction with stock market tanking): The commodity market has been the last refuge for investors. I expect that last leg of the stool to be kicked out any day now

Strategy: Stay out of the way

5) Liquidity Trap (Timing: 6 months to 12 months, in conjunction with Fed panic)

6) Widespread Bank Failures (Timing: 1 month to 18 months). Once the credit market goes into seizure, the crisis will soon spread to the banks. People will be SHOCKED AND AMAZED at how fast banks will close...

Strategy: Hold $10k - $20k in hard cash. All other cash funds only in FDIC insured deposits (no more than $100k at any one bank)

7) Massive Layoffs (Timing: Now for next 2 years). Today's job report was worst in five years (100k jobs lost in private sector). It's all downhill from here...

8) Real Economy Collapses (Timing: 3 months for next several years).

9) Deflation takes hold (Timing: 3 months for next ~2 years). Asset prices and goods and services prices deflate

10) Government Gets Desperate (Timing: 1 - 2 years)

Strategy: BUY GOLD (bullion, coins, futures, CEF, GLD etc...)

11) Hyperinflation (Timing: 2 to 5 years - hard to predict)

Strategy: BUY MORE GOLD (bullion, coins, futures, CEF, GLD etc...)

12) Crime and Anarchy (Timing: Now for the foreseeable future): Crime rates are already starting to tick up...

Strategy: TBD...

LOOK OUT BELOW !!!

Looks like ALL of the markets (domestic stocks, global stocks, commodities) are getting set for a major leg down and here is why:

1) Since the January 22nd low, the stock market has been consolidating sideways in a very narrow pennant-shaped range. Usually a pennant formation is resolved in the direction of the trend, in this case down.

2) The Volatility index has declined since the January low, but it made a higher low and is beginning to rise again. Put sellers have been saved time and again these past four years, by V-Shaped recovery rallies, so they are highly conditioned to sell volatility into every decline. It's only a matter of time before this clueless cohort blow themselves up...

3) Oil, gold and commodities in general, appear to be in blowoff mode. Gold has risen 7 of the last 8 days and is now at $975/ounce. The charts of all commodities have gone parabolic...

4) Complaceny reigns: There appear to be few if any commentators looking for a major decline from here. The most bearish commentators are calling for a successful "retest" of the January lows.

5) The Euro has broken out to a major new high 1.52 vs. the dollar today, but similar to gold, the Euro move appears to be exhaustive, rather than breakaway. Likewise, the "dumb" money has been feeding at the Euro trough a little bit too long for this to be a lasting move...

6) Financial stocks started to break down again today on heavy volume. They led the way down in January, and most likely will lead the next leg down.

7) Treauries have caught a major reversal bid on very heavy volume in the past 3 days, indicating a flight to safety

8) The news flow this week has been unbelievably awful:
i) Decades' high inflation
ii) Rising unemployment claims
iii) Home prices falling by greatest percentage since 1930s depression
iv) Accelerating liquidity crisis in the debt markets, spreading to new asset classes

So far the market has weathered this perfect storm of bad data, but it likely wouldn't take much more to see things come really unglued...