Hi Elmat, I want to get all the bad news tidings out of my way before the holiday seasons gets underway, saving the good feelings for the feeling-good season, parties and Santa Claus. I am really looking forward to the good times. We need it, parties and a recovering equity market, and it looks as if we will get both, for a while.
Am I not even one little bit hesitant about my continuing stance to not buy the equity market? No. I am not. I am ‘paranoid-ally’ sure that if I buy now, I will trigger the Collapse. Oops, there is that word again, and I do not want to trigger it before the season of good tidings:0)
Before the onset of next abracadabra there first must be a Collapse, and we are collapsing, except the world no longer seems to work quite as we expected per Collapse script, because our script was still based on logic, as opposed to exhaustion, whereas the ‘fight’ left in governments, institutions, and J6P are still plentiful, and thus making the script of collapse playing out longer than I had guessed.
The fighters’ ranks are, never the less, getting thinned out, mowed down in successive waves by machined bad news, and every now and then fragmented and ‘gibletized’ by fuel-air announcements. Governments are dropping away, institutions are having their bellies exposed for them, skyward, and J6P twist and wither despondently amidst the general chaos of layoffs and bankruptcies, too scared to face the facts, too numbed to recognize the truth, but still motivated enough to buy a new SUV, and, obviously, CSCO and ORCL, along with a dollop of IBM, and even a smidgen of Enron. Yes, crazy.
The imbalances and dislocations in the economy, where investment is not justified by returns, spending not offset by savings, talking not by learning, taking not by giving, and price not by value, are taking longer to first crack, disintegrate, and then pulverize the economic gear works, trains, and wheels. This is how physics work. The wheels are now spun by spin, and motivated by ever cheaper credit, and delaying a new age of abracadabra. This is how manias work. Big manias beget little ones, beget froth, then foam, and finally, nothing.
I should have more fully embraced the Japan model of government-market intervention and interaction in my collapse sequence, because that is precisely where we all appear to be going, a place where an all enveloping bubble problem finally burst, caused by plentiful credit and lavish prices, unsupported by value, and where the busted boom is still being resuscitated by intravenous injection of still more and ever cheaper credit.
The patient is brain dead, heart is pumped by disembodied energy source and unnatural manipulation, and veins are bursting by red hot and cheap liquidity. Still, there is no recovery.
Come to think of it, Japan collapsed and is still collapsing, and yet there was not a single dramatic day that could be termed black Friday or any other day; just day after awful day, then a few bright days, and then continuing the awfulness.
This week’s anecdotes:
Turkey, the country, is laying off all civil servants over the age of 50. How this action helps the Turkish economic recovery is not clear. Let’s see, the action will shrink government payroll, reduce societal income, shrink consumer spending, lessen taxpayers’ burden, but also reduce the number of taxpayers. Plus side, as will no doubt be noted by WSJ, is there will be less red tape, thus freeing hundreds of thousands of entrepreneur wannabes, newly laid off, start new businesses with cheap credit, and then attempt IPOs. In any case, net net, the GDP shrinks immediately, and the dangers for credit providers never higher.
Enron, the company, declares bankruptcy, and threatens others with same, via bad debt, derivative linkages, or legal suits. The Enron management is so obviously at fault. By that I mean they had lied and should simply have lied in ever-greater scale. Why did they not simply used their erasers and fudged the 1.2 billion dollar balance sheet write down, perhaps by trading a special balance-sheet-recovery derivative contract with JP Morgan Chase and/or Citicorp. They could have made it a four party deal, roping in and saving Argentina and Turkey in the same day’s work. Had Arthur Andersen wanted to audit the counter party to the so-very-special derivative, the Turkish and Argentine governments would no doubt have told the auditors to pound sand. Again, GDP shrinks immediately, and the dangers for credit providers … just ask Cheveron. Of course, Enron is a child of the then Human Capital rich New Economy, and have suffered for it. More on human capital …
Message 14869036
“On the trade deficit, it drives manufacturing asset rich old economy into the ocean in favor of human capital rich new economy. Uncharted territory. Human beings are fickle.”
Message 15126319
“The US will also need an invigoration of its manufacturing sector, as opposed to simply the designing and labeling that the CSCOs do. Human capital is simply too human, optioned and option-able. Land, buildings, equipment, warehouses, and now you are talking my language.”
Another few words on Enron, a crime has been committed, and those responsible will retire wealthy to probably the West Indies, joining the Chief Geologist of Bre-X, away from the ex-employees and poorer shareholders wishing to reach them, and then reach inside them.
I will wait for the inevitable funny book to learn more about what took place in Enron, no doubt a hoot, and may be able to buy it from that other crime called Amazon before it too gets nibbled to wealth heaven.
Back on my original rant train …
Micron, the future dead, embraces Hynix, the already dead, to prevent the South Korean firm from spiraling ever downward, intravenously fed by the South Korean government, and sell chips at marginal cost basis, as it disintegrated, dragging Micron down with it. What will management think of next? Pressure GWBush to arm-twist South Korea to stop intervening in the free market? GDP increases somewhat, as high capital factories produce what is not in demand, and the dangers for credit providers … you get the idea.
Closer to Wall Street, after-tax incomes go down, tax rate go down, bankruptcies rise, delinquencies break record, government surplus is no more, retirees security is lesser still, but, hey, zero financed SUVs move onto driveways, and J6P ignores all the bad news not reported by CNBC, focusing on none of the good news, not for lack of trying, but for lack of it in content, only in the headlines, and buys, buys, and buys some more, into his garage, 401K, IRA, mutual funds, learning nothing, believing everything, only if it is financially suicidal.
Wang-3-Cups (W3C) over on this side of the Pacific is being educated in the joys of consumer credit and the joys are starting to be made available in quantity. So far the small financed spending is focused on home durable goods related purchases, as opposed to clothing, vacation and such. But, the less durable spending will no doubt follow. The Chinese Communist Party propaganda machine, together with the self-regulated press is cheering that consumer credit will fuel spending, which in turn will charge the economy. And so, the CCP and CNBC agree on something, causing me to worry, this time truly.
The variations of bread and circus situations described above, all arising from ‘give the people what they want, but hard’, and will probably all end in the one simplest predictable way, at different times, thus clearing the way for a new age of abracadabra, with the world working as expected once more, for a while.
What we must do is, as I noted before …
Message 16141292
“… ready for the silence inducing mental shock and the simultaneous cacophony of simple primeval screaming that such a down-draft would entail; however, I know, in my own case, I have not even begin to imagine the worst that a scream can be …
When the bulls dismiss a sharp down-draft by following the same thought with "and when recovery takes place" they have left out a big huge chunk of the interim darkness and chaos …
Feel the market. Trust the force. Trust the power of insanity.”
… and have faith in Reversion to the Mean, where attitudes and beliefs again hug the age old standard of “education, work, savings, family, neighbors, truth, value, and specie (oh, oops, OK, I meant gold)”.
The whole world is becoming one big Argentina cum Lebanon, et cetera, ad infinitum, ad nauseaum. The world must first become slightly less dangerous for the credit providers, else the Japan-model holds: no spending, no borrowing, no abracadabra, even as the savers become poorer each day, deflated away, devalued away, and simpler still, robbed by the borrowers, even as the borrowers disintegrate in slow motion.
Until then, no abracadabra, only purchase of choice land, gold, platinum, un-hedged mines, all matters that can similarly skip generations, and holding on to the puzzlingly ever unfashionable cash in a balanced apportionment amongst the currencies, while waiting for the new age of abracadabra, and practicing primeval screaming.
On buying land, I do not mean the USD 100 mm that Enron spent to name the Houston Astro's new ballpark "Enron Field” for 30 years. I hope ex-Enron employees, devoid of pension, can at least enjoy the games at the park.
On abracadabra, it is instigated by human capital, launched by financial capital, and kept aloft by media capital. Human capital is getting cheaper by the day, and media capital is getting better by the day. Once financial capital is no longer abused, there will be plenty of abras and cadabras to go around, bigger than ever, better to be enjoyed by those able to secure what financial capital they already have.
Chugs, Jay |
