Financial Disconnect
Two years ago this month, when I started blogging, I mentioned that I had a sense of dread about our financial future.
It comes from a sense of profound economic peril. We have lived as a country off the rich inheritance of past generations and now the party may be coming to a close.
So from a practical point of view, I got out of the equity market and moved everything into bonds and munis. And then last March when Apple was selling for $95 a share, I felt the fear and panic had been overdone and began investing in stocks again–Apple plus some very good developing markets ETF’s. Since then the S & P has risen more than 50% in a very short time.
I’m getting that foreboding again.
The stock market has completely disconnected from the real economy in the United States. Considering the fact (as David Rosenberg points out) that:
One in every eight Americans …
• With a mortgage are either in arrears or in the foreclosure process
• Are unemployed or underemployed
• Are on a food stamp program
How can this be considered anything but a deep recession, or even a depression? Rosenberg thinks the valuation on the S & P 500 is assuming 5% growth next year. We’ll be lucky if we get 2.5% growth. Now I’m aware that Mr. Market is not always rational and so this rally could keep going for a while, but a some point in the next few months we’re going to have a mighty correction.
Which leads me back to my original post about a country “living off the rich inheritance of past generations.” Look at the chart at the top of this post and see where the growth is–everywhere but the U.S.. We can’t continue on this path spending our treasure policing the world. If the American Century is over, so be it. Let’s declare the end of our empire, bring the troops home and start rebuilding our country.
Sorry, I have to ask again, why is “growth” a Good Thing? If I have a “growth” removed from my liver, that is not a good thing. Even some of the Wise Economists, apparently having run out of theories that fly in the face of human nature and all of history to concoct, are asking at least a form of the question. But hey, I confess my studied ignorance of all that Nobel prize-winning obscurity.
There must be a reason “everyone says” ngdp (and futures markets thereon) are a Good Way To Measure Something And Derive Policy From.
Sorry, I have to ask again, why is “growth” a Good Thing? If I have a “growth” removed from my liver, that is not a good thing. Even some of the Wise Economists, apparently having run out of theories that fly in the face of human nature and all of history to concoct, are asking at least a form of the question. But hey, I confess my studied ignorance of all that Nobel prize-winning obscurity.
There must be a reason “everyone says” ngdp (and futures markets thereon) are a Good Way To Measure Something And Derive Policy From.
I’m wondering how much of the growth of US firms comes from overseas – companies like Apple, Coke, Nike and so on are hardly American firms in the sense that their fate rests with the nation’s.
The country may be on the way down, but there’s no reason why many of the S&P 500 should grow with the rest of the world.
The UK collapsed after WW II, but many of its companies remained [and remain] world class for long after.
I’m wondering how much of the growth of US firms comes from overseas – companies like Apple, Coke, Nike and so on are hardly American firms in the sense that their fate rests with the nation’s.
The country may be on the way down, but there’s no reason why many of the S&P 500 should grow with the rest of the world.
The UK collapsed after WW II, but many of its companies remained [and remain] world class for long after.
The problem is that our ( the pale faces) economical ethos is based on scarcity (also called paucity). The Sioux ( the red skins) ethos was one of abundance.
The problem is that our ( the pale faces) economical ethos is based on scarcity (also called paucity). The Sioux ( the red skins) ethos was one of abundance.
America is a concept of abindance.
America is a concept of abindance.
IF…..
IF you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:
If you can dream – and not make dreams your master;
If you can think – and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ‘em up with worn-out tools:
If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’
If you can talk with crowds and keep your virtue,
‘ Or walk with Kings – nor lose the common touch,
if neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And – which is more – you’ll be a Man, my son!
Rudyard Kipling
IF…..
IF you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or being lied about, don’t deal in lies,
Or being hated, don’t give way to hating,
And yet don’t look too good, nor talk too wise:
If you can dream – and not make dreams your master;
If you can think – and not make thoughts your aim;
If you can meet with Triumph and Disaster
And treat those two impostors just the same;
If you can bear to hear the truth you’ve spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to, broken,
And stoop and build ‘em up with worn-out tools:
If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: ‘Hold on!’
If you can talk with crowds and keep your virtue,
‘ Or walk with Kings – nor lose the common touch,
if neither foes nor loving friends can hurt you,
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds’ worth of distance run,
Yours is the Earth and everything that’s in it,
And – which is more – you’ll be a Man, my son!
Rudyard Kipling
The Empire continues to grow. The next huge military base is scheduled for Colombia (neighbor of Venezuelan oil). I’d look for another base somewhere in Africa soon either in or close to Nigeria.
When it comes to the military, I’m not sure how much power the presidency carries any more.
And as for growth, 2.5% is optimistic. Small businesses can’t get loans. And if they could, health insurance costs would keep them from hiring many people.
This economy is fundamentally broken. BushCo looted it on the way out the door for a trillion or so. We’re stuck with the mess for a generation or more. And the consumer credit and commercial real estate bubbles have yet to pop.
We are in for a full blown depression before things turn around. Time to rearrange the 401k.
The Empire continues to grow. The next huge military base is scheduled for Colombia (neighbor of Venezuelan oil). I’d look for another base somewhere in Africa soon either in or close to Nigeria.
When it comes to the military, I’m not sure how much power the presidency carries any more.
And as for growth, 2.5% is optimistic. Small businesses can’t get loans. And if they could, health insurance costs would keep them from hiring many people.
This economy is fundamentally broken. BushCo looted it on the way out the door for a trillion or so. We’re stuck with the mess for a generation or more. And the consumer credit and commercial real estate bubbles have yet to pop.
We are in for a full blown depression before things turn around. Time to rearrange the 401k.
Ironic choice of poets, that.
Ironic choice of poets, that.
Yeah, that massive myth called “civilian control of the military…”
Yeah, that massive myth called “civilian control of the military…”
“How can this be considered anything but a deep recession, or even a depression?”
One of the most disturbing anecdotes I ever read about World War II (I believe it was the siege of Leningrad) was a man running down a street when a shell exploded near him. Shrapnel neatly removed his head, but his body kept on running for a few steps before slumping down.
That’s us.
“How can this be considered anything but a deep recession, or even a depression?”
One of the most disturbing anecdotes I ever read about World War II (I believe it was the siege of Leningrad) was a man running down a street when a shell exploded near him. Shrapnel neatly removed his head, but his body kept on running for a few steps before slumping down.
That’s us.
When you cut the heads off live chickens (or bite, if your name is Ozzie) they do the same thing… Kind of funny to watch, if you eat chicken and are not one of them…
When you cut the heads off live chickens (or bite, if your name is Ozzie) they do the same thing… Kind of funny to watch, if you eat chicken and are not one of them…
JTM-I’ve talked before about the idea of a “steady state economy”, but no one seemed to care.
JTM-I’ve talked before about the idea of a “steady state economy”, but no one seemed to care.
Wrong audience? Not talking loud enough? I would keep trying — just because as things trend from bad to worse and the bubble/lottery mentality gets uncovered for the dead-end notion that it is, you will become a sainted pudit and seer.
And it’s not like you are alone in seeing the inevitable light:
http://steadystate.org/CASSEBasics.html
is just one of over a million hits in Google-land on that “steady-state economics” search term. I would add the caveat that one might best think it terms of “meta-steady-state.” Some folks here decry any effort to analogize to biological systems, but hey, what is a “modern” economy but a more complex and less well regulated and buffered set of energy and information exchanges between carbon-nitrogen-oxygen biological units? Our bodies at least are blessed with the homeostasis that billions of years of life have gifted us with. The framework is in our genes — one might hope that engrafted parasite called the “cerebrum” and its jerky relations with the older parts of the brain might be trained or even hyperspeed-evolved by all these really smart folks messing with the genome, to at least increase the number and strength of negative-feedback mechanisms.
Or not.
Wrong audience? Not talking loud enough? I would keep trying — just because as things trend from bad to worse and the bubble/lottery mentality gets uncovered for the dead-end notion that it is, you will become a sainted pudit and seer.
And it’s not like you are alone in seeing the inevitable light:
http://steadystate.org/CASSEBasics.html
is just one of over a million hits in Google-land on that “steady-state economics” search term. I would add the caveat that one might best think it terms of “meta-steady-state.” Some folks here decry any effort to analogize to biological systems, but hey, what is a “modern” economy but a more complex and less well regulated and buffered set of energy and information exchanges between carbon-nitrogen-oxygen biological units? Our bodies at least are blessed with the homeostasis that billions of years of life have gifted us with. The framework is in our genes — one might hope that engrafted parasite called the “cerebrum” and its jerky relations with the older parts of the brain might be trained or even hyperspeed-evolved by all these really smart folks messing with the genome, to at least increase the number and strength of negative-feedback mechanisms.
Or not.
I agree, Jon, that there is a fundamental disconnect between the stock markets and the rest of economy. Why, I don’t know. But I, too, fear that soon the markets will plummet if the rest of the economy remains so bleak.
Treasury note news is not good. It looks like foreign buyers are ready to move on.
Equity prices are up but companies are still losing money so few if any dividend returns. and few companies are willing to hire again in the near future.
Layoffs continue although at a lesser number, but, at a real unemployment rate of nearly 20%, how many more people can be laid off before doors have to shutter?
And credit still is unavailable or very expensive.
Meanwhile, Congress – both the House and the Senate – dithers and vocally plays to the populist revolt without doing anything substantive to change the financial dynamics that caused this deep – and lengthy – recession for the millions of American citizens who have seen their lives go down the tubes.
Worse still, we’ve got a massive federal debt and deficit that is unsustainable, given the financial dynamics now in play. I keep repeating: look at what happened with the USSR…and how it crumbled.
This country is in for the same crumble if it doesn’t get its fiscal house in order and make major changes in its financial industries, and either cut the federal budget or raise taxes to get the deficit under control, and figure out a sound strategy to increase to increase exports that doesn’t lead to trade wars.
Unlike China where lawmakers determine an economic policy 5 or 10 or 50 years down the road, this country can’t seem to make a policy for one year in advance because we are a democracy – which means everyone has a say in policy. The result is warring factions both in the beltway – and in the heartland. That worked in the last century, but it’s no longer working because of the enormous number of bad policies and laws made in Washington…and promulgated in the financial sector.
So, what does the average person do? Move to Canada? How do average people survive the coming stock meltdown which so many are predicting?
I agree, Jon, that there is a fundamental disconnect between the stock markets and the rest of economy. Why, I don’t know. But I, too, fear that soon the markets will plummet if the rest of the economy remains so bleak.
Treasury note news is not good. It looks like foreign buyers are ready to move on.
Equity prices are up but companies are still losing money so few if any dividend returns. and few companies are willing to hire again in the near future.
Layoffs continue although at a lesser number, but, at a real unemployment rate of nearly 20%, how many more people can be laid off before doors have to shutter?
And credit still is unavailable or very expensive.
Meanwhile, Congress – both the House and the Senate – dithers and vocally plays to the populist revolt without doing anything substantive to change the financial dynamics that caused this deep – and lengthy – recession for the millions of American citizens who have seen their lives go down the tubes.
Worse still, we’ve got a massive federal debt and deficit that is unsustainable, given the financial dynamics now in play. I keep repeating: look at what happened with the USSR…and how it crumbled.
This country is in for the same crumble if it doesn’t get its fiscal house in order and make major changes in its financial industries, and either cut the federal budget or raise taxes to get the deficit under control, and figure out a sound strategy to increase to increase exports that doesn’t lead to trade wars.
Unlike China where lawmakers determine an economic policy 5 or 10 or 50 years down the road, this country can’t seem to make a policy for one year in advance because we are a democracy – which means everyone has a say in policy. The result is warring factions both in the beltway – and in the heartland. That worked in the last century, but it’s no longer working because of the enormous number of bad policies and laws made in Washington…and promulgated in the financial sector.
So, what does the average person do? Move to Canada? How do average people survive the coming stock meltdown which so many are predicting?
PUNDIT, PUNDIT.
PUNDIT, PUNDIT.
VC-You can always buy the SH ETF. It shorts the S & P 500. You have to be patient, though.
VC-You can always buy the SH ETF. It shorts the S & P 500. You have to be patient, though.
Canada sounds good, but they don’t have much use for us older folks except as tourists. They have their own Lou Dobbs’s. This ain’t like young people avoiding the draft by fleeing to Canada — Canadians like what they get from the US, but maybe the policies don’t invite large-scale migration? And “we” have helped them start up their own MIC…
Valerie, my bet is that what you see really is at least a 20-year “US-stands-for-us-rich-folk fiscal and economic policy.” It’s based on something a little more subtle, functionally speaking, than the Murder, Inc./Mafia model of the Soviet Union, but not much — the lobby-driven and lobby-written legislation and regulations that have turned our effusive and effulgent faith in Constitutionalruleoflaw into a form of self-injected mental chemical restraint. (Gee, I wonder what actually happened to Karen Silkwood…)
We no more have a “democracy,” or even a “republic,” than the Soviet Union did — incumbency, virtually a single party, the equivalent of “Sovietologists” studying our version of the Politburo for clues to manipulability and venality, the military-industrialists running the circus train into the ditch out of habits of thought and the same career pressures on our own senior military, and the same enormous upward wealth transfer and concentration into the offshore accounts of, instead of a shrinking, hereditary “Marxist-Leninist Doctrine” spouting clan of kleptocrats, our “democracy-mouthing,” our own platitude-spouting Colonel Blimps and defective-industry-alists. (The Romans and bourbons and Romanovs and Nazis did the same thing, of course, as their perversions finally drew their own decline and fall.)
We are on the point of starting to appreciate the true bitter humor of that not-so-old Soviet joke: “They pretend to pay us, so we pretend to work.” Although, of course, people here are so desperate for jobs and lack even the Socialist Safety Net that propped up the Soviets for so long, that they eat “management by intimidation,” and “productivity” created by demanding more and more effort from fewer and fewer employees, preferably working on salary or as “independent contractors,” and dreaming that the “flexibility and independence” they experience is a “good thing,” none of whom can look up from their Jacob Marley desks or speak to one another except on official business. “Brazil,” anyone? “Office Space” is now a serial on what, CBS? And I ask again, why are the “Bourne” movies and “Shooter” and “White Collar” and “Dark Blue” such popular entertainment these days? Something to do with sublimation, or maybe just catharsis?
From what I glean, the Chinese process has a fair share of grabbing and baksheesh and the kind of back-and-forth-scratching that passes for legislative action in our own “World’s Greatest Deliberative Body.” For the moment, it looks like “growth” is masking some of the worser problems of humanity-as-locust-plague over there, but I understand there’s some shoddily built schools and apartment buildings in earthquake-prone areas, and people being executed to provide spare body parts for the old farts among powers that be, and their very own class of upper-class parasites who have found out how to “make a killing” off of, e.g., selling fake medicine pills in containers and packaging that is a perfect clone of the actual real medications — to Western folks who then sell it as the real, 10,000-percent-markup thing to little ole ladies in Keokuk and Ashtabula, who have to pay the full criminal and fraudulent (are you listening, JP?) price for the fakes because they have fallen into the Bush League’s “donut hole.” And whoa, there’s no central government around to rein them fake-pill pushers in, either at home or abroad. What kind of wallboard you got in YOUR new house? What flavor paint on your kid’s toys? Any problems with baby formula lately? Where does Swine Flu come from?
There’s a reason gold is running up. You should look up what the Vietnamese ruling class did with its piasters, starting toward the end of 1973. Lots of little portable concealable gold tablets…
Look up “Anomie.” It comes right before “Antoinette,” which comes right before “Interregnum,” which comes right before “Ragnarok.”
Canada sounds good, but they don’t have much use for us older folks except as tourists. They have their own Lou Dobbs’s. This ain’t like young people avoiding the draft by fleeing to Canada — Canadians like what they get from the US, but maybe the policies don’t invite large-scale migration? And “we” have helped them start up their own MIC…
Valerie, my bet is that what you see really is at least a 20-year “US-stands-for-us-rich-folk fiscal and economic policy.” It’s based on something a little more subtle, functionally speaking, than the Murder, Inc./Mafia model of the Soviet Union, but not much — the lobby-driven and lobby-written legislation and regulations that have turned our effusive and effulgent faith in Constitutionalruleoflaw into a form of self-injected mental chemical restraint. (Gee, I wonder what actually happened to Karen Silkwood…)
We no more have a “democracy,” or even a “republic,” than the Soviet Union did — incumbency, virtually a single party, the equivalent of “Sovietologists” studying our version of the Politburo for clues to manipulability and venality, the military-industrialists running the circus train into the ditch out of habits of thought and the same career pressures on our own senior military, and the same enormous upward wealth transfer and concentration into the offshore accounts of, instead of a shrinking, hereditary “Marxist-Leninist Doctrine” spouting clan of kleptocrats, our “democracy-mouthing,” our own platitude-spouting Colonel Blimps and defective-industry-alists. (The Romans and bourbons and Romanovs and Nazis did the same thing, of course, as their perversions finally drew their own decline and fall.)
We are on the point of starting to appreciate the true bitter humor of that not-so-old Soviet joke: “They pretend to pay us, so we pretend to work.” Although, of course, people here are so desperate for jobs and lack even the Socialist Safety Net that propped up the Soviets for so long, that they eat “management by intimidation,” and “productivity” created by demanding more and more effort from fewer and fewer employees, preferably working on salary or as “independent contractors,” and dreaming that the “flexibility and independence” they experience is a “good thing,” none of whom can look up from their Jacob Marley desks or speak to one another except on official business. “Brazil,” anyone? “Office Space” is now a serial on what, CBS? And I ask again, why are the “Bourne” movies and “Shooter” and “White Collar” and “Dark Blue” such popular entertainment these days? Something to do with sublimation, or maybe just catharsis?
From what I glean, the Chinese process has a fair share of grabbing and baksheesh and the kind of back-and-forth-scratching that passes for legislative action in our own “World’s Greatest Deliberative Body.” For the moment, it looks like “growth” is masking some of the worser problems of humanity-as-locust-plague over there, but I understand there’s some shoddily built schools and apartment buildings in earthquake-prone areas, and people being executed to provide spare body parts for the old farts among powers that be, and their very own class of upper-class parasites who have found out how to “make a killing” off of, e.g., selling fake medicine pills in containers and packaging that is a perfect clone of the actual real medications — to Western folks who then sell it as the real, 10,000-percent-markup thing to little ole ladies in Keokuk and Ashtabula, who have to pay the full criminal and fraudulent (are you listening, JP?) price for the fakes because they have fallen into the Bush League’s “donut hole.” And whoa, there’s no central government around to rein them fake-pill pushers in, either at home or abroad. What kind of wallboard you got in YOUR new house? What flavor paint on your kid’s toys? Any problems with baby formula lately? Where does Swine Flu come from?
There’s a reason gold is running up. You should look up what the Vietnamese ruling class did with its piasters, starting toward the end of 1973. Lots of little portable concealable gold tablets…
Look up “Anomie.” It comes right before “Antoinette,” which comes right before “Interregnum,” which comes right before “Ragnarok.”
Today Elizabeth Warren reports (at HuffingtonPost.com) on “America Without a Middle Class.”
These statistics expand upon (and include) the ones quoted here, and point the finger at the banking industry:
“…Through it all, families never asked for a handout from anyone, especially Washington. They were left to go on their own, working harder, squeezing nickels, and taking care of themselves. But their economic boats have been taking on water for years, and now the crisis has swamped millions of middle class families.
“The contrast with the big banks could not be sharper. While the middle class has been caught in an economic vise, the financial industry that was supposed to serve them has prospered at their expense. Consumer banking — selling debt to middle class families — has been a gold mine. Boring banking has given way to creative banking, and the industry has generated tens of billions of dollars annually in fees made possible by deceptive and dangerous terms buried in the fine print of opaque, incomprehensible, and largely unregulated contracts.”
worth a look at the article: http://www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html
Today Elizabeth Warren reports (at HuffingtonPost.com) on “America Without a Middle Class.”
These statistics expand upon (and include) the ones quoted here, and point the finger at the banking industry:
“…Through it all, families never asked for a handout from anyone, especially Washington. They were left to go on their own, working harder, squeezing nickels, and taking care of themselves. But their economic boats have been taking on water for years, and now the crisis has swamped millions of middle class families.
“The contrast with the big banks could not be sharper. While the middle class has been caught in an economic vise, the financial industry that was supposed to serve them has prospered at their expense. Consumer banking — selling debt to middle class families — has been a gold mine. Boring banking has given way to creative banking, and the industry has generated tens of billions of dollars annually in fees made possible by deceptive and dangerous terms buried in the fine print of opaque, incomprehensible, and largely unregulated contracts.”
worth a look at the article: http://www.huffingtonpost.com/elizabeth-warren/america-without-a-middle_b_377829.html
This is just about all you need to know about the disconnect:
http://www.huffingtonpost.com/2009/12/03/richest-counties-in-ameri_n_378287.html
Foxes and henhouses and all that…
This is just about all you need to know about the disconnect:
http://www.huffingtonpost.com/2009/12/03/richest-counties-in-ameri_n_378287.html
Foxes and henhouses and all that…