Monday, March 21, 2016

Re: Mr. David Brooks, No, Not Trump, Not Ever

Dear David Brooks,

We’ve never met, but let’s just say I have admired you from afar. Specifically your intellectual rigor, expression, instincts and sensibilites. I was always in awe of one of your Mentor’s, William F. Buckley and with that, in awe of you. But.

We are two people, of two groups both grieving for the same nearly dead or dead ideal, the death of the American Dream. We are each grieving in our own separate ways. Make no mistake though, we are both traversing the seven stages of grief, specifically shock/disbelief, denial, bargaining, anger, depression and lastly acceptance/hope.

We know your loss, it is ours. We’ve been there, we are still there; just a few stages ahead. The first stage for US was shock, disbelief, it’s hard to say when it actually came to realization. I am sure within everyone’s timeline like Kurosawa’s Rashomon, there was an inflection point; perhaps it was Kennedy, Nixon, Chainsaw Al, September 11th, or the crash, the repeal of The Glass-Steagal Act, The Deficit, the Wars in the Middle East, OJ or the Monica Lewinsky Scandal. For you now perhaps it is Trump.

For many of US, our denial was US carrying on as though nothing happened. The realization for a few of US, came in the ensuing years, as each day we were faced with the same inevitability. The presence of the American Dream was still tangible the clothes hanging in the closet, the room left just as it was on that fateful day the framed Norman Rockwell print hanging on the wall. We became timid, withdrawn, reflective with  intermittent periods of acute grief and despondency. Some of US went in the other direction, got active, championed a cause, determined to make the loss count for something. Everyday of not hearing the Dream’s whimsical laughter, tittering in the halls became a lament, a hole you just couldn’t fill.

Some of US bargained with ourselves, trading what we knew as the basic tenets of the American Dream for the empty promises and chochtkas to fill the hole. For some it was money, faux success, others — drugs/alcohol, promiscuity and vanity. Left in place was the body of the American Dream, but the Soul had left and was hovering above.

For a great many of US, we have guilt, what if we in our own lives had done this, or said that or had listened or had preached or not preached. It would still be here today. It tears you up, it eats you from the inside, you end up doubling down on the behaviors picked up from the bargaining stage hoping that the modicum of relief you experienced will manifest itself into a reincarnation of the persona lost. You hurt yourself and those around you and perhaps the Village as a whole. At the end of this stage you become aware of the larger environment, the machinations of the things, where perhaps you might have contributed, but really you were just following along. For many of US, The Establishment, has become that which caused the circumstances by which the American Dream was lost.

Anger, first it’s a slow burn and confrontational, then it grabs the harmful things first at hand. The assault rifle, the knife, the divorce papers, the syringe the camera and/or pen. It comes out raw, blind and fast in a torrent. It’s primal. it’s unfocused and focused at the same time. Your eyes get squinty, tunnel vision and the energy comes out in an eruption. It’s fast and furious, hurtful and destructive to the party it is directed and of course there is always collateral damage. The degree of anger is important and to distinguish the differences dictates the amount of penance required. Anger in the first degree is likely confined to your sphere, harsh words, laptop lids/doors are slammed. In the second degree, well, it occurs in a larger circle a bigger audience. In the third degree, small circle or large there is no way to avoid maiming, death or incarceration and naked retribution by society. 

While perhaps “The Establishment” has just gotten the news that the American Dream is dead, more than half of US have faced that inevitability for some time. This is our current stage. We are closer to coming to terms with the loss than “They” are. 

Make no mistake, the majority — 99% — of US are now in one of the seven emotional stages of grief, there can be no denying that. Unless we can all acknowledge the death and loss we cannot move forward together. This is the time to comfort and get busy with creating the new; new normal in our lives.

Trump as a candidate, is a curious development. Hard to say for him, what or when was the point in time that he realized the American Dream was dead. We should be asking ourselves this of him because of its importance to the timeline. He is the most uncommon griever, only because 99% of US would look at his life and say, he would be the last person in the room to realize it, much less acknowledge it. But he has, amazingly his recognition and reaction is the same of so many other people grieving. It was like that moment when magnets jump the divide and cling tightly together. That revelation will bring more, and the collective we, will be shocked at the breadth and depth of everyones acknowledgment of this loss. It transcends Race, Socio-Economic, Gender, Borders; in essence anything we can point to as a difference between each other.

I judge the anger now, as 2nd degree. It’s not that we are yelling within our household or at the TV, we are now at the town meeting, staring at a Narcissistic Establishment/Town Council staring back at US who take affront and appear shocked at the anger and vitriol knowing full well how it was likely cultivated. All of US are an employee, spouse, partner or child of The Establishment and at some level we have all been goaded or reduced to being angry, upset and emotional, because that is the end result of what Narcissists do to those closest to them. Onlookers, passersby or people looking from the outside in, shake their heads in disbelief, sympathy, exasperation at US, meanwhile shielding their children’s eyes from the Angry raw, ugliness of discord.

Narcissists are largely successful in our society. In politics and business, narcissists are held in high regard, apparently it is an important construct for success at most levels and it is designed that way. I don’t believe that we are so clueless as to what Donald Trump may be. I don’t believe he is a narcissist and I vigorously dismiss your assertion. Big Ego? Yes… Is that a trait of narcissism? Yes, but largely, he is angry just like US. If he is a narcissist? IF! What better way to get the upper hand on Narcissism in government or contain it, than to dull the edge with another Narcissist. We could do the eye for and eye, but in the end we all end up blind.

That however is not advancement and ensures mutual destruction, scorched earth. Narcissists will always put their employees, partner, children loved ones in a bad spot so that they themselves may shine. Public humiliation, gas lighting, shame by dressing them inappropriately, constantly breaking down their emotional/mental equilibrium. Knowing Donald Trump the public figure, he doesn’t come across as a Narcissist. His kids are successful, well mannered, well dressed and respectful. Not angry, withdrawn, emotional or unstable. It isn’t the family of a Narcississt. I think you are confusing his vice of vanity and putting too much weight on it. There is no denying The Donald our Donald Trump is vane.

All of US — recently had before US — candidates which I am sure, if we were to pick one word from each list of virtues and vices to ascribe or label to each — the collective US — would be remarkably similar in our assessments. This list of Vices and Virtues are comprised of the seven deadly sins — pride, greed, lust, envy, gluttony, wrath and sloth. As for virtues — chastity, temperance, charity, diligence, patience, kindness and humility.

I think that given the collective US in this campaign we looked over the list of Virtues and instead embraced the Vice. Either that or, we just saw what our narcissistic partner said we saw. Many of US started to believe it, but then we started to see differently. If you see Donald Trump, as many of US are starting to see him, it is because of his remarkable admission of grief. He grieves the loss of the American Dream. With that recognition, we see within Mr. Trump virtue, chastity, diligence, patience, kindness, humility and without a doubt we will start to see temperance. Something I believe his family and close friends would attest to.

Everyone that has “shorted” America for too long has come away hurting, my belief it is because as Churchill said, the US  Democratic system is the best of the worst. One over arching attribute is that we have this uncanny ability to collectively pick the right person for the task at hand. Mr. Trump is not however out of line for “shorting” America it is ultimately a healthy process, provided you know when to “Buy” again.

What better candidate for leader of the Free World than one who embodies all of our vices, and yes virtues as shared by all humanity. So that he can reflect us and we can reflect him to reincarnate a resurgent American Dream. A product we can be proud to affix the label of Made in the USA for export around the world. The 2.0 version we export now, is lacking.

That being said, The Establishment itself is Narcissistic, if you were to look at the country as a whole, the bottom half is hurting. Those closer to the top half keep telling themselves this too shall pass, but it isn’t, and it won’t. Narcissists never stop, they can’t help themselves. We look at the Media, the GOP, the Liberals, Wall Street, State and Local Governments, even with the overwhelming evidence and acknowledgment of the detrimental impact to the populace, they still do what they do best.

Narcissism is inherent in US all. It’s required in healthy doses perhaps for conviction, self worth and individualism. In a mild cases it is not a bad thing in and of itself. But as the old adage “birds of a feather flock together”, in close confines of Government leadership it gets past the healthy threshold fast.

I am of the belief you cannot point out a problem without offering a solution, so with that I’d like to shape what I think is a bigger problem within The Establishment.

The real issue, perhaps is something even more insidious as it is it was created by nature. That is the role of sociopaths in our society, specifically Government/Business. One out of Twenty of US citizens are likely sociopaths. That being said, of the leaders in our society they perhaps are in greater prevalence. They are of course part of humanity too, but humanity without a conscience, no guilt, no concept of morality. They are Watson’s with impulses and urges that they act upon — without a governor switch — save for an action that would harm their interests/pursuits. They act on the Vice and feign the Virtue.

Art is a reflection of current zeitgeist within a society, Frank Underwood is a sociopath, that’s not to say they don’t have a place in politics, and The Establishment at large, they do. In the right time and place they make the hard choices, in the same instance they are the embodiment of the belief that no big success was achieved without a significant crime or major infraction of morality being committed. The ends justify the means. I repeat. The Ends justify the Means. Here is our slippery slope, as AI is all the rage and robots will soon make US (Humanity) the leisure class we should embrace and have recognition that these “automatons of nature” are amongst us now. Take heed. We need to adopt/modify the three immutable laws of Asimov’s iRobot to safeguard US. Here is my attempt.

A sociopath may not injure humanity or, through inaction, allow  humanity to come to harm. A sociopath must follow directives and guidance given by humanity except where such orders would conflict with the First Law. A sociopath must protect his/her own interests as long as such protection does not conflict with the First or Second Law.

Which now brings us to the stage of depression. Whether or not Mr.Trump is successful to being elected leader of the Free World, with either outcome there will be depression. For US further along, within this stage we perhaps will be on the back end of it. We’ve had decades to traverse the chasm of grief. The Establishment will have to do this in just a few scant months. However, we will be closer at this moment in time, than we have since WWII to being as United as a Nation of differences. I am omitting of course other events although shocking  as they were. These events were not a dirge of sludge, loss, sacrifice and heartache year upon year, with at the end a great deal of many broken pieces, people, borders and histories left to pick up. It’s likely our mind state will manifest itself into a financial Armageddon, a rash reaction to the overwhelming last grip of despair, or perhaps not. That could happen regardless of who wins. No need to prescribe Meds. Many of US will be ready to get active, get busy and get consumed with building and living the rest of our lives in making this an even greater Republic. The world will benefit along with US.

The American Dream didn’t die a tragic or frightening death it wasn’t willful neglect, it was more of a bad diet and being sedentary leading to sclerosis and bad humours. In the end it really hasn’t died, you can’t kill a dream, it’s just that many of US just woke up to a new day.

With Acceptance, comes Hope for US. For me I accept the human frailty, the strength,  the encapsulation of all the Virtues and Vices of Donald Trump, he was Made in the USA. He is all that is Great and All that is Bad of US. I hope that he lives up to the virtues I project on to him, and as for the vices well let’s just say we all have them, so we will tackle them together.

There is no US without THEM and there is no THEM without US.

God Bless The USA and the World as we know it.


W. Henderson

Passenger On the #TrumpTrain


Thursday, October 14, 2010

So what about the new foreclosure crap.... who cares!!!

Here we are dancing above 11k on the DOW, and the talk of Golden Crosses (50 day moving average breaking through the 200 day MVA) well if it ain't Scottish it's CRRRRRAAAAAAAPPP!!!

Here is the point where the DOW 4500 20 Year Head and Shoulders is fulfilled.  In my view we are at the right shoulder top right now... a double top at that!

It has been over a year that I have been tracking this one particular indicator and watching the news events track it's development.  Recently this new item about banks having to stop foreclosures, because they don't have proper title is what I believe will cause the right shoulder.

It makes sense that the banks probably knew this some months ago and the folks in their houses not paying a dime have been doing the broader market a favor by buying electronics and consumer goods and saving$$$!!!  This time I guess the banks can't be bailed out, so that leaves big hulking masses of debt holes that will act like economic black holes and suck everything within proximity into it's hungry MAW.  Including stocks!


Now for the other shoe...who owns the title? Here is a hint... the bank doesn't.

SELL!  SELL! SELL! This example x 2Million Homes...ouch! 

Meet Danielle And Jim Plus 9: The Squatters Who "Reclaimed" Their Foreclosed Home Over The Weekend

Unfortunately, surreal stories like this will very soon become daily news. As was pointed out yesterday, Simi Valley has just seen the first case of a forced reclamation of a foreclosed home, after Jim and Danielle Earl took their nine (9!) children, ages 9-23, and a locksmith and broke into the six-bedroom house that had been foreclosed upon for lack of payment, and on which the couple owed $880,000! And where would such brilliant advice originate from? Why, the couple's lawyer of course, who will one day be seen as the prophetic visionary who stole the bankers wealth from underneath them and handed it out to America's millions of starving lawyers, one billing sheet at a time: "The move was recommended by their lawyer" as the WSJ suggests. Already in process: millions of cases identical to this one, billions in legal fees, and hundreds of billions in lost market value of associated equity and credit instrument, not to mention very unpleasant days for LPs in "Recovery" funds.

More on the family:

The Earls paid $500,000 for the house in 2001 and then refinanced to pull out cash. They fell behind on their mortgage and at the time of their eviction they owed about $880,000 on a no-interest mortgage.

Investors at Conejo Capital bought the house for $697,000 at a lender’s trustee sale and put $40,000 of work into a remodel, replacing carpeting and appliances, as well as upgrading the kitchen. They flipped it to new buyers for $800,000. Those buyers were supposed to move in this week; those plans are on hold.

The Earls claim that they were working with GRP Financial Services to catch up on payments, but discovered a $25,000 difference between what they believed they owed and what the bank said they owed. They then stopped making payments.

“This is only the beginning of this,” the Earls’ attorney, Michael Pines tells KABC News. “I chose this family because we needed to get back in before the investor and the real-estate broker defrauded a new family by having them move in, which would have created a bigger mess. (The Earls) have done absolutely nothing wrong.”

So there you have it: people who owe $880,000 on their mortgage believe it is their right to reclaim homes. We will avoid any ethical commentary on this, suffice to say that it is the bankers who in the greed and stupidity have managed to dig themselves into what could be a hole so deep not even TARP 2-XXX can dig them out of.

For a clip of this surreal harbinger of things to come, click below.



Thursday, August 19, 2010

Gee we are making sacrifices these days, but think of the sacrifices these...

Men and Women and their families have made.  Thanks to all the fine US Soldiers and their families that have paid such a high price for our freedom and the freedom of the others in the world. GBA


Wednesday, August 11, 2010

Children of the Apocalypse - i.e. The World According to David Stockman

Politics or Selective Quotes from Ron Paul's stump speeches...  I happen to agree with David Stockman, but I don't take any stock in his admission that the GOP is at fault or any party for that matter.  We are hurtling now to a place of which many history books 200 hundred years from now will be focused on explaining with the hindsight of 20/20 vision.  

We are so far into the weeds on this and right in the middle of the weed field it's full impact can in no way be ascertained.  It's like watching a locomotive reach the end of the line at top speed with a thousand screaming passengers or a cruise ship at full steam heading for the passenger terminal.  

It hasn't crashed yet, so the aftermath cannot even be fathomed.  You just know that it is going to end badly and a lot of people are going to get hurt, but because it hasn't happened yet you just sit transfixed by the impending disaster about to happen.  The only thing you can think at this point is that it is going to happen, you just can't envision the aftermath. 

Many of us shared this moment watching the Trade Towers on fire anyone that had visited them or knew them intimately was extremely worried and heartbroken to see them on fire.  However, none could have envisioned that they would have collapsed, and this is kind of where we have been and about to see play out again in our economy. 

We have been vainly fighting  against and at the same time watching our economy burn since 2000, but we refused to give up and fought like hell to get it under control only to see the floor collapse despite our best efforts and watched helplessly as the economy fall into itself in 2007-09.  Well the next part of the collapse is about to happen and it's as I envisioned going to occur at the earliest within the next 3-6 months.  This is when the pig with the lipstick, decides to put us on the menu and gives us the kiss of death.  The aftermath will only start to be visible one - two years from now. 

Personally I don't think you need fiscal discipline when all you have to do is to print more money, and find ways to inject it into the economy.  I mean the amount of wealth that has been accumulated and stored is staggering.  

The funny thing about storing mass sums of money, because there is more where that came from and sitting on it akin to watching a glacier melt.  You can't see it melt but every year there are a few hundred yards less of it.  It's akin to your continent of money being overrun each year by the amount of liquidity oceans of new money brings, so that your continent is now an island country.

In my humble view, it isn't not the printing of the money that is necessarily the issue.  The problem is the how all the money has been distributed and accounted for thus far.  Specifically the point David makes about the speculative and non-value creating ways we are able to make money these days.  The trick here is when maintaining a "Token Economy System" it has to be fair and equitable or people won't want to play anymore and will stop cooperating. 

I like how the article, makes a point that our deficit in 1971 was $425 Billion, but while it does mention "indirectly" that $1Trillion was our GDP it doesn't say that GDP in Q2 of this year was 14.6 Trillion while our debt was $11.8 Billion for the year.  For the most part until the last eight years our debt accumulation has been in lock step with our creation of GDP.  I think we have made a huge mistake eight-ten years ago, by not continuing to focus on paying down our debt.  If you look at the US as a company taking on more debt is a decidely risk gamble of which never really goes well.  But we are now committed.

Job recovery will never happen because technology is quickly outpacing human development and displacing more and more people.  All you have to do is look at the explosion of reality shows like the Bachelorette, Survivor, MTV etc. etc. many Americans have already been displaced but the offset has been the entertainment industry.  It's is still the US's biggest export, movies, music, tv shows...  no one wants to watch a robot just yet, but be prepared, actors are going to be non-existent as well, relegated to people venues where you leave your house to see live entertainment.  

I can't really see class warfare, because everyone in their family has a rich uncle, aunt, cousin, brother / sister no matter how unfortunate they are their own situation.  Class warfare was something that happened prior to standardized testing.  Wealth is not something that is only open to a family it has indiscriminately touched many lives of people from all ethnicity's and cultures, enough to offset a backlash of class fueled ire.

We will though need to undergo some aspect of social upheaval, only because change is now a constant and it is something we shall have to get used to.

Aug. 10, 2010, 12:45 a.m. EDT

Reagan insider: 'GOP destroyed U.S. economy'

Commentary: How: Gold. Tax cuts. Debts. Wars. Fat Cats. Class gap. No fiscal discipline

By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- "How my G.O.P. destroyed the U.S. economy." Yes, that is exactly what David Stockman
Get it? Not "destroying." The GOP has already "destroyed" the U.S. economy, setting up an "American Apocalypse."

Jobs recovery could take years

In the wake of Friday's disappointing jobs report, Neal Lipschutz and Phil Izzo discuss new predictions that it could be many years before the nation's unemployment rate reaches pre-recession levels.
Yes, Stockman is equally damning of the Democrats' Keynesian policies. But what this indictment by a party insider -- someone so close to the development of the Reaganomics ideology -- says about America, helps all of us better understand how America's toxic partisan-politics "holy war" is destroying not just the economy and capitalism, but the America dream. And unless this war stops soon, both parties will succeed in their collective death wish.
But why focus on Stockman's message? It's already lost in the 24/7 news cycle. Why? We need some introspection. Ask yourself: How did the great nation of America lose its moral compass and drift so far off course, to where our very survival is threatened?
We've arrived at a historic turning point as a nation that no longer needs outside enemies to destroy us, we are committing suicide. Democracy. Capitalism. The American dream. All dying. Why? Because of the economic decisions of the GOP the past 40 years, says this leading Reagan Republican.
Please listen with an open mind, no matter your party affiliation: This makes for a powerful history lesson, because it exposes how both parties are responsible for destroying the U.S. economy. Listen closely:

Reagan Republican: the GOP should file for bankruptcy

Stockman rushes into the ring swinging like a boxer: "If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt ... will soon reach $18 trillion." It screams "out for austerity and sacrifice." But instead, the GOP insists "that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase."
In the past 40 years Republican ideology has gone from solid principles to hype and slogans. Stockman says: "Republicans used to believe that prosperity depended upon the regular balancing of accounts -- in government, in international trade, on the ledgers of central banks and in the financial affairs of private households and businesses too."
No more. Today there's a "new catechism" that's "little more than money printing and deficit finance, vulgar Keynesianism robed in the ideological vestments of the prosperous classes" making a mockery of GOP ideals. Worse, it has resulted in "serial financial bubbles and Wall Street depredations that have crippled our economy." Yes, GOP ideals backfired, crippling our economy.
Stockman's indictment warns that the Republican party's "new policy doctrines have caused four great deformations of the national economy, and modern Republicans have turned a blind eye to each one:"

Stage 1. Nixon irresponsible, dumps gold, U.S starts spending binge

Richard Nixon's gold policies get Stockman's first assault, for defaulting "on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world." So for the past 40 years, America's been living "beyond our means as a nation" on "borrowed prosperity on an epic scale ... an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves."
Remember Friedman: "Just let the free market set currency exchange rates, he said, and trade deficits will self-correct." Friedman was wrong by trillions. And unfortunately "once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors."
And without discipline America was also encouraging "global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve." Yes, the road to the coming apocalypse began with a Republican president listening to a misguided Nobel economist's advice.

Stage 2. Crushing debts from domestic excesses, war mongering

Stockman says "the second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40% of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970." Who's to blame? Not big-spending Dems, says Stockman, but "from the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts."
Back "in 1981, traditional Republicans supported tax cuts," but Stockman makes clear, they had to be "matched by spending cuts, to offset the way inflation was pushing many taxpayers into higher brackets and to spur investment. The Reagan administration's hastily prepared fiscal blueprint, however, was no match for the primordial forces -- the welfare state and the warfare state -- that drive the federal spending machine."
OK, stop a minute. As you absorb Stockman's indictment of how his Republican party has "destroyed the U.S. economy," you're probably asking yourself why anyone should believe a traitor to the Reagan legacy. I believe party affiliation is irrelevant here. This is a crucial subject that must be explored because it further exposes a dangerous historical trend where politics is so partisan it's having huge negative consequences.
Yes, the GOP does have a welfare-warfare state: Stockman says "the neocons were pushing the military budget skyward. And the Republicans on Capitol Hill who were supposed to cut spending, exempted from the knife most of the domestic budget -- entitlements, farm subsidies, education, water projects. But in the end it was a new cadre of ideological tax-cutters who killed the Republicans' fiscal religion."
When Fed chief Paul Volcker "crushed inflation" in the '80s we got a "solid economic rebound." But then "the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts." By 2009, they "reduced federal revenues to 15% of gross domestic product," lowest since the 1940s. Still today they're irrationally demanding an extension of those "unaffordable Bush tax cuts [that] would amount to a bankruptcy filing."
Recently Bush made matters far worse by "rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures." Bush also gave in "on domestic spending cuts, signing into law $420 billion in nondefense appropriations, a 65% percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy." Takes two to tango.

Stage 3. Wall Street's deadly 'vast, unproductive expansion'

Stockman continues pounding away: "The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector." He warns that "Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation." Wrong, not oblivious. Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing.
They wanted the economy, markets and the government to be under the absolute control of Wall Street's too-greedy-to-fail banks. They conned Congress and the Fed into bailing out an estimated $23.7 trillion debt. Worse, they have since destroyed meaningful financial reforms. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in the coming "American Apocalypse."
Stockman refers to Wall Street's surviving banks as "wards of the state." Wrong, the opposite is true. Wall Street now controls Washington, and its "unproductive" trading is "extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives." Wall Street banks like Goldman were virtually bankrupt, would have never survived without government-guaranteed deposits and "virtually free money from the Fed's discount window to cover their bad bets."

Stage 4. New American Revolution class-warfare coming soon

Finally, thanks to Republican policies that let us "live beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore," while at home "high-value jobs in goods production ... trade, transportation, information technology and the professions shrunk by 12% to 68 million from 77 million."
As the apocalypse draws near, Stockman sees a class-rebellion, a new revolution, a war against greed and the wealthy. Soon. The trigger will be the growing gap between economic classes: No wonder "that during the last bubble (from 2002 to 2006) the top 1% of Americans -- paid mainly from the Wall Street casino -- received two-thirds of the gain in national income, while the bottom 90% -- mainly dependent on Main Street's shrinking economy -- got only 12%. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy."
Get it? The decaying fruit of the GOP's bad economic policies is destroying our economy.

Warning: this black swan won't be pretty, will shock, soon

His bottom line: "The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing ... it's a pity that the modern Republican party offers the American people an irrelevant platform of recycled Keynesianism when the old approach -- balanced budgets, sound money and financial discipline -- is needed more than ever."
Wrong: There are far bigger things to "pity."
First, that most Americans, 300 million, are helpless, will do nothing, sit in the bleachers passively watching this deadly partisan game like it's just another TV reality show.
Second, that, unfortunately, politicians are so deep-in-the-pockets of the Wall Street conspiracy that controls Washington they are helpless and blind.
And third, there's a depressing sense that Stockman will be dismissed as a traitor, his message lost in the 24/7 news cycle ... until the final apocalyptic event, an unpredictable black swan triggers another, bigger global meltdown, followed by a long Great Depression II and a historic class war.
So be prepared, it will hit soon, when you least expect.

Friday, August 06, 2010

Japan should take a page from our book!

Unfortunately, for these lost sons they don't have a widely in demand entertainment structure like the US to soak up all this excess talent.  We have this problem too, but with the Bachlerette, America's Got Talent and American Idol and a million sports we manage to keep our youth engaged and productive;-)

Japan's Economic Stagnation Is Creating a Nation of Lost Youths

Posted 7:00 AM 08/06/10 ,
Japanese youth
What happens to a generation of young people when:

  • They are told to work hard and go to college, yet after graduating they find few permanent job opportunities?
  • Many of jobs that are available are part-time, temporary or contract labor?
  • These insecure jobs pay one-third of what their fathers earned?
  • The low pay makes living at home the only viable option?
  • Poor economic conditions persist for 10, 15 and 20 years in a row?
For an answer, turn to Japan. The world's second-largest economy has stagnated in just this fashion for almost 20 years, and the consequences for the "lost generations" that have come of age in the "lost decades" have been dire. In many ways, Japan's social conventions are fraying under the relentless pressure of an economy in
seemingly permanent decline.

While the world sees Japan as the home of consumer technology juggernauts such as Sony and Toshiba and high-tech "bullet trains" (shinkansen), beneath the bright lights of Tokyo and the evident wealth generated by decades of hard work and Japan Inc.'s massive global export machine lies a different reality: increasing poverty and decreasing opportunity for the nation's youth.

Suddenly, It's Haves and Have Nots

The gap between extremes of income at the top and bottom of society -- measured by the Gini coefficient -- has been growing in Japan for years. To the surprise of many outsiders, once-egalitarian Japan is becoming a nation of haves and have-nots.

The media in Japan have popularized the phrase "kakusa shakai," literally meaning "gap society." As the elite slice prospers and younger workers are increasingly marginalized, the media has focused on the shrinking middle class. For example, a best-selling book offers tips on how to get by on an annual income of less than 3 million yen ($34,800). Two million yen ($23,000) has become the de-facto poverty line for millions of Japanese, especially outside high-cost Tokyo.

More than one-third of the workforce is part-time as companies have shed the famed Japanese lifetime employment system, nudged along by government legislation that abolished restrictions on flexible hiring a few years ago. Temp agencies have expanded to fill the need for contract jobs as permanent job opportunities have dwindled.

Many fear that as the generation of salaried baby boomers dies out, the country's economic slide might accelerate. Japan's share of the global economy has fallen below 10% from a peak of 18% in 1994. Were this decline to continue, income disparities would widen and threaten to pull this once-stable society apart.

Downsized Expectations, Opting Out

The Japanese term ''freeter'' is a hybrid word that originated in the late 1980s, just as Japan's property and stock market bubbles reached their zenith. It combines the English ''free'' and the German ''arbeiter,'' or worker, and describes a lifestyle that's radically different from the buttoned-down rigidity of the permanent-employment economy: freedom to move between jobs. This absence of loyalty to a company is totally alien to previous generations of driven Japanese "salarymen'' who were expected to uncomplainingly turn in 70-hour work weeks at the same company for decades, all in exchange for lifetime employment.

Many young people have come to mistrust big corporations, having seen their fathers or uncles eased out of ''lifetime'' jobs in the relentless downsizing of the past 20 years. From the point of view of the younger generations, the loyalty their parents unstintingly gave to companies was wasted.

The freeters have also come to see diminishing value in the grueling study and tortuous examinations required to compete for the elite jobs in academia, industry and government. With opportunities fading, long years of study are perceived as pointless. In contrast, the freeter lifestyle is one of hopping between short-term jobs and devoting energy and time to foreign travel, hobbies or other interests.

As long ago as 2001, Japan's Ministry of Health, Labor and Welfare estimated that 50% of high school graduates and 30% of college graduates quit their jobs within three years of leaving school. The downside is permanently shrunken income and prospects. These trends have led to an ironic moniker for the freeter lifestyle: dame-ren (no good people). The dame-ren get by on odd jobs, low-cost living and drastically diminished expectations.

Changed Men

The decline of permanent employment has also led to the unraveling of social mores and conventions. The young men who reject their fathers' macho work ethic are derisively called "herbivores" or "grass-eaters" because they're uncompetitive and uncommitted to work.

Take the bestselling book The Herbivorous Ladylike Men Who Are Changing Japan, by Megumi Ushikubo, president of Infinity, a Tokyo marketing firm. Ushikubo claims that about two-thirds of all Japanese men aged 20-34 are now partial or total "grass-eaters." "People who grew up in the bubble era [of the 1980s] really feel like they were let down. They worked so hard and it all came to nothing," says Ushikubo. "So the men who came after them have changed."

This has spawned a disconnect between genders so pervasive that Japan is experiencing a "social recession" in marriage, births and even sex, all of which are declining.

With a wealth and income divide widening along generational lines, many young Japanese are attaching themselves to their parents. Surveys indicate that roughly two-thirds of freeters live at home. Freeters ''who have no children, no dreams, hope or job skills could become a major burden on society, as they contribute to the decline in the birthrate and in social insurance contributions,'' Masahiro Yamada, a sociology professor wrote in a magazine essay titled, ''Parasite Singles Feed on Family System.''

Take My Son, Please

"Parasite singles" is yet another harsh term for some Japanese youths. It refers to those who never leave home, sparking an almost tragicomical countertrend of Japanese parents who actively seek mates to marry off their "parasite single" offspring as the only way to get them out of the house.

Even more extreme is hikikomori, or "acute social withdrawal," a condition in which the young live-at-home person nearly walls himself off from the world by never leaving his room. Though acute social withdrawal in Japan affect both genders, impossibly high expectations for males from middle- and upper-middle-class families has led many sons, typically the eldest, to refuse to leave home. The trigger for this complete withdrawal from social interaction is often one or more traumatic episodes of social or academic failure. That is, the inability to meet standards of conduct and success that can no longer be met in diminished-opportunity Japan.

The unraveling of Japan's social fabric as a result of eroding economic conditions for young people offers Americans a troubling glimpse of the high costs of long-term economic stagnation.

Japan leading the pack in rising debt at 200% debt to GDP...

This article ties in with my recent article on the obsolescence of human capital... remember Japan has the jump on nearly the whole world when it comes to automation and the the impact on their economy as their workforce transitions from 70+ hours of hard salaryman labor to 40+ hours a week of leisure time.  Hey if you aren't working and you aren't saving, you must be spending

Japan's Cheap Debt Could Cost the World Dearly

Posted 5:30 PM 08/04/10 ,
Japan flag
Japan has been piling up debt for years. Over two decades, the government of the world's second-largest economy has borrowed staggering sums of money to fund domestic stimulus spending. Much of the spending has produced public goods of questionable value, the Japanese equivalents of "bridges to nowhere."

This profligate borrowing has left the island nation with ratio of debt to gross domestic product (GDP) nearing 200%, almost double that of troubled Greece (113%).

Japan's government debt has more than tripled since 1992, and that doesn't include local government borrowing, the equivalent of state and county municipal bonds in the U.S.

How has Japan been able to sustain a debt load that would have crushed other economies long ago?

Saving -- and Retiring

The answer lies in a dynamic few nations share: a populace which saved an extraordinarily large percentage of its income, and then invested those savings in its own government's debt. More than 90% of Japan's government bonds are owned by its people.

In effect, Japan's soaring debt was self-funded. As long as the Japanese people saved trillions of yen and handed them to their government for 1% interest, then the government had a cheap and seemingly limitless supply of low-cost money to tap.

But demographics are finally putting the squeeze on this arrangement. As Japan's population ages, the nation's savings rate is plummeting. A recent report from the McKinsey Global Institute summed the situation up succinctly: Japan: The World's Savers Retire.

The consequences are visible in this chart, which shows that Japan's savings rate is slowly dropping to zero.

Why is the savings rate falling so dramatically? As workers retire, they stop saving as their income declines in retirement. They need cash to live and cover the costs of aging -- additional health care, home care, etc. -- so they sell their investments (often Japanese government bonds) to raise cash. This puts double pressure on bonds: buying dries up and selling accelerates.

Japan Faces a New Reality

The net result of this demographic trend toward lower savings means Japan's government must soon start competing on the world market for capital. In other words, it must start selling its bonds to international investors since its own savings will no longer be substantial enough to fund its enormous debt.

For two decades, Japan's fiscal policy has operated on the assumption that the government can always borrow money at very low interest rates. But as domestic demand for government bonds declines, the government will have to raise interest rates to attract buyers.

Currently, Japanese ten-year Treasuries currently yield 1.3%, compared to U.S. bonds yielding 3.5% or German bonds offering 3%. Facing international competition for capital, Japan will have little choice but to double or even triple the interest rate paid on its bonds. This jump in servicing costs will place impossible pressures on the nation's budget, as roughly 40% of all tax revenues have long gone to paying interest on Japan's ballooning debt.

Global Implications

The consequences of Japan's declining savings rate and the necessity of paying higher interest rates will not stay bottled up in Japan. As the second-largest holder of U.S. government debt behind China, Japan may decide to start selling some of its hundreds of billions of dollars in U.S. Treasuries. That would put pressure on the U.S. Treasury, which already must sell $1.5 trillion in new bonds every year, in addition to rolling over hundreds of billions in bonds which mature.

As Japan's need to sell bonds on the global market increases, the world may see an increasingly desperate competition for global capital arise, as all nations seeking to fund their sovereign debt must raise the yield (the interest rate) they pay on their bonds. That would dramatically raise the interest costs each government pays annually, further pressuring their other spending priorities.

If Japan's cheap debt balloon finally does pop, the consequences will reverberate throughout the global economy.

Thursday, August 05, 2010

Paulson, finally got the memo or did he?

Time to hunker down and batten own the hatches for the wind is building steadily and the waves it is a pushing are 2-4 feet and building.  I expected better from Paulson, specifically to have taken the first bump from the bottom last in March 09, and gotten off somewhere around the top of this year.  Apparently he missed the exit at the "TOP"  and he paid the price.  Remember this kids Sell All Rallies And You'll Be Happy! 

Paulson & Co takes a bearish turn

By Sam Jones and Henny Sender in New York
Published: August 4 2010 20:33 | Last updated: August 5 2010 01:35
Paulson & Co, a leading hedge fund manager, is scaling back its bullish positions on the US economy.
After a vicious second quarter that saw its funds hit hard by a rise in market volatility, Paulson has cut its net long bets across almost all of its funds.

“A consequence of our portfolio positioning is higher short-term market correlation and volatility,” John Paulson, the company’s founder, said in a letter to investors describing his funds’ performance in the second quarter.

The move reflects increasing uncertainty over the sustainability of the US recovery.
Paulson’s Recovery funds have been among the casualties of the second quarter downdraft. The funds were down 12.6 per cent, according to the second quarter letter sent to investors.
The $3bn Paulson & Co Recovery fund, which was launched in late 2008 to take advantage of a rebound in the US housing market and economy, has decreased its net exposure from 140 per cent to 107 per cent in recent weeks, according to Mr Paulson’s letter.

Net exposure is a measure used by hedge fund managers as a gauge of their directional bias, and is calculated by subtracting total short positions from total long positions, with leverage taken into account. A net exposure of zero would imply a market-neutral portfolio with equal long and short positions.

John Paulson’s flagship Advantage fund, which manages $9bn of client money and was down 6.6 per cent for the period, has shrunk its net long exposure from 72.4 per cent to 67.3 per cent. The more specialist $4.3bn merger arbitrage funds, which make money by trading corporate names engaged in takeover talks, have scaled back from 58 per cent to 50 per cent.

“We are now at the point where further upside in the enterprise is less in the credit but rather in the equities of companies which have or will undergo restructuring, recapitalisation and bankruptcy reorganisation,” Mr Paulson told investors in his letter.

The average hedge fund lost 2.5 per cent in the second quarter, according to Hedge Fund Research.
Many managers have significantly derisked their books over the past few weeks in response to the volatility.
According to Hedge Fund Research, equity long short and event driven funds lost $32.5bn in the three months to the beginning of July.

Tuesday, July 27, 2010

Further on the Left Tail Risk....

In addition, to the as yet to be realized jobs being supplanted by technology and the real estate issue.  Remember the baby boomers are going to need nursing homes not vacation and primary homes, can you say glut.  Add a nice top in gold to go along with the previous two and we've got lot's of opportunities for a left tail risk event.... 

Gold Top?
As most people  know, gold has been in a raging bull market for more than 10 years rallying from about $250 per ounce to more than$1,250 per ounce. Many people are now wondering if the world's currencies have any value at all and are flocking to gold as the only hard asset that historically has always had value.
Gold coin purchases are at an all time high. There are people walking up and down city streets and in shopping mall, holding signs saying "We Buy Gold." There are even vending machines where  people can purchase gold bars. Of course, there are the ubiquitous commercials on TV about gold.
Does a contrarian look at all these factors and take the other side? Possibly, but the problem is most of these factors have been present for more than two years and gold has rallied more than $400. Why would gold be any different now?
I believe the psychology of the gold market is in a dangerous place, but manias can go on longer than people think. This happened in the real estate market in 2005 when everyone rushed in. Real estate TV commercials ran nonstop, many were buying second homes as an investment with no down payment, bankers were giving loans to anyone.
It took about three years for it to finally come apart. The gold and real estate markets are not related, but the mass psychology is eerily similar.
Are we finally at that tipping point? I believe we are.
Until two weeks ago, gold had been in a steady uptrend since February.  It was going up because of inflation or deflation; it was going up because Euro weakness or Euro strength or it was going up because of stock market strength or stock market weakness. People on CNBC have even said gold will never go down.
But close inspection of the gold market at this time show many technical difficulties that may bring it down. Below is a candlestick weekly chart of the gold market.

Gold set the all time high of $1,264.80 per ounce during the week of 6/21/10, but that week also formed a candle stick called a "hang man". This is when a market breaks off the highs but then runs all the way back up to the previous daily or weekly close. The next bar is critical because it must run back down and close under that previous low.  As you can see, this is exactly what happened.
The chart below also shows some import reversal patterns. This is a daily candlestick of gold. On June 21, gold made an all time high but closed below the previous day's low. This previous day was the all time high. This can bea very bearish sign. Also notice it happened againjust five days later.

There have also been some major divergences recently. The Gold Bugs Index bug index (HUI), a basket of un-hedged gold stocks, topped out in March  2008 just as gold did. From there, both markets had severe sell-offs. Since then, gold has come back to make new highs in November 2009, and then another rally to an all-time new high again in June.As you can see, HUI has not confirmed this high, not just once but three times. This triple divergence is also very dangerous.


The last component I analyze closely is the Commitment of Traders Report (COT).  The rally in gold this year has gone to new highs but buying from managed futures traders (the purple line) has not had the buying enthusiasm that accompanies these type of rallies. The large spec (the green line) also has been a reluctant buyer. The commercial trader (the red line) set an all-time record on the short side in March. This type of selling from commercials does not pinpoint tops, but it does put you on alert for possible market failures.

Calling tops in a raging bull market can be very difficult and painful,but with so many yellow flags, there seems to be a great trade from the short side. If gold closes below $1,170 per ounce I think the gold market is in for a large fall.
Bruce Gwyn
Managing Partner
Level III Trading


Are jobs the left tail risk?

 Left tail risk in my view is likely the rapid displacement of jobs, this will gain momentum remember this is the gift that keeps on giving and the faster technology develops the faster people will be displaced.  Another left tail risk is definitely real estate, real estate appears to moving forward and holding it's own the real test will be the spring of next year to see if it sticks.

Guest Article: Left Tail Risk
by Duncan Frearson, Smith Street Capital , July 22, 2010

Seemingly small initial events have cascaded many times into far from normal outcomes. These can both act in a positive way, such as birth of the Web browser or the discovery of oil, or in a negative way, such as the 1929 panic, by damaging economic conditions severely.

Popularized as “Black Swans” these three sigma events tend to occur slowly at first and then rapidly escalate. In 1929 a bankruptcy of a large conglomerate is said to have begun the great unwinding that led to the initial stock market crash and then the subsequent Great Depression. In early 1997 funding problems at major Thai finance companies and the consequent decision to float the Baht began a run on Asian currencies. In 2007 some initial defaults in the U.S. subprime mortgage market escalated into a nationwide housing collapse and financial panic.

Why does this happen?
Collapses generally involve high degrees of leverage. Large scale leverage can be gained by very loose lending or by the use of derivatives with incredibly low collateral requirements.
Leverage in and of itself is not such a bad thing as it can be used to finance a house, or a car or a new factory for production, but when it becomes concentrated into certain end markets in a large enough way it can have devastating consequences. If this lender or borrower is also connected in some way to another institution that also faces the same type of concentrated exposure, then the pain has been multiplied. Two becomes four which becomes eight which becomes 16, etc.

This happens rapidly. Once a critical mass is reached, the problem becomes somewhat unstoppable under normal conditions. However, if this rapid escalation gets muted by hitting a well capitalized diversified number of lenders only one or two institutions would then be the ultimate victims. One way to mitigate this risk within a closely knit system is to require concentration limits to various borrowers and categories. In the U.S. banking system individual loan limits have been in place for awhile, but no hard limits for lending to entire categories have been put into effect. In our latest bust we saw a chain reaction occur due to a huge build up in exposure to housing both in construction and development lending and in mortgage lending.

Once this trend began to come undone banks found they were all connected in a fairly concentrated way to one another. To make matters worse, a certain segment of their borrowers were the same people involved in constructing the houses.

Source: SNL
The cascade across Asia in 1997 had the same fundamental issues. Concentrated lending in real estate and infrastructure development caused one failure to cascade through the regional lending system, multiplying the initial problem across many players.

In all these instances the banking system itself was unable to stem the cascade and the only solution was large scale involvement from both the central bank and the government. In the case of large foreign debtors the IMF was also called in to provide dollar funding.

Is there a way to reduce this tail risk to the system? It would seem that imposing limits on concentration not just to individuals but also to categories would provide the ideal roadblocks to this type of dangerous cascade.
The question of whether this was tackled in our latest financial reform is certainly a good one.
In 1933 Glass-Steagall approached the problem by limiting the activity of the deposit banks. Investment banks were left to run stock lending activity but margin requirements were put in effect to keep the down payments high.
If some stock market players began to default depositors would not be impacted because the investment banks that tended to borrow widely from the capital markets would spread the pain around. There was a cut-off in place that isolated the risk.

This was eventually overcome by investment bankers using securitization markets to get into the bank lending business through finance companies which caused a boom in lending in housing related markets at the deposit banks.
The two players became connected again and once the investment banks began to get into trouble, the concentration that had built up at the deposit banks in the same market began to cause problems.
All this was accentuated by the build up of credit insurance written against that same lending that was now facing claims and by the off balance sheet lending that created far greater leverage than was immediately apparent.
In today’s environment there has been talk of another cascade from the build up of sovereign debt at some of the less stable nations of the world. Sovereign debt has been used to provide a bridge to allow private market participants to restructure their own finances. We might look to budget deficits as a far from normal condition but this is a different state of affairs as governments will only default when they have foreign debt exposure that can’t be paid back by raising domestic currency.

In the case of Europe the banks have access to dollar swap lines from the Federal Reserve and access to domestic currency has been assured by the ECB. This means that despite challenges in certain European nations there is virtually zero risk of a cascade as principal payments are essentially assured.
There is also talk of another cascade to be set into effect from a further decline in U.S. house prices. I think one of the fundamental changes at present however is that the concentration risk in the U.S. system has been reduced and housing collateral values have been reset at far lower levels.

There has also been a build of protective capital at the large and regional banks capable of preventing the type of cascade we have recently seen. This new capital buffer would require a very large decline in what is arguably a less concentrated book of business in order to cause the same sort of chain reaction we saw in 2008.
Government involvement in the housing market provided an initial boost but as they wind down these programs a subsequent drop off in activity is almost inevitable.

This uncertainty can cause tremendous volatility.and we must be careful about any premature extrapolations.
For example, when the “cash for clunkers” program approached its roll-off date, auto sales rose to over 14 million annualized units and then dropped to around 9 million a month later. Auto sales now stand at 11.3 million units, according to industry data.

The housing market may well see the same sort of volatility in sales activity.
It should also be noted that the sensitivity of consumer discretionary income to declines in interest rates, given the 15% or so of disposable income that is taken up by debt service is especially pronounced and the rise in refinancing activity will not only facilitate the large rollover burden, but will also help keep those teetering on the edge from losing their homes.
There is an increase in the margin of safety in both buying or deciding to remain in one’s home because of the decline in interest rates. The build-up of monetary stock in the economy and the Fed’s communication of an “extended period of low rates” will continue to keep both short and long term interest rates low for the foreseeable future.
Ultimately, the question is how does a manager price this tail risk and is the pricing for this protection reasonable.

We believe the risk of another negative cascade is low.
If this is the case, the premium required for portfolio protection in the next 12 months is not such a great deal. Another option is to hold cash as a protection of principal, but at a 0.32% yield for 12 months, it becomes economically expensive considering the higher yields available in owning high quality equities.

If you believe, like we do, the tail risk is low, then holding high quality equities with stable earnings in a zero growth environment will provide you with a far better yield than holding cash. If the economy eventually grows then this will be icing on the cake.


My Favorite Roller Coaster!

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