I can’t remember there being so much hype around a social media IPO since… was it Facebook? Nevertheless, this morning I’m besieged with breathless headlines panting “All eyes on NYSE for Twitter IPO…” and other such pap. Us ‘lil people, not in the club are going to have to buy retail and I would be surprised if the hype doesn’t press the stock up to the $50-$100 buck range in short order.
Near as I can figure it, the big boyz will make a killing and considering it’s social media, which really means more grist for the government and advertisers to track, the “better to know you with” I’ll be among those not getting rich over the next couple of hours.
Now, a moment of economic reality.
Let’s look back at the FB IPO on May 18th of 2012. On the Friday the FB IPO hit the S&P closed at 1,295.22. Yesterday the S&P closed at 1,770.49.
History in hand, let me ask you a few questions about the economy we’ve experienced between the FB IPO and the the Big Event Hype-fest of today:
- Is the economic outlook any brighter? I don’t see it.You may have pink glasses on.
- Is peace in the Middle East nearer? Nope. Dangerous as ever.
- Is the long-term decline of bond yields still going to end? Surely, but just not today.
- When it does, will companies be able to boost dividends? Hardly – that would require growing sales and that sure as hell ain’t there…we’re all buying insurance at gunpoint, instead.
- Is Twitter “life critical” (like ADM or the food stocks?) No, not really, now that I mention it.
- Is CB radio still around? Not so’s you’d notice.
- Is government and advertiser surveillance still growing out of control? Uh-huh…
- Do people really care about Founding values? I don’t like this answer any better than you do.
So ya’ll have fun playing the paper chase. I’ll be “show me” guy with the longer view…which is why I’m not rich, I ‘spose.
Deflation is out there like a mutha-what’er…and the word this morning that the ECB may be a kick in the ass for markets on purely technical grounds, but the real-life economics of this are horrifying.
Look, the fact is that when a central bank cuts its prime to a quarter of one percent, they are in the “free money” business which is probably exactly the wrong policy, for reasons that are too complicated to explain here.
But the reason stocks are going up in simple: Suppose you have a stock which was worth $10 bucks yesterday because it was paying a dime of dividends. Own the stock, get a 1% return. And let’s pretend that this is about what bid deposits in banks are getting.
So before the interest drop this morning, dividend/rate = $10 (or $0.10/0.1 = $10)
After the rate move: dividend/rate = $13.33 (or $0.10/0.0075=$13,.33333333333333…)
Now, when the bank rate goes down, to say 3/4’s of 1%, that means the stock price has to rise in order for the equation to balance. That’s what will happen this morning at the open and with it, likely a 100 point pop in the Dow. Crack for stocks. Not reality, just paper crack.
Is it good news? Hell no!
It means gold (or other inflation hedges) is going to drop and it means inflation (which had been propping up house prices)is going bye-bye for even longer and the bankster class knows that.
But if you want to get sucked into spending, what’s the banker class to do but pimp out “free money?” You saw that auto sales were collapsing in the latest report? Zero down auto loans are on the horizon again – along with a retest of the 2009 lows.
But don’t let that bother you none. Or, if you do, keep those concerns down to 160-characters, will yah?
Speaking of the Middle East
Madison Avenue Mike’s got us a fine catch from the BBC headline “Saudi nuclear weapons ‘on order’ from Pakistan.”
We’ve been watching this for months and months, ever since the Pakistanis agreed to sell at least one to the Kingdom (KSA, right?). Now, they’re getting close.
So with the Geneva Talks about to conclude (seems Israel wasn’t even invited) that this weekend might see another in the “last straw” series. The only question is which of streams of last straws will break the camel’s nukes.
Iran’s demanding the right to expand their nuke program and the Dimona crowd doesn’t want competition in the ‘hood. Ain’t gonna let it happen, simple-az-zat.
More after this…
Our self-referential runaway quadratic nightmare from the Land Percentage Police Forget is out:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.8 percent in the third quarter of 2013 (that is, from the second quarter to the third quarter), according to the “advance” estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 2.5 percent.
The Bureau emphasized that the third-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3 and “Comparisons of Revisions to GDP” on page 4). The “second” estimate for the third quarter, based on more complete data, will be released on December 5, 2013.
The increase in real GDP in the third quarter primarily reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, exports, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by a negative contribution from federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.
Fine. But try to choke this one down:
Disposable personal income increased $138.1 billion (4.5 percent) in the third quarter, compared with an increase of $103.2 billion (3.4 percent) in the second. Real disposable personal income increased 2.5 percent, compared with an increase of 3.5 percent.
Since the law isn’t in place yet…or is it?…does mandatory healthcare get paid out of disposable? Otherwise, if we’re all getting more insurance bills, how come disposable is going up, or is healthcare costs (cough, sough) going down? Enough…such Grimm Economics is a fairytale…but since we’re all asleep by now… You do know what WTFU means, right?
Earthquake Alert: Data Points Clustering
What wasOne theory – the one most prevalent on the ‘net this morning – is that it was just a leftover from the Taurid meteor shower which peaked Tuesday night.
But in case you missed it, the San Juan Islands where my friend Gaye, who publishes www.backdoorsurvival.com is located, just had a massive internet and phone outage which put somewhere between between 16 and 18-thousand people back into the pre-internet Dark Ages. No banking, ATM’s that kind of thing.
You aren’t paying attention to the data over at our www.nostracodeus.com word frequency-studies if you don’t remember the recent spate of oarfish reports. These are deep sea dwellers whose surfacing seems to be associated with earthquakes.
And, to connect this with the San Juan Islands internet/phone outage (undersea fiber cable break) which is just starting to get press outside the Islands,, remember that what could break a fiber cable is what? Undersea earth movement!
And what about that 40-tank car derailment up in Alberta not to long ago?
I won’t pretend to know the hour and minute of earthquakes to come, but there has been a recent breakthrough which is explained over here under the title “GPS Signals can predict earthquakes 40-minutes before they happen” and it’s based on solid science.
And I mention this point last because it all circles back to that California flash reported last night. You need to read the Wikipedia entry under “Earthquake Lights”:
An earthquake light is an unusual luminous aerial phenomenon that reportedly appears in the sky at or near areas of tectonic stress, seismic activity, or volcanic eruptions. Once commonly challenged, it was not until photographs were taken during the Matsushiro earthquake swarm in Nagano, Japan (which occurred from 1965 through 1967) that the seismology community acknowledged their occurrence.
So we have broken fiber, derailment, oarfish, language increasing, and now a mystery light. I’m not sure what your prepping threshold is, but mine’s right about here.
There Go Property Values
Oh, and speaking of quakes and other cheery news, did you see where noted science whiz David Suzuki (CBC and many books) has now weighed in and figures that one more good walloping of.
Humans: Acting Badly
Latest flash mob event – trashing a Sports Authority – is more and more cause for government to a) license the internet, social media, and more. And b) can you spell kill-switch?
Enjoying the Tribulations, are you?…Next?