Good News, Bad News, & Something In-Between

First a few comments about the Market and Peoplenomics.

There WILL be a Peoplenomics report tomorrow, right on schedule.  And that is where we get to the “news.”  But let’s talk money first

In tomorrow’s report, assuming the market stays on its present trajectory (90-minutes before the close) we should close right at the trend line and be in position to begin a decent sized decline next week.  Needless to say, this is something I am anxious to see happen, having entered a short position earlier this week in the big bubble into the Friday options expiration.

Next week will be critical for the market for several reasons, not the least of which is the Fed decision due out.

Here’s where we could see a dramatic market move – but we can’t be sure which way things will go until after we see initial movement in the first half-hour after the announcement.

In the case of 1928, which the Fed raised the discount rate, we saw a huge migration of “hot money” from bonds (safe, but whose PRICE was falling – remember in bonds, which the yield of the bond rises, the net present value drops) into stocks, which are about the only investment left to consider.

The problem with gold is that it is a fairly stable commodity.  Sure, there is industrial, medical, and some banking interest in holding the yeller dog, but when it comes down to it, gold doesn’t produce anything.

The saving grace of gold is that it is almost impossible to water down, recent experiences with  fraudulent tungsten bars notwithstanding, and it will not come and go like paper fiat money.  That’s why sunken treasure is still “treasure.”  Sunken paper is know by a lot of names (Continentals, Greenbacks, and so on) but “treasure” ain’t among them.

We could still have my “blow off high” because other investments are not looking very good right now. 

Take real estate, as one example.  Yes, it produces an ongoing future revenue stream, so that’s good.  And yes, as long as government in rolling with the water-down-the—money movement of inflation, it shows a “paper gain” as an asset line item.

But it can also go upside down, too. 

You may not remember the collapse in the Texas Oil Patch in the middle 1980’s. but in that, one of the reasons so many apartment complexes went belly up was that valuations had been fraudulently raised through crooked appraisals and when the oil patch rolled over, a lot of “sharps” in the real estate business did the math and figured with declining rents, they better refi and blow out of the country with any gains while their occupancy rates looked good.

Yes, there were two sides to the reasons for that crisis.

My point is, real estate right now is one of the better assets, that is, until you don’t have the income stream to support it.

As we look to what happens after we get to the peak of Wave V – which I don’t expect until 2017,. or very shortly thereafter, what we will see is a similar problem.  We have been building multi-family homes like crazy.

There is some good news in the Obama administration’s immigration programs (which I still think of illegal, in that I don’t think the intent of Congress was to load American up with people not interested in being assimilated, but that’s a different topic)  which does have the very short term effect of increasing demand for Housing.

So as new arrivals come to America, they buy cars, require hiring of social workers, increase Housing jobs and so forth.

Short term stimulus is addictive.  We’ve about run out of ideas what to do with all these people.  I know it’s politically correct to speak in terms of “human capital” but it’s only “capital” if the asset can be put to work to make something  and non-assimilation isn’t a product.  At least not yet.  Maybe ongoing civil strife is a business model and maybe that’s what Kosovo was testing…

On the flip side, of all this “paper growth” we’ve been experiencing is the fact that during the Great Depression, one of the bright spots was that the Roosevelt Administration could promote “job sharing.”

Look around you:  We don’t have that lever available to pull;  The reason?  Offshoring, the Obamacare problem, and employer cost reductions not to mention offshoring have reduced the average work week well below 40 hours.  People are all “shared out.”

In many ways, a Depression is a healing thing for a country.

Hurts like hell in plenty of ways, though. 

When you read the accounts of the last one, there was almost universal hunger except among the very well-off, and being fat was a sign that didn’t endear the overweight to the really poor.  “Fat cat” is not complimentary.

There’s an interesting psychological “hangover” from the Great Depression, which I haven’t see written about much and that’s the pent-up desires angle from being so hungry for so long.

In my own family, perhaps 50% of the family (almost 100% on my mom’s side) were overweight to obese.  But these people (I have the pictures) were thin to outright skinny in the Depression.  In fact, when they did get food, it was the same excessive carbohydrates and excessive fats of the sort that keep lots of welfare moms today in overweight to obese category.

In other words, it was famine, followed by a feast of poison – lots of fats and wheat, all bleached, and loaded with sugar which became corn syrup based and here came the pounds.

No one goes into a Depression wanting to go hungry.  No one comes out of one wanting to be fat.  It’s like the hard reality that few in the medical profession actually talk about:  People eat for a lot of reasons, but many times if people are overweight, there is a personal, experiential, emotional, blood sugar basis to it.  Manage the right problem and the solutions become self=evident.

The good side of Depressions is they change the way people think.  The reuse, repurpose, and recycle, become not only school lessons, but the way people live. 

Urban gardening is the same way.  And a huge portion of the population will likely “go nomad or mobile” looking for work, although the Internet may provide for a “work substitute” except there’s so little of “value” that meets the test of enduring and so on. 

That doesn’t stop the block-chain crowd from arguing bitcoins are forever, but pardon me. what exactly would I do around the house with a block-chain, short of hoisting an engine?  Oh?  Different thing? 
Well, the difference between a bitcoin and a federal reserve note is the paper is still enduring even after EMP.  Bitcoins may not be.

Frankly, trading the integrity of a central bank for the integrity of software developers makes for an interesting thought problem!

I don’t mean to turn this into a Peoplenomics report right here, but this is why there are long wave cycles in the economy as well.

Seven years of fat, seven years of lean, rinse and repeat three times with two corporate parties and you have one long wave cycle of about 42 years,  four times gets you 56 years and five gets you 70 while six ends at 84.

More in Peoplenomics tomorrow, but this cycles, and others all play together, though sometimes not “nicely.”

– – – – – –

About them eyes:

Good news:  The eye will likely return to full use.

Bad news:  It’s going to be a knock-out at a hospital to put things right.  Likely week after next.

Something in-between:  Yes, after 25-years, the old implant “fell” and is causing the fogging.  Still seeing 20/15, but no airplanes until repairs are made.

Next Tuesday, Panama will hold down the fort while I go get “measurements” made and we will then either:

a) move the old lens into position and toss in a stitch, or…

b) haul out the old implant and put in a new one.

c) if a) and b) don’t go smoothly, I will get a front of eye implant.  Longer recovery, good vision, just a longer road around the mountain.

So we shall see whether it is a) or…but that’s the one I want from the smorgasbord of life.  We shall see.

Elaine will be learning a good bit about Excel and how our charts work, so she can help with that in the event that the surgery and recovery is of the more complicated sort.

And so it goes.

Now off to work on Peoplenomics for Saturday.  Thanks for all the good wishes and prayers.

Like the old saying goes, “Not may atheists in foxholes.”  Toss hospitals into that mix, too.

Write when you break-even,

George@ure.net