It’s Mid-Summer – Of 1929

Economics is a kind of “pretend science.”  Schooled in  scientific method, and with an amazing ability to observe a handful of data points and turn these into all manner of  indecipherable formulae, we’re supposed to believe modern economics has the situation well in hand.

Don’t buy it.

We recently explained to our  subscriber that there’s a lot more to the Kondratieff long wave, than most realize.  Kondratieff, (also spelled Kondratiev by people who haven’t read his books thoroughly) proposed the  length of the long wave economic cycle at between 48 and 54 years.

Here’s where modern economics runs off the rails:  Kondratieff’s  cycle length may be closer than most realize.  But, whether a cycle results  in a global economic Depression, seems to depend on other factors, such as the prevailing interest and inflation rates at the time the K-Wave says “Time’s up!”

Many remember the 1987 mini-crash.  That was arguably a 58-year cycle end.  So, why didn’t we crash in 1987?  Where was TEOTWAWKI?

It all has to do with interest rates.

In 1982, interest rates were peaking in the 13% range.  That that’s critical for exactly one reason.

The expectation that goods would be more expensive later drove consumers to continue spending in ’87.  Housing sales held up well, the new cars were still being sold (they’d cost more next year, right?) and in general, the market bump didn’t impact many outside the financial markets.  Even there, the impacts were short-lived.

As a colleague explained once “We don’t have any problems more revenue won’t fix…” And high interest rates force current spending.

Now we’re at (or very near) the end of another cycle.  Only this time, interest rates have been bumping along bottom.  Never-before seen  lows, in fact.  Remember that by the summer of 1929, interest rates in NYC had been running 5-6%.  But, that was lower than they had been…as revealed by the Fed discount rates from the period that we’ve reviewed on the subscriber side.

What got our attention last week (and it cost me a few buck) is that we are apparently now about where the 1920-1929 market was over the Fourth of July period back in 1929.

It’s always been a curiosity to me that economists are plagued by the “Illusion of precision.

The concept is familiar in Engineering disciplines.  It’s why – back in old-school times – engineers didn’t bother with more than 3- decimal places (if they were any good at the art of slide rule interpolation, if not, two digits would do).  As long as the main number was right and the decimal points were correct, that was usually a “close enough to be workable” answer.

In Economics, too much time is (IMHO) spent on trying to push accuracy to four decimals.  Think of it this way using electronic design, as an example. Anyone with “in the trenches experience” knows that if a particular circuit pencils out to 12,598.3 ohms, you select either a 12.5K or 12K or 13K ohm resistor, if that’s what’s handy, and move on.

An economist, on the other hand, would write learned papers about the faux criticality of a “perfect component value” and its broader implications.  In the end, most could never build the circuit under discussion, nor will they EVER find PRECISELY the right resistor because it’s not in the standard engineering prototyping kit. The illusion of precision in economics is real.

Point I’m trying to make is that right now, we’re on a historical track where one of two things is likely to occur:

  1. The market is biased heavily to the upside.  Reason is the Fed’s Making Up Money (MUM) policy which goes hand-in-glove with the Bernanke (et al) Lower-for-Longer (L4L) policy.  The illusion of higher costs is still a recent-enough  memory to keep people spending.
  2. The major downside risks, however, are that a) China will want another round of trade, since they’re slippery negotiators OR b) some political lightning bold will hit Trump (like a 25th Amendment coup by the Obama implants, holdover, and socialist sympathizers,  because Trump loyalists Barr and Durham are getting close to indicting for how the Intelligence Community effectively IS  the Deep State) OR c) Consumers are fully saturated, have nothing left to buy that they really need and we run out of storage units to pile up our shit in.

(I apologize for offending your sensibilities.  Using the non-economic term “piling up shit in” but it’s born of frustration.  The “naughty-word” fully describes the phenomena of hoarding, excessive consumption, and the reality of too much attachment to physical goods that we just want to rent housing for….why?.  I’ve read a ton of economics papers in the past 30-years and it’s significant to me (being crazy, and all) that not ONE learned paper discusses the importance of Storage Locker Utilization Index rates as a precursor to consumer reluctance to spend more generally.  Which, in case you’re still grogged-out this morning, means “When the spending stops, grab the ankles.”  Why Gloomberg and SeeNBC haven’t nailed this yet astounds me.  (OK, I’m over it…)

Alexander Harris has a great set of stats over here that reveal (as we have contented) 9.4% of American household pay a shade under $89 per month to “pile their sh*t up in.  To me, or anyone else with half a brain, the density and amount of stored goods is one hell of a useful tool.  It just hasn’t “been discovered” by some prince or princess of econ on their way to Nobelhood.  When it happens, remember Harris go there first and Ure wasn’t far behind.  I digress.

Where does this leave us?  Well, hell, who knows?

The G-20 is orchestrating the global blow-off, but as we saw on the subscriber side over the weekend, euphoria hasn’t busted out to the upside.  Yet Europe is up strongly this morning and Asia did OK overnight.

We’re just waiting for someone to yell “Trade!” in this crowded theater.

Meantime Bitcoins remain sketchy –  under $9,200 when checked earlier. We’re thinking those rolling “Bitcoins don’t work” power events in California  might have schooled some speculators on a thing or two.  Fortunately, we live in a country with no shortage of ignorant people.  We’re wall-to-wall with “willing to listen to any half-assed, ill-though sales pitch.”  Which explains how the free lunchers in Congress persist, too…but that gets into politics and we’re so sick of this whole waste of public funds on a witch hunt…hand me a barf bag, would you?

Wise-Acre Headlines

Since Stand-Up Economics isn’t wildly popular – yet – we’ll use only B material on  this morning’s stroll down Headline Lane.

In Politics – if you aren’t sick of it, yet – nothing moved over the weekend.  In  The SF Chronicle though, a Willie Brown piece “Impeachment a winner for Democrats? Don’t bet on it” is a very well-thought-out piece.  Willie Brown is a rare example of a reality-based democrat.  Not sure if there are any others like him, since most have TDS.  And we don’t trust a word from any of the pack clamoring for the White House.

The Writer’s Problem is this: If we skip the political crap, we’ll be reduced to rewriting  Hints from Heloise to fill up space. She is already covering NH... OK, skin moisturize issue from there, but that’s more useful than anything in political columns, right?

Still, if that’s a little too hard-hitting for you, consider Study reveals early Christmas decorating is good for you.  Since we don’t celebrate Christmas here at Uretopia (Because anything with antlers is shot on sight due to Texas hunting season being open over the holidays…) wel skip right to a Trader Vic’s HBR (hot buttered rum) and call it good. More risky than decorating, there’s no pink elephant season in Texas.

Derr eRabbit?Volkswagen starts factory production of electric car it says is ‘accessible to millions'”   (Passing ponder:  Why has no one has named a car “The Weasel?”  Ads shot in front of government buildings and the naughty corporate of the week would be a hit…juss wun-drin…)

Speaking of cars, here’s another indicator of too much money sloshing around: Ferrari raises 2019 outlook after solid third-quarter results, shares jump.  Sports car drivers are a shifty lot…

Trouble ahead in Iran because we know people in Tel Aviv are going to read Iran working on prototype centrifuge 50 times faster than allowed by nuke deal: official and think preemptively.

Did these people not read  Twilight in the Desert? Aramco’s Aim for a $2 Trillion Valuation Is Doubted by Many, But Saudi Investors Are Lining Up.  One born every what in the desert, too?  Repeat after me “Water Cut!”

The price of oil reflects the economy and if you listen closely, you’ll here the word “Trade!” in  Oil prices creep higher on tentative U.S.-China hopes.

Recycled Clothing continues to propagate.  High end, too, as Olivia Newton-John’s famous ‘Grease’ outfit sells for over $400,000.

The Week Ahead

As you may have figured by now, no real news this morning other than trade and impeachment hype.  Factory orders at mid session.

Tomorrow, international trade, but with the trade war, that’ll be a zilch.   Ditto the Labor Department productivity and cost WednesdayConsumer debt from the Fed and the federal balance sheet could make for an interesting Thursday.  Minor trade and consumer data Friday. Plan to skip work Friday.

In short, if you have vacation time to burn, unless there’s some kind of left field event that starts to pop, this is a great week to “call in well” and pursue your own interests.

The world’s likely to be here tomorrow.   Since the online hype about a weekend risk for Seattle passed without incident, The big Seattle buzz is Russell Wilson’s pass completions (29 for 43) in the OT beat of the Buccaneers Sunday.

When I’m reduced to citing a sporting event, there’a a deep lack of useful out there, Hey!  How about we call it quits and grab some chow, huh?  Good day for Bailey’s & nutmeg French Toast with a side of ham.

Be sure and get to work early enough to see who screwed up on the time change.

Write when you get rich,

18 thoughts on “It’s Mid-Summer – Of 1929”

  1. Au contrair mon fraire..

    The Q psyop is back this weekend – up and posting over on – need tor browser to read only – so far.

    A little over 13 weeks ago Q post #3525: (93DK) – Q knew and told us they were going dark for 93 days – exactly. Took that long to rebuild a secure/hardened platform – needed to be hardened for whats about to be unleashed..first new post – ” RIG FOR RED” – old school Squids and Bubbleheads will know/remember rigging for red..periscope depth – “lockout” the frogs..”and let slip the dogs of war” -W.S. , or just comming up for a looksey or transfer/P.U. of peeps.

    G- considering what garbage is being taught in our schools the past 40 years or so – its a dam miracle society has held together this long..

    add the fact that we have 1 political party that is defacto enemy of the people, a proagandistic media in bed with them, a fed bureaucracy & judiciary acting as rubberstamp and compromised officers corps – top echelons now openly support removing POTUS they disapprove of by force of arms-We have ourselves a FUBAR situation..

    Time to go Risk On with everything U got ?

    ..As Jackie Gleason used to say on the Honeymooners – “to the moon Alice”

    • EastCoast,

      you said…”we have 1 political party that is defacto enemy of the people,”
      I am assuming you mean the GOP. I mean, who else could it be right? Nothing they say and do…especially their state run media outlet Fox or Fix…whatever is more appropriate, is based on factual metrics. The only metrics Fox and the GOP track is the voter Trends. The more outrageous the lie, the deeper the loyalty. The garbage being taught in our schools is just what the GOP wants…to control the peons. It’s obvious. Look who the peons elected President? Sad!

      You don’t actually believe anything Q says do you? What if I were to tell you he is a former actor/comedian using this platform for an upcoming 2020 movie? Just saying.

      • The goal of Socialism is
        -Vladimir Lenin

        Mark, Your constant criticism of the Republican Party is not without basis, but what is strange is lack of the same against the Democrat Party. After all the “Neocon” infiltration of the Republican Party all began from the Democrats. Please pay attention to Lenin’s quote above. One must not fall under “range of the moment” thinking.
        Also a cursory review of late 20th Century history (and some ‘old farts’ like me) will pin the beginning of the take-over of the public skool system to the LBJ administration. As more and more federal money financed the skools the strings went with is and were firmly attached. Much of this financing went to hire the preponderance of socialist teachers, professors and control of the content of the textbooks.
        We allowed it by not paying attention to what was happening and our failure to look to the future. We hired socialist politicians to steal from our neighbors and give us the money (minus the vig of course) and not realizing our neighbors were doing the same to us.
        I have never joined either political party, and never will.
        Al B.

      • Well Mark…
        I did it.. I have been considering doing it for some time now.. but I finally did it.. went in to pay taxes.. and I switched parties..
        I had been a demoncrap from the very beginning..Since DJT got in office I have never been so ashamed of a group in my life..How low can they go.. I don’t know I think they have been rubbing the bottom for some time now…. I was going to take no party.. (they are all corrupt if you ask me.. each of them bought and paid for..) but out of all of them.. I had to make a choice.. so I went Republican…

  2. We know this a house of cards simply because you cannot spend double what your income in any sustainable way. The only time an entity should spend more then their income is with an investment that will lower costs or raise income over time. Very little government spending is in the investment category, but in consumption. No current national political figure will ever discuss taking our medicine and cutting spending. I have thought the reckoning would have happened at 50% or 75% overspending, but now we are over 100%. – – “In the third quarter of 2019, the U.S. debt-to-GDP ratio was 106%.” No politicians will discuss a painful plan, because they know people will not vote for people telling the truth. They tell them what they want to hear, then continue on the same paths.

    I just don’t have any idea how to protect my personal assets from coming economic calamity.

    • Anon your on the money there..
      The wife brought up the daily news article that was saying what LOW INCOME housing costs were for our area. The recipient would be liable ffg or one thousand a month plus utilities they would pay the rest.
      She said they were talking about how minimum wage went up but wages for dull time employees hasn’t.
      Anyway I had to explain th o her that it didnt matter.. a household on low income housing assistance would have to have a fairly high income and the devalued dollar minimum wage would need to be around thirty dollars. Everyone has been living on credit. Storage units are a waste of money.( even though I cussed myself out yesterday for dumping my junk bolt jar.) Overall the cost of renting one (if its longer than one month ) your better off selling what’s in there or giving it away than keeping it.
      For us we stopped buying I like george dont celebrate xmas ( seriously have you done any ready on the xmas holiday) but i do put on all the show for the kids. If they ask me a question I will answer them honestly though..they need to know reindeer dont fly and the only jolly fat man with red pajamas putting gifts out is me..minus the beard..

      Everyone I know has drasticly cut spending.. mostly because the the costs of necessities has finally outpaced income levels.
      The gentleman that owns an apartment complex was just telling me he’s in a fix to.
      They changed how certain utilities that are normally not charged to the tenants has changed and risen considerably. He to has a huge concern since they all signed leases that state he pays for those expenses .
      Which brings up mark .. he hasn’t noticed any of that in the upper classes of san fran..only the bottom tiers are affected.
      My question is how soon will it be that it starts to affect the upper tiers of society

      • LOB,

        I noticed soup went up in value again.

        Late December 2019 one could get Campbell’s® Chunky™ Soups on sale for $1.00 a can. I bought two flats.

        Early 2020 Campbell’s® Chunky™ Soups went up in value, sale price was four cans for $5.00.

        Today, Campbell’s® Chunky™ Soups are on sale again, now they are four cans for $6.00.

        Milk was $1.32 a gallon whole milk at the beginning of the year. Today it’s .47 cent more valuable, $1.79 a gallon.

        We are getting ripped off.

        G, update your “live on 10K a year” to 15K.

      • unfortunately OOWSteve.. they all have gone up around here a few pennies but we still have one hundred pennies to a dollar…. started with the utilities.. and everyone down the line from there had to raise rates.. even our health insurance went up again.. wages.. 1.5 percent..
        I haven’t felt this broke since we went a year without an income..

  3. George, nice piece on economics again today, and yes, impeachment is part of the crap piling up.
    -As you note, Willie Brown is a cagey, pragmatic, old-school politician, who along with Pelosi, correctly read the dangers to the D’s by impeachment. Pelosi avoided impeachment like the plague, opting instead for the playbook that got the D’s the House in the last election, until Trump forced her hand with virtually irrefutable, and obviously despicable conduct. Now it’s a wildcard, and anyone’s guess.
    -What I fear is that when the Trump rule of soliciting foreign assistance becomes an accepted norm, as the R’s are forced to do in order to save Trump’s bacon, then like non-steroid using athletes, the D’s are forced to conform or to be left behind. SO, the D’s will be forced to ‘offer’ the Russians, even Iran, a ‘better deal.’ Maybe even offer up the rest of Ukraine to Russia or the rest of Iraq to Iran. And back and forth it will go between the parties, obviously to the detriment of US interests.
    -So much for America First. Thank you conservatives. Best, Mike

  4. G.

    It came to me in a flash. Today’s column (remember when we called daily writings by such?) exhibits a certain stylistic similarity to another favorite writer — namely, Tom Wolfe (the latter: he of the white suit).

    Lotta Tangerine Snowflake Baby in there today…

    …also reminds me a tad of Brock Yates of C&D.

    (This IS intended as a compliment, in case any doubt exists…)

    – 73 –

  5. “Trump loyalists Barr and Durham”

    Neither Barr nor Durham (US Atty, Connecticut) are Trump loyalists. What they are, are people who’re somewhat more honest than we, da peeps, are used to seeing in D.C. Durham is a Clinton appointee who first came to fame investigating the Whitey Bulger fiasco. He is known for his intense dislike of corruption…

    You ain’t just a woofin’ WRT “news.” I don’t recall seeing so many “summer fill” articles in U.S. pubs in November, EVER!

    I’ll try to fill the void a little, with these:

    Bipartisan law targets Google and its rivals to end ‘secret’ online search algorithms that critics say censor political speech and manipulate users

    Author of Russiagate Origins Book Claims the Scandal Was an FBI Plot to Help Clinton Win in 2016

    Hundreds Of Earthquakes Rattle The U.S. As The Level Of Seismic Activity In North America Continues To Rise

    Expert: Swedish Bombings Not Matched by Any Industrialised Country

    I’ve been following the Muslim wave in Sweden since the early 2000s. It goes unreported, even within Sweden. The Scandinavian cheese-eaters have become SO politically-correct they’re not allowed to report crimes wrought by the imports, and when any attempt to do so, they are, themselves, arrested. If you read the writeup, you’ll see the Swedes are more concerned that the bomb-makers are “inexperienced” and might blow themselves up, than they are, that the bombs are killing Swedish Citizens and blowing up their cities.

  6. G – U should have a look at them thar digital tulips..$9400 and breaking out to the upside today.

    yeah yeah I know its like a penny stock -will return to nothing or suckers fantasy – got say the fantasy has been exciting and tons o far.

    in other tech news ..Microsoft project silica announced successfully Storing the entire 1978 Superman movie on a 72 by 72 by 2 millimeter piece of quartz glass and they are able to Read it out successfully. as most of Ure astute readers already surmise – U can put this “loaded” quartz glass in boiling waters, bake it the oven, flood it , scour it, demagnetize it – like the 3 little birds on the doorstep say – “no worries”

    * no bitcoin 4 U ! or U either NC.

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