Markets: Seatbacks and Tray Tables?

So much for the Holidays, huh?  Peoplenomics will be back on regular schedule Saturday…

There are two occasions when the “back-end crew” of an airliner will tell you “Please return your seatbacks and tray-tables to their upright and locked position.”

One occasion is when it’s time to descend for landing.  The other?  When the pilot fears he may (as the old airline joke goes) “Run out of airspeed, altitude, and ideas at the same time.”

Which frames our thinking on long waves in the economy in general and how this late-winter/spring period could shake-out, in particular.

In last weekend’s report, I mentioned three bands where we could potentially reverse and head higher.  But this is not a prediction or recommendation.  More like noticing an airliner flying high overhead, seeing its nose pointed earthward, and wondering how it will all work out…

As you can see, this is a weekly view of markets dating back to 1999 and comparing it with the trajectory of things in the 1929 post-Crash period.

What’s different about the present track and the 1929 time-series is the Federal Reserve’s diddling with money.

For example, in 1929, if you had a $100-bill, it would only cost $75.35 to buy 1929’s $100 worth of goods by 1933.  Holding cash made a lot of sense that time around.  On the other hand,  the depression-era Fed could not pull certain financial strings because the Federal Reserve was bound by convertibility of precious metals.

Convertibility into “real” money (gold and silver) had to be done-away with for the Fed’s papering over to work, so as a result, BOTH gold AND silver were confiscated.  It would be 1974 before president Nixon would get us totally off the gold standard.

Now, let’s consider a more recent hiccup in the economy:  The Housing Bubble collapse that bottomed in 2009. However, unfettered by convertibility, the Fed simply “made up money” effectively inflating their way through a potential economic depression.  The CPI only dropped from 219,96 in July 2008 to a low of 210.228 in December 2008.  Other than that, prices were going UP.  There was no incentive to hold cash.  The Fed saw to that.

America has arrived in the financial engineering paradise called Variable Value Money.  By deftly printing up enough of the stuff, Ben Bernanke’s helicoptering notion (dumping oodles of billions from helicopters to keep the illusion of solidity of the system intact) was actually run. It just didn’t get widely noticed because people really ain’t as bright as we’d like to believe.

Today, we don’t have a convenient bubble popping except the one in stocks..

Which gets us to the phenomenally important question who’s going to get screwed next?

It’s a useful axiom to recall that “In every economic calamity, some class of customer gets screwed.”  In 1929, it was the over-extended stock players.  But, in the 2009 event, it was the over-extended home buyers.  In the mid 1970’s recession it was people who drove gas-hogs…

Who’s over-extended today?

Simply:  the U.S. Government.  Which is why it’s so important for the Fed to raise rates, even though it may cause a recession. Like virtually all other kinds of business, government has the same “grow or die” problem with its business models faced by other CEO’s.

That’s why the Mexico Border showdown (where tear gas was fired overnight as the Soft War with Mexico begins to harden) is so critical.  The Shadow Government (the unelected bureaucracy) desperately needs more population in order to justify bureaucratic growth.  In the end it’s tax and spend.

In a sense they are right: As a 2013 article in Forbes explained, there’s a calculation called the government employees to population ratio that may be revealing.  Even here, there’s a ton of “wiggle-room” because while government headcounts may vary a bit, government spending has continued to increase. Lots of “government jobs” have been “outsourced”
which make it all a big game of liar’s poker to figure out.

Thing is, bureaucrats know that government is a large flywheel that can power the economy through rough patches.

We’re there, but both political parties have gotten wrapped around the axles of socialism and the radical left effectively doesn’t want borders. Ignorant of how Europe has been torn-apart by unfettered immigration (and the EU has gone through an explosion is social services costs as a result) the US seems likely to go down the same (stupid) path.

Our view of Reality says government is looking for an excuse to grow.  The “excuses?”  Well, it was global warming, but since the sun has inconveniently gone to sleep and may be there for an extended period, the rebranding to climate change has been pulled.  People, lacking inventiveness and gumption follow the most obvious of pied-pipers.  Climate has been changing for hundreds of millions of years not requiring fund-raising, action groups, or polarization.

Word that China’s growth rate is slowing dramatically. But, we don’t hear from environmentalists cheering this – as they should since China dumps in more CO2 emissions than any ot her country in the world, but admittedly, the US leads in CO2 per capita.

Yet, management science says there’s an answer to be found to all these problems.  It’s all there in calculations. It’s just whoever is “driving the spreadsheets” isn’t being heard by the shut-down government.  The latest Pelosi/democrat plan to end the shutdown has been labeled a non-starter by the Tweeter-in-Chief.

Which gets us to the impasse as we begin the year with a whole orchestra of sour notes.

Not only did the Chinese market plummet more than 700-points overnight, but that pencils out to 2.77 percent.  As such things do, the effects are rippling around the world:  European markets were bleeding all over the monitors here and it looked like a 300-point dive at the open based on the futures being down more than that with three hours to run for the open.

What’s a body to do?

Other than seat backs and tray tables to their fully upright and locked position?

Looking Ahead

Tomorrow, both the ADP and Challenger Job numbers will give us some insight what to expect in the federal jobs report due out Friday.

Only other biggie could be Jerome Powell’s speaking mid-Friday morning.

Useful News?

Most of what’s passed off as news is personally useless – since there’s nothing you can do about most of it:  But, stories like these get us to thinking:

The latest social media gaffe  as Facebook apologizes for banning evangelist Franklin Graham gets us to thinking”  At what point should government operate social media as a public utility?  Use the ad revenue to pay down the federal debt?  Sell all that personal data to itself?

Technology is already “cooking our brains” with cell phone radiation and if I read this article right, your hands might be next: Google wins U.S. approval for radar-based hand motion sensor.

Yet-another hat looks like it’s in the ring for 2020 as Mitt Romney: Trump has caused worldwide dismay.

Our long-term skepticism of Europe, Brexit, and the British comes through as a: UK minister defends giving Brexit ferry contract to company with no ships. Yes, it takes time to cross real borders.

For Ure Reading List

Former NY Times editor Jill Abramson’s new book “Merchants of Truth: The Business of News and the Fight for Facts”  Rips the NY Times for it’s anti-Trump boas andopines they have a financial incentive to bash, according to this story on Fox.  Book is due for release Feb. 5th but you can pre-order…

Also in the “merchanting” arena, toss in the 2011  “Merchants of Doubt: How a Handful of Scientists Obscured the Truth on Issues from Tobacco Smoke to Global Warming” and you’ll get a better sense of our thinking around here.

Off to another hard day of clicking, so moron the ‘morrow….

22 thoughts on “Markets: Seatbacks and Tray Tables?”

  1. Coast had it’s annual pro predictions show last night featuring psychics and astrologers. The general theme was that the next few years are going to see significant turmoil. The economy and market will rise for a few more months, then all bets are off as chaos hits the world.

    Sounds like fun, doesn’t it?

    • As things are going we may not HAVE national elections in 2020. With both parties trying everything that is detrimental to national security and interest in just “keeping things together” Penny Kelly’s prediction of the breakup, primarily political, of the U.S. is looking more and more possible. It’s amazing how the smartest people in the room keep trying the same old self-destructive tactics. It’s almost like they WANT things to fall apart … hmmmm.

      I love TEDx talks. Here’s one that gets to the heart of our financial dilemma from bottom to top – “When Money Isn’t Real”.

      • Just because some folks sit around telling each other how smart they are, and convince not-very-bright media types of their brilliance, doesn’t necessarily mean there’s even a single person in the room whose I.Q. is actually a larger number than his or her age…

      • Bill… I don’t know but if the way I understood what I read is right on.. They election could be postponed.

        A bill that was passed had a clause in it about a paragraph.. The way I understood the paragraph to say is in the event of a national emergency was declared by the secretary of defense that we would be in a police state. Congress could be sent home, elections put on hold and the president would be in charge until the crisis is resolved.
        But then I may have misunderstood what I read.. But that’s one of those that it seemed everyone was on tv telling everyone how badly we needed it.

      • Anonymous – Yesss. Bill and Hillary, Obamas, Cheney and other recipients of “The Envelop” in orange down in GITMO along with half of Congress, probably more. Trump divulging everything from Johnson’s coup to 9/11 and beyond and every conspiracy theorist jumping up and down saying “I told you so!” If you thought Mexico has it bad with that poor mayor getting whacked 90 minutes after taking his oath there won’t be anywhere a politician could hide here in the states. Michael Savage will be out selling hunting tags for liberals in California, Tucker doing the same in D.C. OMG … people might even be running around in CA publicly carrying straws with impunity!

  2. In your reading list department, Jill Abramson book doesn’t rip The NY Times for its Anti-Trump bias. To the contrary, she rips Trump more. And doesn’t Consider Fox a real news source. That article you linked to is a perfect example. She does say that the old guard way (Woodward and Bernstein) of news gathering has died and that it is being commoditized. In her prologue she writes the following…

    “There are not that many places that do quality news well or even aim to do it al all. But these four can an sometimes do: Buzzfeed, Vice, the New York Times and the Washington Post. Buzz Feed because it’s success exemplifies Facebook’s impact on how information spreads online. Vice because digital video and streaming services are rapidly replacing conventional TV broadcasters and cable stations and earning the loyalty of younger audiences who would rather watch than read. The Times because it covers more subjects and places more deeply than any other news organization. The Post because of its inspired quest to reclaim its lost glory as the most important digest of American politics and government. These four are among the leaders in producing big stories….”

    Of course Fox spins it to their agenda…They are the true fake news….the enemy.

    • Absolutely true, but they’re hell on crowned teeth, especially if you have a British heritage. Don’t ask me how I know.

  3. So long as we’re on the “book of the month” topic, Michael Pillsbury’s “The Hundred Year Marathon” all about China’s plan for world dominance should be right up there. Pillsbury is one of those “think-tank” guys; speaks and writes Mandarin, and you’ll learn who our REAL enemy is by reading this one. Also learned that McConnell’s wife, Elaine Cho, (who is sec/labor I think), anyway her father is probably the #3 guy in China and gifted his daughter and son-in-law with somewhere between $5 million and $12 million. But we wouldn’t want to call it a bribe, would we?

    • God WD… I don’t think I have read that one..
      thanks for sharing.. I will add it on my list..

    • WD…. reading it now.. check out The China Dream.. you can get it in the Harvard LIbrary.. this book seems to be running parallel to that one in the message it is sharing..

      I think they can and will if they aren’t already .. we are already almost totally dependent on them. our military our economy our manufacturing..even in our financial world.. they got their money on the list of back up currencies.. and it is backed by gold..

      I use to have a financial bookkeeping system I dumped it two years ago because they changed their format so that all your financial data is kept there.. so .. what would it take to tap your bank for fifty cents a month.. or a dollar a month.. would you notice..

  4. “Word that China’s growth rate is slowing dramatically.”

    People spent less for Xmas..everyone I know spent less traveled shorter distances…

    The other thing I noticed.. The of my hats was retail oriented..right after Xmas rather than pay taxes on over stock they usually dump it to make room for newer stuff..(merchandise I didn’t want to use the c word) stuff they can’t dump is slice and diced to the landfill.
    My wife needed a new winter coat.. I just got back from the sporting goods store.. I picked up a winter coat..|SC_Shopping_NoPromo_Brand_Desktop-_-google|1486604067|63167302771|284196963351|aud-302302480289:pla-300400769430|m|9020341|3694268&gclid=EAIaIQobChMI8pX63erP3wIVXLjACh3eEgPCEAQYBSABEgKFYPD_BwE

    For 29.00 took a bit of dickering but I knew by tomorrow the vast majority would be sliced and written off to make room for spring items..
    I’m going snow blower shopping in three weeks..
    The other thing that comes to mind..the stores are going to online sales order it they put it in a cart and you pick it up.. Oops there isn’t any impulse buying there

    • Looking – I saw an Xmas in the opposite. Excess spending & more travel. People have the cash in the form of credit cards to spend excessively. I spent more this year than usual, do to the fact of having to take a minimum distribution from my IRA beginning this year which gave me a Xmas bonus.

      Times are good & citizens are willing to spend. They make good money & have an enjoy it now mentality. No thought of the future. Most don’t even realize the stock market had a correction.

      • Wow.. ECS.. that is way different than the normal for around here this year..
        Seemed everyone I know or talk to had pulled in Reigns on spending.. very few went traveling that I know anyway r.. My IRA went to doctors and medical expenses LOL.. boy that was nice..everyone stayed close to home..
        Although the last couple of years were the years of Plastic around here when everyone I knew spent using plastic..
        Fuel is down another nickle here to.. which is wild.. I think they drop the cost of a gallon to a buck fifty and that could keep this area afloat at least..
        of course if you look at the wage structure of an area the average wage in my area is about eleven dollars an hour to fourteen dollars an hour.. eight fifty to start.. high end is at thirty although I do know a couple on the flight for life that make around forty dollars an hour plus the head mechanic for the hospital is in the thirty dollar an hour range. and a few that work for the govt that makes a lot more. and utility workers make more on average they are in the big bucks area. the job I use to have but gave up for my ethical reasons is way up in the six digit range.(still kicking myself on that one LOL) of course then you have doctors and high end earners.. one hospital ceo was downsized and while we were having beer by his pool he was telling me how insulted he was cause a hospital in another state only offered him a half mil a year.. I told him they could insult me if they wanted LOL.. a friend of mines son in law is cardiac surgeon.. spends more than he makes. a woman decorator does staging during the holidays for wealthy and redecorating she has trouble getting them to pay but brags about having them as customers.. of course I couldn’t resist its the smart azz in me that had to say.. you can come decorate my house and I won’t pay you either LOL..
        a few months ago my bank manager and I were talking and his wage would be in the thirty dollar an hour range but he is salaried.He was telling me about a college kid that came looking for a job and when he asked what wage the kid was expecting more than what he made LOL. the little bank down the street the bank manager there makes the fourteen something figured in hourly wages the tellers ten and one eleven something..
        Then again the cost of living is a lot different here than in some places. what surprises me here is the cost of housing is going up yet wage structures aren’t going up accordingly..

  5. Could the Chinese stock market (Shanghai) be the bubble market of 2019 like Japan in the 80’s when the NIKKEI 225 went from 6,000 to 40,000. Currently, if a Chinese investor wanted to buy BABA, they would have to purchase it in the US Market not the Shanghai market. What if Japan started a NASDAQ like exchange & had a BABA CDR (Chinese Depository Receipt) listed on it. The demand by Chinese investors would be huge as PT would say, & the price of BABA would soar upward as Chinese investors were able to purchase BABA in the Homeland markets using CDR’s.

    This would also apply to BIDU, CTRP, JD, etc.

  6. “It just didn’t get widely noticed because people really ain’t as bright as we’d like to believe.”

    And that’s why Democracy is a wonderful illusion!! ;-((

  7. If you actually read “Merchants of Doubt” your climate denial is completely debunked and shown

    to be a created theory supported and paid for by Big Oil.

    • 850 years ago, hemispheric average temperatures were ~7 degrees higher than they are today. Please explain why you believe today’s temperatures are anything more than a correction back to a state of normality.

  8. Not surprised Abramson ripped the Times. She was a hard-core Liberal who got ripped by the Times, and by one of Mr. Obama’s many forays beyond legality, because she at least tried to exhibit a shard of “journalistic integrity.”

    Whether this experience with reality jolted her into a re-evaluation of her political bent, I don’t know, but I doubt it. I DO know a lot of people ASSume she either is, or has become, conservative, because pundits like Hannity have given her air time. This shows how shallow, unaware, and just plain ignorant the American public is. Hannity, Beck, I think even Rush, gave air to Don Imus, who was, and still is a huge Liberal, not because he’d gotten a right-wing feather up his pitoot, but because the way he and his show were canned was unjust.

    Jill Abramson got air from Conservative pundits, and will again, now that she’s hawking a book. She won’t get air because she’s “one of them,” but because she was wronged, and the Conservative media will attempt to make up for the Obama Administration’s, and Liberal media’s lack of morals and Constitutional integrity.

  9. “Find 4 Ways to Reduce Operating Costs”

    Wise words.. Our problem this year is our base expenses all increased their base rates above our incoming income.

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