Although people use the term pejoratively, the word Paranoid is not a bad thing. If it’s fed with actual life-experiences, it’s a great example of how the human species learned to avoid injury (and death) in our formative millennia.
I mean, you stick your hand into a bee hive – resulting in a massive bee-stinging attack (worse: swarming and death) – you’re going to learn from the pain. Next time a buddy says “Get me some honey from that hive, why don’t you?” Paranoia cranks-up and you tell ’em “Piss off!”
In the stock market, people don’t always take “the long view” but in terms of overall returns in life, being an ultra long-term investor makes sense.
Therefore, when you look at where the market closed last week and compare it with 1929, it looks like this:
Many economists don’t like long cycle work because it’s not well-understood how to harness the power of “going with the long-term trends.”
So when I catch an article like “‘Father of Reaganomics’ says ‘get out of the market’ — bond and stock market — ‘and put your money in cash’” I look at it from as pragmatic a viewpoint as I can muster and wonder if David Stockman is being paranoid or whether there is something to his warning.
I don’t know if you’ve read any of Stockman’s books (there are several) and paranoid is not a label I’d pin on him. Because, I suppose, I’ve read several of his books and they read like fine wine to a certain economic skeptic (ahem)…
Some of his books are self-critical: “The Triumph of Politics: Why the Reagan Revolution Failed.” Which goes hand-in-glove with his optimistic “Trumped! A Nation on the Brink of Ruin… And How to Bring It Back.”
Then something happened. Like our view, Stockman’s evolved into a kind of “sand in the gears will break things” line of reasoning in “The Great Deformation: The Corruption of Capitalism in America.”
Even more interesting is that Stockman then continues to sense America’s growing frustration with the ongoing corruption of politics and leadership in his “Peak Trump: The Undrainable Swamp And The Fantasy Of MAGA.” (This is the one I’m wolfing down now as time permits now.)
The Crooked “Virtuous Cycle”
What’s not explicit, though he’s moving in this direction, is that we have moved out of the “real” world and have moved into one where everyone knows the system is broken, but in massive denial-fashion, we simply rewrite a few rules and keep things going via bad policy rather than honest values and money.
So why talk about Stockman, paranoia, and the victory of political money over sound money rather than focusing on the Housing data or this morning’s Chicago Fed report which we’ll get to in a sec?
Because Friday the Bureau of Economic Analysis releases updated GDP data.
People (in government these days) don’t like to mention specific numbers. Instead, in a PR policy slightly reminiscent of the Former Soviet Union, they refer to “percentage gains” rather than absolute numbers.
So, just as collectives reported perpetual percentage gains, so too, the US economic data is parsed down to percentage because (to quote a movie line) “You Can’t Handle the Truth.”
Which can be found way down on Page 9 of the last detailed release of GDP data. It says (top line) that Q3 that the US GDP was $18.665 trillion dollars.
The reason this is THE DIRTIEST SECRET AROUND is that with the current Federal Debt to the Penny report showing total debt at $22.039-trillion, n We assume you know that even this number falls into the “not quite honest” bucket?
Reason is that this is principal only and doesn’t include a larger amount of promised interest. It’s like the “pay-off” on your home. If you were to pay it off today, maybe you’d write a $100,000 check. But, in reality, since you have no serious prospect of paying it off, the real debt number is the $100,000 of principal plus another $125,000 of interest for a total (IRL) debt of maybe something like $225,000.
Government does the same thing: Talks about the payoff number only, but since we DON’T HAVE $22-trillion laying around the HONEST number if more like $55-trillion. Following?
But that’s not my point (though it’s one to be aware of, for sure).
The real point is when we divide the real GDP into the real debt, we find what? 1.180766139833914. Slide the decimal point two places to the right and we know as of this morning, the most current data says we are bankrupt in the sense that our debts are now 118 percent of what is effectively the income number.
Debt is 118% of GDP – which is the kind of level from which massive declines begin.
While we wait for sobriety to return to markets, the Chicago Fed National Activity Index is out. And not so good…
Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –0.43 in January from +0.05 in December. One of the four broad categories of indicators that make up the index decreased from December, and two of the four categories made negative contributions to the index in January. The index’s three-month moving average, CFNAI-MA3, decreased to a neutral reading in January from +0.16 in December.
Which means – simple enough – that we’re sliding a bit.
Does that worry the crack-headed market?
Nope: Dow futures were up 164 points and outfits like CNBC are focusing on stories like “Warren Buffett says he was close to making a ‘very large’ acquisition in the fourth quarter” which are now unlikely, but toss in strength in Intel and GE today, and its oh so easy to overlook the fact that “Growth Has Left the Building.”
Such are Wave 2 bounces, we reckon. We knew this last week, for example: Wall St. set for strong open as Trump delays tariff deadline. But that means its a negotiating slug-fest and Trump may be out-classed by China. But bubble-on is the hype and the market’s up again at least for the open.
In our Also Worth Knowing scans:
Speaking of Warren Buffett, he’s sounding more and more like he’s still in bed with the radicalized Left when headlines like this pop up: Buffett says wealthy Americans are ‘definitely undertaxed’.
We call bullshit of course: We’re not under-taxed. We’re “over governemented.”
Sideshow is still open for the weak of mind: Chicago police say they have more evidence Jussie Smollett staged hate crime.
Off to breakfast with (wait for it) moron the ‘morrow.