Five Things You Need to Know: Fear Mixed With Incredulity
Kevin Depew's Five Things You Need to Know to stay ahead of the pack on Wall Street:
1. Fear Mixed With Incredulity
These days, hammering a For Sale sign in the front yard of a home must feel a bit like driving a stake into the rotting corpse of a vampire; fear mixed with incredulity and the foggy notion that this unnatural gesture may not, in fact, work. And so we get headlines like those streaming across the wires this morning: "Existing US Home Sales Up 3.1 Percent in July." That's good, but only until nightfall. Then the bad craziness begins all over again.
Yes, sales rebounded in July from a 10-year low, but the median priced dropped 7.1% nationally and, worse, the number of homes entering the market hit a record. There were a record 4.67 million unsold houses and condos on the market in July, representing 11.2 month's supply at the current sales pace, the highest ever, according to the National Association of Realtors.
2. An Ongoing Nightmare...
"It's like an ongoing nightmare and no one is sure when we're going to wake up."
- Stuart Thomson, Resolution Investment Management Ltd., Glasgow
Indeed. Thomson's talking about money market lending in Europe, from Glasgow to be precise, but he might as well be standing on an orange crate in Hot Springs.
Over the weekend, I read where in Kentucky unemployment has crossed the 6.7% threshold on its way to 7%. Seven's the magic number for unemployment. Anything above 7 for any length of time is the kind of full-on crisis that results in wholesale regime change for anyone with the misfortune to be involved in state government at the behest of voters.
My mother lives about 60 miles south of Lexington, where the last large Kentucky city on Interstate 75 gives way to the foot of the Appalachian mountains of the east and the hill country that rolls up further south into Tennessee. Her city, London, is the last line of defense between decent law abiding citizens and the Crystal Meth crime wars, high unemployment and poverty that have been raging in the southeastern part of the state, under the radar of national news media, for the better part of the past decade.
I asked her for a report from Kentucky and the news was grim. "Churches and cash advance places are huge targets, and people are being robbed on the streets," she said. "Gas stations were considering closing at night, but they are being hit during the day as well and the biggest news story was a young man who climbed on the roof during broad daylight, disabled the cameras, filled up and drove off. It's crazy!," she added, in case I had somehow become too jaded by New York City to recognize economic desperation.
She had a point. Manhattan today, far from being at the epicenter of degenerating economics, is actually the last bastion of The Dream in America. Manhattan, with rents for a one-bedroom approaching $3,000 a month, is for all intents and purposes the largest gated community in the country... for now.
3. Department of Chilling Stats: The Lost Decade
Merrill Lynch North American Economist David Rosenberg presented a chilling stat this morning:
"[T]he return on cash over the past decade has exceeded the return on equities by nearly 1,000 basis points (and the entire total return in equities has come from reinvested
dividends, not price appreciation)."
That's what I mean by "structural bear market." Like all bear markets, this one will end when no one cares about it anymore, when "investing" seems ridiculous, a pursuit on par with phone book collecting.
4. Champagne for My Real Friends, Real Pain for My Sham Friends
Finally some good news... at least for the ultra-wealthy with pending yacht christenings. According to the Financial Times, champagne houses, including G H Mumm owned by Pernod-Ricard, are making their bottles thinner due to the economic pressures of production and transportation cost increases.
The cost of glass bottles has risen 40% this year. And, the FT says there is a shortage of bottles due to increasing bottle consumption in emerging markets.
Ahoy Polloi!
5. Daily Socionomic Datapoint: Eat the Rich
Surely, by now everyone is familiar with the Senator John McCain uncountable house story.
From the Washington Post:
By Anne E. Kornblut
RICHMOND, Va. -- As part of an increasingly aggressive effort to redefine his opponent, Sen. Barack Obama on Thursday morning seized on a new remark by Sen. John McCain that he does not know how many houses he owns.
"Somebody asked John McCain, 'How many houses do you have?' And he said, 'I'm not sure, I'll have to check with my staff,'" Obama said with a tone of incredulousness at an outdoor event here.
Of course, there's nothing new about politicians on both sides attacking their opponents' apparent wealth as a signifier of economic detachment and exclusivity. This sometimes plays well on the streets of Smalltown, USA, fueling the fiery rhetoric of whomever at the moment is playing the role of The People's Populist.
However, as social mood continues to darken, we should expect increasing attacks against the signifiers of wealth across a wide spectrum of cultural channels. This is a far different mood than that of the early 1960s, when the JFK empire of "Camelot" was widely embraced and admired.
From large, gas-guzzling SUV's to suburban McMansions and ostentatious hyper-brand-conscious clothing lines, aspirational economics will soon recede, displaced by a mistrust of, and a resentment toward, those with wealth and means.
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Nobody worry 'bout me
Why you got to gimme a fight?
Can't you just let it be?
of course being that he doesn't have a speech writer living in his head this would be very difficult.
oh well. atleast he didn't say there was 57 states.
....
We are at a turning point in our history. There are two paths to choose. One is a path I've warned about tonight, the path that leads to fragmentation and self-interest. Down that road lies a mistaken idea of freedom, the right to grasp for ourselves some advantage over others. That path would be one of constant conflict between narrow interests ending in chaos and immobility. It is a certain route to failure."
jimmy carter, july 15th 1979
Then the past 30 years have happened and they seem like they've been one ongoing paroxysm of wasteful attainment masked as progress. They have been PRECISELY what Carter warned: "A mistaken idea of freedom, the right to grasp for ourselves some advantage over others." Sure, a few people got rich for real and a lot more got rich on paper (or on debt now due), and while we've been thinking that we were all just getting more, more, more, in fact we've caught all the fish, cut down all the trees, burned up all the oil, dug up all the uranium, and poisoned every river with our unchecked filth. Metaphorically or not, kids... we've done this stuff to ourselves. And goddammit, you can't possibly say that Uncle Jimmy didn't warn us. Clearly, we can't stomach the idea that maybe we should live a little more simply so that others may simply live.
The illusion of prosperity is not the real thing by a long stretch. No question that growth is good, that economic progress truly does make lives better across the whole world, but that progress must be sustainable, it must be responsible, and it must be grounded in the recognition that borrowing our way to wealth is a logical impossibility.
History ultimately will show Reagan to have been the beginning of the end of America precisely because his administration precipitated the parabolic rise in the national debt and the overarching belief that we Americans are entitled to all the money simply because we can print it faster than anyone else. Subsequent "leaders" have each been more shamefully disgraceful than he, and each more morally bankrupt than his predecessor. Finally, this year we get a real choice, between disaster and calamity. Choose wisely.
A beautiful piece of writing. Just the way my Father and I have felt for all those years. Those that thought Carter was a terrible president are the same ones that voted for Bush. And that will vote for McCain.
Thanks for reminding me how I used to feel and still do.
Jerry
Comeuppance time is upon us.
Carter told Americans the hard truth, and, surprise, they rejected him for it.
Obama's answer?--more taxes and regulation.
"Not ready to lead" versus "No longer capable of leading". What an election.
Which leads me back to my standard rant against corruption as the worst form of taxation.
You posit, "The US economy has become structurally uncompetitive in many markets due to high taxes, constrictive laws, and innumerable pages of regulation(,)" but offer neither definition of what constitutes "competitiveness", nor evidence of the logical connection, nor plausible solution even if your hypothesis were to prove correct. Implicit in your statement is that the obverse - "low taxes, no (or few) laws, and no (or few) regulations" would lead to structural competitiveness.
The past 8 years of non-enforcement by the present administration mimics "no (or few) regulations" (see LA Times 8/25/08 article here: http://www.latimes.com/business/la-fi-mortgagefraud25-2008aug25,0,6946937.story).
Seeing where that got us, I'm loathe to return to the social and economic circumstances that your statement implies. Insofar as I am aware, written history indicates that governments of all kinds levied taxes - some more than others. Lack of regulation and lack of enforcement has led to long term economic and /or environmental catastrophe (see VA stripmining, for one) beyond the current debacle.
However, I am curious to see if you would provide us with specific examples where the US could return to structural competitiveness by reducing regulations. Or perhaps, like many of us here, you *would* like to see uniform enforcement.
Finally, to echo Mr. Magid's point - do you speed on the freeway? Or do you view excessive fuel consumption as an inalienable right?
I couldn't agree more. Anyone willing to examine capitalism through history will realize rather quickly that the secret ingredient is slavery.
Whether it was sugar cane or rubber or spices or cotton or the industrial revolution all of these 'miracles' of capitalism are really miserable stories of exploitation.
Today, because our 'sensitivities' have changed (and we are less concerned with truth and honesty) the slaves are known as the workers of third world countries or illegal immigrants or even 'terrorists' when they have the audacity to fight back against the status quo.
The lie of capitalism doesn't have to be very good for us sitting at the table but for the exploited it is wearing pretty thin.
Soon, as the numbers who have access to the benefits of capitalism dwindles, terrorism may become a lot more mainstream and may finally be seen for what it really is...
a fight for justice.
Capitalism does not exploit the weak it provides goods and services cheaper than they would otherwise be available. The indigenous population was not a peace loving group of hippies the only reason they were sitting where they were is because they killed off the people who were there before them. Those people are welcome to join our society they are given the choice of staying on the reservation and recieving government subsidies or entering our society as fully participating members. That doesn't sound oppressive to me.
Try putting real resource numbers to it and don't forget to subtract how much actually ends up in a landfill or spewed into the atmosphere or water within 6 months....99%.
What good is it going to be to create more jobs so people can drive to more jobs to buy more stuff to drive to jobs? What is it all FOR?
Unfortunately, the things done in secret will stay in secret, and President Carter didn't know what he (a nuclear scientist, by the way) was getting into. The power of the technocrat is only as strong as the understanding and information available to solve problems with technical solutions. (pssst: Iran Contra would have occurred no matter who was in the white house)
The current economic/political situation is like a city's water system. Unless you get rid of the waste and toxins that have accumulated, no amount of fresh water will make things better. The biggest toxins right now are advertising and consumption. Until we can dig our way down to basic necessities and clean out the muck, we won't find any path that leads to a sustainable economic future.
You can bet you will be lied to for the next 3 months, so turn off the TV and leave it off. Real solutions for real people come from the actions at the bottom of the food chain. If you don't like the way the System is going, stop feeding it with your time and money. Don't buy tickets to the 'voting' game: it's rigged. By all means show up, but don't pretend to believe that you have any real choice in the matter.
Anyway, a couple thoughts, neither intended as partisan:
1. Didn't Saint Jimmy usher in the era of deregulation by dismantling the CAB (i.e., airline dereg)?
2. Isn't is possible that McCain is actually less materialistic/acquisitive than Obama? I suspect he doesn't care much about houses, except as it makes the wife happy. Rick Warren asked him what makes a person rich, and he said some of the richest people he knows are the least happy. Leno asked him about the houses thing, and he said he spent 5 years in prison not because he wanted to get a house when he got out. If the measure of a candidate is antimaterialism, not sure who wins.
