About a month ago we showed photos of the Chinese police engaged in a drill designed to crush a "working class insurrection", in which the police did precisely what would be required to end a middle class rebellion. It made us wonder: what does China know that the US doesn't. As it turns out, nothing. Because long before China was practicing counter-riot ops using rubber bullets, all the way back in 2008, the US Department of Defense was conducting studies on the dynamics of civil unrest, and how the US military might best respond. The name of the project: "Minerva Research Initiative" and its role is to " “improve DoD’s basic understanding of the social, cultural, behavioral and political forces that shape regions of the world of strategic importance to the U.S." The premise behind Minerva is simple: study how violent political overthrow, aka mass civil breakdown, happens in the day and age of social networks, and be prepared to counteract it - by "targeting peaceful activities and protest movements" - when it finally reaches US shores.
Today's financial markets make a mockery out of sanity and logic. The difference between what SHOULD happen and what IS happening is perhaps the greatest it has been in our investing lifetimes. If you're perplexed, flummoxed, frustrated, stymied, enraged, bored, irritated, insulted, discouraged -- any or all of these -- by the ever-higher blind grinding of asset prices over the past several years, despite so many structural reasons for concern, you have good reason to be.
Those who have lost trust in Wall Street or actively hate it and everything it stands for (neofeudalism, unbridled greed, the corruption and collusion of the revolving door between the state and Wall Street, etc.) will never change their minds and hand their money to Wall Street to play with. If the primary assets held by Boomers (houses and stocks) both decline for these fundamental reasons, there may be relatively little wealth left to pass on to Gen-Y... if Gen-Y avoids bank debt/mortgages, buying conspicuous consumption luxury goods on credit and investing in Wall Street's scams and skims, this generational lack of demand for housing, stocks and luxury goods will effectively crash the sky-high valuations of these assets. These factors suggest a generational bet against banks, Wall Street, housing and luxury retail stocks.
This week’s news certainly WASN’T BORING. Big events and small add up to unfolding CHAOS around the WORLD. This week’s subjects: American Empire on FIRE!, Out on a LIMB: Credit Unions facing INSOLVECY, Is rising indebtedness a sign of economic strength?, Bond YIELDS continue to collapse as the race for yield INTENSIFIES, George Orwell in Action, Showdown looming at the OK corral!, Simply UNBELIEVABLE SOVEREIGN credit market action, PHANTOM GDP, Rare INDEED, Must watch video interview with Charles Nenner,European BANKING SYSTEM INSOLVECY
The numbers that you are about to see are likely to shock you. They prove that the global financial Ponzi scheme is far more extensive than most people would ever dare to imagine. The truth is that our financial system is little more than a giant pyramid scheme that is based on debt and paper promises. It is literally a miracle that it has survived for so long without collapsing already. But at some point a day of reckoning is coming, and when it arrives it is going to be the most painful financial crisis the world has ever seen.
If capital is not treated equally, political equality is an illusion, for capital buys political influence and power. Capital that can buy political power gains political protection of its extraordinary privileges to control rentier income streams, income which furthers its political power.
The middle class happily accepts high risk in return for temporary gains in the asset bubble of the day, guaranteeing a steady progression of losses. The illusory safety of following the crowd feeds the wealth-destroying dynamic of taking on high risk for either zero gains or huge losses once the asset bubble du jour pops.
New All time highs almost every single day, yet market volumes have literally collapsed. On any given day, you would see an average of 2M eminis (S&P Futures, spoos) trade, and now we are seeing barely 1M trade, sometimes even lower. This has left everyone, including big banks, who are now being forced to lay off traders amid the slowdown, asking the same question: WTF is going on?
Henry Ford once said, “It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” We hope this brief discussion raises that 'understanding'.
Snow may have "crushed" the world's biggest economy by 1% in Q1, but in the last 6 years, the Fed has goosed its 20% higher than it otherwise would be.
With the VIX smashing last week to levels not seen since early 2007, the S&P rising to all time highs, and European core and peripheral bond yield this morning touching historic lows, it would appear that the "market" has priced in every possible negative outcome. Which, as Goldman showed over the weekend is clearly not the case at least as investors are concerned who continued to sell stocks across the board in May even as the market broke out to record levels making many wonder who is buying stocks (for more read here)? Expect more of the same, and with some luck we will get a single digit VIX in the coming days as newsflow slows down following payrolls week and ahead of the world cup start in Brazil.
When looking at residential real estate, we often tend to focus almost solely on recent price movements in assessing the health of the housing market at any point in time. But as both homeowners and income-earners in the larger economy, of which the housing market is an important component, to really understand what's going on, we need clarity into the larger cycle driving those price movements. The more we look at today's data, the more it looks like that we are in a new type of pricing cycle -- one that homeowners and housing investors have no prior experience with. And the more we learn about the fundamentals underlying the current cycle, the harder it becomes to justify today's home prices on any sustained level. Meaning a downward reversion in home values is very probable in the coming years.
Eurozone recessions, unemployment fiascos, toppling banks, crashing auto sales... didn’t exist, sez the Stoxx 600. But then an ugly thing happened.