(Originally posted on Slope of Hope, hence the references to Slopers and SOH): Well, my fellow Slope-a-Dopes, I just could not bear sitting in silence any longer while all the blabbering bulls boast and gloat as they roast bear chestnuts over an open fire. Enjoy your happy holidays highs, my bloated bovine butt-heads, as you sip your rosy bubbly and toast each other's good fortunes. As for BDI, he went along briefly for a spectacular Santa sleigh ride to close out an otherwise dismal year with a BOOM. Blow me momos, technos, and especially you trendos!
For the New Year, it seems that SOH, that last true refuge for pensive brooding bears, has been overrun with pompous bulls peddling & pumping a new 21st century high tech plateau of permanent prosperity, that would make even Irving Fisher's rose twittering cheeks blush. I wonder if old Irving would have Linked himself In or posted his rip roaring 20s rosy market views on a pretty pink Facebook page?
As for The Idiot Savant, he sure does not smell the long stem roses. Take off your pink shades and take a good sniff, smell the rotting rancid rot, Cowgirls!
Pink Shades # 1: Europe is still deeply mired in an intractable recession, trapped in a crippling cluster-fucked currency union contraction with no way for the struggling periphery nations to pull themselves out of a dreadful debt death dive. Don't believe the mindless misdirection manifested by the recent rosy European capital markets' marvelously manufactured momentum. France just printed a near all time high unemployment rate.
Pink Shades # 2: The 10 year U.S. bond just closed above 3% and is most certainly trending for a continued move higher. Those sporting rose colored Ray Bans on their elongated noses, will tell you the economy is surely picking up, and thus, it is a welcome quite natural sign to see interest rates edge higher at this point. What they won't tell you is that newly issued commercial bank loan volumes are near all time record lows. Don't kid yourselves my pink pussy cats, interest rates are not being driven up by healthy demand pull forces in the real economy, but rather by the early signs of stagflationary supply push forces which always inevitably show up when too much money is being circulated in a monetary system.
Pink Shades # 3: Super strength stagnating inflation is right around the bend. Its insipid effect always first appears in pesky peak priced fixed and financial asset of all kinds before it metastasizes into and onto the real economy on the ground. Here again take off your silly rose spectacles and smell the smelly stagflationary stench. Rents, Food, Energy, Utilities, Education, Healthcare, TV/Internet/Smartphone bills, Entertainment tickets......etc, all hitting high water marks. Ask yourselves, are fixed operating costs getting cheaper in your pink picket fenced palaces?
Pink Shades # 4: The USD is skating on thin ice here, having recently broken the all important 80 level on its typically trusted treadmill DXY index. You really think a country that converts these degraded debased dollars in order to import over 70% of what it consumes will not see higher prices in the near future? You think China's appreciating and better yielding yellow Yuan will not increase the prices that your fat pink asses pay at the Walmart checkout counter? What about that petro-dollar oil barrel price perpetually parked above $100 once again? Attention all waddling whale Walmart shoppers!
Pink Shades # 5: Despite the tiny timid taper, the FED’s balance sheet continues to grow exponentially with each passing month. Despite the frantically feeble fiscal budget agreement reached by the cowardly congressional clowns, the country continues to spend its way into oblivion with no end in site. As interest rates inevitably rise, these terrific twin time bombs will be right back in your sights, front and center, quickly clearing up your fogged rose tinted lenses.
Pink Shades # 6: Unemployment claims & benefits. The BLS tells us that countless copious crappy jobs are constantly being created and the unemployment rate is steadily heading down. Yet, unemployment claims have moved back up recently and the goofy Government goons are about to debate whether or not to resume the extended benefits program. So, which is it? Does this add up to you giddy ghey girly men wearing suave mauve designer shades? Seems to me that the problem is rather entrenched and not going anywhere anytime soon, as the middle class continues to lose ground from all sides. Did you know that the number of 18-30 year olds living at home with their parents has never been higher in half a century.
Pink Shades # 7: The Black Stone brick and mortar housing asinine asset abomination. Remember that virtual housing market our fiendish fraudulent financial friends blew up with their demented dubiously deranged debacle of mirage money mortgages that detonated last time around? Well, that bogus busted bubble seems to have reemerged, reincarnated via the rabidly rapacious rapid re-inflation of free flowing FED funded subsidies, handed directly to the very same elite financial institutions whose unabashed greed preyed on us all the last time around. Everyone talks so re-assuredly about the guaranteed rental income streams these new real structures, as opposed to falsely structured investments, will genuinely generate. Do these fabulous freeloading financial wizards really understand the actual fixed costs and real world care on the ground level, involved in maintaining hundreds of thousands of single family homes? When interest rates head back up and the housing prices collapse will rents not follow suit? Will the high prices they have set on these hard asset backed investments not head south in a hurry. Did they not sell us on the exact same pipe dream with the so called safe and sound moronic MBS meme? At the end of the day, have they not simply repriced and re-financialized the exact same assets which are dependent on the very same income stream generated from the busted american middle class. Don't forget where the real value in housing comes from, it's not the standing structures themselves, but those that actually live in them that determine their value. Speaking of houses, keep your eyes on existing home sales, they be going downtown in a hurry!
Pink Shades # 8: GDP & Inventories, smell the rot. There is no doubt that massive magnanimous monetary policy can generate real growth and create actual production. The question I have for you, my pinko friends, is can that fantastically force fed growth actually be sustained. If the new growth was achieved through the artifice of ZIRP & QE, will it not correspondingly dissipate in their absence? Do you all really believe that we will magically arrive at escape velocity which will carry us forward even as the monetary fire hoses are turned off? And, should they not turn off the emergency fire hoses, do you actually believe we will escape the powerfully potent physical universal laws of inflation and the inevitable upward push on interest that necessarily follows? The US public and private sectors are both leveraged to the hilt, loaded to the gills with unmanageable debt. The free money has only served one purpose, and that is to avoid your rose colored world to be seen as the looming liquidity debt trap that it is, flashing a bright code red alert. We are being lulled into a false sense of security my friends, and your cozy pink blankets and comforting lullabies will turn into your worst nightmares as soon as you remove your rose colored glasses.
I'm certain that most of my pretty in pink cowgirl equity cheer-leading friends will promptly pump their red white and blue USA, USA, USA pompoms, singing and shouting their tried and true cheer; "the economy is NOT the market BDI!!! The economy is NOT the market you Idiot!!!". Well, all I can reply to you, my fine fair weather friends, is that your future is so bright you will definitely need to wear your silly pink shades. As for your idiot French friend, he will most assuredly be set up short by week's end, in anticipation of a steamy valentines date complete with a dozen pink roses.
John Maynard Keynes:
Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.