Feeling the Heat of a Civilization on the Downside

Today we begin with a list.  A partial list.  And in no particular order…

Angela Merkel.  Donald Tusk.  Mario Draghi.  Donald Trump.  Jerome Powell.  Shinzo Abe.  Haruhiko Kuroda.  Theresa May.  Boris Johnson.  Mark Carney.  Xi Jinping.  Emmanuel Macron.  Vladimir Putin.  Justin Trudeau.  Juan Trump.  And many, many more…

These central planners – though they may not know it – are facing a no-win situation.  They’ve extrapolated the past and are attempting to preserve the status quo into the future.  Yet their efforts to perpetuate the upward growth curve of their countries and unions are useless against the relentless turn of history.

The political, financial, economic, and social foundations that have been in place over the last 75 years – and perhaps, over the last 220 years – are breaking down.  And no policy directive, no interest rate adjustment, no trade tariff, no five year plan, no extraordinary measures, no green new deal, and no technocratic prevarication is going to stop it.  Big Government doesn’t stand a chance. Continue reading

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Fed Chair Powell’s Plan to Pickle the Economy

The Dow Jones Industrial Average made another concerted run at the elusive 27,000 milestone over the last several weeks.  But, as of this writing, the index has stalled out short of this psychosomatic barrier.  By our estimation, this is for the best.

While not always apparent, the stock market generally maintains a loose connection to the underlying economy.  Over long multi-decade periods, as measured by the price-to-earnings (P/E) ratio, it will undulate between stages where it’s cheap and stages where it’s dear.  Eventually, however, the stock market reverts towards its mean P/E ratio – always overshooting and undershooting as it cycles about.

One of the unintended consequences of fiscal and monetary intervention is that it distorts this relationship.  Stimulus intended to juice the economy has the effect of juicing financial markets.  Sometimes these inflationary policies have the effect of completely disconnecting the stock market from the economy. Continue reading

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Elizabeth Warren’s Plan to Bamboozle American Voters

The run-up to the presidential primaries offers a funhouse reflection of American life.  Presidential hopefuls, hacks, and has-beens turn to focus groups to discover what they think the American electorate wants.  Then they distill it down to hollow bumper stickers.  After that, they pump their fists and reflect it back with mindless repetition.

Change We Can Believe In.  Feel the Bern.  Make America Great Again.  Sí Se Puede.  Fighting for Us.  Compassionate Conservatism.  A Stronger America.  Ross for Boss.  Morning in America.  Not Just Peanuts.  Nixon’s the One.  Dean Scream.  And much, much, more…

The mantras are both idiotic and comical.  They provide political lemmings with something to believe in.  They also provide incisive observers with a unique prism into the menaces of tomorrow.

For example, presidential candidate Elizabeth Warren’s slogan is: “Warren Has a Plan for That.”  An official t-shirt, adorned with this slogan, will set you back just $30 bucks.  And you can pick up a slogan emblazoned tote bag for $35.  What a bargain! Continue reading

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The Ugly End of Globalization

Sometime in the fall of 2018 a lowly gofer at the New York Stock Exchange was sweating  bullets.  He’d made an honest mistake.  One that could forever tag him a buffoon.

After trading sideways for most of the spring, the Dow Jones Industrial Average was on the move.  When it closed at 26,828 on October 3, it appeared the Dow was but one trading day away from eclipsing 27,000.  Everyone, including Jim Cramer, just knew it was about to happen.

And this was precisely what the NYSE gofer feared most.  For he’d failed to procure Dow 27,000 hats.  What a shame it would be for Wall Street’s most revered index to notch this historic milestone with no commemorative hats for floor traders to put on while they go bananas.

But then a miracle happen.  The Dow didn’t go up; rather, it went down.  A week later, to the gofers relief, the Dow 27,000 hats arrived…in advance of Dow 27,000.

And now, nearly eight months later, Dow 27,000 remains elusive.  After pulling back in October of last year, the Dow made another run at it last month.  But, again, fell short.  Hence, the hats remain stowed away in a box in the back of a broom closet. Continue reading

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