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rsbs
Advisor

The CF election, economy, and stock market

Can’t we just all get along?  No, apparently. Branding everyone to the right of Woke a “terrorist” and an “insurrectionist,” as is the style these days with the sore winner party, will probably not warm a whole lot of hearts and minds among the politically disenchanted. It comes with an odor of desperation, too, as if Joe Biden’s consolidated Deep State is so lacking in confidence, even in victory, that it can’t distinguish policy from punishment — and so the beatings will continue until morale improves.

Outside the razor-wired DC perimeter, with its bomb-proof bureaucracy, the economy is in freefall. This has not quite come to the attention of a new regime aroused over systemic racism and the pressing need to expand athletic opportunity for transsexuals. But an inferno is racing across the land like a prairie fire and the remaining American buffalo out there may be inclined to stampede before long. Can Ol’ White Joe hear their distant hoofbeats from the Oval Office? Maybe not with Nancy Pelosi and AOC screaming in his ears.

The Bureau of Labor Statistics reported 779,000 people filed for first-time unemployment the week ended January 30. The news media called that “a beat” because it was under the 830,000 expected. It’s been that way week-after-week this year of Covid-19. Nonfarm business sector labor productivity decreased 4.8 percent in the fourth quarter of 2020, the largest quarterly decline in the measure since the second quarter of 1981. Yes, forty years ago, when the US population was 226 million (it’s now 330 million). The stock market responded by smashing new all-time highs. Bad “optics?”

How do you think the value of shares manages to go up, up, up, and away, day-after-day, while the value of the economic activity goes down, down, down day-after-day? Must be Modern Monetary Magic, like the Federal Reserve purchasing $80-billion a month in US Treasury bond issues and another $40-billion in mortgage-backed securities for a grand total of $120-billion a month. The real monetary magic, of course, is that it’s possible to have a Wall Street boom while the economy collapses. The nation’s assets have already been stripped, so where is all this “value” actually coming from? Answer: from the false expectation of enormous future American productivity. It’s false because it’s based on the creation of debt that can’t possibly be paid back…ever. It’s not based on investment in future productive enterprise.

The economy won’t be fixed by policy because the things that have to happen to fix it will be resisted to the death by the parasitical entities feeding on what little remains. For instance, Walmart. Do you think it’s unhealthy that all the profit in American commerce is funneled into Bentonville, Arkansas? It used to be distributed in hundreds of thousands of small businesses in tens of thousands of US towns and cities. What do you think will die first: Walmart or the organism it’s feeding on?

Since the dynamic at work is emergent and non-linear, other forces can come between these relationships and change things. We are already in conflict with China, the land that supplies most of the merchandise in Walmart. The conflict right now is mostly playing out in the capture of US corporate and cultural enterprise, and in cyberwarfare, and it’s liable to hotten up around the continued sovereignty of Taiwan (America’s China). It’s difficult to assign intentions to another country but it appears that China’s China wishes to cancel the USA as the fading hegemon on the world stage, at least neutralize us, and perhaps dominate us. Mr. Trump is no longer in place to resist that, and the country might be forced to consider all those deals that our new president, “China Joe,” enjoyed from the Biden family’s business ventures there over the years.

Emergently, then, the Big Box business model could fail, and in fairly short order, which would at least give Americans a chance to self-reorganize the production and distribution of goods in our own country. It sure won’t be like 1957 again, but it would give an awful lot of idle people more to do when they get up in the morning. Wait for it, and plan accordingly.

In the meantime, we are treated to the sordid spectacle of Democratic Wokesters endeavoring to destroy what remains of American cultural life. It’s an incomparably stupid and malign distraction from the imperatives of this historical moment. They will not succeed in cancelling those who object to the systematic disassembly of our national language, myth, and meaning, even if we have to go back to the mimeograph machine to keep these things alive. They will not turn a republic into a psychopathic despotism. Politics, they say, is downstream from culture. Truth is the antidote to a culture of lies. The upcoming impeachment trial of former president Trump will be a showcase for that, and it may prove to be a hoax too far.


This blog is sponsored this week by Vaulted, an online mobile web app for investing in allocated and deliverable physical gold. To learn more visit:  Kunstler.com/vaulted


16 Replies
sdholloway56
Senior Advisor

Re: The CF election, economy, and stock market

Funny, I don't recall Jimmy being all that concerned about unemployment when the weekly numbers were higher in every one of 46 successive preceding weeks (and each higher than the highest in the GFC).

It doesn't make a lot of sense to commingle culture war grievance and the current economic situation, but that's why he did it.

The stock market is in a bubble because when the economy began to slow a bit in '18 while the Fed was tapering a tiny, tiny amount, stocks experienced some volatility.

So somehow the administration managed to bully the Fed into pretending there was a "liquidity crisis" and they hit the market with a flush of repos, which blew a bubble. That bubble popped with the arrival of Covid and they hit it again, hit it again, harder, harder. It almost worked to re-elect the POTUS, but not quite.

Yes, a very large problem, somewhere down the road.

My sense of it is that Kashkari, Powell et al know they got rolled but they're going to do their best not to pull the rug out from under the new Admin.

jennys_mn
Veteran Advisor

Re: The CF election, economy, and stock market


Yes Nox - you are so right.   A friend asked me the other day, since he had some money to invest, should he put it in the stock market now that President Biden had won.   An easy answer - not just NO - HELL NO!!!

Yes, it is funny how under Trump, the “economy” was the “stock market”.   Bitch, bitch, bitch, is all we heard when President Obama was in office, how terrible the “economy” was, and the stick market was not “the economy”.   All that changed when Trump got in office.   Millions of people out of work, but “the economy” was “great”, because the stock market went up.   Yeah - OK.   Sure. 

The day of reckoning for the stock market will come.   And the higher and longer we go, the worse the crash will be.   And, it will be ugly.   But, just keep your money in it - just like you have been told to always do.   It’ll eventually come back up to where it was when it crashed.  It took farms 7 years to reach the bottom after the crash in 1981.  And then it took 7 more years for it to exceed where it had been.   Same thing with the housing crisis.  I suspect, this “bubble” will see something similar.   Maybe.  And if you live long enough, you may actually recover your losses in 15 to 20 years.  Not make ANY money - but recover your losses.

Jen

Packard27
Senior Contributor

Re: The CF election, economy, and stock market

I fear that some form of currency devaluation is in our future. Whether it occurs in weeks, months, or years I cannot say. Nevertheless, our forty year party of prolifigate spending seems closer to its ending than it does to its beginning. When the end does come, try to remember that the crisis was always self inflicted and bi-partisan.

Pity, however the bottom 90% of American households when the party does end. The social security recipients, the government pensioners, the federal & state entitlement crowds, and even the well paid government workers will all pay a frightful price with regard to their individual standards of living. When a global reserve currency dies, it is always a painful death for many.

Otherwise, stay well diversified, avoid taking on too much leverage, pay attention to your own management fees, continue to exercise both personal thrift & industry in your daily life, and above all, do not ever sell the farm.

ANF

Packard27
Senior Contributor

Re: The CF election, economy, and stock market

Jens,

You could check me out on this, but the twelve years (beginning on March 9, 2009) of Obama/Trump were very, very good for plain vanilla, buy & hold stock market investors. So, God bless America...I suppose.

Unfortunately, half of the country never had zip in the stock market and of the upper half that did, those living in the 50-89% had minimal amounts to profit from. They did, however, experience having their salaries and wages stagnate for the same period.

At least we managed to give the peasants their free Obamacare and some of those Obamaphones.

 

sdholloway56
Senior Advisor

Re: The CF election, economy, and stock market

Actually......

1929-46, 1969-82, 2001-2014 are examples of the long stretches where the total return on the SP500 has been equal or less to holding T-Bills (cash). Stock gains come in spurts, and there are very long stretches where markets "go nowhere in an interesting fashion."

But now we are in a postion where neoliberalism (the Ownership Society, Socialism for the Rich) has made the stock market a public and political utility. So students of market history should exercise caution in regards to how well they think they know how "markets" operate.

But like 2001-7, when you cut interest rates to 0 or near, you basically just ensure that other asset classes also seek the price where they have 0 return, or worse.

FWIW, you can certainly make an argument that Greenspan should have moved to stop the Naz bubble before it grew so much that there was going to be a lot of collateral damage when it popped, but he didn't full socialize risk. That began with Bernanke. Yellen didn't do anything but she was in no hurry to unwind the Fed's position either. Powell presumably came in as a very, very conventional guy who thought he could slowly normalize rates and wind down the Fed's bloated balance sheet. 

BTW, as the economy started to stall in '18, I can make a case for why he would stop raising rates and selling assets. I can find no justification for doing an about face and cutting rates and putting out huge repos as not so stealthy QE. That's where the crime was committed, IMHO. And when that bubble imploded from Covid, that meant they had to go even further in what was easily historic Fed activism.

 

jennys_mn
Veteran Advisor

Re: The CF election, economy, and stock market


@Packard27 wrote:

Jens,

You could check me out on this, but the twelve years (beginning on March 9, 2009) of Obama/Trump were very, very good for plain vanilla, buy & hold stock market investors. So, God bless America...I suppose.

Unfortunately, half of the country never had zip in the stock market and of the upper half that did, those living in the 50-89% had minimal amounts to profit from. They did, however, experience having their salaries and wages stagnate for the same period.

At least we managed to give the peasants their free Obamacare and some of those Obamaphones.

 


Yes - you are correct.   It was the time of Suze Orman, who got rich telling people buy, buy, buy the stock market - don’t ever sell, even if you need to take money out because your mother was dying and you needed money to be at her side on her death bed.   

And I remember the same group who now says “the stock market is the economy”, just bitching because “The stock market is NOT the economy!”   We went around and around on that.   I showed pictures of new developments under construction  (not houses - housing developments), and mentioned how the traffic was back on the highways, and it was always met with “The economy isn’t improved here!!!”

Somehow, all that changed when Trump got in.   Then, suddenly, ALL OF THE ECONOMY “WAS” the stock market.  Period.   Nothing else mattered.   Millions out of work - businesses shuttered.  But the stock market just ignores it all.   It’s all just wonderful....

Jen

sdholloway56
Senior Advisor

Re: The CF election, economy, and stock market

There's no reason for Biden to cut his own throat, but he needs to say "We're worried about the economy and actual people. We take care of that, the stock market will take care of itself."

In fairness, as the economy labored under the extreme damage from the GFC and an austerity minded Congress, Bernanke did take a serious step into socializing market risk with QE. I was concerned but willing to go along on #1 but at absolutely not by #3.

Obama should not have spent ammo on the ACA, even though the HC system had spun wildly out of control in the preceding 8 years. They should have done everything they could have to push through a huge infrastructure plan in those first two years, while they could.

That's on Obama, even though I blame Rahm specifically. Buck stops at the top.

bruce MN
Advisor

BINGO. Lost in the culture of hatred that it spawned

The genuine populist election was 2008. Proven, actually in the election of Dennison in 2016 and those very well documented Obama-Dennison voters that numbered in the millions.

But as you refer by using the Rahm word, D leaders somehow interpreted the win as a call for a fine tuning of neoliberalism after the spendthrift imperialist previous 8 years had fractured the unbridled Reagan lite kleptocracy.

If Obama knew better, which he very well may have, it didn’t help that the masters of financialization laid the likes of Geithner and Summers on him to appease “the markets” and prove that he wasn’t the 2nd coming of Malcolm X or Angela Davis.

In the end what saved him and cemented his legacy was that he was and remains a very decent and commendable human being. Which in the end offers a stark contrast to his successor and what will be his legacy.

 

sdholloway56
Senior Advisor

Re: BINGO. Lost in the culture of hatred that it spawned

‘08 also featured the bizarre bifurcation of Uber-establishment (But occasionally belligerent and contrary

)McCain paired with the first national Dogpatch populist.

It might be argued that she won that round if you look at ‘10-‘20.