We will look back and laugh

Seriously. I would think that at some point we will all be sitting around a fire, a bar, or a TV and having a bit of a chuckle over this a few years from now.

Lying about everything.

But the telling quote is at the very end:

So… let’s see here: huge disparity between what is represented and what the reality is… a crucial political election… and a regime that many have accused of misreporting critical data for years (even if others captured media outlets accuse the former of being conspiracy theorists)…

Why… could this possibly mean that every piece of data out of the US is just as made up and just as meaningless? Now that would be truly unpossible.

Everything you know is a lie.

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The Reality, It Burns

From Zerohedge:

The backdrop for all of this should also be squarely in your sights. The world came out of the American Financial Crisis based upon the expansion in the monetary supply. A huge amount of the stabilization since then and one giant reason for the corporate profits that we have had in America has been based upon this stimulus and this is largely ignored in the press which credits everything in the world but the stimulus for our better economic conditions.

It will continue on until it doesn’t. When that happens, the new reality will be the norm. How you plan to adjust and thrive in this new reality is up to you. Plan now. Time is indeed short.

More later.

The Not So New Newspeak

Orwell reference for those of you who didn’t read the book.

Article which motivated this post.

The timeless paradox of Schrodinger’s Cat, though after reading this, I’m beginning to question Quantum Theory as a whole. Lest we digress…

The bit I’m referring to:

Just spent a record high amount at the gas pump for this time of year? The BLS says you didn’t, and after all when it comes to reality, the BLS has a right of first refusal. The just printed headline CPI came at 0.4%, just in line with expectations of 0.4%, while core CPI of 0.2%, missed expectations of 0.3%. That’s right: not only is inflation meaningless, it is less than expected, leading to surge higher in stocks, bonds and the EURUSD. As for those items which are once again soaring in prices such as food and gas? Luckily, those can be hedonically adjusted by everyone to virtually zero. (wait? You still pay your mortgage or rent? Sucker!) Remember: the iPad is deflationary.

While some of this is like the political numbers game that the news outlets constantly play, there is, as always a shred of truth at the core. That truth is simple: Your currency is decreasing in value, sometimes exponentially, and therefor, commodities you use to, you know, live, are increasing in price.

It is true that economics can get complicated, this however, is not one of those times.

Dear readers, this impacts your way of life. This will impact the battle space going forward, and how your tribe fails or succeeds.

A government that will blatantly lie through one of its functionaries today when things are still pretty good, will magnify that to an order of magnitude when things get worse. Newspeak is the order of the day, and will be the vision of the future.

To clarify something I feel is critical regarding why I post so much econ related content:

  1. There is a wealth of fodder about it.
  2. It will impact you & yours going forward.
  3. It is the biggest picture view I can find.

I believe we are about to go through at least two decades of misery – globally. Life in America is going to radically change. The decadence we have known since we destroyed global industrial production during WWII will end. Life will be harsh, and an entire generation is likely to be decimated.

It is up to us to mitigate that damage by understanding the trajectory we are on and adapting solutions to counter that damage.

The ‘first right of refusal on reality’. Think about that dear readers. Times are still good. I would venture to guess that if you are reading this post in a western nation, you went to sleep in a bed last night with your hunger and thirst satiated. Again, think about what that propaganda would look like when unemployment is at 30% and inflation is spiraling out of control.

 

Denninger Sends

From one of yesterday’s tickers:

Take a look at the FVX (5yr Treasury Yield) and you see a materially-more-frightening thing.  Yields have backed up from 0.7% to 0.97%.  Sounds trivial.  It’s not — it’s a huge move, close to 40% on yield since the end of January!

Yep.

This matters because the Federal Government’s deficit spending in February is what has been driving the “improving” economic numbers, just as it has been for the last three years.  This is a pincer move; while yields have to normalize if and when they start to move in this direction that move will also choke off federal deficit spending capacity.

The Depression featured this sort of attempt at “repression” by The Fed and government and it was unsuccessful.  It looked successful for a while, but eventually the math caught up with them and we slumped back into the morass.  Our “exit” was war; we blew up all of our industrial competitor’s output capacity and by doing so rejiggered demand.  That’s a rather bleak way of looking at what was “death by all forms” for the common man, but from an economic perspective that’s what happened.  But “war as a solution” since that time hasn’t “worked” (and in fact can’t) since small-ball wars run into the broken-window fallacy; you can’t “win” by breaking windows as the economic damage from a war exceeds the benefit.  For war to be a “winning” strategy you have to literally flatten your economic competitors so that even with the economic damage you wind up with a net benefit.

Wall cloud indeed.

AAPL

Priceless…

Comment brilliance that only ZH can provide:

peekcrackers's picture

trade your Ipad for a Maxi Pad to stop the bleeding in the stock

Nothing To See Here's picture

The guy who shouted “I can’t eat an iPad” probably never thought that iPads would actually be used as collateral against the currency he uses to buy his food….

And further down into the rabbit hole!

ghengiskhan's picture

Bingo.  Every day half the people I run into outside of work are doing the same thing “I go back school… get job”.  Some already have staggering amounts of debt accumulated.  Considering that it is simple as sliding the range finder to the max on the loan amoant and then pressing the “Get Money” button for students I am surprised that the bubble hasn’t burst already (I wish I was making this up…. Students can literally log into their online account and get up to $15,000 a semester depending on grants available etc.).  Far too many long term unemployed are surviving this way and it only gets worse once you consider that they are working on degrees for saturated areas of the job market.  Factor in the diploma mills (I realize it has become harder to tell the difference between the mills and the universities) and I foresee the concept of higher education being devalued to a point where only the core specialties will have meaning.

An it goes on and on from there…

 

Economics: Ponzi Schemes & You

A few things before we get started:

  1. Lack of regular (and good) posting bothers me too. I’ve taken on a second day gig because it’s an opportunity that cannot be ignored. I guess I will sleep when I’m dead.
  2. Regular day gig is still in transition.
  3. Family outranks all of this.

So, I wanted to talk about this Zerohedge post from yesterday afternoon.

Here’s the summary:

Foreign, central banks are directly investing into US stocks with their reserves.

Now, under the Fed’s mandate, this in itself is not only unethical, but illegal based upon the explicit wording in it’s own charter. Not that it matters as the Fed has gone so far past it’s mandate at this point, that actually adhering to the rules set would be laughable. BTW, never throw out a complicated conspiracy when you can just chalk it up to shocking levels of incompetence.

Denninger covers it here as well.

Extend. Pretend.

There is no evidence that this trend will cease. Based on previous history, it is only a matter of time before this comes to an end. I stand behind the statement that at some point they will run out of places to blow these bubbles.

From the Zerohedge piece:

In other words, while the Fed’s charter forbids it from buying US equities outright, it certainly can promise that it will bail out such bosom friends as the Bank of Israel, the Swiss National Bank, and soon everyone else, if and when their investment in Apple should sour.

Luckily, this means that the exponential phase in risk is approaching as everyone will now scramble to frontrun central bank purchases no longer in bonds, but in stocks outright, leading to epic surges in everything risk related, then collapse and force the Fed to print tens of trillions to bail everyone out all over again, rinse repeat, until this chart becomes asymptotic. We say luckily, because it means that the long overdue systemic reset is finally approaching.

Do you see the trend/ What did the Dow close at yesterday? 12,900?

Harkening back to a discussion I had in 2005 with John Dvorak, I believe we have one hell of a ramp up, but when you start to approach 20,000, it’s time to run for the hills.

BTW, on another note, expect a run on ammo and guns sooner rather than later – meaning prior to the election. I’m starting to see incremental price increases based upon demand alone. My favorite vendors are running low on bulk, but doing ok on the premium stuff. If you are inclined to spend some cash on ammo stocks, I would advise that now is a good time.

I still think we have a long way to go. However, the darkness approaches, and at a steady pace. Keep your wits about you. Watch your six & keep your powder dry.

 

So, let’s talk econ…

Extend & Pretend Coming to an End

Go read, then come back. Good times.

Lots of info in there, but let me tell you. I own a real estate company. I have for almost ten years now, and while I mostly deal residential and the Florida condo market, I can echo the bullet points in the article above verbatim. Here’s why:

In a recent interview with The Casey Report Miller details a dramatic turn for the worse in the commercial real estate market he has witnessed in the last few months. His company deals with distressed commercial real estate. This segment of his business was booming in 2009 and into the middle of 2010. Then magically, there was no more distress as the “extend and pretend” plan was implemented by the governing powers. The distressed market dried up completely until November 2011. Miller describes what happened next:

“All of a sudden, right after Thanksgiving in 2011, the floodgates opened again. In the last six weeks we probably picked up seven or eight receiverships – and we’re now seeing some really big-ticket properties with major loans on them that have gone into distress, and they’re all sharing some characteristics in common. In 2008 and 2009, these borrowers were put on a workout or had a forbearance agreement put into place with their lenders. In 2009, their lenders were thinking, “Let’s do a two- or three-year workout with these guys. I’m sure by 2012 this market is going to get a lot better.” Well, 2012 is here now, and guess what? It’s not any better. In fact I would argue that it’s still deteriorating.”

Why the sudden surge in distressed properties coming to market in late 2011? It seems the FASB finally decided to grow a pair of balls after being neutered by Bernanke and Geithner in 2009 regarding mark to market accounting. They issued an Accounting Standards Update (ASU) that went into effect for all periods after June 15, 2011called Clarifications to Accounting for Troubled Debt Restructurings by Creditors. Essentially, if a lender is involved in a troubled debt restructuring with a debtor, including a forbearance agreement or a workout, the property MUST be marked to market. Andy Miller understands this is the beginning of the end for “extend and pretend”

Remember when they said, “Hey, move that date out cause by then, the market will have gotten better…”?

Well, here we are and it hasn’t. In fact, the fundamentals have not changed since 2008. The amount of debt in the system has not cleared and we are again at the precipice of the cliff. One has to wonder when we will actually make a move.

I have personally been waiting for such an event for over four years now, saying constantly, that “something has indeed got to give”, yet here we are.

This is a badness thing.