Send this article to a friend: March |
13 Black swans swirling above the US economy The black swans are circling like vultures now. Dark economic events seem to be flying in out of nowhere for those who have vision to see them. Even dovish New York Fed President William Dudley, who cannot tell the difference between money and hot air, sees a lot of black in the skies now and says that he is less confident about the economy than he was when he and his Feddish partners voted to raise interest rates last December:
Yes, Dudley did wrong with perfect timing and voted to raise interest rates into a crashing economy. For some reason, he didn’t see the global slowdown coming, never mind that it had already begun last fall; but he sure sees it now. He could have read all about it right here for months before he took part in an ill-fated decision. Now he’s losing confidence. If he’s not confident in the recovery and he was one of the architects, why should you be? US stock market cheerleader, Jim Cramer, is counting black swans, too Jim Cramer, CNBC’s hyperactive host of Mad Money, thinks the Fed is flying blind. He believes the Fed might not understand the life of the common man from within their first-class flights to Fed meetings and chauffeured limousines. Gee, yathink?
You almost wonder? Of course, they live in a vacuum. And from their vacuums, they are creating a world of Hoovervilles. Of course, Cramer likes to roll dice in the Fed’s Wall Street casino. He knows that Fed free money was the only game in town, driving the stock market higher in past years. He loved a good rigged game of predictable market gains! The market soared every time the Fed threw money around the craps tables. It didn’t even matter what number you rolled. Almost every bet was a winner. I’t’s hard to make money now without Fed free money floating down like confetti over the marketplace everyday. So, yes, recession is now a powerful theme that keeps popping its ugly black head out from unexpected places, such as out of the mouth of Jim Cramer. It whispers among the chatter of Citigroup’s flock of analysts. It keeps JP Morgan meetings all aflutter. You hear it everywhere now. Not a day goes by without people wondering if recession is lurking in the wings. Here are a few of the dark whispers and black swans that are swirling above the US economy
That is not intended as an exhaustive list or even as a list of the worst things flying around us. That is just a short list of headline items from the past week’s news. So, call it the most current flurry of dark rumors and black swan events. Not all of these are true “black swans” because, if people were paying attention they could see them coming (for example, if they were reading this blog ; ) A “black swan” event is meant to mean a deadly event that comes in out of nowhere; but many refuse to see these things coming. For those wearing the blinders of economic denial, many things fly in out of nowhere that were anticipated by the minority that has been paying attention. If you think either the global economy or the stock markets of this world are riding a rally back to success with all that bad economic news in just one week, you’ve been hitting the happy juice again. I’m not always right, but when I’m wrong, I’m still right I sometimes miss my mark when I make predictions, but when I do, I admit it. Last fall, I missed it very pointedly on one thing. I predicted two major black swan events would contribute to a crashing stock market. One of those events would be that Republicans would let the US default on its debt by November third. Obviously, that dark swan never landed and is a bird that never bit. Fortunately, I didn’t bet my blog on that one as I did with the other date I predicted for an event that did become a major contributor to an immediate stock market crash. Boehner wrangled his rascally gang into a going-away present for himself, and then they anointed Paul Ryan as the Great White Swan. But I made a bigger point in that “Black Swan” article (linked at the start of this one) over falling commodity prices. And that cause of a market crash proved true. So, the US stock market crashed even though one of the anticipated causes didn’t happen, and that’s the more important sense in which I say, somewhat tongue in cheek, even when I’m wrong I’m right. It was the fall of the stock market that I bet m blog on, not which anticipated event would come through as the cause. The one cause that I talked about that did come through remains the biggest, blackest swan of all. It’s the swan that floated in, drenched in cheap crude oil in January. That raging swan, black due to the deluge of oil, stomped the market every step of its way down, and it is still mucking about on the beach, stirring up trouble. [Added note: And market lunacy (sheer euphoria) over the oily swan is growing worse each week. I can’t write fast enough to keep up with it. Take this article that I’m revising into this post after having published the post:
In other words, because 1) the Russians stated they absolutely will not decrease oil production and because 2) the Saudis stated they absolutely will not decrease oil production, but will both maintain oil oversupply at the current level, and because 3) Iran said the whole concept of freezing production was stupid, so they have committed to increasing their rate of oversupply, the market stabilized. Now that everyone has been told for certain that the glut in oil will grow for months to come (because no one is cutting production and Iran is increasing theirs), the price of oil is going up, and stocks are going up. That’s just so absolutely stupid it turns my neck into a pretzel. I don’t think I’ve ever seen a more ludicrous example of markets hearing only what they want to hear, even if they have to turn it inside out to stuff it into their ears.] The point with the list above is is that no particular event has to happen to take the market down the next leg of its collapse. There are so many black-swan type of events waiting in the wings to take over that it is virtually certain some of these will grow to a size that becomes devastating, even after the crude swan is finished trashing about. There is practically a parade of black swans lined up for action. Look at how many poked their heads up in just the past week — all just waiting their turn to have a go at the market. Will it be bankruptcies in shipping, oil drilling, auto loans and student loans that pile up into a big enough heap to implode a couple of major banks, or will it be the Chinese flush turning into a whirlpool that sucks all industry down, or will US economy manage to hold on until the next housing collapse when the next wave of adjustable-rate mortgage failures hits people who only put 3% down so that banks lose a bundle in foreclosures during a market of falling prices? Or will it simply be that recession is already here as a sinking tide that lowers all boats? Or will the next big drop arrive in the next week’s list where a true black swan emerges that NO ONE saw coming, not even me? My point has always been that with so much bad economic news building up in the world and such monstrous overhangs of national, corporate and personal debt — mostly worse than the last time around — the odds are strongly stacked on the side of major trouble. If you’re wise you’ll prepare for that in reasonable and prudent ways.
My path to writing this blog began as a personal journey. Prior to the start of this so-called “Great Recession,” my ex-wife had a family home that was an inheritance from her mother. I worked as a property manger at the time, and near the end of 2007, I could tell from rumblings in the industry that the U.S. housing market was on the verge of catastrophic collapse. I urged her to press her brothers to sell the family home before prices dropped. The house went on the market and sold right away — and just three months before Bear-Stearns and others crashed, taking the U.S. housing market down for the tumble. Her family sold at the peak of the market. Having foreseen the beginning of what is now called The Great Recession half a year before it hit, the economic collapse seemed to me the kind of thing anyone should have seen if his eyes were wide open. So, I decided in the months thereafter to write humorous editorials in a series I called “Downtime“, which chided the U.S. government and banking people who should have seen the economic collapse on the horizon but whose greed, cronyism, and ineptitude got us into this mess. I self-syndicated those articles to The Hudson Valley Business Journal, The Valley City Times-Record (North Dakota), The Daily Herald (Tennessee) and a news website in Israel (www.worthynews.com) and another in Australia (australia.to). The articles were critical of the Bush and early Obama administrations and stated without reservation why all political efforts at the time were wrong, sometimes bordering on immoral, and why they would fail — even how long it would take for them to fail. You can use the link above or in the sidebar to go back and see whether or not the Great Recession was foreseeable.
|
---|
Send this article to a friend: