Tanta, who blogged over at Calculated Risk, lost her battle with cancer this morning. Her wit, her intelligence, her ability to entertain while educating us in the ins and outs of the mortgage beast that was rampaging out of control these last few years will be missed. Rest in peace.
Sunday, November 30, 2008
Stratfor has a new brief out on the India-Pakistan situation. Let's see, India may find herself "forced" to respond in a very strong manner. Pakistan is fragile. Both have nuclear arms. Just what the world needs on top of this ongoing credit crisis and in the waning days of a presidency with historically low approval ratings and little international credibility. When it rains, it pours...India: A Political Response Begins to Form
Five days after the Mumbai militant attacks began, the Indian government’s response is beginning to take shape Nov. 30. So far, the following actions have been taken:
- According to a Reuters interview with India’s minister of state for home affairs, Sriprakash Jaiswal, India will increase security to a “war level.” Jaiswal went on to say, “They (Pakistan) can say what they want, but we have no doubt that the terrorists had come from Pakistan.”
- Indian Home Minister Shivraj Patil resigned Nov. 30. Finance Minister Palaniappan Chidambaram, who led an effort to overhaul India’s security agencies as a junior minister in the 1990s, will take his place. Prime Minister Manmohan Singh, an economist by trade, will handle the finance portfolio for now. National Security Adviser M.K. Narayanan had submitted his resignation, but Singh refused it and thus Narayanan will retain his position, according to the Times of India. More resignations are expected from senior members of the Indian Intelligence Bureau and the Research and Analysis Wing.
- Singh announced in an official statement that air and sea security would be increased; the counterterrorism National Security Guard will be expanded to include four additional hubs in different parts of the country; special forces at the disposal of the central government will now be utilized for counterinsurgency operations; and a Federal Investigating Agency will be formed.
- Singh asked Foreign Secretary Shiv Shankar Menon to rush to Washington, D.C., to brief U.S. President-elect Barack Obama’s advisers on the Mumbai attacks. Menon is expected to leave for Washington on Dec. 1.
Saturday, November 29, 2008
FYI, the Socionomics Institute has a new set of online resources that help describe their model. Check it out - lot's of good stuff there.
Socioeconomics vs. Socionomics
Sex and Stocks
The Wave Principle Explained
Robert PrechterExplains Socionomics
Take a few days off for Thanksgiving and all kinds of crap breaks loose.
I won't dwell on the Mumbai attacks right now, that is being well covered by others. While I'm not quite as apocalyptic as Mike Ruppert about the blowback from this tragedy, if Pakistani intel is fingered in this, who really knows how far the Indians will push it? Will they take it out in Kashmir? Will they try and sponsor their own groups in Afghanistan to open a new "front" on them? Crack down on their large Muslim minority? The blowback is what we need to be looking for now.
The market rally was impressive this past week as well, but the reality is no different than when we discussed a previous bear market rally in Holy Short Squeeze, Marketman!
The memes being pimped out by the MSM are in flux, but keep an eye on what they are selling us:
- "We" are all vulnerable to attack!
- Overseas is dangerous! (Ignore the U.S. crime rate and death rate from car crashes)
- An attack like this is coming to the U.S.
- U.S. markets are oversold!
- Low oil means a recovery is right around the corner!
What is interesting is we are missing the "we have to do something about terrorism" meme that I expected post-Mumbai.
Look for trends in the language the media will be using in the coming days to describe the economy and the security situation. Look for similar words or phrases and it should give us an idea of where the elites are wanting to push things in the coming months.
Tuesday, November 25, 2008
I'm tied up in meetings and then on the road soon, so Happy Thanksgiving to you all. We are living in interesting times to say the least.
Thanksgiving is a great time to reflect on the year past and prepare for the year to come. Reconnect with those you care about. Look at your life and give thanks for the many mercies and blessings that have come your way this year. Good friends, family and community will once again become of vital importance to you - as they have been for much of human history.
We are entering dark times, but that doesn't mean we can't find personal fulfillment and happiness in a time of chaos. It just means we have to approach it with a prepared mind.
As a Thanksgiving bonus, I give you one of the best Thanksgiving sit com episodes ever shot.
As God as my witness, I thought turkeys could fly...
Fabius Maximus has another of his usual thoughtful, provocative posts up. Give it a read:A certain casualty of the recession: the US Government’s solvency
Summary: Whatever happens during this recession, one thing is almost certain: the US government’s balance sheet will be trashed. Wrecked, perhaps beyond repair. This post discusses what we should do to mitigate the damage, and why such extreme spending is necessary.
As described in “The most important story in this week’s newspapers” (22 May 2008), the government has borrowed $6.4 trillion to finance past expenditures (aka “net public debt”, posted here). The government — us, collectively – owe an estimated $57 trillion in past promises to pay (the debt) AND future promises (social security, government pensions, medicare, etc).
That’s bad, perhaps beyond our ability to pay by means of future taxes. The alternatives are stark:
None of these are easy or certain remedies. All may be necessary, and even together might be inadequate...
- cut expenses — the budget consists almost entirely of interest,
defense/security, and social services.
- renege on our promises — cutting pensions, social security, medicare via
taxation of benefits, and means-testing).
- inflation — reducing the debt in real terms.
- big tax increases.
If you think he is being alarmist, please provide me with a realistic way to service the debt being piled up by the United States. Please.
Monday, November 24, 2008
A smorgasbord for you today.
Los Federales are bailing out Citi. I'd rant about Crony Capitalism run amuck and the destruction of Free Enterprise, but why? We have sunk so deeply into the morass of moral hazard (in regards to the banks and finance companies) that what use is more indignation? The same geniuses who used to hector the Japanese about letting their "Zombie Banks" stay afloat instead of letting the "magic of the markets" flush out the dead are investing in Voudon zombie dust themselves these days. We are all Papa Docs these days in the U.S. Ponzi Finance sector.Zombie Economics
by Jim Kunstler
Though Citicorp is deemed too big to fail, it's hardly reassuring to know that it's been allowed to sink its fangs into the Mother Zombie that the US Treasury has become and sucked out a multi-billion dollar dose of embalming fluid so it can go on pretending to be a bank for a while longer. I employ this somewhat clunky metaphor to point out that the US Government is no more solvent than the financial zombies it is keeping on walking-dead support. And so this serial mummery of weekend bailout schemes is as much of a fraud and a swindle as the algorithm-derived-securities shenanigans that induced the disease of bank zombification in the first place. The main question it raises is whether, eventually, the creation of evermore zombified US dollars will exceed the amount of previously-created US dollars now vanishing into oblivion through compressive debt deflation...
Jeff Vail has Part 3 of his "Reslient Suburbia" series up:A Resilient Suburbia 3: Weighing the Potential for Self-Sufficiency
...this post will look at the potential of suburbia to produce some degree of self-sufficiency in food, water, and energy. At one extreme, if suburbia can sustainably produce 100% of the food, water, and energy, then the prospects are excellent for a resilient suburbia.
While true self-sufficiency may be theoretically possible, I don’t think this goal is realistic. Some degree of self-sufficiency, however, is possible. While the majority of this post will address the potential, and challenges, of attaining different degrees of self-sufficiency, there are two additional issues that must be addressed...
And just a quick recap of the recent memeering efforts by the Powers That Be:
- The Big 3 Automakers flew from Detroit in their Private Jets! Bad, bad. (No mention, of course, in any of the diatribes I read about how the big finance playerz arrived in D.C. Via the train, I'm sure...)
- The bailout of Citi is great for the stock market!
- Been seeing some chain emails already blaming Obama for the coming collapse. He'll play his part, of course, but it looks like he is being set up as a useful dupe. Definitely keep an eye on this one - if the chain emails (you know the ones I mean) start getting a violent edge to them, watch the hell out.
One this I do find interesting though, is that there are a lot of cross-currents. I think the various big playerz in finance, industrial ag, manufacturing and various government cliques are splintering in this time of fiscal crisis. Definitely keep an eye out here. Normally, all the big playerz have a lot of general interests in keeping the proles stupid and happy - but the money to fund all this stuff is vaporizing before their eyes. The messages matter. Compare and contrast the words used by Fox, CNBC, MSNBC, et al and look for the patterns and the fissures.
I'll try to get a few more posts up before traveling for Thanksgiving. Thanks for taking the time to drop in and read this stuff. Have a great Thanksgiving.
Saturday, November 22, 2008
The current crop of "leaders" in the U.S. continue their stirring and heroic actions in this time of crisis. Gotta make sure the banksters and finance playerz don't lose that second house in the Hamptons. If they aren't there to buy up all that foie gras and caviar, who will?
The autoworkers in Detroit can eat Ramen.Citigroup May End Up With U.S. Government Rescue
By Christine Harper and Bradley Keoun, Bloomberg
Nov. 22 (Bloomberg) -- The U.S. government may step in to rescue Citigroup Inc. after a crisis in confidence erased half the bank’s stock-market value in three days, according to investors and analysts...
Friday, November 21, 2008
So much to think about.
- We could discuss the big pop in the markets in the last hour of trading today, but what is there really to say? Today was an options expiration date and you knew the big money playerz were going to force things up if they could, plus the shorts needed to cash in to realize some serious gains today as well.
- We could discuss another glaring socionomic signal of negative social mood - a Florida teenager streamed his suicide live over the internet on Wednesday. Suicide rates are used as a socionomic gauge. Unfortunately, we can expect more of these tragedies. But what is there really to discuss? All signs point towards a long and profound period of negative social mood. You either will believe this or not and you will either act on it or not.
- We could discuss the proposed bridge loans for the various automakers, discuss the hypocrisy of the Congresscritters and their Senate compadres as they grill the Big 3 execs over $25 billion after happily dropping to their knees and servicing the finance playerz to the tune of $700 billion just a few weeks ago. But again, why? This will end in rage and tears as it is, why waste energy on these rats?
No, what I do want to talk about is a little more personal. Something I also think could spark a lot of blowback for various Powers That Be if it happens.
A Trip Down Memory Lane
On this date in 1985, U.S. Navy intelligence analyst Jonathan Jay Pollard is arrested and accused of spying for Israel. He pleads guilty and is sentenced to life in prison. Damage assessments of his treasonous activities include evidence that "he compromised US worldwide signals intelligence efforts by revealing US penetration of cryptographic modules sold around the world for official use" - all while working as a sanctioned agent for Israeli intelligence. The full extent is not known as the summary prepared by Casper Weinberger was deemed too sensitive to release. Indications are that the traitor Pollard did immense damage to the U.S. on behalf of a foreign state.
As we get closer to the end of Bush 43's final year in office, apparently he is considering giving Pollard a pardon for his treasonous activities.
Un-freaking-believable. If Bush 43 pardons Pollard, he will be making a mockery of our intel services. In this new world we are entering into, a strong intel and counter-intel community is worth more than an entire field army. Our CIA, FBI and the various components of the national intel community are an asset we have to cultivate, to encourage and to hold up as the patriots they are. Should a pardon be issued, Bush 43 will be insulting all Americans as he suckles up to a pressure group and releases a traitor. The son of a bitch should have been taken out and shot, and his body hung from a lamppost outside the Israeli embassy until it decomposed and the bones left to bleach in the sun to this day. Instead, he may wind up with a Get Out of Jail Free card and a one-way ticket back to the foreign power that used him to spy against my country.
This of course speculation at the moment. Pardons and rumors of pardons start flying about as a President's term comes to a close. With the staunch support that Bush 43 has shown the State of Israel over the last 8 years, I guess I should have expected talk of this.
I would warn El Senor Presidente Bush though, that actions have consequences. And that, as a son of a former CIA chieftan, he should know that the CIA and the intel services in general are not a bunch of wimps who will take something like this lying down.
Just ask Nixon.
Huh, you may ask?
I won't give you any spoilers. Just click over, print the thing off and sit down with a good drink. Read what Mr. North has to say, ponder it for awhile.
Mr. Bush, I suggest you do the same thing and think long and hard before signing a piece of paper that frees a traitor and sticks a thumb in the eye of our counter-intel community.
Thursday, November 20, 2008
When the bull market was in full swing, the socionomic model was ignored or derided as a curiosity. The market "is" propelled by fundamentals. It "is" particpated in by rational economic players and governed by a random walk.
Now that these market playerz are seeing a real Bear Market, they are, one by one, having a come to Jesus experience down by the River of Losses, and are realizing that social mood drives them all - and the counterparties of those trades they want to make. They aren't calling it socionomics - yet - but this fear and distrust is just the socionomic model in action. A rose by any other name...Global Stocks, U.S. Index Futures Fall; Yen, Treasuries Rally
By Sarah Thompson, Bloomberg
"...We're seeing a total collapse of trust in everything fundamental,'' said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which has the equivalent of $48 billion. "There are no buyers in sight. This year will go down in history..."
"...Changing the terms of the TARP as suddenly as [SecTreas Paulson] did undermined investor confidence,'' said Richard Schlanger, a bond fund manager in Boston at Pioneer Investments, which oversees $44 billion. "It's a frightening situation..."
Mood makes markets. Know it. Learn it. Love it.
Here is a great chart from Calculated Risk, showing the current decline in relation to other major bear markets. I think when it finally shakes out, our current one will look very, very similar (percentagewise) t0 the Great Bear Market of the 1930's.
Sorry for the lack of posts yesterday, I had to be away from the computer all day. Nothing really new to point out - just keep your eyes on the markets. If you are not already in cash and safe instruments, if you have not already right-sized your living arrangements, if you are not already building up your network of friends and family to help you through the coming hard times, well, nothing else I am going to say will convince you at this point.
Tuesday, November 18, 2008
by Alex Williams, New York Times
...Wooden shutters and brick have replaced the silk curtains. Salvaged wood from a barn will stand in for the ruby-tinted glass. As for the chandelier, well, there is no chandelier.
“There’s a shift to get away from glitz,” Ms. Kaufman said. “I’m almost starting to feel that luxury is a dirty word.”
It is no secret that consumers are cutting back, anxious about jobs, plummeting home values and shrinking retirement savings. But that belt-tightening seems to have also prompted a reconsideration of what is acceptable consumerism even for those relatively unaffected by the economic cataclysm...
...Today, bejeweled fashionistas are pegged as tone-deaf Marie Antoinettes. “It’s not good taste in our business to walk into a party loaded with the biggest diamonds you can find,” said Bud Konheim, the chief executive of Nicole Miller. “You don’t brag about paying $10,000 for a dress for a party. The feeling now is, so what are you telling us? You’re either a sucker or showing off when people have lost jobs...”
Quite a fascinating article. Especially note the Marie Antoinette reference. I continue to believe that a study of the French Revolution will benefit you as we enter this multi-decade downturn in social mood.
Of course there are the other, more serious, calling cards of a large-scale socioniomic corrective cycle - anger, xenophobia, destructive rage - and their attendant horsement - violence, ethnic cleansing and the destruction of the previous bull market edifice.
We'll see them soon enough, I fear.
Jeff Vail has posted part two of his ongoing study of Peak Oil and suburbia:
A Resilient Suburbia 2: Cost of Commuting
...My conclusions may surprise readers: suburbanites aren't particularly vulnerable to the rising cost of gasoline. Instead, like all of us, they are vulnerable to general economic shocks that may be caused by peak oil, but the elasticity of their commuting budgets may better position them to deal with these shocks than urban residents.
The first thing that comes to mind when people discuss peak oil and suburbia is the massive amount of gasoline used to commute to and from work. I think this is also the least problematic. However, to the extent that it is a problem it won’t result in the abandonment of suburbia—rather, it will act as a catalyst to reshape the economic structure of suburbia...
Monday, November 17, 2008
It just gets better and better...Lincoln, Aegon May Buy S&Ls With `Unsafe' Practices to Get Aid
by Andrew Frye and Linda Shen, Bloomberg
Nov. 17 (Bloomberg) -- Four of the world's biggest insurers may acquire small banks that regulators have cited for improper practices to improve their own chances of getting cash from the $700 billion U.S. government bailout fund.
Lincoln National Corp. and Aegon NV, owner of Transamerica Corp., may buy savings and loan companies in Indiana and Maryland whose methods were found to be "unsafe and unsound'' by the Office of Thrift Supervision. Hartford Financial Services Group Inc. is acquiring a Florida lender that was told by the OTS in May to curb lending. Genworth Financial Inc.'s target got a "cease-and-desist'' order tied to potentially fraudulent loans.
Purchasing thrifts may allow insurers to qualify as savings- and-loan companies and tap the Treasury's Troubled Asset Relief Program. Hartford's $10 million acquisition of Sanford, Florida- based Federal Trust Corp. may entitle it to $3.4 billion of U.S. capital. Lincoln National in Philadelphia may win access to $3 billion by taking over Newton County Loan & Savings, which has three full-time employees and $7.3 million of assets...
We had to destroy the village in order to save it. We had to destroy our company's financial balance sheet in order to save it...
The socionomic model would indicate that smaller groups (4GW entities, 5G gangs, mafias, whatever you want to call them) will attract more loyalty and be more successful in periods of social pessimism as opposed to periods optimism.
The upsurge in Somali pirate "victories" helps prove the point.
Somali Pirates Nab Supertanker, Biggest Prize Yet
by Noah Shachtman, Wired's Danger Room
Somali pirates have nabbed their biggest prize yet -- a Saudi-owned supertanker, three times the size of an aircraft carrier. The ocean-going hijackers managed to pull off this latest assault, on the Sirius Star, despite a swarm of international warships now working to ward off such strikes.
"Our presence in the region is helping deter and disrupt criminal attacks off the Somali coast, but the situation with the Sirius Star clearly indicates the pirates’ ability to adapt their tactics and methods of attack," U.S. Vice Adm. Bill Gortney, Commander, Combined Maritime Forces, said in a statement. "Typically, pirates attack within 200 miles of the shoreline and go after smaller prey," the L.A. Times observes...
We're still early in this cycle. These amateurs are more party-goers than truly enraged citizens. Which is good - don't get me wrong. But don't think that this is truly representative of an enraged mob. Read some history of the U.S. and French Revolutions to understand just how influential a violent mob can be.
Friday, November 14, 2008
Iceland: A Laboratory for Social Unrest?
A large demonstration is expected to occur in Reykjavik, Iceland, on Nov. 15 to protest the failure of the government to clinch a $2.1 billion loan from the International Monetary Fund (IMF). Observers estimate that the number of protesters could reach as high as 20,000 people over the weekend, a huge number for a country of only 320,000 inhabitants. While there is little chance of violence during the protest — or that it will worsen Iceland’s already critical financial woes — social unrest caused by the economic crisis in Iceland could suggest what other countries may soon be facing...
In George Ure's Urbansurvival article for today (14 November 2008), there is a great quote that you should remember as we navigate the Chump Phase of the Great Collapse, on our way to whatever comes next for our society:
"...speaking of layoffs and such - had an email recently from a reader in one of the Top 10 markets who is putting in a $30-million apartment complex. He's been hearing some rumbles that the bank which is backing the project may delay payments to subs. Traditionally, in the construction industry, when this happens, the subs are the ones that get screwed.
So managing this big project he asked me "What's the right thing to do here? Tell my subs that the bank may be late or freeze the project, or don't tell the subs and get the job as far along as fast as possible?"
Tough one, but simple when you remember some basics. "Subs" are humans with lives they put on the line and they deserve first consideration when compared to paper legal entities that are designed to shield owners from liability.
I wrote to him that 10-years from now you're not going to run into a corporate entity in some dark alley when you've been out for a few pops on Friday night. A disgruntled sub? One you screwed out of thousands and destroyed his family knowing that he was about to get stiffed and didn't shoot straight with 'em?
Not uncommon for humans to carry grudges over a whole lifetime. Humans first. Corporate entities last..."
As winter nears (and a long, cold one it is going to be), it is always good to reflect on the year to this point. All of us are familiar with the parable of the ant and the grasshopper and how winter helped educate that grasshopper. Well, who needs a parable when you have a scientific study proving the same point?
Thursday, November 13, 2008
Not that we do day trading here at FutureJacked, but today's action is a nice example of how mood swings can affect our decision-making and how truly great Bear Markets like the one we are in now milk "investors" dry as they slide down a slope of hope.
The DJIA hit technical support at 8,000 around lunch today, kicking in a raft of technical analysis buy signals. You see the result. This will have the meme-pushers on the financial and news talk shows happy-talking it up tonight.
Keep your eyes open, though and keep making your decisions based on the fact that we are in the early stages of a massive credit crisis. Also recall, the biggest market upside days are generally during bear markets, which we found by looking at the raw data in Holy Short Squeeze, Marketman!.
by Michael Lewis, Portfolio.com
...At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was...
Wednesday, November 12, 2008
Sorry for just the news-stringing - another customer audit today. In the meantime, as a follow-up to the GM clip below, check out Rant #471 from Autoextremist:
Tick, tick, tick...
By Peter M. De Lorenzo
Detroit. So it has come down to this for General Motors: 100 years of living, breathing American industrial and social history is on the precipice of total
disaster, with the once-glittering corporate icon facing certain collapse if some sort of government financial aid package is not put together in the next 60 days.
Think about that for a moment.
The company that basically powered this nation through a century of progress and helped this country muster the strength to fight world wars - while contributing immeasurably to the fabric of America and the development of our vast middle class - is on the verge of filing bankruptcy...
While getting ready this morning I had CNBC on in the background and one of the big bankster playerz was on Squawk Box explaining why TARP and the other actions to bail out the credit sector were just "stabilization" - which is okay. But "stimulus" is bad and must be carefully tuned to get the most jobs from the smallest amount of dollars.
The howling emptiness of crony capitalism that has replaced free enterprise in the U.S. would play as satire at any other period in history. I feel bad for The Onion - it's tough to craft an over-the-top scenario these days that is not already being pimped out by someone in D.C.
Just for the record, I do believe any bailout of GM, Ford or Chrysler is just adding to the moral hazard problem - but the way I see it, the money for all these bailouts is going to be choked off sooner than most expect as the Asians begin to refuse our Treasury offerings. Might as well get some cash into the hands of working Americans before this thing implodes.
This will end in tears and rage, friends. Ugh.
Tuesday, November 11, 2008
Where's Cramer screaming "they know nothing!" when it looks like GM could collapse into bankruptcy? It would leave a smoking crater in the middle of American manufacturing, but I guess since his Wall Street pals are hedged against a collapse, it's okay.
Monday, November 10, 2008
Keep your eye out for more stories like this. As we slip into a deflationary debt collapse, the big programs like the Oil Megaprojects that are supposedly going to mitigate Peak Oil, the big wind projects that will supposedly give us all clean energy and, unfortunately, the big nuclear projects (both enrichment plants and power plants) that actually stood a chance of helping us transition to an all-electric transport fleet - they will shrivel on the vine for lack of access to credit.Financing a concern for American Centrifuge Plant
USEC has said that, despite "substantial progress" with constructing the American Centrifuge Plant (ACP), it remains uncertain how the uranium enrichment plant will ultimately be financed.
The company reported that all of its major suppliers have been fully qualified to begin manufacturing components and have been preparing their facilities for high-volume manufacturing. USEC is preparing to install its next cascade of 40 to 50 AC100 centrifuge machines. The company said, "Under our current schedule, we expect to receive the first AC100 machines from our manufacturers in November and begin AC100 Lead Cascade operation by the end of the first quarter of 2009.
Another reason why the Hyperion mini-nuke may be the best bet at this point when it comes to decentralized power generation.
UPDATE: Dan Yurman, who blogs over at Idaho Samizdat (a must-read blog for those interested in the nuclear industry and lab complex in the U.S.) emailed me, reminding me that only projects that depend on Wall Street finance and credit are going to suffer. AREVA, of which the French Government owns 80%, is currently planning to build an enrichment facility in Idaho that will get built regardless of what happens on the credit front. He has a very valid point - in the coming years those with cash and access to it will have an enormous range of freedom and opportunity on the financial front. Those whose business models require taking on large amounts of debt to execute projects will suffer greatly.
Plus, USEC has plenty of management issues of its own making that have helped hamstring this project.
As usual - it is complicated out there, but reliance on debt is going to hamstring a lot of big projects in the coming years. Cash will be king. We'll all wish we had more of it.
Jeff Vail is at it again. His newest post, A Resilient Suburbia?, is worth your time. For those of us in the U.S., how we deal with the suburban infrastructure in the coming credit collapse, and the fallout from sliding down the other side of Hubbert's Peak will define the next twenty years - at least.
Sunday, November 9, 2008
I've mentioned before that I regard the ongoing financial and economic crisis in Argentina as a good model for the early stages of what we are facing here in the U.S. Well, here's a proposal being floated that is straight out of Argentina:Dems Target Private Retirement Accounts
by Karen McMahan
RALEIGH — Democrats in the U.S. House have been conducting hearings on proposals to confiscate workers’ personal retirement accounts — including 401(k)s and IRAs — and convert them to accounts managed by the Social Security Administration.Triggered by the financial crisis the past two months, the hearings reportedly were meant to stem losses incurred by many workers and retirees whose 401(k) and IRA balances have been shrinking rapidly.The testimony of Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York, in hearings Oct. 7 drew the most attention and criticism. Testifying for the House Committee on Education and Labor, Ghilarducci proposed that the government eliminate tax breaks for 401(k) and similar retirement accounts, such as IRAs, and confiscate workers’ retirement plan accounts and convert them to universal Guaranteed Retirement Accounts (GRAs) managed by the Social Security Administration...
I'll let you think about the blowback from such an action. My oh my.
And then, in an announcement that warms my nuclear heart, Hyperion Power Generation is claiming they are a step closer to mini-nukes. Just the kind of disruptive technology that would allow for decentralized communities to survive and eventually thrive in a chaotic environment:Mini nuclear plants to power 20,000 homes
by John Vidal and Nick Rosen, Guardian
Nuclear power plants smaller than a garden shed and able to power 20,000 homes will be on sale within five years, say scientists at Los Alamos, the US government laboratory which developed the first atomic bomb.
The miniature reactors will be factory-sealed, contain no weapons-grade material, have no moving parts and will be nearly impossible to steal because they will be encased in concrete and buried underground.
The US government has licensed the technology to Hyperion, a New Mexico-based company which said last week that it has taken its first firm orders and plans to start mass production within five years. 'Our goal is to generate electricity for 10 cents a watt anywhere in the world,' said John Deal, chief executive of Hyperion. 'They will cost approximately $25m [£13m] each. For a community with 10,000 households, that is a very affordable $250 per home...'
If only we can hold this thing together long enough to implement production...
There are so many topics out there worthy of dicussion, but with intense constraints on my time, I've not been blogging much on them. Between dealing with customer audits, working on a prototype for the patent I filed earlier in the year, projects at work, I've not been able to spend as much time game-planning in these opening days of the Great Collapse. That said, most of my preparations were in place by summer (and hopefully yours), so there is little urgency at the moment - at this point, we can only watch the tower of debts swaying in the wind and wonder where it will collapse - into a fiery heap of hyperinflation, or into a chasm of deflation? Or first the deflation, then the hyperinflation?
So, sure, there are plenty of news stories being peddled to describe the raging emotions of fear and anger that are building up around us, but we all know that the jig is up for the debt-fueled consumerist economy pimped out by the banksters over the last century or so.
Those of us watching this "service economy" crumble know where it will end - in tears and rage. Right now, I think many involved in the service economy know it as well, but we are in that awkward transition phase which we called the Chump Phase (discussed here) or "Reframing Crisis" - too early for radical reworkings of society, even at a local level, but too late to save the machine.
I hate to say it, but I don't have any new suggestions. I wrote many of my ideas down in Catastrophic Abundance. We've discussed most of them here at FutureJacked. I strongly believe we are all tied to the Great Wheel of humanity - and the ebbs and flows of optimism and pessimism that go with it. Becoming aware of this allows you to free yourself from the "sleepwalk" that most people stumble through life in and become just a bit more aware of the beauty and majesty of the world around us.
We all have to focus on being producers. On being generators of "fruitful activity" to use Kunstler's phrase. And, most importantly, we have to get our heads wrapped around the fact that this credit crisis is going to be the worst economic disaster ever recorded and if you don't have your shit together, if you think someone "in charge" will come along to "save you" or some other such nonsense, well, you will get what you deserve.More Dire Warnings
We'll wrap up with a few anecdotes.Debt Trap
by Doug Noland of Prudent Bear Funds
The economy lost 651,000 jobs in three months. Auto sales have collapsed, and retail sales have “fallen off a cliff.” And there is at this point little indication that Credit Availability will normalize anytime soon for household, corporate or municipal borrowers. While the extraordinary efforts by the Fed and global central bankers have loosened the clogged up inter-bank lending market, risk markets remain hopelessly paralyzed. The unfolding collapse of the leveraged speculating community continues to overhanging the marketplace. Securitization markets are still essentially closed for business...
...It’s popular to label Federal Reserve operations as a massive effort to “print money.” Yet it is important to recognize that, at least to this point, the expansion of the Fed assets (“Fed Credit”) is counterbalanced by the collapsing balance sheets of leveraged financial operators. The inflationary effects – the increased purchasing power created by the expansion of Credit – occurred back when the original loan was made, securitized, and leveraged by, say, a hedge fund. Today’s ballooning central bank holdings (and TARP spending) may very well stem financial system implosion. This is, however, a far cry from engendering a meaningful increase in either the market’s appetite for risk assets or the expansion of new system Credit in the real economy...
Doug Noland has, in my opinion, hit upon the single key factor that makes the coming crisis so severe - in an economic system that requires individuals to take on debt to fund productive activity, you have to have a constant expansion of debt to keep the growth machine functioning. It ignores the fact that there comes a time when the debt service becomes too great and the whole series of interlocked debt obligations collapses.
We are there. That's why the Powers That Be are so freaked out - they know how bad it is going to get and are trying everything they can to stem the tide. They'll succeed about as well as King Canute did...
And a thought exercise from the bright boys over at Halfpasthuman and George Ure - link over the following article. Every time you see the word "Iceland" replace it with word "America" and you'll get a flavor for what is coming our way...Stunned Icelanders Struggle After Economy’s Fall
by Sarah Lyall, New York Times
REYKJAVIK, Iceland — The collapse came so fast it seemed unreal, impossible. One woman here compared it to being hit by a train. Another said she felt as if she were watching it through a window. Another said, “It feels like you’ve been put in a prison, and you don’t know what you did wrong.”
This country, as modern and sophisticated as it is geographically isolated, still seems to be in shock. But if the events of last month — the failure of Iceland’s banks; the plummeting of its currency; the first wave of layoffs; the loss of reputation abroad — felt like a bad dream, Iceland has now awakened to find that it is all coming true.
It is not as if Reykjavik, where about two-thirds of the country’s 300,000 people live, is filled with bread lines or homeless shanties or looters smashing store windows. But this city, until recently the center of one of the world’s fastest economic booms, is now the unhappy site of one of its great crashes. It is impossible to meet anyone here who has not been profoundly affected by the financial crisis...
Thursday, November 6, 2008
Michael Crichton went forth from this world into that unknown country on 4 November 2009. I found Mr. Crichton's books fascinating, challenging, fantastic reads. His ability to synthesize data from a wide range of fields and craft compelling plots and stories from it was impressive and inspiring.
Though his fiction was fantastic, I found myself re-reading Travels more than his novels. The vignettes in Travels show a man with a penetrating mind, keen to understand the world around him, eager to try new things and not limited by the opinions of others.
The ideas he played with in his works could get me so excited that I even tried pitching a start-up based on an idea sparked by his novel Next a couple years back.
Mr. Crichton, rest in peace, you will be missed.
Wednesday, November 5, 2008
I went to lunch at an awesome Chinese place and wound up with a fortune cookie that sums up the current thrust of this blog:
Don't worry about the stock market. Invest in family.
In a world where family ties, where friendships, where community will soon be far more important than the digits in your bank account, that's great advice.
Oh yeah, for those intersted, the "lucky numbers" were 14 18 23 38 44 47
Well, here we go. A Brave New World indeed.
McCain concedes. It was a bridge too far. We desperately needed you in 2000, Senator. Instead, we got Bush 43. Karl Rove's dirty tricks in South Carolina will haunt the Republic for decades to come.
Well, Mr. President-Elect, you have a great and grave series of challenges ahead. Here's hoping there is substance to back up the soaring rhetoric. Good luck.
Tuesday, November 4, 2008
Posting will be light in the coming days, I have a bunch of meetings with DOE and IAEA reps. I am working on a discussion of the oil supply situation - things seem to be playing out in step with our posting from May of this year entitled Countertrend Thinking on Oil. Remember, ALWAYS look beyond the headlines and what is reported. Look to the implications, look for root causes. We'll discuss further later in the week when the day job is less hectic.
Get out and vote. Granted that I may think it is little more than rearranging the deck chairs on the Titanic at the Federal level at this point - it is still very, very important. The difference between a ballot and a bullet is immense and we as Americans MUST keep alive the flame of the old Republic in this coming crisis.
Monday, November 3, 2008
For those of you worried about rising sea levels or need a way to make a getaway in style, here is an option - get together with a few of your closest friends and bid on former Iraqi tyrant Saddam Hussein's luxury yacht, the Basra Breeze.
It comes complete with "...gold-tap bathrooms, a mini-operating theater, a helicopter landing pad, and a secret escape passageway, according to a report from the British Sunday Times."
Pardon the use (or abuse ) of Kuhn's Hypothesis on "Paradigm Shift" - but since we are living in the midst of a huge transition (from a model of ever-expanding credit and consumer debt fueling "the economy" to Whatever Comes Next) I am trying to find what guidepost I can as we stumble through the chaos of a collapsing system.
Last week was a nice respite - rising markets, focus on a political campaign that, for all the barbs and mud thrown, has been remarkably civil overall and focused on "hope" and other positive themes. The warm afterglow of the greatest period of optimism in recent human history is helping to keep the campaigns away from hate and demagoguery. We'll probably see that come 2012. No new or unexpected blow-ups in the markets.
The credit markets are still ugly, if improving, though that is a high-level picture and if you live in Iceland, Pakistan, Hungary, Argentina or half a hundred other countries, you would disagree with that statement.
Big picture aside, I want to give what I think will be a bright and shining message that the world has irrevocably changed. Hat tip to CalculatedRisk for bringing my attention to this article by Bill Fleckenstein:Economy sinks as we save bankers
by Bill Fleckenstein
...I could be wrong, of course, but I think we're probably in about the eighth inning of the crisis in financials. The government is not going to let any major financial entity (or almost any large entity) go bust at this juncture -- which means no one will lose access to green paper. Thus, while folks are worried about financial institutions, their real concern ought to be the economy...
...The third crisis that I see coming, which is theoretical but I suspect cannot be avoided: At some point, the U.S. will not be allowed to finance all of its debts in dollars. We have proposed better than $1 trillion worth of bailouts, and there will be more money thrown at the economy, I'm sure. I cannot see why foreigners would fund a couple of trillion dollars in spending in our currency, given our recent behavior...
We here at FutureJacked have made some nebulous comments before that basically amounted to the fact that the U.S. FedGov debt machine could not run ad infinitum. Fleck explains more specifically.
When the day comes that the U.S. has to float bond issues that are denominated in Yuan or Euros or Yen, you will know that the point of no return is past.
What does that mean for you and yours? Not sure. If the foreign creditors impose harsh sanctions on the U.S. and force us to live within our means, we are then facing a massive deflationary collapse. I expect that to be the initial phase, but I also expect a massive hyperinflation (probably in "digidollars" - easier than printing currency) via stimulus "checks" wired directly into the accounts of U.S. taxpayers. The end game will be the same - a country that will take generations to rebuild, weighed down under the burden of massive debts.
We have a lot of work ahead of us, friends.