Thursday, December 30, 2010

If We Close Our Eyes...

...the monster will go away.

Charles Hugh Smith takes a look at the psychology involved in this plateau of self-delusion the U.S. has been living on since the rebound in mood that began in early 2009. The socionomic implications of this continued denial of reality are going to be horrendous:

If We Close Our Eyes, The Monster Will Go Away
by Charles Hugh Smith, Of Two Minds Blog
...Clinging to denial sets up pathology, anger and collapse. If we continue to keep our eyes closed, and demand the Monster go away because we don't want to deal with change and challenge, then we either detach ourselves from reality altogether (a pathological psychosis perfectly depicted in the classic film Sunset Boulevard) or we rage in fear and dread at the challenge/Monster, as if it is somehow unfair that change has occurred without our express permission...

This combination of rage, a sense of how it is "unfair" that this collapse happened on our watch and a host of other emotions will drive decisions in politics, business and warmaking - and probably all to the detriment of the Old Republic.

Tuesday, December 28, 2010

The Thin Blue Line as a Socionomic Warning

This is an ugly statistic, that could get uglier should mood in the U.S. slide more deeply into a net negative-bias:

Law Enforcement Fatalities Spike Dangerously in 2010
issued by the Law Enforcement Officers Memorial Fund
Following a twoyear decline, law enforcement fatalities in 2010 spiked to 160. This was an increase of nearly 40 percent compared to last year, when 117 officers were killed in the line of duty...

Some of these numbers are from an increase in traffic-related deaths (car crash, struck while outside their vehicle, etc.). One statistic that I think should be especially monitored is firearms-related fatalities, especially the ambush killings. Ambush killings show a focused rage against the most visible piece of the power structure - cops. I think this will be a proxy for a lot of anti-establishment violence in the coming years. The legislators make the often stupid laws and the cops get to eat the anger those laws engender. Pile on top of that a socionomically predicted move towards more anger and a desire to break things apart and we could see a lot more dead officers, should 2011 be the year that mood plunges.

I fished through the basic data, looking for trends that might match up with stock market prices.  There appear to be some correlations at times to declines in stock prices (2001 being a big example, tied I assume to the 9/11 attacks).  I am going to look for data specific to violent deaths of officers and see if that subset (ignoring traffic deaths) shows sensitivity to mood as measured by stock price signals.

Friday, December 24, 2010

Merry Christmas

Whether or not this is "the last Christmas in America" as Charles Hugh Smith puts it or not, I wish you a Merry Christmas and a New Year filled with adapability, the fortitude to endure what is coming and the serenity to pull joy from amidst the chaos I fear awaits us.

Keep in mind that, as a wise scientist once said, "all models are false, but some are useful." I think socionomics is one of those useful models as it can point out the potholes ahead and gives us all hope for the future.

Wednesday, December 22, 2010

Glimpses of the Future

Most of you reading FutureJacked also follow folks like Mish and Karl Denninger, so you are probably familiar with their thoughts on the recent bill submitted by Rep. Kucinich that would wipe out the Fed and return monetary authority to Congress.

Karl looks like he is for it at the moment and Mish is rather vehemently against it.

You can read it here for yourself:

NEED_ACT

Leaving aside the "good" or "bad" of this bill, what we are seeing are the seeds of the future being nurtured, seeds that will blossom when negative-bias mood deepens.

Think about consistent themes you are seeing as we waddle through this delusional rally:

  • Ron Paul, soon to be head of the House Domestic Monetary Policy Subcommittee (overseeing the Federal Reserve), has called for the abolition of the Fed. His bill to audit the Fed gained a lot of traction before this rally kicked back in.
  • Rep. Kucinich is calling for not only the abolition of the Fed with this bill, but the abolition of fractional reserve lending!  (See page 10 line 21, page 28 line 9, and pages 36 and 39 of the bill where ending fractional reserve lending is proposed)

 Talk about a deflationary mind-set - ending fractional reserve lending would aboslutely wipe out the kind of economic growth most business pro formas factor in.  It very well might also match up with the moods of the coming times.

Ending the Fed and ending fractional reserve lending especially, would be revolutionary acts. The kind of revolutionary acts you see in negative-bias times, especially when the bear market we are entering has been centuries in the making.

Look for consistent themes like the "abolish the Fed" stuff. These ideas that get batted around during the good times are the life rings that society will grab at when the current system sinks.

Monday, December 20, 2010

Power and Negative-Bias Mood

Ran across this article from a few months back (h/t Seth Roberts) on studies showing that power makes the powerful more dismissive of evidence that does not agree with their established world view:

The Power Trip

by Jonah Lehrer, Wall Street Journal
Contrary to the Machiavellian cliché, nice people are more likely to rise to power. Then something strange happens: Authority atrophies the very talents that got them there...

...The very traits that helped leaders accumulate control in the first place all but disappear once they rise to power. Instead of being polite, honest and outgoing, they become impulsive, reckless and rude. In some cases, these new habits can help a leader be more decisive and single-minded, or more likely to make choices that will be profitable regardless of their popularity. One recent study found that overconfident CEOs were more likely to pursue innovation and take their companies in new technological directions. Unchecked, however, these instincts can lead to a big fall...

I bring this up in an attempt to shine a light on current events from a different direction. The decision-makers, who are feeling better than they were a year ago, are collecting more and more power into their hands in terms of Federal Reserve policies, letting the banks ignore bad loans, wide-ranging stimulus and tax-cut packages, clamping down on travelers via the TSA, etc. When the mood shifts under their feet and when public response to their authority and authoritarian responses kicks in, the powerful will be biased to retreat to well-established views of keeping hold of their power and they'll also be influenced by the anger, xenophobia and fear sweeping the general population - and be expected to do something about it. That their tools will fail them at this important time is pretty evident. What is more frightening is that these studies indicate that the decision-makers won't be able to adjust or think themselves out of this hole.

The Public Pension Fault Line

If you haven't seen this clip yet, take time today to do so (h/t Mish):


Chris Christie isn't indulging in "magical thinking" - but everyone else is. Socionomics has been warning us about this for years now. The endgame is upon us.

Thursday, December 9, 2010

WikiLeaks, Thorium, and Mood

Finally back from my travels. Not much has changed in the last week, but my interpretation remains that we are teetering on the edge of the abyss, not building a base for the next huge Bull market. Time will tell. As for the socionomic landscape, I want to touch on a few mountains rising up in distance.

WikiLeaks

I initially regarded the media storm over the WikiLeaks release of U.S. diplomatic cables as just another media event. More bread and circuses for the media-consuming public while the political elites conducted a take-down on Assange via the laughable “sex crime” charges that have been brought against him. But the law of unintended consequences, teamed with a negatively biased mood, may turn this into a larger story about the struggle between authoritarianism and freedom.

The Socionomist has covered the basics of this struggle, so those of you who subscribe to the newsletter, get it. The thumbnail version is that there is significant evidence to support the socionomic thesis that controls over information flow and behaviors will increase as mood darkens. At least, the various political and policing elites will attempt to cram such controls down on societies across the globe. The technological wildcard presented by the internet is now being tested. I alluded to this in an earlier blog post and an expanded version in last month’s Socionomist, where I suggested that computer systems, “connectivity,” social networking and the various darlings and feel-good stories of the previous positive-bias era (and the rallies since 2000) would turn into Frankenstein monsters of some sort during this negative-bias era we are slowly, but steadily, marching into.

Operation Payback is one of those Frankenstein monsters, at least in the eyes of those who would govern our Republic and “guard” the liberties spelled out in the Bill of Rights:


Just a note on this YouTube clip – it is a bit unpolished in parts, but that is not the point. Those who would oppose the authoritarians are just learning. You are seeing it born. This is just an low-scale operation right now – but this is how you learn to get better at your trade. And it is all happening outside government control.

The hacktivists continue to fight back against various corporate and government authorities. They have the tools, they have an excuse which enables them to paint their cause as just and they can scale their attacks as needed:


1. WikiLeaks backers threaten more cyber attacks
2. Facebook Confirms It Pulled Operation Payback Page
3. Anonymous' 'Operation Payback' Twitter Account SUSPENDED
4. Teenager held over WikiLeaks web assaults

All the ingredients of an open-source war are being cooked up right before our eyes. Note that I am quite sure that these initial attacks against various websites will be fought off successfully and that funding sources, various sites that host Anon and others will be challenged and that in general this initial wave will fizzle. What is important, though, is that the hacktivist community will get their initial lesson in how to handle the response and watch the terrain development. Just as the car and roadside bombers in Iraq learned to quickly adapt to countermeasures, you may rest assured that Anon and others will learn as well.

The key piece, in my opinion, is whether or not the mildly negative-bias mood shifts to positive or whether it will intensify. The more anger and negative emotion, the more fuel these groups will have and the more grievances they will find worthy of using as a reason to hack and attack established authority and corporate entities on the web.

Thorium Power

Another “mountain” looming on our landscape of mood and markets is energy and resources – and the potential for protectionism and anger to shatter existing market structures.

I’ve blogged a bit before on the socionomic thesis of negative mood driving trade barriers, specifically when it comes to the “rare earth” minerals and energy products. China has generated rather severe anxieties over their monopoly on rare earth mineral supplies (see here for more details).

By a stroke of luck or fate, we here in Missouri have a significant ore seam that could be exploited for Rare Earth minerals at Pea Ridge. In addition, wherever you find Rare Earths, you find Thorium – a mineral that can be used as a material to generate fuel for nuclear reactors (see here and here for all you would ever need to understand thorium fueled reactors). I attended a conference discussing which hopes to develop a combined approach of putting the Rare Earths back on the list of “strategic” minerals, get some government help in avoiding the inevitable low-ball pricing China would unleash on a producer and to find a use for the Thorium that will drop out of the Rare Earths refining process as a fuel source for a new generation of reactors.

It was all entirely reasonable. As an American, I sat there appalled at the way we allowed ourselves to become utterly dependent upon China for the raw materials of pretty much every high tech device on Earth. The Thorium reactor concept is well known to me, as I helped design one in college for a project. It is a great design that would be safer than current reactors and the fuel costs ridiculously cheap. There was talk of lobbying Congress to develop a new regulatory agency and avoid the heavy hand of the NRC. All very well thought out and all of it would benefit America.

And with all that, likely none of it will get done. If this coming era is defined by net negative mood bias, then big plans such a new regulatory agencies (to get things done, as opposed to obstructing or enforcing laws) will be impossible, the mining part might happen as part of a trade war, but we have to also build a refinery for ~$1 billion to just meet current U.S. needs (we sold the refinery we did have to… China – who literally took it apart and rebuilt it there. Sigh.). Not impossible, but again, we’ll be going upstream against the forces of anger and breakdown and large projects will suffer. The thorium reactors themselves are a great idea – for a positive mood era. A negative mood era, colored by extremist environmentalism (a course I expect) and anti-science mood will not treat Big Science projects well.

We are watching it all unfold, friends. It is a slow process, but the wheels of time grind fine.

Tuesday, November 30, 2010

Odds and Ends

Going to be another slow week here at FutureJacked as I have to travel again for the day job.

Just a note on the tenor of the times. Look at how the following two stories are unfolding. Look at the reactions by the Powers That Be as they reflect current mood and be aware of how the changes in mood are going to affect how similar stories play out once the Bear returns in force.

Item #1, the absurdly transparent takedown of Julian Assange and the efforts to clamp down on Wikileaks:

Interpol issues 'Red Notice' for Wikileaks' Assange
from the BBC
Interpol has issued a "Red Notice" for the founder of the whistle-blowing website Wikileaks, Julian Assange.

It said the Australian was wanted for questioning in Sweden over an alleged sex offence, which he has denied...

An Interpol notice on a trumped up charge - but probably effective enough for times like these. Make it a drug or sex crime and you whittle away from knee-jerk support of the human rights crowd. Now, think what this story would be deep in a bear mood, with an angry, polarized power structure in fear of an angrier and more polarized citizenry. The Assange story would probably (will probably?) be one of how he was taken out by a car bomb or a Predator drone.

Item #2, the "economic" take on stories continues to be a staple of newspaper/mainstream media filtering:

Unemployment checks to 2 million to stop by end of month
By Paul Davidson, USA TODAY
About 2 million Americans stand to lose their unemployment checks by the end of the month after Congress failed to extend benefits Tuesday, threatening to crimp consumer spending in a fragile recovery and critical holiday shopping season...

Once the Bear goes rock star on us, USA Today and other newsish outlets aren't going to be leading off with how a benefits cutoff is affecting consumer spending. They'll be talking about the rage in the streets, the evil machinations of "Them" (wealthy, politically connected) to oppress "Us" (poor, downtrodden). "Fragile consumer spending" will be the last thing on peoples minds as they weave the stories that try to reflect the angry mood.

Enjoy this strange twilight era we find ourselves in as best you can. Lot's of heat and volume, but little of the anger is getting translated to action. Yet.

Wednesday, November 24, 2010

Happy Thanksgiving

While we await what comes next for society and markets, let's not lose sight that previous generations have endured and thrived in conditions far harsher than anything even most impoverished Americans have experienced. Our ancestors were not some different species - we have in us the same toughness, the bravery, the same ability to build up communities with the long run in mind. That our current society reflects a decadence and corruption that would have appalled and startled those of previous generations is all part of the same cycle. We'll get to live through the next Great Turning of the wheel. As we live through it, let's take time to stop and give thanks for the good things that were passed along to us and to plan for a better future for those who will follow us.

Happy Thanksgiving.

Tuesday, November 23, 2010

Yes Virginia, There is a Bear

This week has started off with a series of events so much in tune with the socionomic theory of how Bear Markets unfold as to almost be absurd.

First, we have War (good God, y'all):


Second, we have political rage (though it is still in its muted, infant stage - the real crapstorm awaits):


Third, we have social rage finding an outlet via our (very, very close) friends with the TSA:


Fourth, we know we are still in the early phases of this era of negative mood because the media talkers are still being nice and deferential to the plutocrats:


Take what you've seen here, extrapolate out about a thousand-fold and that is what I think you'll be seeing within in the next few years.

Friday, November 19, 2010

Note To Those Who Would Oppose the Machine

The recent story out of Sweden has me thinking more and more about the backlash that the corporate cartels and governments are going to lay down on populations across the globe once the negative mood goes negative in a parabolic manner.

Sweden issuing arrest warrant for WikiLeaks' Assange
by Declan McCullagh, CNET News

The Swedish government said today it would issue an international arrest warrant for WikiLeaks spokesman Julian Assange on rape charges.

A Stockholm district court ruled that Assange will be "detained in his absence" on charges of rape, sexual molestation, and unlawful coercion. The decision came at a hearing where Sweden's director of prosecution, Marianne Ny presented evidence related to the allegations...

Traditional methods of influencing the governing elites, the stuff they taught us Civics class about writing our Congressfolks and Senators, debating the issues, etc., etc., were proven by the TARP fiasco to be the crock of steaming fecal matter that the more cynical among us had always asserted.

As for other methods of influencing the behavior of the elites, such as street protest - I personally think that era has ended with a whimper as well. "Free Speech Zones," increasingly effective police efforts to break groups into pieces before protests even occur, and the (current) lack of a coherent protest message that is appealing to the "Silent Majority" all conspire to make such efforts a general waste of time.

The efforts of the elites to tackle other methods of protest - cultural stuff like songs, video, books, whistle-blowing (a la Wikileaks) etc. are age-old but are wearing new labels. In the past, a poet in the old USSR would have been hit with some variety of sedition or disturbing the peace type charge. With that tactic grown stale, we now see the growth of efforts to discredit opponents to the state via drug or sex crime charges. "Peace" groups that might support a "victim" will shy away from supporting a "drug trafficker" (such as was the case in Russia back in the 1990's when they jailed the rabble-rousing poet Alina Vitukhnovskaya on drug charges that turned out to be fabricated, instead of the old tried and true method of calling her an enemy of the State).

Wikileaks is seeing this in the actions against Assange. The discussion and debate will now always center on the salacious "crime" he is supposed to have committed, not the criminal behavior his organization is seeking to bring to light.


Much of this will be obvious to many readers, but I wanted to revisit it as a reminder. Once mood craters, lots of opposition movements are going to spring up. Always remember that the elites are fantastic at suborning opposition groups that work outside the mainstream parties. Always keep that in mind. You are going to travel a rough and rugged road between here and whatever place you think you need to move the country (or what will be left of it) once mood plunges into the abyss of rage and fear that I expect. I'm not saying don't pursue whatever reform you think you need to support. I am saying, do it with both eyes wide open.

Tuesday, November 16, 2010

Flying Fault Line?


I've been wary of commenting on the building anger over getting felt up by the skilled practitioners of safety with TSA. This is mainly because I figured it was just another example of the nutless libertarian movement which rages mightily on the interwebs about Freedom!, but truckles under the first time someone yells loud at them.

Well, the anger seems to be building (as socionomics posits that it would). The folks sponsoring National Opt Out Day seem to be gaining some momentum. We'll see come Thanksgiving what really happens. Real anger translating into real action? Or just more suburban soccer mom whining and compliance with a security review that really doesn't protect against any of the recent threats?

We'll see where the DJIA is come next week and then we'll see if it correlates. A socionomic experiment at work!

Friday, November 12, 2010

More Real Estate

I had expected the "bando" phenomenon to take off this year and was wrong. Mood and the markets it drives have held up better than I expected to this point. But the basic supply and demand phenomenon remains - lots of abandoned properties intersecting with growing numbers of homeless people or people in need of lower rent payments and an immoral dark empire of fraudulent real estate transactions lending a moral air to the adverse possession of homes by men and women desparate enough to give it a try.

At Legal Fringe, Empty Houses Go to the Needy
by Catherine Skipp and Damien Cave, New York Times
Save Florida Homes Inc. and its owner, Mark Guerette, have found foreclosed homes for several needy families here in Broward County, and his tenants could not be more pleased. Fabian Ferguson, his wife and two children now live a two-bedroom home they have transformed from damaged and abandoned to full and cozy.

There is just one problem: Mr. Guerette is not the owner. Yet....

...Michael Allan Wolf, a real estate expert at the University of Florida law school, said adverse possessors also disrupt the chain of title. Rightful owners end up having to evict tenants. The time between foreclosure and legitimate resale may be extended....

I added the bold to that snippet about screwing up the chain of title. Professor Wolf neglects to mention other things that might disrupt the chain of title. These include the big banks baiting homeowners who call in to have their mortgages reworked into missing three payments so they can qualify for a modification program, then foreclosing on them and ignoring the fact they told them to stop payment, or the fact that big banks are churning out fraudulent documentation to support shaky claims to title. But I forget, when Banksters break the law and commit fraud, it isn't illegal. When common folks do it, they get jail time. Gotta keep that in mind. This is why the assault on the Rule of Law by the financial elites is so poisonous. It feeds down into the general population, eating away at centuries of work to make the ideal of Justice and the primacy of Law the centerpiece of civilization.

This is another fault line to keep an eye on. When these tresspassers/desparate fellow citizens find conditions worsening and they feel that right and morality is on their side when they seize these properties, it has the making for an explosive cocktail that could lock up real estate transactions for decades...

Continuing to Sow the Wind...

...and awaiting the Whirlwind that will grow from it.


Just another blazing example of my "Asteroid Theory" of the financial and political elites in action. The "Asteroid Theory" is that no one can be as willfully blind, as crassly greedy and as eager to destroy the fundamental pillars of trust and sound banking upon which our modern economy rests as the Banksters and Wall Street Playerz and the lickspittles they own in D.C. have been over the last ten years - for the sheer fact that they are burning down the house in which they live. Therefore, the elites must all know that a world-killing asteroid is on the way and they are all just living it up today with no expectation that there will be a future to plan for. This is just a running joke on my part, but as I continue to read about the foreclosure-MBS scam and the fact that Prosecutors and Judges are actively working to destroy the very Rule of Law that gives them their power, I begin to question whether it is a joke or not. No one, especially in the realm of Prosecuting Attorney - known to be unsympathetic hardasses in the main, can remain this blind to vast criminal undertakings can they?

Sigh.

Matt Taibbi shines a little light on the subject. Amazing when I have to turn to Rolling Stone for investigative journalism into this topic. And mainline newspapers wonder why their business is cratering...

Courts Helping Banks Screw Over Homeowners
by Matt Taibbi, Rolling Stone
...Foreclosure lawyers told me one other thing about the rocket docket. The hearings, they said, aren't exactly public. "The judges might give you a hard time about watching," one lawyer warned. "They're not exactly anxious for people to know about this stuff." Inwardly, I laughed at this — it sounded like typical activist paranoia. The notion that a judge would try to prevent any citizen, much less a member of the media, from watching an open civil hearing sounded ridiculous. Fucked-up as everyone knows the state of Florida is, it couldn't be that bad. It isn't Indonesia. Right?

Wednesday, November 10, 2010

Anger Translating to Action?


I tend to look to the U.K. as a leading indicator for what will come to the U.S. in trends of governance, the surveilance state and how the population will react to controls or other government actions.

If they hold up as a leading indicator and as mood deepens into a negative trend, expect to see mobs in the U.S. to spring up as cuts in spending go into effect next year. I still think mood is not strong enough here yet and we still have enough Xanax and Prozac flowing in our collective brains to dampen the mass herding impulse for a bit longer, but the dam is weakening and when the break comes, I fear it will be spectacular.

Monday, November 1, 2010

Some Frightening Food for Thought

Take a few minutes and read about the Mexican Drug War from someone on the ground there. Note, how the Zetas got their start. Think about this in terms of a collapsed economy, the inability of the U.S. to sustain massively expensive foreign wars and hundreds of thousands of well-trained soldiers facing a Department of Defense that will be slashing its budget and a private economy that is stagnant at best and, once Wave 3 gets underway in earnest, will be in freefall. Oh yeah, and don't forget the anger that goes along with eras of negative mood:

The Mexican Drug War in One Lesson: Know Your Zetas
By Pancho Montana

...Los Zetas started out as an elite Special Forces unit–or GAFE–created and trained in the School of the Americas (in the USA), with counter-insurgency in mind: Specifically, to combat the 1994 Zapatista Army of National Liberation insurrection in Chaipas. A few years later, at the turn of the millennium, GAFE units found themselves with no insurgencies to fight. So they were re-trained for drug-interdiction operations and were sent to Tamaulipas to capture the capos and disrupt narcotrafficing operations in the region. One of those GAFEs was headed by a man named Arturo Guzmán Decena, who would go on to be known as “Z-1”–the leader of the Zetas. Z-1 realized there was a lot more money helping the traffickers than trying to police them, and ended up as the personal escort of Osiel Cardenas. Nicknamed “The Friend-Killer,” Cardenas was just starting to take control of the leaderless Gulf Cartel around 1998-1999. Hiring elite soldiers was his way of consolidating power...

...And that’s how it all began: Bored, over-trained professional soldiers going rogue and working as hired killers for the Gulf Cartel...

...Monterrey went from to suburbia to shithole and then into hellhole category in less than a year, and it’s getting even worse. In the last two weeks there’ve been two shootouts between Zetas and the Army. The first one left 28 Zetas dead on the road in General Treviño, Nuevo Leon, plus 5 more in Juarez the next day, and 22 the next week on Mier City, Tamaulipas, on the border with Nuevo Leon. And that’s not counting all the individual executions between the battles. Nearly every day there are grenade attacks against police headquarters of different municipalities and state prisons.

That’s leaving out the mass graves, rural training camps for sicarios, the assassination of a local mayor by Zetas dressed as Federal Police, and all kinds of other stuff that makes life in Monterrey an adventure whether you want it to be or not...

Not sure what to recommend. Keep your eyes open as things continue to deteriorate. If you have means to provide structure, employment or something - anything - constructive for young males to rally to, deploy it.

Friday, October 29, 2010

Superstition on the Ascent

Here is a headline straight out of Socionmic Theory for eras where mood is in a dominant negative phase:

Superstitious Beliefs Getting More Common
by Emily Sohn, DiscoveryNews
It's that time of year again. Ghosts, goblins and other spooky characters come out from the shadows and into our everyday lives.

For most people, the thrill lasts for a few weeks each October. But for true believers, the paranormal is an everyday fact, not just a holiday joke...

...trends in television programming offer a sense that there is a widespread interest in mystical phenomena that is becoming more common. In the 1970s and 80s, Bader said, there were maybe one or two paranormal-themed shows in the TV line-up. Today, there are dozens, including programs about ghost hunters, psychic kids, haunted homes and even possessed pets...

Expect more of this. Some of the coming rise in paranormal and "occult" activities that I expect to see will simply be individuals who have long held these beliefs finding a climate more conducive to airing these beliefs, while others "on the margin" will pick up these beliefs as a symptom of "magical thinking."

Plus, there are a number of fringe phenomena that I believe will be integrated into science once the negative mood phase is well underway, as conventional theories are found wanting in an age of anger and destruction of old paradigms.

Should be a wild ride. I'd brush up on my Crowley, Regardie and Lisiewski if I were you...

Tuesday, October 26, 2010

Another Anecdote of Doom

Here's another anecdote on the interest in "doomer" topics. Matt Savinar at Life After the Oil Crash has had forums up for years, discussing peak oil, financial instability, prepper actions and general doomer topics.

He's had to move the forum a few times recently because traffic is so high the boards crash. He put up a "disinvitation" to people last week - basically saying that if you need the forum just to find a "daddy" to make you feel better or answer all your questions the way you want to hear them, then you should not participate in the forum. Guess it wasn't enough to drive off business because Matt put this notice up yesterday:

Editor's Note: Future of the Forum
Am closing it, except for the meetup section, am working on archiving the old one. (When I take it out of maintanence mode, it still allows people to post and them "bammo" it crashes again.) Will have more tomorrow.

Wow. So much interest in a Peak Oil/Doomer forum that they continue to crash the boards, even on several different forum vendors. Folks are nervous out there.

Monday, October 25, 2010

Another Sign...

This weekend gave us a non-socionomic indicator that the Apocalypse must be right around the corner: Missouri 36 Oklahoma 27

Be afraid. Be very afraid.

Thursday, October 21, 2010

Socionomic Context on the Rare Earth Metals "War"

I'm sure you've seen some mention of China imposing export restrictions on "rare earth" elements that have become critical to many new energy and defense technologies. This issue has been discussed here at FutureJacked as well as in the Socionomist.

The Congressional Research Service produced a report on the rare earths and policy options entitled Rare Earth Elements: The Global Supply Chain. For policy wonks it is worth a read.

What I'd like to point out is the schizophrenic nature of the response to this supply issue/challenge/problem. Socionomics tells us that as this period of negative mood drags on, more restrictions will be put in place on capital and goods, more anger will be expressed in international relations and the superstructure of treaties and trading ties built up during the old Bull Market will be shredded. We are seeing the initial phases of this.

Options floated to this issue include challenging China through the WTO, supporting new mining operations in the U.S. and stockpiling.

The WTO option is based on the dying paradigm of harmonious international relations, wherein countries and societies saw integration into a larger and freer world economy would allow a rising tide of prosperity to lift all boats. If the socionomic thesis is correct and if we are in an era defined by negative sentiment, then one might expect any WTO action to fail - either by disappearing into bureaucratic swamp and fizzling out or by China refusing to allow the WTO to dictate their trade policy on this matter, preferring instead to divert that material into strategic domestic production instead of being a wholesaler to the West who then turn the material into value-added products.

Supporting new mining operations seems also at cross-purposes with negative mood. While the idea of home-grown mining of goods for "us" as a way of sticking it to "them" has an appeal, there are dramatic hurdles in place to building out new infrastructure in the face of the environmental policies put in place during the Bull era, back when we thought we could afford all sorts of extra costs on productive activity because we were all going to get rich, stay rich and buy cheap stuff from China. Home-grown production of rare earths will come to pass in the U.S., but not after ugly fights with environmental types, in my opinion.

Hoarding/Stockpiling will probably be the first option chosen. The defense stockpiles will be rebuilt based on whatever supply can be obtained whilst the legal battles over resuming production in the U.S. are fought. Hoarding/stockpiling is a natural reaction to uncertain times and probably will be implemented quickly.

Remember, we are still operating in a world structure built up and defined by positive mood beliefs. That structure is totally at odds with the growing negative sentiment. When/if we see the big collapse in mood once this delusional "I've got my eyes closed so the monster under the bed won't see me" phase breaks like bad fever, then the schizophrenic nature of trying to operate within a world economic system built for a dead era should come clear, and a trail of broken economies, ignored treaties, trade wars and eventually hot wars will follow.

Tuesday, October 19, 2010

Building a Better Sociometer

Socionomics has proven its worth over the last decade. As this discipline gains momentum, we continue to search for better and better mood meters. The equity markets have been excellent proxies and their use is well chronicled in socionomic literature.

Well, as the Communications/Informational Revolution continues to unfold and social networking reshapes how communication unfolds, a researcher from Indiana may have stumbled upon a way to gauge and monitor mood in near real-time:

Twitter Can Predict the Stock Market
by Lisa Grossman, Wired Science Blog
The emotional roller coaster captured on Twitter can predict the ups and downs of the stock market, a new study finds. Measuring how calm the Twitterverse is on a given day can predict the direction of changes to the Dow Jones Industrial Average three days later with an accuracy of 87.6 percent.

“We were pretty astonished that this actually worked,” said computational social scientist Johan Bollen of Indiana University-Bloomington. The new results appear in a paper on the arXiv.org preprint server...

This is some very exciting stuff. The correlations will somehow have to be tied back to Elliott Wave forms, I assume, but it is very encouraging that research continues to validate the socionomic premise, even when it isn't trying to.

The Great Game

I strongly suggest you read Charles Hugh Smith's recent blog post on Oil, China and his reading of Global Geopolitics:

The Great Game: Geopolitics and Oil
Geopolitics is not called The Great Game without reason. The game of dominating the world's resources, nation-states and alliances is like a combination of Go and chess, with the threat of military conquest or defeat always hovering over the statecraft and financial game...

I recommend the article for two reasons. One, because I think it is a cogent analysis of how power really works (and because I agree with him on the expectations of a coming collapse in oil prices - a "head fake" that few are expecting) and because it reveals quite a number of silver linings in the stormclouds that seem to crowd the horizon.

We often dwell on the absurdities and negative aspects of the USA's current position in the world. Mr. Smith's article is a good reminder that there is still a firm base upon which to build a better country once the Great Collapse reaches its howling end point.

Monday, October 18, 2010

Multiculturalism Has Failed?

Pardon the long silence here at FutureJacked lately. I was in Europe for nearly two weeks on business. Glad to be back, though this lingering plateau of tension in mood and markets is getting old - not the Mr. Market cares what I think.

Speaking of Europe, negative mood continues to build up under the brittle facade of happy talk. Prime Minister Merkel now gets on board by taking a shot at one of the sacred cows of the last 30 years - the multicultural society. Actually, I might argue that this particular cow has been sacred since the end of World War II. Socionomics marches on:

Merkel says German multicultural society has failed
from the BBC
Attempts to build a multicultural society in Germany have "utterly failed", Chancellor Angela Merkel says.

She said the so-called "multikulti" concept - where people would "live side-by-side" happily - did not work, and immigrants needed to do more to integrate - including learning German.

The comments come amid rising anti-immigration feeling in Germany.

A recent survey suggested more than 30% of people believed the country was "overrun by foreigners..."

Oh my. And to have this come from Germany, which is normally more sensitive to this kind of thing. Actually, I heard a similar sentiment from a few conversations I had with people in Germany and Austria both.

Another trend to watch.

Wednesday, October 6, 2010

Imagine the Coming Reaction

Icelanders took to the streets recently to vent their anger over the continuing economic collapse of their island nation.

Iceland's politicians forced to flee from angry protesters
by Jill Treanor, The Guardian
Protesters took to the streets of Reykjavik today, forcing MPs to run away from the people they represent as renewed anger about the impact of the financial crisis erupted in Iceland.

The violent protest came amid growing fury at austerity measures being imposed across Europe. Disruption in more than a dozen countries this week included a national strike in Spain and a cement truck driven into the Irish parliament's gates.

Witnesses said up to 2,000 people caused chaos at the state opening of the Icelandic parliament, with politicians forced to race to the back door of the building because of the large number of protesters at the front. Eggs were said to have hit the prime minister, Jóhanna Sigurðardóttir, other MPs and the wife of the Icelandic president, Ólafur Ragnar Grímsson.

Árni Páll Árnason, the minister of economics affairs, who was caught up in the protests, said: "We have a difficult economic situation and this is something to be expected in a democratic country..."

I want to draw your attention to the bolded sentence from the Guardian story above. At least a segment of the Icelandic political elites, after getting pelted with eggs and shouted down by protesters, just shrugged it off and chalked it up to the cost of doing business as a democracy.

Think for a moment what Congress would have done had the same thing happened here in the Land of the Free. With the exception of Ron Paul, what would the response had been? Mass arrests? A new set of names on the "No Fly List?" Protestors being tasered left and right, flopping like dying fish on beach? Can you imagine members of Congress or Senators just blowing it off, basically saying they understood the anger and it was unfortunate?  Ten bucks says the word "terrorist" would have been used fifty times in the first five minutes of a press conference if a political elite had been struck by an egg.

Little anecdotes like this matter, in my opinion, as they can help forecast the flavor of the times to come. Socionomics gives us the broad strokes and tenor of the times, but individuals and societies still have a choice of how to respond to the mass negative mood.

Iceland has chosen to at least attempt to keep a civil government that is somewhat responsive to the People. In the U.S. we only need look back to 9/11 to see where our choices have landed us.

Imagine a President who came out and, instead of telling the country to be scared and hide and let the military do all the heavy lifting, the President and leadership had hearkened back to the mindset of World War II and told people to be strong, be prepared for hardship and that tough choices would have to be made, especially on things such as our dependency on foreign oil.  And then that President had actually made hard choices - not to kill or invade, but on how we in the U.S. use energy, how we fund out government, how we crush our businesses with regulatory burdens and how we plan to fund the coming Baby Boomer retirements - all of which help inform the decision to stay in the Middle East, which was one of the drivers of that tragedy.

Then imagine that the big playerz in the Federal Reserve had championed austerity and balance sheet repair back in 2001 instead of encouraging people to lever up and go out and buy and SUV?

Imagine that instead of invading Iraq, that $1 trillion had gone into fifty new nuclear power plants, into massive new wind farms and into restructuring the U.S. auto fleet for all-electric or hybrid electric vehicles? Where would we be today?

I realize that wishful thinking and speculation can't overcome the fact that we have the government we deserve and, frankly, probably the government ordained by the precarious position of the waves of social mood that have brought us to this point. While acknowledging that socionomics has a deterministic feel to it, my interpretation remains that individuals can make choices that have significant impacts, not just on your personal lives but on society at large. Your choices and behavior matter, especially in times of stress. Remember that in the days and years to come.

I have a bad feeling we are going to get to see the difference between Icelandic elites faced with protesters and U.S. elites faced with protesters all too soon.

FYI, I will be out on travel for the next couple of weeks. I'll try posting from the road, but no promises.

Monday, October 4, 2010

More Mortgage Mess

Please check out this recent post by Karl Denninger over at The Market Ticker. It links over to a very long document that will interest those of you who have your JD. Even for those of us non-lawyers, it makes a fascinating read:

MERS/MBS/Foreclosure Goes RICO
...[W]ithout standing [REMICs] can't foreclose, but then we get back to "who can?" And what we find is that the originator was paid, and thus they can't either. Worse, for those originators that are bankrupt, their "assets", such as they are, can't go anywhere without a bankruptcy trustee's signature, and further, even if someone was to acquire that, which nobody has, THE REMICs CAN'T TAKE THE PAPER ANYWAY AS THEIR CLOSING DATE HAS EXPIRED.

So we have a bankrupt originator who was paid in full and can't foreclose, and we have a note that can't be transferred into the REMIC without destroying its tax preference (retroactively, incidentally), which instantaneously trashes the value of the MBS - probably by more than they could hope to recover if they were going to take the note anyway...

Another fistful of sand is about to be thrown into the gears of real estate commerce - and the associated Mortgage Backed Securities. Fugly.

Friday, October 1, 2010

Mortgage Market Breakdown

The fraudulent practices and obscene degradation of underwriting practices that metastisized during the mortgage markets during the Housing Bubble powered by the delusional positive mood from 2002 - 2008 are unraveling, just as mood is unraveling:

Foreclosures Slow as Document Flaws Emerge
The foreclosure machinery that has forced millions of Americans out of their homes is beginning to seize up as some lenders and their lawyers are accused of cutting corners in their pursuit of rapid home repossessions...

...[O]ne of the major title insurance companies, Old Republic National Title, has sent a bulletin to agents saying that “until further notice” it would not insure title to properties foreclosed upon by GMAC Mortgage, the country’s fourth-largest home lender and one of the two big lenders at the center of the current controversy.

GMAC declined to comment, and Old Republic representatives did not return calls.

GMAC has acknowledged legal missteps in processing mortgages, and JPMorgan Chase has acknowledged the possibility of missteps, and both have suspended all foreclosures in the 23 states where they need a court’s approval. That’s 56,000 in the case of Chase alone; GMAC declined to provide a number...

If title insurance dries up and stays that way, we will have ourselves one hell of a trainwreck on our hands.

Bull Market Heroes get eaten by the Bear. The stock market. Warren Buffett his ownself. Computers. Now Housing (back for another round in the meatgrinder). Note the common thread - fraud and corruption leading to mistrust and the breakdown of the complex systems that are founded on trust and an assumption that the rule of law is in force and that the playing field is level. This Great Bear market will trash the concept of trust, gut the happy unicorns of the belief that "the authorities are not corrupt" and blacken the rainbows of naive gullibility in "modern" underwriting practices.

This is almost as sadly funny as the report the SEC just released, blaming the flash crash on Waddell & Reed for selling a block of 75,000 e-minis. They need to have a coupon for a bottle of Crown Royal on the front of that report, so that anyone reading it can get tanked before getting to far in - that is the only way you could possibly believe the story the SEC is telling there.

These are signs of a schizophrenic system. Crazy systems, like crazy people, can be dangerous to those in the general area. Be aware.

Thursday, September 30, 2010

Stuxnet and Socionomics

If you have not been following the story of the Stuxnet malware that has come to light recently, I strongly recommend that you get yourself up to speed on at the least general nature of this amazing piece of code. Some resources include:

The fascinating technical aspects of this computer worm aside, I'd like to view this story in the context of socionomics.

If we work on the assumption that the vast majority of societies are in a negative mood trend (though currently experiencing a positive mood rally in the context of the overall negative trend), and if that trend is one that will result in an enormous bear market, then our view of Stuxnet can easily shift from seeing it as a one-off "dirty trick" used to hit at Iran by parties "unknown" (very similar to something the U.S. did to our Soviet friends a few decades back) to another leading indicator of what a world governed by negative mood might look like.

Bear markets eat the heroes that were raised up by the preceding bull market. This goes for Warren Buffet and the Incredible Charlie Munger - who are going out of their way to out-Goldman Goldman-Sachs when it comes to arrogance and mob-baiting. I think this concept can also be applied to other "concepts" that enjoyed great prominence in the preceding bull market. And if there was ever a poster child for the late great bull market, it was the computer. Even with the bursting of the tech bubble, computers and software have remained powerful symbols of U.S. expertise and dominance.

Bear market moods bring barriers and walls to physical goods. In the past, those same barriers included barriers against information, new ideas and foreign concepts, and the methods of enforcement included book burnings and torture. Responses to that included the formation of underground secret societies, secret libraries and who knows what manner of individual retaliation.

In the modern era, expressions of this aspect of negative mood might include wave upon wave of increasingly sophisticated malware, resulting in the political elites clamping down on use of communications and computer networks. What makes this latest hack so impressive is that it made the leap to SCADA systems and could actually affect equipment in the "real" world. Now that hacker teams know that someone has bridged that gap, I would expect the black hat community to be all over it. Granted, this initial attack looks like an expensive piece of code, almost certainly sponsored by a nation-state. But with all the cheap processing power and brilliant minds out there, one can expect a coming round of malware hell-bent on crashing infrastructure systems and causing a bit of chaos. The walls, restrictions and barriers that will be put up in response will further reinforce the negative mood and trash the reputation of "computers" as agents of progress and benign utility.

Just a thought.

Deflation? Yes.

This picture, sent to Michael Shedlock, who blogs as Mish over at Global Economic Trend Analysis, gives you a good picture of the price deflation being experienced in manufactured goods:

Massive ongoing credit deflation, a continuing trend towards price deflation (in markets relatively free of government influence on pricing, unlike medicine, insurance, etc.) - just think what this is going to look like when we go off the credit cliff.

Thursday, September 23, 2010

FYI

FYI, I'll be travelling on business for the next several days. I'll try to get some posts up this weekend, but no promises. Best of luck navigating this excruciating levitation act that mood and markets are engaged in at the moment.

Tuesday, September 21, 2010

Pass the Kerosene

Update: Check out Mish's continuing coverage of this story - especially the letter from a former Berskire shareholder to Mr. Buffett.

The economic elites are feeling sassy these days. So much so that the big-time Crony Capitalists are feeling free to speak their minds about how they really feel about the economic dislocations of the past few years.

Hear it firsthand from Charles Munger, described by the shiny young man who introduces him in this video as "one of the most principled leaders in American business." Here, this "principled" man (as long as the government largesse is helping protect or build up his principal), who actually does have a lot of intelligent things to say, shows how disconnected the wealthy elites are from the anger that is building across the country.

Charles Munger's speech at the University of Michigan

Choice quotes:

“You should thank God” for bank bailouts
“Now, if you talk about bailouts for everybody else, there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies.”
“There’s danger in just shoveling out money to people who say, ‘My life is a little harder than it used to be'”

Wow, the political and economic elites truly seem hell-bent on building the bonfires upon which to burn down the entire structure of the economy and Mr. Munger has just poured a tanker truck worth of kerosene on the whole thing. I kept waiting for Charlie to suggest that they all trade in their Gucci loafers for some leather riding boots and ride through Ann Arbor on horseback, whomping the peasants.

When the show trials start, you may rest assured clips of this video will be part of the prosecution's portfolio.

h/t Bloomberg and Mish

Monday, September 20, 2010

Interview

If you are interested, I did an interview with Brett Owens over at The Contrary Investing Report last week that he now has up. In the interview we discuss general socionomic theory, my riff on Peak Oil and socionomics and discuss some markers for the coming downturn:

Exploring Socionomics and Social Mood Trends with Michael Flagg of FutureJacked

I've not done many interviews in the past and hope to get better. There were a few points I probably could have done a better job with, but we live and learn. Brett was a great host and I really appreciate his time and interest.

The Limits to Prepping

We've discussed what I've called termed the "Mechanics" of dealing with the coming breakdown - stealing this engineering term as a way of trying to figure out how individuals and communities are going to handle the incredible dislocations that I believe are coming our way, courtesy of a wave of negative mood so deep that the like has not been seen in centuries, though the flashes that tore across the United States in the 1860's and that ripped Europe, then much of the globe apart in the 20th century, were bad enough.

One key concern is the "brittle" nature of the systems that have grown up during the late great Bull Market that flamed out at the beginning of this new century. Yes, we have very cheap energy (especially compared to the great benefits we derive from it), we have a vast abundance of cheap food (the product of industrial farming techniques), and, even with all of its absurdities, we have a government system that still works tolerably well as far as the average citizen is concerned. Be that as it may, each of these key systems is in grave peril:

1. The cheap energy we enjoy is courtesy of our immense military power. The ability to keep the sea lanes open, to keep friendly (or at least cowed) governments in power in Saudi Arabia, Kuwait, Congo, and Mexico and even unfriendly or neutral governments, such as Iraq and Venezuela, contribute mightily to the global supply of petroleum. In deep bear markets, the reigning military power is often challenged. That challenge, even if met successfully, can often disrupt or destroy the supply chain it was built to defend. By that I mean, sure, we could bomb Iran into dust and keep bombing for years to come, but if the blowback meant a devastation of Saudi oil refineries and ports, a revolt in Iraq and Kuwait and the choking off of passage through the Straits of Hormuz - what would that mean to household and government budgets in the U.S. when the impact on oil prices was felt? Alternatives do exist and rationing would be put in place, but imagine the disruption as the country moved to only being able to use 9 million barrels of oil/liquid fuels products a day instead of 20 million?

2. The cheap food system continues to worry me deeply. It is highly reliant on petroleum products for both fuel and pesticides. Ag would almost certainly be given a top claim on fuel in any rationing situation, but even then, considering how corrupt the federal government has become (note the disgusting way BP continues to distort how the Gulf Oil Spill disaster is "researched) would such rationing work? What worries me is that it would be a step-wise collapse down in production if petroleum supplies were restricted, not some gentle curve. Remember, to do industrial farming right, you have to use the soil totally different than in non-industrial farming. Industrial farming means you kill off as much of the bugs in the soil as you can, you have to run enormous combines and tractors through your fields, you have to pretty much use RoundUp Ready crops these days for large scale production of corn or beans and if any of that chain gets broken, you can count on massively reduced harvests.

And if you think switching to non-industrial farming techniques is viable in the short term, I will first laugh sadly, and then refer to you some quotes from a man writing for Collapsenet under the pen name Unrepentant Cowboy - a Texas farmer who is trying to farm without using Big Ag hybrid seeds and use the kinds of techniques you'd need in a world where inputs such as capital and petroleum were restricted:

From Corn Harvest 2010: Corn harvest is near done and the end can’t come soon enough. I am seriously considering not planting corn again as a commercial crop. Like many that have studied sustainable agriculture, I decided to get away from genetically modified grains. So the corn we planted was non-Roundup-ready corn. Not only non-Roundup-ready corn, but also a non-hybrid. The idea was to grow corn from which I could keep back my own seed... ...For all of this we harvested about 60 bushels to the acre, while most people that grew Monsanto’s best harvested between 120 and 140 bushels to the acre. They didn’t work half as hard as we did. Half hell, one-tenth as hard. Their crop is worth as much or more per bushel than mine in the local market. There’s a reason farmers use chemicals and genetically modified grains. People want cheap food. Farmers want to make money growing food. Oh, you’ll hear talk about organic this and that or natural this or that. Bottom line: at least 95 out of every 100 dollars worth of food sold in this country is produced by industrial agriculturalists. You cannot grow good wholesome food for those prices. Period. Every goddamned advance in efficiency or productivity over the years has been met with a price cut in the value of the commodity produced...

Unrepentant Cowboy is a must-read for anyone thinking that disruptions to industrial farming techniques will be met by smooth and seemless transitions as farmers immediately adjust to meet new market conditions. Ag is like every other sector of the economy - burdened with debt and locked into production techniques that work great in an era of positive mood, but which have little resiliency to face a shattered economy and society.

3. And yes, for all of the horrible manifestations of corrpution and stupidity we can focus on, the government system in the U.S. still functions well for 80% of the population. When budgets get slashed further, when services get sold off to corrupt corporations or abandoned altogether, when corporations buy off the Feds from the next great disaster, this system will face a crisis of faith. I believe the government system at the federal and state levels will be found wanting, with all the socionomically-predicted consequences inherent in it.

This was a lot of blog space to summarize what we've already been thinking about. I think it is important to revisit "where we are" because it has impacts on just how much we truly can prepare for the Coming Collapse.

On paper, getting out of debt, totally readjusting how you use transportation or grow food and trying isolate yourself from the impact of food or oil shocks should be your task. In reality, many people, especially younger ones are burdened by excessive student debt while at the same time facing a job market that has few prospects and many of those prospects are low-paying. Incentives (in the form of already-built infrastructure and propaganda for nearly 100 years) are skewed towards a car-centric culture and housing and job opportunities are layed out accordingly. Growing your own food is a pipe dream and the few who are attempting to grow bulk grops with heritage seeds or other sustainable practices may well be broke by the time the crash has settled out fully.

The energy required to keep the self-delusion of solvency and greatness alive is wearing the United States thin, but the self-delusion is still there. Prep for what you can but always remember that your mind and how you react and "swim" in the greater sea of mass mood is the most important asset you have.

Thursday, September 16, 2010

More on Our Brittle Society

This story from Georgia is a prime example, in my opinion, of just how ugly and protracted the downturn is going to be. Click on this link to hear about the story of a man being prosecuted for growing too many vegetables on his property.

I still strongly believe that once the Great Collapse gets going in earnest, kitchen gardens are going to make a comeback. Lawfare waged against citizens by government hacks will make it a dicey endeavor in many places as large gardens will fluourish and farmers markets will grow in popularity (propelled by not only locals wanting to support their neighbors but by the anger at, and suspicion of, large corporate farms using genetically modified crops - a perfect scapegoat for the negative emotions that will erupt throughout society as we slide into this long correction).

The lack of creativity and understanding by the governing elites continues to stun me. As one of the neighbors put it, local government should be helping him, not hindering him.

Morons.

Wednesday, September 15, 2010

Creative Thinking on Governance

Once the "Oh Shit" moment of the coming collapse has worn off, it will be time to get abuilding new and vital structures on the rubble-heap of "modern" society.

The concept of "Phyles" has a certain appeal that could move from "vaporware" to full implementation once modern states get hollowed out.  Check out this link for more.

For a fictional account of this in action, consider Neal Stephenson's Diamond Age as well as Daemon and Freedom (TM) by Daniel Suarez.

h/t John Robb

Strange and Befuddling Trend to Mainstream Thinking


The "strange and befuddling" trend these talking heads are discussing in confused tones is easy to forecast using socionomics. We've been discussing the trend in walls, barriers and bunkers here for years now.

Mood matters. Mood makes markets. By the time this Bear Market settles out, the mocking tone in reports like these will be long gone.

Tuesday, September 14, 2010

A Few More Fault Lines

Here are few more fault lines to consider when the next big economic quake rips off with the commencement of Wave 3 down in the markets.
One ugly point of contention will be access to what jobs are left available in a contracting economy. On the one hand, here is how the Baby Boom Generation will paint it:

Old workers can shine -- but will they get chance?
BY JOHN GALLAGHER
FREE PRESS BUSINESS WRITER
In June 2007, German automaker BMW was faced with an aging work force and declining productivity at its factory in Dingolfing, Germany. Older workers tended to call in sick for longer stretches, and they had to work harder to keep up with output demands.

The company responded with an innovative experiment that has been hailed as a prototype for how to keep an aging work force both happy and productive. As written up in a case study in the Harvard Business Review, BMW put a team of older workers (average age 47) on a pilot line, and let them make whatever changes they needed to keep productivity high...

I totally buy in that many older workers have very valuable skills and their knowledge can significantly contribute to a company's success. That said, here is a chart of the unemployment rate for those aged 16 to 24 from 2000 to 2010, you know the ones learning the basic job skills and laying the foundation for future careers:

Source:  BLS data

Enjoy thinking about the social ramifications of that chart, especially if that rate doubles yet again or gets worse. And one can imagine that since Baby Boomers are a massive voting block that "Age Bias" legislation will be strengthened in the coming years, strengthening a trend of oldsters staying in the workplace far longer than previous generations because their nest eggs have been shredded.  Fewer jobs to go around and the existing jobs won't see the rotation out of older workers that has been seen in the past. 

Pile that on top of a student debt load that the Baby Boomers never had to deal with:

How Debt Can Destroy a Budding Relationship
By Ron Lieber, New York Times
Nobody likes unpleasant surprises, but when Allison Brooke Eastman’s fiancé found out four months ago just how high her student loan debt was, he had a particularly strong reaction: he broke off the engagement within three days...

The propaganda that students and parents have been mislead with about the value of a college education versus the debt needed to obtain said credentials has lead countless millions into a trap that will spring shut once the true nature of credit deflation makes itself felt.

That my friends is the making of a generational storm.

A Silver Lining?

There might be a silver lining in all this. The younger cohorts might have to fall back on entrepreneurship and creative thinking just to survive. A new wave of small co-ops and family corporations might be one way to rebuild the foundation of wealth in America. I don't imagine it will be easy to do in the current restrictive tax and regulation environment, but let's hope the energy gets channeled to productive pursuits and not anger and rage at the oldsters out there...

Monday, September 13, 2010

I Feel Better Already

More apologies for the lack of posts. Things are very hectic outside of blogland. Couple that with this "undulating plateau" to steal a term from our Peak Oil friends and I've not had a huge sense of urgency to post. That is, until the Grand Poobah of the dead and gone Bull Era, Warren Buffet his ownself, has stood up and ruled out a Double Dip Recession - all without having to have Becky Quick prompt him.

Buffett Rules Out Double-Dip Recession Amid Growth
Andrew Frye and Kelly Bit, On Monday September 13, 2010, 1:14 pm EDT from Bloomberg
Warren Buffett ruled out a second recession in the U.S. and said businesses owned by his Berkshire Hathaway Inc. are growing.

“I am a huge bull on this country,” Buffett, Berkshire’s chief executive officer, said today in remarks to the Montana Economic Development Summit. “We will not have a double-dip recession at all. I see our businesses coming back almost across the board...”

...Buffett, who spoke via video connection to an assembly in Butte, Montana, said U.S. banks were ready to boost lending and encouraged entrepreneurs to seek financing for their business ideas. Berkshire is the biggest shareholder of Wells Fargo & Co., the top U.S. home lender...

I especially like the claim that banks are ready to boost lending. I spent Saturday at a college football tailgate getting caught back up with a number of entrepreneurs who run businesses in my local area and nationally. Every one of them would laugh at the claim banks are ready to boost lending. Granted, that is anecdotal. Time will tell.

I personally am bullish on the Republic just like Mr. Buffet, but that doesn't mean that one hell of a serious economic storm isn't coming our way and always remember, Bear Markets devour the icons built up by the preceding Bull Market...

Friday, September 3, 2010

Why the Stock Market’s Direction May Hinge on Katy Perry’s Next Hit Single

I am very excited to introduce Brett Owens as a guest blogger for FutureJacked.  Brett is one of those highly talented, multi-skilled guys who "do," not just dream.  He is CEO at Chrometa and blogs at The Contrary Investing Report and CommodityBullMarket.com and is one of the brightest minds out there in the community of men and women wrestling with the intersection of mood, markets and society.

Here is Brett's take on Why the Stock Market’s Direction May Hinge on Katy Perry’s Next Hit Single:

Last Friday on The Today Show, Katy Perry rocked the stage with a live performance of her summer 2010 mega-hit “California Gurls”. It’s bubble gum pop at its absolute finest:

  • “California Gurls might even be described as the token summer pop song, all bounce and fun” – The Tartan
  • “All bubble gum and candyland fun, its pure sugar-rush exuberance” – Montreal Gazette

Careful – this video might melt your popsicle…

Visit msnbc.com for breaking news, world news, and news about the economy

But could Katy’s calls to “put your hands up” also be a warning that you need to hit the “sell” button for your stocks ASAP?

Famed market forecaster Robert Prechter has been, over the last 15 years, pioneering research in a new field called Socionomics - a blending of “social mood” measurements, and economics. Prechter’s thesis is that the social mood of society rises and falls intrinsically, in wave-like patterns.

During waves up, people feel good about life, and they bid up stock prices. During waves down, the opposite happens – social mood declines, and folks dump their stocks. They get more conservative in business life as well, which creates a negative feedback loop of sorts – one that is only broken when the market finally bottoms, and mood turns up once again (as it inevitably does).

Socionomics has become a very intriguing, as well as controversial, subject in investing circles. New research and literature has emerged this year – leading the charge is a book I’m reading now by John L. Casti entitled Mood Matters: From Rising Skirt Lengths to the Collapse of World Powers. In his research, Casti looks at other potential “sociometers” – tools that can be used to measure social mood.

Central to the socionomics thesis is the sequence of cause and effect. Common sense and popular belief tells us that events happen in the world, which create subsequent effects. Like a hurricane hitting the coast causing widespread damage. Or bad economic news triggering a stock market decline.

Socionomics turns this traditional cause and effect sequence on its head. The cause in socionomics is the rise and fall in social mood. And the effect is the “news” that people gather as a result. Rising social mood results in “good news” – a rising stock market, peace treaties amongst warring nations, and general cooperation. And declining social mood has the opposite negative effects. The idea is that if you can tune in to the trend in social mood, you can gain an edge in anticipating future events, which are driven by this “hidden engine”, as Prechter calls it.

Pop music taste is something that both Casti and Prechter pay close attention to. The theory is that the instantaneous feedback of the Billboard Top 40 rivals the Big Board itself – whether it’s the most requsted songs on the radio, or the daily advance/decline ratio on the NYSE, both are effective measures of social mood.

In general, Casti and Prechter observe a correlation between stock prices and popular music tastes – for example:

  • Upbeat music during rising bull markets - Think upbeat rock & roll of the 1950’s and early-to-mid 1960’s (The Beatles, The Beach Boys), along with the general upbeat music of the 1980’s and 1990’s (Michael Jackson, Madonna).
  • Depressed and angry rock during the bear market of 1966-1982 (Led Zepplin, Pink Floyd).
  • “Bubble gum” pop hits during market tops – songs that express moods of outright euphoria (California Gurls)

The idea is that a turning point in pop culture may signal a turning point in social mood before stock prices. For example, in Prechter’s previous work, he’s cited the upbeat pop culture mood of the early 1980’s as a signal that the bull market was back on. And when social mood is outright euphoric, and stock prices are topping, other sociometers are also “off the hook”.

An interesting data point for you to chew on – the most famous version of California Girls is of course by the Beach Boys, the upbeat surfer dudes of bull markets’ past. They are back in the news, with rumors about a potential Beach Boys reunion to celebrate the upcoming 50th anniversary of their first single (from 1961, two bull markets ago). How about band member Mike Love’s take on Katy Perry:

And Love’s thoughts about Perry’s “California Gurls?” “I think the part she did is pretty cool,” he says. “There are a lot of writers on it, and I think it’s probably a stroke of genius to have the king of canine cool, Mr. [Snoop] Dogg, do his thing. But I think her creative part, her musical part, is pretty hooky. I think it brings the Beach Boys’ 1965 classic to mind, that’s for sure.” (Source: Billboard.com)

Ironically, their rendition of California Girls was topping the charts (1965) just before the epic bull market of 1942-1966 was about to roll over.

While the talking heads at CNBC are watching key resistance/support lines for the rangebound S&P, we’re seeing an equally polarized battle at the top of the music charts to end the summer. Leading the negative social mood charge is rapper Eminem, who has the current top spot with his bear market tailored hit Love the Way You Lie. You won’t confuse this tune with Katy’s sunkissed hit!

Just gonna stand there
And watch me burn
But that’s alright
Because I like
The way it hurts
Just gonna stand there
And hear me cry
But that’s alright
Because I love
The way you lie
I love the way you lie
I love the way you lie

And the actual music video is perhaps even darker:

Eminem’s current comeback may fittingly coincide with the return of the bear on Wall Street. He stepped out of the music scene altogether in 2005 – when the credit and housing bubbles were peaking in America, and everyone in this country was giddy getting rich by buying homes they couldn’t afford.

Eminem began mulling his return in September of 2007 – the exact month the S&P and DOW were about to start their plunges in excess of 50%. Perhaps Eminem sensed the initial decline in social mood, which historically has welcomed his darker rap style the best?

If we are indeed at the front end of a social mood downturn - what’s to become of our dear Katy? Fortunately for her, evidence suggests that she’s got the goods to succeed in periods of declining mood as well. Her 2008 single I Kissed a Girl – a tune of sexual confusion that was well suited to the plummeting social mood of 2008 – originally put her on the pop map. So, Katy may be actually better positioned for a potential bear market decline and mood shift than most bullish investors.

Perhaps us stock jocks would be best served to ditch our technical and fundamental analysis paralysis – screw the 200-day moving average, and key support resistance levels. More importantly – Hey Katy, what ya cooking up next?

Ed. note – A trimmed down version of this piece was syndicated by Minyanville.

Further Reading: