Saturday, January 30, 2010

Mood as Driver (Anecdote 1)

Here's a new running item for you FutureJacked readers out there - I'll call it the Mood as Driver series. As 2010 unfolds and the anger and fear drives events before it, we'll try and spot inflection points where "mood" is obviously trumping so-call economic fundamentals or economic reasoning.

We lead off today with our friend George Soros and his observations on Germany's hesitation to attempt to ride to the rescue of Greece's financial fecklessness, as reported by the Times:

...However, a key trigger yesterday was testimony in Germany's parliament by economy minister Rainer Brüderle, who said there would be "no bail-outs" for struggling debtors and no move to a "European economic government".

"A few European nations are exhibiting dangerous weaknesses. That could have fatal consequences for all countries in the eurozone," he said. Despite the warning, he said each country must solve its own problems.

"Germany is not in a mood to be the deep pocket for what they consider profligate, southern neighbours," said hedge fund doyen George Soros...

Here we go. Makes me wonder if we won't hear a similar quote when California and Illinois send delegations to beg for a handout from the federales later this year.

Tuesday, January 26, 2010

Next Steps

In the comments section of Socionomic Trendspotting 2010 - The Gritty Reboot, the comments stuck with me and I thought I'd address some of my thoughts as a post.

Fool53 wrote: "...What we are dealing with is a once in 300 year state of collective conscience, but it's also coupled with the largest debt bubble in the history of mankind. So what unfolds seems that it should be unprecedented, although not Armageddon..."

Greg B wrote: "...For those who don't shut down and "hibernate" (perhaps because we knew before that winter does come and go) the big question becomes what to do until Spring. Really hard to plan for a 5 year economic winter..."

Those comments do a fantastic job of summing up my mood at the moment. Part of the reason postings have been spotty lately is that I've been very busy, but the other reason is that I seem to be waiting for the other shoe to drop. I've said my piece. FutureJacked started as a way for me to bounce around ideas on what was coming our way. Well, "it" is on our doorstep and now I have few real answers and don't really know what to suggest or plan for at this point.

When this house of cards goes, it is going to be stunning in every sense of the word. How we react to the falling roofbeams and just where the blind beast of mass rage is going to devour populations is something I just can't be sure of. Planning is fine, but when reality hits, plans will change. Having a plan is important, I believe, but being flexible is just as key to surviving the coming crash. All that said, I am actually a bit more optimistic than I was last year. Yes, things are going to be bad in many ways. But this isn't Armageddon. Frankly, it is time my country shucked off this old skin of overfed, credit-gorged, adolescent consumerism and re-learned what it means to be a mature country. A crash is the bitter pill that helps effect the cure.

Much of this thinking was sparked as I reread David Hackett Fisher's The Great Wave earlier in the month while holed up during a bitter cold snap. I strongly recommend reading it for a perspective on just how vast the price revolutions of the past have been and how they serve as prologue for what is to come. Seeing someone recognize that history can be modeled very well as wave movements (even if he doesn't use Wave Principle or Socionomics as part of that model) is refreshing, even if the message can be unsettling for our particular time and place.

Thanks for your patience with my maundering. Keep an eye on mood and markets and be ready to act when others freeze up.

Friday, January 22, 2010

Socionomic Trendspotting 2010 - The Gritty Reboot

What a year 2009 turned out to be. From the depths of despair in March to the Waterloo of the Bears by October, it was a great example in how emotions trump reason. By giving a rationalization for playing extend and pretend, by using the Fed’s balance sheet to soak up vast amounts of toxic paper assets and by extending the full faith and credit of the United States to vast new degrees of indebtedness, the emotional impulse towards optimism that pulled us off the lows in early 2009 have led us, inexorably, to the edge of the precipice that will be 2010.

The rally mood is still in the air. I am personally as busy as I've ever been at my day job - which is driven by research and industrial activity. Every project I take on makes me wonder if the effort is really worth it. Then I remember that my timing has not been great in the past on big turns and I get to work. I think 2010 may be "it" though for a lot of activities across this fine land of ours.

Recall that my interpretation of the Socionomic Model is that mood makes markets and markets make opinions. Emotions drive all. Understand that the causality we have all be taught to believe in is false and you will be miles ahead of everyone else when TSHTF.

Below are some trends or emotional themes I expect to flavor the coming year. Be aware off the bat that I never expected the rally to carry on this long. My timing may be off, but I think the declines out of 2008 into early 2009 have shaped the early parameters of how the coming catastrophic decline will be expressed and I think we can use those lessons to prepare ourselves to move quickly once events begin to unfold and to provide us with some sort of map to work by while others stand in gape-mouthed awe at the enormity of this coming crash.

The Gritty Reboot

The theme of a “gritty reboot” should be prevalent in all walks of life. I take that concept from an interesting bit of Hollywood ephemera. It looks like Sony is going to do a “gritty, contemporary reboot” of the Spiderman movie franchise – one of the biggest movie franchises going at the moment. Socionomics calls for this, of course. In eras of dominant negative mood, movies tend to turn dark (see Chapter 15 of The Wave Principle of Human Social Behavior for more details). What I find very interesting is the quote out of Sony:

…The decision to go with an origin story stemmed from Sony developing two Spidey projects simultaneously. According to studio insiders, Sony was working on both Raimi’s Spider-Man 4 and the new origin story from James Vanderbilt, who wrote Zodiac. The original plan was to keep the Spider-Man gang together for one last film in 2011 before rebooting the series in 2012. When it became clear that Raimi would not be able to make the summer 2011 release date planned for Spider-Man 4, the studio opted to scrap Spider-Man 4 altogether, and focus solely on the series reboot…

The studio had two choices – continue with the series that unfolded during the rally years, kicking off in 2002, then hitting big in 2004 and bigger in 2007, a formula that had generated massive amounts of money for them or to scrap that direction for the franchise and go darker and grittier. If Sam Raimi had studied his Socionomics, he would have had a clue which way the studio bosses would lean.

I expect a lot of things will get a gritty reboot. The financial crisis will return as toxic assets that were papered over and wished away return to devastate financial firms. This time, the financial firms will have no more silver bullets to spend with Congress. I expect that the utterly amazing fact that none of these financial geniuses who helped create a system that has endangered the very fabric of “division of labor” free enterprise in this country with its potential collapse have been hauled up for trial as of early 2010 to change and instead of getting hundreds of billions in backstop funding, many financial luminaries will be vigorously pursued as criminals.

Expect neighborhoods and your cities to get a gritty, 1970’s-esque reboot as well. If you haven’t noticed, state and local tax receipts are cratering. Speaking of craters, expect your roads to have more of them as cash dries up.

Gritty living conditions should arrive for many millions of Americans later this year. Whether it is because families are reduced to homelessness, living in cars or campgrounds, or just not being able to afford upkeep on their homes, the coming devastation to family balance sheets is going to leave an ugly scar across the land. For those looking for opportunities to keep their communities healthy, if you have capital or even food to share, maybe consider funding local cleanup crews. The emotional impact of a devastated ghetto versus a tidy, if shabby, neighborhood cannot be overstated.

Expect politics to get gritty as well, if not violent. I think we will see a patchwork of responses to the coming crisis. Some communities will ease into a seedy, alcohol-soaked inertia, as many areas of Russia have seen since the collapse of the Soviet Union, while others are gripped by explosions of violence as groups of people channel their anger into action. Choose your action items here – invest in local booze production or get your reloader ready.

The Show Trials Begin

This may take until the end of the year, but I think that the legalistic culture of the United States will find natural outlet in show trials of “them” as the financial and social system unravels. Financiers, banksters, lobbyists, politicos on the wrong side of the current mob opinion and worker-bees of the Big Government Machine will find themselves hauled before tribunals or special courts founded to investigate the devastating wave of bankruptcies and financial hooliganism that will be running rampant as 2010 unwinds.

The Wall Street types will be especially vulnerable to this as the chieftains of finance have shown zero political acumen in handling the fallout from the 2008 market seizure. I expect little more from them when 2010 presents them with a full-blown systemic stroke.

One of my favorite windows into the squirrely little minds of these Masters of the Universe is the blogger over at Epicurean Dealmaker, whose writings I heartily recommend. As he puts it, when discussing the recent Congressional testimony of some Wall Street banksters:

Let there be no mistake: Mr. Dimon, Mr. Mack, and Mr. Blankfein are not stupid or uninformed. (The jury is still out on What's-his-name.) They are damn smart; scary smart, in fact. You don't get to the top of the greasy ladder of a major global investment bank's executive suite by being dull, incurious, or lethargic. People like that get sliced to ribbons and thrown into the chum bucket in my industry before they reach Managing Director, if they ever get inside in the first place. These guys got game, people. Serious game. You would be foolish to doubt it...

…[they] have absolutely no interest whatsoever in the whys and wherefores of the financial crisis, the proper size and role of banks and investment banks in the domestic economy, or the moral imperatives inherent in stewarding the financial plumbing undergirding the daily lives and livelihoods of six billion people. For one thing, they don't have time to worry about such things. Most of a senior bank executive's time is consumed competing against other scary-smart investment bankers and executives at other firms, who are hell-bent on grinding his bones into dust beneath their bloody heels, while trying to prevent his own firm from flying apart under the internal stresses generated by thousands of egotistical prima donnas all scrapping for more than their fair share of the pie. There is too much going on, and unrelenting change comes too fast and furious to allow quiet contemplation of the order of things…

…because the volatile, high velocity nature of the business attracts such people—the people who go into the industry are not really interested in thinking deeply about why things are the way they are. You will almost never find an investment banker "sicklied o'er with the pale cast of thought." It's just not in their genetic makeup to be reflective, introspective, or speculative in an intellectual sense. Investment bankers have almost no interest in why things are the way they are. Rather, they spend all their considerable intellectual and psychological resources on understanding how they can take advantage of the way things are…

And, what I consider the money quote:

…People still make fun of Chuck Prince's 2007 pre-crisis assertion that “As long as the music is playing, you've got to get up and dance.” Chuck Prince was a boob, and in way over his head, but he was not wrong. Had he even contemplated bowing out of the dance, shareholders, employees, and yes, probably even regulators would have strung him up with piano wire so fast even Mr. Krugman's head would have spun. Investment bankers' job is to surf the wave of financial and economic activity and make money from it, not convene a committee to discuss the design of dikes and levees.

That is the job of regulators, politicians, and public intellectuals like you, Mr. Krugman. So get crackin'.

We'll be over here in the corner, making money, until you get back to us… (Emphasis FJ)

Rest assured, the mob, whether led by NY Attorney General Cuomo, some upstart in Congress that we have not yet heard much of or some Federal DA, will get back to the bankers. The end result will not be pretty. People will want scalps and these jokers are the most blind scions of privilege seen strutting and preening on the world stage since the French Revolution.

I have no doubts the ancestors of Messrs. Blankfein, Prince, et al were busy hovering around the French Court during the last days of King Louis XVI, rushing about, bribing officials, getting the best tax farming positions available, wheeling and dealing for privileges, power and money – all the while oblivious to the game changing revolution that would swallow them whole.

If possible, get a cable or satellite package with C-SPAN on it. The show trials should be educational, if nothing else.

The U.S. Nation-State Hollows Out

That the coming crash will challenge the federal government’s finances and totally devastate most state, county and local balance sheets is pretty much baked in to the coming crisis. What happens when government employee checks start bouncing and when services are slashed or privatized will color the latter part of 2010.

My default tendencies lean towards free markets and limited government. What we may face, though, could be a façade of free enterprise via the privatization of local services that turns said services into monopolistic fee extraction companies that feast on taxpayers who are then forced to deal with these enterprises under force of law – which itself might be farmed out.

I want to think more on this topic, but think about how private companies have used the federal government and the Federal Reserve to loot U.S. taxpayers to avoid suffering the consequences of their stupidity during the late great credit bubble. Then play out similar scenes at a local level when companies take on more responsibilities currently held by government, but without competition and with the ability to have laws rewritten to force people to use their services in certain ways.

I guess I really worry about a formalization of the slow corporate coup that has been ongoing, whereby governments are not taken over per se, but where the decision making and legal enforcement apparatus is co-opted and used to steer loot to the coffers of the coup masters. Please review how the SEC has behaved over the last 20 years for a great example.

Memes We May See

What wild urban legends will erupt and what destructive behavior will overtake millions as the observations of socionomics get played out across the United States in the coming year?

I missed on my thought that the “bandos” meme would take wing last year. I figured squatting in abandoned houses would be all the rage at the moment. It never occurred to me that a quiet decision would be made by many banks to not foreclose on many people who have fallen behind in their payments as a way of not realizing the losses inherent in their loan portfolios. Maybe that changes this year? I would think so.

Cults should make a big comeback. You angry gurus out there should begin to find fertile ground in the coming months. I figure the regular sort of religious dissenters should grow some, as will splinter groups from mainstream religious outfits. Where will the fringe go? Some sort of fusion of New Ager mysticism with ethnic supremacist groups? UFO contactee groups who shift from an optimistic “Space Brothers are here to help us” point of view to angry, “we are the vanguard of the aliens come to clear human scum off the planet” or something like that? I figure eco-terrorism might get a boost as well. On the more productive side, many of these splinter groups may eschew violence and replay the Back to the Land movement from the 60’s. A lot of good work will probably be done by Transition Towns and permaculturist types. Being able to grow your own food may come in handy should restrictions on travel be imposed – either government dictate or some overseas troubles that reduce oil imports to the U.S. (look to Mexico as a potential blow-up, followed by Venezuela, Nigeria and the Middle East – if Israel bombs Iran, all bets are off on being able to predict oil imports).

I also think the 2012 meme may find purchase in many minds this year. It seems to be a growing niche on fringe web sites that it will mark some sort of pole shift, massive electrical storm or some over world-ending event. End of the world fever seems to wax and wane. Looks like we may see it begin to wax strongly again in the coming years.

Gang wars should erupt in places you don’t expect as well. High unemployment for young men, combined with anger and access to firepower should make for a volatile mix in many small cities and large towns, not to mention large urban areas. Maybe you could start a bullet-proof glass and steel door installation business to adapt.

2010 and Beyond

My assessment is that 2010 will see the crash that forces people to understand just how rotten the infrastructure of commerce and governance has grown in the U.S.

Some will go mad. Some will sink into lethargy. Some will rise up in pointless anger to kill and be killed. Others will husband their resources, help their communities, reconnect with their families and friends and lay the groundwork to build up something new from the ashes that will be left once the raging conflagration that will erupt again this year is done burning down the world we have all grown up in.

Good luck.

Sunday, January 10, 2010

How TPTB Can Shape What You See on the Web

Very interesting heads up from Jeff Id over at the Air Vent (where the whole climategate scandal kicked off).

Apparently, search results for the term "climategate" have been plummeting for Google searches. Per Jeff, "...It appears google is linking to less and less websites specific to climategate. Early this morning [Dr. Weinstein] sent an email saying google was below 3 million hits where it once peaked at around 50 million. Currently the number has dropped even further to 2.2 million..."

I tried Bing, and got an estimated 51,400,000 hits for climategate and on Altavista I got 30,000,000 hits.

The rich irony in contrasting Google's "Don't Be Evil" schtick to its behavior on this topic is not unnoticed.

Basically, this is just more evidence that when the storm of anger and negativity that will roll over the West like a tidal wave when this Bear Trap rally is over, we will see all kinds of information clampdowns, controls and barriers put in place. Might be interesting to track the number of references to "bankers bonuses," "Goldman Sachs," etc. for the coming months.

The more this kind of crap goes on, the more it sure looks like the human-caused climate thesis is nothing but smoke, mirrors and a petty hot-air version Lysenkoism.

We'll see how long it takes them to "tweak" their search algorithms once this comes to light.

UPDATE: Following some of the comments, this may be a case of the Goog "optimizing" the search results for this topic and not actually dropping sites. No confirmation yet. Interesting that other search terms seem to have a much longer half-life than "climategate" though.

The above concerns still stand, though. The Goog works with the Peoples' Republic of China to filter and censor searches, so the capability is there - and the willingness to use it...

Friday, January 8, 2010

The U.S. Looks to Go All Argentina on 401(k)s

I've been crafting my Socionomics Trendspotting 2010 post and hope to have it up soon. Meanwhile, big hat tip to Karl Denninger on a story straight out of Conquer the Crash:

Americans Oppose Initiatives Limiting 401(k) Choice ICI Says
by Jeff Plungis
Jan. 8 (Bloomberg)-- U.S. investors oppose federal initiatives that would force them to give up control over their 401(k) accounts, the Investment Company Institute said...

...The U.S. Treasury and Labor Departments will ask for public comment as soon as next week on ways to promote the conversion of 401(k) savings and Individual Retirement Accounts into annuities or other steady payment streams, according to Assistant Labor Secretary Phyllis C. Borzi and Deputy Assistant Treasury Secretary Mark Iwry, who are spearheading the effort...

I agree with Mr. Denninger that there actually are people at Treasury who can do math and are looking for a replacement buyer for the Chinese if/when TSHTF later this year. This comes as no surprise to students of history, but since there are very few of those left these days, I imagine the coming restrictions or forced conversions may come as a shock to most.

Or, more frightening to me, a forced conversion of 401(k)s to Treasury holdings might actually be welcomed by a populace angry at Wall Street and fearful of risking their capital in productive ventures.

This is the reason I subscribe to Elliott Wave products and try to always keep the big picture in mind when making decisions. Robert Prechter talked about this back in 2002 in Conquer the Crash. I was able to plan accordingly. Hopefully you won't get screwed by when the U.S. starts turning Argentinian. See Chapter 23: What To Do With Your Pension Plan (First Edition) -

Make sure you fully understand all aspects of your government's individual retirement plans. in the U.S., this includes such structures as IRAs, 401Ks and Keoghs. If you anticipate severe system-wide financial and political stresses, you may decide to liquidate any such plans and pay whatever penalty is required. Why? Because there are string attached to the perk of having your money sheltered from taxes. You have to do only what the government allows you to do with the money. It restricts certain investments and can change the list at any time...

...What is the worst that could happen? In Argentina, the government continued to spend more than it took in until it went broke trying to pay the interest on the debt. In December (of 2001, FJ), it seized $2.3 billion dollars worth of deposits in private pension funds to pay its bills...

Bold emphasis mine. History not only rhymes, it occasionally repeats itself.

FutureJacked bold prediction #1: Sometime between now and 2012 the U.S. Federal Government will seize a majority, if not all, of the funds held in IRA and 401(k) style accounts, taking the money in those accounts and replacing them with long maturity U.S. Treasury Bonds that are not valid for sale on the open market.

To get there, the power of Wall Street will have to be shattered. I think Primary Bear Wave 3, coming to a stock market near you soon, will be the hammer that does that shattering.

More to come on this, I am quite sure.

Tuesday, January 5, 2010

The System Eats Itself

Epic Win for those who wish to disrupt transport networks, harass innocent civilians and degrade respect for "security" personnel. And terrorists didn't have to do a thing.

Suspicious bags cause airport scares news services
BAKERSFIELD, Calif. - Suspicious items caused scares at airports in Bakersfield, Calif., and Minneapolis on Tuesday.

Federal officials reopened operations at Bakersfield airport after a hazardous materials scare turned out to be containers of honey...

Notice they are questioning a gardener because their dog smelled something. Well, huh, you think maybe, just maybe a gardener might have traces of various fertilizers compounds on him? Just curious.

We've looked at this kind of idiocy before. In an era of anger, magical thinking, xenophobia (which will only get worse as the Bear Market deepens) the deep reach of bureaucracy into individual lives will be felt in many unpleasant ways. Look at what went into the response at Bakersfield - immense cost in terms of first responders gearing up, delayed travel, further fear mongering in the community after intial media reports of "hazardous materials" in checked baggage. Every little cut to the system matters, especially in a time of budget stress.

With great power comes great responsibility. With negative mood, comes many random acts of stupidity, vile pettiness and willful blindness to reason.

John Robb may be onto something with his Failure As A Strategy concept. If the wannabe terrorists out there are paying any sort of attention, this kind of zero cost "operation" can be achieved by hyping the terrorist threat at all times, then watching the chips fall in many new and frustrating ways. Oh wait, that strategy is already in place. It's called the DHS.

Monday, January 4, 2010

The Building Indicator

The Christian Science Monitor has a socionomics-flavored story that is of interest:

World's tallest building: Is the Burj Khalifa a herald of economic woe?
The world's tallest buildings usually open when the economy has crashed, just like Monday's opening of the Burj Khalifa in Dubai
By Laurent Belsie Staff writer / January 4, 2010
The world's tallest building opened Monday in Dubai – known as the Burj Khalifa, it's an exuberant architectural triumph in the middle of a deep economic swamp.

It's often that way. The tallest skyscrapers always seem to pop up just as the economy is headed down...

More posts to come. Several are in the hopper, but nothing wrapped up yet. Very busy at the moment with the day job - which is a problem to have, I guess.