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Mind Blowing

Mind Blowing

We’re in one of the longest economic expansion cycles in history and nobody’s happy. It’s mind blowing. You’d think 2018 would have people dancing in the streets. 3.7% unemployment, record stock market prices. Well the ladder until recently that is.

So let me rephrase:

What happens if you have record buybacks, record dividends, and record earnings but 89% of assets yield a negative return in US dollar terms?

No really that’s just what happened:

The short answer is: Nobody knows because it has never happened before.

According to $DB: “A whopping 89 percent of assets have handed investors losses in U.S. dollar terms, more than any previous year going back more than a century”.

Mind Blowing.

No wonder The Fed Crying has Begun. Bulls are now dependent on a big year end rally to turn the ship around. And a technical case for that can certainly be made. But they only have a few weeks left in the year and they better hurry otherwise they owe everyone a big apology and can kiss their year end bonuses goodbye.

But that’s markets in 2018. It’s not reflective of what has happened to the middle class over the last 20 years.

Summary: Utterly screwed.

How else to square headlines such as these:

America’s 1% hasn’t controlled this much wealth since before the Great Depression

1 in 3 Americans have less than $5,000 saved for retirement

65% of Americans save little or nothing—and half could end up struggling in retirement

I could post more links, but the message is clear: Wealth inequality is vast and nobody’s happy.

If you don’t think so have you looked at our political discourse lately?

…click on the above link to read the rest of the article…

Stock markets look ever more like Ponzi schemes

Stock markets look ever more like Ponzi schemes

The FT has reported this morning that:

Debt at UK listed companies has soared to hit a record high of £390bn as companies have scrambled to maintain dividend payouts in response to shareholder demand despite weak profitability.

They added:

UK plc’s net debt has surpassed pre-crisis levels to reach £390.7bn in the 2017-18 financial year, according to analysis from Link Asset Services, which assessed balance sheet data from 440 UK listed companies.

So what, you might ask? Does it matter that companies are making sense of low-interest rates to raise money when I am saying that government could and should be doing the same thing?

Actually, yes it does. And that’s because of what the cash is being used for. Borrowing for investment makes sense. Borrowing to fund revenue investment (that is training, for example, which cannot go on the balance sheet but still adds value to the business) makes sense. But borrowing to pay a dividend when current profits and cash flow would not support it? No, that makes no sense at all.

Unless, of course, you are CEO on a large share price linked bonus package and your aim is to manipulate the market price of the company. It is that manipulation that is going on here, I suggest. These loans are being used to artificially inflate share prices.

The problem is systemic. In the US the problem is share buybacks, which I read recently have exceeded $5 trillion in the last decade, meaning that US companies are now by far the biggest buyers of their own shares. That is, once again, market manipulation.

And this manipulation does matter.

People think their savings and pensions are safe because of rising share prices. They do not realise it is all a con-trick.

…click on the above link to read the rest of the article…

Our “Storm Warning” for the Year Ahead …

Ils viennent jusque dans vos bras / They’re coming right into your arms
Égorger vos fils, vos compagnes! / To cut the throats of your sons, your women!
Aux armes, citoyens / To arms, citizens
Formez vos bataillons / Form your battalions
Marchons, marchons! / Let’s march, let’s march!
Qu’un sang impur / Let an impure blood
Abreuve nos sillons! / Soak our fields!
– “La Marseillaise”

Choppy Waters

PARIS – And so the old year ended…

closerie des LilacsLa Closerie has been around for some time – and it seems it has always been popular.

The Closerie des Lilacs brasserie was packed. Every table was taken. On the corner of the Boulevard de Montparnasse and the Boulevard Saint-Michel, this was one of Hemingway’s favorite restaurants. It is now popular with tourists as well as locals.

Coming in, we heard familiar American accents behind us, but almost everyone else appeared to be native to the city. It was bright, the way brasseries are supposed to be…

“The way things are supposed to be” is our beat at the Diary. The way they really are is beyond us. Far too complex. Infinitely nuanced. Mind-blowingly intricate.

“Is,” as President Clinton noted, is too high a standard. “Ought to be” is the best we can do. Only the gods can know what is really going on. All we can do is to observe certain superficial patterns and rules – like waves on the surface of a deep sea – and wonder how they might slap against our little bark.

One observation: Markets bob up and down. Yes, dear reader, it is a new year… and we face new conditions. New challenges. New threats. But at least we know how the waves work… floating prices up one side and down the other.

 

…click on the above link to read the rest of the article…

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