Monday, May 13, 2013

Global Capitalism Running Off The Rails - Timely Remarks About Corporate Earnings, Financial Assets And The Global Economy

I want to start this post off by reminding readers of remarks made by Treasury Secretary Hank Paulson back in 2007 before the collapse.   I remember Paulson giving a TV interview where he waxed poetic about unprecedented strength of the global economy and unprecedented global prosperity.  When it comes right down to it, Hank was truly an ignoramus as are most politicians and corporate bureaucrats.   Contrarily, I had been writing that the world was experiencing the biggest bubble in history, the world would shudder and shake when this cycle ended and that all of the wealth created under globalization could very well disappear.  It certainly wasn’t because I was some genius but that I had my eyes open to the reality of what people like Paulson created.   By the way, that was an incredibly lonely position at the time.  Again today we see a similar type of optimism within the establishment bureaucracy as the perception of a post-crash asset recovery unfold.   (We are seeing extreme levels of speculation in equity futures & derivatives markets as I type this.  The looters are showing nearly unprecedented levels of arrogance and risk-taking in their actions regardless of any blow about this being a “hated” rally.  I’m still comfortable with a projected peak in equities in the middle or second half of this year.)  But how the world has changed from that pre-2008 perception of global prosperity under which  Goldman Sachs was telling us it was doing God’s work.   Now, while we see the perceptions of recovery in the assets controlled by corporations and elites, we now also see unprecedented poverty and strife as the world burns at the hands of politicians, private for-profit bankers and corporate capitalists.  Yet what I see in my experiences is that most people who are doing extremely well under this system have closed their mind to what is going on around them.  The ego can and does rationalize anything, especially when it comes to its its belief systems involving attachment.

Unlike 2008, today countries around the world are experiencing structural economic crises that cannot and will not be fixed under global capitalism.  Yet hot money fresh coming from Europe in lieu of the Cyprus confiscation, hot money rolling out of falling commodities, central banks seeking higher returns, hedge funds & global banks and the endless leveraged manipulation of the carry trade are fueling artificial demand and the associated  speculative rise in global asset prices.  Mind you, all of this is occurring without an antecedent rise in wealth.  As the always brilliant-less Alan Greenspan has been quoted, rising asset prices creates the confidence of wealth needed for people to go out and spend.  Of course, reality is that only true social wealth creates sustainable, rising demand for assets.  Simply more of the illusions created by the renter class that owns all of the assets.   We have now seen over 300 stimulative central banking and policy-driven programs around the world meant to bail out the small number of people who control the world’s assets while allowing widespread misery and poverty to flourish. 

I  now appreciate how much I underestimated the mind-boggling corruption that defines class-based corporate capitalism and the captured global political class of thugs that does its will.  I certainly never believed politicians, bankers or corporate bureaucrats were virtuous but the entire world is clearly run by an unprecedented global class of criminals whose common shared interest is in serving class-based private, for-profit corporate capital(ism) at the expense of human dignity, human rights, economic freedom and democracy.

Asset prices have seen large rises recently and U.S. equity prices, as one example, are now the second most expensive in the top 30 world’s exchanges and the most expensive in the developed world on an expected future earnings basis.  As I noted on here many times before the 2008 collapse, on a fundamental basis the U.S. equity market was many times more expensive than the market in 1929.  You know, before it fell 90+%.   Corporate fundamentals have deteriorated significantly since and financial assets, including equities, are now even more overvalued.  Eventually, the illusion of financial markets/assets and the reality of the underlying economy will recouple.  That is, true wealth is not a function of highly-levered, fraudulently-manipulated financially-engineered asset prices that provides perceptions of wealth and control for a small number of renter-class royalty.  

I want to remind readers that I have noted on here that some day the stock market in our nation will disappear.  Forever.  That it is not necessary to a functioning democratic, merit-based economy.  Frankly, it has become a detriment to a functioning economy as noted on here through many dysfunctional dynamics.  One must consider that this cycle could be that some day.  So while many talk of investment haircuts or market corrections, there is a much greater reality that exists.   Haircuts and financial asset declines could be 100% and permanent on many, if not all, markets.   If you understand my posts stating that we are likely living through the end times of  capitalism, just as we recently lived through the end times of communism, then you must appreciate that capitalism’s funding and financial mechanisms will ultimately disappear as well.   This is not a prediction but a serious possibility that no one is considering.  It will happen some day.  The only question is when.  (My long-time downside target on the S&P remains 200-450 if capitalism  makes it through this.  As time goes by it has become ever-more apparent to me that it likely won’t.)

Let me also remark of those who are now calling this the start of a  new bull market.  As noted on here before, we cannot be at the start of a new bull market because the companies, markets and technologies don’t yet exist for that to happen.  And the existing corporate structure of control, political bribery and market-rigging ensures that will never happening under this current reign of corporate terror.  We must see new ideas, new innovations, new economic opportunities, new markets and massive new employment opportunities from these innovations and opportunities for a new bull market to appear.  Otherwise, this is nothing more than the existing debt-based illusion of capitalism’s overconsumption, overproduction, money printing and financial fraud that serves only illusions to keep the current capitalist class-based power structure in place.  Are we about to see a new bull market in PCs, genetically-modified foods, healthcare that serves little to no benefit to society, military spending, portable phones, financial speculation, overconsuming more overproduced, toxic junk from China and the overproduction of antidepressants and liquor to numb society into surviving another bout of this psychotic corporate-state-controlled world?  And is this going to create tens of millions of high-paying, wealth-creating new jobs in the U.S.?  Or more marketing, advertising, political consulting, lobbying and finance jobs?  Need I even answer that?

That is, at this very moment corporate balance sheets across the board are deteriorating at a rate not seen at any time in the last twelve years.  Yes, that's right.  Worse than anything experienced under George Bush.   This ties in very nicely with my game theory post that corporations are headed for a massive hard landing and that many major corporate names will very likely disappear in coming years.  - My July 18th, 2012  post titled “Buffett Breaks His Cardinal Rule And Invests In IBM”

Two months after I posted the above remarks Thomson Reuters announce the largest downward earnings revisions since in the last eleven years.   It was the first quarter that the S&P 500’s cumulative revenue growth turned negative since the 2008 crash.  S&P 500 revenue contraction is an unheard of dynamic.  Well, it was until 2008.  Now we have seen it twice since as results this quarter have also been horrible for many multinationals.  Again, today the S&P’s cumulative revenue growth is being reported as negative as financial assets and equity markets make all-time highs. 

To give some indication of how disconnected financial markets currently are from reality, let’s look at some very disconcerting and deteriorating economic highlights from around the world in 2013.  These highlights are starting to confirm large disturbances in the global capitalist overproduction (and resultant required overconsumption) bubble that appears to be starting to pop.   

  • Copper demand, as noted on here many times as a proxy for the global economy, has collapsed in China.  Demand in China is 35% sequentially on a monthly basis, an unheard of decline.  The price of copper has been declining for years and was down 34% from its peak as inventory has exploded for the first time since the housing bubble peak.  In the last week or so, prices have moderately recovered on a reflex rally.  China’s most recent trade results are completely bogus and people are starting to understand how deregulated capital and hot money is severely manipulating China’s Ponzi trade numbers.   The Chinese ministry of propaganda, caught with its pants down,  has finally acknowledged this.  As I noted leading up to the collapse of its stock market bubble in 2008, the communists had lost complete control of their economy and their money.  Soon thereafter we saw a massive collapse in their equity markets and their overproduction bubble as tens of thousands of factories were shuttered.  The same dynamic is building today as the communist central planners have again lost complete control.  Remember, deregulated capital(ism), aka free market capitalism, is the precursor for all capitalist-created economic disasters and it is the key component to the U.S.-China free trade or looting agreement.  (Remember, as noted on here at the peak of copper’s bubble back in 2008, copper costs 7 cents a pound to mine.  It was selling for $5 a pound at the time.  Copper and all commodities are being manipulated by Wall Street as I have written on here ad nauseam.  Copper will almost certainly fall 80-90% still from these prices.)
  • Excess crude oil supply imbalances are now the greatest in recorded history.  In other words, the world is now awash with the greatest excess supply of crude oil in history.  Even more than when crude was $10 a barrel in 1998.  (A long term thesis on here is that crude is likely going back to somewhere around $10-20 a barrel.)  And gasoline demand in the U.S. is falling at the fastest pace since the 2008 collapse.  As noted on here ad nauseam, peak oil like anthropogenic global warming is a myth.  And Wall Street manipulating petroleum prices is a foundational element of hoodwinking people into this propaganda just as similar junk science-propaganda is behind human-caused climate warming.  This has been a consistent thesis on here for the last eight years and now many people are finally starting to understand how true this really is.
  • Semiconductor companies are seeing bookings for new equipment often fall precipitously, margins implode, large amounts of business deferred and may be ready to  revert back to the dominant trend of the last few years of falling revenues for the entire industry. (As noted on here many times over the years, I hate technology stocks.  Most companies are last year’s dead wood.)
  • Caterpillar’s earnings were down 50% and revenues are down dramatically.  Asian demand for heavy constructing and mining equipment is down a whopping 25%.  So much for those distorted China trade numbers showing a massive increase in exports.  Massive collapse in demand for construction and mining equipment and associated commodities is impacting the entire commodities and cyclical/industrial business complex.
  • Most recent data on exports of U.S. corn are down the most ever recorded at –54%.   So much for Monsanto dominating the world.  Is this a trend and a sign of rejection of GMO food and food slavery by corporate America?  It’s too early to tell.  But I have written on here that we could most certainly see starvation around the world as this system unwinds.   Of course, this could simply be production arbitrage or  corporations shifting production of GMO corn to South America where costs are much cheaper. 
  • Vladimir Putin just remarked of an “alarming” economic slowdown in Russia. 
  • Greece and Spain have just reported record unemployment and Italy just formed a government that cannot govern while Germany’s economy continues to slip with every euro nation’s production contracting.
  • Commodities across the board peaked two years ago and have been falling ever since.   For that reason, it should be surprise to anyone gold aka anti-democratic money of which the majority is controlled by criminal central bankers, copper or anything else is falling. 
  • The Chicago Business Barometer just reported the lowest reading in the last three and one half years.
  • Taiwan, Japan, South Korea and Singapore are all seeing industrial production shrink and factory orders fell to a seven month low in the U.S.
  • IBM’s server revenue imploded 17% and the CEO blamed it on salespeople not moving fast enough.  That’s clearly wishful thinking.  The same dynamic is being reported at other companies including the night-of-the-living-dead zombie, Dell.   (Remember, last June I wrote that IBM was putting in a major top.  Maybe its last top.  Forever.  This past quarter IBM missed earnings for the first time in eight years and reported its single-day largest share price drop in a decade.  It’s just the beginning.  It’s going to get much worse for business technology, software and consulting related corporations.   Most of these companies are dead wood that have been pulling proverbial rabbits out of their hats for a long time.  Rabbits that really create little to no quantifiable return on investment or productivity enhancements for clients and almost no value to society but that allow their profit schemes to stay afloat.   These companies have transformed into bureaucracies that serve little purpose other than enriching their executives and a place for its countless workers to collect a paycheck.  Just like the massive, state-backed Soviet corporations.)
  • IT outsourcing and business process outsourcing, BPO, contracts have collapsed and are down over 30% globally in this last quarter, a staggering drop. (Again, I wrote years ago that the BPO, IT outsourcing, Indian outsourcing/software bubble story was peaking and we were likely to see a major shift against this business.  Not only are we seeing revenues collapse, but Congress is now considering legislation that could start putting nails in this business model’s coffin and in India’s software, BPO and outsourcing bubble.) 

These are simply examples.  While there are many financial-related and service-related companies still doing well, these companies rely substantially on corporate cash and usury for their profits.  They are benefiting from the central bank reflation bubble.  Additionally, these businesses consume wealth and capital rather than create it.  They take money and wealth out of the economy and out of our pockets.   They either consume or destroy wealth and jobs.    They are that loud sucking sound that is simply part of the renter class that enslaves democracy to private, for-profit capital.  Most of these are companies and jobs our society would be better off not having.  Then our wealth could be spent on more productive outcomes that benefit our citizen’s and community’s quality of life.

The above highlights are not small perturbations in the global economy.   These are growing crises and large shifts that are a result of huge drops in overproduction (and resultant overconsumption) and associated capitalist business demand.  As is often cited with military bureaucrats for their closed-mindedness and ignorance, the Federal Reserve and other central banks are still fighting the last war.  ie, Their concern about providing bank liquidity to ensure there is no repeat of 2008 is the war they are still waging.  It is the last war and not the current war that should be waged to stave off future crises.   As discussed on here ad nauseam, 2008 was not a banking or financial crisis as incompetent bureaucrats in politics, economics, Wall Street, central banks and university professors in the economics, business and financial community have told us.  It was a crisis of capitalism.  And now we are starting to see exactly that with global capitalist production and global demand beginning to recouple with the initial signs of large declines.  What, pray tell, are central banks going to do to stop the fall of capitalism and its endless overproduced make-work?  Buy copper and then dump it back in mines?  Then mine it again and dump it again?   Or buy computer equipment and then scrap it?  Then buy some more and scrap some more?  Or buy more real estate and bulldoze the massive oversupply of commercial and residential development?   That’s essentially what has been happening for the last 30 years.  That is, corporate capitalism’s endless make-work.  And bankers are once gain lowering borrowing standards to re-ignite even more demand for make-work.  What’s next?   Maybe they’ll bring George Bush out of retirement to tell Americans to go out and spend their welfare check to buy more overproduced make-work.  Or a house or a car or more junk made in Chinese sweatshops as he did after 9-11. 

So, if we take into account last September’s earnings were a result of horrible 2012 3Q results, we haven’t really seen any growth in almost a year.   As noted on here ad nauseam, a service economy cannot grow.  Period.  A fact lost on everyone in politics, finance and economics who keep seeking these growth-at-all-cost policies needed to inflate away their massive debt bubble.  In fact, a service-based economy is why we have this debt bubble and horrendous wage growth in the first place. (I’ll show you mathematically why a service economy cannot grow at some point.  And how it is tied to slave wages.) 

Most of the perceived economic growth in the last 30 years is mythical.  It was based almost exclusively on excessive money printing and the resultant accumulation of our massive debt bubble to keep this system from dying.  Remember, I have harped on here countless times that U.S. economic activity peaked around 1980.  That’s an important date I will continue to point to until I come back with a very substantial post on why it is so important.  And it is important in ways you will never read anywhere else. 

That we have seen hundreds of monetary stimulus actions around the globe since the 2008 collapse is simply confirmation of thirty years of failed global economic policies are now careening out of control.  It’s preposterous to blame this on George Bush as so many liberal idiots do.   Not that Bush did anything but continue the same failed economic policies of Reagan and Clinton.   The ever-increasing speed and size of these required stimulus policies that must be employed to keep capitalism’s wheels from running off of the rails shows how incredible unstable global capitalism is.  I’ve called this part of the “quickening” before.   It’s exactly what one would expect of a complex system that has passed the tipping point.  ie, Greater and greater instability requiring more and more force or stabilization (stimulus) efforts unfolding at a faster and faster pace.  For conspiracy theorists who believe events in the world today were planned by global elites, you have to be kidding me.  No one can plan and control anything with trillions of moving parts.   Instead, these are simply reactionary measures by the status quo in an attempt to maintain their control over the global production and finance system, and as a result, over us.   They are simply forcing austerity onto the rest of us in order to try to maintain what must inevitably end.  That is, their class-based overproduction and overconsumption Ponzi scheme.  They too will be joining the rest of the world and experiencing a collapse in perceived wealth, status and success.  Just like 1929 when the vast majority of the elites, bankers and capitalists living large and enjoying the overproduction and overconsumption of the Roaring 20’s ended up destitute.  Again, another long-time thesis on here.

With more than 300 stimulative polices announced around the world since the 2008 collapse we still see global unemployment is rising as are economic disturbances.  That includes in the U.S. where the employment ratio and other real-world measurements continues to point to a massive structural crisis regardless of the pablum puke Obama, dimwitted Democrats, political propagandists, the mainstream media and corporate bureaucrats feed us.   And global production peaked back in 2008.  That means the majority of jobs created since are low-wage, benefit-less slave labor jobs created in the mythical service economy.   Essentially what this tells us is that no amount of money has had any effect in saving the global economy.   All it has done is recreate bubbles, not the least of which are financial assets and real estate.  They’ve thrown unprecedented resources at this system and it’s once again failing at an alarming rate.  Just as I have said it would countless times.  This is not a crisis that can be fixed by the Federal Reserve; the elites, corporations, politicians and other benefactors of this scheme can’t be saved by the public-private fascist partnership, the Federal Reserve, that has allowed them to continually loot the public treasury.

DOWDAX

Dow Jones Industrials & German DAX (in green)

DAX

Australian dollar/Japanese Yen & German Dax (in green)

Let’s once again look at an update of charts shown on here before.  The Australian dollar/Japanese Yen carry trade along with the German DAX and Dow Jones Industrials equity indices.   The correlation is 100%.  You don’t need a PhD to understand why all assets are correlated down to minute-to-minute actions in financial markets and headed higher.  For now.   It’s not because the economy is doing well.  It’s unprecedented leverage taken from the carry trade and flooded into already levered financial derivatives, futures and assets along with the unprecedented spending of the people’s money to save the corporations and elites that owns all of the world’s assets.  Period.   In other words, it’s incredibly leveraged, artificially-manufactured financial engineering meant to bail out the most leveraged bubble of all.  That is, that 1% of the population controls the other 99% by defeating democracy, creating economic slavery and indebting us to a system of usury and graft.   The leverage in this “financial engineering” is unknown to anyone but most certainly more than one hundred to one and in some cases possibly even more than one thousand to one by the time the wages are paid at that Chinese iPhone sweatshop.  

The reflation trade is only meant to bail out trickle down economics.  To bail out those who have stolen all of the world’s assets and wealth so that they can maintain their perceptions of control and wealth.  That is, class-based, private, for-profit capital(ism).   These are the only people (and corporations) who really own all of the assets being reflated by massive leverage, money printing and central banks.  That includes gold, by the way that is almost completely controlled by central banks and global elites.  There is no true wealth behind any of these monetary and economic stimulus actions or in the rising price of financial assets.  It’s just an illusion created by manipulation and looting.  By artificial levered demand.  A massive concerted Ponzi scheme meant to save global private, for-profit capitalism and private, for-profit banking and our elite masters.  A Ponzi scheme that terrorizes billions who have to stay alive in this hell.  A hell created in the minds of megalomaniacs, psychopaths and predators who have enslaved us to its madness.  This illusion will certainly pass as all illusions do.

This latest quarter’s results are pointing to very large disturbances once again building in an uncontrollable and inherently unstable complex system.  It’s all working out exactly as I have been writing it would for the last eight years… albeit slower than I expected. But then I never could have predicted hundreds of stimulus actions by the bankers and capitalists using the people’s money and the associated increased taxes/fees/costs/usury/austerity to save themselves while having not a care in the world as the rest of humanity deals with the death, misery and suffering of its wake. 

The world power structure of the state and its invention of class-based economic looting and slavery -  private for-profit corporate capitalism - that runs roughshod over human rights and freedom is and always has been truly evil beyond words.  Since democracy’s attempted regulation of capitalism has been completely gutted starting with Reagan and substantially more so under Clinton/Gore, who literally burned capitalism’s regulatory structure to the ground, we now stand witness to its most glorious manifestation of pure evil in its complete deregulation.   It is perfectly predatory, exploitive and violent.  It is perfectly psychotic as are the people who defend it.

This current environment is much worse than anything leading up to 2008 and it is worsening.  Just as I said it would be.  And it’s across the globe just as I said it would be.  When I first wrote the end game for the global economy would involve most crises being outside of the U.S., that was a very, very lonely position.   The 2008 Wall Street crisis then made it even more lonely because that was perceived as a U.S.-only financial crisis.  Can you remember how peaceful and prosperous the world seemed just a handful of years ago?  How the world has changed.  It is literally on fire.  And so have the perceptions changed for almost everyone from peace and prosperity to utter madness and chaos.  Just as quickly as perceptions changed from the pre-2008 crash to one of awareness at the world’s crises and misery, the current crises and misery could be constructively ameliorated were virtue, truth, public service and selflessness  to replace psychotic politicians, bankers and corporate executives in the determination of humanity’s way forward. 

As has been uniquely written on here ad nauseam since the 2008 crash, globalization and global finance are dead.  2008 was the final nail in the coffin.   We are simply witnessing  capitalism’s last, best attempt at saving itself rather than serving, protecting and defending the populations it is  supposed to be serving.  

Change you can believe in.

posted by TimingLogic at 9:59 AM

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