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MUTANT CAPITALISM

This one makes you think. I think there is much truth in Farrell’s assessment. Fear of death does drive the actions of many in this world. I think this is part of the reason that history runs in cycles. Farrell concentrates on the narcissism and arrogance of individuals, but it is much more powerful when generations act in a similar manner. This is another confirmation of the Fourth Turning cycle theory. I also agree that Jamie Dimon is pure evil and I will rejoice when he is discredited and hopefully imprisoned for his crimes against America.

The ‘cult of capitalism’ and U.S. moral decline

Commentary: America is being led astray by narcissists

By Paul B. Farrell, MarketWatch

Capitalism is now a cult, and Jamie Dimon is the self-appointed leader of the “cult of capitalism.”

That message is gleaned from a Huffington Post column by Mark Gongloff, whose headline stated that not only is the J.P. Morgan CEO and chairman a cult leader but a “very dangerous” one. Why? Because apparently shareholders have signed “a billion-year contract” to join the cult, notwithstanding portrayals of Dimon as a greedy egomaniac and poster boy for everything wrong with capitalism.

His is a monster of a cult: Warren Buffett is a member. So is CNBC’s Jim Cramer. Says Gongloff, who labels Cramer a “shouty man”: “Cramer joined Warren Buffett and many more VIPs in singing Dimon’s praises and warning of the woe that would befall shareholders” if they split his roles. Still, “the media played along, helping … Dimon keep both of his jobs” as J.P. Morgan Chase & Co.’s chief executive and chairman.

Dimon, meanwhile, was doing what any self-respecting egomaniac under such a threat would do: acting like a petulant teenager and threatening to quit.

Today, reconfirmed as leader of the cult of capitalism, Dimon could serve as the perfect example of what psychologist Ernest Becker wrote about in his Pulitzer Prize–winning classic, “The Denial of Death,” a favorite from my years at Morgan Stanley. Dimon fits the cult-leader profile: charismatic narcissist, uncompromising, manipulating and threatening to his co-conspirators in the “cult of capitalism” and to the masses marching to the drumbeat of his destiny, off another economic cliff, bigger than 2008’s.

Reuters

Jamie Dimon.

The destiny of this cult of capitalism is also driven by historical trends that Dimon cannot see, trends beyond his control, beyond his leadership talents. Why? He is blinded, incapable of seeing the mega-billion-dollar danger Gongloff claims to have spotted dead ahead.

Is the new capitalism is destroying America’s morals?

Earlier, Dimon revealed himself as a doomsdayer with a self-destructive streak. I first wrote of this back in 2011. After Dimon spoke at the U.S. Chamber of Commerce the headlines shouted: “Jamie Dimon Worries Financial Regulation Will Doom Banks Forever.” Reports followed: Dimon attacked Dodd-Frank as “the nail in the coffin of big American banks.” Doom? Coffin? No, over the top.

In analyzing this behavior, it does fit the diagnosis in Becker’s “The Denial of Death,” a classic analysis of why America is led by narcissists wired to self-destruct.

We now see what John Bogle call a “mutant” capitalism that no longer resembles Adam Smith’s inspiring economic principles enshrined in our Declaration of Independence and Constitution. This type of capitalism has turned into an out-of-control virus destroying America’s moral values from within.

Vanguard

John Bogle, Vanguard Group founder.

Missing is an sense of honor and love of democracy that made me proud as a U.S. Marine sergeant. Missing is a balance of conservative free-market principles with liberal compassion. All that has vanished in the blind ideologies of today’s Ayn Rand clones demanding a return to a world that mimics the Wild West.

Wall Street narcissists and their blinding ‘denial of death’

When I was first at Morgan Stanley, I read a wide assortment of books, from Adam Smith’s “Wealth of Nations” and “The Theory of Moral Sentiments” to “Supermoney” and “Powers of Mind.” Becker’s “Denial of Death” still haunts me. It took many readings over the years — plus a Ph.D. in psychology and later work as an interventionist with hundreds of executives, physicians, actors, rock stars, athletes, politicians, royalty and other celebrities — to fully comprehend its power.

Today Becker’s message seems obvious: Wall Street insiders really are their own worst enemies. Once again, as in 2000 and 2008, a million blind insiders are self-destructing.

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Instead of Adam Smith’s “invisible hand,” we now have many hands of narcissistic egomaniacs driving this new cult of capitalism. The philosopher Sam Keen, author of “Hymns to an Unknown God,” wrote a great summary of Becker’s worldview in “Denial of Death.” Here are seven steps in the rise and demise of the cult of capitalism:

1. The world is terrifying, hostile and unsafe

Wall Street insiders, playing with billions, all face the same, deep angst in their souls. An inner war rages every day from birth. This world is “not Disneyland,” says Keen: “Mother Nature is a brutal bitch, red in tooth and claw, who destroys what she creates,” brutishly “tearing others apart with teeth of all types — biting, grinding flesh.” This is our reality from birth until death. Both Hollywood and Wall Street remind us of it every day.

2. Fear of death haunts all humans, creating intense anxieties

The world “out there” is filled with mortal enemies. Our basic human motivation is a “biological need to control our basic anxiety, to deny the terror of death.”

We adapt, enduring the pain of existence in a cruel world, anxious, “helpless, abandoned in a world where we are fated to die.” We live, relates Keen, in “terror: to have emerged from nothing, to have a name, consciousness of self, deep inner feelings, an excruciating inner yearning for life and self-expression — and with all this yet to die.” Yes, it sounds like an endless summer of Hollywood blockbusters, repeating on an endless loop in our brains.

3. So we invent clever ways to quiet our anxiety, deny our fears

Every day, we try to deny this reality, block the fears from our minds: to survive, raise a family, be productive.

Denial is the “first line of defense that protects us from the painful awareness of our helplessness.” So, writes Keen, “we hide in our phony defense mechanisms” to “feel safe … able to pretend that the world is manageable.” As do all capitalists. “But the price we pay is high,” Keen continues. “We repress our bodies to purchase a soul that time cannot destroy; we sacrifice pleasure to buy immortality,” but “life escapes us while we huddle within our defended fortress.”

4. Our goal: Escape death, be an immortal hero saving the world

Here’s where the human brain is at its most brilliant, most evident with cult leaders: “Society provides the second line of defense against our natural impotence,” says Keen. For all cultures create “a hero system that allows us to believe we transcend death by participating in something of lasting worth. We achieve ersatz immortality by sacrificing ourselves to conquer an empire, to build a temple, to write a book, to establish a family, to accumulate a fortune, to further progress and prosperity, to create an information-society and global free market.”

And not just individuals but “corporations and nations may be driven by unconscious motives that have little to do with their stated goals.” Each driven by leaders whose unconscious motives have more to do with overcoming their anxieties about death as a hero. In fact, the motivations of leaders “making a killing in business or on the battlefield frequently have less to do with economic need or political reality than with the need for assuring ourselves that we have achieved something of lasting worth,” while, deep inside, they remain our cult leaders, selfish, self-seeking, little narcissistic egomaniacs.

5. Our heroic ventures create enemies, backfire, counterattack

This is the final act for capitalists and for capitalism. As Keen puts it, “our heroic projects aimed at destroying evil have the paradoxical effect of bringing more evil into the world.” America vs. China, Republicans vs Democrats, etc. But the real war is always within us. Each of us projects our inner demons onto the real world. To distract us from our fear of death. And in our denials we convince ourselves we are immortal. In our minds we become as gods. And yet deep inside every hero quest to save the world are buried childhood fears, ancient terrors. And eventually this shadow world turns real, the game backfires, and old fears resurface, fighting back.

6. Our denial-of-death quest creates a blind hero

In Becker’s psychological reality we soon discover that “one of the key concepts for understanding man’s urge to heroism is the idea of narcissism.” Freud “discovered that each of us repeats the tragedy of the mythical Greek Narcissus.” We are “hopelessly absorbed with ourselves.” And 2,500 years of history has “not changed man’s basic narcissism.” In fact, “most of the time … practically everyone is expendable except ourselves.” We are indispensible. Forever. Immortal. We know best, for greed is always good in the cult of capitalism.

7. Escape into enlightenment? Sorry, but it gets worse

You ask: Is there hope for becoming a hero? Happy endings? Solutions? New strategies to get rich in recessions and bear markets? No.

As with Sartre’s existentialism, Becker sees no escape, “no exit” from the human condition — our denial of death, our destiny, our self-inflicted hell.

You’re trapped in a no-win drama: Even if you do get enlightened, your new enlightened state you will suffer a new awareness — that the cult of capitalism continues unenlightened, blind, driven to self-destruct by forces unseen and un-comprehended until it’s too late.

And unfortunately that leaves 300 million Americans trapped in the cult’s drama, where Wall Street’s greedy narcissists are unwittingly sabotaging the economy, lost in their silent conspiracy, controlling the invisible hand, in a costly war that will again lead, as in 2000 and 2008, to the fulfillment of the death wish of the cult of capitalism.

15 EYE OPENING MINUTES AT WALGREENS

I dropped into the Walgreens near my house yesterday to pick up a couple of prescriptions. Every time I go to this store, the workers outnumber the customers. It must have something to do with the other 10 drug stores within five miles. There is absolutely no possibility this store is turning a profit. It will eventually be closed. But, in the meantime it is very convenient for our family. I noticed two things that I hadn’t seen before in this Walgreens. As I walked towards the pharmacy I noticed there were big red signs on all of the refrigerator doors. There must have been 10 of these signs. SNAP ain’t just for West Philly anymore. I live in an upper middle class area. There are no slums or ghettos within 20 miles. Why would Walgreens be making such a big deal about accepting SNAP? This is just another example of what a scam this program has become. Allowing people to purchase ice cream and goodies with taxpayer money is a joke. I’d love to know what volume of business this Walgreens is doing in SNAP purchases.

Once I arrived at the pharmacy, I had to wait a few minutes for the customer ahead of me. I glanced up at the wall and saw a large notice. I started scanning it and was blown away by who Walgreens will give our private health information to. Below is the complete notice that was hung on their wall. Calling it protect health information is an oxymoron. Walgreens essentially is telling you they will give your information to any governmental agency that asks for it. They will give it to the police, FBI, FDA, DHS, and probably to MSNBC if they ask nicely. Here is the best one:

National Security, Intelligence Activities, and Protective Services for the President and Others. We may release PHI about you to federal officials for intelligence, counterintelligence, protection to the President, and other national security activities authorized by law.

They will provide information about your constipation or having a limp dick to DHS in order to protect the President. I feel so much safer now.

Nothing you say, do, type, order online, or put into your body is not known to the Orwellian government we live under today. We’ve learned to love our servitude as long as we can use our EBT cards to buy Cherry Garcia ice cream.

Notice of Privacy Practices

THIS NOTICE DESCRIBES HOW MEDICAL INFORMATION ABOUT YOU MAY BE USED AND DISCLOSED AND HOW YOU CAN GET ACCESS TO THIS INFORMATION. PLEASE REVIEW IT CAREFULLY.

Walgreen Co., including its subsidiaries, is required by law to maintain the privacy of Protected Health Information (“PHI”) and to provide you with notice of our legal duties and privacy practices with respect to PHI. PHI is information that may identify you and that relates to your past, present or future physical or mental health or condition and related health care services. This Notice of Privacy Practices (“Notice”) describes how we may use and disclose PHI to carry out treatment, payment or health care operations and for other specified purposes that are permitted or required by law. The Notice also describes your rights with respect to your PHI. We are required to provide this notice to you by the Health Insurance Portability and Accountability Act (“HIPAA”).

Walgreens is required to follow the terms of this Notice. We will not use or disclose your PHI without your written authorization, except as described or otherwise permitted by this Notice. We reserve the right to change our practices and this Notice and to make the new Notice effective for all PHI we maintain. Upon request, we will provide any revised Notice to you.

Examples of How We Use and Disclose Protected Health Information About You

The following categories describe different ways that we use and disclose your protected health information. We have provided you with examples in certain categories; however, not every use or disclosure in a category will be listed.

Treatment. We may use your health information to provide and coordinate the treatment, medications and services you receive. For example, we may contact you regarding medications, equipment, supplies, compliance programs such as drug recommendations, therapeutic substitution, refill reminders, other product or service recommendations such as specialty and infusion therapies, counseling and drug utilization review (DUR), product recalls or disease state management.

Payment. We may use your health information for various payment-related functions. Example: We may contact your insurer, pharmacy benefit manager or other health care payer to determine whether it will pay for your medications, equipment and supplies and the amount of your co-payment. We will bill you or a third-party payer for the cost of medications, equipment and supplies dispensed to you. The information on or accompanying the bill may include information that identifies you, as well as the medications you are taking.

Health Care Operations. We may use your health information for certain operational, administrative and quality assurance activities. Example: We may use information in your health record to monitor the performance of the staff and pharmacists providing treatment to you. This information will be used in an effort to continually improve the quality and effectiveness of the health care and service we provide. We may disclose health information to business associates if they need to receive this information to provide a service to us and will agree to abide by specific HIPAA rules relating to the protection of health information.

We may also use your health information to provide you with information about benefits available to you, and, in limited situations, about health-related products or services that may be of interest to you. If you register your email address on Walgreens.com, or any of our other websites, you may elect to receive this information via email.

We are permitted to use or disclose your PHI for the following purposes. However, Walgreens may never have reason to make some of these disclosures.

To Communicate with Individuals Involved in Your Care or Payment for Your Care. We may disclose to a family member, other relative, close personal friend or any other person you identify, PHI directly relevant to that person’s involvement in your care or payment related to your care.

Food and Drug Administration (FDA). We may disclose to the FDA, or persons under the jurisdiction of the FDA, PHI relative to adverse events with respect to drugs, foods, supplements, products and product defects, or post-marketing surveillance information to enable product recalls, repairs, or replacement.

Worker’s Compensation. We may disclose your PHI to the extent authorized by and to the extent necessary to comply with laws relating to worker’s compensation or other similar programs established by law.

Public Health. As required by law, we may disclose your PHI to public health or legal authorities charged with preventing or controlling disease, injury, or disability.

Law Enforcement. We may disclose your PHI for law enforcement purposes as required by law or in response to a subpoena or court order.

As Required by Law. We will disclose your PHI when required to do so by federal, state, or local law.

Health Oversight Activities. We may disclose your PHI to an oversight agency for activities authorized by law. These oversight activities include audits, investigations, inspections, and credentialing, as necessary for licensure and for the government to monitor the health care system, government programs, and compliance with civil rights laws.

Judicial and Administrative Proceedings. If you are involved in a lawsuit or a dispute, we may disclose your PHI in response to a court or administrative order. We may also disclose health information about you in response to a subpoena, discovery request, or other lawful process instituted by someone else involved in the dispute, but only if efforts have been made, either by the requesting party or us, to tell you about the request or to obtain an order protecting the information requested.

Research. We may disclose your PHI to researchers when their research has been approved by an institutional review board or privacy board that has reviewed the research proposal and established protocols to ensure the privacy of your information.

Coroners, Medical Examiners, and Funeral Directors. We may release your PHI to a coroner or medical examiner. This may be necessary, for example, to identify a deceased person or determine the cause of death. We may also disclose PHI to funeral directors consistent with applicable law to enable them to carry out their duties.

Organ or Tissue Procurement Organizations. Consistent with applicable law, we may disclose your PHI to organ procurement organizations or other entities engaged in the procurement, banking, or transplantation of organs for the purpose of tissue donation and transplant.

Notification. We may use or disclose your PHI to notify or assist in notifying a family member, personal representative, or another person responsible for your care, regarding your location and general condition.

Fundraising. We may contact you as part of a fundraising effort.

Correctional Institution. If you are or become an inmate of a correctional institution, we may disclose to the institution or its agents PHI necessary for your health and the health and safety of other individuals.

To Avert a Serious Threat to Health or Safety. We may use and disclose your PHI when necessary to prevent a serious threat to your health and safety or the health and safety of the public or another person.

Military and Veterans. If you are a member of the armed forces, we may release PHI about you as required by military command authorities. We may also release PHI about foreign military personnel to the appropriate foreign military authority.

Victims of Abuse or Neglect. We may disclose PHI about you to a government authority if we reasonably believe you are a victim of abuse or neglect. We will only disclose this type of information to the extent required by law, if you agree to the disclosure, or if the disclosure is allowed by law and we believe it is necessary to prevent serious harm to you or someone else.

Other Uses and Disclosures of PHI
We will obtain your written authorization before using or disclosing your PHI for purposes other than those provided for above (or as otherwise permitted or required by law). You may revoke an authorization in writing at any time. Upon receipt of the written revocation, we will stop using or disclosing your PHI, except to the extent that we have already taken action in reliance on the authorization.

Your Health Information Rights

Obtain a paper copy of the Notice upon request. You may request a copy of our current Notice at any time. Even if you have agreed to receive the Notice electronically, you are still entitled to a paper copy. You may obtain a paper copy from a pharmacy, home care facility, mail service location or the Privacy Office.

Request a restriction on certain uses and disclosures of PHI. You have the right to request additional restrictions on our use or disclosure of your PHI by sending a written request to the Privacy Office. We are not required to agree to those restrictions. We cannot agree to restrictions on uses or disclosures that are legally required, or which are necessary to administer our business.

Inspect and obtain a copy of PHI. In most cases, you have the right to access and copy the PHI that we maintain about you. To inspect or copy your PHI, you must send a written request to the Privacy Office. We may charge you a fee for the costs of copying, mailing and supplies that are necessary to fulfill your request. We may deny your request to inspect and copy in certain limited circumstances.

Request an amendment of PHI. If you feel that PHI we maintain about you is incomplete or incorrect, you may request that we amend it. To request an amendment, you must send a written request to the Privacy Office. You must include a reason that supports your request. In certain cases, we may deny your request for amendment.

Receive an accounting of disclosures of PHI. You have the right to receive an accounting of the disclosures we have made of your PHI after April 14, 2003 for most purposes other than treatment, payment, or health care operations. The right to receive an accounting is subject to certain exceptions, restrictions, and limitations. To request an accounting, you must submit a request in writing to the Privacy Office. Your request must specify the time period. The time period may not be longer than six years and may not include dates before April 14, 2003.

Request communications of PHI by alternative means or at alternative locations. For instance, you may request that we contact you at a different residence or post office box. To request confidential communication of your PHI, you must submit a request in writing to the Privacy Office. Your request must tell us how or where you would like to be contacted. We will accommodate all reasonable requests.

Where to obtain forms for submitting written requests. You may obtain forms for submitting written requests from any Walgreens store, home care facility, mail service location or by contacting the Privacy Officer at Walgreen Co. Privacy Office, 200 Wilmot Road, Mail Stop 9000, Deerfield, Illinois 60015 or toll-free by telephone at (877) 924-4472. You can also visit www.walgreens.com to obtain these forms.

Incidental Disclosures
Walgreens will make reasonable efforts to avoid incidental disclosures of protected health information. An example of an incidental disclosure is conversations that may be overheard between the pharmacy staff and the patient at the drive-thru, as a result of the speaker system. To reduce the likelihood of this happening, we recommend that you go inside the store to the pharmacy for any consultations.

Minors
If you are a minor who has lawfully provided consent for treatment and you wish for Walgreens to treat you as an adult for purposes of access to and disclosure of records related to such treatment, please notify a staff member, pharmacist or the Privacy Office.

For More Information or To Report a Problem
If you have questions or would like additional information about Walgreens’ privacy practices, you may contact our Privacy Officer at Walgreen Co. Privacy Office, 200 Wilmot Road, Mail Stop 9000, Deerfield, Illinois 60015 or toll-free by telephone at (877) 924-4472. If you believe your privacy rights have been violated, you can file a complaint with the Privacy Officer or with the Secretary of Health and Human Services. You can also file a complaint through www.walgreens.com, and we will route your complaint to the Privacy Office. There will be no retaliation for filing a complaint.

Effective Date
This Notice is effective as of April 13, 2003.

GOING MEDIEVAL

Jimmy takes a shot at Krugman and NASCAR in one article. I agree that Japan is going to be the catalyst for the next leg down in this Fourth Turning. One thing about Fourth Turnings – they never peter out. They build to a crescendo.

Let’s All Go Medieval

By James Howard Kunstler on May 27, 2013 9:34 AM

That voice! All a’quiver with the dread of self-knowledge that it is confabulating a story, much like the “money” that his Open Market Committee spins out of the increasingly carbonized air. His words fill the vacuum of the collectively blank American mind, where hopes and dreams spin like debris in an Oklahoma twister, only to fall incoherently on a landscape of man-made ruins. If Federal Reserve chairman Ben Bernanke were hooked up to a polygraph machine when he made a public statement — such as last Wednesday’s testimony before congress — I bet the output graph would look something like a seismic record of the 9.0 Fukushima megathrust, all fretful spikes and dips.

When historians of the future ponder our fate around their campfires, they will marvel that this society invited such a temporizing little nerd to act as its Oracle-in-Chief… that he made periodic visits to sit before the poobahs of the land, and issued prophesies that nobody could really understand — and that the fate of the people in this land hung on his muttered ambiguities. Let’s face it: people need oracles when they don’t know what the fuck is going on.

What’s going on is as follows: America’s central bank is trying to compensate for a floundering economy that will never return to its prior state. The economy is floundering because its scale and mode of operation are no longer consistent with what reality offers in the way of available resources at the right price, especially oil. So, rather than change the scale and mode of operations in this economy — that is, do things differently — we try to keep doing things the same by flushing more “money” into the system, as though it were a captive beast receiving nutriment.

One problem with that is that the “money” is no longer money. That is, it’s not really an effective store of value, or pricing reference. It remains for the moment a medium of exchange, but the persons exchanging it grow suspicious of what this “money” purports to represent. Does it stand for promises of future repayment? Hmmmm. Those promises are looking sketchy lately, especially since this is an economy that does not generate enough new real wealth to make the interest payments, let alone manage to pay back the principal. Is it a claim on future work? Some are afraid that the future work deliverable will be less than they expect. Whatever else it is, does it find respect in other societies where different money is used?

These questions are making a lot of people nervous these days. Of course, a time will come when all matters concerning this particular incarnation of money will be seen as strictly ceremonial. Ben Bernanke, we will understand, was not stating facts before congress but rather singing a song, or rather chanting in a low, repetitive, tedious way in the primal manner of a frightened person trying to comfort himself with reassuring sound — that is, prayer. You’d be surprised how well that goes over in a place like congress, which is stuffed with prayerful characters, people who exist in a religious delirium. These are not the people who are nervous, by the way. The nervous tend to be more secular, and inhabit the margins of life where unconventional thinking thrives weedlike at a remove from all the mental toxicity at the center.

These nervous ones are looking ever more closely these days at the distant nation of Japan, where an interesting scenario is playing out: the last days of a giant industrial-technocratic economy. The story there is actually pretty simple if you peel away the quasi-metaphysical bullshit it comes wrapped in these days from astrologasters like John Mauldin and Paul Krugman, viz. Japan has no fossil fuel resources. Zip. You can’t run their kind of economy without the stuff. And they can’t. Japan is crapping out, as they say in Las Vegas. Tilt! Game over. As this happens, Japan issues a lot of distracting financial noise that involves evermore “creation” of their own “money,” and the knock-on effects of that, but it’s all just noise. Japan’s only good choice is to go medieval, that is, to give up on the rather hopeless 150-year-long project of being an industrial-technocratic modern super-state, and go back to being an island of a beautiful artistic hand-made culture. I call that “going medieval,” though you could quibble as to whether that’s the best word for it, since I’m not talking about cathedrals or crusades.

One of Japan’s other choices is to “go mad-dog,” something they actually tried back in the mid-20th century. It didn’t work out too well then. The Japanese leadership is making noises about “re-arming,” and a nice state of conflict is already simmering between them and their age old rivals-victims next door in China, a country that has lately enjoyed the upper hand in the industrial-techno racket (though it will be faced with the same choices as Japan not too many years hence). Do the Japanese start another world war on their side of the planet? Let’s hope not. Let’s hope they lay down their robotics and their nuclear reactors gently and go back to making netsuke. Just give it up and do things differently — after all, that’s what all the human beings on the planet have to do now.

For what it’s worth, Japan’s stock market has tanked a hearty 14 percent in the past five days, if that means anything, and I’m not sure it does considering the aforesaid “noise,” but there you have it. Our own stock markets are mercifully closed this holiday, having given American worriers an extra day of anxious reflection on the state of things out there. My own opinion is that we’re all going medieval sooner rather than later and the big remaining question is how much of a mess we’ll make on the journey to it.

Also, personally, I don’t like these manufactured holidays when the landscape is cluttered with morons enjoying motorsports. I’ll be working today, and grateful when it blows over.

JUST AN OBSERVATION

I took the minivan to the Jiffy Lube at the 5 Points intersection in Montgomeryville for an oil change this morning. I arrived at 8:01. It opened at 8:00. They completed the entire service by 8:15. I used my $10 coupon and ended up paying $31. The staff was courteous, efficient, friendly and quick.

I’ve been taking my vehicles to this Jiffy Lube for 15 years. I know all you grease monkeys prefer to do it yourself, but I have no interest or inclination to do any work on my cars. Over the years the staff has changed dramatically at this Jiffy Lube. It probably isn’t a fun job. They have three bays and a staff of about 8 guys. They were all hustling and busting their humps to service my van and the other car that was there. There were five young white guys and three young Asian guys.

This is my observation. Having gone there for 15 years, I’ve seen the demographics of the Jiffy Lube staff change dramatically. Back when the economy was booming in the early to mid 2000’s the staff was mostly African American. In the last few years the staff has been solely white and Asian. I find myself wondering why the shift. I don’t think Jiffy Lube is practicing racial discrimination. I can only think of three possible reasons:

Is the economy so bad that suburban Asians and whites, who would normally get office jobs, had to accept lower paying low skill jobs that would normally go to the less skilled people from urban areas?

Has the level of welfare benefits (SNAP, Section 8 housing, SSDI, subsidized phones, cable, utilities) become high enough that low income people no longer choose to work?

Jiffy Lube is racist and Obama will be putting Eric Holder on the case as soon as he’s done investigating Tea Party members and AP reporters.

Any other ideas on this demographic shift?

QUOTES OF THE DAY

“At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where, during the Unraveling, America will have neglected, denied, or delayed needed action. Anger at “mistakes we made” will translate into calls for action, regardless of the heightened public risk. It is unlikely that the catalyst will worsen into a full-fledged catastrophe, since the nation will probably find a way to avert the initial danger and stabilize the situation for a while. Yet even if dire consequences are temporarily averted, America will have entered the Fourth Turning.”

“As the Crisis catalyzes, these fears will rush to the surface, jagged and exposed. Distrustful of some things, individuals will feel that their survival requires them to distrust more things. This behavior could cascade into a sudden downward spiral, an implosion of societal trust.”

“But as the Crisis mood congeals, people will come to the jarring realization that they have grown helplessly dependent on a teetering edifice of anonymous transactions and paper guarantees. Many Americans won’t know where their savings are, who their employer is, what their pension is, or how their government works. The era will have left the financial world arbitraged and tentacled: Debtors won’t know who holds their notes, homeowners who owns their mortgages, and shareholders who runs their equities – and vice versa.”

“Soon after the catalyst, a national election will produce a sweeping political realignment, as one faction or coalition capitalizes on a new public demand for decisive action. Republicans, Democrats, or perhaps a new party will decisively win the long partisan tug of war. This new regime will enthrone itself for the duration of the Crisis. Regardless of its ideology, that new leadership will assert public authority and demand private sacrifice. Regardless of its ideology, that new leadership will assert public authority and demand private sacrifice. Where leaders had once been inclined to alleviate societal pressures, they will now aggravate them to command the nation’s attention. The regeneracy will be solidly under way.”

“In foreign affairs, America’s initial Fourth Turning instinct will be to look away from other countries and focus total energy on the domestic birth of a new order. Later, provoked by real or imagined outside provocations, the society will turn newly martial. America will become more isolationist than today in its unwillingness to coordinate its affairs with other countries but less isolationist in its insistence that vital national interests not be compromised. The Crisis mood will dim expectations that multilateral diplomacy and expanding global democracy can keep the world out of trouble. Even before any conflicts arise, people will feel less anxiety over the prospect of casualties. Old Unraveling-era strategies (flexibility, stealth, elite expertise, stand-off weaponry, and surgical goals) will be replaced by new Crisis-era strategies (mass, intimidation, universal conscription, frontal assault, and total victory) more suitable to a fight for civic survival. By then, people will will look back on the Unraveling as the time when America evolved from a postwar to a prewar era.”

“The Boomers’ old age will loom, exposing the thinness in private savings and the unsustainability of public promises. The 13ers will reach their make or break peak earning years, realizing at last that they can’t all be lucky exceptions to their stagnating average income. Millenials will come of age facing debts, tax burdens, and two tier wage structures that older generations will now declare intolerable.”

“This might result in a Great Devaluation, a severe drop in the market price of most financial and real assets. This devaluation could be a short but horrific panic, a free-falling price in a market with no buyers. Or it could be a series of downward ratchets linked to political events that sequentially knock the supports out from under the residual popular trust in the system. As assets devalue, trust will further disintegrate, which will cause assets to devalue further, and so on.”

Eventually, all of America’s lesser problems will combine into one giant problem. The very survival of the society will feel at stake, as leaders lead and people follow. The emergent society may be something better, a nation that sustains its Framers’ visions with a robust new pride. Or it may be something unspeakably worse. The Fourth Turning will be a time of glory or ruin.”

“The seasons of time offer no guarantees. For modern societies, no less than for all forms of life, transformative change is discontinuous. For what seems an eternity, history goes nowhere – and then it suddenly flings us forward across some vast chaos that defies any mortal effort to plan our way there. The Fourth Turning will try our souls – and the saecular rhythm tells us much will depend on how we face up to that trial. The saeculum does not reveal whether the story will have a happy ending, but it does tell us how and when our choices will make a difference.” – Strauss & Howe

“History offers even more sobering warnings: Armed confrontation usually occurs around the climax of Crisis. If there is confrontation, it is likely to lead to war. This could be any kind of war – class war, sectional war, war against global anarchists or terrorists, or superpower war. If there is war, it is likely to culminate in total war, fought until the losing side has been rendered nil – its will broken, territory taken, and leaders captured.”

– The Fourth Turning – Strauss & Howe -1997

AND THE BAND PLAYED ON

A confluence of events last week has me reminiscing about the days gone by and apprehensive about the future. I’ve spent a substantial portion of my adulthood rushing to baseball fields, hockey rinks, gymnasiums, and school auditoriums after a long day at work. I’d be lying if I said I enjoyed every moment. Watching eight year olds trying to throw a strike for two hours can become excruciatingly mind-numbing. But, the years of baseball, hockey, basketball, and band taught my boys life lessons about teamwork, sportsmanship, winning, losing, hard work, and having fun. There were championship teams, awful teams and of course trophies for finishing in 7^th place. As my boys have gotten older and no longer participate in organized sports, the time commitment has dropped considerably. Last week was one of those few occasions where I had to rush home from work, wolf down a slice of pizza and head out to a school function. It was the annual 8^th grade Spring concert.

My youngest son was one of a hundred kids in the 8^th grade choir. I think it was mandatory, since none of my kids like to sing. As my wife and I found a seat in the back of the auditorium where we could make a quick escape at the conclusion of the show, neither of us were enthused with the prospect of spending the next ninety minutes listening to off-key music and lame songs. I’ve been jaded by sitting through these ordeals since pre-school. But a funny thing happened during my 30^th band concert. I began to feel sentimental about the past and sorrowful about the future for these Millennials.

The Millennial generation was born between 1982 and 2004. Therefore, they range in age from 9 years old to 31 years old. There are approximately 87 million of them, or 27.5% of the U.S. population. In comparison, the much ballyhooed Boomer generation only has 65 million cohorts remaining on this earth. The Millennials will have a much greater influence on the direction of this country over the next fifteen years than the currently in control Boomers. There has been abundant scorn heaped upon this young generation by their elders. In a fit of irrationality befit the arrogant, hubristic, delusional elder generations, they somehow blame a cohort in which 54 million of them are still younger than 21 years old for many of the ills afflicting our society. This disgusting display of hubris is par for the course among these delusional elders.

Are Millennials addicted to their iGadgets, cell phones and Facebook pages? Probably. Do they spend too much time on the internet and playing PS3 & Xbox? Certainly. Have they been indoctrinated in social engineering gibberish like diversity and planet worship by government run public school bureaucrats? Absolutely. Are they young, foolish, immature, irrational and not respectful towards their elders? You betcha. Teenagers have acted like this forever. You acted like that. The ongoing crisis in this country and our unsustainable economic system are in no way the result of anything perpetrated by the Millennial generation.

Can the Millennial generation be blamed for the $17 trillion national debt, $222 trillion of unfunded un-payable social obligations promised by corrupt politicians, $1 trillion of annual deficits, undeclared wars being waged across the globe on behalf of the military industrial complex arms dealer mega-corporations, economic policies that have resulted in 48 million people dependent on food stamps, tax policies that enrich those who write the code, trade policies that benefit corporations who gutted the industrial base and shipped jobs overseas to slave labor factories, or monetary policies that have destroyed 96% of the dollar’s purchasing power? They had no say in the creation of our untenable welfare/warfare state.

There are no Millennials among the 535 corrupt bought off politicians slithering down the halls of Congress. There are no Millennials running the Too Big To Control Wall Street banks. There are no Millennials in charge of the mega-corporations that buy and sell our politicians. There are no Millennials at the upper echelon of the Military Industrial Complex or in the upper ranks of the U.S. Military. But, and this is a big but, they have done most of the dying in the Middle East over the last ten years in our multiple undeclared preemptive wars of aggression. They have died under the false pretenses of a War on Terror, when they are truly dying on behalf of the crony capitalists who profit from never ending war. They have been fighting and dying to protect “our oil” that happens to be under “their sand”. If the energy independence storyline was true, why is our military perpetually at war in the Middle East?

The Millennials will also be required to do the heavy lifting over the next fifteen years of this Fourth Turning Crisis. The Silent Generation is dying off rapidly. The Boomer generation has done some hard living and some hefty eating and with the oldest of their cohort hitting 70 years old, their supremacy will begin to diminish over the coming fifteen years. At 87 million strong, and millions yet to reach voting age, the Millennials will become more influential by the day regarding the future course of this nation. The question is what will be left of this country by the time they assume control. They are saddled with $1 trillion of student loan debt, peddled to them by the government and Wall Street with the false promise of good paying jobs and the opportunity for a better life than their parents lived. They have obediently followed the path laid out by their elders, but they have been badly misled. This American dream has been shattered upon an iceberg of debt, delusion, deception and denial. The unsinkable American empire’s hubris and arrogance are leading to its demise. The Millennials are coming of age during a Crisis that will reach momentous magnitudes over the next fifteen years, and they had nothing to do with creating the circumstances which will propel the chaos and anarchy that ensues. But, they will bear the brunt of the dreadful consequences.

Generational Bridge

“The Boomers’ old age will loom, exposing the thinness in private savings and the unsustainability of public promises. The 13ers will reach their make or break peak earning years, realizing at last that they can’t all be lucky exceptions to their stagnating average income. Millennials will come of age facing debts, tax burdens, and two tier wage structures that older generations will now declare intolerable.” – Strauss & Howe – The Fourth Turning

The kids on the stage at the 8^th grade Spring concert were all around 14 years old. They are unaware they are in the midst of a twenty year period of Crisis. The boys are at that gawky looking stage with pimply faces and gawky limbs. The girls mature quicker than the boys at that age. These youngsters have barely begun their lives. I was amazed at their proficiency with a wide variety of musical instruments. They displayed poise and talent. The soloists exhibited composure well beyond their years. The performers were all musically endowed and proved that hard work and practice pays off. They were clearly enjoying themselves. They were all dressed in their Sunday best. I found myself enjoying the show despite my jaded attitude upon entering the auditorium. Even my son, wearing one of my ties, actually appeared to be singing during the choir performance. What I saw were hundreds of bright eyed Millennials with their hopes and dreams for a bright future intact. They have no idea what trials and tribulations await them.

I reached a milestone on the age chart last week that had me ruminating about yesteryear and contemplating the future. I reached the half century mark. Birthdays generally do not faze me, but the intersection of the 8^th grade concert and my landmark birthday had me pondering my purpose for inhabiting this world. I’ve likely realized two-thirds of my life. The final third of my life will be spent trying to maneuver through the minefields of this Fourth Turning. I’m a father to three Millennial boys. I consider it my duty to defend and support them during this Crisis. Strauss & Howe wrote their book in 1997 and predicted a Great Devaluation in the financial markets around the time Millennials were entering their twenties. This Crisis began in September 2008 with the worldwide financial collapse created by Wall Street “Greed is Good” Boomers, as the oldest Millennials entered their twenties. It continues to worsen as more Millennials approach their twenties. We’ve reached a point in history when the elder generations need to sacrifice in order to insure younger generations have a chance at some form of the American dream.

I believe each generation has an obligation to future generations. We are bridge between preceding generations and future generations. We have a civic obligation to manage the resources of the country in a prudent manner. It’s our duty to leave the country in a financially viable condition so younger generations have an opportunity to live a better life than their parents. Every generation that preceded the Millennials has achieved the goal of having a better standard of living than their parents. I don’t believe my boys will enjoy a better life than I’ve lived. We’ve lived well beyond our means for decades. Government, Wall Street banks, corporations and individuals have run up a $56 trillion tab and are sticking the Millennials with the bill.

The $17 trillion national debt accumulated by elder generations to benefit themselves and $222 trillion of unfunded entitlements promised to themselves is nothing but generational theft. It’s immoral and possibly the most selfish act in human history. I’m ashamed that my generation and older generations have committed this criminal act of theft. Deficit spending today with no intention of repaying that debt is a tax on future generations. This egotistical abuse of power by the current and past regimes must be reversed voluntarily or it will be done by force. I’m 50 years old and will dedicating my remaining time on this earth fighting to create a sustainable future for my kids and their kids. The lucky among us get eighty years on this planet to make a difference. When did the definition of success become dying with the most toys and spending your life screwing your fellow man by accumulating obscene levels of wealth at their expense? If Boomers and Generation X have any sense of guilt about what they have done, they would be willingly offering to sacrifice their ill-gotten entitlements.

Not only are those currently in power not proposing to scale back their spending, debt accumulation, or entitlement transfers, but they have accelerated the pace of each in the last five years. An already unsustainable corrupted economic structure is being driven towards collapse by psychopathic central bankers and cowardly captured politicians. These are acts of treason against the youth of this country and larceny on a grand scale. It will lead to generational warfare and these crooks will pay for their transgressions. Strauss & Howe suspected in 1997 the elders might cling to their illicit profits acquired at the expense of the Millennials:

“When young adults encounter leaders who cling to the old regime (and who keep propping up senior benefit programs that will by then be busting the budget), they will not tune out, 13er – style. Instead, they will get busy working to defeat or overcome their adversaries. Their success will lead some older critics to perceive real danger in a rising generation perceived as capable but naïve.” – Strauss & Howe – The Fourth Turning

The elders who represent the status quo do perceive real danger in the rising Millennial generation. The initial skirmishes occurred in the midst of the Occupy protests. The young protestors initially focused on the true culprits in the crashing of the financial system and vaporizing of the net worth of millions – Wall Street bankers and their sugar daddy at the Federal Reserve. In a display of status quo bipartisanship you had liberal Democrat mayors in cities across the country call out their armed thugs to beat the millennial protestors into submission while being cheered on by Fox News and the neo-cons.

The existing status quo regime provides the illusion of choice, but both political parties are interchangeable in their desire to control our lives, flex our military might around the globe, indebt future generations and write laws to favor their corporate and banking masters. The establishment is showing contempt for the futures of our youth. Their solutions to the criminally created financial crisis have been to reward reckless debtors and bankers at the expense of future generations. Their doling out of hundreds of billions in student loan debt and artificial propping up of home prices has effectively made it impossible for millions of young people to get their lives started. Boomers have done such a poor job saving for their retirements they are unable to leave the workforce. Since January 2009, despite adding $400 billion of student loan debt, Millennials have a net loss in jobs, while the Boomers have taken 4 million jobs.

Strauss & Howe anticipated that older people would be anguished to see good kids suffer for the mistakes they had made. They thought the elders couldn’t possibly be shallow enough, selfish enough, or immoral enough to deny the Millennial generation a chance at the American Dream. They were wrong. The old regime has no plans to step aside or sacrifice on behalf of younger generations. The implications of this resistance will be dire.

“The youthful hunger for social discipline and centralized authority could lead Millennial youth brigades to lend mass to dangerous demagogues. The risk of class warfare will be especially grave if the 20% of Millennials who were poor as children (50% in inner cities) come of age seeing their peer-bonded paths to generational progress blocked by elder inertia.” – Strauss & Howe – The Fourth Turning

The social mood in this country continues to deteriorate as the sociopathic financial elite accelerate their pillaging of the working middle class, steal money from senior citizens through zero interest rate inflationary policies, and enslave our youth in the chains of crushing debt and promise of dead end jobs. When the next leg down in this ongoing depression strikes like an F5 tornado, the simmering anger in this country will explode in a chaotic frenzy of violence and retribution. The chances of class and generational warfare have increased exponentially due to the actions of the elderly regime over the last five years.

Generational Sacrifice

“You got your whole life ahead of you, but for me, I finish things.” – Walt Kowalski – Gran Torino

A couple days after the Spring concert I was flipping through the 650 channels on my TV with nothing worth watching when I stumbled across the 2008 Clint Eastwood movie Gran Torino. This was the third episode within the week that had me thinking about the future of my kids. It was his highest grossing film in history. Eastwood played a bigoted tough guy Korean War veteran whose Detroit suburban neighborhood had deteriorated into a dangerous gang infested Asian war zone. The movie did not follow the standard Eastwood plot where he kills dozens of bad guys. He grudgingly befriends two young Millennial teenage Laos refugees who live next door. He had lost his wife of 50 years. He was in his 70s and dying from some undiagnosed illness. I viewed the movie as an allegory for the generational sacrifice that should be taking place now.

Eastwood’s character, Walt Kowlaski, decided to finish things his way. He realized the two Millennials would never find peace or have a chance at a better life until the criminal gang running the show in the neighborhood were confronted and defeated. He knew he was too old to kill six gang members singlehandedly, so he made a choice to sacrifice himself and be gunned down in cold blood in front of multiple witnesses so the perpetrators would go to jail and allow his Millennial companions to have a chance at a better life. He sacrificed his life for the good of young people who weren’t even related to him. This message has not connected with the elder generations who control the purse strings and political system in this country. The media propaganda machine supporting the existing regime continues to peddle a storyline that debt doesn’t matter, consumption is good, saving is for suckers, and passing the bill for unfunded entitlements to future generations is not immoral and cowardly. Walt Kowalski displayed courage, bravery, and valor that is sorely lacking in the elderly generations today.

At the age of 50 I have a choice with my remaining 20 or 30 years. I can choose to keep accumulating material goods with debt, voting for politicians who promise never to cut my entitlements, believing deficits growing to infinity are beneficial to the economic health of the nation, supporting the military industrial complex as they wage undeclared wars across the world, applauding the Orwellian fascist surveillance measures instituted to give the illusion of safety while sacrificing freedoms and liberties and selfishly looking out for my best interests. Or I can stand up to the corporate fascist old boy regime and lure them into a violent response that will ultimately lead to their downfall. I’m willing to sacrifice what is supposedly “owed” to me on behalf of my kids and all Millennials. They don’t deserve to start life in a $200 trillion hole created by their parents and grandparents. It is disconcerting to me that more Boomer and Generation X parents are unprepared, unwilling or too willfully ignorant to forfeit entitlements awarded them under false pretenses in order to preserve a decent standard of living for their children and grandchildren. The Bernaysian propaganda programmed into their brains over decades by the sociopathic central planning status quo has created this inertia.

The inertia will be replaced by frenzied activity when this unsustainable system ultimately fails. Time seems to be standing still. People have been lulled into a false sense of security even though history is about to fling us into a chaotic transformational period in history. How do I know this is going to happen? Because it happens every eighty years like clockwork. The best laid plans of the men running the show will be swept away in a whirl of pandemonium, violence, war and reckoning for sins committed against humanity. There will be no escape.

“Don’t think you can escape the Fourth Turning the way you might today distance yourself from news, national politics, or even taxes you don’t feel like paying. History warns that a Crisis will reshape the basic social and economic environment that you now take for granted. The Fourth Turning necessitates the death and rebirth of the social order. It is the ultimate rite of passage for an entire people, requiring a luminal state of sheer chaos whose nature and duration no one can predict in advance. The risk of catastrophe will be very high. The nation could erupt into insurrection or civil violence, crack up geographically, or succumb to authoritarian rule. If there is a war, it is likely to be one of maximum risk and effort – in other words, a total war. Every Fourth Turning has registered an upward ratchet in the technology of destruction, and in mankind’s willingness to use it.” – Strauss & Howe – The Fourth Turning

Our country has entered a period of Crisis. We may or may not successfully navigate our way through the visible icebergs and more dangerous icebergs just below the surface. The similarities between the course of our country and the maiden voyage of the Titanic are eerily allegorical.

The owners of the ship (Wall Street, Washington politicians, crony capitalists) are arrogant and reckless. They declare the ship unsinkable, while only providing half the lifeboats needed to save all the passengers in case of disaster in order to maximize their profits. The captain (Ben Bernanke) has been tendered the greatest cruise liner (United States) in history. The initial voyage across the Atlantic Ocean has drawn the financial elite ruling class (financers & bankers) onboard, occupying the luxurious state rooms on the upper decks. But, the lower decks are filled with young poor peasants (Millennials) who are sneered at and ridiculed by those in the upper decks. A maiden voyage should always be approached cautiously. A prudent captain would not take undue risks.

Our captain (Ben Bernanke) wants to make his mark on history. He considers himself an expert in navigating dangerous waters (Great Depression) because he studied dangerous waters at his Ivy League school. It doesn’t matter that he never actually captained a ship in the real world. He declares full steam ahead (reducing interest rates to 0% and throwing vast amounts of fiat currency into the engine room boilers). Midway through the voyage, the captain is handed a telegram warning of icebergs (potential financial catastrophe) ahead. If he slows down the vessel, he will not set the speed record and receive the accolades of an adoring public. He ignores the warning and steams on to his rendezvous (eternal disgrace) with destiny.

In the middle of the night, the lookouts (Ron Paul, John Hussman, Zero Hedge) cry iceberg!! But, it is too late. The great ship (United States) has struck an enormous iceberg (debt & currency crisis). At first, it seems like everything will be OK. The captain and crew assure the passengers that everything is under control and their evasive action has saved the ship. But below the waterline, the great ship (United States) is taking on water (toxic levels of debt, un-payable entitlement promises, trillion dollar deficits, political & financial corruption). The engine room (Federal Reserve) works frantically to alleviate the damage (QE to infinity). The captain is sure the compartmentalization of the ship will save it. One of the designers of the ship (David Stockman) sadly declares that the ship will surely sink. The captain orders the band (CNBC, Fox, MSNBC, CNN) on deck to distract the passengers from their impending fate with soothing music. The owners of the ship (Wall Street, Washington politicians, crony capitalists) aren’t worried. They collected their fees upfront and over-insured the vessel. They anticipate a windfall when the ship sinks. It worked last time.

To avoid mass panic, the crew (government apparatchiks) has locked the youthful poor peasants (Millennials) below deck. The captain and his crew are content to let them go down with the ship. They’ve decided the women, children, and senior citizens (Middle Class) can also be sacrificed. The financial elite ruling class (financers and bankers) are piling into the boats with the ship’s jewels, escaping the fate of the peasants. The captain (Ben Bernanke) has no intention of going down with the ship. In a cowardly act, he leaps onto the 1st lifeboat to be launched. We are on a voyage of the damned. The great cruise liner (United States) has a fatal wound and is headed for a watery grave. Are we going to let the owners, captain and crew dictate who will be saved in the few lifeboats or will we rise up and throw these guilty parties overboard?

It comes down to the abuse of power by a few evil men and their henchmen as they have centralized their control over our financial, political, economic and social institutions. The existing social order is an ancient, rotting, fetid swamp of parasites that will be drained during this Fourth Turning. The Millennials are rising and will be the spearhead of the coming revolution. As each day passes they will become a more powerful force and the power of the existing regime will wane. Meanwhile, the band will play on as the ship of state descends into the abyss.

RETURNS BORN OF EUPHORIA ARE NOT EASILY RETAINED

John Hussman is the master of the understatement. Heed his warning:

“Markets move in cycles. Investors learned that by the 2002 lows, but only after terrible losses. They learned it again in 2009. They have already forgotten, so investors will have to learn it yet again.”

The show may go on for a few more weeks, but the stampede for the exits will be epic. Your “friends” on Wall Street have blocked the exits and caged you in.

Not In Kansas Anymore

John P. Hussman, Ph.D.

Having rested the case for a defensive investment stance in a series of recent weekly comments (see Closing Arguments for a summary), what remains is simply to update the status of those considerations. Importantly, our concerns are driven by the average outcomes that have accompanied similar evidence. We don’t need to forecast near-term direction, and while we have very strong views about long-term return prospects, there are likely to be numerous constructive opportunities along the way to more favorable valuations. Our approach is to align our investment position with the return/risk profile that we estimate based on observable evidence at the present moment. The fact that similar evidence has historically been so one-sidedly hostile is certainly worth noting, but in fact, no forecasts are required, and we have every expectation of moving with the evidence. What is most necessary here is simply the recognition that markets move in cycles, that investment conditions will change over time, and that returns born of euphoria are not easily retained.

On overvalued, overbought, overbullish conditions

Last week, Investors Intelligence reported that the percentage of bullish investment advisors moved to 54.2% (from 52.1% the prior week) with just 19.8% of advisors bearish. The Shiller P/E (S&P 500 Index divided by the 10-year average of inflation-adjusted earnings) reached 24.5. The S&P 500 is well-through its upper Bollinger bands (two standard deviations above its 20 period moving average) on weekly and monthly resolutions, in a mature bull market advance, with 10-year Treasury yields higher than they were 6-months prior.

None of these conditions in isolation has enormous impact; each usually only modifies expected returns. The problem is that when significantly overvalued, overbought, overbullish conditions have been observed together – particularly coupled with rising bond yields – the syndrome indicates a disease that none of the symptoms identify individually.

I’ve noted before that even a Shiller P/E above 18 combined with a wide spread of bulls versus bears at some point during the prior 4-week period is generally enough to outweigh trend-following considerations, such as the S&P 500 being above its 200-day moving average (see Aligning Market Exposure with the Expected Return/Risk Profile). I’ve also noted that some conditions can be more simply defined. For example, instances featuring bearish advisors below 20%, with the S&P 500 at a 4-year high and a Shiller P/E above 18 are limited to the present advance, May 2007, August 1987, December 1972 (though with an early signal in March-May of that year), and February 1966, all which were followed by significant bear market losses.

Various definitions of an overvalued, overbought, overbullish syndrome can capture slightly different instances. Less stringent definitions capture a larger number of danger zones, but also allow more false signals. Still, as long as the basic syndrome is captured, the subsequent market outcomes are almost invariably negative, on average. Presently, what we observe is among the least frequent and most hostile syndromes we identify. As I observed in the weekly comment that turned out, in hindsight, to accompany the 2007 market peak (see Warning – Examine All Risk Exposures):

“There is one particular syndrome of conditions after which stocks have reliably suffered major, generally abrupt losses, without any historical counter-examples. This syndrome features a combination of overvalued, overbought, overbullish conditions in an environment of upward pressure on yields or risk spreads. The negative outcomes are robust to alternative definitions, provided that they capture that general syndrome.”

The chart below highlights each point in history that we’ve observed the following conditions: Overvalued: Shiller P/E anywhere above 18; Overbought: S&P 500 at least 7% above its 12-month average, within 3% of its upper Bollinger bands on weekly and monthly resolutions, and to capture a mature advance, the S&P 500 well over 50% above its lowest point in the prior 4 years; Overbullish: a two-week average of advisory bulls more than 52%, and advisory bears less than 28%. Rising yields: 10-year Treasury yields higher than 6-months earlier. The instance in 1929 is based on imputed sentiment data, as bullish and bearish sentiment is correlated with the extent and volatility of prior market fluctuations.

One of the difficulties with this sort of analysis is that instances that appear to be very clear peaks on an 85-year chart are actually periods where there was often a cluster of instances with further market advances for several more weeks. In 1929, the market advanced another 5% to its final peak in the two weeks following the first instance of this syndrome. In 1972, the market advanced a final 3% over 6 weeks. The 1987 and 2000 peaks occurred the same week that the syndrome emerged. In 2007, the S&P 500 advanced to within 2% of its final peak 3 weeks after this syndrome emerged, and crawled within 1% of that peak after 9 weeks. The S&P 500 then dropped nearly 10% over the next 4 weeks, and then staged a final 11% spike over 8 weeks to a marginal new high which actually marked the 2007 peak. In 2011 the market enjoyed a choppy 6% advance, dragged out over 16 weeks, before rolling into a 19% correction over the following 12 weeks. The present signal reiterates the first one that we observed in late-January, 17 weeks ago. To a long-term investor, this is the blink of an eye, but in the context of day after day of bullish euphoria, it seems like an absolute eternity.

In general, the initial decline from these peaks tends to occur as a sharp 6-10% market drop over a handful of weeks, typically followed by a partial recovery attempt toward the prior peak. This sort of activity both before and after major peaks gives the market the impression of near-term “resilience” that dilutes the resolve even of investors who know the history of these things.

I should note that present conditions are extreme enough that neither trend-following nor momentum factors can be used to separate out favorable outcomes from this small set of decidedly unfavorable ones. As I’ve previously noted, a great deal of our research during this advance has focused on this sort of “exclusion analysis.” I recognize that many investors have simply decided on the strategy of holding stocks until QE ends, or some similar formulation of “strategy,” but for better or worse, we do insist on approaches that we can validate in historical and out-of-sample data, and that have been strongly effective over full market cycles. When we examine the past few years, as well as long-term history, the most effective “exclusions” aren’t simple ones like “don’t fight the trend” or “don’t fight the Fed.” Rather, they are more subtle prescriptions like “stay with the trend in an overvalued market, but only until overvalued, overbought, overbullish conditions are established.” These considerations aren’t actually required to do well over complete market cycles, but quantitative easing has held off the resolution of historically unfavorable market conditions much longer than usual, and these subtle considerations would have undoubtedly made recent experience less frustrating.

If this bull market is to continue, I have little doubt that considerations like this will provide the opportunity to be constructive on the basis of well-tested evidence that actually supports a constructive stance. Here and now, a constructive stance is an experiment about whether QE can override market conditions that have always preceded unfortunate outcomes. My views and research should be of no impediment to investors with a different view, assuming that they have a reliable exit criterion that will precede the attempts of tens of millions of others to exit. It would be far easier to conduct that experiment without me than to convince me that it is a good idea.

As the respected technician Bob Farrell once noted, “exponential rapidly rising or falling markets usually go further than you think, but they do not correct by going sideways.” This is really all the 1987 crash was – a mass of investors trying to preserve profits from the preceding advance by acting on the identical trend-following exit signal simultaneously.

On valuations

Even in the event that quantitative easing is sufficient to override hostile market conditions in the near-term, it is worth noting that long-term outcomes are likely to be unaffected. We presently estimate a prospective 10-year total return on the S&P 500 Index of just 2.9% annually (nominal). See Investment, Speculation, Valuation and Tinker Bell for the general methodology here, which has a correlation of nearly 90% with subsequent 10-year market returns – about twice the correlation and nearly four times the explanatory power as the “Fed Model” and naïve estimates of the “equity risk premium” based on forward operating earnings.

We presently estimate that the S&P 500 is about 94% above the level that would be required to achieve historically normal market returns. If you work out present discounted values, you’ll find that depressed interest rates can explain only a fraction of this differential, even assuming another decade of QE – and even then only if historically inconsistent assumptions are made to combine normal economic growth with deeply depressed rates.

This chart gives a good overview of what has actually transpired in the stock market through post-war history. Points of deep undervaluation like 1942, 1950, 1974 and 1982 created foundations on which long secular bull market advances were built. The rich valuations of the mid-1960’s were enough to ensure that any return to undervaluation would result in a long period of poor market returns. The late-1990’s bubble took valuations far above any historical valuation norm, and ensured that even a return to valuations previously considered “rich” would produce devastating returns, and we saw that in 2000-2002. The advance to the 2007 peak did not go nearly as far, but still ensured that even a return to normal valuations would produce devastating returns, and we saw that in 2007-2009.

At present, valuations are less extreme than they were in 2000, approach levels that were reached in 2007, and remain well beyond those observed at the late-1960’s secular peak. The question is where valuations will go from here, and while other indicators can be applied to that question, valuations alone don’t provide the answer. Matching the valuations of the 2007 peak would require another 8% advance in the S&P 500. A return to historically normal valuations would imply a 48% market decline – the average cyclical bear market in a secular bear market period has typically represented a decline closer to 38%. A move to secular lows (about 0.5 as a multiple of fair value) would imply a Depression-like drop of about 75%, but such lows are typically associated with macroeconomic crises such as world war or uncontrolled inflation. Still, these are all valuations that we’ve actually observed in the post-war period. None of these calculations are indicative of where the market is going, but we should at least be aware of the extremes that are already in place.

On the economy

Among the better leading indicators of the economy, the Philadelphia Fed Index of economic activity deteriorated to 1.3 in April, and dropped to a disappointing -5.2 reading for May. The Chicago Purchasing Managers Index slipped from 52.4 to a contractionary reading of 49 in April, though the important “new orders” component held above 50, coming in at 53.2. The chart below shows data on a variety of national and regional surveys from the Fed and the Institute of Supply Management. Notably, the chart shows data only through April. The May reports released thus far are the Philly Fed and Empire Manufacturing surveys, both which surprised significantly to the downside.

As I noted last week, holding hours worked constant, the U.S. economy would have lost the equivalent of 550,000 to 600,000 jobs in April. Meanwhile, excitement about improvement in the federal deficit is largely driven by several one-off factors and quite rosy assumptions. These include special distributions, repayments from Fannie Mae and Freddie Mac, the expiration of accelerated depreciation deductions for investment, and capital gains realizations taken in advance of the “fiscal cliff.” Projections of further deficit reductions are predicated on assumptions that inflation in health costs will be controlled; that corporate tax revenues will increase by 57% by 2014 (and 88% by 2015); that the U.S. economy will avoid any recession in the coming decade; and that real GDP growth will increase to 4% (6% nominal) in the coming years, despite a 9% decline in discretionary outlays by the government next year. The CBO projections also assume that tax revenue as a percentage of GDP will move sustainably above the long-term average. I do expect that the Federal deficit will gradually come down over time. But barring a massive, domestically financed increase in gross real investment (which the data do not suggest is presently in the works), the 2-quarter lagged effect of a smaller government deficit is likely to be weaker corporate profit margins, for reasons I’ve articulated previously.

On quantitative easing

Over the past three years, the U.S. economy has repeatedly approached levels that have historically marked the border between expansion and recession. There is little question that massive quantitative easing by the Federal Reserve has successfully nudged the economy away from this border for a few months at a time. But as I’ve noted before, the belief that monetary easing solved the 2008-2009 financial crisis is an artifact of timing. The Fed was easing monetary policy throughout 2008, and while it is tempting to view the recovery as a delayed effect, the more proximate factors were a) the change in FASB accounting rules to dispense with mark-to-market accounting, which relieved banks of insolvency concerns even if they were technically insolvent, and b) the move to government conservatorship and Treasury backstop of Fannie Mae and Freddie Mac, which reduced concerns about default risk among mortgage securities.

The Pavlovian response of investors to monetary easing – as if it has anything more than a transitory and indirect effect on the economy – fails to distinguish between liquidity and solvency; between economic activity and market speculation; and between investment value and artificially depressed risk premiums. The economy is not gaining anything durable from these policies, and the conditions for the next bear market are already established. Meanwhile, the chart below updates the extreme that monetary policy has already reached (data points since 1929).

The 3-month Treasury yield now stands at a single basis point. Unwinding this abomination to restore even 2% Treasury bill rates implies a return to less than 10 cents of monetary base per dollar of nominal GDP. To do this without a balance sheet reduction would require 12 years of 6% nominal growth (which is fairly incompatible with sub-2% yields), a more extended limbo of stagnant economic growth like Japan, or significant inflation pressures – most likely in the back half of this decade. The alternative is to conduct the largest monetary tightening in the history of the world.

None of this is to suggest that speculation cannot go further – though present overvalued, overbought, overbullish extremes weigh against it. Still, valuations and monetary conditions are far removed from what is sustainable, and there is more evidence to indicate that the economy is weakening than support of the idea that it is strengthening.

Knowing where you are doesn’t mean that you’re leaving, but you should still know where you are. We’re not in Kansas anymore.

The foregoing comments represent the general investment analysis and economic views of the Advisor, and are provided solely for the purpose of information, instruction and discourse. Only comments in the Fund Notes section relate specifically to the Hussman Funds and the investment positions of the Funds.

Fund Notes

Last week, market conditions reiterated the most hostile syndrome of overvalued, overbought, overbullish, rising-yield conditions we identify. Strategic Growth Fund remains fully hedged, with a “staggered strike” hedge that raises the strike price of the index put option side of the hedge closer to market levels, but we continue to significantly lag those strikes below the market in order to minimize time decay. Presently, that staggered strike position represents less than 1% of assets in additional time premium looking out to mid-summer. This also means that until the market declines by more than several percent, most of the day-to-day fluctuation in Fund value is likely to be driven by differences in performance between the stocks owned by the Fund and the indices we use to hedge. Strategic International remains fully hedged. Strategic Dividend Value is hedged at about 50% of the value of the stocks held by the Fund. Strategic Total Return continues to carry a duration of about 3 years (meaning that a 100 basis point move in interest rates would be expected to impact Fund value by about 3% on the basis of bond price fluctuations), and just over 12% of assets in precious metals shares.

There are countless investment strategies that offer aggressive investment approaches, long-only exposure, and loads of various market risks for investors who desire them. We follow a specific, long-term discipline defined by an effort to accept market risk in proportion to the expected return/risk profile that we estimate based on prevailing conditions. We make every attempt to refine that discipline over time, but the Funds are defined by the specific investment objectives and disciplines that we promise to our shareholders. We constantly research promising indicators and investment considerations. Those that place heavy weight on trend-following and Fed-following are testable strategies, and their return/risk characteristics can be carefully evaluated. Once overvalued, overbought, overbullish conditions emerge, they don’t perform nearly as well over time as investors seem to believe. Quantitative easing is certainly “new” in the sense that such extreme policies have never been pursued. But data on interest rates, Fed action and the monetary base go back nearly a century, and even analyzing more recent experience with quantitative easing by Japan, England, the European Central Bank and the Federal Reserve leaves us with little confidence that QE does much more than to temporarily suppress periodic spikes in risk premiums.

Investors who wish to follow the Fed to the exclusion of other evidence should feel no compulsion to consider our own research, or our own performance in the years prior to the recent bull market advance. In my view, we are now in a very mature, unfinished half of a market cycle spectacularly distorted by monetary and fiscal imbalances. The prospects that the financial markets will face over the next few years are quite unlikely to mirror the lovely ones that they enjoyed while these imbalances were being established.

Nearly all of my own assets remain invested in the four Hussman Funds, with the largest allocation to Strategic Growth, because despite the challenges we’ve experienced in the advancing portion of this cycle, I have no doubt that the financial markets will experience cycles – not endless parabolas – over time. We accept a significant of “tracking difference” versus a buy-and-hold approach because our objective is to achieve full-cycle returns above the long-term norm for equities, with smaller losses than the general market over the full-cycle. There is no assurance we’ll achieve that objective, and the recent cycle has been an extraordinary challenge for reasons that I’ve frequently detailed. In contrast, I view the performance of Strategic Growth in the 2000-2008 period to be a reasonable reflection of those objectives in practice, even in an environment where the general market achieved no net gain.

With regard to the challenges of the most recent market cycle, my insistence on stress-testing our approach against Depression-era data in 2009 to early-2010 led to an unfortunate miss in the interim, but I believe that it will make us more resistant to extreme market conditions in the future. I also believe that we’ve addressed most (though probably not all) of the challenges created the monetary-driven speculation of recent years by incorporating what I’ve described as “exclusion analysis.” This involves refining the pool of periods where average expected outcomes are negative in order to “exclude” the largest set of constructive instances from that pool, and validating the exclusion criteria in out-of-sample data. For example, trend-following considerations can be important even in periods where our return/risk estimates are negative, but only in the absence of overvalued, overbought, overbullish syndromes. That refinement could have saved us some trouble in recent years, but such considerations still do not encourage a constructive position here. That may be a shame, or it may turn out to be a blessing. All we know with certainty is that nearly a century of evidence – even including trend-following and monetary factors – supports a defensive stance from our investment approach here.

This will change. Markets move in cycles. Investors learned that by the 2002 lows, but only after terrible losses. They learned it again in 2009. They have already forgotten, so investors will have to learn it yet again

WEST PHILLY – WILDWOOD CONUNDRUM

While walking down the street in Wildwood yesterday I noticed something that most people would find highly unusual. There was a gang of teenagers coming towards me and I wasn’t scared. It was because they were all Asian and dressed in blue Morey’s Piers work shirts. They were headed to their jobs on the boardwalk. I had previously passed a gaggle of Eastern Europeans in blue Morey’s work shirts while riding my bike on the boardwalk. This is not a recent development. Morey’s has been employing foreign students for years to man their rides and concession booths.

The Morey family essentially runs the Wildwood Boardwalk. They operate the three amusement piers and many of the game and food booths. They have been model citizens and have done many good things for the town and the people. They have been the major player in Wildwood for decades.

They employ 1,500 people every summer and half of them are foreign students. They come from China, Thailand, Bulgaria, Egypt, Ireland and other Eastern European countries. This fact has always had me scratching my head. Morey’s pays them $7.50 to $8.00 per hour. They provide housing and transportation. They feed them lunch and dinner. The foreign workers are pleasant, efficient, and competent. They are clean cut and show up every day for work. They appear to be loving the experience.

You might be wondering how foreigners can come to the U.S. over the summer and get jobs when our real unemployment rate is north of 20%. It seems there is a Federal government program called the Summer Work Travel Program, run by the State Department. It was created in 1961 to bolster diplomatic ties with other countries by way of cultural exchange. As a reminder, Federal programs NEVER die. They just get bigger. The primary purpose of the program is to acquaint foreign students with the culture and life of modern America and the distribution of other cultures among its inhabitants. I guess taking ride tickets and selling fried oreos to obese tattooed Americans is really acquainting them with our culture. Approximately 120,000 foreign university students are shipped over for three or four months every year to work low level tourist industry jobs.

The foreign students actually end up paying $2,000 to just get over here to work. Would-be participants typically first make contact with a recruiter in their home country. From there, they are connected with one of dozens of private “sponsors,” who are tasked by the State Department with overseeing the visa program. The sponsors acquire visas for students and connect them with employers or, at times, another company before they are granted entrance into the United States. Those who gain entry into the program typically spend more than $2,000 in travel expenses and fees to recruiters and sponsors, but some pay much, much more. “With recruiters, you don’t know how much they might be charging. We found someone who was charging $10,000,” said Allan Smith, chief executive officer at American Camp And Work Experience, the sole New Jersey-based Summer Work Travel sponsor. “On the other side,” Smith said, “you have employers who house kids, charging them over $100 a week. At the end of the summer, they end up owing the company money. When you get stuff like that, it hurts everybody.”

Morey’s does not treat their employees badly. But this program is not really a cultural immersion program. It’s a cheap labor program for American companies. Federal taxes are waived for participants in the program. That means Morey’s does not have to pay their 7.65% portion into the Social Security fund. But at the end of the day, I believe Morey’s when they say they can’t fill the positions locally. I do not believe Morey’s are racists, but there are very few African American or Hispanic workers on their piers. This is interesting since 31% of the local population is Hispanic and 12% is African American. The total local population is only 5,500, with only 500 or so residents between 18 and 24 years old. It makes sense that they would need teenagers from outside of Wildwood to fill their needs.

This brings me to West Philly and how the welfare state policies of this country are the reason the Morey family has to seek out good teenage workers from across the globe. My Section 8 neighbors have a 17 year old son living in the condo. He lives 50 yards from the Wildwood boardwalk between two Morey’s amusement piers. He does not work. Morey’s is going through a lot of effort to ship in teenagers from foreign countries. The people living next door have not interest in working. If they earned money working at a real job, they would lose some of their free shit. That kid has no interest in working on the Boardwalk. He has learned already that not working is easier and more profitable than working.

This entitlement attitude extends into West Philly. Philadelphia is 90 miles from Wildwood. There are 205,000 18 to 24 year olds living in Philadelphia. The true youth unemployment rate in Philadelphia is in excess of 50%. The black unemployment rate is north of 70%. How screwed up is our country that Morey’s couldn’t find 750 teenagers in Philadelphia to collect ride tickets and sell funnel cake? Any normal teenager would love to spend the summer at a shore house with an easy night time job. I blame the 45 years of welfare state policies for this ridiculous situation. The teenagers in West Philly have been raised with an entitlement mindset. Working would reduce their government freebies. Most of these teenagers have never had an example of two parents working hard at jobs. Many don’t even know their fathers. They have no concept of personal responsibility or getting ahead in life. They know their family EBT cards will be recharged on the 1st of the month. They aren’t capable of adding, subtracting, using correct grammar or dressing like a normal human being. The kids from China have a better grasp of the English language than kids in West Philly.

It is a sad reflection on our government run educational system, entitlement plantation mentality instilled by liberal do-gooder politicians, and complete lack of parental responsibility within the urban ghettos, that employers have to seek workers from 7,000 miles away when there are 200,000 teenagers only ninety miles away. Do you blame Morey’s for not hiring these Philadelphia teenagers?

TBP POLL OF DOOM

Do you get the feeling there is something seriously wrong with the world right now? There appears to be a confluence of events that are in direct conflict. Capital markets are in disarray. Politicians are clueless and flailing about. Central Bankers have pressed their foot on the accelerator through the floorboard. Stock markets are hitting new highs. Real economic measurements are plunging. Corporations are slashing the hours of their workers. The entire Middle East is on the verge of revolution. Europe is in a deep depression and social unrest is reaching a crescendo.

I’m reminded of Vladimir Lenin’s quote about history:

“There are decades where nothing happens; and there are weeks where decades happen.”

I have a feeling in my gut that we are getting very close to a week when decades of history will unravel and historic events will mark a dramatic turn in world history. It’s just a feeling. Somebody will do something stupid and all hell will break loose.

I have a feeling that Japan has lit the fuse. Their stock maket has now soared by 77% in the last seven months and is accelerating upward at a rapid pace. Meanwhile, their 10Year bonds have declined by 45% in the last five days. Surging interest rates in a country with a debt to GDP ratio of 250% is suicide. The Yen has declined by 26% versus the USD in the last 6 months and 8% in the last month. These are not normal changes. The Japanese are taking a reckless gamble that will end in the Prime Minister committing hari kari.

The other extreme oddity occuring across the globe is the continuing drop in gold and silver prices even though demand for physical gold and silver is off the charts. The U.S. Mint has run out of gold and silver coins. Countries are repatriating physical gold. It takes weeks to get silver coins from dealers. People in China and India are buying gold and silver in a frenzy. JP Morgan’s vaults have the lowest amount of physical gold in history. There is a valid concern that there is not nearly enough physcial gold and silver to back up all of the paper gold and silver obligations.

The citizens of countries across the world are losing faith in their political leaders. They have already lost faith in the bankers. They are losing faith in fiat paper currencies. The natives are growing restless. Americans are buying guns in record numbers. The government is attempting override the 2nd amendment and disarm the citizens. Their fallback position has been to buy up all of the ammunition and not allow the citizens to buy it. The government is conducting military “exercises” in cities across the country. DHS is arming local police forces with military style weaponry. DHS and the military are accelerating the proliferation and use of domestic drones in communities around the country. Surveillance of citizens is increasing.

All is not well below the surface. The men behind the curtain are nervous. Their “solutions” are failing. I believe they are preparing for a scenario the average person on the street cannot fathom. I’ve been wrong before and I hope I’m wrong this time, but I’ve got a bad feeling.

What do you think will happen in the next six months?

Markets will rise, the economy will recover, gold and silver will continue to fall, and people around the world will become more optimistic about the future.
Markets will flatten out, along with gold and silver. The status quo will remain in effect and there will be no dramatic world events to change the course of history.
A worldwide currency crisis will be created by the grand Japanese experiment leading to plunging markets across the globe. Gold and silver will rise as the only safe haven. Surging interest rates will bring down developed nations across the globe. The Middle East will explode, with wars and revolutions. The U.S. will be the least affected by the worldwide turmoil and the USD will rise.
It is revealed that there is no gold or silver backing up most of the paper in the world. There is a worldwide run on banks, creating havoc and confusion. The masters of the fractional reserve banking system circle the wagons and attempt to keep people from withdrawing their money and their gold. The politicians fall into line behind their banker puppet masters. People around the world begin to realize they have been screwed. Violence and revolution breaks out in countries around the world. Obama calls out the troops. There are skirmishes and battles in cities and communities around the country. The urban areas begin to burn as the FSA stop receiving their EBT deposits.
Some combination of 3 and 4.
Don’t bother me. I’m busy texting someone about the American Idol finale and updating my status on Facebook.

LUCKY THEY AREN’T GOOD AT MATH

The Wall Street shysters running the payday loan shops in urban shitholes around the country are certainly satisfied with the government operated public school system. They prefer their customers to be ignorant and unable to calculate their true cost of borrowing. It’s good for profits. Michael Snyder wants these customer service centers shut down. If that happened, 50% of the commerce in West Philly would come to a halt. Only the 50% from EBT cards would be left.

Shut Them Down! – Payday Loan Companies Are Making Billions Preying On The Misery Of The Poor

http://theeconomiccollapseblog.com/

By Michael, on May 12th, 2013

Payday Loan Companies Are Making Billions Preying On The Misery Of The Poor - Photo by Vinceesq

Would you take out a loan that has an annual percentage rate of 391 percent? Yes, I know that sounds absolutely crazy, but millions of Americans do it every single year. The typical payday loan requires borrowers to pay about 15 dollars for every $100 that they borrow for two weeks. That comes out to a yearly rate of about 391 percent. And the payday loan companies know exactly who to target. They have set up thousands of shops in the poorest communities all over the nation over the last several decades. Each year, approximately 12 million Americans take out payday loans and they pay approximately 7.4 billion dollars in interest and fees on those loans. Sadly, once you get hooked on payday loans they are very hard to stop. In fact, one study found that only 13 percent of payday borrowers get two loans or less per year. All other borrowers take out more loans than that. In fact, more than a third of all payday borrowers take out between 11 and 19 loans during the course of a single year. And as was mentioned earlier, the interest rates on these loans are beyond exorbitant. Payday loans are estimated to be about 20 times more expensive than bank loans, with annual interest rates that are sometimes as high as 500 percent. The payday loan companies circle the poor like vultures, because they know that the poor are the only ones desperate enough to agree to such terms. This is why we need to shut them down. The payday loan companies are making billions preying on the misery of the poor and it needs to be stopped.

And it just isn’t small, disreputable banks that are involved in these practices. The truth is that some of the largest banks in America are now making payday loans…

Some, including U.S. Bank, Fifth Third Bank and Wells Fargo, offer payday loans under names such as Ready Advance, Fast Loan and Early Access, according to the Center for Responsible Lending (CRL). They can carry interest rates averaging between 225 and 300 percent, CRL said.

Others major banks not making such loans directly, but instead they are investing millions of dollars in the companies that do make the loans. Bank of New York Mellon Corp., JPMorgan Chase and Bank of America are just some of the major banks that have invested large amounts of money in the payday loan industry.

These financial institutions are making billions of dollars by exploiting the people in our society that are the most vulnerable. As I showed the other day, the bottom 90 percent of America is systematically getting poorer, and many Americans in desperate financial situations have found the easy cash provided by the payday loan companies to be irresistible. The following are some statistics about payday loans from a recent Pew Research study...

-Fifty-eight percent of payday loan borrowers have trouble meeting monthly expenses at least half the time. These borrowers are dealing with persistent cash shortfalls rather than temporary emergencies.

-Only 14 percent of borrowers say they can afford to repay an average payday loan out of their monthly budgets.

-Seventy-eight percent of borrowers rely on information from lenders—who sell these loans as a safe, two-week product—when choosing to borrow money. This reliance reinforces the perception that payday loans are unlike other forms of credit because they will not create ongoing debt. Yet the stated price tag for a two-week, $375 loan bears little resemblance to the actual $520 cost over the five months of debt that the average user experiences.

-While payday loans are often presented as an alternative to overdrafting on a checking account, a majority of borrowers end up paying fees for both.

-Some borrowers ultimately turn to the same options they could have used instead of payday loans to finally pay off the loans. Forty-one percent need an outside cash infusion to eliminate payday loan debt– including getting help from friends or family, selling or pawning personal possessions, taking out another type of loan, or using a tax refund.

-By almost a three-to-one margin, borrowers favor more regulation of payday loans. A majority of borrowers say the loans both take advantage of them and that they provide relief. Despite feeling conflicted about their experiences, borrowers want to change how payday loans work.

But those statistics don’t really convey the real world consequences that these predatory loans have. Many Americans have lost everything that they had after they turned to payday loans. In fact, it is estimated that at least 50,000 Americans a year go bankrupt due to payday loans.

A recent NBC News article profiled Raymond Chaney, a 66-year-old military veteran that had his life totally destroyed by these predators…

For Raymond Chaney, taking out a payday loan was like hiring a taxi to drive across the country. He ended up broke — and stranded.

The 66-year-old veteran from Boise lives off of Social Security benefits, but borrowed from an Internet payday lender last November after his car broke down and didn’t have the $400 for repairs. When the 14-day loan came due, he couldn’t pay, so he renewed it several times.

Within months, the cash flow nightmare spun out of control. Chaney ended up taking out multiple loans from multiple sites, trying to to stave off bank overdraft fees and pay his rent. By February, payday lenders — who had direct access to his checking account as part of the loan terms — took every cent of his Social Security payment, and he was kicked out of his apartment. He had borrowed nearly $3,000 and owed $12,000.

“I’m not dumb, but I did a dumb thing,” said Chaney, who is now homeless, living in a rescue mission in Boise.

Is there anyone out there that still wants to argue that we should not shut these predators down?

Sadly, many Americans in poor communities have very few alternatives to the payday loan companies. In recent years, the large banking chains have been systematically closing down branches in poor neighborhoods while expanding in wealthy neighborhoods at the same time. Since the Federal Reserve is paying banks not to lend money, it doesn’t make a lot of sense for them to make high-risk loans to poor Americans who may not be able to pay them back. And recent regulations passed by Congress have made it not very profitable to offer checking accounts to poor people. In many poor communities all over the country, it has now gotten to the point where it is becoming extremely difficult to find a bank branch anywhere.

So payday loan companies have been more than happy to fill the void.

But don’t look down on those that have taken out payday loans. The truth is that almost all of us have willingly allowed ourselves to become enslaved to the system at one point or another.

For example, in a previous article entitled “Money Is A Form Of Social Control And Most Americans Are Debt Slaves“, I pointed out the utter foolishness of constantly carrying a balance on a credit card. In that article, I included a great explanation from a former Goldman Sachs banker about how incredibly crippling credit card debt can be…

On the debt side of things, how much does your credit card company earn if you carry just an average of a $5,000 credit card balance, paying, say, 22% annual interest rate (compounding monthly) for the next 10 years?

In your mind you owe a balance of only $5,000, which is not a huge amount, especially for someone gainfully employed. After all, $5,000 is just a quick Disney trip, or a moderately priced ski-trip, or that week in Hawaii. You think to yourself, “how bad could it be?”

The answer, including the cost of monthly compounding, is $44,235, or about 9 times what it appears to cost you at face value.

This is why one of the top things that I recommend for getting prepared for the economic crisis that is coming is to get out of debt.

You do not want to be enslaved to financial predators when everything starts falling apart all around you.

So do any of you have any payday loan or credit card horror stories to share? Please feel free to share what you have to say by posting a comment below…

“STRONG” RETAIL SALES???

The markets are attempting to rally on the “unexpectedly positive” retail sales numbers for April. The bullshit is getting so deep in this country, you have to wear hip boots. Even though I’m a trusting soul and know the MSM and our Wall Street economist “experts” will tell me what I need to know, I decided to go directly to the report. Here is a link in case you want the actual data:

http://www.census.gov/retail/marts/www/marts_current.pdf

Here are my observations about the “strong” retail sales:

Through the beauty of seasonal adjustments the actual 2.7% decrease in retail sales in April versus March becomes a .09% increase, which is rounded up to .1% by the MSM. The government drones would never use seasonal adjustments to make numbers look better than they really are. Right?
Even with seasonal adjustments, retail sales only went up $377 million. The subprime financing scam being run by the Obama owned Ally Financial and the other government subsidized Wall Street shysters resulted in a $783 million increase in auto sales. Therefore, retail sales excluding this government use of your tax dollars actually declined by $406 billion.
The MSM is crowing about the lower gasoline sales which are benefitting the American consumer. If you look at the 4 month trend versus last year, you see that retail sales at gasoline stations is down 1.1% versus last year. Let me remind you that last year was the highest average price for gasoline in history, so a 1.1% decline is not exactly a windfall to the consumer. Do you see the MSM reporting the facts on this chart?

The first four months of retail sales in 2013 have sucked. Overall, they are up 3.3%. Subtracting the government boosted auto sales and the increase is 2.5%. Even using the government manipulated CPI yields basically flat retail sales with 2012. Using a real inflation rate of 5% reveals that real retail sales are declining by 2.5% in the first four months of 2013.
If there is a real housing recovery how could retail sales of furniture, electronics and building materials be languishing in the -0.7% to 3.6% range? How can general merchandise sales (Wal-Mart, Target) be 3.4% below last year?

The fact is that real retail sales are falling. The Obama tax increases and Obamacare insurance premium increases have sucked the life out of the consumer. Gas prices have risen 10 cents per gallon in the last two weeks. The busy driving season is coming. The Middle East is a powderkeg. Hurricane season isn’t far off. Companies are cutting the hours of their employees. The savings rate is already at 2.7%. Consumers are reducing credit card debt. There are 10,000 people per day turning 65. Sounds like a recipe for strong retail sale growth. Right?

Maybe a government drone economist could chime in and explain the extreme wide variation in seasonal adjustments over the last ten years. Shouldn’t seasonal adjustments for the same month be fairly consistent over time? Inquiring minds want to know.