Thursday, February 21, 2013

Fascism in America?

My family was friends with Peter Drucker’s family when I was growing up.  I recently got back in touch with Drucker’s daughter, about my age.  Peter and Doris Drucker escaped from Austria in 1937 for America.  They were concerned about the Nazis.  Both Druckers were of Jewish extraction.

Peter died years ago, but Doris, a brilliant woman, lives on in Southern California, now 102.  I asked my friend if her mother saw any similarities between what is happening in America now and what she saw in the 1930s in Europe.

“My mother is paranoid,” my friend said.  “She’s says we need to keep cash on hand to bribe the guards at the Canadian border.”

Go read Jim Quinn’s last few posts at— “No hesitation targets” and “Wall Street titans screw you every day”.

Wednesday, February 20, 2013

Economy at stall speed


Source:  FRED.  Data to 2012Q4.  The blue line is the value of the most recent observation.  Almost every other time this value has been seen the economy has been either going into recession imminently, or within a year or so.  Only in the 21st century has the economy managed to avoid recession by bouncing off the blue line.

The green line is linear trend over the period from 1950.  The red line is the trend over the past 30 years, which suggests that the US economy is headed for a state of secular stagnation and possible collapse.  

Friday, February 1, 2013

‘Animal spirits’ update

N.B. This is research, not investment advice.  You invest at your own risk, unlike the Wall Street banks, who also invest at your risk. 

The uptick of the unemployment rate from 7.8 to 7.9 has caused our ‘animal spirits’ indicator to put in a top.  Continued increases or merely stability of the unemployment rate will cause further losses of confidence.


The underlying judgmental unemployment rate forecast is this:


My forecast is still that the US economy enters recession in the second half of 2013.  The two big proximate drivers:  the continuing assault on consumption from higher taxes and medical costs; a precautionary demand for liquidity (increased saving rate); the sequester—to any degree—of federal government spending; and to the extent that it impacts the small segment of the population current salivating over stock market gains induced by QEternity, a diminished wealth effect (yes, the implicit stock market forecast is that we’re at a major top—I called it a year ago but the presidential election year got in the way—this cycle is very reminiscent of the early 1970s, and we’re at about the turn from 1972 to 1973).  Throw in Europe in various states of severe recession and depression, and the likelihood of some slowdown in China, and we have the potential for a coordinated global contraction, almost as if the signs all say we are at the end of the [high?] growth age….

Here is the whole history:


Note how depressed the Michigan Consumer Sentiment index is, just as it was in the early ‘Seventies.  The drop-off from here could be precipitous from here.  Even somewhat proven indicators such as the “Rule of 20” show the market looking toppy (yellow line is where the blue S&P line is supposed to be):

Source:  News-to-Use