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Stock Ideas Investors Daily Edge An Economic Miracle?
Stock Ideas Investors Daily Edge An Economic Miracle? 
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By Charles Delvalle Is there any doubt that there’s a speculative bubble in Chinese companies? With that in mind, reader John S asked: Alibaba, China's second-most popular Internet search engine behind Baidu (BIDU), is going public today on the Hong Kong stock exchange. The IPO is priced at $13.50, but shares are expected to hit the tape at almost twice that price. Charles, could this be true? Regards, John |
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| An Economic Miracle? |
| Saturday, 06 December 2008 | ||||||||
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The challenge this week is to project exactly when the US economy will get back on its feet. The question in itself assumes that we’re simply in an ugly downturn and we should be back to “normal” in the short to medium term. I have a problem with that premise. This current economic and financial mess is one for the ages. Bailouts and bankruptcies dominate the headlines. Unfathomable levels of debt, derivatives and their inherent leverage remain on the ropes. I’d rather be the bearer of good news, but we have yet to see the bottom of this carnage. Look first at what constitutes a normal economy. That requires both production as well as savings from that effort. You simply have to produce more than you consume or there is no seed corn. The US comes up negative in both of these categories. Other than plastic surgery and weapons of war, we don’t manufacture much. Nor do we save. The US is simply beholden to strangers (foreigners) to pay for our excesses. They have been only too happy to accommodate us for a couple of decades. The US also produces paper money and weird financial products, "The End of Weird Finance", and we’ve long traded these entities for real assets made in foreign countries. It’s been a sweetheart of a deal, thanks to the dollar supremacy since WW2. The buck is taking a backseat in world finance as you read this editorial. Who would have ever guessed that foreigners would ever figure out the toxic paper scam? The New York boys simply got a little toooooooooooo greedy on this one. They outperformed their normal low standards, thus the many bonuses. The dollar and US Treasuries are going to be a hard sell for years! US citizens will have to pay their own way in the world. Not only that, but we’re going to have to accomplish this from well behind the starting line. Our funded and unfunded debts are beyond the ability to either comprehend or pay. I’ll spare you the numbers in this article. No net production and no savings equates to no real economy. A normal and healthy economic upturn isn’t on the radar screen. Quite possibly the original question had to do with a different type of economic upturn. There are a lot of CNBC watchers in the US and around the globe. Maybe the question was ... “Can the Fed blow up another bubble?” Let’s look at it from that angle.
Federal, state and individuals are all supposed to borrow their way to wealth in this giant New York/DC casino. That is the essence of fiat money. I’ll let you in on a little secret. If it works, it will be an historic first. A consumer economy is a bad joke. People need to start borrowing, spending and consuming once again in order to inflate another bubble. That’s not an easy assignment when one-ply toilet paper barely squeezes into the budget. There are clearly some changes dead ahead on the American horizon. An inherent part of the question about when the economy is going to turn has to do with the stock market. If we had honest markets I’d say you shouldn’t hold your breath for the next upturn. We’re about half way to what we deserve were there true merit in the markets. Much deleveraging remains. How do you have a normal economy when the markets see regular government intervention? You simply don’t. That is a big part of the reason for the present bust. The Fed and the designated “Plunge Protection Team” work day and night to create enormous profits for their buddies and illusions for you. Rising paper wealth through the markets and real estate have resulted in much of the mirage of wealth created in the recent bubble. The markets are propped up to keep the status quo. Have we seen the bottom of the stock market meltdown? I don’t know; it’s certainly possible. The Fed and it’s henchmen like Goldman Sachs and JP Morgan are in a much better position to answer that question. Does the “economic upturn” you’re looking for have any of the major players performing under a nationalization scene? Banks, investment houses, insurances, real estate, health care and automotive conglomerates are busy tying the knot in our crony capitalist society. And you thought communism was a failed strategy. WW2 was a struggle to end fascism, "Is Fascism in Fashion?". It’s apparently not over. The US still runs a “capitalist” system only in the sense of crony capitalism. Your freedom is likely to go the way of our free markets. Here’s your best case scenario. The trillions and trillions of funny money being thrown around might eventually trickle down to the hands of the peons. These financial clowns couldn’t hit a black hole with their monetary efforts. Interventions may stop the bleeding in real estate and the stock market. They’d like to blow another bubble but consolidation of power is the central theme. Obama is up to his eyeballs in elitist connections going back to the Carter years. Hello. The real danger is that so many people are buying into the philosophy of the “change” he promises. I wouldn’t want to bet that President Obama will be able to implement anything in direct contradiction to his New World Order handlers. The games continue. In finality-, there will be no real economic recovery. The US hasn’t had anything but a bubble economy for an extended period of time. Do federal smoke and mirror plants count in GDP production? Can you save empty promises? This is the season for miracles but there isn’t one on the economic horizon. Speaking of assets that are real and those that are not... a Citigroup analyst just came out with a price target for gold of $2000 in the next two years. Last I heard, Citigroup is fairly well connected. Monetary breakdowns light a fire under precious metals. Hyperinflation also comes directly out of extreme monetary chaos. It does not have to come out of an over heated economy. Make sure you read my coming IDE Unplugged article on the final burial of the US Constitution. Live Resourcefully, Rusty
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