Listen You Lazy Bugger!

First up, Slipstream Trader has posted his latest S&P 500 analysis over at his YouTube Channel. The latest video came out Friday. You can find it here.

Murray’s written synopsis is that:

Basically the market is in no man’s land and we need to see more price action to decide on direction. Huge overhead resistance still in place between 1230-1260 in the S+P 500. Any failure from that zone will give some great sell signals. If the market can’t reach that level and falls over from here then I have to wait until we see a close below 1255-1270 before getting more bearish. There are some conflicting signals and we have the Europe rescue package coming up which could cause some buying leading into it.

You can watch the latest Slipstream update here.

Meanwhile, in other news..

Australian rap news crew Juice Media has uploaded its latest creation onto YouTube. Quite frankly, the members of the crew are geniuses. If you don’t feel like bobbing your head to the tune, here are some of the opening lyrics:

‘As you know, the world is urgently trying to make sense of our “global economy” and its arcane trends.
As financial temples teeter, the priesthood is scrambling, to maintain our confidence in markets and banking.
After derivatives, quantitative easing, trade imbalances, recession, low GDP, nations close to collapsing and subprime loans, foreclosed homes and peoples’ taxes spent to bail out too-big-to-fail triple-A banks again.
Fear levels rising as a US crash seems imminent, having smashed the debt ceiling of fourteen trillion.
Despite protests and clashes in Athens’ streets the IMF imposed structurally unjust programs in Greece.
Where, in fact, the term “economy” entered our language from the Greek “oikonomia”, meaning “household management”.
Well, how are we managing? Theories abound, but in practice, does anyone actually know what the hell’s even happening?’

Gloom Boom and Doom editor Marc Faber also reckons he knows what’s happening. And he has a solution for the Americans too:

‘I tell you what the US needs. The US needs a Lee Kwan Yew [former PM of Singapore] who stands in front of the US and tells them: Listen you lazy bugger! Now you have to tighten your belts! You have to save more! You have to work more for lower salaries! And only through that will we get out of the current dilemma that essentially prevents the economy from growing.’

That’s right. Only by reducing debt can the problem of too much debt be reduced. People need to save.

‘But that will crash the economy’ scream the Keynesians. Even Keynesians can’t force people to spend though, so they look to the government to fill the gap. But government borrowing is just a balance sheet swap. The poor and overleveraged swap their own questionable balance sheet for the government’s – the taxpayers’. That allows them to borrow far more than they otherwise could. The proceeds are then distributed around the system.

The poor get welfare to keep them poor. The big companies get bailouts to keep them big. The rich get paid interest on the bonds. And the politicians get to keep their jobs.

But what about the Steve Jobses of the world who are still in their garages? What about the Mark Zuckerbergs who are still at university? They are the job creators. And they get nothing. They are prevented, more and more each day, by the barriers erected to their success.

You might notice that most of the big corporate successes in the last few decades have come about in the IT industry. Apple, Google, Facebook. How many of their employees are unionised? Is the industry subject to a special tax? Does it pay royalties? Have badly run IT companies received bailouts? (The NBN doesn’t count.)

The one part of the world’s industry that is least inhibited is the one part keeping it going. But productive initiatives can only support so much dead weight. With less and less proper capitalism, there will be less and less prosperity.

So is there any chance of a political resolution? Well, Europe seems a basket case. And the US presidential race is shaping up with so much irony its gobsmacking. Three of the big campaign issues are Obamacare, the Federal Reserve, and improper use of political power. The Republican nomination is between an implementer of universal healthcare, a former chairman of a Federal Reserve board and a former democrat who believes in executive orders for mass vaccination!

But unless libertarian Ron Paul wins, it won’t matter who does. The economic problems are bigger than any president, prime minister or central banker. That doesn’t mean they won’t have a go at ‘solving’ them.

CLSA’s investment guru Russel Napier explains how they will proceed:

‘What’s going on now is nothing to do with the business cycle. It’s much, much bigger than that. We’re getting a change in the structure of the way the world works. It’s very simple. In a market system prices are determined by supply and demand. But that isn’t always true… sometimes the government doesn’t like the prices. And the government comes in and determines prices. That’s a structural change that goes on for 20-30 years. That’s what we’re living through this last couple of years… That’s coming to the entire developed world. People say it’s deflation, devaluation, default. No it’s not. Its nationalisation.’

The nationalisations have already begun in Europe, with the Belgian bank Dexia. Well, this is the second round after the many nationalisations in 2008.

But how will governments fund nationalisations? They will be willing to monetise debt to make up what their taxpayers aren’t willing to pay.

That creates inflation, if they are successful.

That leaves our own Reserve Bank of the Land of Oz in a difficult situation. The Wizard of Oz, RBA Governor Glenn Stevens will face the choice of watching the Aussie dollar go stratospheric in value relative to trading partners’ currencies, or join in the fun of printing money to manipulate currencies.

The Swiss and Singaporeans faced this issue recently and gave in to temptation. They intervened in foreign exchange markets to devalue their currency. If the Swiss and Singaporeans can’t set an example, what are the chances of Aussies doing it?

Reader Mail

Last week, we asked this question: After 20 years without a recession, how will Australians react when one finally comes along? Will they set themselves alight, protest, loot, stage a revolution?

Here are a select few of the excellent responses we got:

‘I think most Aussies will go to the pub and bitch about the rising price of beer when a recession occurs. I would also hope some form of demonstration against stupid taxes (and lies regarding them), against ridiculous management payouts, and Government intervention into Sound Money of individuals. But we’ll all likely just go to the pub.’

‘I believe that many Australians have their head in their sand and do not want to believe that the world is in an increasingly dangerous place from a financial perspective. There is almost a “titanic like” refusal to acknowledge that there is a real possibility of hard times around the corner. This is encouraged of course by the “China cargo cult” where we hear Wayne Swan saying weekly how well we are doing. I suspect many Australians would really struggle in a recession and would be very shocked if their access to expensive clothing, cars, housing and regular overseas holidays was cut back.’

‘If the government decides the Zombies in society get a smaller pay check each we can expect them to revolt and riot as has been experienced in Euro countries. Somehow these Zombies who eat the flesh off the system us taxpayers provide deem themselves as positive contributors to society.’

‘Given the frustration at all levels of society with the rotten performance of most politicians – with magnificent exceptions – I would say new parties will emerge with genuine dedication to country and people. Inevitably, with the current economic regime dictating the political agenda, they won’t achieve much.’

‘At least 51% of them will vote for continuing welfare hand-outs/employment in the public sector and give the Socialist/Fabians/Marxists/Trotskyists another 4 years. Case closed.’

‘If Australia is affected by a recession – Australians will react as our Nation always has in time of trouble and that is to band together and help each other. Of course, there are always bad apples in the bunch, but, they shall be squashed like bugs.’

‘I have suggested that Australians, particularly those Australians reared in the country, will be like a ‘suspension fence’. Most fences are rigid, but suspension fences (an Australian invention) give like elastic on impact. So, we the Australian people have a lot of ‘give’ in us and are seen by others as apathetic. But, after a suspension fence gives on impact (it doesn’t break) it rebounds, throwing off the beast that has hit it with force. I expect that the country people, true to the roots of their forebears, will respond strongly when least expected.’

‘As has been the case for decades on a variety of issues; Aussies will scream but mostly WHINGE long and loud. When challenged, it will be a case of “why didn’t someone tell us about it? Then , when the warnings they got are shown to their faces,., it’s a case of “Well,we didn’t think you meant it so bad and you were only trying to make a point”‘

‘I believe riots and protests are inevitable, when people finally awaken to how royally screwed theyve been by corrupt leaders…bankers who are not elected….. reserve bank officials who also work for major corporations…. superannuation that is going down the gurgler’

‘In short, I think we will experience all the bad things that the USA is currently experiencing but, since our house prices and wage rates are the highest in the world, the ramifications of a recession will be far, far worse.’

Until next week,

Nickolai Hubble.
Markets and Money Weekend Edition

Nick Hubble
Nick Hubble is a feature editor of Markets and Money and editor of The Money for Life Letter. Having gained degrees in Finance, Economics and Law from the prestigious Bond University, Nick completed an internship at probably the most famous investment bank in the world, where he discovered what the financial world was really like. He then brought his youthful enthusiasm and energy to Port Phillip Publishing, where, instead of telling everyone about Markets and Money, he started writing for it. To follow Nick's financial world view more closely you can you can subscribe to Markets and Money for free here. If you’re already a Markets and Money subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Markets and Money emails.

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Terry Mccrann is the man – excerpt below “Again, we continue to have two futures. Either China continues to sustain its momentum and we have to deal with the problems of even greater two-speed prosperity. Or it doesn’t and we get to experience the joys of a single, Greece-style, one-speed economy. The Labor-Green seemingly now successful determination to impose a carbon tax is depressing enough in its own right. Here we have a government setting out quite deliberately to hurt its citizens, all its citizens, to utterly no purpose. It’s even worse in this broader context. It’s a gesture to… Read more »

The world has been completely deceived concerning socialism. The ideology is accepted by suckers and oppresses those wishing to be productive in their own individual ways.

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