It is always brightest before they turn the lights out.
You can quote us on that, Dear Reader.
Just when you thought things couldn’t get better…guess what?
They don’t. They go dark as a dungeon.
Antidote to optimism
Our task today and tomorrow is to show that however wonderful things may appear in today’s markets and economy, they may not be all that great.
We put our backs into this grim work neither for love nor money, but simply out of a sense of stern duty.
If not us, who? If not now, when?
Someone must put forward an antidote to the optimism now raging through markets around the world.
Someone must make the case for cynicism, suspicion, and mockery.
Someone must take the other side of the trade.
And so…the work, like shucking oysters on a cold day, falls to us. We open them up…hoping to find a pearl.
Donald Trump, Davos man
Instead, we find claptrap.
‘The elite gathering at Davos [including Donald Trump],’ begins a Financial Times article, ‘takes place against a backdrop of improving economic activity across the world.’
The IMF says it is the ‘broadest synchronized global growth upswing since 2010.’
The FT goes on to tell us that the world economy is supposed to grow a healthy 3.9% ‘this year and next’ thanks, at least in part, to the sweeping tax reform measure just implemented in the US.
Well, well, well. Gosh, it looks as though we were wrong about everything. You can predict the future after all.
As for the tax cut, we didn’t believe that the tax measure would have any positive consequences other than giving us more money.
What economic benefit could be reaped by taking money from one pocket and putting it in another?
Unless Swamp spending were reduced, we reasoned, there could be no net gain from cutting taxes.
Just goes to show what we know.
Over at The Wall Street Journal, meanwhile, the tax cut has touched off celebrations worthy of VE Day.
Andy Puzder, the former CEO of the Hardee’s and Carl’s Jr restaurant chains, praises employers for sharing out their extra tax-spared loot with employees.
He also thinks employers should use the opportunity to indoctrinate workers about where the money came from, ‘otherwise employees may take their pay increase and bonus and not give Republicans the credit they deserve.’
What praise Republicans deserve for switching government funding from above-board tax revenues to surreptitious debt is not clear to your editor.
But now that we know that it is creating such a powerful, worldwide boom, we wonder why they don’t do more of it.
Perhaps they should cut taxes to zero for everyone and just print the money needed to pay for their boondoggles. What a boom that would set off!
Wealth redistribution system
Whatever they are doing…it seems to be working.
The US stock market has only been down one single day in all of 2018. And super hedge fund investor Ray Dalio says we’re ‘going to feel pretty stupid’ if we continue to hold cash.
Reporters caught up with Dalio in Davos — where else? — and the great man told them we are in a ‘Goldilocks period’, where growth is almost guaranteed.
‘Things couldn’t be better,’ he seemed to say.
Heck, nobody wants to be stupid. So, everyone’s long now. In the latest tally, there are five bulls for every one bear. How much longer can this poor beast hold out?
The unemployment rate, too, is almost a miracle. At 4.1% nationally, it is at a 17-year low.
In some states, it is at a record low. In Mississippi, for example. And California. And in Hawaii, apparently, not a single person could be found who admitted to being jobless.
These glass-half-full figures don’t jibe with the 102 million American adults of working age who really don’t have jobs.
But perhaps in some future instalment, the Bureau of Labor Statistics will fully explain the discrepancy…or simply ignore it along with all the rest of the glass-half-empty figures.
Inflation is still below 2%…but only if you follow the feds’ bogus numbers…and don’t count the rampant inflation in the asset markets.
And the stock market, too, requires a special caveat emptor. It is no longer a place where we find out how much companies are worth.
Instead, it is part of a wealth redistribution system: The feds feed fake money into the markets. Assets go up. And the people who own them find themselves with a greater share of the nation’s wealth.
Congrats to the ‘one percent’
By pushing fake money onto the financial class, the feds have increased the share of national income made by the ‘One Percent’ to three times what it was in the 1970s.
The bottom share had to go down.
There are 2.3 million people, for example, who earn more than $1 million a year. And the top 0.1% earn more than $6 million a year.
But the bottom half of the population has an average income of only $16,000. And seven out of 10 Americans, says USA Today, have less than $1,000 in savings.
How is it possible that an economy can be doing so well…when most people in it are worse off?
Casual readers will quickly tag us as bleeding-heart liberals whining about inequality. But we don’t care about ‘inequality’. What we care about is truth, justice, and the American way.
Which is to say, if a person earns his money honestly, it should be a rough measure of what he deserves. Or at least what other people are willing to pay him.
In a free, win-win world, what you get is related to — if not exactly equal to — what you give.
But in the 1970s, the top 0.1% got 10% of the nation’s income. Now, it gets 20% — twice as much.
What are the rich giving to deserve twice the income share? Are they giving twice as much?
The bottom 90% got 35% of national income as recently as 1980. Now, they only get 25%.
What happened? Do they give so much less? Or is the system rigged against them?
Tune in tomorrow for our look at America’s Depressed Counties. (There are more of them than you think.)
For Markets & Money