Why when Bernanke’s talks about the road to recovery – I am out of the market!

April 15, 2010

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A good rule of thumb that has held me in good stead is bear out what Ben Bernanke et al has to say about the US economy –  and do the direct opposite –recently, this was what Benny had to say about the health of the US economy – Bernanke Sees Moderate Recovery

As soon as Bernanke proclaimed the US economy was on it’s way to recovery, I sold all my shares in Citibank, Sirius XM, Synovus Financials and a few others – I am now completely cleaned out, except for a few EU based shares – What’s my beef with Bernanke? Do I have an axe to grind with him? Not really. In fact, I happen to think he is a great guy – just one problem – he doesn’t know how to call a spade a spade.

To cut to the chase, I just think it’s premature to proclaim that we are well on our way to economic recovery and the good times are back again!

The way I see it, it’s still early days– one reason for this disconnect is simple: the US economy is not Wall Street / that’s to say the stock market should never be confused with the actual state of a nations economic health – granted, it may well be a barometer, bell weather or even the equivalent of sticking a licked thumb against the wind, but that’s all it is, nothing more or less – reading more into it is like studying pig entrails to figure out the weather tomorrow  – besides what’s the big deal if the S & P managed to punch a hole through the mythical 1,210.65 level? – to me that’s just a big zero (it’s all up there in your head!) – for all we know it could all go the other way next week – now you know why I refer to the stock market as a glorified casino! (and I will never retract that statement!)

What a lot of people don’t seem to realize when they’re uncorking the champagne and digging into the caviar is Bernanke’s so called recovery is as real as silicone tits and it all came at an exorbitant cost!

To put it in allegorical terms, it’s reminiscent of the last chapter of story around the world in 80 days – when the main protagonist, Phileas Fog decides to strip every single plank from his steam ship just to keep the steam engines running at full throttle during the last leg of the race – this naturally begs the question: when is the pay back time coming?

I am trying to keep this simple Simon so that even the average Joe can understand the math – my point is a major unknown quantity is how will the markets continue to fare once the Fed decides to reclaim some of the unprecedented amounts of cash it once foolishly pumped into zombie banks and dead beat firms to the prop up the US economy?

In a nutshell, it’s this part of the narrative that’s missing from the ticker tape mission accomplished boast of Ben Bernanke.

The long and short of all this is simple – investors will still have to keep their ears close to the ground to figure out how the Fed is going proceed to cash out of the market – and just to put it all into the right scale and perspective – we aren’t talking peanuts and loose change here – the exact sum hovers somewhere short of just USD$ 2 trillion! – so it doesn’t take a rocket scientist to figure out no matter how or when the Fed decides to siphon back some of this money, it’s definitely going to be disruptive – unless you can convince me the freemasons, Mickey Mouse club and Jewish lobby have already figured out how to plug that hole.

IMHO you need to always keep your eye on the ball, fact ALWAYS needs to be separated from fiction – for example: the only reason why the US economy appears to be recovering is because part govt moneys is still circulating to around the system to either keep the housing market, zombie firms and deadender enterprises from taking a nose dive – in the case of housing, this is accomplished when the Fed keeps mortgage rates ARTIFICIALLY  low by purchasing back mortgage-backed securities – if that sounds complicated, its like opening a restaraunt and standing out in the street handing out $100 bills to passerby’s providing they eat there – and when all the seats are filled – you say whoopeeeeeeee!

Facts will always be facts; at some point tighter monetary policy will have to feature – and to exacerbate matters if the Fed keeps on procrastinating by side skirting the time table and methodology as to how to reclaim back the money they once pumped into the market; it risk opening up another ten more cans of worms – it could even trigger an inflation flare-up since interest rates can’t be kept low in perpetuity – that in turn could very well spark a rise in long-term interest rates that could hurt the housing market – and take us all back to square numero uno – what I am trying to say in economic terms is the head bone is connected to the neck bone and so on and so forth.

So what we are really dealing with here is a very complex matter – HOW THE HELL IS THE US GOVT GOING TO GET OUT OF THE MARKET!

Another thing that rubbishes this whole idea of a recovery is what many people don’t seem to realize is most corporations aren’t what they were prior to 2008  – those who have managed to survive did so by literally pursuing a policy of corporate anorexia; by either peddling off their crown jewels at fire sale prices, cutting back their budgets for R&D, mothballing costly innovation and creativity and retrenching highly skilled workers. Yes, that means many of these firms who are on the so called road of recovery are really not so different from walking skeletons – they may have survived , but let’s be clear, if you take for example Citigroup – it’s never ever going to regain its financial primacy in the global market again (not in my life time at least) – the same holds true for a basket of firms – and all this will have a direct effect on GDP and GNP somewhere down the line.

Again this is jugular metric is missing from Bernanke’s recovery narrative; and the reason is simple; the Fed for some curious reason doesn’t seem to see the wisdom of tracking R&D, human skills and other intangible business investments in the whole calculus that makes up national output.

To them all these things (that I consider to be real value) count for crud and you don’t even have any idea how much I am holding back – as what I have mentioned is only the tip of the iceberg (let’s not even get into employment figures; the deficit and cost of capital against the Yuan – as my mission here is not confuse you as it remains the simple task of sharing whatever I have in between my ears) as to why I believe we are still a very long way away from recovery beyond the dictionary meaning of what it really implies in the economic sense  -that simply means, when Bernanke talks about recovery – he’s not so different from one of those really dumb automobile consumers who will plumb to buy a car just because he likes the cup holders (in short, Bernanke and his brain damage dream team have the wrong end of the stick!) – as stuff like long-term product development, prototyping and the whole gamut that makes up the whole competitive advantage chess pieces mean nought to Bernanke and his team – all Bernanke and his motley crew are really doing is trying to sell the idea the machine that was once supposed to change the world is now humming again – and that unfortunately is going to be a very hard sell in this part of blogosphere.

Sorry, the fish ain’t biting.

Darkness 2010 – The Brotherhood Press 2010

“Why do we need another meeting? I may look like a young man, but I feel very old Gentlemen! So I am not going to fly to Beunos Aries for a dumb meeting with Confederation – the brotherhood has a 2 rights to a veto and 3 including the Guilds, we will use it!

Why do we need to complicate our already complicated lives? This is a simple calculation….do you notice, if you ask ANY politician, economist and even a high class call girl in the US, why it makes perfect sense to support too big to fail institutions……they will have no trouble rattling off 10 good reasons why it makes perfect sense…the really funny thing is the flip side of the coin….if you ask any of those same people how the hell is Uncle Sam going to get all his money back without destroying the same market he was trying so hard to save….all you get is a wall of silence…..no one can flesh out the plan B, the great escape….so gentlemen what I see is a one way ticket; what fucking recovery are we talking about here?

You can only talk about real recovery, if you can sit me down and explain to me like a baby – how the hell is Uncle Sam going to get all his money back without busting the machine that could have changed the world!

Gentlemen, it is conceivable, what we may have here is a man who has decided to walk into a kiosk with a rubber gun….he’s got that part “right.”

The money is in his hands. But let’s be clear…this guy ain’t going anywhere except maybe to the local morgue…as what he hasn’t done is his homework – he hasn’t sat down and thought out the details of the get away plan….never forget, it’s like a bank heist, the entry is 1%, the exit is the 99% that makes a perfect 100%. Without a copper clad get away…there can be no road to recovery….that idea is still born, it’s a sterile debate….all I see is a bunch of cheap pirates who are trying so hard to sell you and I the illusion of recovery that there are even foaming in their mouths to persuade you and me the best thing you can ever do right now! Is to to put our hard earned money into the market….you know why don’t you?….that’s the only way they can get their’s money out…that’s the only way for them to legitimize higher taxes and squeeze us all dry….and these mother fuckers even have the gall to call that the road to recovery…I  call it a Ponzi scheme…..these people actually think we are stupid!  You know what, this is not going to be allowed to happen under my watch…I have instructed the ASDF to resight our investments in the Eurozone!

Fuck them!” 

Darkness 2010 – Meeting with the Interspacing Mercantile Guild recently on board the starcruiser les enfants du paradis – captured by an auto-bot crawler – the Brotherhood Press 2010.

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