Blue Skies and Pink Clouds

Ok that last post was a bit depressing. Maybe I am bearish because Nixon and Volcker made a big mess. I can blame them because hindsight is easy to see faults. I will explain the mistakes they made which led to excessive money supply combined with an over abundance of credit in a detailed post later. In short, their action then inaction created excessive consumption of equities, real estate and anything else that moved or didn’t move. That excessiveness coupled with excessive government spending and corruption is seen at peaks of empires.

Our Presidents are also a sign of a peaking empire. Clinton, who was that last full term President in a rising empire, got away with lying. “I did not have sexual relations with that girl”. Everyone was so drunk and high they simply said… “OK, even if we proved you did, and caught you red handed in a lie; we forgive you because we are stoned and please pass the bong. Oh right, he didn’t inhale-yea right….

Then we elected Bush who was totally unqualified to be a President, We didn’t care, we were drunk. The only thing he had going for him was the momentum of the empire and he had a father who was an experienced President to ask for advice when times got tough. But Bush being Bush relied on the wrong father for advice.

His term was the actual peak. We were still drunk so we reelected him, then we started to sober up and we started down the backside of the mountain. Bush was so bad that we had two minorities as the only real candidates for election. McCain’s big mistake was Palin as he tried to compete with the popular minorities in the other party. All I can say is we are lucky he chose her as he might have been President and we would be in war with North Korea and Iran right now. That will come - be patient.

Poor President Obama – They guy doesn’t have a chance. Even if he was a good President, which there are few as you must be a good leader and they are only good at getting elected which doesn’t qualify you to lead a country, he is fighting the pressure of a declining empire. Only a very strong leader and visionary can make the hard and unpopular choices that are needed to slow the trend. I think he is a smart guy but his handlers will never let him make the right choices. He is certainly not a leader.

The pace at which we consumed life during the ’80’s and ‘90’s is simply a pace that can’t be sustained forever. Sooner or later we have to pay up. Adams Smith’s invisible hand has to “Beech” slap us for all the abuse and misbehavior we participated in. This happens every 40 years or so. It’s just a cycle, this one being bigger than the last few.

Nevertheless, I could be wrong and events might reverse the current direction. These events are yet to come so my outlook is bearish but still, it is possible that the EU breaks up and dollars are in demand as safe haven which will be put to work in treasuries and equities. Its possible that China never measures up to their growth expectations as they have no value for the Rule of Law. As mush as they try to grow and expand their economy it will still be suppressed by the distribution of wealth but not to the poor who can consume goods and better their quality of life but to the crooks who pick and choose what to make, when to make it and who will supply it.

If so, we will likely chop around the 10,000 area just like we did 1,000 and 100. Then we will break to a strong rally and there will be nothing but blue skies and pink clouds,, Oh yea, we will have to get out of two very costly wars and avoid two others for this to happen. Otherwise even if the EU and China are not good investments, neither are we.



Tim Mack