Gulag Blog

Tom Ferguson: The Invisible Hand Is Waving Goodbye

This is a great interview of Tom Ferguson on Real News Network on the consequences of the “head’s I win, tails you lose” the financial sector has constructed with the rest of us, with Baltimore as object lesson. Enjy!

Tags: Free markets and their discontents

Obama Says Democratic Policies Moving US Forward

President Barack Obama says the policies his administration has put in place have helped move the country forward. Obama went on to blame Republican policies for leading the country into recession.(Sept. 10)

The Market Ticker – Don’t Buy The Pumps

In this case, the consequence of the pumping (that is, a nasty little dump) is coming from this little "momo" stock called CROX:

For those living in a cave for the last couple of years, CROX makes these cheap plastic shoes that cost about 50 cents to make in China, then sends them over here and sells them for $50.  A massive fad that ran their stock up to $75 in the fall of 2007 before it spectacularly crashed to under a buck at the end of the 2008, it has lately been up fourteen fold to over $14.

Well, now it’s trading $10.65, down about 40% in the last two days.

Why?

I can’t find a reason.

Yeah, they’re at some conference, but allegedly "reconfirmed" guidance in front of it.  So what’s the cause of the collapse?

I don’t know.

But what I do know is this – there are a lot of stocks out there that have seen similar meteoric rises over the last year and change.  This is, to a large degree, what has powered the "miraculous" recovery in the stock market in general.

But the question remains as always – was that move higher justified?

Because if it was not, and in many cases I don’t believe it was, when "gravity" reasserts itself you’re going to see more CROX-style implosions, and with it will go the indices – and you, once again, will be the bagholder.

Folks, parabolic moves like this never end well.  We saw that happening in 2007 and then the meteoric rises of many from the ashes of the dead in 2009.  Many proclaimed that we would be reaching for SPX 1350 this year, DOW 13,000, and new all time highs in 2011.

Plaintively – how?

If these "improvements" are predicated on momentum stocks that sell cheap Chinese crap to Americans at radically-inflated prices that are only supportable so long as Joe Consumer can run his plastic up and then "pay" it with a HELOC, what are the odds that this will play out as the media claims?

I think the answer is "zero", which is why I have not bought into the idea of "recovery."  The reason isn’t because I think we’re going to do a Zombieland impression in the coming months, although I do see the possibility of it happening, especially if we keep promising to deliver that which we simply cannot actually do.

Rather, I continue to argue that valuations are ridiculous on balance.  This doesn’t mean that every stock is expensive, but it does mean that the market is expensive.  Valuations today are predicated on continual falling labor costs but increasing sales, a formula that is a Ponzi Scheme as certainly as was the housing market.  You can no more pay people less and get more and then expect them to buy more stuff (with their lower earnings) than you can continually grow housing prices at 3 or 4x the rate of wages.  While this game appears to "work" for a short period of time, the collapse that will come from overextending valuations in this fashion is inevitable, and the longer the idiocy goes on the worse it will be.

Something to think about.

The Market Ticker – Academic Achievement Is Financial?

Oh, so now you don’t have to be as smart if you’re poor?

The results came in and Jennifer said Hannah scored exceptionally well. She said she was told that Hannah scored high enough for some students to get in, but not high enough for Hannah.

"Because Hannah’s daddy made a little more money than that and was considered middle class and a higher income, she would have to score a 130," Jennifer said.

….

According to the school district, there are different standards for different students. If a student gets a free or reduced lunch or speaks limited English, the grading scale is different.

So let me see if I understand this.

We have a "Gifted Program" for students who are smart.  These students are able to take accelerated classes, thereby not becoming bored in school and actually learning something, where they would otherwise be sitting around with their thumb up their butts all day.

But if you’re a straight A student, and your father makes a decent amount of money, you have to score higher than someone who is poor or doesn’t speak English (that’s code for "is an illegal immigrant") to get into the same program.

What part of anti-discrimination rules and statutes did the school forget? 

Shall not harass or discriminate against any student on the basis of race, color, religion, sex, age, national or ethnic origin, political beliefs, marital status, handicapping condition, sexual orientation, or social and family background and shall make reasonable effort to assure that each student is protected from harassment or discrimination.

Oh really?

So tell me, Florida, when are you going to revoke the teaching certificates of the instructors involved here and fire the administrators?

Why do I already know the answer – this so-called "Code of Professional Conduct" only applies when they want it to, and the rest of the time it is abused to violate the rights of students such as Hannah.

To Florida and it’s so-called "equality in education" claim: