"Crazy Old Guy"

May 20, 2010

My prescient nephew, Danny, stuck me with that monikur about 20 years ago and happily, it's as valid today as it was 20 years ago. I love how we use words. Socialism is out. We are witnessing the demise of socialism in Europe, as well as the merits of Keynsianism. Socialism fails when you run out of other people's money.

Here in the states, we used to use the term liberal to describe socialists but that is out and the current term is "progessive". Progressive, socialist, liberal, whatever.....you cann't shine shit. Reform is another of my favorites. Doesn't reform sort of imply improvement of whatever is being "reformed?" Wrong! Reform means politically motivated change with unintended consequences. Consider the case of California Representative Henry Waxman. Following the socialistic orgasm associated with the passage of Obamacare, multiple companies reported substantial writedowns as mandated by the bill. This action outraged Mr Waxman who felt that corporate America was out to embarass the President and as a spinal cord reflex, he called for Congressional hearings. Fortunately, his aides stuffed a sock in his mouth and the hearing was cancelled. In defense of Mr Waxman, the legislation was over 2000 pages so who could reasonably expect this intellectually challenged soul to read it much less understand it. Now we have financial reform. I couldn't hazard a guess about what it will be but I will bet anything that the result will be reduction of availability and increase in the cost of credit to the private sector. Macroeconomically, this will be a whopper of an unintended consequence.

Anyway, today was an exciting one for the markets. 2008 was wild because banks were insolvent; 2010 will be even more fun because entire countries are going bellyup. In case you maynot be aware, global growth is yesterday's story. Everyone knows that Europe is a basketcase but trouble is brewing in the emerging markets. The FXI and EWZ are in bearmarket territory. Copper, oil, you name it are in freefall. The engines of growth are sputtering. Here in the good old USofA, the V shaped recovery is a mirage; if we're lucky we get an L. Housing will deteriorate, not improve. Unemployment will remain high. In short, we're Japan, circa 1990. More to follow; got to feed Bonnie and Clyde.

-Guga