Economics, Satires

Jobs Crash – Dow Booms

DowBest-CNBCMadMoney

Shawn Langlois of MarketWatch flagged this marvelously sickening screenshot from CNBC’s Jim Cramer (Mad Money): “Everything that is wrong with America.”

While millions lose jobs and faced financial ruin, the Dow chalks up its best week in 80 years.

Of course, that prior “best” was during the Great Depression, so maybe we shouldn’t be so surprised.

Economic Musings by Luke Hauser – short and sometimes funny!

 

Economics

Economic Musings

Books & Other Stuff By Luke Hauser – no economics!!

Short reflections by Luke Hauser

Beware the Debt Zombies

Recessions Aren’t a Bug – They’re a Feature!

Slashed by the Debt Scissors – Low Fed Rates vs Government Debt

Time to Unload My Portfolio – oops, I forgot to get one!

Marx’s Capital – now an audiobook (short review)

Economics Satires & Miscellany

ToiletShare – my latest tech startup!

Eat4U – tech startup seeks funding!

Jobs Crash – Dow Booms – for real

Online Underwear Ads – Was It Mom?

HelloFresh Death Watch – farewell to a debt zombie

Youtubes Etc

Ponzi Scheme Documentary – meet Mr. Ponzi!

Bernie Madoff’s scam – a modern Ponzi scheme

US Auto Industry – evolution of an industry (great visuals!)

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Economics, Video

Meet Mr. Ponzi!

Variants of the Ponzi scheme are rife today – ie, using new investments (or loans) to pay off old investors (or banks). As long as interest rates are low and money is easy, it may work. When credit collapses, bye bye to the debt zombies.

Here’s a documentary on the originator of the Ponzi scheme – an ex-con with an actual profit-making idea that went haywire.

Click here for more economics articles, satires, and features.

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Economics

Time to Unload My Portfolio!

More economics satires & musings by Luke Hauser

– originally posted January 2020, when the Dow approached 30K

I woke up this morning and realized – it’s time to unload my stock portfolio!

As my mind cleared, I recalled that I didn’t actually have a portfolio, or any stocks at all.

I don’t even have a 401K. My retirement plan is the 401EZ – it should cover me, as long as I don’t stop working after I retire.

Just the same – it’s time to sell stocks. A Dow of 30,000?

It was 20,000 a year ago, and that was padded.

Take a look around – do you see 50% economic growth since last Spring? I see low interest rates, a huge tax cut for the rich, a housing bubble in major markets…. but not much economic growth.

But What About Uber?

Sorry, Uber is not “economic growth” – at best it’s a lateral movement that provides a slight improvement in taxi services. Whoop tee do.

What else is booming? Tourism? Destroying the environment in search of more fossil fuels? New advances in robotic senior care?

OK, I grant you those – but a 50% boost to the entire economy? I’m skeptical.

It’s a bubble. And while I can’t name the date it will burst, it is not going to inflate much further.

Let’s look back at the last bubble – which peaked much lower than this one.

The 2008 Crash Revisited

In the mid-2000s, the booming stock market – then passing peaks of 12, 13, and even 14,000 – was widely called “irrational exuberance,” even by the former Fed chairman.

No one believed the economy had grown that much, nor that housing prices should have doubled in a decade. The word bubble was widely bandied about.

Sure enough, the markets crashed.

In 2008, the Dow crashed to about 8000, and took until 2013 to get back to 14,000.

What brought the markets (housing and stocks in particular) back was not actual economic growth, but microscopic interest rates (.25 at one point in the US, which had a past average of around 4-5% in non-inflationary periods). Nearly-free money was hurled around, and lacking productive investments (more on this in another post) the money basically re-inflated stock and housing bubbles.

As I write, the Dow is over 29,000 – double the peak of just a few years ago.

Ie – double the peak that crashed hard in 2008.

Amazing What Cheap Money Can Do

Why? Cheap money. Low interest rates, big bonuses paid to the stock-buying classes, and most recently an absurdly unnecessary tax cut that poured billions more into the pockets of stock-buyers.

To no one’s surprise, the market bubble has inflated to new “irrational” heights.

But now, interest rates are as low as they can go (negative rates would destroy savings and retirement funds – a political non-starter unless we’re in a severe depression).

The tax cut will continue to pour money into the pockets of the rich – but the effect on the market will be to sustain current prices, not increase them.

The current peak will be almost impossible to surpass.

Sensing the peak, speculators will look for more lucrative “investments.” They’ll be selling – so whatever new cheap money comes into stocks, the speculators will balance by selling. The peak has been reached.

Sooner or later, stagnant or rising interest rates and declining effects of the tax cut will result in an overall slowdown. Recessions do happen, you know.

At that point, the downward spiral begins – people sell stocks because they need money to cover their debts. With increased stocks for sale, market prices go lower, so people have to sell more stocks to get the same money. And so on.

That moment is fast approaching. It’s been 12 years since the 2008 crash. That’s one of the longer stretches between crashes since 1900.

I’d say – prepare for hard times.

– in process – email Luke Hauser with ideas

More economics satires & musings by Luke Hauser

Continue reading “Time to Unload My Portfolio!”

Culture, Economics, Satires

ToiletShare – New Tech Start-Up!

Toilet-HighTech-ToykoWeekender

To all venture capitalists and others with too much money on their hands:

My company is called ToiletShare – we sublet time-share toilets to techies. After all, you can’t “function” without toilets!

Our innovative, cutting edge, high tech idea is – most of the time, toilets are sitting unoccupied. What if instead of paying for toilet-time you don’t use, you simply paid for a block of toilet time that you and your employees could use at your discretion?

ToiletShare maintains a worker-friendly environment, with quality reading material and relaxing muzak.

Bonus – ToiletShare monitors all toilet-related activity and provides a complete monthly report of employee toilet usage.

Can we have $5 billion for starts?

Photo – Tokyo Weekender

More economics satires & musings by Luke Hauser

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Economics

Beware the Debt Zombies

More economics satires & musings by Luke Hauser

Zombie-ClipArtLibrary-Free

Debt zombie – a corporation which can only function by continuing to borrow money.

Debt is a part of corporate finance. Even the most successful companies are constantly manipulating debt vs income to maximize return.

If I can invest money and get a 10% return (say, during a stock or housing bubble), why not borrow all I can at 5%?

Basically, why not gouge your neighbor for all you can? In America, that counts as good business sense.

(I believe Jesus had a rather different opinion on this matter, but that’s a topic for another article.)

For these businesses, when hard times hit, they have to tighten their belts. Maybe they have to repay debt. People are laid off.

But they survive.

Ponzi Turns Green

Debt Zombies have a different balance sheet. For Uber, Lyft, Pelaton, Spotify – and possibly for the secretive Amazon, Google, and Facebook (none of which pays a dividend on its inflated stock) – debt is not simply good finance.

It’s a lifeline.

Charles Ponzi must be green with envy. Or mould. Or maybe both.

Ponzi actually had to convince investors that he had a money-making scheme (by buying US postal coupons in Italy and shipping them back to the US for cash-in, producing a small net profit on each transaction).

The scheme was probably unprofitable once you factored in labor, and in any case Ponzi simply lied about the transactions. Promising huge dividends, he paid early investors with money obtained from later investors, giving his name to the classic sucker’s game, the Ponzi Scheme.

Ponzi Scheme Documentary – Youtube

Uber and its ilk go Ponzi one better – they actually have no business plan at all except “be the biggest and the money will roll in.”

So Much For That Plan

Spotify is the biggest streaming service – and still hemorrhaging money. So much for that plan.

Uber jumps from rides to eats to on-demand house cleaning (really!), losing money on every one.

Lyft cries out: “We lose less than Uber!!”

And Pelaton, raising billions for what is at best a minor niche product, digs its own grave with the most ineptly patriarchal ad campaign of the decade.

The bottom line – not one of these tech giants could function without massive infusions of new credit.

The Day of Reckoning

In Summer 2008, the credit markets froze up. Loans became nearly impossible to obtain even for solvent companies.

Imagine that scenario today. A dozen top tech companies would be unable to meet payroll.

Employee loyalty will be put to a severe test. Techies with huge condo mortgages will have to jump ship.

San Francisco, for 20 years a gold-rush cesspool, will become a ghost town – tons of housing – but no jobs.

No Bailout This Time

In 2008, central banks around the West bundled “rescue” packages to bail out companies like Wells Fargo and Bank of America, which teetered on the edge of collapse due to irresponsible home loans.

Prime rates were cut. Billions of dollars were pumped into the banks at cut-rates.

The massive new credit slowly did the job, and by 2011 the housing market and stock market were reviving.

(As for the actual economy – flat-lined since the 1970s – that’s a different matter.)

So why can’t we just do it again?

Easy – because the Fed (under pressure from Trump) has already cut rates below 2% to pump up the current stock bubble.

Trump’s tax cut pumped billions into corporate treasuries – most of which has simply been poured into stock buy-backs that mainly benefit about 5% of Americans.

Basically, we’ve used up most of our silver bullets during a bubble.

When the crash comes this time – and it will, as I explain in a separate post – there won’t be many tools left to cope.

Expect to hear talk of the benefits of negative interest rates (a last-ditch effort that has never done more than keep a flaccid economy afloat – cf Japan since 1990).

And expect a major bout of inflation in the near future. It’s impossible to pump so much “cash” into completely non-productive sinkholes without producing inflation.

Capital Bids Adieu to the Zombies

As far as prevention, forget it. All the Trump/Fed cuts are doing is delaying the inevitable.

Capitalist recessions are not avoidable. They are not even a problem for the larger system. They’re a cleansing mechanism – the way the system wipes away moribund and redundant businesses. (See Recession link below for more.)

The global system has been teetering on the edge a year or more. China has been in a slump for two years. Europe is staggering to realign. Russia is a corrupt , decadent police state. India and Brazil, for all their efforts, aren’t going to make up the difference.

Capitalism in its cyclical splendor will soon wipe the debt zombies away. One or two might pick up the pieces and slowly become viable. Some (like Spotify) will be bought by bigger players.

Most will become punchlines of depressing jokes – “Remember when investors poured billions into subscription exercycles?”

What Do We Do?

We can’t prevent this crash. Nor can we prevent the knock-on effects it will have on millions of working people, who will lose jobs and income as the economy contracts.

What we can do is prepare for a major recession.

Prepare to live more modestly. Prepare to help one another. Prepare to value people more than possessions.

Prepare to ride your exercycle without a subscription.

Prepare to take back our cities. Prepare to squat vacant housing. Prepare to make cities a place we live, not the plaything of speculators.

Let’s go further – imagine a city with no cars – let alone robot-driven Uberlyfts.

There may actually be an upside to all of this…

Image: ClipArt Library.

Recessions Aren’t a Bug – They’re a Feature

More economics satires & musings by Luke Hauser

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Economics

Recessions Aren’t a Bug – They’re a Feature!

Economic Musings by Luke Hauser – an Index

Those Pesky Crashes

Back in the early days of tech when computers routinely crashed and programs had all sorts of weird glitches that you had to work around, engineers would explain the anomalies by saying:

“That’s not a bug – that’s a feature!”

Capitalism says the same.

Recessions aren’t a glitch in the system, something that our shiny new virtual economy has rendered obsolete.

They are a built-in self-cleansing mechanism for an incredibly durable economic system.

A Tendency to Overproduce

Capitalism has a tendency to overproduce.

When a company makes a profit doing something new – oh, let’s say, producing subscription exercycles for the global elite to give as holiday gifts – immediately – in fact, before the original company even remotely shows a profit – competitors materialize. Soon the market is flooded with exercycles (and soon flea markets will be flooded…)

Whether it’s car companies, music streaming services, or fast food – capitalism has a tendency to overproduce.

Left unchecked – or propped up by irresponsible interest-rate and tax-cut policies – we’d soon drown in ride-sharing services, music streaming sites, and exercycles.

It’s as if the whole system has gone on a giant binge.

Capitalism Purges Itself

But as our beloved if somewhat crotchety ancestor Karl Mark noted, capitalism has a built-in safety device. At the peak of over-production, companies get overstocked warehouses (can you say China 2020?), too many fast-food franchises (your home town?), etc.

Companies slash prices, selling below cost, taking anything just to get some cash flow.

Some survive, some hit the wall. A quick look at the US auto industry shows the results. Where there were once twenty or more auto companies, by 1960 there were basically three. The others hit the wall during recessions.

That was a disaster for investors, for workers, for the home communities. But for capitalism as a whole, it was a blessing.

Think of it as a cleansing. A purge. Like a giant dose of Ex-Lax for what ails the system.

It gets shit moving again, so to speak.

It Works – Unless We Decide Otherwise

It works. Depressions in the 1890s, 1930s, and 1980s eliminated vast amounts of excess production. Hundreds of factories closed. Thousands were thrown out of work and onto the streets

But in the end, capitalism got on just fine.

We escaped recent crashes in 1989, 1999, and 2008 by lowering interest rates and cutting taxes. This time, we’ve already used up those options.

The next crash will be long and ugly. But unless we specifically decide otherwise, history will repeat itself. Capitalism will get on just fine.

As they say – it’s not a bug.

It’s a feature.

Economic Musings by Luke Hauser – an Index