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Musings Report #12 3-20-15 Swimming Against the Rip-Tide
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For those who are new to the Musings reports: they are basically a glimpse into my notebook,the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
Swimming Against the Rip-Tide
Longtime correspondent Kevin K. recently shared an extremely insightful analogy with me. Those of you who swim or body-surf in the ocean are familiar with rip-tides--very strong currents shaped by the sandbank contours of inlets and bays.
In a rip-tide, swimmers by the shore are pulled inexorably out to sea. Those with experience of rip-tides know that it is futile to attempt to swim back to shore directly against the tide--those who try will only exhaust themselves, and be carried out regardless of their exertions.
The only way to escape the rip-tide is to swim parallel to the shore. This strategy succeeds because the rip-tide is like a narrow river; once the swimmer moves outside the the current, the tidal flow quickly subsides.
Kevin described the economic and cultural rip-tide of the postwar years 1946 - 1985 as positive: anyone caught in the tide of prosperity was carried into secure jobs, homeownership, and opportunities for higher education--all the critical elements of middle-class prosperity that became widely available to the majority of households.
These included the GI Bill that paid higher education costs for 20+ million veterans of World War II and Korea (and later of the Vietnam War), abundant factory jobs that offered relatively high pay to those with little education, and dirt-cheap (by today's standards) college. (CUNY, the public university in New York, was free until the mid-1970s. My tuition at the University of Hawaii in 1975 was $119 per semester plus $28 student fees. Basic healthcare was was less than $50/semester.)
Once the civil rights movement eliminated the most egregious systemic sources of blatant discrimination (for example, banning Asian and African-Americans from owning property in certain parts of town) in the mid-1960s, the last major impediments to widespread social mobility (i.e. joining the middle class) were swept aside.
My father once said that when he was a young veteran in the late 1940s and early 1950s, virtualy any vet could buy a home with a low-down-payment VA home loan, as homes were cheap: the cost was typically three or four times a modest income. To his way of thinking, those vets who stayed renters did so as a choice, not as a necessity. (He bought a house and supported four children and a spouse on the salary of a Sears appliance salesman.)
Kevin related that when he was growing up in San Francisco, the average working-class Irish or Italian-American households all bought houses despite modest salaries--not McMansions, to be sure, but homes that built equity that could be passed on tho their offspring.
Now, in Kevin's rip-tide analogy, the tide is carrying everyone to financial insecurity via rising debt loads, low-value, high-cost college degrees and a loss of the cultural/practical skills that enabled those of lesser means to acquire capital in the previous era.
Only those know who know to swim parallel to the shore can escape the terrible rip-tide of debt, overcapacity and unrealistic expectations pulling the unwary to insecurity and impoverishment.
I think this is a powerful analogy for our economy and culture. Anyone who is carried by the tide of monumental student debt, over-priced homes, and dependence on state entitlements and/or Wall Street is not being carried to prosperity but to insecurity and poverty.
The trick is to swim away from this tide of debt and false promises rather than try to resist it directly. In a very real way, learning to escape this terrible rip-tide is the core purpose of the blog and site.
Summary of the Blog This Past Week
The Web: Destroyer or Savior of Culture, Pay and Employment? 3/21/15
Income, Education and Inequality in the "Recovery": Prepare to be Surprised 3/20/15
The Unraveling Is Gathering Speed 3/19/15
Dollar Demand = Global Economy Has Skidded Over the Cliff 3/18/15
The Undebtors: Sworn Enemies of the Vampires of Debt 3/17/15
When It Becomes Serious, First They Lie--When That Fails, They Arrest You 3/16/15
Best Thing That Happened To Me This Week
I finally saw the 1989 documentary on the fabled night clubs of San Francisco's Chinatown in the 1930 and 40s, "Forbidden City," at the old Great Star theater in SF Chinatown. Then, a quick walk to North Beach and dinner at a sidewalk table with a bottle of Marcucci Farms 2008 Zinfandel. If this was not the best of S.F., it was close enough....
And the peach tree is blooming:
Market Musings: Is the crash window open?
Analyst Steve Puetz correlated eclipses and stock market crashes around the world, and found that while eclipses do not always lead to crashes, crashes tend to fall within Puetz windows--roughly a week on either side of major eclipses.
Correspondent B.C. called my attention to a Puetz window in late March-early April. Since the correlation is not causal--that is, eclipses don't cause stock market crashes--it's a weak correlation. But just for laughs, I decided to look for any evidence that a sharp correction might be coming.
One classic precursor of corrections is weakening market leaders and narrowing of breadth/liquidity/volume. When leaders that pulled the index higher roll over, the index is usually not far behind.
Consider the chart of Apple, (AAPL), long the engine that has been pulling the indices higher for years. Apple's chart is looking weak:
Another classic precursor of a decline is high levels of complacency, which is reflected in a low VIX or volatility index. When fear has been vanquished, the VIX declines to the 10-12 range. These levels reliably indicate market tops.
Interestingly, the VIX has been tracing out a descending wedge, a pattern that is usually bullish. The VIX soars when stocks fall sharply and fear comes alive.
The signs of a global slowdown are so plentiful that even the most ardent bulls should start feeling caution. Yet the central-bank-driven markets in the UK and Germany are hitting new highs, and the SPX in the US is within a few points of its all-time high.
Interestingly, the SPX is acting rather tired. Despite the decling VIX, the S&P 500 has only managed a tepid 30-point gain in the past three months--months that are typically among the best in the calendar year. This characteristic not of a robust Bull trend but of a topping process--a process that typically takes several months to manifest.
Can stocks keep hitting new highs even as sales and profits plummet? History suggests we've reached Peak Central Banking--the faith that central bank easing can push markets higher forever, regardless of fundamentals, has reached near-euphoric levels. Few fear a decline or volatility.
So it's all smooth sailing even as the global economy slides into recession? That is a disconnect from reality that beggars belief.
Perhaps the VIX will soon awaken from its slumbers, and if so, the Puetz window is a likely opportunity for a "surprise" plummet in stocks.
From Left Field
Beijing, You Have A Big Problem - In Ten Charts
Reality Check: How Fast is China Growing? Global Recession at Hand
The Final Nail In China's Deflationary Coffin: Wages In The 4 Largest Cities Are Now Dropping
Curtis Mayfield - Keep On Keeping On (4:06)
Japan's Weird New Beauty Trend: Looking Sick, On Purpose (via Ishabaka)
I don't care about contemporary art anymore? -- David Byrne of Talking Heads arose in the NYC art-music scene in the mid-1970s, so he is a longtime observer of that world....
Matt Ridley: Fossil Fuels Will Save the World (Really) -- some excellent points made here about oil and prosperity....
The Hardest (and Most Important) Job in Afghanistan -- security....
How the U.S. Health Care System Compares Internationally -- #1 in costs, #11 in every other measure....
Why the American Dream is unraveling, in 4 charts "The young and poor in America ‘are completely clueless about the kinds of skills and savvy and connections needed to get ahead.' Robert Putnam" -- one big part of income inequality....
Massive 'ocean' discovered towards Earth's core (via John S-P.) -- not an ocean, in the pores of rock, but nonetheless...
Buckminster Fuller on The Geodesic Life | The Experimenters (6 min. video) (Via GFB) -- a genius who famously was once near suicide and chose to live...
Europe’s fierce, fabled villages (via Joel M.) -- some wonderful photos, not sure I'd want to live there...
"If the highest aim of a captain was to preserve his ship, he would keep it in port forever." Thomas Aquinas
Thanks for reading--
charles |
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