Juggling Dynamite

There is always something cathartic, when realism get some words in edgewise on financial-tainment. Steve Ricchiuto, Chief U.S. Economist at Mizuho Securities, managed to do it for a few moments on CNBC this week. 

“The deflation story is very, very critical but there’s also this wrong concept that I keep hearing over and over again in the financial press about this acceleration in economic growth. That isn’t happening. Last month we had a horrible retail sales number. We had a horrible durable goods number. We’re likely to have a very disappointing retail sales number coming forward. This month we’ve had a strong payroll number – we say everything’s great. It’s not great. It’s running where it’s been. It’s been the same thing for the last five years. There’s no improvement in the economy.”

Here is a direct video link.

Excellent article in the NYT this weekend from Mark Spitznagel, founder and chief investment officer of Universa Investments.  Spitznagel is elevated in both intelligence and wisdom– still a very rare combination in finance.

First he offers a chart of the Tobin Q ratio for the S&P 500 since 1900–here with annotation from my partner Cory–(the total aggregate value of publicly traded common shares in relation to the estimated aggregate replacement value of the stock of capital for those corporations (ie., machines, equipment, buildings, chairs, etc.).

As shown on this historically reliable metric (and many others!) stock prices today are the most over-valued in 115 years, but for the fleeting tech wreck top in 2000:

…The bear markets we saw following all of these periods were not dreaded “black swan” events at all. They were perfectly predictable, by economic logic alone, the same logic that says governments cannot manipulate market prices without creating distortions that will always, without exception, be counterproductive.

In the next stock market crash, we will be told that the fault was some surprising economic or geopolitical shock. Let’s remind ourselves now that this will be false, the proximate cause rather than the ultimate cause. The ultimate cause is the same ultimate cause that has been demonstrated to us for over a century: distorted and manipulated markets.

These markets are speaking to us yet again. This time around, we need to listen.

For useful historical context on the interventionist policies that have driven repeated periods of equity over-valuation and then collapse, read the whole article here:  The myth of Black Swan market events.

People who value democracy, fairness and civil society, should care about breaking up the banking cartel.  The current state of anarchy there, threatens all of us.  Avazz captures the issues well in today’s petition:

HSBC helped the super-rich dodge taxes. We’d go to jail for this, but governments won’t prosecute them unless we demand it!

I’ve just signed a critical campaign to bring the tax dodgers to justice.

Join me by signing here.

HSBC bank has just been caught red-handed helping some of the world’s mega-rich dodge taxes! We’d go to prison for this, but governments are treating these powerful people like they’re too big to jail. Let’s show them they’re not.

Our governments are losing $3 trillion a year to tax dodging — enough to end extreme world poverty many times over! This leak is the biggest in banking history — if we don’t seize it now to get prosecutions, we may never get a chance like this again.

UK finance minister Osborne faces an imminent election, while US Attorney General Lynch is yet to be confirmed in her new job. They’re both very sensitive to the public right now, so our million-strong call, delivered via ads and with legislators, could get them to investigate, prosecute, and send the tax-dodging elite a powerful signal: no one is too big to jail!

The UK is HSBC’s home country, and the UK and US have jurisdiction over thousands of the tax-dodgers. If we get them to prosecute first, it could trigger a worldwide wave of accountability.

The mega-rich often cause damaging financial crises with wild speculation, get bailed out by taxpayers, then argue that public spending on schools and hospitals should be slashed to meet the resulting deficits — all while many of them fail to pay their legal share of taxes! This austerity-spiral is driving a rapid worldwide increase in inequality.

Just 85 billionaires have as much wealth as the poorest half of our planet — wealth they too often use to buy politicians and capture our democracies to keep the whole system going in their favour.

It’s time to stop this damaging downward spiral, and making the richest pay their taxes would be a massive step. Let’s make it happen:

Avaaz is all about the many gathering the power to stand up to the few. Law is a contract that links us all together, equally. Thousands of the world’s most powerful think they’re above it. For the sake of our democracies and our societies, let’s show them they’re not.

With hope and determination,

Alex, Bert, Laila, Ricken, Marie, Andrew, Nell and the whole Avaaz team