Juggling Dynamite

Rule number 1 of successful investing: never buy what the sellers are selling you on. Avoid IPO’s like the plague. IPO’s are made to create enormous wealth for those who are cashing out by selling their shares at peak valuations as well as the underwriting firms who put the deals together and market them. By definition, buyers are virtually always getting the over-priced end of the deal.

The ratio of earnings beats fell in the fourth quarter to the lowest level since the start of the 2008 and 2001 recessions. Ditto for revenue misses.  As the big bankers and their brokers salivate over the Facebook IPO which will be sold to the “dumb money” of their unsuspecting clients (known to the bankers as their “distribution channels”), the stock market is bidding prices further into nosebleed territory, on more low volume, liquidity speculation. This will end as badly as it always has before. Buyers beware. Here is a direct link to a video clip by Jim Bianco on the numbers.

Poor people and countries suffer most in global recessions.  The Economist this month runs with an excellent article on the catalysts for growing unrest in China, some highlights:

“…the explosive growth in the use of home-grown versions of Twitter has made it easy for protestors to convey instant reports and images to huge audiences. The Communist Party’s capacity to stop ripples of unease from widening is waning–just as economic conditions are making trouble more likely.

…Europe is the biggest buyer of Chinese products—and the euro zone’s travails have plunged many [Chinese] manufacturers into despair. Depressed demand in both Europe and America has taken its toll on factories. The steelworkers’ strike was one of many in recent months, most of them in China’s export-manufacturing heartlands near the coast…this time exporters face protracted slow growth in developed economies, and the risk that the euro zone’s difficulties might worsen. China’s policymakers do not want another lending spree that might burden the financial system with more bad debt, on top of the borrowing accumulated during the previous binge.”

See:  Unrest in China, a dangerous year

This chart of Chinese Money Supply shows the massive liquidity expansion from the 4 trillion yuan ($630 billion) stimulus package the Chinese unleashed against the last global recession in 2008 followed by the equally extreme plunge in the money supply since–now at a 10 year low.

This also confirms what the Chinese stock market has been telling us for many months now–the longer-term trend has been down since last April. The nearer the Shanghai moves toward its November 2008 lows, the lower it beckons other lagging world stock and commodity markets to follow.

Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.

Big banks are rewriting the rules of our economy to the exclusive benefit of their own bottom line. But how did our political and financial class shift the benefits of the economy to the very top, while saddling us with greater debt and tearing new holes in the safety net? Bill Moyers talks with former Citigroup Chairman John Reed and former Senator Byron Dorgan to explore a momentous instance: how the mid-90s merger of Citicorp and Travelers Group and a friendly Presidential pen — brought down the Glass-Steagall Act, a crucial firewall between banks and investment firms which had protected consumers from financial calamity since the aftermath of the Great Depression. In effect, says Moyers, they put the watchdog to sleep. Here is a direct link to the clip.

Moyers & Company Show 103: How power and influence helped big banks rewrite the rules of our economy. from BillMoyers.com on Vimeo.