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http://www.joe-duarte.com
A World In Disorder
by Dr Joe Duarte
December 1, 2008
Which Way Are We Headed?
The politicians in Washington are arguing about whether to give GM money in order for the company to continue to perpetrate its flawed business plan for the near future. Yet, it is becoming increasigly clear that the world has moved beyond the financial crisis and into a state of Disorder.
Dr. Ravi Batra, author of "The Great Depression of 1990," in a book titled "The Downfall of Capitalism and Communism" wrote the following on page 19: "At the time of this writing, January 1990,one half of my prophecy - the downfall of communism - is already beginning to unfold. The other half, the downfall of capitalism, is yet to begin. But it is not too far off. Capitalism will begin to collapse in 1992 or 1993 and both systems will disappear in the next 15 years."
That's a lot to think about, given the fact that the U.S. government has spent over one trillion dollars propping up the U.S. economy since the subprime mess started, and interest rates are near zero, while U.S. GDP is contracting.
Communism, as we once knew it has changed its face and is now a market oriented ideology fueled by oil and leading to alliances between old cronies who had fallen apart, such as Venezuela, Russia, and Cuba.
Yet, Capitalism ending, well, that's something to consider, especially since Batra thought that both systems would have collapsed by now, at least according to page 19, as we noted above.
So what did Batra think about the ability to save Capitalism? Interestingly, he thought that it could be salvaged if "we eliminate the influence of money on politics." Oh, boy, that's a tall order, given obama's ability to raise $1 billion in order to get to Pennsylvania avenue this past November, boldly eschewing public financing.
So where does all this come from? Most of Batra's arguments stem from Prabhar Ranjan Sarkar, a "leading indian philosopher," who died in 1990, and who was the father of the Neohumanist movement. Hang in there folks, we're not going Left Coast on you.
Sarkar grouped people based on four kinds of minds, laborers, warriors, intellectuals and acquisitors. Societies progress through cycles in which each individual type of mind is dominant. Each stage is characterized by a certain type of activity. Laborer stagest tend to be full of disorder and lacking intellectual or other kinds of pursuits. The most important thing on most minds during these stages is survival. Warrior stages are periods where conflicts are eventually resolved by the strong and the rule of military might. Intellectual stages are periods of rebirth where ideas, philosophies and technologies flourish. And acquisitor stages are periods where greed rules and all things are perverted for the pursuit of wealth.
Modern day examples of each stage are Africa for laborer, Gaza and Israel for military, and the U.S. for acquisitors, or more specifically for the tail end of an acquisitor stage which is currently pondering which stage would be next. Notice how there doesn't seem to be any place in the world right now where intellectual stages are in any stage of development, other than perhaps in China, where they are in the transition from an intellectual stage to an acquisitor stage with perhaps some military overtones blended in for effect.
So based on the fact that we are at the tail end of an acquisitor stage in the U.S., the real question is which stage is next. If you follow dogma, laborer stages follow acquisitor stages. That's because the hallmark of an acquisitor stage is that the rich become so rich that the poor will never catch up. When that happens, the financial rubber band snaps, and you get social unrest, thus the ushering of a laborer stage and disorder. Right now, Thailand is a perfect example of a place bordering on the start of a new military stage.
According to Peggy Noonan "One of the weirdest, most perceptually jarring things about the economic crisis is that everything looks the same. We are told every day and in every news venue that we are in Great Depression II, that we are in a crisis, a cataclysm, a meltdown, the credit crunch from hell, that we will lose millions of jobs, and that the great abundance is over and may never return." Yet, despite the woeful news and assessments of the current situation "Everyone is dressed the same. Everyone looks as comfortable as they did three years ago, at the height of prosperity. The mall is still there, and people are still walking into the stores and daydreaming with half-full carts in aisle 3." In other words, in Ms. Noonan's world "Nothing looks different."
Yet, as we've noted here, restaurants that catered to families and average Janes were full six months ago and are half-full a lot of the time now. And it's taking a lot longer to sell a big house now than it did six months ago, even when the price has been cut in half.
According to Noonan: "In the Depression people sold apples on the street. They sold pencils. Angels with dirty faces wore coats too thin and short and shivered in line at the government surplus warehouse. There was the Dust Bowl, and the want of the cities. Captains of industry are said to have jumped from the skyscrapers of Wall Street," and "People didn't have enough food." To be sure, it's not widespread, but there have been at least two Wall Street related suicides that we know of, so far, and the number of homeless in Dallas, seems to be a little higher than a few months ago, at least when you pass by street corners that during the summer were empty of folks begging for food and money.
What's interesting is how Noonan's thought process progresses, a fact that is notable in this: "So where is GDII happening? Right now mostly in conversations between wives and husbands, in families and among friends, about selling, about digging in, about layoffs, and not taking chances, and reduced income, and fear."
Even more compelling is this notion: "in economic stories there's always a lag. New York in 1990 did not know it was in the midst of coming levels of affluence unseen in all of human history. The storefronts in my neighborhood at that time were tatty, tired. At some point in the next 10 years everything in the neighborhood was updated and started to gleam. There were bright new awnings on the shops, and the windows shining. Everything was washed clean by affluence. The food stores on Lexington Avenue offered more and more varied fruit for sale in thicker stacks outside. Even the dogs were suddenly more beautiful, handsome brushed brown Labs and stately golden retrievers."
In other words, come back in about six months and see how many people are in the restaurants. See if Chili's is still open, or if it went along the path of Steak & Ale and Bennigan's.
According to Sarkar's
Conclusion
Where are we? Are we at the end, the beginning, or the transition from one stage to the other. It's clear that we are watching a battle. A battle between natural forces, colored by perceptions and economic realities, and institutions, central banks and governments.
It's clear that it's too early to bet on any outcome good or bad. Yet, it's clear that the forces of Disorder are making their move. We saw it this past week in India. And a crisis has been brewing in Thailand for a few weeks. Mexico's drug war, Russian ships docked by Venezuela, and Iran offering Arab Gulf nations the opportunity to a join nuclear consortium are signs of uncertainty ahead.
Is the U.S. headed for something like Africa, or are we going to muddle through?
Or is it based on regions, cities, or even neighborhoods? This morning we passed through Garland, Texas, an area that has a wide set of demographics. The upscale part of Garland looked fine enough, with construction ongoing, and a Wal-Mart whose parking lot was pretty full.
On the other end, we noted that a Wal-Mart had been closed and that a shopping center that once had had some downscale tenants now had one tenant, an Aaron' Rents outlet that looked out of place with its flamboyant facade advertising bargains, even if it was surrounded by a dead zone of any other viable commerce.
The roads seemed less full this Thanksgiving too. And the mood more sober. Maybe this kind of stuff just takes a while to fully develop. Maybe it doesn't.
Noonan offers a sobering thought: "I suppose as months and years pass it will all gleam less, with a steady falling off from perfection. It will roughen."
If the U.S. was isolated, we could see clearer path ahead. But, the U.S. is not isolated. It is the kingpin of a global economy that is linked by fiberoptic cables and satellites where money moves at the speed of light, and where fortunes are made and lost in seconds.
The U.S. is also the place where CDO's, subprime mortgages, and Dark Pools originated. And it's a place where it is still possible, although not easy, to get ahead if you work hard and get lucky.
So where are we? We are in a fog. We are watching for signs where there are too many variables involved to see clearly. And we are hopeful but careful not to become complacent.
Which stage is next? Maybe it all comes down to where you live and what type of mind you were given.
Maybe it's wise to consider that even as this crisis in unfolding, the next financial gimmick is being created, and will at some point be unleashed, perhaps even as a purported cure for the current plague.
Maybe it's better not to know at all, and just prepare for the worst, while hoping it never happens.
Meanwhile, we watch, we trade, and we hope it all works out.
Apple (Nasdaq: AAPL) and Research in Motion (Nasdaq: RIMM) Come Up Short
Nasdaq needs new leadership as Apple (Nasdaq: AAPL) and Research in Motion (Nasdaq: RIMM) are both looking tired.
Chart Courtesy of StockCharts.com
Few talk about Google as a market leader anymore, with Apple and RIMM taking up the media's attention. After all Iphones and Blackberrys are sexy, and mobile surfing and texting are now the national pastimes, since flipping houses is, well, on hiatus for now.
Chart Courtesy of StockCharts.com
So what do the charts tell us? Well unless something changes it looks as if both RIMM and Apple ran into some significant overhead resistance last week, as both stalled just below their 20-day moving average.
To be sure, lots could change in the next few days as reports of holiday sales hit the airwaves. So we could see a huge number of handheld devices come off the shelves, and thus the implication for higher earnings ahead with these two companies could start to rise.
Yet, many things remain uncertain, as the surge in retail interest could be just that, a surge. And it could be a surge that falls quickly as the consumers put their hands in their wallets and wait for last minute sales where they could get some real bargains as retailers get desperate.
Huge discounts would do Apple and RIMM little good, as shrinking margins are not the stuff of earnings growth which is what lifts these stocks momentum.
If RIMM and Apple fail, the Nasdaq has little to turn to for leadership, as Google, Intel, Cisco, and Microsoft are all but dead money right now.
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