Commentary for the Week of March 8

In a recent Question of the Week, we sought to determine why the so-called good life has edged beyond the reach of the broad middle class. If this perplexing turn of events is causing pain and frustration for many, it is about to rain calamity on the lives of Baby Boomers, who as a group have not saved nearly enough for retirement. This means they will have to rely on today’s twenty-  and thirty-somethings to pay a hefty chunk of their Social Security and Medicare benefits. This is preposterous on its face, since there are not nearly enough good jobs for young people to meet their own financial needs, let alone those of scores of millions of new retirees. Is there a chance the situation will improve?  Probably not. America’s standard of living appears destined to remain in a downward spiral that will abate only as wages in the U.S. move toward equilibrium with those paid elsewhere in the world. The most lucid explanation of this we have seen was posted recently at ZeroHedge, where the rough-and-tumble discussion often yields insights that will forever elude a mainstream media that knows only how to pander. The author has identified himself as ‘chindit13’, and although we are unable to credit him by his real name, we are most thankful nonetheless for the brilliant clarity of his thoughts, to wit: The Debt Problem “All the arguments and frustrations expressed in these periodic meat-tossing, cross-generational smackdowns are symptoms, not causes, of the underlying problem, which is that on a worldwide basis, labor has lost its pricing power.  The world is too efficient at production, and cannot create sufficient demand, except through debt.  The debt problem is a symptom.  Debt was the stop gap solution as society tried to find a reason to be for

If most Americans hate Obamacare already, wait till they see their healthcare bills in January. Big insurers, who strongly supported the Affordable Care Act Frankenstein they helped create, have notified customers that the biggest rate hikes ever are coming at the beginning of 2014. A friend of ours was informed just last week that the cost of his family plan will increase by 92 percent.  He got off easy compared to your editor. My wife and kids are on a high-deductible plan offered by Humana whose cost will nearly triple at the beginning of the New Year if we don’t take steps to keep our existing plan. Turns out the Obamacare version they would substitute covers maternity care and a variety of other services that we neither need nor want. The changes will be hitting tens of millions of Americans in just three months, threatening to implode a tortured economic recovery that was already the weakest on record. Premium increases will come on top of staggering price hikes effected since Chief Justice Roberts personally sanctioned an Affordable Care Act that the Wall Street Journal once editorialized as “the worst bill ever.” It should be obvious to all by now why Obama is unwilling to modify it.  Clearly, it was never meant to improve the quality of health care in this country, but rather to redistribute income without imposing an explicit new tax on the middle class.  “The president's health-insurance plan forces those who hire, work and produce to pay full price for health care, while creating generous discounts for practically everyone else,” noted an op-ed piece by Casey Mulligan last week in The Wall Street Journal. Next Wave of Obama Redistribution “This second redistributionist wave of the Obama era will follow a first wave of tax hikes, additional unemployment benefits,

We veer well off the beaten path with this week’s Question of the Week:  What could conceivably reverse the U.S. economy’s decline of the last 40 years?  Although I’d initially considered limiting the dialogue to optimistic points of view to stretch readers' imaginations, a sunshine-and-lollipops requirement might prove to be a non-starter in this forum.  And so, if you truly believe that there is nothing you can think of that would reverse the implosion of America’s standard of living, feel free to vent your pessimism. Implosion?  Some will argue that the very word overstates the problem – or that the problem doesn’t exist. They will point out that the stock market is trading at all-time highs, that their next-door neighbor just spent $40,000 on a kitchen remodel, that another recently took his family on an Alaskan cruise, and that a 60-inch TV is well within the reach of every family that wants one. ‘Shop Till You Drop’ Is America great, then, or what?  It depends. If your credo is “Shop till you drop!” then yes, one could argue that we are indeed living in the very best of times. But others, including your editor, would say that although the easy availability of “stuff” is arguably at a civilizational high, some non-material things that matter a great deal more to our well-being have receded beyond the reach of the broad middle class.  Consider the following: Private-sector workers are no longer able to save enough to retire at 65 if at all. Stay-at-home mothers have become a luxury that fewer and fewer households can afford. Even double-income families are having to borrow heavily to put the kids through college. New graduates face a bleak job market for which the degree skills they acquired are ill-suited. Retirees who held good jobs during their

It’s that time of year again, when talk of a government shutdown fills us with hope that Washington will actually go dark. Alas, for all of the disagreement, animosity and deep dysfunction on Capitol Hill, we can always count on our elected representatives to find a way to settle their differences and perpetuate themselves like some biologically invincible parasite.  Indeed, no matter how shrill the warnings of the mainstream media that Congress is finally about to take the Republic over a cliff, it will end up having been business as usual, with an outcome that is certain to please no one. Unfortunately for most Americans, our n'er-do-well government is not about to shut down. Rather, it is about to take a blind leap into the economic and political morass that is Obamacare. House Republicans have threatened to defund this legislative turd unless their budget priorities are met, but the Democratically controlled Senate is sure to return the volley with equal malice. Pundits from across the political spectrum think the GOP may be shooting itself in the foot, and there is some truth to this; for even if the Senate were to backpedal on its support of Obamacare, there aren’t nearly enough votes to override the presidential veto that would follow. Death by Obamacare Ironically, the laughably misnamed Affordable Care Act may never be implemented, since it appears to be suffocating under its own weight. The danger grows, however, that it will take the economy with it anyway, since the monthly premiums Americans pay for healthcare coverage have been increasing by 30% per year or more as employers struggle to implement the bill’s provisions, or at least go through the motions.  For their part, insurers have warned that the heftiest premium increases to date are coming in January. We will take

With Lawrence Summers out of the race by his own choice, Janet Yellen looks all but certain to succeed Helicopter Ben Bernanke as chairman of the Federal Reserve. Do you have any advice for her? That is the Question of the Week, and we are encouraging all who post on the topic to speak freely. Scholarly citations from The Creature from Jekyll Island will be especially welcome. Personally, we doubt the choice ever mattered, since the Fed was designed by the Banksters as a self-perpetuating scam that can steer itself as competently as Google’s driverless car -- albeit with the help of such useful idiots as Paul Krugman, the U.S. President (whoever he is) and the editorial boards of The New York Times and The Wall Street Journal, all of whom have either implicitly or explicitly endorsed and/or helped to perpetuate such nefarious schemes of the feather merchants as Quantitative Easing, fractional-reserve banking and, of course, central banking itself. Summers was widely perceived as the monetary hawk, Yellen as the dove – a divide with implications that were underscored by the exuberant leap gold and index futures took Sunday night on the news concerning Summers. The hawk/dove thing really boiled down to Tweedle-Dee or Tweedle-Dum, though, since neither Yellin nor Summers – nor Joe Blow, for that matter – will have any flexibility in maneuvering interest rates. How could they when every uptick in real rates brings the global financial system’s quadrillion dollar Ponzi scheme an inch closer to collapse? Your turn, readers….

We’ve known all along that The Great Bull Market that began in March of 2009 would end badly, mainly because The Great Recession that brought the economy crashing down 18 months earlier is still very much with us.  Granted, corporate profits have been a bright spot, at least until recently (a modest achievement, considering the trillions in borrowing it has cost us to create the mere appearance of recovery).  But the growth in profits came at the expense of the workers themselves; for in fact, incomes have continued to fall in real terms, accelerating a trend that had been waxing for decades.  With this has come a shrinkage in job opportunities that is due in part to a mismatch between the college degrees that are most popular these days –i.e., basket weaving and feminist studies – and a labor market whose growth has come almost entirely from McJobs and part-time positions. Imploding Job Market Employment prospects for the young are likely to implode in the years ahead for several reasons. For one, baby boomers are no longer able to gracefully vacate their desks and free up positions for new hires because most of the boomers are too strapped to retire.  To make matters worse, the money they had counted on inheriting from their parents has dwindled as the latter have drawn down savings to offset the paltry yields engineered by our stupid, dishonest, corrupt, terminally inept Government.  And then there is Obamacare, presciently labeled “the worst piece of legislation ever” by the Wall Street Journal when it was rammed down our throats a couple of years ago. We have serious doubts that Obamacare will ever be implemented, since the program appears to be asphyxiating under the weight of its own red tape. Even so, businesses have already reshaped themselves to

Any trading anecdotes or tips you’d like to share?  That’s the Question of the Week, the goal being to stimulate a discussion that can help us all grow as traders. Speaking for myself, it has been a long and bumpy road. During the 1980s, I enjoyed all-too-easy success as a market maker on the Pacific Options Exchange. I’d left a newspaper job in 1978 and was soon earning 20 times my editor’s salary working in the option pits. At the time, the competition was relatively light, options premiums were fat and juicy, and retail customers – always easy pickings – were still in the game.  Anyone could have been a winner back then – it was like prospecting for gold in California in 1849. Not surprisingly, my colleagues came from all walks of life – bartenders, ski bums, film producers, cops, rocket scientists, pet groomers, marathon swimmers -- you name it. Anyone Could Do It… That was the main appeal of floor trading: anyone could do it, at least in theory. Trouble was, the game was always mutating, and over time it came to increasingly favor rocket scientists over seat-of-the-pants traders like myself.  I left the floor in 1989 with my earnings in a steep decline and spent the next seven years wandering in the woods, working mainly as a headhunter (I was ill-suited for this kind of work, since I took unreturned phone calls personally); as a reporter for a company that used a Madison Avenue model for ferreting out promising stocks;  and as an investigator for Hal Lipset, the late San Francisco private eye. I never lost my Jones for trading, though, and I returned to it on the encouragement of a friend who had happened on a powerful trading system. That system led me to develop one

Here’s some bracing news for the college crowd:  There are 115,520 janitors in the U.S. with bachelor’s degrees or more. Just as surprising is that, even though 30% of the adult population has college degrees, only 20% of the jobs available require one, according to an article by Daniel Greenfield in Frontpage magazine. Students may not be aware of these depressing facts, but they clearly imply that most of the degrees they are now seeking will be largely valueless when they graduate.  It’s possible that some undergrads, especially in the humanities departments, are not overly concerned about such things.  But you can bet their parents are taking a hard look as steeply rising college costs strain many household budgets beyond prudent limits. It’s not hard to see why the cost of a college education has risen more sharply than the cost of just about everything else:  The U.S. Government, ever eager to blow bubbles,  has made loans to students so cheap and plentiful that they currently total more than $1 trillion. At the individual level this translates into student loan debt averaging $26,000. Obviously, those with professional degrees have borrowed a great deal more – typically six figures. A Degree in English Speaking personally, we have a son who is enrolled in a four-year college and another who graduated high school in the spring.  The older son, following in his father’s footsteps, is majoring in an English, and the degree he is scheduled to receive next year will come with a teaching certificate. Although the job market for English majors is not nearly what it was in the 1970s, when your editor graduated college – it is pretty scary, actually -- my wife and I have every confidence that our son will succeed in life because he has succeeded so

Here’s a perplexing new twist in the story of America’s supposed recovery from The Great Recession. While auto manufacturers can barely keep up with demand, sales at Wal-Mart, Macy’s and some other big retailers have gone flat. What’s going on here?  The easy explanation is that auto showrooms attract a different class of shopper, one with more discretionary income. Our take, however, is  that more than a few Wal-Mart shoppers who have cut back on non-essential purchases are in fact driving shiny new SUVs. While this might seem paradoxical, there’s a simple explanation – namely, that even households that don’t have two nickels to rub together at the end of the month can easily qualify for a $40,000, five-year car loan. With interest rates as low as they are, especially for big-ticket items purchased on credit, the buy-now- pay-later engine of the U.S. economy is able to thrive even with real incomes stagnant and new employment coming mainly from minimum-wage jobs. The Question of the Week is:  What’s your take on the recovery? Is it about to come to a screeching halt?  Did it ever really begin?  Will the economy ever return to “normal,” whatever that means? Are college grads doomed to live with their parents until they are 35 or older, like they do in Spain?  Anecdotes drawn from personal experience and the lives of friends and neighbors are welcome.