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STAGFLATION INEVITABLE
Is a return of stagflation inevtable? I say yes. Here's why: Contrary to popular opinion our economy has been experiencing a violent run-away inflation. The problem is that it has been confined almost entirely to the stock market. Furthermore, the Federal Reserve has been furiously printing huge amounts of money to keep this financial market inflation going. But, as the financial economy has soared like a rocket, the real economy, best exemplified by commodity prices, has sunk like a stone. So, here's the problem: At some point, the corporate economy is going to reach a saturation point of too much capacity and too little priceing power, resulting in declining profits. Then, the flow of money out of ridiculously over-priced defensive, "nifty fifty" stocks and into ridiculously under-priced commodties will begin. (Be warned, this process may have already begun.) Amazingly, the public will percieve this shift as a rise in prices in the real economy at the very moment when business activity seems to be slowing down, in other words, stagflation. Then, the bond market vigilantes will punish this rise in real economy prices by raising interest rates, making the stock market's decline even worse. This explains why, for example, the stock market mania in the 1960's gave way to the stagflation decade of the 1970's. Commodities, like oil, effectively soak up the money that was originally printed to support the stock mania. In effect, stagflation is how we "do" depressions in the post- gold standard world of paper money economies.
TEN PERCENT BOND WON'T STOP BULL
Today's WSJ had a few interesting essays on Market Bubbles of the Past. Nothing new. Just the usual blah, blah, blah about tulips, the SouthSeas, the 20's, the 60's and the 90's in Japan. This can mean only one thing: THIS MARKET IS A BUY!!! Lately, everyone is wondering why Greenspan's usual timidly mumbled warnings are ignored by the markets. Go figure. Of course, here at the Gloom and Doom Club we've seen that one coming a long time ago. Indeed, one of my first postings to this club was entitled: MARKETS "DIS" GREENSPAN. So, nothing has really changed. Except, that we no longer really believe the myth that interest rates matter in this kind of "Ponzi-Scheme" Momentum Market. I FIRMLY BELIEVE THAT THE LONG BOND WOULD HAVE TO GO TO 8% BEFORE IT COULD HAVE ANY IMPACT ON THE NASDAQ 100, AT THIS POINT. AND, ONLY A 10% BOND COULD STOP THIS BULL MARKET!! THIS MARKET WILL NOT BE STOPPED BY JAWBONEING FROM GREENSPAN OR ANYONE ELSE. SO, IT'S ONWARD AND UPWARD AT LEAST UNTIL MAY 2000! BY THEN, THE LONG BOND AND OIL PRICES COULD BE LOOKING PRETTY UGLY!! BUT, FOR THE FORSEEABLE FUTURE MOMENTUM LIVES!
THE INTERNET IN 2050!!!
I'm sick of all the "expert predictions" about the future of the Internet. So, I dicided to take the guess work out of it, and just go there, and see for myself! You know, Time Travel!! I decided to go to the year 2050, and just "look around" for a while. To see "what's up." The exact details on how this was accomplished I am not at liberty to divulge, expect to say that H.G.Wells had to whole process totally ass-backwards, if you know what I mean. Nor am I at liberty to discuss the financial markets in 2050. But, I can tell you that the word "Greenspan" has entered the vocabulary as a verb and an adjective. And also. That AOL-Time/Warner deal? It was a total flop! Conglomerates never work. It's an Oil and Water thing, you know. But, one thing the AOL guys got right was the merger of TV and the Internet! In 2050, the TV, the Internet and the Telephone are Totally merged! You know, one device! And the P.C.? It's completely obsolete!! Although some people still play around with them as a hobby. Bill Gates runs a popular "P.C. Hobbyist" Web Site called "Micosoft". Amazingly, this new TV-Telephone-Internet device comes in all different sizes and colors. Some are huge, the size of an entire interior wall of a house!! And, some are very, very small, the size of a credit card, or even smaller! And, they are all very, very flat so they don't take up a lot of space! Furthermore, there are literally, millions of "new channels" to watch. Some are private and others are public. Everyone who wants to can now be a "TV Producer"! Just like the old Internet, back in 2000, allowed everyone to be a "publisher." Families will commonly "teleconference" for major holidays like Christmas and New Years. Because it's cheaper than air travel, since Oil is selling at 3000 Greenspan Dollars per Barrel!! The "bandwidth" problem was solved by jiggering the old IP Addressing scheme, and coming up with some kind of new "souped up" router protocols which I don't understand. There was also some "new device" patented by Cisco in 2010 that "made everything else look like a Model-T." But, I don't understand that either. So the world in 2050 is really, really interesting! But, some things never change. For instance, the politicans are still a bunch of pathetic phoneys, and "bricks-and-mortor" stores still hold 80% of retail sales. And, finally, if you play the lottery?? Try to always include the number "3". But, that's all I can tell you about that!! Postscript: LOL
GREENSPAN LOSING IT?
Has Alan Greenspan lost his ability to scare Wall Street? Answer: OF COURSE!! But, we at the Gloom and Doom Club have known that all along! I simply repeat it for the benefit of new viewers of this page. As I have said before, ANY SPEECH BY GREENSPAN WARNING THE MARKETS ABOUT EXCESSIVE VALUATIONS: SHOULD BE CONSIDERED AN ABSOLUTELY UNEQUIVOCAL SCREAMING~~~BUYING OPPORTUNTIY!! Speculators would be well advised to start buying heavily IN ADVANCE of any announced Greenspan Speech! This rule of thumb also applies to any INFLATION or LABOR DATA to be announced. AND TO EVERY FED MEETING!! BECAUSE THE COMBINATION OF: HIGH TECH AND LOW WAGES NOW MAKES INFLATION IMPOSSIBLE!!! LET ME REPEAT THAT FOR EMPHASIS. OK? THE COMBINATION OF HIGH TECH AND LOW WAGES MAKES INFLATION IMPOSSIBLE. Daytraders are well advised to cut this phrase out and paste it on the bathroom mirror, so they can see it every morning BEFORE trading starts. So What's the NEXT BIG BUYING OPPORTUNITY?? THE FEBRUARY FED MEETING OBVIOUSLY! I believe the markets will begin to rise sharply the week before the coming meeting. AN ABSOLUTELY SOAR TO UNBELIEVABLE LEVELS THE DAY BEFORE THE FED ANNOUNCES ITS 1/4 POINT HIKE IN INTEREST RATES. GREENSPAN MAY HAVE LOST IT. BUT, YOU CAN PROFIT FROM HIS LOSS!! Postscript: The Japanese will continue buy "physical" Dollars with abandon in preparation for the coming "Crash", but that should support the bond market-short term. And, the Japanese might even get some assitance from Greenspan, who needs a strong dollar and strong bond, BY ANY MEANS NECESSARY, to keep his Wall Street buddies on a roll.
BUBBLE DOLLARS vs. REAL DOLLARS
If our Speculative Bubble ever breaks on Wall Street, it will be bad for the Dollar. Right? Well, maybe not. Consider: There are more "bubble dollars" on balance sheets than "real dollars" in circulation. Even Greenspan couldn't print money fast enough to exchange every bubble dollar for a real dollar. Although, I'm sure he would get an "A" for effort. Every real dollar in the markets could be said to "support" a 100 dollars in "stock market capitization". And, now, maybe even a 1000 dollars in market cap in some of the Internet Companies! During a severe market decline, an Internet multi-millionaire might be willing to accept a mere million dollars in "real dollars", instead of his current 10 million dollars, in "bubble dollars", in the stock market capitalization. Why? Because during severe market down-turns a lot of bubble dollars go to "money heaven." Nobody really knows what "money heaven" looks like, or even if it really exists at all, because no one has ever actually been there and returned to tell about it. But, if everyone suddenly wanted to exchange their bubble dollars for real dollars, the DEMAND for real dollars would be huge, and the supply relatively small. THEREFORE THE VALUE OF THE REAL DOLLAR WOULD RISE, NOT FALL. Furthermore, people who hold real dollars would now be very reluctant to part with their NEWLY RARE ASSET. They would want more from you to loan it out. SO, INTEREST RATES WOULD RISE. AND, AMAZINGLY BONDS WOULD FALL. BECAUSE BONDS ARE NOT REALLY REAL DOLLARS EITHER, ONLY VERY CLOSE TO IT!! THEREFORE, A BEAR MARKET IN STOCKS AND BONDS, WOULD PRODUCE A BULL MARKET IN CASH!! Just maybe, that is why the Dollar is rising against the Japanese Yen, even as US STOCKS AND BONDS slide lower and struggle!! The Japanese realize that a BULL MARKET IN REAL DOLLARS IS COMING!!! A "CASH DASH" IS COMING. TRANSLATION??? A MARKET CRASH COULD BE COMING VERY SOON!
AOL; DON'T HAVE A COW!
The financial media are a-buzz about the next mega-bucks "Internet Giant-Content Provider" merger. But Why? Why does an ISP or Internet Portal need a content provider? Back in the "olden days" of the THREE TV NETWORKS, the networks survived quite well on AD REVENUE. Content could be "farmed out" if necessary. Or, purchased as needed. And, remember the old TV Networks were providing "streaming video" way back in the 1950's!! It was called Television back then. So, why does an Internet provider need to own a content provider? I don't see the pressing need. What benefit does AOL actually recieve from owning Time Magazine or other print media outlets? Other that the fact that the Internet may, eventually, send the "slick" magazines down the road to extinction, just like the "slicks" killed off the "pulps" many years ago. So I guess I'm baffled by the AOL/Time Warner Merger. In fact, I think there is a 50-50 chance it won't even happen if current market trends stay in place. IF YOU WANT A GLASS OF MILK~~~YOU DON'T HAVE TO BUY THE COW!
AOL GETS REAL!!! TROUBLE AHEAD.
01/11/2000 11:15 am EST
Welcome to the Age of Conglomerates! Or, maybe I should say welcome back to the Age of Conglomerates, because we've been here before. Back in the 1920's and again the 1960's. Conglomerates always happen at the end of a financial bubble. Conglomerates mostly develop when the financial markets "over-value" a "new industry" to the detriment of "old industry." This gives the "new industries" enormous purchasing power with their "new currency", which is, of course their stock. The Railroads went through this in the 19th Century. And, what was Standard Oil, in 1900, if not a conglomerate? Teddy Roosevelt's TRUST BUSTING was really a reaction to this trend toward conglomerates. General Motors, in the 1910-1920 period, was our first modern industrial conglomerate. Now, not unexpectedly, we have our first INTERNET CONGLOMERATE. But, Amazingly the AOL/Time Warner conglomeration may have had more to do with FEAR, than greed. Why? It is possible that we are in the very "late innings" of the INTERNET BUBBLE. And, AOL may have been motivated to cash-in it's high-priced "chips" while it still can. This allows AOL to "buy respectability" by aquireing a "old media" company with solid revenues, at a time when "Internet Valuations" and "Internet Time" may be stretching the litmits of optimism AND reality. But, I really don't think any other Internet company except AOL could have pulled this off!! The rest of the Internet pack will likely be doomed to live on "Internet Time" for the duration of this Market Bubble. Like an American Millionaire in the 1920's, who "marries off" his daughter to a penniless British aristocrat~with a "title", both parties get something they lack. IN THE CASE OF AOL, THAT IS THE POSSIBILITY IT WILL SURVIVE THE INEVITABLE END OF THE "INTERNET BUBBLE." LIKE A PUPPET THAT WANTS TO BE A "REAL BOY", OR THE ROBOT IN "BICENTENNIAL MAN" WHO WANTS ONLY TO BE HUMAN~~~ AOL HAS SEEMINGLY MADE THAT DANGEROUS TRANSITION. BUT NOW, IT HAS TO DEAL WITH ALL OF THE PROBLEMS THAT COME WITH BEING "REAL"!! LIKE P/E RATIOS, VALUATIONS, RETURN ON CAPITAL!! THIS COULD PRESAGE THE BEGINNING OF THE END OF THE INTERNET BUBBLE.
SINCE WHEN?
01/10/2000 02:46 pm EST
Since when are Internet Companies able to use their stock as to buy "Real Companies." What next? Amazon buys GM, and picks up J.P. Morgan with the "spare change"!! Wake me up when the LUNACY stops!
The way the market spanked Amazon today, you have to wonder if the whole e-tailing concept might not be under question. Sooner or later, these companies are going to have to PRICE FOR A
PROFIT. Just getting market share by "giving away the store" ain't going to cut it for too much longer. I have been a skeptic on e-tailing for a long time. Too me it just seems like "electronic catalog shopping", kinda like Grandma used to do with the SEARS CATALOG years ago. Of course, back then, Grandma didn't live 5 minutes from a MAJOR SHOPPING MALL, like today. Why would I want to dink around with an on-line catalog, when I can hop in the car, and JUST BUY what I want at the Mall! And get it over with! AND, WAITING FOR THE UPS, OR FED EX GUY!! YIKES!! AND, PAYING THROUGHT THE NOSE FOR "SHIPPING!" GIVE ME A BREAK, OK! But, if e-tailing is finally in the dumpster; What about the so-called BACKBONE COMPANIES. Those who are building out the Internet Infrastructure. Well, back in California in 1849 a lot of people got rich SELLING PICKS AND SHOVELS TO THE MINERS. NO MINERS, NO SALES. Hmmmmm...........? Maybe, just maybe, BEFORE WE BUILD THIS RAILROAD, WE SHOULD FIGURE OUT WHERE IT'S GOING?? YA THINK??
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