Friday, February 27, 2009

It's A Mad Mad Mad Mad World

As a kid, one of my favorite TV movies was "It's A Mad Mad Mad Mad World". The story was fun and the movie had just about every TV actor known at the time in the film. The movie is a "cat and mouse" treasure hunt with greed as the core theme. The final clue indicates that a "W" is the key to finding the buried treasure. The "W-shaped" palm trees stand tall above the greedy mob.
Watching the news at night indicates that we now live in a Mad, Mad, Mad, Mad World. The Republicans are mad that the stimulus bill passed. The Madoff investors are mad. The Stanford investors are mad. The auto industry is mad because they want more free money. The stock market is mad. All stockholders are mad. The oil industry is mad. The reality has set in that all things can't go up forever.

I've presented Robert Prechter's psychological theory of mass social mood before. The essence is that mass social mood amongst human beings oscillates between rising and falling mood. While ascending, people are generally happy and positive. During these times the economy expands and greed reigns. During a descending mass social mood, people become angry and fearful.

It's almost comical that a guy named MADoff is involved in one of the most significant scams. Maybe if the bust would have occurred in the 90's, the scamster would have been named Happyoff. What's significant is that the SEC investigated him during the "upswing", but found no wrong doing. In the downturn, he was caught and will be brought to justice.

We had dinner with a friend last weekend that does a significant amount of business in China. I asked him if China would grow at 8% this year as in past years. He said that they would only grow at 6% and that would cause many problems. The Chinese have been partaking in an interesting experiment over the past decade moving all of their farmers and peasants to the city. He said that the drop to 6% growth meant that 20 million people that just moved to the city and abandoned their farm would now be unemployed. His final quote was "there's going to be a revolution".

A great clip from the climatic ending of the movie. This scene might be symbolic of all of the recently revealed scams.....the ending has poetic justice. Picture Madoff and Stanford up on the dangling stairwell.

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