I Faked It

Over the past few years, it's been a challenge to really determine who's faking it. The banks appeared to have money. Madoff appeared to be returning his investors their money. Oprah thought that all of her authors were authentic. Elin thought that Tiger was loyal and moral. Is it time to ask more questions and assume less?

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.
http://www.youtube.com/watch?v=LlCb41nelD8

Drunk on Kool-Aid

"The mushroom cloud never forms until the mania is over because people are too mesmerized by the boom to see even the most blatant abuse in their quest for 'easy money' ".

Robert Prechter - January 2009

I read this last week in a report and it rang so true. Every day on the news we see reports from within the "mushroom cloud". Everyone now has a theory on why and how, but 99% didn't see it coming. The "blatant abuse" has evolved during the entire expansion phase. The Madoff scam is a classic example. It didn't happen yesterday and it wasn't fallout from the mortgage crisis. It was one small piece of an overall cycle. Regulation is always laxed during the expansion. The SEC investigated Madoff during the expansion, but the hammer doesn't fall until the contraction phase gains momentum.

The cycle vibrates along and the herding mammals align in perfect synchronization. These unfolding events are the "flip side" of the last 26 years of excess. The mob's anger continues to grow as their long buzz wears off. For details, keep your eyes on Israel/Gaza, India/Pakistan, Greece, Russia/former Republics, Zimbabwee, and the Congo. When will N. Ireland reignite? That Christian struggle has always baffled me. Keep your ears on the ground and your eyes on the road!