Halloween Zombie Story
I thought I would watch some horror movies to celebrate Halloween, but instead I only had to turn on the news for my own horror show; Fed continues QE indefinitely, Obamacare website failures, Obamacare hearings, Lawmakers start their first vicious debate over the debt / budget battle, more phone tapping scandals, low job creation, New Yorkers now have be 21 to buy cigarettes, CPI raised Social Security benefits a paltry 1.5% and expects to raise it even less in years to come. I never thought we could see it get worse after Bush dragged us into two wars and lowered the moral of the American people, but here we are, $17 trillion in debt, deficit spending $1 trillion per year, government shutdowns, and a new failing, socialized healthcare plan. Both the Republicans and Democrats are so unpopular that we are very close, for the first time in history, to seeing the largest party in this nation be identified as Independent. This morning polls show for the first time that President Obama’s popularity is now net negative. Yet the market continues to remain resilient against the failings and flaying’s of our Federal Government. Part of it is certainly due to the Fed pushing down yields and forcing any investments looking for real returns into equities. Yet another part is that the business world, regardless of being smothered by government intervention, is resilient and so are investors. There remains bright spots in technology, energy, emerging markets, and in the decades to come the boom in manufacturing and commodities in Africa. So don’t get too depressed about our domestic stagnation, there are opportunities. Remain vigilant about hedging against inflation. So, today I will celebrate Halloween, by sharing a Zombie Story.
Halloween Zombie Story
In the beginning, like every great horror story, government scientists experimented, believing they could improve society. The master plan was consumption – if we could just get people to consume more and consume en mass, they could get the nation to grow. The government’s mad scientists created projects like the GSE, but they eventually had to label them an idyllic name to swoon the masses. The names Freddie and Fannie did not sound threatening and the masses embraced them. Meanwhile, the government worked with banks to create easier access to credit. What they didn’t know was that their best of intentions would be their downfall and start the Zombie Consumer invasion that would bring the nation to its knees.
What the government didn’t realize was that everyone was already infected with the consumption plague and what kept everyone in check was their limited ability to spend. For if the government allowed the people access to more credit and helped perpetuate consumption, the plague would break-out into a full zombie invasion.
The government couldn’t contain the plague that they created with the GSE, easier lending rules and the backing of financial intuitions spread quickly. Even the government succumbed to its own devices.
The Zombie Consumers
Good people were converted into zombies and soon the nation’s biggest demographic became the zombie consumer. The banks continued to lend money to the zombies and the government continued to back the banks as well as fuel the zombies with Freddie, Fannie, and Sally. The fault of their banks was their willingness to assume the risk of feeding these zombies with more credit. The mindless zombies came and gobbled it up and quickly turned that credit into debt. Businesses sprung up to feed the zombies stuff to consume. Products like the Flowbee and Snuggie made millions. If Zombies couldn’t go out to spend, they would sit in front of the TV with their phone at the ready. The zombies would then return to the bank for MORE credit.
The zombie consumers moved from small stuff to bigger stuff. Soon car leases and homes. Government agencies along with banks started creating all kinds of new credit food for the zombie consumers. The government didn’t see them as zombies, but instead labeled them the “Booming Middle Class”. The government measured success of their mad scientist programs on the consumption side, but never asked what the fuel for that consumption was. Debt mounted and no one took notice.
The plague quickly spread into the government. The government started consumption and expanding as well, but again never measured or considered the fuel of their consumption. Expansion and consumption fed on itself.
Day of Reckoning.
The day of reckoning came when the fuel (credit), for the Zombies ran out. They could no longer consume and soon the realization of the Zombie horde became very real and it came quickly. The problem with zombies is that they don’t understand accountability or responsibility. The only thing they understand is consuming. It was certainly not the zombies’ fault that they couldn’t consume any more.
The few human survivors saw the day of reckoning as a good thing, even though it left destruction and would be painful. As Zombies were forced out of their homes, cars were repo, and credit was limited, there was hope that the Zombie Invasion would end. Perhaps the Zombies would eventually be converted back to humans and stop their rabid consumption.
It was going to be painful and a slow process, but there was hope that the zombie plague would end and we could start on a road of recovery.
Mad Scientist returns!
Unfortunately the mad scientist in the government didn’t see the day of reckoning as a good thing. They wanted to keep the zombie consumption going. They never ever saw the zombie plague of being something bad, because they themselves had turned into zombies. They too, just like the zombie consumers, needed MORE credit to keep spending.
The world was concerned with what they saw with the zombie apocalypse in our nation, but our zombie government didn’t care. If the world would not give the zombie’s the fuel (money) it needed, the Zombie government would create it themselves. Soon the Federal Reserve was converted to the zombie cause and started printing money to keep the zombie consumption alive and well.
Zombies don’t know the word responsibility or accountability and they certainly don’t want to take on the liability for their actions. Zombies quickly turn to blaming anyone and anything for their zombie condition. The easiest target was the first creators of zombie fuel; the banks, Wall Street, and financial institutions. Ironically the zombie government had been working with the banks and Wall Street before and during the day of reckoning, helping them to create the zombie plague. The zombie government not only asked the banks and Wall Street for help, but also gave them billions. But Zombie brains don’t work very well and they soon turned on their own.
Those banks and financial institutions are also source of more fuel for zombie consumption. If the Zombie government couldn’t get these banks to give more credit to the Zombie consumers they would TAKE it from them. Fines, investigations, penalties, and legal action was brought to bear on the once partners of the government. Zombies can quickly turn on themselves when the fuel that drives consumption runs out.
The Zombie government needed a new plan to keep the zombie nation alive and to spur more zombie consumption. So they turned to their zombie bible, the Keynesian plan.
First they needed more fuel (credit/money). They solved that by converting the Federal Reserve into zombies and now elected the Queen Zombie who will continue with the Keynesian doctrine.
Second, they needed to blame someone and convince the zombie masses that it wasn’t their fault. They solved that by blaming Wall Street and the Banks.
Last, they needed more control by creating more government institutions to control the daily needs of the zombie consumers. If the Zombie Government could be the mommy of needs, then the Zombie consumers could focus on consuming.
This last phase was the hardest, while their beloved GSEs (Freddie, Fannie, and Sallie) were now bankrupt, they now had a new source to keep them going (Fed money printing) along with some Fed some mark-to-myth accounting. They also pushed forward with great difficulty a plan to control healthcare, which would hopefully free up more credit for Zombie consumption.
Zombie propaganda propagated by the media, coupled with the blame game, while printing more money, and the promise of more free stuff would allow the Zombie Hordes to focus on what they did best – consume!
The Zombie hordes just needed to keep drinking the Kool-Aid.
The last humans left
Just like in the show the Walking Dead, there were some survivors that saw the Zombie Middle Class consumption invasion coming. These were the savers, the responsible, the accountable, and the frugal. This group of people didn’t lease extra cars, live in a house they couldn’t afford; perhaps they rented or had a 30-year fix mortgage. They don’t carry loads of debt and used credit sparingly. For them it might have been frustrating to see their friends and co-workers turn into Zombies as these Zombies leased a new car every year, move into the latest and greatest McMansion, and consumed with credit in an apocalyptic manner. Some humans may have been bitten and were at risk of becoming a Zombie and leased a car or ran up debt, but they quickly cut off that debt plague before it took hold.
This minority of skilled labor, the savers, and the frugal sit and watch. These last few humans are not that 1% or even the 10%; they are part of the 99%. They are that school teacher who lived modestly and saved money, paid their debts, and saved for the future. They are the mechanic that started his own small business and worked every day to create a business and future for his family and saved money. They are the unseen computer programmer that banged out code to make the companies system work, but never got the same credit as that Zombie manager, that leased a BMW, who took all the credit.
The human survivors will survive and struggle, but they need to remain hidden. Because the Zombie consumers don’t really own anything and will quickly turn on the human survivors to blame and to take what they have as well.
The law doesn’t recognize Zombies, because ignorance and stupidity is no excuse in the eyes of the law or in the moral code of society. If you become a zombie and borrow and spend mindlessly, you are still responsible and accountable for the debt disaster you have left in your wake. Yet, the law is changing. More zombies are being freed from their accountability and responsibility, as the blame has been leveled at the banks and Wall Street and, possibly, soon the last human survivors.
The Land of Opportunity.
What helped to give rise to the zombie story was the mistake and confusion in the definition of the word FAIR. Our trusted politicians have used the word FAIR synonymous with Opportunity, but they are NOT synonyms.
Life is not fair and it should not be fair. Fairness is Zombie-ism, Socialism, Communism, and any of the collectivisms in which the Doctor and the ditch digger are paid the same. In which they all get the same bread and the same non-descript car. A government that creates FAIRNESS strips away incentives, competition, and the drive of man. It creates ZOMBIES.
What makes America GREAT is the ladder of OPPORTUNITY. Sure, we will not all start on the same rung and while that is NOT fair, it does NOT prohibit us from climbing to the top rung.
Regardless of your politics or ideology, the greatest example, as well as an ironic one, that proves this is the Land of Opportunity is a story about a poor boy. A boy born into a mixed marriage, a poor family and a broken marriage. A boy who was raised both Christian and Muslim. That boy climbed the ladder of opportunity and went to an Ivy League school. That African American boy with a Muslim name that rhymed with our greatest terrorist threat as we fought two wars with Muslim countries, grew up and became the President of the United States.
Ideology aside, it is his amazing story that is a beacon to the entire world that America is the land of Opportunity in which ANYONE can climb that ladder to the top.
It is unfortunate that President Obama doesn’t preach his life story, for he could be the greatest spokesman and inspiration to generations to come. Life is not fair, it was not for him, but America IS the Land of Opportunity. America created the Freedom for him to pursue that opportunity. It had nothing to do with fairness or entitlements, it was his tenacity, his will, and his drive, in which he climbed the ladder of opportunity. If ONLY he could preach the message of the Freedom and the Land of Opportunity which is America, rather than his Zombie-ism of Fairness.
We are still the land of opportunity, but our nation is teaching the next generation that it is the land of FAIRNESS. Teachers and parents have fallen under the strict rules of being PC, that competition is NOT welcome and that all children should win a prize. No child is left behind, because it isn’t fair. We grade to the lowest common denominator and we are more concerned with protecting and babying than actually raising and preparing our children for the real world in which life is NOT fair, but this nation does provide opportunity.
Today we live in this disparity, this division – in which there is a solid and strong group of people with skills who also understand the value of SAVING, INVESTING, and to be cautious with credit and debt. They were raised with the value of Responsibility and Accountability. However, they are the minority and they are the ones that are carrying the water for the debt consumers, because they pay their bills, they pay for health insurance, they pay their taxes, and all these fees they pay increase more and more to cover the majority that don’t pay. This minority is now looked down upon, they are now part of the problem because they are considered the HAVE’s and to be a HAVE is not being fair.
Support & Resistance
We got right up to the 15,700 mark and then we came off. There seems to be some resistance up there. If we climb back up there we could see more selling pressure again.
We have had a good run in the tech sector, but it is starting to stall up here. I would expect a pull back down to the 3250 level in the near future. Most of the big earnings are out, so the initial hype is over.
The SPX looks like we might see a little selling pressure, but nothing too concerning. The VIX is holding up well, so there is not any panic, but some expectations of volatility. One would think the VIX would move lower after the recent run and consolidation, but it is still holding up.
The RUT broke down yesterday from that consolidation zone and is looking a little weak at this point. If that continues, it is a “tell” that the rest of the market will most likely follow suit. I would look at 1080 as short-term support.
Sorry for the long story this morning, but I thought it was worth reviewing after the crazy political month of October. We can easily get caught up in the political circus in Washington and also blinded about the Fed intervention. Sometimes we need to revisit what has happened and where we have come.
We can never forget that this is the land of opportunity and we must never confuse the fairness for opportunity.