Maybe It’s the New Season of Mad Men
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This post is a bit unusual for me.

Strange and disturbing thoughts crowded my mind tonight—Sunday, March 7.

These thoughts interrupted my television viewing. I couldn’t really focus. Then, I couldn’t sleep. The thoughts won’t rest, and they won’t give me rest. So I write.

I’m bewildered by the world’s stock markets. Someone told the Wall Street Journal that, sure, the US economy seems to be tanking, manufacturing’s falling, the labor rate’s in the toilet. But the Fed will keep printing money, so why not buy stocks?

That’s right. People are borrowing money to buy stocks in companies they expect to fail. Or, at least, disappoint.

The people buying these overpriced stocks in weak companies with borrowed money don’t appear to be yahoos. They appear to be MBAs in finance working in the finance world. In other words, these are the people who think they run our economy, the people who think they understand this stuff better than we do.

Some of these Masters of Finance work for the government. This sub-species spent the last four years herding the lazy onto Social Security disability programs. Those programs will be unable to write checks in 2016—to the goldbricks or to the seriously disabled. In other words, the Social Security disability system is crashing, yet the Masters of Finance prod people into that plummeting vessel by tens of thousands every month.

Over in Europe—the continent from which most of our families fled—the Masters of Finance told Portugal to ignore its Constitutional Court and implement the troika’s austerity plan. Essentially, the EU ordered Portugal to dissolve the last vestiges of democracy. At least they’ve stopped pretending democracy still exists.

Meanwhile, the Japanese stock market skyrockets at 3 percent a day while Japan’s economy remains in something just a few clicks north of depression.

So what makes so many smart people so willing to mortgage everything to buy stocks they expect to go to zero?

Hell if I know.

But I wonder if Too Big To Fail has infiltrated everyone’s mind like an ear-worm tune that we just can’t shake.

The Visit

I read a play ages ago, The Visit, by Friedrich Dürrenmatt. A small town mired in depression awaits the return of native woman, Claire Zachanassian, who left and became a billionaire. Well, she married one who died, leaving her loaded. The town invests its last pennies to put on a huge welcome for her hoping she’ll bail them out. She was sort of like Hank Paulson, Congress, Bush, and Bernanke rolled into one.

The town selects Claire’s old beau, Alfred Ill (as in sick), to petition her help. They were lovers, after all.

After a few days, Claire gathers the townsfolk together to make her announcement. She will give one billion to the town—half to the government, half to be split among the families. On one condition. The town would have to murder her old flame, Alfred.

Now, Alfred is the most popular man in town. He runs the general store. He solves problems. Until Claire’s return, Alfred is Güllen’s leading citizen.

The townspeople are flabbergasted. From the mayor on down, they assail Claire’s immoral offer and assure Alfred his life is safe with them. They would never carry out her wish.

But something happens. Alfred begins to notice that the impoverished people of Güllen have new things. Nothing big, at first, but noticeable after years of privation.

There’s new shoes on girls’ feet, new bicycles for little boys. The mayor wears fashionable new clothes and a fresh hat.

In his general store, Alfred notices that his friends and neighbors are buying a lot of expensive goods on credit.

They expect a windfall.

Alfred, of course, had done Claire wrong. Very wrong. She used the power of her money to destroy Güllen’s economy. She returned, not to save her town, but to destroy Alfred. Alfred confesses his sin to the mayor and several town leaders. The leaders admit that they intend to kill him. They have to, they reason. Alfred brought on their plague, and they seriously need the money.

Alfred, seeing no way out, acquiesces.

There’s a big town hall meeting, full of reporters. The people vote to accept Claire’s offer. Then the reporters are ushered out, the townspeople murder Alfred, and his death is reported as a heart attack.

And they all lived guiltily ever after. Except Alfred.

Are We the People of Güllen?

The savings rate in America, which mounted a strong comeback in the wake of the 2008 crash, has fallen back to 2 percent in recent months. The labor rate is lower than anytime since 1979, when many women still stayed at home raising children. The real unemployment rate is over 11 percent.

But home prices are soaring. Everybody’s buying cars. All on credit. Just like the people of Güllen.

All of this gives me the creeps. I feel like I’m living out The Visit, only the sacrificial lamb hasn’t been identified.

Warming Up The Guns of August

Legendary investor Art Cashin told King World News that the present time reminds him of the days leading up to World War I.

There seems to be an almost palpable belief around the world that cooler heads will prevail.  Someone will step in and stop this from happening.  And while it happened even before I began my 50 year career, I’ve long been a student of history, both financial and geopolitical, and I think back to World War I when everyone on both sides knew that such a war would be unwinnable, would be distasteful, but managed to walk into it believing that logic would prevent the guy on the other side from making a fatal mistake.

So whether it is exercises in Korea or economic changes in Europe, the idea that rational men will prevent irrational crises doesn’t live up to world history.

Maybe this is why I can’t sleep. Something tells me that 2008 was just a rehearsal for the crash that’s coming. And after this next crash, no one alive will trust the markets, paper money, or government ever again.

That could mean we have something close to anarchy. Or it could mean we have dictatorships. Or maybe something completely different. Black swans appeared though we never conceived of them.

Which, finally, reminds me of something my friend Lee Presser told me the first time we met four years ago.

Lee was talking about the long cycles of history. He was urging me to read The Fourth Turning, still the most amazing history book I’ve ever read. Lee pointed out that civilizations don’t last forever.

“Roman citizens,” he told me, “had a very high literacy rate. Ridiculously high compared to any civilization before the modern west.”

“Yet in the period of only about one hundred years, that literacy rate fell almost to zero. Only kings and some clergy could read in the course of four generations. And it stayed that way, pretty much, until the twentieth century.”

I just looked at him, no idea what to say.

“And it could happen again,” he added.

Tonight I’m thinking maybe the sacrificial lamb is modern civilization itself.

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