Final Top Approaching

We are the French Revolution without the guillotine

—Beppe Grillo

The era of the Grand Rip-off goes on and on.  Wall Street bankers still speculate wildly, expecting to be bailed out when they blow up. Corporate CEOs continue to extract stratospheric incomes from their companies, while part-timing vast segments of their employment base. Politicians in state houses grant sweetheart deals to cronies, and Washington does worse year after year, while efforts to seriously curtail the misfeasance have produced very little in the way of punishment. Does it ever end?

Yes. And soon. A citizenry comprised of the employed, the under-employed, the precariously employed, students, investors, retirees-in short, the entire shaky middle class-has gotten sick and tired of being sick and tired of having their lives damaged by the nation’s elites. Every household in this cohort either has some financial distress, knows someone in financial distress, or fears the onset of it for themselves. Thus far, the pain has been scattered, so the reaction has been muted, limited to a few Occupy-type demonstrations. But it is a tinderbox waiting to explode. The catalyst will be an abrupt change in social mood, signaled by an epic fall in stock prices, real estate prices, the price of gold, oil, and commodities in general, which will rationalize the absurd valuations in these asset classes, bringing about a huge increase in unemployment, greatly increasing the financial stress in the land.

For a number of internal and cyclical reasons, the collapse figures to get underway between now and April 25th. Readers who still click through from my e-mail notice to my blog will want to know why, with the major averages making new highs, do I continue to beat this dead horse? For two reasons. 1) The markets are in the same extreme overbought, over owned, overvalued condition as in the previous two tops, and 2) a bull market can no more get underway from a situation like this than a space shuttle can get off the launch pad without fuel.

It’s over-with a different set of circumstances from the previous two tops. When the market sold off in 2000, investors, giddily plunging in the dot com bubble, were totally surprised by their losses, and hung on until it was too late. The drop in 2007 was more serious. Towards the end, genuine fear and even some liquidation took place. This time, with a litany of global economic and financial ills hanging over the markets, and their own financial security very much in doubt, the crowd’s panic will come quickly, followed by anger and a furious determination to change things at the top of the heap.

David Stockman’s new book, The Great Deformation: The Corruption of Capitalism in America is due out tomorrow. Everything you need to know about this scurrilous period in our economic history is in the book (…they lied to us!). Stockman’s timing is exquisite. The book will be an immediate bestseller. When the crowds begin laying siege to statehouses, Congress and corporate headquarters, they’ll be beating the scoundrels over the head with the hard copies of the book.

Read it, if you’ve got the stomach for it.

Cheers,

Rod

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