01/18/10 London, England – The stock market fell 100 points on the Dow index on Friday. We hope Daily Reckoning readers are out of US stocks. Sooner or later this jig is going to be up. You don’t want to be heavily invested when it does.
Right now, the market is dilly-dallying. Investors are enjoying a picnic. Alas, they’ve spread their picnic blanket on the side of Vesuvius. It could blow up at any time.
We are in a depression. Not yet a ‘great’ depression. But it’s a pretty good depression; and we’ll take what we can get.
Depressions take time. They go away eventually, but not before they’ve done their work. Among the jobs this one has to do is to knock stocks down to bargain levels. Or hold them down while inflation takes them to bargain prices. Either way, we’ve got a long road ahead. In the meantime, we’ll keep our Crash Alert flag flying. The dilly-dallying could end any day – in a panic to get out of stocks.
Depressions are illusion-killers.
One fellow imagines that somehow he will be able to afford a new house – even though he hasn’t got a real job.
A real estate investor thinks the market for new condos in Florida always goes up…no matter how many they build.
GM believes it will muddle through somehow… It loses money on each sale; maybe it can make it up in volume!
The job of a depression is to destroy illusions…to bring people down to earth. And that begins with questions:
Is this stock really worth 20 times earnings?
What happened to the buyers?
How do I know the bank is solvent?
In this weekends’ Washington Post, a columnist wonders what GM executives were thinking when they allowed the best automotive franchise in the world go broke. They probably weren’t thinking much at all. They didn’t need to. Business was good for a very long time. American auto sales expanded for an entire century. Remember the glory years…’50s…the ’60s? GM came out with new and better models every year. People paid attention – they measured the fins…admired the chrome…and listened to the roar of GM horsepower.
The highway system was getting better and better. Salaries were increasing – at least, until 1973. Gasoline was 25 cents a gallon. Everyone wanted to ‘See the USA in a Chevrolet.’
But nothing fails like success. GM was the world’s biggest and most successful company. Naturally, it attracted parasites. The unions wanted more and more – more paid time off…more health care benefits…better retirement programs. Management became parasitic too. It was too comfortable and too well-paid to resist. Everyone went along…getting what they could get…all the way to bankruptcy.
“When a machine broke down and stopped the assembly line,” explains Paul Ingrassia in his book Crash Course, “workers would take an unscheduled break and wait for an electrician or machinists instead of rushing to fix it themselves. Only skilled tradesmen were allowed to repair machinery, even if ordinary workers were capable of doing it – rules enforced not only by the national contract but also by the separate local contracts at each factory. The electricians or machinists often took their time getting to where they were needed, so that the plant would have to go into overtime to make up for lost production and everybody would get more money.”
As GM goes, so goes the nation. The 20th century saw Detroit hustle and bustle…then it went on cruise control. That was true of the whole country, too; America was so successful she couldn’t overcome it. Like the labor unions at GM, every major group got a little edge…a little advantage…food stamps for the poor…bailouts for the rich… And everywhere you looked there were more petty tyrants enforcing pettifogging, perverse rules.
“This sidewalk is closed,” announced a municipal employee, working on the sidewalk on Charles Street in Baltimore last week.
It was a silly matter. But Americans have become so burdened with claptrap rules that they no longer question them. And they’ve become so accustomed to being bossed around that the fight has gone out of them.
“No, it’s not,” your editor replied, stepping over a pneumatic hose.
“Dumb son of a b****,” came the response…
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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As any district judge will tell you, people usualy don’t start questioning their habits until they fall into a dpression or a crisis. So why should it be any different from an economy that has seen years of execsses and imbalances.
Not sure why Bill has a problem with ‘skilled’ electricians, machinists, etc but not to worry!!!
All these skilled people are no longer needed as our manufacturing is long gone.
Not much skill is needed to flip a burger or mow a lawn or cut hair.
See all the junk your getting from Asia? A good example of unskilled workers ‘doing it all’.
Disclaimer: I am/was a non union skilled industrial electrician. I have witnessed workers getting killed when trying to ‘fix’ a problem. Sometimes a little training is a good thing…
The recovery won’t be bolstered by the consumer, like in previous recessions. Instead demand will come from a build-up of low inventories and large companies’ exposure to emerging market growth, Edith Thouin, vice president of ABN Amro Private Banking said Monday.
“We do think we are in a V-shaped recovery and equities are the place to be,” she said, adding that investors should still shift their focus into a more diversified portfolio.
-She is right on the money. Couldn’t agree more. Sore Mr. Depression.
Bill has a problem with union “skilled” workers because they rarely bring more to the table than non-union counterparts. Well, that is, except higher priced invoices for their labors. The unions have gone too far.
In Anaheim California the convention center requires union thugs to carry a womens laptop bag to the trade show booth. Something she just lugged cross country by herself. Yet she must pay a minimum fee to have it transported the last 100 feet. Heaven forbid it be a large sign. That requires one guy on each end. Ooops! Two guys requires she also hire a “supervisor” ostensibly to make sure the thugs carry it correctly. Sadly, with all this skilled labor they cannot and/or do not tell her when she can actually expect the delivery to happen. We will get it to you is all she gets. (!!!)
Need to plug in the charger for that laptop? IBEW supplies the electricians to plug it in for you.
Carpet in your trade show booth? You got it! Floor coverings union. Yeah, of course, to unroll a swatch of carpet. Good thing they are “skilled” workers.
I say unions have FAR outlasted their utility. The unions are not at odds with their own members. Those members that pay their dues who do NOT want to strike, yet must because the union bosses say so.
The word on the street here in California is the Teachers union is 40% of the ENTIRE education budget. To make this happen they must be getting payments directly from the state. A huge conflict of interest. Students suffer, teachers? Naw they get a boatload of paid days off plus the best bennies’ anybody could ask for.
corrections “unions are now at odds with their own members”
replace “not” with “now”.
Good article
GM, as well as all car manufacturers, had to compete (unfairly) with cheaper made foreign imports. Protective tariffs had been abolished…So we got the cheap cars (whew!), but we have lost our industrial base for it.
Many (especially libertarians) wring their hands and wonder where US industry has gone. Many like to “bash” GM, etc.
But the reality is, the golden goose of industry (protected from 1789 – 1950′s through tariffs) has been sold for a few cheap golden eggs.
Please read history: The US became a great industrial nation because of the protective tariffs. Now, people cherish Free Trade, but wonder where the factories went.
Put some tariffs in place, and you’ll see industry roar back (like Harley Davidson under President Reagan’s tariffs in the 1980′s).
No, Mr. Absolutist– you got it right the first time. “The unions are not at odds with their own members.”
sincerely yours, Dr. Freud
I was once at a tradeshow in my early 20′s and had to wait for a late union employee to tack up one of my posters on my exhibit. A POSTER!
Could anybody get killed for not properly hanging up a poster?
This told me EVERYTHING I needed to know about labor unions and from that day forward I knew that they were evil.
If you doubt that they are evil, consider how evil the destruction of GM.
If GM is not officially destroyed yet it’s only because the government is propping it up, but the government is only able to do this because it has “unionized” the whole nation.
That whole Kafkaesque, soul-killing attitude has seeped into every pore of the American psyche now which is why we’re a nation of slobs about to get what slobs deserve.
Why comment can’t be submitted
Hi,
I have just read through “This is One Funny Bull”. It is a great article, but, I feel that yankee are still harbouring the bitter memory of defeat of their Chinese (counterpart) frontline field marshal, Chiang.
Let’s get things straight. Chiang’s defeat can be broadly linked to the followings :
1 – domestic economic failure.
2 – practice of woman foot-binding.
3 – result of Sino-Japanese war.
First, corrupted governance led to total economic failure and wide spread unrest.
Paper money was overly supplied. The call for a change was overwhelming.
Next ..
I am trying but unable to submit some comment.
I am trying to post comment but in vain. Please help !!!
As the American workforce has become unwilling to work for less, the rest of the world has. As the American government has put up more rules, regulations and fees to manufacture here, the rest of the world expanded.
Why does the rest of the world work for less them us? To keep from starving. When will we be will to work for less? When we start to starve.
I’m sick of these jealous americans calling products made in asia as junk. Recently i had the choice for a new car between a chevrolet or a toyota. Well let’s just say the car i happily chose was almost 2.5 times more fuel efficient than the piece of american junk. Sorry but americans don’t even have a leg to stand on anymore. Perhaps you’re still reliving the glory days. Hahahahahaha.
Want to solve some of your problems then take a good look at produce label and buy things that say MADE IN USA. I could go on with this but I think I made my point. FP.
I can’t work for less, CommonCents, because government rules and regulations prevent me from living in a tarpaper shack outside the factory gate.