2012 Preview

Armageddon outta here:  is 2012 the end of the world? No.

Depression: but you may wish it were. Because we’re in a Depression. Much similar to the 1929-1936 one. That Depression affected Europe and the US, causing widespread unemployment population movement and a ‘hard dollar’ in the US, and bringing currency problems, shifting alliances, and the rise of Germany to Europe.

The United States of Europe: the European Union can survive if member nations can be persuaded (by German and French governments, neither of whom have the backing of their publics on this) to give up national economic sovereignty and become the actual ‘states’ of an actual nation which has an economy the size of the USA’s, while essentially swearing fealty to a central bank, the ECB, and by choosing to back a common currency with shared values goals and laws. This is not a quick fix. It will take years. Not only are the German and the French publics’ skeptical of this, but so are the Greek and Italian publics, who would be the beneficiaries. If the EU does come apart, Germany and a core of other western European nations with similar values would likely keep the Euro as a currency, even as they renationmalize. This would, for a while, devalue the Euro against the US dollar, which looks far stronger than it is. While Italy and Greece and Spain would develop economies much like the ones they had right after the end of WWII. The UK is currently staying out: to join fully would mean the end of British sovereignty. And the end of the illusion that the British Empire lives on.

Morning in America: For some. In 2008, the US hosted a domestic economic crisis that rocked the very core of its economy. The USA’s solution was to recapitalize the banks and other biggies (like GM) and not the American people. The Fed’s bailout benefits went to those who caused the crisis, while its victims, the American people, had to bear cost of the subprime bubble in order to keep their homes and maintain some level of lifestyle and consumer capacity. How it looks from abroad: the US simply exported the crisis, flooding the markets with excess liquidity. In Europe: this helped bring the EU’s own economic crisis to a head more quickly. At home: public outrage continues.

The Death of Privacy: Hidden software called Carrier IQ installed in most smartphones that logs the details of users’ activities. Carrier IQ software logs every text message, every Google search and every phone number typed on a wide variety of smartphones including HTC, Blackberry, Nokia (Nokia says not) and others, and reports them to the mobile phone carrier. This application, labeled on many smartphones as “HTC IQ Agent” also logs the URL of all websites searched from that phone, even if the user intends to encrypt that data using a URL that begins with HTTPS. This software always runs when Android operating system is running and users are unable to stop it. This phenomenon is unstoppable. It is grounded in the policies and guidelines of Homeland Security and other police and intelligence agencies. It is one more legacy of 9/11. Such systems may have been inevitable even without that. We may still live in the Home of the Brave, but if you want to live in the Land of the Free, you may have to move somewhere else. But can you escape Carrier IQ or something like it? Probably not. World citizen, you are being monitored.

The Return of Storytelling: the electrifying SyFy channel 4-hr TV movie Neverland established an entirely untapped Storytelling Genre to be mined for plots: the creation of Backstories for major volumes of world literature. This one is the backstory of Peter Pan. The result: The Return of Television. Beneficiaries: General Electric, Comcast, Time Warner, Corning and the television manufacturers, Disney, Newscorp. NetFlix and whoever buys it. And you. In modern literature, the riveting Noah Bond novels NOMAD/Y, the Lost Testimony of Bones LeBeau, and All the Targets may be the Jules Verne works of our time. Wait til SyFY channel finds out about these.

Don’t cry for Argentina: But watch Argentina carefully. Argentina is as Broadway soap-opera as ever. The Presidente of Argentina, Cristina Fernandez de Kirchner, is the last Presidente’s (Nestor Carlos Kirchner’s) daughter. Argentina’s 2011 GDP was at least $526 bil, possibly as high as $590bil, and its GDP growth rate was above 6%, following 9.2% GDP growth in 2010. A G20 country and an Agribiz powerhouse. One of the world’s wealthiest economies 100 years ago. Today, much like Canada: Canada has 3.85mil sq miles 30mil people and huge mineral resources, Argentina has 3.7mil sq miles, 40mil people and huge mineral resources. But Latin America’s 2nd largest economy is in trouble over inflation, currency issues, and bad govt policies, part of a long history of bad government. $Tens of $billions in capital fled the country in 2011, including mining co’s that don’t wish to be ripped off by draconian resource-nationalist ‘windfall’ taxes. This may be a prelude to another ‘elected’ military dictatorship. Argentina has the Brazil Model next door.  A trillion dollars is at stake. Will Argentina choose wisely?

Enough to eat: Seven billion people, and the world is beginning to run out of food.  Since 2008, food shortages and food riots have occurred in 28 countries. The food supply is unable to keep up with demand. High prices have pushed 40 million more people into extreme poverty since June 2010. Last year’s largest US/Canadian wheat crop in history, plus big 2012 rice crops, will ease social unrest over food. 

Commodity prices: will rise at least 15% in 2012: expensive copper and iron ore,  expensive steel, expensive steel. Gold will move closer to its Fair Value, currently around $2306.

Metaphor of the Year 2012: Welding. Welding is reality. Welding is truth. You can’t fake it. You can’t talk your way around it or through it. You have to know how. And it has to work. It’s either fixed, or not. The weld either holds, or it doesn’t. There is no partial answer, no moral flexibility, and no conditional truth. Yes, or no.

Dwolla: this tiny startup co charges $0.25 per transaction to move money. It will challenge Paypal and even major credit card companies.

Art as charity: if you are an artist, there is not much money to be made from art unless your work is spectacularly unusual or niche-unique, or has mass lowbrow appeal. Most artists are waiting table and will be for the foreseeable future. Do not buy art by living artists as an investment. Buy art by living artists because you love it every time you see it. Dead established artists rule as an investment. We would hate to have to try to sell photos paintings and sculpture by living artists into a 2012 market, though a great deal of excellent work is being done. “Fabric art” and “installation art” have especially small resale value. Buy art by living artists as a delight or an amusement. As an investment w resale value, buy at your peril.

The Russian Spring: 2011’s Arab Spring will give way to 2012’s Russian Spring. Russia’s young and educated are fed up. So are Russia’s rich.

Brazil in 2012: passes both the UK and France to become the world’s 5th largest economy. The govt has $350 billion in cash reserves, owes not a dime to the IMF, and the country has $300 billion in annual exports. Brazil also is at the moment the world’s most successfully-functioning democracy with the possible exception of Germany. Most Americans don’t realize that Brazil is not dependent on its exports to the US.

Jumpstart the US economy:  the US needs a lower corporate tax rate: 20% to 25%. It won’t happen in 2012 but will be talked about. May likely happen in 2013.

Save the USA’s’s economy and create jobs: force the Big Banks, who benefitted from a preposterous Bailout to the detriment of the American People, to put their reserves (more than $3tril) into the system rather than sitting on this money. This will be talked about in 2012 but won’t happen. It may happen in 2013

Polar: USA is the most polarized nation on earth, and has been in a cultural civil war for years. Two entirely different cultures- different beliefs, values, goals, and political views- live in the same place. Whether this becomes a ‘hot’ war, like the USA’s (first) Civil War, or whether it engenders a ‘bloodless coup’ from the military, or remains a culture war with skirmishes, is open to question. The polarization and culture war have, however, recently been upstaged by the jobless, ‘occupying force’ movement. What has quickly come to be called “the 99%” is increasingly restless, militant and disruptive. The hobo army: coming to a neighborhood near you. Because these encampments are expensive for cities to take care of, expect too, the National Guard.

Buy it. Please: a continuing and desperate attempt to re-ignite consumerism among Americans who have no money for arbitrary, leisure, and discretionary spending, and are deeply in debt means that US leadership- in the banking sector,  in the retail sector and in government- is still looking backward, not forward.

The rise of Germany: Germany is on an upward trajectory much like its rise to power 1932 through 1939, but without the militarism. Our favorite economies in 2012 are Germany’s and Brazil’s but the USA’s looks very strong as well. An exasperated German people, upon whose back the Euro ultimately rests, may give up and ask to take their toys and go home. The German government, however, is fiercely committed to a United States of Europe, which commits EU member-nations to giving up national economic sovereignty. It seems the best way to go. Whether a European ‘nation’ with European ‘states’ can be built remains open to question. The EU may still come apart but we think, ultimately, it won’t. The key factor is whether the French & the German govts see eye to eye. And whether their populations will agree to it. The British are especially reticent: giving up sovereignty means the end of the illusion that the British Empire lives.

China as next World Banker: China’s enormous trade surpluses and lack of debt make China- and its currency- a strong contender to become the go-to nation for financially-troubled or loan-hungry industries businesses and countries over the next two decades.

Authorities with no authority: the financial ratings agencies (Fitch, Standard & Poor’s, Moody’s etc) have lost credibility. They dissed the USA’s credit rating, then Italy’s Spain’s Portugal’s and Belgium’s and voiced concern over France,  they even put the entire Eurozone on credit-watch as a unit. Then: the world economy simply went right on, doing the best it can do. That’s what 2012 is all about. The rating’s agencies’ loss of credibility means: the world will move relentlessly forward. And the indices with it. The authorities will be still holding the checkered flags at the race finish line. But the runners passed by a half hour ago.

Waiting for the American messiah: Republicans are still waiting for an electable messiah. So far, that George Washington does not seem to have appeared. As of January 1st, the person who in 2012 will actually become the 45th President of the United States may not yet even be in the public eye. The strongest voting bloc in today’s United States seems to be evangelical Christians. But actually it’s the 50-some million members of the AARP, who will decide whether we have a new George Washington or whether the US will continue to wither and die. Newt Gingrich has the best mind (an American history buff, a PhD in European history from Tulane) the best values, the best Big-Picture view and the best grasp of what the US needs now. But to many people, including to us, he is Eric Cartman. Is the USA ready for a South Park™ President ?

Full cycle and reboot: If we’re lucky. The USA reached the end of its first complete cycle, as a nation, in 2008, Full cycle from 1776 to 2008.  How that plays out: the United States will next either get a 2nd George Washington for a President and begin a 2nd full cycle, the start of a new start, a new start, or the United States as we know it will come to an end. The USA as we knew it, as a country, actually ended in 2008 and we are now in a sort of no-man’s land. In response to the ‘sky-is-falling’ armageddonists (“Sell everything! Buy gold coins! Buy guns! Hoard food!”) we argue that the US has already fallen, but that it can be rebooted. The White House presides over something that is in the same geographical space the USA used to be in, and which used to be the United States, but is not the United States now. Since 2008 the United States has been in an absolute zero time-out, a historic intermission just before either a nation’s reboot, the start of a second cycle, or a nation’s collapse. That intermission is ending.

Word of the Year: Default. Higher education prices and education debt is the next bubble. Students and their families owe $600 billion in college loans, and are unable to free themselves of this debt even through bankruptcy. They are the USA’s new indentured servants.

Insolvent: More US cities will become insolvent in 2012, and declare bankruptcy. Next in line: Detroit. Not good for the muni bond market.

The White House learning curve: Don’t rule out the possibility that Obama will grow into the job. Especially if we get into a war. And there is no question one is coming.

Debt End: You can only kick the debt can down the road a finite number of times before you run out of road. The year both EU ran out of road: 2011. The year the USA runs out of road: 2012. The EU and the USA are inextricably linked. An economic marriage that involves so much ECB/Federal Reserve debt swap that the regions might just as well have one currency. That’s both good and bad. If the debt problem cannot be solved, both the Euro and the US dollar will go down together.

The Beginning of the End of Foreign Aid: Both the core EU populations (Germans French Dutch) and the Mainstream American people are united in their view that someone has to learn a financial lesson. To the Europeans, it’s the profligacy of Greece Italy Spain et al. To the Americans, it’s that but it’s also their own elected leaders throwing money around. Afghanistan wants us to get out of their country. But they also want thirty billion dollars in aid. The new descriptive term is “conditional aid.” Which means: do it my way or I’ll void the check.

Health Care: Not consumer-driven, but insurance-driven. Big Pharma: very much  consumer-driven. The pharmaceutical industry is driven by advertising. Ask your doctor if --- is right for you. The government has for decades, paid for all or for the drug Rx’es for many Americans. Now, it cant. Look for the US health care system to continue to unravel. As in any Third World country, the wealthy few can afford health care. The masses cannot.

In the Tabloids: Steve Jobs as America’s patron saint. Watch the tabloids: during year 2012, miracles will be attributed Steve Jobs.

The check is in the mail: 2012 is the start of the decline and end of the US Postal Service. In three to five years: postal privatization. Mail a letter? Fedex.

Anger in the streets: The Occupy Wall Street movement has already descended into street rabble but the sentiment continues and the movement grows. Expect continuing rage, with accompanying demonstrations occupations and even rioting in some cities. As this becomes more and more a job for the National Guard, the US will look increasingly like a police state.

The 14k Dow? The S&P 500 companies’ and the Russell 2000 companies’ foundation of the US economy is doing very well, and if the Eurozone stabilizes we are headed toward a 14,000 Dow even while the general American population falls deeper into poverty and the US continues its slide into Third World Country status with a small rich elite a huge impoverished mass and no middle class. As the EU crisis calms, look for very strong stock indices in 2012 even though the populations in the countries that host these indices may not be doing as well. There is an enormous disconnect between the world capital markets and commodity markets, and the world’s now-global labor forces. Worldwide: there is an oversupply labor, and the price of labor will, accordingly, fall. In the USA, there is an undersupply of skilled labor. Can you weld? Use industrial diving gear? Operate a bulldozer or a wheat harvester? Help Corning make better optical cable? Come up with a better optical laser pump? Great! You got the job! If not, join the unemployed millions.

Potential for a bloodless US coup or a military ‘national emergency’: still there. Especially if the Pentagon gets a $500billion defense spending cut, which would gut it at a time when the US is heading toward a war with Iran.

Islam won: without any more suicide bombings and without any more flying airplanes into buildings. It has gained tolerance in the West. That’s all Islam needs. Have more children, keep to the tradional ways, take over more territory, buy time to achieve nuclear arms. In Europe and the US, press for sharia law, refuse to assimilate. Use the West’s legal system, and its delusion that diversity is good, to institute Islamic values and laws. In a decade or two your children will live under, abide by, or tolerate Sharia law. And some of your children will have four wives. Islam, as a unified regional & geographic phenomenon, is more in tune w the times than the western practice of sovereign states. Islam is based on shared values not geographical borders. The US is no longer a country based on shared values beliefs ideals & goals, and the Transnational Islamic Superstate continues to grow.

The USA’s Middle Class: Not returning. Wal-Mart’s 3rd Q 2011 revenue of 109.5 billion dollars is money that once was revenue that went to America’s small businesses and which supported an American Middle Class and its lifestyle. Want an American middle Class back? You’ll have to be willing to extinguish WMT.

Deferred Maintenance: A euphemism for dilapidated, decayed, deteriorated, fallen into ruin. Ramshackle. It’s happening to our roads highways bridges schools buildings ports airports libraries and homes.

Fields of dreams: By 2020, windfarms will be as common a sight as coal-fired power plants were in 1964. Windfarms are an interim power source for the next 3 4 5 decades. It is very much ok to invest in wind power now. See MW’s energy stocks section every month.

Solar power: Set to explode as an industry in the TwentyTwenties as it becomes cost-effective. In fifty to seventy years FWD solar will provide much of the electricity on earth. But not yet. The time to begin to invest in solar stocks is still in the distance.

European & American Banks in Transition: Big banks, beseiged by public outrage and sovereign debt crises, are lying low. They are sitting on enormous bundles of cash, even as both the EU and US govts face unprecedented debt levels. No one government can force the banks to put that money to work. And so the European and American economies languish.

The banks’ position is not as impregnable as it seems. The world is heading toward the establishment of a world ‘currency’ based on gold. In fact that shift has already happened, it’s just that no govt and no bank is yet willing to admit it. At some point banks will still be leveraging debt as the creation of ‘money’ but will have to begin carrying 10% or more of reserves/tangible assets in gold. Some big banks won’t survive this.

Porn as background: Watch for the rise in visibility of Online XXX.com websites (known as “dot Triple X”) as a voluntary means for skin websites to separate themselves from the Mainstream Internet. But this voluntary option is too little too late. Online: sex is so ubiquitous that it’s globally Online, everywhere, and in in all varieties. ‘Porn’ has ceased to be a valid concept and noun. Or, take your choice, sex has ceased to be a valid concept and noun, and ‘porn’ has replaced it. Porn is the background noise the setup shot and the white noise behind everything, both Online and in media. The murmur behind every single thing on the Internet. Sex is becoming the background noise for entire cultures, including ours.  The Chinese govt is trying to firewall this, but it can’t. The 21st century zeitgeist has four components so far: failing national governments, the rise of the Big Six Global Mining Companies as the source of most wealth, the creation of the Transnational Islamic Superstate, and porn as an undercurrent of much of what we see.

Slavery is real: In a world of 7 billion people, humans are a commodity. Only a small portion of the seven billion are lucky enough to have been born into freedom or to be educated into a profession or trained into the skilled workforce. The rest have limited resource or none, can easily fall victim to fate’s whim, and in many parts of the world, sell what they can, or become, themselves, a buy-and sell item.

Urban livestock: Chickens goats rabbits ducks sheep cows are increasingly being kept in areas that used to be urban or even metro environments.

The death of the sedan: The United States has a backlog of $500 billion worth of road repair to do that no one can afford to pay for. Most US major highways and state roads are continuing to deteriorate and most local roads, except in the country’s most extremely wealthy communities and suburbs, are becoming goat trails. That means there are fewer and fewer places to drive a delicate sports car or what’s politely called a “boulevard car”- a Lincoln Continental or Acura or Cadillac CTX. Couple that with the USA’s severe winters, increasing number of quakes floods and severe storms plus fewer white-collar jobs, more ordinary Americans in ‘heavy-lifting’ jobs  and also keeping urban livestock and practicing subsistence-level yard-farming, and the only sensible vehicles to drive, in the United States, are Jeeps, Land Cruisers, Range Rovers and full-size American all-wheel-drive pickup trucks, plus ATVs and multipurpose motorcycles like the BMW or Triumph dual-sport off-road bikes.

 A corollary: The rise of the Ural Motorcycle. Primitive transportation rules: http://www.ural.com/

The start of immortality: http://halcyonmolecular.com/ Many small biotechs, staffed by the smartest human beings on the entire planet, are seeking bio-renewable human cells and bodies. One of these companies will find the grail. Then what?

The Return of the Railroads: The 21st century is much like the 19th century. Expansionism,  geo-regional infrastructure buildouts, global trade (earlier centuries were slower but no less global) and expensive trucking. The solution: railroads.

Yo friend upstairs says you’re eighteen years old, but I don’t want yo ID: 2012 is the 50th anniversary of the founding of the Rolling Stones. Expect hoopla and celebrations for The World’s Best Rock and Roll Band.

Continuing USA poverty: A basic undergraduate college degree ceased to be cost-effective around 1998, and today the average college loan debt for an undergraduate degree- which used to secure a bottom rung white collar job but now secures not much- now costs more than $25,000. Meanwhile, American college students and their families owe more than $600 billion in student loan debts. Debt that can’t be erased and can’t be paid off. These are America’s new indentured servants.

The young are also the poor: As of right now, the median net worth of an American household headed by someone 65 or older is $170,494. That’s 40% lower than in 1984. The median net worth of younger-age households is $3662, down by 68% from a quarter century ago. Recent data from the US Census Bureau indicates that the typical US household headed by someone 65 or older has a net worth 47 times greater than the household of someone under the age of 35. The USA’s Middle Class has died, and the US has become a Third World Country

The USA’s poor: Not only poor, but often mentally ill: Between the start of 2009 and the end of 2011, USA states cut $1.6 billion in vital mental health services for adults and children. This comes on top of the closing of most of  the USA’s most big state mental hospitals during the last 20 years and the financial failure of all but a few major (and expensive) mental hospitals like Menninger and Chestnut Lodge. The result: USA’s mentally ill are in the country’s hospital emergency rooms (they’re not being treated, they’re living there waiting days and days awaiting psychiatric admission or even to be seen for an evaluation by a mental health MD) for a mental health bed, of which there are few, or none) or they are in our homeless shelters and our jails.

Low reimbursement from insurance companies to both psychiatrists and to hospitals for psychiatric services and drugs make the problem worse. Psychiatrists have for decades been paid lower wages than other medical specialties. The result: about twenty years ago, medical graduates stopped choosing psychiatry as a specialty field. Now there is a shortage of thousands of psychiatrists, and in many parts of the country, no psychiatrists at all. A mentally ill person is fortunate to be seen by any health care person at all: a nurse, a social worker, a psychologist, none of whom can do a medical psychiatric evaluation and then prescribe the proper drugs.

Left to their own devices, the mentally ill fall thru the cracks. They lose their house their apartment their job. They end up on the street, in jail, living in their car in a state park or a mall, or in the crowds of the OWS demonstrations.

Not fair? The health insurance companies think it is. It is a strong argument for  governments, especially the states, to re-instate the mental health universe and manage it, as they once did. Unfortunately, our state governments can’t afford to.

Untreated psychiatric illness costs our communities $100s of billions annually in lost work productivity, broken homes, school dropouts, crime, drug & alcohol abuse, jail time,  and increased need for backup social services like food and shelter.

New York State has a $3.5bil budget deficit heading into the start of 2013. NY has no money for the mentally ill. It is all they can do to buy gas for the school buses.

Most of America’s mentally ill are living in doorways, movie theater lobbies, bus stop benches, Wal-Marts, 24hr supermarkets, or on the street, with their possessions in a shopping cart. Or in prisons and jails, where because mental illness is a ‘victimless crime’ they are simply released back onto the street, where you’ll find them living in your local park or mall. Or in your garage or yard.

A price rise for basic-necessities stocks: UL PG CL DG BIG KMB PG DG BIG K PEP. People will continue to buy: toothpaste, shampoo, detergent, toilet paper, plus Pringles Cheese-its Rice Krispies Big Macs and Fritos. No matter what.  

A price rise for small-pleasures stocks: KO KKD PNRA CMG  

Dream on: 41% of Americans say the 'American Dream' has been lost. 37% USA of adults have NO retirement savings and 38% plan to live off Social Security. 63% of Americans believe the economy is getting worse, including 72% of those over the age of 55.

China’s Great Leap Forward: Led by its ambitious & successful SE coast Shanghai region, China may become a responsible force in the global economic community. This is a government that is fading, and has increasingly smaller power over the portion of the Chinese economy that is a global participant. The upshot: over years, The Shanghai coast will simply erase the Peking gov’t’s strength and validity.

When in doubt, stay home: In the worst US economy since the 1930s, and one subject to far larger and more elemental forces than the ‘30s crisis, Americans have been waylaid by falling home value, underwater mortgages, family debt, unemployment and underemployment and multi-job strategies, and one result is that people simply stay put. 2011 had the lowest rate of state to state migration in more than six decades. Right now, most Americans never leave their home state, and about 60% live in the states where they were born.

Exodus: The buzzword for 2012 is emigration. Exodus. Many Americans, facing joblessness and lack of opportunity, will simply pack up and leave, a la the 1930s USA Dust Bowl. But not to another part of the USA. Thus beginning a tide of emigration to other countries that offer more opportunity and job opportunity than the USA does now, as well as freedom from what is increasingly becoming a managed police state. Three likely destinations: Canada, Australia and Brazil. A surprising one: France. In addition, a potential crisis in Israel may start a flow of Jews out of Israel and out of that region as well, to a location that offers more safety.

Infotech hardware manufacturing: Consolidating: Only three co’s produce almost all the hard drives for laptops. Still left to hardwire w optical cable: all of Africa, all of the Middle East, much of Asia, much of Latin America.

War Clouds: The USA and Iran, and increasingly, USA and Pakistan- are almost at each others’ throats. A vast portion of the world’s mineral resources are in Pakistan Afghanistan and Iran. There are going to be fights over these reserves, and probably over food and water, too. As Humphrey Bogart would say, Maybe not today, maybe not tomorrow, but soon, and for the rest of our lives.”

We don’t much like the 21st century so far. But we thoroughly understand it. It’s our job.

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