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Cincinnati (Special Edition Joe-Duarte.com)
We've been on the road for the last week or so. During these few days we've spent
a great deal of time on highways, in sports arenas, hotels, and restaurants,
some of the places where people meet, talk, and exchange ideas.
Sometimes you talk to people, sometimes you overhear things, and sometimes you
can just feel things in the air. But unless, we're missing something, the bad
economy is something that is not happening to everyone, not in the same way,
and not all at once.
Everywhere we've been, we've seen crowds, and we've seen businesses doing transactions.
To be sure, we've also spoken to people, in the business and just passers by,
or anyone sharing an experience, and there are varying degrees of issues.
First, few people that we spoke to admitted that they're worried. A store clerk
at the hotel's gift shop told us that weekend crowds for football and baseball
games keep this Westin going. The rest of the time, she said that if there are
no conventions booked on the property, things are "dead."
Yet, we ate breakfast at the same hotel restaurant for five straight days and
it was full, both on the weekend with families and sportsfans, and on Monday
morning with business travelers. It was full all morning, and into lunch.
Other shops in the neighborhood were not as full, though, which again brings
up the wave like motion of this economy. It has no staying power. It moves in
fits and starts, and it doesn't seem to hit everyone at once.
What is of concern, is that all of the jobs that are gone, don't seem to be coming
back. There is a new wave of scuttlebutt in the blogs that is putting forth the
idea that government statistics are being manipulated to create the notion of
a recovery. An outfit called Shadowstats.com says that the government has overcounted
employment and undercounted inflation to give the impression of a recovery.
But, what is of most concern to us is that this country is starting to become
all or nothing on all levels. In our other life, that of a physician, this scribe
sees the real pain and suffering of those on fixed incomes who live off of the
government. Those people are seeing their lives slip away.
Meanwhile, during this trip, we've seen a whole lot of people who seem to be
doing just fine.
Where are we going with this? We're able to see both sides of the divide. Those
who are doing fine, are doing fine. Those who are not are doing so poorly that
they are not likely to ever crawl out of their current hole.
More interesting is how easy it is to go from doing just fine to one of the not
so fortunate. One or two bad things, an injury, or a job loss can make the difference
between doing just fine and being homeless.
What does this have to do with the market? In "The Big Short," Michael Lewis
tells the tale of how Wall Street went crazy and pushed America's economy over
the brink, bringing us to where we are today. Oh, they had help from politicians.
And people who lose money during bear markets have no excuse, given the fact
that they could learn about technical analysis and protect their investments,
including their 401-k plans.
But, this is about the markets, and their connection to the global economy. Interest
rates, currency exchanges, the value of companies, and what anyone has in their
retirement funds at anyone time is all connected, and can evaporate with the
push of one button by a rogue trader or by the forced sale of assets as obscure
credit default swap transactions are settled between two big money players.
What it all comes down to is that for now, lots of people are doing well enough
to continue to live a fairly normal life; staying in their home, going out to
football games and tennis tournaments, eating at restaurants, taking vacations,
and so forth.
But it's all very fragile right now. And it all feels vulnerable. And if you
don't feel it, you're either blind or lucky enough to have no worries.
If you're looking for a chart point to hover around, try the S & P 500 1100
area.
Editor's note: Dr. Duarte will be traveling Tuesday. Market IQ is scheduled to
return to a more normal format and schedule on Wednesday. Check out his observations
on Twitter on Tuesday.
"The Balkanization of America"
America is turning into a nation of contrasts, where all or nothing, rather than
something in between is likely to be the norm for the future as far as the eye
can see.
We've been traveling for the past week, passing through East Texas, Arkansas,
Tennessee, Kentucky and Ohio to get to our final destination, Cincinnati, Ohio,
home of the Western and Southern Financial Women's Open and Masters' Series tennis
tournament.
The week has been full of nothing but contrasts. Everywhere, from the highways,
to hotels, streets, and sports arenas, we've had no middle ground. Everything
seems to be extreme, from the performance of the athletes on the court who are
for a few minutes brilliant to just awful the next, to the things we see all
around us.
It's as if America is suddenly the "Land of Stop and Go." As we Blackberried
and Twittered all week, we saw markets tumble, and we saw middling crowds all
week. Then on Saturday and Sunday it seems as if everyone came to the Lindner
Center to watch tennis. All or nothing. Same thing with restaurants. Crowds were
huge for about an hour this evening. But soon everyone went to Riverfront to
watch the Cincinnati Bengals football game and the place looked like a morgue.
The waiter told us that they'd be back after the game, hopefully.
The problems is that we were at the same restaurant a few years ago, at the same
time of day and it was packed, without a football crows. The young woman at the
hotel's gift shop told us that the hotel is "dead" unless there is some kind
of game in town or a convention at the hotel.
A food vendor at the tennis center had time to talk with us as we ordered. He
said that the first three days of the tournament sales were great. And then they
died. He thought it was the heat. We think he was in denial.
There is suddenly a lack of sustainability in business because demand in sporadic.
We seem to be going from spasm to spasm, without any real stable muscle that
can sustain activity for any period of time. We're not sprinting. We're experiencing
a seried of false starts.
And it's evident in our politics, our economy, and the way we're going about
life in general; no direction; no ability to sustain any kind of stable or consistent
performance.
Last week, the Federal Reserve, after weeks of warning investors, announced that
it was going to steadily continue to expand its balance sheet, and thus pump
money into the economy. The markets tanked.
Meanwhile, as U.S. economic statistics suggested more uncertainty ahead, Europe
seems to be stabilizing, and China may be poised to become the number 2 economy
in the world.
Things aren't good in Washington. The Democrats and the Republicans are becoming
more distant and dissonant as the election nears. And the polls are suggesting
that the public is pulling away from both of them, although Republicans may be
gaining some quasi-advantange, although it's hard to figure out why they would.
They are offering little in the way of ideas and alternatives. The Democrats,
on the other hand seem to be fighting among themselves to the point where they
may be self neutering.
And the press is screaming, nearly in agony, wanting to influence the public,
just as the polls are saying that the public is losing their trust in newspapers
and television newscasts.
In other words, what we've learned this week is that the U.S. is a country on
the rocks where things are so fragmented and disorganized that anything is possible,
and all conflicts and successes are now likely to be regional.
Conclusion
Peggy Noonan has likened the current situation in the U.S. to "Balkanization," the
process where Yugoslavia returned to being Serbia, Croatia, and the rest of the
smaller lands that once were.
In the U.S., at this point, "Balkanization" may be more about the economy and
the well being of one region vs. another. Where one county may be holding up,
its neigbor may not be doing as well. And the problem is that the press and the
natural psyche are used to dealing with the situation as a whole ecosystem, the
United States.
Yes, the Federal Reserve does regional analysis in its Beige Book. And, yes,
there are regional elections that precede or coincide with national elections.
But, at the end of the day, the U.S. has been seen as one nation.
What we're seeing on this road trip is that nothing is whole anymore. No, we're
not seeing anarchy. But we're seeing such an all or nothing reality that we can't
help but projecting that further into the future.
What's the bottom line? We're not sure where this is going, but fractionation, "Balkanazination" and
any other term you use to describe the U.S. at this point can only be interpreted
as one word, divided.
And in the most basic terms, empires, villages, families, or individuals who
are divided, are the most easily conquered.
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