I am not concerned by inflation, or sharemarket valuations being too high, although they could be minor factors. These are my key concerns (some are US-centric, but if the US crashes, the world will follow).

• Corporations hoarding money – particularly Big Tech – instead of spending it. This is bad for capitalism in general. Never been worse than today.
• Share buy-backs. This is corporations enriching shareholders and executives while leaving the business financially vulnerable and not investing in the future either. Never been worse than today.
• Collateralised Loan Obligations. This is the one nobody is talking about. Banks bundle dodgy business loans together, the same as they did with mortgages pre-GFC. It is the exact same problem, and undoubtedly when pandemic help runs out, many business will go under, with a lot of debt defaults. Never been worse than today.
• Idiot investors. The Bitcoin rollercoaster is due to leveraged gambles. When the price dips, stop-loss mechanisms kick in, sending the price lower again. The same gamblers are betting on stocks stupidly (GameStop) and useless cryptos (DogeCoin). RobinHood enables these idiots, and it will only get worse.
• China. China lies. We can’t trust any financial news from there, and don’t be surprised if western experts discover a major underlying problem that affects market everywhere.
• Small business failure and mortgage defaults. As we emerge from the pandemic, which is uncharted territory, it won’t take much, another black swan event, to be the final nail for many businesses. Changing habits (WFH, empty downtowns, packed freeways, Uber Eats) are all disruptive.
• Protests. We have become a much more politicised, complaining people, in all countries. Inequality has never been worse in modern times. Expect protests to continue on various topics, including inequality, the lack of wage growth, surveillance and evil Big Tech.
• East/West. There is much talk of a fracture in global trade. I think this is so likely I have a blog about it. East West Split.

It only takes some of the above to go sideways at the same time to cause a major financial crash. There will be corporations that have lied about their true state of affairs. I recommend keeping most of your cash in cash. Don’t invest in bank stocks or high-flyers like Big Tech. Put a little bit in gold and crypto, both should rise in a crash.

If we make it to 2023 without a crash, ignore the above, I was wrong.

The post The Coming Crash appeared first on Unism.

The Christian tradition has never recognized the right to private property as absolute or inviolable, and has stressed the social purpose of all forms of private property. Saint John Paul II forcefully reaffirmed this teaching, stating that “God gave the earth to the whole human race for the sustenance of all its members, without excluding or favouring anyone”.[72] These are strong words. He noted that “a type of development which did not respect and promote human rights – personal and social, economic and political, including the rights of nations and of peoples – would not be really worthy of man”.[73] He clearly explained that “the Church does indeed defend the legitimate right to private property, but she also teaches no less clearly that there is always a social mortgage on all private property, in order that goods may serve the general purpose that God gave them”.[74] Consequently, he maintained, “it is not in accord with God’s plan that this gift be used in such a way that its benefits favour only a few”.[75] This calls into serious question the unjust habits of a part of humanity.[76]

This doesn’t delegitimise the obscene wealth of the Catholic church, as they would see all they have and do as being for the social good.

The document provides some ammunition against any of the 1% who declare themselves to be Catholic. With footnotes. Hard to argue against the Pope if your a Catholic…

…pointed out by the bishops of Paraguay: “Every campesino has a natural right to possess a reasonable allotment of land where he can establish his home, work for subsistence of his family and a secure life. This right must be guaranteed so that its exercise is not illusory but real. That means that apart from the ownership of property, rural people must have access to means of technical education, credit, insurance, and markets”.[77]

I was pleased to see, much later in the document, Pope Francis was willing to not only rip into the banking system, but to call for a new way of running economies. This is bold, provocative stuff!

These excerpts are from paragraph 189 onwards. Read the full chapter for context.

Saving banks at any cost, making the public pay the price, foregoing a firm commitment to reviewing and reforming the entire system, only reaffirms the absolute power of a financial system, a power which has no future and will only give rise to new crises after a slow, costly and only apparent recovery. The financial crisis of 2007-08 provided an opportunity to develop a new economy, more attentive to ethical principles, and new ways of regulating speculative financial practices and virtual wealth. But the response to the crisis did not include rethinking the outdated criteria which continue to rule the world. 

…we need to reject a magical conception of the market, which would suggest that problems can be solved simply by an increase in the profits of companies or individuals. Is it realistic to hope that those who are obsessed with maximizing profits will stop to reflect on the environmental damage which they will leave behind for future generations? 

Whenever these questions are raised, some react by accusing others of irrationally attempting to stand in the way of progress and human development. But we need to grow in the conviction that a decrease in the pace of production and consumption can at times give rise to another form of progress and development. Efforts to promote a sustainable use of natural resources are not a waste of money, but rather an investment capable of providing other economic benefits in the medium term. 

A technological and economic development which does not leave in its wake a better world and an integrally higher quality of life cannot be considered progress. Frequently, in fact, people’s quality of life actually diminishes – by the deterioration of the environment, the low quality of food or the depletion of resources – in the midst of economic growth.

Politics and the economy tend to blame each other when it comes to poverty and environmental degradation. It is to be hoped that they can acknowledge their own mistakes and find forms of interaction directed to the common good. While some are concerned only with financial gain, and others with holding on to or increasing their power, what we are left with are conflicts or spurious agreements where the last thing either party is concerned about is caring for the environment and protecting those who are most vulnerable. 

The post Pope Francis and Inequality appeared first on Unism.

Of the two pieces of information I found worth using, the second could have been great. However being in the second-to-last paragraph of the book, you would think more effort could have been made:

“America is the wealthiest nation in the history of the world. Over the course of the twentieth century alone, real income per capita (adjusted for inflation) increased roughly sevenfold in the United States. As we have seen, so wealthy is our nation that were income divided equally today, all families of four would receive almost $200,000. (Alternatively, of course, the workweek could be cut in half, with family income reduced on average to $100,000–roughly two times current median family income.”

What is a family of four? If it is two adults and two children, then the assumption is that half of the population are children. That’s nothing like reality. Surely just counting the number of adults is easier?

But more importantly, he has made the simplistic assumption that if the nation works half as much, they earn half as much.

Here’s the real statistic, and it is an important one to use alongside the popular The richest 0.1% earn more than the… stats that abound.

If the national GDP was split evenly, it would equate to $95K per adult before tax.

That’s what income equality looks like – the average American earns double the income from the same amount of work. People can easily imagine what that looks like to them.

Or to put it more crudely, half of your income is currently being stolen by rich people, compared with equality.

• The median income in the US is $31K per full-time worker, or $63K per household
• Average per capita income (after income tax) is $45K
• Labor share of income is 45%
• GDP is $20 trillion
• Adults (18+) in the US is 210 million

The post Brilliant Stat, Screwed Up by Gar Alperovitz appeared first on Unism.

We are in the virus crisis, and Boeing & the airlines are asking for handouts. Airlines are necessary infrastructure, but Boeing is simply a large employer, like say car manufacturers.

What is interesting is these are businesses that have made a lot of money in the last decade, but instead of putting it in the bank, they have been buying back their own shares. Less shares in the market causes the share price to rise, making investors and executives richer.

They are literally lining their own pockets instead of saving money in an industry that can be highly volatile.

Boeing has spent $100 billion buying back its own shares since 2013.

For example, Boeing’s report to shareholders in 2017 said:

• Solid core operating performance led to core operating earnings of nearly $5.5 billion, core earnings per share of $7.24 and a company-record $10.5 billion in cash.
• We continued to deploy that cash responsibly, repurchasing 55 million shares of Boeing stock for $7 billion and paying $2.8 billion in dividends. Encouraged by our performance and positive long-term outlook, our board of directors in December increased the quarterly dividend 30 percent and authorized a new $14 billion share repurchase program.
• Together, this sustained strong performance has driven Boeing’s stock price to an all-time high, hitting $184.83 last Friday, 38 percent higher than this time last year.

So, they saved just $700M of the $10.5B they made in cash that year, purely to enrich investors and execs (through bonuses). They then cut corners with safety on their MAX aircraft, causing their profits and share price to collapse. And now they are crying “poor us, we need help”.

This is a major problem with capitalism – too big to fail. Large corporations get handouts in times of need (and typically don’t pay them back), while siphoning away profits when times are good. Small businesses cannot do this, putting them at a distinct disadvantage.

The post Privatizing Profits And Socializing Losses appeared first on Unism.

Most advanced countries provide 4 weeks of annual leave for full-time employees. Some, like France with 6 weeks, offer more. The US is at the very bottom, with just 2 weeks (and that is not federally mandated). And, from my experience as an employer in the US, employees can be reluctant to even take the whole 2 weeks.

Now I learn, thanks to the coronavirus, that paid sick leave is not federally mandated either. While 70% or so of US workers do have paid sick leave, it is decided at the state or employer level. And lots of workers, typically the lowest paid, will not be paid when they are sick.

This is exploitative, (and not good for society), and gives the US a distinct advantage. Future trade negotiations could/should require the US to catch up with the rest of the civilised world, and give their workers a break.

The post USA & Their Invisible Trade Advantage appeared first on Unism.