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Doomsday Deluxe

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I frequently enjoy watching the Doomsday Preppers program on the National Geographic Channel.  I get a particular kick out of hearing the reason each particular family gives for building a bunker and making plans for Armageddon.  At the end of each story, the producers at Nat Geo usually reference the consensus of expert opinion concerning the particular doomsday scenario discussed by the featured family.  A popular fear is that earth will get knocked off its axis, causing a polar shift.  (You’ve probably heard Matt Damon mention that one on the TD Ameritrade commercial – wherein he credits the Mayans for starting the rumor.)  Although many of the preppers’ fears are far-fetched, there are certainly many legitimate causes for the sort of concern which could lead a perfectly reasonable person to initiate efforts toward the Ultimate Plan B.  My personal favorite threat is Fukushima.

A number of reports have recently been published concerning the efforts made by more upscale preppers to build designer bunkers.  This situation really cries out for a new television program:  Beverly Hills Bunkers or Celebrity Preppers of Palm Beach.

The Raw Story website ran an AFP report describing the efforts by developer Larry Hall to convert abandoned missile silos into luxury bunkers.  At this point, Hall has found four buyers who have plunked down nearly $2 million each for a silo bunker:

“They worry about events ranging from solar flares, to economic collapse, to pandemics to terrorism to food shortages,” Hall told AFP on a tour of the site.

These “doomsday preppers”, as they are called, want a safe place and he will be there with them because Hall, 55, bought one of the condos for himself. He says his fear is that sun flares could wipe out the power grid and cause chaos.

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Built to withstand an atomic blast, even the most paranoid can find comfort inside concrete walls that are nine feet thick and stretch 174 feet (53 meters) underground.

Instead of simply setting up shop in the old living quarters provided for missile operators, Hall is building condos right up the missile shaft. Seven of the 14 underground floors will be condo space selling for $2 million a floor or $1 million a half floor. Three and a half units have been sold, two contracts are pending and only two more full units are available, Hall said.

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He is also installing an indoor farm to grow enough fish and vegetables to feed 70 people for as long as they need to stay inside and also stockpiling enough dry goods to feed them for five years.

The top floor and an outside building above it will be for elaborate security. Other floors will be for a pool, a movie theater and a library, and when in lockdown mode there will be floors for a medical center and a school.

Complex life support systems provide energy supplies from sources of conventional power, as well as windmill power and generators. Giant underground water tanks will hold water pre-filtered through carbon and sand.

*   *   *

Interested buyers have included an NFL player, a racing car driver, a movie producer and famous politicians, he said, but he now requires all the money up front.

Blake Ellis of CNN Money gave us a peek at how “the one percent” is getting ready for doomsday:

Northwest Shelter Systems, which offers shelters ranging in price from $200,000 to $20 million, has seen sales surge 70% since the uprisings in the Middle East, with the Japanese earthquake only spurring further interest. In hard numbers, that’s 12 shelters already booked when the company normally sells four shelters per year.

Who spent $20 million on a bunker?  Oprah?  Bill Gates?  Lloyd Blankfein?

Inquiring minds want to know how their favorite celebrities will be riding out The Apocalypse.  Which porn stars will Charlie Sheen invite to his Doomsday Den?  How many people within one degree of Kevin Bacon will Kyra Sedgwick allow into his bunker?

There is definitely a television show here – and it’s bound to draw a bigger audience than the number watching Doomsday Preppers.  Any guesses as to which network runs with this?


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Rampant Stock Market Pumping

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It has always been one of my pet peeves.  The usual stock market cheerleaders start chanting into the echo chamber.  Do they always believe that their efforts will create a genuine, consensus reality?  A posting at the Daily Beast website by Zachary Karabell caught my attention.  The headline said, “Bells Are Ringing!  Confidence Rises as the Dow –  Finally – Hits 13,000 Again”.  After highlighting all of the exciting news, Mr. Karabell was thoughtful enough to mention the trepidation experienced by a good number of money managers, given all the potential risks out there.  Nevertheless, the piece concluded with this thought:

The crises that have obsessed markets for the past years – debt and defaults, housing markets, Europe and Greece– are winding down.  And markets are gearing up.  Maybe it’s time to focus on that.

As luck would have it, my next stop was at the Pragmatic Capitalism blog, where I came across a clever essay by Lance Roberts, which had been cross-posted from his Streettalklive website.  The title of the piece, “Media Headlines Will Lead You To Ruin”, jumped right out at me.  Here’s how it began:

It’s quite amazing actually.   Two weeks ago Barron’s ran the cover page of “Dow 15,000?.  Over the weekend Alan Abelson ran a column titled “Everyone In The Pool”.  Today, CNBC leads with “Dow 13,000 May Finally Lure Investors Back Into Stocks”.   Unfortunately, for most investors, the headline is probably right.  Investors, on the whole, have a tendency to do exactly the opposite of what they should do when it comes to investing – “Buy High and Sell Low.”  The reality is that the emotions of greed and fear do more to cause investors to lose money in the market than being robbed at the point of a gun.

Take a look at the chart of the data from ICI who tracks flows of money into and out of mutual funds.  When markets are correcting investors panic and sell out of stocks with the majority of the selling occurring near the lows of the market.  As the markets rally investors continue to sell as they disbelieve the rally intially and are just happy to be getting some of their money back.  However, as the rally continues to advance from oversold conditions – investors are “lured” back into the water as memories of the past pain fades and the “greed factor” overtakes their logic.  Unfortunately, this buying always tends to occur at, or near, market peaks.

Lance Roberts provided some great advice which you aren’t likely to hear from the cheerleading perma-bulls – such as, “getting back to even is not an investment strategy.”

As a longtime fan of the Zero Hedge blog, I immediately become cynical at the first sign of irrational exuberance demonstrated by any commentator who downplays economic headwinds while encouraging the public to buy, buy, buy.  Those who feel tempted to respond to that siren song would do well to follow the Weekly Market Comments by economist John Hussman of the Hussman Funds.  In this week’s edition, Dr. Hussman admitted that there may still be an opportunity to make some gains, although the risks weigh heavily toward a more cautious strategy:

The bottom line is that near-term market direction is largely a throw of the dice, though with dice that are modestly biased to the downside.  Indeed, the present overvalued, overbought, overbullish syndrome tends to be associated with a tendency for the market to repeatedly establish slight new highs, with shallow pullbacks giving way to further marginal new highs over a period of weeks.  This instance has been no different.  As we extend the outlook horizon beyond several weeks, however, the risks we observe become far more pointed.  The most severe risk we measure is not the projected return over any particular window such as 4 weeks or 6 months, but is instead the likelihood of a particularly deep drawdown at some point within the coming 18-month period.

Economist Nouriel Roubini (a/k/a Dr. Doom) provided a sobering counterpoint to the recent stock market enthusiasm in a piece he wrote for the Project Syndicate website entitled, “The Uptick’s Downside”.  Dr. Roubini focused on the fact that “at least four downside risks are likely to materialize this year”.  These include:  “fiscal austerity pushing the eurozone periphery into economic free-fall” as well as “evidence of weakening performance in China and the rest of Asia”.  The third and fourth risks were explained in the following terms:

Third, while US data have been surprisingly encouraging, America’s growth momentum appears to be peaking.  Fiscal tightening will escalate in 2012 and 2013, contributing to a slowdown, as will the expiration of tax benefits that boosted capital spending in 2011.  Moreover, given continuing malaise in credit and housing markets, private consumption will remain subdued; indeed, two percentage points of the 2.8% expansion in the last quarter of 2011 reflected rising inventories rather than final sales.  And, as for external demand, the generally strong dollar, together with the global and eurozone slowdown, will weaken US exports, while still-elevated oil prices will increase the energy import bill, further impeding growth.

Finally, geopolitical risks in the Middle East are rising, owing to the possibility of an Israeli military response to Iran’s nuclear ambitions.  While the risk of armed conflict remains low, the current war of words is escalating, as is the covert war in which Israel and the US are engaged with Iran; and now Iran is lashing back with terrorist attacks against Israeli diplomats.

Any latecomers to the recent festival of bullishness should be mindful of the fact that their fellow investors could suddenly feel inspired to head for the exits in response to one of these risks.  Lance Roberts said it best in the concluding paragraph of his February 21 commentary:

With corporate earnings now slowing sharply, the economy growing at a sub-par rate, the Eurozone headed towards a prolonged recession and the American consumer facing higher gas prices and reduced incomes, a continued bull market rally from here is highly suspect.   Add to those economic facts the technical aspects of a very extended market with overbought internals – the reality is that this is a better place to be selling investments versus buying them.  Or – go to Vegas and bet on black.


 

Our Generation Got Old

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October 13, 2008

As John McCain’s Presidential campaign goes swirling down the toilet during the final desperate weeks of its existence, we see its surrogates cling to the non-issue of Obama’s contact with 1960s radical activist, Bill Ayers.  As I said on October 2, McCain missed his chance to take control of this race by opposing the 700-billion-dollar “bailout bill”, which has yet to inspire the confidence of the investing public, foreign markets or the banks.  By reuniting with his old ally from the “campaign finance reform” days, Democratic Senator Russ Feingold of Wisconsin, as well as Democratic rising star, Senator Maria Cantwell of Washington, the “Blue Dog” Democrats and the so-called “House Republicans” led by Jeb Hensarling and Mike Pence, McCain could have secured his position as the man who would take the Republican Party into the new century.  Instead, he chose to follow the advice of the lobbyists who run his campaign:  Steve “Skinhead” Schmidt and (Jeffrey Dahmer look-alike) Rick Davis.  These “Guys on the Plane” (if I may steal an expression from Peggy Noonan) have their careers rooted in the negative campaigning strategies created by Lee Atwater and refined by Karl Rove.  These operatives have no other cards to play.  They have no experience in successful reliance upon a strategy, based solely on portraying their own candidate in a positive way.

As the nation’s economic condition becomes more perilous, the McCain campaign leans more heavily on its claim that Obama’s contacts with Bill Ayers should determine the outcome of the 2008 Presidential election.

At this point it’s starting to get funny.  Worse yet  … it is an indicator (to me, at least) of how old I am and how old my generation has become.  Back in my old home town (a place called Chicago) there is a writer for a local paper called the Chicago Tribune.  His name is John Kass.  Kass is an outspoken opponent of Chicago’s current mayor, Richard M. Daley and Kass has a nickname for him, just as I have nicknames for such worthy characters as Senator Joe “The Tool” Lieberman.  On Sunday, October 12, Kass expressed his outrage that Marilyn Katz, Ayers’ fellow member of the 1960s radical group, Students for a Democratic Society (SDS), is involved in Obama’s Presidential campaign.  Kass took particular umbrage at the fact that Marilyn Katz now has a successful public relations firm called: MK Communications.  According to Kass, MK Communications now represents the Chicago Police Department, City Colleges of Chicago, the city’s “Law Department” (actually referred to as the Office of the Corporation Counsel for the City of Chicago), and numerous other city departments  … including the venerable “Streets and San”.  Kass seemed like a shoe salesman trying to fit an old foot that was accustomed to the “militant radical” style of the 1960s, into the new, 21st century, “Terrorist” model. It  doesn’t fit.  The militant radicals of the 1960s used small bombs to make political statements.  There is an absence of information about the number of alleged casualties or injuries resulting from such bombings.  Today, “terrorists” use small bombs to take down airplanes and they use airplanes to take down skyscrapers.  The use of the “terrorist” label to a 1960s radical is an obvious stretch.

The rant by the Tribune’s Kass about how former radical, Marilyn Katz, has become a “mainstream” figure in Chicago’s Public Relations business community, reminded me of an old song.  On August 17, 1969, Grace Slick and her band, Jefferson Airplane, woke up the crowd at the Woodstock Music and Arts Fair with what she described as “morning maniac music”: the title song from their upcoming album, Volunteers.  Included among the song’s lyrics was the following passage:

One generation got old.
One generation got soul.
This generation got no destination to hold.

The Marilyn Katz story and the Bill Ayers story tell me that our generation got old.  The former radicals of that era are now playing important roles within what they used to consider an archaic milieu, referred to as “the establishment”.  Nevertheless, many members of this latest “establishment” generation are in a fight to retain the claim of having “soul” by helping to bring an African-American to The White House for the first time in this nation’s history.  The crowds at the McCain and Palin rallies have expressed their fear of what an Obama Administration might bring to America.  These McCain supporters have been able to replace their fears of how they are going to economically survive from day to day and how to fund their retirement plans with the fears conjured up by Schmidt, Davis and their ilk.  The ball is now in the court of the Obama campaign to help establish a legacy for these people and all Americans – by righting the ship capsized by the “perfect storm” of greed, corruption and deregulation.  Another three-pointer would be nice.