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I’m not going to write about stocks today, but I will at least mention one. Instead, I wish to direct your attention to the economy in general. I’m also going to say some things that the media does not often say and politicians don’t want them to say it.
The economy is out of control. A few people realize this. A few more people think it might be true, but they’d rather not dwell on it. The rest have no clue.
The micro view
Let me demonstrate my point by pointing to one individual, if not somewhat obscure company and its share price fluctuations. Be patient. I am only using this for illustrative purposes. I will make my point after looking at the macro view.
The share price of Manroy plc (LSE:MAN) is up by more than 25% (12.5 pence) to 62.0 today. In January 2013 its share price was in the 40 pence range. In January 2012 it was in the 90 pence range. It took a hit in May 2013 when it reported a loss in quarterly earnings. In fact, that’s about the last time MAN made any kind of headlines at all until today. The share price rose today on a single announcement that it had been awarded a €1.7 million spare parts contract. The announcement, exclusive of its title, contained only 88 words. At this rate, the company’s market cap will have jumped from £10.86 to £13.60 million in less than eight hours.
This is not caused by control. This is caused by reaction.
The MACRO view
The G20 Economic Summit is underway in St. Petersburg. The is a collection of leaders whom Forbes magazine characterized today as not “the best and brightest.” Aside from the fact that most of them have no idea how to deal with the major economic issues that are crippling the world, they are likely to spend as much time debating President Obama’s incompetence and mendacity in handling the Syrian problem (which, in my humble opinion, is not his problem) than they do in dealing with larger economic issues.
However, the Syrian situation could become a major economic problem for all Western culture if Obama decides, in his infinite lack of wisdom, to launch any kind of attack on the Assad regime. So, here we are once again, with an out-of-control situation that is currently isolated within the borders of a single country, yet which has the potential to send economic shock waves throughout the world, if some arrogant, would-be despot decides to intervene. He doesn’t seem to understand that his painting himself into a political corner and trying to make his way out of the corner with a military “solution” is a stimulus for massive economic upheaval. Are you connecting the dots?
The economy is out of control because it is all based upon reaction to disparate events. Whether you look at the share price of Manroy, the G20 Summit, the Bank of England, the Federal Reserve, the FTSE or the NYSE, every action is really a reaction. And those reactions, especially on the macro level, are efforts by people trying to keep their own interests under control, often at the expense of others’ interests.
The ethical view
Finally, this constant reactionary scenario is exacerbated by a major paradigm shift in business that began in the 1990s and has fully matured in the last ten years. Russian billionaire, Vladimir Yakunin described the essence of economic chaos, saying “We currently seem to be moving in a destructive direction of diminishing the role of the social in state activities and further emancipating business from any ethically based supervision, thus making business generally immune from all values other than the maximization of profit.”
We have witnessed the intensification of greed increase incrementally since the exposure of the sub-prime lending crisis in 2008-2009. We have seen banks and other businesses adopt a philosophy of doing whatever it takes to make a profit, and then ask us for our trust. This essential greed has infected everyone from people who invest to the companies in which they are invested and to the rulers of the nations who think that they control the economy.
The economy is out of control and there are very few who appear to have any idea what to do about it. One of those who are clueless, and probably more, are at the G20. And I am not referring to anyone from the UK.
