Author Archives: Editor of the Fabius Maximus website

About Editor of the Fabius Maximus website

See the authors page for more information about the Fabius Maximus website.

More evidence that we’re losing America. It’s not too late to act.

Summary: I have long discussed what might make Americans rouse themselves to retake the reins of the Republic and reverse its evolution into a new regime. Clear warnings, descriptions and diagnosis of the problem? Anger at ourselves and what we’ve allowed America to become? None of these seem plausible. Perhaps fear will do it, produced by recognition that there is a class war — and we’re losing. A few posts will review the depressing news.

Will these spur you to act? Time is not our ally. Lots of groups talk about building a New America; the people doing so act in the shadows — visible only if you look. But the results of their work have become obvious.

Despair at losing

We discuss the progress of our foreign wars in great details, just as we track every vibration of the economy and the political machinery in Washington. The big things get less attention, such as the class war by the 1% against us. We’re losing. It’s like slowly boiling a frog; it’s happening so slowly that we don’t notice. But there’s still time to act.  {Also: zoologists consider this a myth; please don’t test it at home.}

(1)  COIN comes to America

As I and so many others warned for so long, the techniques of surveillance and oppression developed during our occupations of Iraq and Afghanistan would eventually come home. As we see at the crushing of the Occupy protests and on the streets of Ferguson. Here’s another example. Even I, who has chronicled so many horrific stories about America at this website, was shocked. I shouldn’t have been surprised.

The disappeared: Chicago police detain Americans at abuse-laden ‘black site’“, Spencer Ackerman, The Guardian, 24 February 2015 — Secret interrogation facility reveals aspects of war on terror in US. Protester details 17-hour shackling without basic rights. Accounts describe police brutality, missing 15-year-old and one man’s death.” Excerpt:

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About the disturbing disconnect between markets and the real economy

Summary:  Today we have a guest post about the often discussed but still mysterious disconnect between the US risk markets and the US economy — between Wall Street and Main Street. Since the crash, economists and investment strategists have confidently predicted it will close soon, certainly when the economy accelerated back to near normal speed. So far neither has happened. Today’s guest post by Lance Roberts examines this important phenomenon.


Markets Vs Economy – The Great Disconnect

From StreetTalk By Lance Roberts
23 February 2015
Posted with his generous permission.

Since Jan 1st of 2009, through the end of 2014, the stock market has risen by an astounding 148.8% (based on Fed Reserve quarterly data). With such a large gain in the financial markets we should see a commensurate indication of economic growth.

The reality is that after three massive Q.E. programs, a maturity extension program, bailouts of TARP, TGLP, TGLF, etc., HAMP, HARP, direct bailouts of Bear Stearns, AIG, GM, bank supports, etc., all of which total to more than $33 Trillion and counting, the economy has grown by a whopping $1.9 trillion since the beginning of 2009. This equates to just 13.5% growth in real GDP during the same period that the market surged by more than 100%.

What do stock prices tell us today?

Click to enlarge.

However, as shown in the chart above, the Fed’s monetary programs have inflated the reserve balances of member banks by roughly 403% during the same period. The increases in reserve balances, which the banks can borrow for effectively zero, have been funneled directly into risky assets in order to create returns. This is why there is such a high correlation, roughly 85%, between the increase in the Fed’s balance sheet and the return of the stock market over that period.

Unfortunately, while Wall Street benefits greatly from repeated Federal Reserve interventions – Main Street has not. Over the past few years, while asset prices surged higher, personal consumption expenditures have remained mired at levels typically associated with very weak economic expansions. This is reflective of continued weak income growth which has been a function of a large amount of slack in the labor force.

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We see a stock market bubble but prefer to close our eyes.

Summary:  Bubbles in the information age differ from those of simpler times. Now we have real-time data showing our folly. Here’s a brief review, another in our series of posts about this mad cycle. Listen while you read and you’ll hear the stock market roaring to the moon.  {1st of 2 posts today.}

“You can’t cheat an honest man.”
— Title of W. C. Fields movie, describing the essence of bubbles (1940). Bubbles are consensual hallucinations. Each participant chooses to join.

Soyuz TMA-12M Prepares To Launch

(1)  Goldman tells the story

As usual, Goldman gives us clear analysis, in mild professional language — seeing events earlier than the rest of the pack. (Via Zero Hedge). The 21st century differs from anything seen before. We see it as distinct phases; future generations will see it as one event (as we’ve combined what participants saw as separate events into the War of the Roses and the Napoleonic Wars).

Stocks with attractive valuation are rare in the current environment of stretched share prices. The aggregate S&P 500 trades at 17.3x forward EPS and 10.2x EV/EBITDA. The only time during the past 40 years that the index traded at a higher multiple was during the 1997-2000 Tech Bubble. The median stock sports a P/E and EV/EBITDA of 18.0x and 11.0x, respectively. These valuations rank in the 99th percentile of both P/E and EV/EBITDA multiples since 1976.

Goldman: valuations

Valuation ratios are deceptively simple, as their interpretation relies on larger factors such as interest rates and the economy’s expected future growth rate. If fears of secular stagnation prove correct, people today pay big money for growth that will not arrive. Also likely to be disappointed are people hoping to sell at valuations like those of 1999-2000. Those were based on GDP growth rates almost twice ours. From 1996-2000 GDP grew at ~4.5%; it was 7.4% in Q4 1999 — fueling dreams of our economy roaring like never before.


(2) The biotech bubble

Every bubble has a heart from which the euphoria is pumped out into the wider society. In this cycle it’s the biotech industry. Like the railroads in 1840s and the internet in the 1990s, the biotech industry has a great future. But like its predecessors, valuations have grown beyond realistic bounds. For news from the front see this: “Forget the tech bubble. It’s the biotech bubble you should worry about“, Max Nisen, Quartz, 19 February 2015. — Excerpt:

Big pharma firms and investors have been showering billions on speculative companies that have never produced a viable drug. For four years running, biotech stocks have risen faster than any other sector of the market in the United States. Health care set new records last year for both IPOs and M&A spending. … Cheap debt, a frenzy of publicity for research that hasn’t yet led to any products, and obscenely high pricing for the medicines that make a difference are all adding fuel to the fire.

As usual, the extreme madness appears in the paper-manufacturing business: the people creating new companies and doing Initial Public Offerings. Fortunes are made by farming gullible investors. Drugs go through five phases from conception to approval: preclinical work, 3 rounds of testing on people, and getting FDA approval. The number of IPOs having only drugs in the first 3 phases has grown to insane levels.

Why are these bad investments? The odds are better at Las Vegas than for early stage drug development projects, and at Vegas you get free drinks served by pretty ladies. Look at the probability of success:

Biotech: Success rates by phase

Biotech: Success rates by phase. By KMR, 8 August 2012.

Printing paper for gullible investors

Bubbles just don’t happen even in the most favorable climate; they’re made. Creating start-ups in a hot market is easier than drilling for oil, and more profitable. Investors give up their money more easily than the Earth yields its treasure. The complex of venture capitalists, attorneys, and investment bankers have constructed a money magnet.

Another note from the front lines: “Look at how quickly the values of multi-billion-dollar startups have multiplied“, Nitasha Tiku, The Verge, 20 February 2015 — “A quick note on how profitability relates to valuations: it doesn’t! At least not yet.” See the following graphic; see the bubbles grow over time! Size of the circle shows the dollars raised in each deal. Go to the article to see this as an interactive graphic, where you can click on each dot for details. Click to enlarge.

Startup Sizes

Startup sizes by year. From The Verge, 20 February 2015. Click to enlarge.

Other articles about the bubble

  1. Stock market bubble warnings grow louder“, CNN, 19 August 2014 — “Some of the brightest minds in finance are sounding the alarm about a stock market bubble.”
  2. US equity markets in ‘dotcom style’ bubble“, The Telegraph, 28 November 2014 — “The UK’s top professional investors think most asset classes are overvalued after years of easy money conditions.”
  3. {CEO Elon Musk} Says Tesla’s China Sales Fell, No Profit Until 2020“, Bloomberg, 13 January 2015 — My personal favorite bubble stock.
  4. The billion-dollar companies Silicon Valley investors ought to fear“, Financial Times. 20 February 2015 — “Late-stage private companies have not endured the scrutiny of the IPO process.”

For More Information

Other posts about our new and strange world:

  1. Will 21st Century USA have a surprise boom, as did the 19th Century UK? — About the 1840s railroad boom.
  2. Four graphs showing a nation in decline. An unnecessary and easily fixed decline.
  3. The new tech bubble takes us to a new world. A mad world.
  4. Watch corporations strip-mine their future (and ours).
  5. America enjoys a time of sunshine in Hell. Let’s use the time wisely.
  6. A guide into the weird numbers that run our world, describing both financial bubbles & climate change.
  7. Let’s ignore another warning from the BIS. Do we enjoy paying for burst bubbles?
  8. How we’ve become accustomed to bubbles bursting the economy, instead of fighting them.

The Secret Life of Walter Mitty is the secret life of many Americans

Summary:  We’ve broadened our geopolitical analysis to include film criticism by Locke Peterseim, today discussing “The Secret Life of Walter Mitty”, a 2013 remake of a 1947 escapist movie based on a 1939 short story by James Thurber almost exactly opposite in tone and meaning from the films. Hollywood transforms everything it touches, either to keep us shallow — or because we fear seeing the depth of life.

The Secret Life of Walter Mitty


The Secret Life of Ben Stiller

By Locke Peterseim
Posted at the film blog of Open Letters Monthly, 29 December 2013
Reposted here with his generous permission.

There are a million reasons (about $100 million budgetary ones, to be exact) that I should hate Ben Stiller’s new adaptation of James Thurber’s The Secret Life of Walter Mitty, written by Steve Conrad and directed by and starring Stiller.

For this latest update (following the 1947 Danny Kaye version), Walter Mitty (Stiller) is now a modern-day photographic archivist, a physical negative handler for LIFE Magazine at a time when both the magazine and its photography are going all-digital.

Of course Mitty still spends half his time lost in elaborate daydreams fueled by Hollywood hero fantasies, but Walter’s own flat, grey, carefully calibrated life is upended on multiple fronts when he simultaneously develops a crush on a winsome co-worker (Kristin Wiig) and learns (from a hilariously hirsute Adam Scott as his new digital-asshole boss) that the magazine (and most likely his anachronistic job) are morphing away into the Internet ether.

That one-two punch spurs Walter to impulsively set off across Greenland, Iceland, and Afghanistan by helicopter (drunkenly piloted), ship (complete with shark-infested waters), car (outrunning an erupting volcano), and skateboard in search of a mysterious missing photo from a ruggedly elusive star photographer (Sean Penn, nicely both embracing and mocking his own self-serious image). Along the way, we learn how Walter’s loss of his father at a young age deferred his plans, goals, and dreams for a not-so-wonderful dull life of George-Bailey-esque responsibility (sans the loving family and friends).

The Secret Life of Walter Mitty is a deep-pocketed Hollywood movie that wears its “big ideas” on its oversized, glossy, movie-star sleeve and proudly tosses out not-so-subtle winks about our current human existence.

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The war of the sexes heats up: society changes as men learn the Dark Triad

Summary: Revolutions begin in the shadows, emerging only when they grow too large for society to ignore. So it is with “game”, the science of seduction. Today let’s look at a revolution in the war between the sexes. It’s one of our weekend posts about American culture, keeping you informed about things not yet in the mainstream news.

During this whole century the progress of artillery has been a duel between the maker of cannons and the maker of armor plates to keep the cannon balls out. You build a ship proof against the best gun known: somebody makes a better gun and sinks your ship. You build a heavier ship, proof against that gun: somebody makes a heavier gun and sinks you again. And so on. Well, the duel of sex is just like that.

— A pick-up artist explaining life to a feminist in George Bernard Shaw’s play “You Never Can Tell” (1895). See the follow-up to this in the comments.

About “Game”

Like the art of war, relations between men and women are a constant remixing of methods. As with war, during the past century science has forced breaks with the past. Nukes made it suicide to wage traditional State-to-State war, driving the shifts described in “Unrestricted Warfare” (e.g., to 4GW, cyberwar, economic war). Similarly, technology brought women to equality in the labor force while allowing them to control their fertility — changes expressed ideologically as feminism. These unleashed trends that we don’t yet understand.

The reaction to feminism has begun, as every force produces an opposite reaction. Like all revolutions and counter-revolutions, it began in the shadows as the ancient methods of pick-up artists became systematized after WWII.

Decades of slow evolution brought “game” to maturity in the mid-1990s. It’s the science of seduction, a crude applied psychology derived by men on the streets. Like alchemy, it’s a mixture of sense and superstition used by people working without theory. It began, like most revolutions, with an insight: men realized that they break the conventions and act as bad boys — against their own natures — and increase their odds of success with women.

Like most innovations in interpersonal relations — new forms of dancing (e.g., the waltz), divorce, abortion, the pill, rock music, postal boxes on the street — moralists have condemned it as a step on the road to iniquity. Feminists have gained the high ground in control of society’s institutions, and watch with outrage as men act in defiance of the new social norms.

As with alchemy, science follows the amateurs in the field.

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Twenty stories with good news about polar bears!

Summary:  Another in our series of good news about the climate, this time about polar bears (others are listed at the end). Good news generates few clicks, so you’ll not see this info in the news. This period of good news probably will not last forever, perhaps not even long. Let’s stop the playground politics and make good use of this time.

Say goodby to the poor photoshopped bear floating out to sea; but his real cousins are doing OK (so far).

Photoshopped polar bear in Science

Pitiful but photoshopped. In Science, 7 May 2010.

Twenty good reasons not to worry about polar bears.

By Susan Crockford
From her website: Polar Bear Science.
Reposted with her generous permission.


Here’s a new resource for cooling the polar bear spin, all in one place. I’ve updated and expanded my previous summary of reasons not to worry about polar bears, now two years old. In it, you’ll find links to supporting information (including previous posts of mine providing background, maps and extensive references). Some important graphs and maps have been copied into the summary. I hope you find it a useful resource for refuting the spin and tuning out the cries of doom and gloom about the future of polar bears. Please feel free to share.  Here is a PDF of the this post.

This is the 1st anniversary of Canada providing population estimates and trends independent of the pessimistic prognostications of the IUCN/SSC Polar Bear Specialist Group (PBSG) — so let’s celebrate the recent triumphs and resilience of polar bears to their ever-changing Arctic environment.

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How we’ve become accustomed to bubbles bursting the economy, instead of fighting them.

Summary: The financial sector has doubled in size as a %GDP since 1970, far exceeding its previous peak in 1929. The effects have been predictably broad and bad. One late stage symptom is the increased frequency of bubbles, perhaps even becoming our only driver of growth. To understand how this happens we should consult sociologists, such as one of the greatest of the post-WWII era: Daniel Moynihan. He describes how we’ve become psychologically adjusted to bubbles, rather than taking the political action to prevent them.

This is the follow-up to this morning’s Let’s ignore another warning from the BIS. Do we enjoy paying for burst bubbles?  For the 3,000 and 3,001 posts I’ve posted some unusually good material, timely and relevant to us all.

It's time for your heroin!

It’s time for your heroin!

Daniel Patrick Moynihan (1927 – 2003) was one of the greatest sociologists of his day. His prescient observations (often too radical for his time, such as seeing the effects of single-parent families) put him in the top rank of sociologists, as did his applying these skills to become an ambassador and 4-term US senator.

Today we look at one of his major papers: “Defining Deviancy Down“, American Scholar, Winter 1993. I strongly recommend reading it, being rich with insights about America. It gives a sociological analysis describing how we (society) adjust to changing levels of deviancy. Moynihan discusses crime and out-of-wedlock childbirth as forms of deviancy.

We can apply his insights to finance — specifically, the development of asset price bubbles.

About financial bubbles

First, some context. Financial bubbles — unsustainable rises in investments and asset prices — naturally occur in free-market systems. Classroom simulations show how easily they happen. Right-wing bugaboos to the contrary, bubble occur without fractional reserve banking, and happen under the gold standard — as seen in 19th C Britain and America. While painful, they might even have beneficial long-term effects, as did the great 1840s UK railroad mania. But Larry Summers and others fear we’ve entered a new era of secular stagnation, with an illusion of growth from bubbles — shattered when they burst.

This post rephrases Moynihan’s text, changing the subject from social deviancy to financial deviancy. I skip over the theory he gives in the first half. Alterations to the text appear in red; additions in brackets.



In one of the founding texts of sociology, The Rules of Sociological Method (1895), Emile Durkheim set it down that “crime is normal.” “It is,” he wrote, “completely impossible for any society entirely free of it to exist.” By defining what is deviant, we are enabled to know what is not, and hence to live by shared standards.

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