Jason Rines (iThinkBig)

Mail Delivery as Economic Bellwether

We experienced a market crash in March. It was under reported and the statistics offered were true, but including this or excluding that, backlogged inventory, etc. Give me a data file (this is my living in Consumer Healthcare) and I'll give our clients, prospects and investors good news all the time if my objective is to deceive about a total picture. I'll chime in on the big picture.

Bernanke did some huge morally hazardous, but creative wizardry to stave off the second part of March's fallout, an outright financial crash of the entire system. I am working on researching parallels of the Great Depression, the 1987 Black Tuesday market crash and financial pain (definately wasn't a financial crash nor was Great Depression) and our current situation and here is what I see and why I come to a black swan event now a likely probability:

The 1987 Black Tuesday was your market crash but it appears some bank failures and the some real financial pain occured a year or two later. The big picture now compared to Great Depression:

The Great Depression has many parralels in how and why it happened, but suffice to say in comparative numbers this ONE IS BIGGER IN COMPARATIVE SCOPE. Good thing the U.S. produces six times the amount of food vs. twice the population of the 1930's. There's going to be a lot of hungry mouths.

Lets add some other things into this mess which no doubt leads to the collapse of the financial system in 2-3 years. Now add in global investors flocking to oil (and $250 billion of Fed assistance going from banks and onto hedge funds, excessive leverage) creating massive near hyperinflation in energy prices. I don't blame the opportunists such as speculators who have a VERY safe bet prices would rise dramatically, I blame failed monetary policy extending 15 years on Efficient Market Hyposis especially with Democrats listening to Greenspan hook line and sinker. But Republicans bought into it as well and after 911 created non-sustainable public debts (now we know the hyposis failed, just GREAT isn't it?) and with there ridiculous 'compassionate way' to run wars.

Risking an entire economy on a hyposis for selfish gain is probably criminal by Greenspan but many see him as a hero and President's like slick Willy do apply a lot of pressure. Republicans provided little oversight which was typical of turning a blind eye when in 2006 many of us sounded alarms bells on subprime and the real estate market as a whole. But I will stop the rant on political discourse.

Now here is the real problem and kicker. Some of you work strictly on Wall St. and financial circles. To you, Wall St. numbers looked decent even when Main St. began faltering last June and kept accelerating downward. Some say we just concluded a bear rally or financials staved off calamity indefinately. Bear rallyers are right but this is becoming obvious now. Financials are on borrowed time and I wouldn't come near them with a ten foot pole. Why are the numbers not more attrocious for Wall St.?

30% of our GDP is global megacorporations with reserve liquidity, access to easy short-term money at historic low rates, and heavily invested in emerging markets. It was an effective hedge but limited until the effects of our inflation exportation and full ripples of declining discretionaries ripples grow stronger. Main St. will drag down Wall St and this should seem obvious to most but I am finding to my surprise that it is not. Fundamentals, what's that?!?!

21% GDP is government which has added a couple of points to GDP growth in the last three years (with defense spending leading the way and this trickles down into U.S. megacorporations outsourcing to emerging markets on a global scale).

The other 49% percent is Main St, comprising 70% of small businesses driving the majority of the 49% GDP in jobs, discretionary and non-discretionary spending. Those numbers are beyond woeful. Banks won't help the little guy, too many risks as they try to fix balance sheets. Deflating real-estate is now effecting prime mortage holders and subprime losses are acclerating. The quality of life for the 49% will become God awful in the next couple of years. Energy independence on a national scale would help tremendously but it may be a little to late to avoid financial collapse but I am hopeful.

Let's add oil shock to the mix, 600% inflation since 2002 which has greatly hurt the 49% much but just now starting to hurt megacorporations. While the megacorporations were able to absorb a good portion of these shocks and not pass large portions off the consumer for a long time, they sure are now.

The consumer is now seeing the full effect of oil shock in gasoline, diesel and heating oil which have doubled in a mere couple of years, but most of it comes within one year. When I see obtuse comments like 'consumers squeezed' it bugs me. More like 49% crashing and burning is more like it. Think that will be great for your folio? I don't but there is indeed plenty to me made between now and then. America will go on.

Let's add Alt-A liar loans still on the financial companies out-of-sight for now books (guess is $300 B) and foreclosures percentage onto the shoulders of those strained banks. We Let's add off the books and so many tens-of-thousands-of-l... credit deravatives where another Bear Sterns or two, or three more were left holding the bag on fees on marked to market assets of $40 trillion of swaps. Umm, I thought this would never effect the real economy? We don't know that full percentage and future hit yet do we? Hmmm, gee I wonder why investor confidence is out the window on the U.S economy.

Bummer for the entrepenuars in the 49% considering we need real innovation for future job and wealth creation. Hard to find a floor on real-estate when real income is falling, now isn't it? Believe me, I am not gleeful about this news although firesales and wealth creation by smart guys between now and then can help prepare for the worst 2-3 years from now. Let's hope for the best but prepare for the worst. Sorry if I am doom and gloom at the extreme. The entire picture broken out into many of these parts is being overlooked at large by many and simplifying it this way helps me make good business and investment decisions.