There’s always something to howl about

Dawn In America- Part One

Anyone who has read this satirical piece knows that my writing turned macabre this past year.  One weekend, one book,  one article, and one website dramatically changed the way I look at the world and it inhabitants.  It has been painful to watch my political party regress from Bob Taft to Teddy Roosevelt in less than 25 years.  It is crushing to watch REALTORs and mortgage originators cheer for professional slavery rather than to muster up the courage associated with the rugged individualism that made this country great.

It has been said that it’s always darkest before dawn so while it was pitch black this past summer, I remained confident that Morning in America was nigh.  Rick Santelli fired the outburst heard ’round the continent and glimmers of light came by way of tea parties and election upsets.  As the economy sputtered, the previous and current administration acted like looters amidst a blackout but people have caught on to their theft- and they don’t like it.

It’s gonna get a lot darker before the dawn and I’ve never been so optimistic in my life. Here’s why- collectivism is a failed philosophy.  For all its noble efforts,  the unintended consequences of collectivism stifle the indomitable American spirit of reward for creativity, ingenuity, and innovation.  We saw collectivism fail here, here, and most recently here.  Now, the average guy in the street knows it, too.

Remember the Stockdale Paradox and you’ll remain optimistic with a keen eye to the circumstances as they unfold.  Now, hold on to your hat because…

It’s gonna get uglier so be prepared. I think great opportunities will go to the prepared. The day that emerges from the dawn will be so bright you’ll swear that global warming isn’t a hoax.  Here’s how I see the next cuppla years playing out:

  1. Real estate may decline, even more. While the lower end of the market has already declined to utilitarian value, the affordable housing organizations will (finally) attack that which artificially inflates markets; zoning regulations.  Rather than convert old military bases to detention FEMA camps, the impending currency crisis will force the Federal government to divest itself of real estate holdings to replenish the Treasury.  Developers will have an opportunity to build housing that people can afford to buy or rent.  The Reds Greens will try to attach deed restrictions for those developments, in order to advance a new way to redistribute wealth, but their original supporters will sacrifice the collectivist ideology for the immediate need to house people.  The free market will find new disciples in the most unlikely of places.
  2. Sovereign debt is going to default en masse. Greece is just the beginning.  Ireland, Portugal, France, Italy, and Spain will set off a chain reaction that dismantles the European Union.  The masters of the Old World will tighten the screws while the people take to the streets.  Americans will be horrified when they see this.  I think Americans will demand drastic spending cuts from our government.   The American people will wonder why we borrow money from other nations to offer free military defense to those very same nations. America may selectively default against those nations in a bi-partisan demonstration of disgust:  the leftists will cite human rights and the neo-conservatives  will giggle in delight that they can “harm” the Chi-Coms and Islamo-Facsist States through the most unconventional of weapons- the debenture.
  3. Americans will respond to this default of our sovereign debt with a HUGE demand for government to be reduced drastically.    The sovereign default and subsequent currency collapse will be the light that shines brightly, exposing all of the cockroaches in the room.  NO will become the new YES for politicians but it still won’t be enough.  Woe betide the politician that expands existing entitlements programs come election day.
  4. The U.S. Dollar will be devalued but so many other currencies will have collapsed it won’t feel too painful (unless you buy stuff from or travel frequently to Switzerland).  Financial pandemonium will last for about two weeks until the most likely technology emerges with a solution backed by the most likely institutions.  Tin-foil hat theorists shouldn’t worry about the One World Currency because demand for competing currencies will rise and the most likely technology will find a way to partner with asset protection firms.
  5. Domestic oil exploration and drilling will grow as the supply gets restricted as aresult of the mistrust propagated by the sovereign defaults.
  6. Public property divestiture will offer big opportunities for the most entrepreneurial of real estate and finance professionals.  Private real estate finance will boom as demand for capital explodes and commensurate returns will reflect the risk associated with the local projects.  Think locally, invest locally will be the new normal in real estate finance.
  7. Certain companies are going to thrive so the stock market won’t necessarily stay down.  While the world will wonder about the safety of dollar-denominated assets, they’ll be worried about the euro, the yen, and the yuan, too.  I suspect investors will get really smart, perform the due diligence required, and invest for longer terms.  I expect trading volume to drop.  You may see annual stockholder meetings held in Madison Square Garden rather than an office board room on Madison Avenue to satisfy that demand for activist capital.

I have a lot going on in my head about the future.  I’ve already written some 1800 words and I feel like I’m just getting started.  Let’s call this a series and I’ll break it up into a bunch of segments.  As always, your feedback is most appreciated.


17 Comments so far

  1. Jim Klein February 25th, 2010 8:19 pm

    Great stuff IMO, Brian. I don’t see an error in principle and I love the optimism, especially in view of the much darker scenarios that are possible.

    I’ve believed for quite a while now that it’ll ultimately come down to one thing you mentioned–repudiation or default of various national debt. I doubt it’ll only be foreign debt though, since there are domestic unfunded liabilities that are beyond comprehension. Since ever-higher taxation has such a diminishing return, there will simply be no choice except a major devaluation or default, which amount to the same thing except for the number of bytes they require in memory. Bytes are a terrible thing to waste, so I’m inclined to believe more rational minds will opt for default. But then, that assumes there are still some rational minds left anywhere near the Atlantic!

    You’re sure doing your part getting us to splendor; nice job!

  2. Jeff Brown February 25th, 2010 8:53 pm

    Brian — I’m pretty much with Jim.

    I think the third rail may be Iran, with the booby prize skyrocketing oil prices. I sure hope not.

  3. Erion Shehaj February 25th, 2010 10:40 pm

    Easy on the optimism, guys. 🙂

  4. Brian Brady February 25th, 2010 11:10 pm

    I think our optimism comes from the hope that we will “reset” to a more merit-based economy, Erion.

    I have a lot more thoughts on prosperity and opportunity in a post-Ponzi world, later in the series. They are but thoughts and not advice so I’ll value all of your input.

    Optimism can be learned. I didn’t exhibit it last Spring but I learned it (again) when I started understanding the collapse better.

  5. Teri Lussier February 26th, 2010 5:22 am

    Amazing piece, Brian, something to digest (and glad to hear you got your mojo back).

  6. Brian Block February 26th, 2010 8:43 am

    Having just attended CPAC this past weekend in D.C., I can attest that there is a definite optimistic mood of “this train wreck can be stopped in November!”

    I tend to view it more as slowing down the train. there are too many factors beyond the control of just the U.S. domestic political scene.

  7. Brian Brady February 26th, 2010 8:49 am

    I am going to explore some ways to steer clear of the wreck so that the collateral damage (to you) is minimal, Brian. I certainly don’t have all the answers nor am I sure I have the correct ones so I hope you’ll lend us your opinion

  8. Al Lorenz February 26th, 2010 11:57 am

    I agree this is a happy article. I really smiled at the PayPal link. Technology and the internet make for an interesting twist that empowers individuals to solve problems in ways that could have never been imagined during past meltdowns.

    I’m thinking this could even be a bunch of fun moving forward.

  9. How Would a U.S. Treasury Default Affect You? February 26th, 2010 12:07 pm

    […] substance, the unrest associated with the financial institutions was nothing compared to what the sovereign debt default continuum might bring.  Here’s how I see it playing out: Sovereign debt is going to default en masse. […]

  10. Ralph Bredahl February 26th, 2010 5:20 pm

    I almost skipped the post because it appeared to long to read. Now I am waiting for the next one on the same topic (You hinted that there would be more)

  11. […] is the second part of The Dawn in America series.  Read the first piece here I’ll offer some more thoughts about opportunities in the […]

  12. Michael Cook March 1st, 2010 1:30 pm

    Better question Brian, how would a California State default effect you?

  13. Brian Brady March 1st, 2010 11:42 pm

    Great question, MC. I think I’d benefit from a CA default because the size and reach of the Legislature would be drastically reduced. That’s probably another complete thought exercise but I’m pretty sure that a reduction in gov’t would bring businesses (and thereby jobs) back to the state.

  14. Michael Cook March 2nd, 2010 9:50 am

    I think thats an illogical assumption Brian. You are assuming that an irrational government will become rational based on the consequences of their bad behaviors.

    While I dont the they will be bailed out by the federal government, I do think they will continue to jack up taxes to pay for things they cant afford. Ironically, they will probably continue to save the whales at the peril of their people.

    Businesses dont like taxes and neither do rich people. Your only hope is a massive change in representation. Unfortunately hippies are really good at organizing. Good luck.

  15. Brian Brady March 2nd, 2010 12:03 pm

    Ultimately, the free market will save CA from itself. Here’s a question for you(I know you don’t work in municipal finance but humor me): Which (same size and coupon) G.O. bond offering would you like to snare, Texas or California?

  16. Michael Cook March 2nd, 2010 1:47 pm

    Why is the easy answer not Texas?

    Same size and coupon (assuming maturity date as well), you go for the lower risk, no? California is a ticking time bomb, while Texas is probably as capitalist as they come. In fact, I dont think there would be any state that I would choose behind California.

  17. Brian Brady March 2nd, 2010 7:30 pm

    That was a softball, Michael. McGurn captures the insanity in today’s Journal:

    We are out of money. In your scenario, the remaining Californians will all be hungry. It’s hard to organize hungry people.

    That’s why I’m optimistic about the collapse. Collectivism’s dead.