Here´s a brand new riddle:
What do a locked-up cat and an eel under a rock have in common?
Clue 1. The answer is right in front of you.
Clue 2. "They both play golf" is not the correct answer.
The solution to the cat/eel riddle will tell you all you need to know about market bubbles.
Market bubbles are made, not born. Contrary to what every oligarch will tell you, they don´t happen randomly or naturally. The bubbles have one purpose. They (i) take money out of your pocket and (ii) put it in somebody else´s.
By far, the most formidable, dangerous bubbles are in real estate. They do a lot more than capsize individual families like yours; they are swamping the American middle class. Our prior post:
"It is not easy to get a handle on the damage which the post-2006 housing crisis inflicted on the middle class as distinguished from the other two classes. However, a highly probative clue is found in net worth (total assets minus deficits). The Pew Research Center concluded in August 2012 in an aptly-titled study, The Lost Decade of The Middle Class: ´Net worth of middle-income families dropped 39% ... [from $129,582 in 2001 to $93,150 in 2010] as the housing market crash and Great Recession wiped out the previous advances. Over the 1983 to 2010 period, only upper-income families registered strong increases in wealth.´
No, you aren´t seeing things. The American middle class is 39% poorer. Only one thing can cause a financial earthquake of that magnitude: homes and other property were lost, repossessed."
A bubble is being manufactured right now that leads us to believe that Cuenca, Ecuador has moved to the top of the real estate speculators´ hit list. If the mayor and council of Cuenca, as well as other cities like it -- maybe yours -- take no protective action, their communities are in for a de-structuration unlike anything they ever imagined, must less experienced.
I watched speculators gut-cut two marvelous towns. In both places, the local memory now has two time frames: Before and After.
What we learned the hard way: once the soul of town is lost, it cannot be found.
So, how can you tell if your town is on the hit list?
The answer is the trade secret of successful realtors and speculators from the New York islands to the Gulf Stream waters. Follow The Artists. Artists move into places that are cheap and fix them up.
To start tracking artists, click here for a list of 10 art towns in the U.S. Are you living in one? Note: some places on the list, notably Taos, have already been discovered by speculators; you are too late.
* * *
To understand the assault on Cuenca, a short digression is necessary into the phenomenon of market bubbles in general.
We will look at the two pillars and base of bubble fabrication. Mega-bucks insiders already know them inside and out. They will audibly shrug so what? and instantly surf away to destinations unknown, which is, of course, precisely our intention.
To the contrary, 95% of outsiders who struggle to make ends meet -- most likely you, dear reader -- have never seen before what follows:
(1) The first pillar: Did you ever buy shares in a company? If so, did you notice something that did not happen?
Example: Microsoft. The company has 8.2 billion shares outstanding. On August 6, 2014, shares closed at $42.74.
Let´s say the next morning you want to buy 100 shares of Microsoft. 100 X $42.74 = $4,274.00. That price will be close but not final. Here´s why:
Your broker will look you in the eye: "100 at the market?" You´d better answer (a) yes (b) quickly if you want to buy the shares.
The reason for his question and your answer:
Your pipsqueak order has no power whatsoever to change the price of Microsoft stock. All you can do is reinforce the price and/or trend in prices already present. If you enter a "buy" order at one penny less than the current market value, unless the market is already headed south, your order will go unexecuted. With nary a snark, the market will leave you and your four grand at the side of the road.
Wait a second. Something is strange...
Prices of stocks move all the time. Example: on August 6, Microsoft moved between $42.21 and $43.17. If you and thousands and thousands of people like you who bought/sold 100 shares didn´t cause that movement, what did?
Answer: somebody big ... very big... You can be sure of one thing: it wasn´t your Aunt Alice. Average daily trading volume for Microsoft is 30 million shares. If an oligarch bought/sold 10 million shares, he moved the price.
Big money, then -- not small, like yours -- makes prices move, gives them velocity. Concentrated quantitative addition creates qualitative change.*
Why concentrated? Well, although it can break a camel´s back, a single straw in mass markets is gone with the wind.
(2) The second pillar is most visible in Hollywood where market bubble manufacturing is highly developed. Hands down, studio movie promotions are decades ahead of paint-by-the-numbers election campaigns run by Washington political consultants.
60 years ago, a technological innovation revolutionized America and forced Hollywood to change how it makes and sells movies. Ditto almost every other consumer industry.
Our post of July 17, 2013 "Stupid Movies Explained" identified and discussed that innovation. Statistical data came from Edward J. Epstein, The Hollywood Economist:
"In 1929, 95 million Americans on average went to movies every week. That was about 80% of the ambulatory population. Today, weekly moviegoers are down to 30 million, which is less than 10% of the population.
You don´t have to look far to find the cause of the astonishing disappearance. It is in your living room. In 1948, when TV was rare, theaters sold 4.6 billion tickets. A mere ten years later, when most homes had TV, theaters sold only 2 billion tickets.
Behind the free-fall in ticket sales was a revolution in American habits. In 2009, only 2% of Americans went to the movies on a given day, but 90% of them watched TV.
Hollywood had to change or perish...
With the loss of 65 million dependable theatergoers, Hollywood had no alternative but to start from scratch with each film and manufacture an audience for it. For major releases, that manufacturing takes place mostly via ads on TV (where else?). Epstein notes that the manufactured audience not only (i) has to be easy to reach (congregates around certain TV programs) but also (ii) "could be induced by this blitz" to leave home and go to a movie...
Teenagers fill the bill... As of 2009, over 70% of the audience that went to widely released movies was under 21. Gender, too, is crucial. Women´s libbers, take note: guess who decides which opening weekend movie to attend. The TV ads, as Epstein says, had to ´hook male teens. The movies that filled that bill were action films laden with special effects, explosions, crashes and mayhem...´
The rise of TV; the reduction of movies to male teens; higher prices, unruly audiences and dirty theaters; no unique offering such as news;...: all are causes of the vanishing theatergoer. Yet despite them all, an amazing fact remains:
Opening weekend moviegoers STILL can make or break a film. Hollywood knows this, which is why it shells out an average of $36 million per film in ads designed to herd teens into theaters on opening weekends."
(i) Note the price tag for manufacturing an audience: $36 million per flick! For anybody not born with that kind of money to throw at a move, it is hard to conceive, much less understand, how a bubble of demand for a movie -- in fact, for any product -- is manufactured.
The simple truth is that bubble audiences are produced every day for products. Again, demand is whipped up not by you or me, but by the top 5% of Americans born with a $36-million spoon in their mouths.
And so, dear reader, if market bubble creation is a mystery to you, it is because you are not one of the fabulous few. If you are indeed an outsider, then you can
Clue 3: relax. You are not the locked-up cat or eel under the rock.
(ii) R.I.P. the days of building a faithful audience over the years via a brand-name reputation based on a good product and good service. Today, anybody who tries rock-solid, old-school marketing -- viz., non-marketing -- will get run over by the first guy with a manufactured bubble crowd.
(iii) To initiate a bubble, specific audiences are targeted. For movies it is male teenagers. You see the difference between the pre-TV era and now? In 1929, 80% of the population went to the movies. That meant the profile of the nation´s movie-goer population resembled the population at large. Old/young, rich/poor, Ph.D.´s/illiterates: everybody went to the movies rain or shine. What was there to target? Among other things, can you imagine trying to write for a totally reliable, truly general audience? The pre-TV world is a world away. So are its concepts of selling.
(iv) Here is audience targeting in action: the $36-million ad campaign for a movie is conducted only during TV programs which attract male adolescents. The same logic applies to products for other demographic groups. For example, the evening news is an appropriate venue for targeting retirees.
Sidebar: a helpful hint to TV network executives. I am eagerly awaiting the Second Coming of Lawrence Welk, this time of rock n´ roll, replete with whiter than white smiles and milk of magnesia-blue suits, with Geritol and Fixodent ads, and do-wop singers performing in wheelchairs.
Targeting specific, identifiable, reachable demographic groups is where it´s at in our world of TV, Internet and other mass communication. That brings me to this point:
I will now reveal the core strategy of all successful mass marketing campaigns. It is based on audience targeting. Build strength on strength, not on weakness. First, you work on and win over the most easily-convertible demographic group/s, i.e., the ones who are already favorably disposed toward your product. Next, you move on to the undecideds and stay clear of the hostiles.
The reason behind the strategy is purely economic. Sure, with enough time and effort you can persuade the most hostile curmudgeon to buy your product. The problem is, with exactly the same resources you could have made purchasers out of hundreds -- maybe thousands -- of favorably-disposed and/or undecided people. The cash register makes no distinction between a hard-won sale and an easy one. If you don´t believe it, look in the drawer.
Favorable-to-undecided: that movement is how to achieve the Number 1 mass marketing goal identified immediately below. That goal is the essence of bubbles.
(v) Keep in mind the objective of a $36-million ad campaign for a movie: fill theaters showing it on opening weekend. A few days, short and sweet: if that isn´t a bubble, what is? The movie´s studio and investors hope and pray that red-hot and throbbing media reports of the mega-bucks raked in Friday-Saturday-Sunday -- for an up-to-the-minute example, click here -- will award the greatest prize of all: not an Oscar; not personal pride or satisfaction; not making history; not reviews by critics Rex Reed and Peter Travers proclaiming the movie to be a classic or artistic masterpiece; not making a positive contribution to mankind, but The Big Mo: momentum.
Momentum will cause the weekend bubble to keep swelling past the weekend, to feed on itself. If it expands beyond a certain magical sales point, the movie is no longer a movie; it is a phenomenon. A phenomenon-movie -- "The Sound of Music," "E.T." -- is a blockbuster (intriguing word) not because it is good or bad but because it is a blockbuster.
(3) The two pillars of bubble crowd formation -- concentrated quantitative addition and building strength on strength -- stand on the same base. Forget any civic duty to educate and inform the public; forget moral and philosophical principles such as The Golden Rule or the greatest good for the greatest number: manufacturers of market bubbles either have no idea what those things are or could care less. Big sudden money, not honesty or hard work or doing a good job or giving good service or anything else, creates market bubbles.
Bubble = momentum paste.
In concluding,...wait a second. Something is missing.
In physics, momentum = mass multiplied by velocity. We found the velocity -- the movement started by concentrated big money. What about the mass? What did the money set in motion?
The answer immediately follows. In the meantime,
Clue 4. The mass is not the locked-up cat or eel under a rock.
From the above observations of market bubbles in general, it follows that not only is the customer no longer king, in a major way he is no longer human. As Epstein made clear, the individual movie-goer is meaningful only as a non-individual, viz., as a member of a herd. To join one, however, requires certain attributes. Most importantly, as Epstein noted of the $36-million ad campaign, to be admitted to a herd someone must be able to be "induced by this blitz" to leave home and go to a movie.
All of which is a diplomatic way of saying something else. Let´s cut to the quick:
Enter the Sheeple.** Pockets of money making clicks at a gate.
Sheeple are the mass in The Big Mo equation.
* * *
You know what the public is like...
They´re a lot of trained seals.
I toss ´em a dead fish and
they´ll flap their flippers.
-- Lonesome Rhodes, "A Face in The Crowd" --
We turn to the speculative assault that has started on Cuenca, Ecuador.
For openers, I invite you to watch this brief NBC nightly news story. It ran a month ago, on July 12, 2014.
If NBC is right, you don´t have to die to go to heaven. It was made by human hands in Cuenca. Honest...
I happen to be sitting in Cuenca right now. O.K., NBC: $2 for a decent lunch? Where? Not unless you like rice with your rice. As for your salad, it will give new meaning to the term lite n´ lively. I eat downtown every day. $2 is a bold-faced lie.
As for prices in general in Cuenca, some things -- taxis, shoes and gasoline -- are cheaper. Other things -- aspirin, suntan lotion and liquor -- are more expensive than in the U.S. Cuenca is cheap? A half-truth, at best.
As for "the views are picture postcard perfect," click here for this week´s weather report (starting August 18). I never leave home without a sweater and an umbrella -- never.
We come to the kicker -- Cuenca has "been called the Paris of South America." See above for the connection between art and how to get rich from real estate.
You don´t trust NBC? Then try the competition. Here´s an item from CBS dated four months ago, April 9. Cuenca "has few big city problems"? Tell it to the locals. P.S. Don´t forget to duck. Cuenca is "full [sic] of stunning colonial architecture, quaint cobblestone streets... of art galleries"? Somebody is definitely full of something, and it isn´t Cuenca. Art again: hmmm...
No, I didn´t forget ABC. Watch this report about "Shangri-La" -- "The Secret Hot Spot," shown on May 18, 2013. "It´s like we never left New York," effuses one spirited newcomer to Cuenca. Please note the disclaimer by buycuencaecuador.com; their company name is providential. Note also on the right of your screen the Cuenca real estate for sale.
How big is the potential Cuenca manufactured audience? Together, NBC, CBS, and ABC news reach 22 million viewers. That´s more population than the Netherlands, Greece, Sweden, Ireland, or -- oh-oh -- Ecuador.
The Cuenca ad catchment area doesn´t end there.
Did I mention New York? Among newspaper "reports" about heavenly Cuenca, don´t leave out the New York Times (June 7, 2012). Reuters (March 8, 2012), Yahoo (April 17, 2012) and Huffington Post (June 12, 2014) also got in on the Cuenca-is-Eden act. I won´t honor with an honorable mention the positively-gushing Internet blogs about Cuenca that are spreading like ragweed.
No, we are not saying Cuenca is a bad place. We are saying the U.S. bubble-blowing machine is entirely ignoring Cuenca´s good side; to start with, its people. That ignorance is as revealing as it is understandable, for the good features of Cuenca mean nothing to Sheeple, i.e., clicks at the gate. To mention Cuencanos would be a waste of time -- and bubble manufacturers don´t waste time.
The three-ring U.S. media circus is the initial phase of bubble formation -- the prefabrication of demand in a full-court press. So effective is this type of offensive that newly-minted Internet billionaire oligarchs who don´t know beans about the mass media are buying newspapers, e.g., Jeff Bezos, owner of Amazon, acquired the Washington Post for $250 million, or are starting up their own media outlets, e.g., Pierre Omidyar, founder of EBay, founded First Look Media at a price tag of $250 million (odd...I could swear I just saw that number).
Feigning and distaining, old school bean-counters who think Bezos, Omidyar and other mega-oligarchs are making a mega-mistake investing in mass media, had better think again. It´s a new world out there.
The media no longer need to make money the old-fashioned way -- attract viewers, readers, subscribers and advertisers by reporting what´s going on -- to make money. In truth, their balance sheets as traditionally understood are of little or no interest to their new owners. The Washington Post is a financial basket case; audiences for NBC, CBS, and ABC nightly news have been steadily evaporating since 1980.
Today, in our mass merchandising and merchandised world, manufacturing bubble crowds is The Greatest Good.
Clue 5. The locked-up cat and eel under a rock are not The Greatest Good.
* * *
Not enough money is the root of all evil.
-- Comandante Lentes, "Pillars of The Sea" --
How can we be so sure a Cuenca bubble campaign is underway?
If confronted, Mr. Editor-in-Chief at NBC, CBS et al will foam at the mouth, pound on the desk, proclaim and defame to the stars above that no organized Cuenca campaign exists. I mean, what do you think he is...a trained seal?
Here´s how we know the campaign is a campaign as opposed to what Mr. Editor will tell you -- pure coincidence. (Neither is it "synchronicity," a term employed by psychoanalyst Carl Jung.)
(i) Normally, journalists turn up their noses at a story written by a competitor, and refuse to run with it. Cuenca? Christ no! -- that´s Bob The Jerk´s story over at (insert competing media´s name). Count on silence, then. Zero eco.
I have an interesting question for you, Mr. Editor. If Bob The Jerk´s work is so awful, why are you reading it?
(ii) Bubbles in real estate differ from bubbles for movies in one important aspect. Movie bubbles are focused on a single weekend; a real estate bubble occurs in cycles over time. Reportedly, there are already 5,000 Americans over 55 years old living in Cuenca. The vast majority of them was conjured forth by a previous Sheeple media campaign I trace to 2009.
Here´s why cycles are absolutely essential in the manufacture of a real estate bubble:
If the bubble were blown all at once, as in the movie industry, the people and authorities would sit up and take notice, perhaps become alarmed and take corrective action of the type presented in our prior post. The intermittent plateaus and downturns in cycles serve to lull any potential opposition to sleep. When and if it wakes up, it is too late.
We come to the nec plus ultra of successful bubble fabrication in real estate. Local people and media must absolutely, positively, definitely believe no bubble threat exists. In that regard, Cuenca bubble manufacturers merit a gold star; check out the local newspaper, El Tiempo, where you can read all about the impossibility of a Cuenca real estate bubble happening anytime soon -- this, despite rising prices.
The nec plus ultra is also a sine qua non. The real estate bubble that is known in advance is the real estate bubble that doesn´t happen. El Tiempo fulfilled its mass media obligation to conceal -- not reveal -- in the most transparent fashion possible: asking a realtor if a bubble is in the offing is the equivalent of asking a barber if you need a haircut.
(iii) Both the form and content of the Cuenca Sheeple bubble campaign reveal it is a campaign.
Let´s look first at form. The Cuenca media campaign is like the sky: simply there.
I will tell you what every media expert knows. Look high and low, you cannot buy anywhere advertising that is comparable in effectiveness to a supposedly "objective" news report that promotes your product. Aloe vera is a plant; your product is good: both statements are presented in a camouflaged ad campaign as being qualitatively the same. To wit: your product is good is not a value judgment, oh no; its goodness is a fact, simply there.
In the journalistic trade, disguised ads like the "news" reports on Cuenca are derisively called "puff pieces." I had a column that ran in 15-20 newspapers including the El Paso Times; I saw time and again, from the inside and with mounting consternation, the creeping invasion of non-ad ads. The U.S. media are quietly and quickly heading to a land´s end where that´s all there is; there ain´t no more.
Never doubt for a single second, dear reader, that a journalist working on a puff piece is 100% aware of what he/she is doing. The same holds for Editors-in-Chief who in Monday morning coffee-fueled meetings behave like short-order cooks and pass down demands for puff pieces sent from on high.
Mr. On High is never identified. How crass. To say his name is taboo. Nodding, winking suffice.
Turning to the content of the Cuenca campaign, here, too, the campaign reveals itself for what it is. That content consists of an unrecognized fiction genre -- the adult fairytale:***
I will not waste my time or yours by further fact-checking the slew of U.S. media ads for Cuenca. What counts -- literally in dollars and cents -- is not reality but fantasy. Dream on: the term in both its senses expresses how Sheeple are congregated, corralled, fattened up at endlessly-moving feed troughs, pushed into vans and driven to market. Not to worry: the oligarchs have that part of bubble crowd manufacturing down pat.
How can we be so sure the ad campaign for Cuenca is targeting Sheeple?
Simple: the content is simple-minded. Retinal junk food. To start a "news" report, as does ABC´s Diane Sawyer, "There are thousands of Americans who want you to know they have found paradise..." is to appeal to guess who? Anybody else is cordially not invited.
Which brings us to
Clue 6. The locked-up cat and eel under a rock are not Sheeple. Or are they? Stay tuned...
(iv) We come to the fourth and final reason we believe real estate speculators are waging a Cuenca Sheeple bubble campaign.
I saw exactly the same hidden ad campaign launched in the 1960s at Sarasota, Florida and in the 1970s at Santa Fe, New Mexico. As if parachuted in overnight, droves of Sheeple showed up. They were easily spotted: they were precisely the people the earlier residents of both cities -- many of them artists -- moved there to escape.
Sidebar. A helpful hint for some Cuencano entrepreneur: manufacture bright red buttons for Sheeple. The buttons would display two words in black: Me First.
If Sheeple are easily seen, they are even more easily heard, particularly in restaurants where their chalk-on-the-blackboard Keyalyfeeeeerrnya accents pierce the din of even the most determined crowd. As for what they are saying, one Sheeple asked, "Where in Cuenca can I practice my Spanish?" Yes, I am serious.
Also easily detectable are the Sheeple drovers. To locate them, go to the Cuenca post office. For spurs and ropes, Sheeple drovers have Chinese knockoff sunglasses perched falcon-like on their foreheads and Mercedes car keys dangling seductively in the pocket of their Lacoste sports shirts.
I have never seen a single Mercedes in Cuenca. As for the sports shirts, don´t look now but the alligator is facing the wrong way.
* * *
It clears nicely.
-- oligarchspeak for "I like it."
Synonym: mildly sensational --
Having shown beyond a reasonable doubt that a fully-orchestrated Sheeple campaign is targeting Cuenca, let´s quickly run that campaign past our five observations (see above) about market bubbles in general.
(i) Big money...very big money...launched the Cuenca ad offensive. To identify Mr. On High, however, don´t bother looking for a deposit in any media owner´s bank account. Forget, too, his company´s balance sheet.
Members of the oligarchy don´t function that way. If you are somebody like Brian L. Larson, billionaire owner of NBC, or 91-year-old billionaire, Sumner Redstone, owner of CBS, you pass the word down from Mr. On High to your Editor-in-Chief to cook up a favorable "piece" on Cuenca. A 10-second telephone call is all it takes, usually on Sunday and at dinnertime. That way you can be sure of catching "your" Mr. Editor at home. Mr. Editor won´t mind a bit...if he is from this planet...
What you, the media owner, will receive from Mr. On High in return is...ah, that´s where it gets interesting.
There isn´t an oligarch alive who doesn´t take to heart the expression payment in kind. Among the mega-wealthy a lively trading of goods and services, e.g., a yacht vacation, a football stadium box, is going on this very second. One of their favorite exchanges: pieces of real estate. Because not a single penny changes hands, in many states there are no evil taxes to pay. Often, the only thing visible is an invisible chit to be cashed in later, when the media owner wants something. Until that happens, the chit creates expectations that enable the media owner to convert what he wants and already has, money, into what he wants but does not have: leverage. In fact, if handled with care, the chit will never be cashed in. It clears nicely.
The beauty of the whole arrangement is that if things turn nasty and lawsuits are filed by Americans who get stung in Cuenca by house flippers and other speculators, a Brian L. Larson or Sumner Redstone can deny any and all responsibility for the Cuenca campaign. What, me participate? Coincidence (see above) will be the fudge factor a legion of lawyers will take off the back burner, serve up.
(ii) No pretense whatsoever is offered by manufacturers of the Cuenca Sheeple bubble that they are of the old-fashioned school that seeks durable sales by gradually building a good reputation. In fact, everything about the lying, half-truthing, ignorant Cuenca ad campaign is au contraire. We will return to this point; something primordial is involved.
(iii) The Cuenca ad campaign is targeting a specific demographic group. The manufactured audience -- American retirees -- is being rounded up by ads, then branded and herded to points of sale. The campaign is conspicuous in its absence of information for and about activities for children, adolescents -- in brief, anybody who is not old.
Sidebar: Shhhhh... A bit of real information has the potential to make the Cuenca bubble explode in a fiery crash reminiscent of the Hindenburg:
We noted there are 5,000 elderly Americans already living in Cuenca. But how accurate is that figure? Nowhere is the number given of Americans who journeyed to Cuenca, looked around and sighed: veni, vidi, vale dixi -- "I came; I saw; I quit." Any movement of American retirees out of Cuenca reduces the mass, thus ipso facto reduces momentum.
I saw the same game of let´s-hide-that-number before...
As our prior post discussed, Santa Fe was invaded by speculators. It is a highly transient area; a lot of people come but they also go -- a fact the speculators want kept secret at all cost. To openly admit that not everybody is happy in Santa Fe -- that it is not Shangri-La (unless you are a divorce enthusiast) -- would puncture the market bubble the speculators have sustained, with ever-increasing difficulty, for three decades.
(iv) You still don´t believe an orchestrated Cuenca Sheeple drive is underway? You might find it strange, then, that Cuenca non-ad ads appear only during programs around which the targeted audience congregates. Retirees tend to watch the evening news -- or non-news news, as the case is getting to be. Cuenca is never mentioned during any broadcast short on an elderly audience. Don´t even think about "Sponge Bob" Saturday morning reruns for kiddies or late night movies for adolescents, e.g., "The Fast and The Furious."
(v) Finally, as noted, the $36-million fabrication of a bubble audience for a movie concentrates on opening weekend only, whereas a real estate bubble is fabricated in cycles over time. In both cases, the goal is momentum.
Build strength on strength, not on weakness. Here´s how that strategy is being played out in the Cuenca campaign:
Momentum building involves not only what is said but also who is saying it. Remember the basic movement required to generate The Big Mo: start with favorables and then move to undecideds. Now you know why the NBC report has a retired American couple already in Cuenca conduct the dog and pony show; they represent the existing base of support for the product -- the favorables.
The ABC report is even more blatant in the use of favorables to lure and convert undecideds: There are thousands of American retirees who want you to know...
Thousands. They don´t call it mass advertising for nothing. The manufacturing of a real estate bubble is impossible without mass. No mass; no momentum. No momentum; no bubble.
* * *
Those who cannot remember the past are condemned to repeat it.
-- George Santayana --
Let´s assume no corrective action is taken by Cuenca and other cities high on the speculators´ hit list. Let´s assume furthermore that the most toxic form of speculation, house flipping (see prior post), is allowed to continue on its merry way.
What is waiting on the road up ahead is only too well-known. It is the tale of two cities, millennium 2000 style.
Let´s start with some recent history. In both Sarasota and Santa Fe the last peak in the housing market occurred in 2007. Since then, home owners who want to sell have been twiddling their thumbs, shuffling their feet, and paying and paying and paying their banks. Talk about a seven-year itch: only now in Santa Fe are prices (and only at the lower end of the market) starting to come down.
Push finally came to shove. Their savings drained and family jewels gone,**** for many home owners repossession is one short paycheck away. Facing the double-edged knife of forced asking-price cuts and ballooning mortgage payments, for many of them something has dawned. They are caught in the oligarchy´s favorite game: Heads we win; tails you lose.
As for the speculators operating in Sarasota and Santa Fe today, most are bottom feeders. The heavyweights made their fortunes decades ago and pulled up stakes. As a perceptive Mexican who cut their lawns told me, "Ellos mean y corren." They piss and run.
Where did they go?
Try Vilcabamba, Ecuador where American real estate speculation is a mere 20 years old and already a senior non-citizen. The heavy hitters are nervously looking around; their Rolexes are telling them it is time to cut and run. Next stop -- only hours away: Cuenca.
The legacy that speculators left behind in Sarasota and Santa Fe comes in four parts:
First and foremost, local people got stuck paying the tabs of itinerant multimillionaires. The bill comes due countless times every day in the form of mind-wobbling inflation in prices of everything from milk and telephones to shirts and dental bills. I remember standing in Kaune´s, the local grocery store in Santa Fe, in 1975, staring at a can of soup. I was mesmerized not by what was in it but by what was on it: five price stickers, each plastered on top of the other. Normally, grocery stores take inventory every six months. What the hell is going on? I wondered aloud. Heads turned; prices had risen five times in half a year.
What the residents of Sarasota and Santa Fe discovered too late: the price of real estate cannot rise without raising prices of everything else. Makes sense. Let´s say you rent an apartment. The county makes its standard 10-year reevaluation of property. Thanks to house flipping, the apartment tripled in value. That means your landlord´s property tax also triples. What do you think he will do to your rent? To pay the rent increase, what do you think you will do to the prices you charge for your goods or services?
To those who want to dispute the connection between real estate speculation, particularly house flipping, and generalized mega-inflation, the holy words of the Sheeple bubble campaign are the only real response: Dream on. It clears nicely.
The second residue left by speculators is best expressed in the hit song "I Dreamed a Dream." Nobody beats the middle class in singing the closing line: life killed the dream I dreamed. The American Dream of home ownership in Santa Fe and Sarasota is going, going... But as we just saw in mega-inflation, the devastation extends beyond houses. A recent report from the Sarasota Herald Tribune:
"But as homeownership becomes out of reach for middle-class families, analysts warn of potential economic dominoes -- from a sharp drop in home sales to rental rate hikes and even job losses in sectors tied to housing, like construction.
´At some point, especially in Florida, we need to make the transition from investors dominating the housing market to traditional buyers,´ said Sean Snaith, an economist with the University of Central Florida.
´Affordability is one element to that, and anything that would jeopardize this transition could have consequences for the housing recovery,´ Snaith said. ´We're just not seeing improvement in the economic foundations -- like employment -- that would help address this.´"
Investors dominating the housing market. You nailed it, Sean Snaith; you hit the top of the note. Thank you.
The third part of the legacy in the two cities where real estate speculation welled up, seized control: the de-structuration of community.
I could write a 400-page book on the life in Sarasota and Santa Fe that was swept out to sea by the speculator storm. The rocky bottom is visible in two standard indicators of anomie and alienation.
(i) Crime rates. Here are Sarasota´s and Santa Fe´s. In personal security, both cities are disasters. 96% of U.S. cities are safer. I know it sounds insane to anybody living in Sarasota and Santa Fe today (the After era), but I can remember when nobody locked their car or house in either city.
(ii) Suicide rates. The suicide rate for Sarasota: 16.3 per 100,000. The suicide rate for Santa Fe: 20.4 per 100,000. The suicide rate for the U.S.: 12 per 100,000.
The fourth and final part of the legacy left by real estate speculation run amuck in Sarasota and Santa Fe took the form of a canary-in-the-mine warning. Their world-renowned artists retired, died, or flew away.
I have an idea where they went but won´t divulge it here. Which brings me to
Clue 7. The locked-up cat and eel under a rock are not artists.
* * *
Every crowd has a silver lining.
-- P.T. Barnum --
We end where we began -- with "A Face in The Crowd."
The movie was made in 1957, when TV was still new and nobody knew what its impact would be. "A Face in The Crowd" had definite ideas about TV´s potential, however, and expressed them forcefully via a great script, a top director and a magnificent cast. A more prescient movie has never been made.
In 1957, rules had yet to be invented. Because few people knew or understood TV´s socio-economic and political implications, there was more freedom, even spontaneity, in the air. Case in point: "Playhouse 90," where a host of top actors and writers got their start, was -- imagine this -- live.
The powers that be did not take long, however, to figure out certain things and to begin to impose limits, even taboos. For starters, to my knowledge "A Face in The Crowd" has never been shown on TV.
There was another reason why in 1957 you could say and do certain things and get away with it...
The political system built by the Founding Fathers still governed America. Regular readers of this blog know our central thesis. It is presented in The Big Movida: The Third American Revolution available without cost on this web site. That thesis is censored; it is found only here:
The First American Revolution, 1776-1789, transformed the political system from a monarchy not into a democracy but rather a “политей” or polity, i.e., a middle class-moderated, oligarchy/democracy hybrid inclined toward democracy. The Second American Revolution, 2008-2009, changed the polity into an oligarchy with democratic residues, accessories. That change was normal, predictable; Aristotle analyzed it 2000 years ago. The Third American Revolution will resurrect the polity but with greater power for democracy, less for the oligarchy.
The clamp-down on freedom of expression in the media increased a hundred-fold when in 2008-9 America underwent its Second Revolution -- a change of, not in -- its political system from the hybrid polity to an oligarchy.
With the richest 5% of Americans now in unabashed, unabridged control of the U.S., there is a compelling need to revisit the Sheeple phenomenon introduced and uncompromisingly portrayed in "A Face in The Crowd."
Who or what are Sheeple -- really?
Dynamic interrelationships between psychology and physiology have been recognized for centuries. The phenomenon of psychosomatic (psycho = mind, soma = body) illness has entered the popular lexicon. A related term, somatic symptom disorder, is being employed more and more frequently.
That the mind can create observable, quantifiable, testable, physical effects in the body is no longer disputed. Which leads us to ask: can the human psyche also create physical effects outside the body?
We are not entertaining simplistic mystical notions -- that an individual or group can create a fork, for example, by thinking about it. Rather, we are speaking of objective, observable cultural phenomena "out there" in the real world which are created and maintained by psychic processes. Many of those phenomena are the result of social interactions among unconscious elements, interactions which no individual alone could create or sustain.*****
Unconscious archetypes, in particular, come to the fore in somatization. Innate to all humans, archetypes constitute a basic part of how the brain functions, viz., its limits. They are potentials that exist in all of us, potentials which can functionally assume material form in real people and behavior. For example, in Africa the archetype of the wise old man was constellated in Nelson Mandela. In American culture, financial fraudster Bernard Madoff incarnated the archetype of the trickster.
Basically, Sheeple sleepwalk through life, thinking other people´s thoughts, feeling other people´s feelings. There is nothing new in that conclusion; in 1835, Tocqueville observed that a slave thinks with the brain of his master. Which raises a question: When we see Sheeple, are we looking at walking, talking, breathing soma -- corporal entities -- that are produced and maintained by unconscious projections and other psychic processes?
Stated differently: are Sheeple, in functional terms, socio-economic psychosomatic entities? To put it bluntly: are Sheeple a tangible figment of somebody´s imagination?
If the answer is yes, then the psychic processes that create and maintain Sheeple pertain to someone else.
The adult fairytale, Cuenca is Paradise, takes us directly to the source. Our post "Stupid Movies Explained" noted that the bubbling core of simple-minded media productions
"was exposed by a man who knew far more than anybody reading these words -- as well as I who am writing them -- will ever know about the American entertainment industry: Rod Serling.
One balmy Saturday afternoon, Serling delivered a lecture, The Old Grad Syndrome, to a packed house. When the time for questions came, up jumped the devil:
´Why are TV programs so stupid?´
I swear I heard a pin drop.
Serling didn´t blink. His answer:
Hollywood executives will tell you they are only behaving in the best tradition of democracy -- giving the American people what it wants. In their never-ending quest to truly represent the majority, the executives will also tell you that at great expense they collect top-flight-up-to-the-minute information about America´s tastes and dislikes and preferences and expectations...That information comes from thousands of scientific public opinion polls, screenings, census data. Through it all, objective quantitative analysis is the order of the day.
All of which is a lie.
Serling claimed in no uncertain terms that what is on TV is the parade of the personal tastes, fantasies, and caprices of the top corporate elite of America. In a word, you are seeing on TV what they want to see on TV.
I know what I like, the men at the top will tell you; actually, they like what they know. I am the market remains their unshakeable mantra. In America, that is tantamount to saying: I am God.
Well, if the oligarchs are right, here is what is going on inside God´s head:
´Hogan´s Heroes´: Gosh a-mighties, them concentration camps and Nazi guards was more fun than a barrel of monkeys! ´I Dream of Jeannie´: That Barbara Eden sure is beautiful! Ya´ reckon if we sponsor the show, I could ... well ... you know ...
Today´s movies and TV programs continue to display the puerile and prurient interests of the richest 5% of Americans...As always, 100% unconscious... "
"They´re mine! I own ´em!," the sociopathic TV-personality Lonesome Rhodes proclaims of Sheeple in "A Face in The Crowd" -- "They think like me." Exactly. But a nuance is needed. Functionally, Sheeple ARE Lonesome´s thoughts embodied, touchable, palpable; they´re mine is true in more ways than one. If Rod Serling is right, those thoughts in turn are nothing more and nothing less than the thoughts of America´s richest 5%.
I would sum up socio-economic psychosomatic entities this way. A culture calls out phenomena from the unconscious and puts names on them. In this case: Sheeple.
Turning to the Sheeple who are coming to Cuenca: it would be interesting to know the name of Mr. On High who set in motion the latest media campaign. An old-time latifundista with hundreds of thousands of acres to sell? Drug traffickers? Builders of apartments and condos? A cartel of real estate speculators?
In the end, I don´t think the name of Mr. On High is worth knowing, and for one reason: tomorrow another Sheeple bubble crowd will be manufactured by another Mr. On High someplace else.
What you really need to know about market bubbles is contained in our riddle:
A locked-up cat (in Spanish, gato encerrado) and eel under a rock (in French: anguilla sous roche) mean exactly the same thing. It is depicted graphically in the golf game photo at the top of this post. I hope you will look at it again.
*Obviously, if you could coordinate a million little people who each want to buy/sell 100 shares and placed a single order for all of them, you could make a price change. Intriguing idea, to which I respond: how are you going to contact them?
Angelo Dundee, trainer of Mohammed Ali, once joked that he was going to make Ali mad so that Ali would hit him, enabling Dundee to sue Ali for $1 million.
To which Ali responded: "Who is going to serve the papers?"
**The term Sheeple
"is often used to describe people who act in direct reaction to saturation advertising, going out and buying the 'must-have' fashions and fads of the moment. Sheeple is also used more generally to refer to people who don't tend to think for themselves but basically follow the crowd or believe what the media tells them." Source: Macmillan Dictionary.
***Manufacturers of real estate bubble audiences aren´t the only ones fabricating adult fairytales.
Watch Barack Obama´s keynote speech to the 2004 Democrat Convention. It was his political launching pad; he never would have become president without it. For a stirring example of an adult fairytale flourish, try: "there's not a liberal America and a conservative America; there's the United States of America."
Sorry, Mr. President, but every political poll I have ever seen or conducted shows the U.S. to be a highly polarized country in its political views. As for economics, United States Government Census Bureau data (note: click on Table H-2, all races) show deepening polarization, viz., the rich are getting richer, the poor poorer, the middle class smaller.
The same official data show something else. The split between the oligarchy and everybody else has grown, not shrunk, under the Obama presidency.
****Exact figures not available. Here is the finding for the U.S. as a whole in a survey of over 4,000 households which was published last month in the Federal Reserve Board´s "Report on The Economic Well-Being of U.S. Households in 2013": "Only 48 percent of respondents said that they would completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money."
*****The anthropologist Jules Henry discussed the phenomenon of people behaving in an as-if world. The retired Americans featured in the Cuenca Sheeple bubble campaign are a textbook example. I would add that seldom is the as-if world consciously perceived as such by its participants, viz., they do not secretly know better. No doubt, they occasionally recognize they are engaging in as-ifness; however, that recognition has no significant impact on their behavior. When it comes to manufacturing bubble crowds for a product, orthopraxis -- not orthodoxy -- is what counts.
As Nazi Germany and other disasters show, as-ifness can get out of hand. Jules Henry explained that “pathological extremes of as-ifness are merely special phases of the average cultural as-ifness we encounter in advertising and elsewhere. One might say that advertising simply exploits the ability of the ordinary citizen to live in an as-if universe.” Jules Henry, Culture Against Man, Random House, 1963, p. 363.