Batchelor & Constable continue their Marketwatch adventure with a piggy bank from the now defunct (and missed) Commerce Bank in order to illustrate that hoarding is hot.  While consumer confidence is at an all-time low, the savings rate is climbing like a space shuttle.   The consumer is not spending between $4-5 billion per week -- going from the negative savings rate during the housing bubble to at least 7% by next year.   This means we as a nation have gone from splurging to hoarding within months: like throwing the Titanic in reverse in an ice field.  It also means that discretionary spending is nonexistent, which explains the shuttering of retail chains like Circuit City and the vanishing of a Starbucks near you and the sudden canceling of "Dreamliner" airplane orders from Boeing.  No one is spending anything (and without the consumer, American business is a skeleton of its former plump self).  Thrift shops are booming.  Second-hand clothes are fashionable.  The only evidence to be found of consumption is that profits are up at Amazon.com where you do not have to pay for brick and mortar overhead.   How long can it last?  Hoarding was anti-social in March 1933 when FDR took office, and banks limited how much cash you could withdraw.  Our grandparents never forgot the idea of putting cash into the mattress. Our parents never trusted the stock market.  Will the modifier "brand-new" become a put-down?  How about the term "retail?" or "take-out."  And is the vocation of "banker" now the same as "black-marketeer?"  Time to reissue Benjamin Franklin's "Poor Richard's Almanac," with the gems of the Enlightenment such as, "He who saves not as he gets, may keep his nose all his life to the grindstone, and die not worth a groat."

John Batchelor, author and radio host, talks with Simon Constable of Dow Jones Newswires, about Britain's intensifying banking crisis, wondering whether the U.S. will follow suit. (Jan. 23) 

Watching their work in Asia collapse, ex-hedgies Batchelor & Constable turn their fretting to the collapse of banking in London after the on-again, off-again Gordon Brown and Alistair Darling announcement of a bad bank to save the very bad balance sheets at the London banks.  One day the word was that there would be a bad bank; the next day it was an aggregator bank; and the third day it was partial insurance coverage for bad bank assets.  The English pound plunged along with the FTSE.  On the fourth day, famous US investor Jimmy Rogers commented from Asia Jim Rogers: 'UK has nothing to sell' that there was nothing in London worth owning, that London was dead as an investment center -- finally a seat in the Tube -- and that it was time time flee the pound.  Days later, the Financial Times Martin Wolf commented that British banks may be too big to rescue "with balance sheets equal to 440 percent of the gross domestic product."  Now the unflinchingly cheery Batchelor & Constable fretting turns to the US, where George Soros writes The right and wrong way to bail out the banks in the Financial Times that there are two choices for the fledgling Obama administration -- either it nationalizes the banks and wrecks the stockholders, bondholders and employees, or it creates a bad bank and solves nothing in small steps.  Lady or the Tiger!  Batchelor & Constable get out front of Gordon Brown and Alsitair Darling, and maybe Mr. Obama and Mr. Geithner, too, by considering the creation of a bad bank for themselves in which to deposit their personal liabilities and debts.   Every man a bad bank holding company.  A bad bank whose bad time has come.  Batchelor & Constable will speak with Jimmy Rogers on Sunday 25 at midnight Eastern Time.

Unemployed hedge fund asset managers Batchelor & Constable (formerly The Bleak Fund, LLC) discover why their investment in Smurfit Stone Corporation,  (NASDAQ: SSCC) "a leading manufacturer of paperboard and paper-based packaging" -- a global box maker for consumer products, has gone from $9.00 to $0.07 in the last year and is now a likely bankrupt.  And why this plunge points to the failure to liquidation of another of Batchelor & Constable investment in consumer goods retailers Circuit City in the US.  And also why the export-led economies in Asia are suffering much more dramatically than the consumer culture in America and Europe.  And why brutality and turmoil toward migrant workers in the Tiger economies of East Asia may be a signal that that the global economy is heading to a lower and darker bottoming before the theoretical recovery.

Colleague Steve Moore, Wall Street Journal, wrote recently a gifted literary piece on the thrilling similarities between Ayn Rand's "Atlas Shrugged" and the current TARP dominated economy of bailout, whining, gloom, and the walking dead General Motors. Compare Ayn Rand's "Anti Dog-Eat-Dog Act" with the TARP. Letting BofA and Wells Fargo and JP Morgan eat Citi was the right choice in October. Now it will happen anyway, and still Citi gets to keep our billions upon billions. John Galt was Ayn Rand's hero who proposed madly that the command economy stop taxes and get rid of all the state workers. Heresy! The Winnie-the-Pooh revival is serendipity, though I do puzzle that Winne and his pals were all born in 1926, "Winne-the-Pooh," and in 1928, "House at Pooh Corner," and therefore they were stock market bubble babies. The market went from 100 in 1920 to 100 in 1926 to nearly 400 in 1929 and then crash! Down to 50 in 1933. And meanwhile Winnie and Piglet and Eeyore prospered in every home throughout the Great Depression and ever since. Now that distress has returned, it is a striking coincidence that Winnie is coming back this year with a sequel by David Benedictus just as we hear remarks by the President-Elect that we must all sacrifice.  Winnie is all about sacrifice for his fearful friend Piglet, for his despairing friend Eeyore, for his own sweet tooth.  Back to the undeveloped 100 Acre Wood, the hunt for free honey in hives, fear of Heffalumps, and other socialist worries lorded over by a fair-haired boy in short pants who wanders in and out with no recognizable source of income or special ambition.  Winnie the always hungry collectivist bear seeking Eeryore's pilfered tail at Owl's high-rise house.

French President Nicholas Sarkozy is the Smoot & Hawley champion of Europe.  (Monsieur Smoot and Monsieur Hawley are played by ex-hedgies Batchelor & Constable.)  Sarkozy has proposed a $25 billion sovereign wealth fund "to shield French companies from foreign 'predators'...." Sarkozy says that without such a mechanism, France will "stop building trains, aricrafts, cars and ships."  Sarkozy looks to use the Cassis des Depots et Consignations (CDC) as the vehicle. Germany is said to oppose (what a surprise). Claude Barfield, AEI, wrote in mid December: "The growing danger of investment protection demands both an international response and a strong statement from the incoming Obama administration.... The recent collapse of the Doha Round of global trade talks has made this all the more urgent."  There is little indication at this point that the Obama administration has made a choice on global trade talks.  It may all seem dry and theoretical except that protectionism and beggar-thy-neighbor manipulation were the predicate for the breakdown in state to state relationships after 1932.  Sarokozy says, "Buy France."  I hear, "Beggar France."

Eric Shawn and I spoke of the convergence of two stories on the same Sunday, the NYT front page excerpt of David Sanger's book on nuclear proliferation, to be released Tuesday 13, and the Washington Post on the ineffectiveness of efforts to block Iran and others from acquiring all the technology they need via internet ordering and third party cut outs. I said that all eyes are on Mrs. Clinton's testimony to the Senate this week re her nomination to SecState, because this will be the Obama Doctrine for Iran, first draft. Malcolm Hoenlein told me on the Sunday 11 radio show that Mrs. Clinton will be very fine in her remarks, that she is hawkish on Iran and will offer diplomacy very conditionally. Her special envoy to Iran will be the old State Department hand, Dennis Ross, who Malcolm knows well and who is trusted and regarded in Jerusalem. Al good news. I did warn Eric Shawn and his audience that the question immediately is how does Tehran respond int he surrogate war in Gaza, between Washington and its ally Jerusalem and Hamas and it enabler Tehran. Who will escalate next?

Yellow metal will soar above $1,000 per ounce, says mining chief -- Financial Times 1/6/09