Pop Goes the Weasel

Now that Steve Case has finally stepped down as the figurehead of AOL-TimeWarner, the media empire is free to spin-off it’s Internet services division and become a good ol’ content provider, again. That is, if they can remember how. Case’s departure marks the real end of the Internet-as-business era, the ultimate admission that kudzu-like though it may be, the interactive network is not the financial behemoth of the century. At least not the next century.

And like AOL, America itself might soon be surprised by the limit of its own ability to comandeer the global economy in the coming century. In a move akin to the inflation of share prices practiced by AOL and others in the 90’s, Nixon and his contemporaries pumped a few last bursts of air into the American dollar and the trading strength of its businesses through some clever accounting – including the release of our currency from any connection to the silver standard.

But like a kid on a speed binge, an economy can live on borrowed dollars for only so long. In the last few gasps of this foreseeable ‘correction,’ we’ve witnessed the pilfering by the ultra-wealthy (and ultra-connected) of what’s left of the nation’s coffers and natural resources. And war – far from bringing new wealth to this waning empire – will merely extend our limited resources and attention beyond their capacities.

Here’s what I think is happening: the ascendancy of America as the world’s great economic power is over. We’re not going anywhere, and we’re not about to become the poorest nation in the world. But we are no longer going to grow the fastest, and – once England accepts the Euro – our currency won’t be the strongest. We are over the top of the hump. That asymptotic rise of the stock markets since WWII has flattened out.

The current mock-recovery is simply an opportunity for the smart to cash out at the expense of a the last suckers. Look at the looming pension plan debts of most of the S&P 500, and you’ll soon get a sense of how dramatically the valuations of these companies will be shrinking over the coming months as they are forced to reinvest literally billions back into these accounts.

So, my official and not-to-be-wagered-upon stock market prediction is a 10-15% rise in the S&P by the end of February, and then freefall down to 6500 before the war starts. Then, a blip up with that sense of certainty that always accompanies a good ariel bombardment, and a blip back down when we realize that in a globally networked economy, war is bad for business, too.