We're in recovery.
#81
I feel the need...
U.S. economy has rocky road to recovery
The U.S. economy is encountering a number of potholes on the road to recovery.
http://www.marketwatch.com/story/us-...ery?siteid=rss
If the recession does wind down later this year, as many economists now expect, it will be nothing short of a miracle.
The natural forces that turn recessions into recoveries, such as the inventory cycle and a rising stock market, are being overwhelmed this time around by a number of negatives that have suddenly cropped up.
Take the lack of fiscal stimulus, for example.
As I wrote last week ( see May 26 column), only about $50 billion of the $787 billion stimulus package has hit the economy so far. Any additional funds will be equally slow in coming, since they are earmarked for states and local governments to upgrade their infrastructure, which can't be done overnight.
Even if this sum was tripled, it would clearly not be enough cash to turn the economy around from what in many respects is the worst recession since the 1930s....
The natural forces that turn recessions into recoveries, such as the inventory cycle and a rising stock market, are being overwhelmed this time around by a number of negatives that have suddenly cropped up.
Take the lack of fiscal stimulus, for example.
As I wrote last week ( see May 26 column), only about $50 billion of the $787 billion stimulus package has hit the economy so far. Any additional funds will be equally slow in coming, since they are earmarked for states and local governments to upgrade their infrastructure, which can't be done overnight.
Even if this sum was tripled, it would clearly not be enough cash to turn the economy around from what in many respects is the worst recession since the 1930s....
#83
Iro Ridg .308
As it comes to daily transactions:
stock market <<< Bond Market << Forex Market
Bank-run dark pools swelling in U.S. stock markets
TORONTO (Reuters) - Big banks are executing an increasing percentage of U.S. stock trades within their own walls, capitalizing on the credit crisis and enticing the most active traders away from the traditional exchanges.
"Dark pools," where orders are anonymously matched so that traders do not alert the wider market to their intentions, have triggered concerns that stock pricing may not be transparent.
But the growth of those run by broker-dealers such as Goldman Sachs and Credit Suisse are squeezing other "dark" electronic trading venues, as well as exchanges, resulting in lower fees.
The bank-run dark pools have only recently gained some traction in Europe, while other countries, such as Canada, are watching closely for signs of success or failure as U.S. equity markets fragment into some 40 venues.
Although executives and market watchers expect to see new U.S. rules to ensure public and accurate pricing of stocks, they also expect the private pools to grow beyond the relatively small niche they now occupy.
"The dark pools are definitely going to grow; the wild card is any new regulation," said Dmitri Galinov, director and head of liquidity strategy at Credit Suisse's advanced execution services, running the bank's CrossFinder dark pool.
http://www.reuters.com/article/domes...090604?sp=true
TORONTO (Reuters) - Big banks are executing an increasing percentage of U.S. stock trades within their own walls, capitalizing on the credit crisis and enticing the most active traders away from the traditional exchanges.
"Dark pools," where orders are anonymously matched so that traders do not alert the wider market to their intentions, have triggered concerns that stock pricing may not be transparent.
But the growth of those run by broker-dealers such as Goldman Sachs and Credit Suisse are squeezing other "dark" electronic trading venues, as well as exchanges, resulting in lower fees.
The bank-run dark pools have only recently gained some traction in Europe, while other countries, such as Canada, are watching closely for signs of success or failure as U.S. equity markets fragment into some 40 venues.
Although executives and market watchers expect to see new U.S. rules to ensure public and accurate pricing of stocks, they also expect the private pools to grow beyond the relatively small niche they now occupy.
"The dark pools are definitely going to grow; the wild card is any new regulation," said Dmitri Galinov, director and head of liquidity strategy at Credit Suisse's advanced execution services, running the bank's CrossFinder dark pool.
http://www.reuters.com/article/domes...090604?sp=true
#84
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I am completely IN the stock market. Well, not like ALL my money at any one given time. Too volatile. That and I cash out once I earn a nice profit. But ever since the collapse I have been actively managing my own money and recovered most of what I lost. Not bad, not bad...
I'm livin the American Dream with Dusty Rhodes again.. the stock market crash won't cause me any more financial pain and misery.
I'm livin the American Dream with Dusty Rhodes again.. the stock market crash won't cause me any more financial pain and misery.
Last edited by afjock21; 06-09-2009 at 01:25 AM.
#85
I feel the need...
On Borrowed Time: Consumer-Led Recovery
Before pricing in a rapid economic recovery, investors might consider the fundamentals of the economy's workhorse -- the U.S. consumer.
Despite recent frugality, consumers have barely dented their debt load. The Federal Reserve will offer a fresh peek at that mountain on Thursday, when it releases its "flow of funds" data for the first quarter.
By the end of 2008, households were on the hook for $13.8 trillion in debt -- nearly matching the $14.3 trillion output of the entire U.S. economy, not adjusted for inflation, that year.
Households are shedding debt; they're just not doing it very quickly. They owed roughly 130% of disposable income at the end of 2008, down only slightly from a record 133% in the first quarter of 2008.....
Despite recent frugality, consumers have barely dented their debt load. The Federal Reserve will offer a fresh peek at that mountain on Thursday, when it releases its "flow of funds" data for the first quarter.
By the end of 2008, households were on the hook for $13.8 trillion in debt -- nearly matching the $14.3 trillion output of the entire U.S. economy, not adjusted for inflation, that year.
Households are shedding debt; they're just not doing it very quickly. They owed roughly 130% of disposable income at the end of 2008, down only slightly from a record 133% in the first quarter of 2008.....
#86
Iro Ridg .308
I am completely IN the stock market. Well, not like ALL my money at any one given time. Too volatile. That and I cash out once I earn a nice profit. But ever since the collapse I have been actively managing my own money and recovered most of what I lost. Not bad, not bad...
I'm livin the American Dream with Dusty Rhodes again.. the stock market crash won't cause me any more financial pain and misery.
I'm livin the American Dream with Dusty Rhodes again.. the stock market crash won't cause me any more financial pain and misery.
*
#87
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Good question. Well, maybe I should add that this IS my job. The "profit" is to pay my monthly expenses, and the rest I re-invest or day-trade. Although, as I invest and pick my spots in certain companies, I also day-trade to try an earn a quick buck. For example, I bought 2,000 shares of bankrupt GM last week under GMGMQ and quickly sold for close to a thousand dollar profit. Obviously the thing is worth nothing, but it's just daytrading at it's finest.
#88
Lots of People Didn't Get the Memo
If today's news cycle is anything to go by, it looks like lots of people didn't get the memo telling them we're on the road to recovery (a technical snafu, perhaps?)....
Time for a new memo...?
http://www.financialarmageddon.com/2...-the-memo.html
If today's news cycle is anything to go by, it looks like lots of people didn't get the memo telling them we're on the road to recovery (a technical snafu, perhaps?)....
"U.S. Homebuilder Confidence Unexpectedly Fell in June" (Bloomberg):
Confidence among U.S. homebuilders fell unexpectedly in June, indicating that a recovery from the housing slump will be slow to develop.
The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 15 this month from 16 in May, the Washington-based NAHB said today. A reading below 50 means most respondents view conditions as poor.
http://www.bloomberg.com/apps/news?p...d=aSGFRjuouGCU
Confidence among U.S. homebuilders fell unexpectedly in June, indicating that a recovery from the housing slump will be slow to develop.
The National Association of Home Builders/Wells Fargo index of builder confidence decreased to 15 this month from 16 in May, the Washington-based NAHB said today. A reading below 50 means most respondents view conditions as poor.
http://www.bloomberg.com/apps/news?p...d=aSGFRjuouGCU
"Treasury: Lending by Bailout Banks Fell in April" (Associated Press):
The Treasury Department says the value of loans held by the 21 largest institutions getting federal bailout support fell in April, the fifth decline in six months.
The department's monthly report of lending activity says that average loan balances at the 21 institutions totaled $4.34 trillion in April, down 0.8 percent from March.
Treasury has been issuing reports to track lending activity at banks that received capital from the $700 billion bailout fund. While activity has fallen in five of the past six months, the administration says the declines would have been even more severe without the government support.
http://www.forbes.com/feeds/ap/2009/...ap6545695.html
The Treasury Department says the value of loans held by the 21 largest institutions getting federal bailout support fell in April, the fifth decline in six months.
The department's monthly report of lending activity says that average loan balances at the 21 institutions totaled $4.34 trillion in April, down 0.8 percent from March.
Treasury has been issuing reports to track lending activity at banks that received capital from the $700 billion bailout fund. While activity has fallen in five of the past six months, the administration says the declines would have been even more severe without the government support.
http://www.forbes.com/feeds/ap/2009/...ap6545695.html
"Citigroup CEO: Accept New World of Tighter Credit" (Associated Press):
Citigroup Inc. Chief Executive Vikram Pandit says borrowers should accept a new world of tighter credit as financial institutions recover from months of bad loans, failed banks and foreclosed homes.
Pandit spoke Monday at the three-day National Summit, which is expected to draw about 3,000 attendees to Detroit over three days. The goal of the summit is to craft a plan to keep the U.S. competitive in manufacturing, energy, technology and the environment.
He anticipates less credit that is more expensive even as financial markets show signs of recovery. He also expects more corporate restructurings across different industries.
http://www.mercurynews.com/business/ci_12594623
Citigroup Inc. Chief Executive Vikram Pandit says borrowers should accept a new world of tighter credit as financial institutions recover from months of bad loans, failed banks and foreclosed homes.
Pandit spoke Monday at the three-day National Summit, which is expected to draw about 3,000 attendees to Detroit over three days. The goal of the summit is to craft a plan to keep the U.S. competitive in manufacturing, energy, technology and the environment.
He anticipates less credit that is more expensive even as financial markets show signs of recovery. He also expects more corporate restructurings across different industries.
http://www.mercurynews.com/business/ci_12594623
"Is the Housing Bust About to Take Manhattan?" (Reuters):
New York City real estate prices are looking increasingly shaky as instability in two of the city's sexier submarkets -- second homes in the Hamptons, and new condos in Manhattan -- register the latest signs of a housing downturn.
http://www.reuters.com/article/newsO...55D1ON20090614
New York City real estate prices are looking increasingly shaky as instability in two of the city's sexier submarkets -- second homes in the Hamptons, and new condos in Manhattan -- register the latest signs of a housing downturn.
http://www.reuters.com/article/newsO...55D1ON20090614
"U.S. Credit Card Defaults Rise to Record in May" (Reuters):
U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America Corp's lending portfolio, in another sign that consumers remain under severe stress.
http://www.reuters.com/article/ousiv...55E5GQ20090615
U.S. credit card defaults rose to record highs in May, with a steep deterioration of Bank of America Corp's lending portfolio, in another sign that consumers remain under severe stress.
http://www.reuters.com/article/ousiv...55E5GQ20090615
"US ECON: May Empire State Mfg Index Falls 5 Points to -9.41" (Reuters):
Washington, June 15 - The New York Federal Reserve Bank's Empire State Manufacturing Index unexpectedly dropped nearly five points in June to -9.41, a sign that manufacturing is still contracting in New York, although at a slower pace compared to Q4 2008 and Q1 2009. Economists were expecting a slight improvement to -4.50 from the -4.55 reported in May. The index has been in negative territory since May 2008.
http://www.forbes.com/feeds/afx/2009...fx6543487.html
Washington, June 15 - The New York Federal Reserve Bank's Empire State Manufacturing Index unexpectedly dropped nearly five points in June to -9.41, a sign that manufacturing is still contracting in New York, although at a slower pace compared to Q4 2008 and Q1 2009. Economists were expecting a slight improvement to -4.50 from the -4.55 reported in May. The index has been in negative territory since May 2008.
http://www.forbes.com/feeds/afx/2009...fx6543487.html
"IMF Says Worst Not Over" (Reuters):
The head of the IMF questioned on Monday debate about when to roll back stimulus spending, saying the world economy had yet to weather the worst of a recession that claimed a record number of European jobs.
http://abcnews.go.com/Business/wireStory?id=7840093
The head of the IMF questioned on Monday debate about when to roll back stimulus spending, saying the world economy had yet to weather the worst of a recession that claimed a record number of European jobs.
http://abcnews.go.com/Business/wireStory?id=7840093
"Idaho, US Rails Clogged With Cars Due to Recession" (Associated Press):
A growing number of idled boxcars and locomotives are filling the sidings in Nampa, reflecting the nationwide economic downturn and Union Pacific Railroad's decreased business.
"It's just a big visual manifestation of what's going on in our economy right now," Union Pacific spokeswoman Zoe Richmond told the Idaho Press-Tribune. "With consumer spending going down, our shipments have gone down."
http://www.forbes.com/feeds/ap/2009/...ap6544889.html
A growing number of idled boxcars and locomotives are filling the sidings in Nampa, reflecting the nationwide economic downturn and Union Pacific Railroad's decreased business.
"It's just a big visual manifestation of what's going on in our economy right now," Union Pacific spokeswoman Zoe Richmond told the Idaho Press-Tribune. "With consumer spending going down, our shipments have gone down."
http://www.forbes.com/feeds/ap/2009/...ap6544889.html
"Even Amish Getting Laid Off In Recession" (Chicago Sun-Times):
“Nowhere in U.S. Amish history has a down economy affected the Amish so much,” said Steven Nolt, a professor at Goshen College who has studied the Northern Indiana Amish and written books about them. “It’s a pivotal time for them.”
http://www.suntimes.com/news/nation/...061509.article
“Nowhere in U.S. Amish history has a down economy affected the Amish so much,” said Steven Nolt, a professor at Goshen College who has studied the Northern Indiana Amish and written books about them. “It’s a pivotal time for them.”
http://www.suntimes.com/news/nation/...061509.article
http://www.financialarmageddon.com/2...-the-memo.html
#89
I feel the need...
Roubini sees weeds amid green shoots
The U.S. economy will not recover until the end of this year, and even then growth will remain meek and vulnerable to higher interest rates and commodity prices, economist Nouriel Roubini said on Tuesday.
Roubini, who rose to prominence for predicting the global credit crisis, tore down the "green shoots" theory that a rebound is imminent, saying there was a significant risk of a "double-dip" recession where the economy expands slightly only to begin contracting again.
"In addition to green shoots there are also yellow weeds," he told the Reuters Investment Outlook Summit in New York.
He pointed to the growing divergence between business sentiment surveys, which have been improving in recent months, and industrial production, which is down sharply and receded another 1.1 percent in May.
Roubini, the head of economics research firm RGE Global Monitor, said the U.S. jobless rate, already at a 26-year high of 9.4 percent, would reach 11 percent before it begins to ease. He added that he saw few engines for growth given that U.S. consumers are tapped out
As a result, Federal Reserve policy-makers, whom Roubini says completely missed the magnitude of the crisis at its inception, face an unenviable set of policy choices.....
Roubini, who rose to prominence for predicting the global credit crisis, tore down the "green shoots" theory that a rebound is imminent, saying there was a significant risk of a "double-dip" recession where the economy expands slightly only to begin contracting again.
"In addition to green shoots there are also yellow weeds," he told the Reuters Investment Outlook Summit in New York.
He pointed to the growing divergence between business sentiment surveys, which have been improving in recent months, and industrial production, which is down sharply and receded another 1.1 percent in May.
Roubini, the head of economics research firm RGE Global Monitor, said the U.S. jobless rate, already at a 26-year high of 9.4 percent, would reach 11 percent before it begins to ease. He added that he saw few engines for growth given that U.S. consumers are tapped out
As a result, Federal Reserve policy-makers, whom Roubini says completely missed the magnitude of the crisis at its inception, face an unenviable set of policy choices.....
#90
Iro Ridg .308
Good question. Well, maybe I should add that this IS my job. The "profit" is to pay my monthly expenses, and the rest I re-invest or day-trade. Although, as I invest and pick my spots in certain companies, I also day-trade to try an earn a quick buck. For example, I bought 2,000 shares of bankrupt GM last week under GMGMQ and quickly sold for close to a thousand dollar profit. Obviously the thing is worth nothing, but it's just daytrading at it's finest.
#91
Iro Ridg .308
Looking to see what happens over the next few days - couple weeks for confirmation to see if top trend lines are broken through and if so, need to see how much longer it runs for. If the top trend resistance lines break, then more likely June for new lows IMO.
In the meantime, keep this graph in mind and watch the bond markets & baltic dry index closely
Definitely money to be made on these bounces but there is a hell of a lot of manipulation going on on a big-big scale. Huge short on Gold to the tune of 1.2M+ ounces 2 days after Big-Ben's decision to inject another 1 Trillion to buy up Treasuries & MBS. That makes absolutely no sense.
Also need to see what comes about from the G20 meeting. If it's all talk and these guys can't coordinate, I feel we are going to see more nations taking the protectionist state and protecting what's left of their own economies and/or you'll have more countries re-aligning themselves with one another (eg. China & Russia, etc.).
* China is already making moves by negotiating (and have already negotiated...) with other countries on Yuan swaps thus removing a portion of those countries' reserves away from USD
* London is starting to struggle to sell all of their bonds as indicated from their recent auction and as a result have begun running the sterling presses to monetize their debt.
* There's good reason why Bernanke had to make the decision to monetize US Debt and I think it's because the writing is on the wall that China is backing off on loaning any more / as much as the idiots in Washington would like to see. China also moving away from long-term Treasuries which is key.
* Germany isn't following blindly the same road the US & England are going down with a spend-spend-spend mentality.
*
In the meantime, keep this graph in mind and watch the bond markets & baltic dry index closely
Definitely money to be made on these bounces but there is a hell of a lot of manipulation going on on a big-big scale. Huge short on Gold to the tune of 1.2M+ ounces 2 days after Big-Ben's decision to inject another 1 Trillion to buy up Treasuries & MBS. That makes absolutely no sense.
Also need to see what comes about from the G20 meeting. If it's all talk and these guys can't coordinate, I feel we are going to see more nations taking the protectionist state and protecting what's left of their own economies and/or you'll have more countries re-aligning themselves with one another (eg. China & Russia, etc.).
* China is already making moves by negotiating (and have already negotiated...) with other countries on Yuan swaps thus removing a portion of those countries' reserves away from USD
* London is starting to struggle to sell all of their bonds as indicated from their recent auction and as a result have begun running the sterling presses to monetize their debt.
* There's good reason why Bernanke had to make the decision to monetize US Debt and I think it's because the writing is on the wall that China is backing off on loaning any more / as much as the idiots in Washington would like to see. China also moving away from long-term Treasuries which is key.
* Germany isn't following blindly the same road the US & England are going down with a spend-spend-spend mentality.
*
Once more unemployment numbers go out and come the end of July when CA is still unable to address it's budget deficit, I think more and more people will realize just how REAL this mess is. By REAL, especially to the residents of CA, I'm talking about seeing less teachers teaching, less people able to get the care they need from their local hospitals, less policeman patrolling the streets thus higher crime rates.
Once you can hit the american citizen on a much more personal note and not just on a financial note, people will really start to wake up.
When the world's 8th LARGEST economy goes broke (for those that didn't know, CA's state economy is larger than most individual countries....) and the effects trickle down, the shit's really gonna hit the fan.
*
#92
US lost 467,000 jobs in June
Just great, the rate of decelleration is diminishing. I hope the country is past the halfway point now, my state is not and this is going to roll on into 2011.
Guess the good news is the boomers won't be retiring in 2012
Just great, the rate of decelleration is diminishing. I hope the country is past the halfway point now, my state is not and this is going to roll on into 2011.
Guess the good news is the boomers won't be retiring in 2012
#93
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What a wild ride back up from about 8100 this wk, in what seemed like a blink of the eye, amazing...
Good thing I have been playing both sides of the fence with the bears and bulls.
#94
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Usually i don't comment on the economy, but working in the welding supply/industrial/medical/commercial gas industry i have a decent prospective on things since companies have to buy from us to produce.
We are currently seeing some metal manufacturers going back up to 40 hour workweeks and bringing back some, just some of their laid off employees.
There are a couple scheduled shut downs coming up here soon. case new holland (john deer competitor whose profits were down also) is scheduled to close for three months starting in august. Harley(york pa) is shutting down for 5 additional weeks from now until the end of the year.
we have started to see a couple large orders from co's that have drastically cut back.
Businesses are not buying new machines yet, companies like miller electric and lincoln are starving for business.
It reminds me of going from winter to spring; you see a couple of decent days and then it gets cold again until spring finally arrives.
We are currently seeing some metal manufacturers going back up to 40 hour workweeks and bringing back some, just some of their laid off employees.
There are a couple scheduled shut downs coming up here soon. case new holland (john deer competitor whose profits were down also) is scheduled to close for three months starting in august. Harley(york pa) is shutting down for 5 additional weeks from now until the end of the year.
we have started to see a couple large orders from co's that have drastically cut back.
Businesses are not buying new machines yet, companies like miller electric and lincoln are starving for business.
It reminds me of going from winter to spring; you see a couple of decent days and then it gets cold again until spring finally arrives.
#97
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The global economy may fall back into a recession by late 2010 or 2011 because of rising government debt, higher oil prices and a lack of job growth, said Nouriel Roubini, the New York University economist who predicted the credit crisis.
A “perfect storm” of fiscal deficits, rising bond yields, “soaring” oil prices, weak profits and a stagnant labor market could “blow the recovering world economy back into a double-dip recession,” he wrote in a research note today. “It is getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented.”
A “perfect storm” of fiscal deficits, rising bond yields, “soaring” oil prices, weak profits and a stagnant labor market could “blow the recovering world economy back into a double-dip recession,” he wrote in a research note today. “It is getting more likely unless a clear exit strategy from the massive monetary and fiscal stimulus is outlined even before it is implemented.”
#98
I feel the need...
Alphabet Soup: Economists argue over how to spell recovery
Now that the recession appears to be coming to an end, most economists are resorting to letters instead of using numbers to describe the kind of upswing they think will occur.
http://www.marketwatch.com/story/eco...ery-2009-08-11
Some of this might trace to the nature of the recession, itself. Its onset caught most forecasters off guard, its causes were unique, and its severity fooled just about everyone.
That being the case, few pundits are willing to go out on a limb and use a precise number when discussing the months ahead.
You can't blame them. Some think that a sharp recovery usually follows a sharp decline. Others postulate the exact opposite, saying the causes of this recession were so unusual that it will take some time before the economy can shake them off.....
That being the case, few pundits are willing to go out on a limb and use a precise number when discussing the months ahead.
You can't blame them. Some think that a sharp recovery usually follows a sharp decline. Others postulate the exact opposite, saying the causes of this recession were so unusual that it will take some time before the economy can shake them off.....
#99
Just watch and maybe revisit this thread in August and see if I'm right or wrong. The DOW is currently trading at 7223,98 and will hit resistance at 7550 on this uptrend. From there I project a downtrend possibly as low as 5000. Yes, I'm short the DOW and sleeping very well at night.
#100
Why "Recovery" Calls Are Doomed: The Bezzle
God the pumping is getting disgusting.
I want to put forward something objective and impossible to argue with: MATH.
Let's go back to this chart:
$2.5 trillion in consumer credit outstanding.
Now let's focus on the underlying fundamental reality of consumer-generated GDP and economic activity in general, and the impact of what I call the rate spread on that activity.
Back in 2007 before the mess got out of hand you could get a 5% 1 year CD. That's the savings rate, or what you were paid to save money.
In addition prime credit on revolving accounts was typically handed out (like candy) at 9.9% or less. I had credit cards with offered rates under 10% and so did a lot of other people. "Higher risk" but still "standard" rates were in the mid-teens (13-14%), with only penalty rates exceeding 20%. Nearly everyone could avoid a penalty rate by refinancing their house and paying off their credit card with the HELOC if required.
Ok.
Now we have this "crisis" but due to the lack of will in Congress, regulators and The Fed they fail to force the bad assets out into the open where they are marked to the market and the people who have those bad assets go under. Doing so would result in a lot of bank bankruptcies. This is thought of as "bad", but in fact it is only bad for the banks that have lied - the good banks (and there are some) and credit unions would win huge from such an event, as they'd not only get your deposits but also your loan business.
Nonetheless most if not all of the "big banks" are the ones who have Congress in their pocket and they're on the bad list.
So in response to this fees and interest rates have gone to the moon. I run no balance on my plastic and have a near-perfect FICO (being "dinged" only because I don't carry balances), charging and paying off every month, generating a very nice "discount" income for any card issuer that gives me credit. Nonetheless I have seen interest rates repriced "for market reasons" up to 13, 14 and in one case to 17.9%.
In addition the interest rate available on a 1 year CD has gone down from 5% to 1%.
What this does to the "spread" and thus private consumer activity is tremendous. Revolving credit is instantly repriced on the outstanding balance at the new interest rate, as are the CDs when they roll over, typically after a year.
For the "typical Grandmother" who was making 5% on her CD and paying 9.9% on her plastic, the spread was 4.9%. That is, 4.9% was the "real cost of credit" to her annualized.
Reasonable.
Now the credit card is 18.9% and her CD earns 1%. The spread is now 17.9%, or nearly 18%, an increase of 12.8%.
For the "subprime" borrower its awful as well. He has no savings, so the CD rate means nothing. But his credit card went from 20% to 36% due to missing one payment. He's seen a spread increase of sixteen percent.
Why does this matter?
It matters tremendously!
Remember, from the above there is $2.5 trillion outstanding in consumer credit. An increase of just ten percent in the spread cost for money means that $250 billion dollars each and every year does not get spent on consumption (and employment of those who make what was consumed), it instead goes to the banks to paper over their fraudulently-marked paper!
How big of a deal is this?
Our economy (at present) is around $13 trillion dollars (was closer to $14, but heh, 'tis a recession, right?)
This is thus a real and permanent 1.92% decrease in private-activity GDP each and every year and it will NEVER GO AWAY so long as "The Bezzle" mandates that the spread be used to cover up the fraudulent accounting at the banks and other financial institutions!
Nor does it stop with consumers. Corporations are also paying outrageous spreads over comparable Treasuries to borrow money compared to just a couple of years ago, and that interest once again is going to the banks and other institutions that buy their paper and use the excess spread to paper over THEIR losses on mismarked paper.
As such the $250 billion number is almost certainly greatly understating the true amount of the damage.
Folks, if you think that this sort of game-playing is somehow "beneficial" to the economy or it is "no big deal" this ought to disabuse you of that notion RIGHT NOW.
There is no possible way to generate a durable trend-growth economic recovery ever in the future until this game-playing stops. This is the fundamental reason that Japan never turned the corner and had a durable recovery and it is why we won't either.
It simply can't happen. The mathematics make it impossible, as that excess spread comes off GDP each and every year until the bad paper is either removed from the system or amortized and the excess spread disappears. Since most of this paper (especially that related to houses!) has amortization schedules measured in decades and an underwater homeowner cannot refinance, this drain on our economy is going to remain for years, not months.
There is only one way to stop it: FORCE all of the bad paper into the open immediately, close all the defunct institutions that this uncovers, and remove the excess liquidity so that the rate spread contracts back to a reasonable level. This means that I will once again be able to get a 5% CD and I will once again see "good credit risks" offered revolving credit at under 10%.
While this would trash a bunch of banks (and it should) it would free upwards of $250 billion dollars a year in consumer spending!
Our regulators and government officials are both protecting crooked dealing and destroying our economic recovery prospects.
Wake up America.
I want to put forward something objective and impossible to argue with: MATH.
Let's go back to this chart:
$2.5 trillion in consumer credit outstanding.
Now let's focus on the underlying fundamental reality of consumer-generated GDP and economic activity in general, and the impact of what I call the rate spread on that activity.
Back in 2007 before the mess got out of hand you could get a 5% 1 year CD. That's the savings rate, or what you were paid to save money.
In addition prime credit on revolving accounts was typically handed out (like candy) at 9.9% or less. I had credit cards with offered rates under 10% and so did a lot of other people. "Higher risk" but still "standard" rates were in the mid-teens (13-14%), with only penalty rates exceeding 20%. Nearly everyone could avoid a penalty rate by refinancing their house and paying off their credit card with the HELOC if required.
Ok.
Now we have this "crisis" but due to the lack of will in Congress, regulators and The Fed they fail to force the bad assets out into the open where they are marked to the market and the people who have those bad assets go under. Doing so would result in a lot of bank bankruptcies. This is thought of as "bad", but in fact it is only bad for the banks that have lied - the good banks (and there are some) and credit unions would win huge from such an event, as they'd not only get your deposits but also your loan business.
Nonetheless most if not all of the "big banks" are the ones who have Congress in their pocket and they're on the bad list.
So in response to this fees and interest rates have gone to the moon. I run no balance on my plastic and have a near-perfect FICO (being "dinged" only because I don't carry balances), charging and paying off every month, generating a very nice "discount" income for any card issuer that gives me credit. Nonetheless I have seen interest rates repriced "for market reasons" up to 13, 14 and in one case to 17.9%.
In addition the interest rate available on a 1 year CD has gone down from 5% to 1%.
What this does to the "spread" and thus private consumer activity is tremendous. Revolving credit is instantly repriced on the outstanding balance at the new interest rate, as are the CDs when they roll over, typically after a year.
For the "typical Grandmother" who was making 5% on her CD and paying 9.9% on her plastic, the spread was 4.9%. That is, 4.9% was the "real cost of credit" to her annualized.
Reasonable.
Now the credit card is 18.9% and her CD earns 1%. The spread is now 17.9%, or nearly 18%, an increase of 12.8%.
For the "subprime" borrower its awful as well. He has no savings, so the CD rate means nothing. But his credit card went from 20% to 36% due to missing one payment. He's seen a spread increase of sixteen percent.
Why does this matter?
It matters tremendously!
Remember, from the above there is $2.5 trillion outstanding in consumer credit. An increase of just ten percent in the spread cost for money means that $250 billion dollars each and every year does not get spent on consumption (and employment of those who make what was consumed), it instead goes to the banks to paper over their fraudulently-marked paper!
How big of a deal is this?
Our economy (at present) is around $13 trillion dollars (was closer to $14, but heh, 'tis a recession, right?)
This is thus a real and permanent 1.92% decrease in private-activity GDP each and every year and it will NEVER GO AWAY so long as "The Bezzle" mandates that the spread be used to cover up the fraudulent accounting at the banks and other financial institutions!
Nor does it stop with consumers. Corporations are also paying outrageous spreads over comparable Treasuries to borrow money compared to just a couple of years ago, and that interest once again is going to the banks and other institutions that buy their paper and use the excess spread to paper over THEIR losses on mismarked paper.
As such the $250 billion number is almost certainly greatly understating the true amount of the damage.
Folks, if you think that this sort of game-playing is somehow "beneficial" to the economy or it is "no big deal" this ought to disabuse you of that notion RIGHT NOW.
There is no possible way to generate a durable trend-growth economic recovery ever in the future until this game-playing stops. This is the fundamental reason that Japan never turned the corner and had a durable recovery and it is why we won't either.
It simply can't happen. The mathematics make it impossible, as that excess spread comes off GDP each and every year until the bad paper is either removed from the system or amortized and the excess spread disappears. Since most of this paper (especially that related to houses!) has amortization schedules measured in decades and an underwater homeowner cannot refinance, this drain on our economy is going to remain for years, not months.
There is only one way to stop it: FORCE all of the bad paper into the open immediately, close all the defunct institutions that this uncovers, and remove the excess liquidity so that the rate spread contracts back to a reasonable level. This means that I will once again be able to get a 5% CD and I will once again see "good credit risks" offered revolving credit at under 10%.
While this would trash a bunch of banks (and it should) it would free upwards of $250 billion dollars a year in consumer spending!
Our regulators and government officials are both protecting crooked dealing and destroying our economic recovery prospects.
Wake up America.
#101
Drifting
Yep- I have been wrong on that call for sure. I still hold my DXD positions and actually added to them last week. I still have the same feelings about the markets though and can afford to hold the losing DXD positions for a very long time. The year is not over yet and I find the Nasdaq especially a little top-heavy now at a 28.6% YTD gain- my hunch is 15% is closer to reality come 12/31/09. As a result, I moved some money into the QID this last week.
Good thing the majority of my longs are outperforming the market or I would not be a happy camper. Here were last week's winners in my portfolio that out-performed the SP500's .3% weekly gain:
ETFC(16.31%), TTM(8.95), KKD(6.14), WDC(4.57), SLV(4.17), COP(3.39), DBA(3.22), MYL(2.85), HOC(2.67), *NL(2.17), HWK(1.40), FRX(1.15), FRD(.85)
I guess we'll see how September goes- Dow futures are down -49 as I write so DXD just might have a good day on 8/31/09.
Good thing the majority of my longs are outperforming the market or I would not be a happy camper. Here were last week's winners in my portfolio that out-performed the SP500's .3% weekly gain:
ETFC(16.31%), TTM(8.95), KKD(6.14), WDC(4.57), SLV(4.17), COP(3.39), DBA(3.22), MYL(2.85), HOC(2.67), *NL(2.17), HWK(1.40), FRX(1.15), FRD(.85)
I guess we'll see how September goes- Dow futures are down -49 as I write so DXD just might have a good day on 8/31/09.
#102
I feel the need...
Goldman Sachs Wrong on Economic Recovery, Macro Hedge Funds Say
Paul Tudor Jones, the billionaire hedge-fund manager who outperformed peers last year, is wagering that Goldman Sachs Group Inc. and Morgan Stanley got it wrong in declaring the start of an economic recovery.
Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff. The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.
“If we have a recovery at all, it isn’t sustainable,” Kevin Harrington, managing director at Clarium, said in an interview at the firm’s New York offices. “This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.....”
Jones’s Tudor Investment Corp., Clarium Capital Management LLC and Horseman Capital Management Ltd. are taking a bearish stand as U.S. stock and bond prices rise, saying that record government spending may be forestalling another slowdown and market selloff. The firms oversee a combined $15 billion in so- called macro funds, which seek to profit from economic trends by trading stocks, bonds, currencies and commodities.
“If we have a recovery at all, it isn’t sustainable,” Kevin Harrington, managing director at Clarium, said in an interview at the firm’s New York offices. “This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later.....”
#103
Drifting
Spending is exactly the negative issue with the economy. Both the U.S. government and many of its citizens are spending more than it is earning/saving which is a recipe for disaster going forward. This is the big reason the 'cash for clunkers' solution is a big sham- yes it helped the auto makers, but did it really help our economy in the long run? How does investing in a depreciating asset help things- it's not like these new cars help Americans produce more going forward.
Here's a link that will get you thinking:
http://www.youtube.com/watch?v=4VoeZD546Y4
It's no fluke that both gold and silver are beginning to take off this last year. The SLV i-share for Silver is up 60+% since December 08 when I started buying positions in this while our best market index (Nasdaq) is up around 25% and even that is to extended.
With our fiscal policy currently in place the next round of inflation is going to be a doozy and that really plays havoc with an economy. This government and its citizens cannot spend themselves out of the hole we got in just like Madoff's Ponzi scheme could not sustain itself forever.
My guess is that the Japanese will be the first of the countries to formally stop buying our treasury debt now that there is a change in political power there. Perhaps we have a one year honeymoon period left before this prediction occurs. Once that happens, China will follow and this game will start playing out. Believe me, I really hope I'm wrong on this one.
Here's a link that will get you thinking:
http://www.youtube.com/watch?v=4VoeZD546Y4
It's no fluke that both gold and silver are beginning to take off this last year. The SLV i-share for Silver is up 60+% since December 08 when I started buying positions in this while our best market index (Nasdaq) is up around 25% and even that is to extended.
With our fiscal policy currently in place the next round of inflation is going to be a doozy and that really plays havoc with an economy. This government and its citizens cannot spend themselves out of the hole we got in just like Madoff's Ponzi scheme could not sustain itself forever.
My guess is that the Japanese will be the first of the countries to formally stop buying our treasury debt now that there is a change in political power there. Perhaps we have a one year honeymoon period left before this prediction occurs. Once that happens, China will follow and this game will start playing out. Believe me, I really hope I'm wrong on this one.
#104
Iro Ridg .308
Spending is exactly the negative issue with the economy. Both the U.S. government and many of its citizens are spending more than it is earning/saving which is a recipe for disaster going forward. This is the big reason the 'cash for clunkers' solution is a big sham- yes it helped the auto makers, but did it really help our economy in the long run? How does investing in a depreciating asset help things- it's not like these new cars help Americans produce more going forward.
Here's a link that will get you thinking:
http://www.youtube.com/watch?v=4VoeZD546Y4
It's no fluke that both gold and silver are beginning to take off this last year. The SLV i-share for Silver is up 60+% since December 08 when I started buying positions in this while our best market index (Nasdaq) is up around 25% and even that is to extended.
With our fiscal policy currently in place the next round of inflation is going to be a doozy and that really plays havoc with an economy. This government and its citizens cannot spend themselves out of the hole we got in just like Madoff's Ponzi scheme could not sustain itself forever.
My guess is that the Japanese will be the first of the countries to formally stop buying our treasury debt now that there is a change in political power there. Perhaps we have a one year honeymoon period left before this prediction occurs. Once that happens, China will follow and this game will start playing out. Believe me, I really hope I'm wrong on this one.
Here's a link that will get you thinking:
http://www.youtube.com/watch?v=4VoeZD546Y4
It's no fluke that both gold and silver are beginning to take off this last year. The SLV i-share for Silver is up 60+% since December 08 when I started buying positions in this while our best market index (Nasdaq) is up around 25% and even that is to extended.
With our fiscal policy currently in place the next round of inflation is going to be a doozy and that really plays havoc with an economy. This government and its citizens cannot spend themselves out of the hole we got in just like Madoff's Ponzi scheme could not sustain itself forever.
My guess is that the Japanese will be the first of the countries to formally stop buying our treasury debt now that there is a change in political power there. Perhaps we have a one year honeymoon period left before this prediction occurs. Once that happens, China will follow and this game will start playing out. Believe me, I really hope I'm wrong on this one.
With clearing houses moving out of New York and London, now being placed in Hong Kong and if I remember correctly countries like UAE placing their bullion vaults back in their own back yard, the writing is on the wall.
These people know that COMEX is a big lie. Thus you can't trust ETF's such as GLD or SLV. Good for an intraday trade yes. Hold overnight or long term hell no unless you want to gamble. Not to say money can't be made gambling....
Then also consider the amount of foreign assets fleeing away from the USA..
Ratio of insider buying : to selling was at approx 61% at the end of August.
Double of what it was the month prior.
Over HALF A BILLION in stock SOLD, while ONLY $8 million was purchased.
BIG DOGS, CEO'S / CFO's and the like, who are the people running these companies, are dumping their shares of stock under the radar like it were a bad case of herpes.
http://www.finviz.com/insidertrading...ansactionValue
Then look at the current PE ratios. Makes absolutely no sense. I was telling another person the other day in layman's terms that what's going on in the stock market and the major swings we're seeing kinda reminds me of a wheel/tire on a car whose lugs are slowly loosening off their wheel studs.
If you've ever witnessed a wheel coming off a vehicle's car in real time, it ain't pretty.
I think we're running on the last 2 lug nuts. 1 of the remaining 2 is about to come off. The other 3 are gone. As each lug comes off and the remaining get more loose, the wheel will eventually shake violently until it finally comes off and the car crashes.
Meanwhile the clueless driver (which equates to 85% of the general population) just keeps driving even though the steering wheel is starting to get major vibrational feedback.
*
#105
Drifting
^Yes, I'm getting more concerned about my paper SLV/GLD positions. I think gambling might be a little harsh though using this definition:
"Gambling means playing a game that you know you will lose, but you play it anyway in hopes you will get lucky. Investing means you fully expect to win, although you admit there is a chance you will lose." (I forget who said this)
Anyway, my SLV positions have pretty substantial gains now. As a result, I'm beginning to unwind these paper positions as they get into long term gains and replacing them with physical positions now. Having held both SLV and GLD for a while, I can say SLV is blowing the doors off GLD in performance.
Today is a typical example of performance: SLV +2.18% while GLD was up only .67% while the SP500 was up 1.04%. Thanks Special-Ed for the info- I appreciate it
"Gambling means playing a game that you know you will lose, but you play it anyway in hopes you will get lucky. Investing means you fully expect to win, although you admit there is a chance you will lose." (I forget who said this)
Anyway, my SLV positions have pretty substantial gains now. As a result, I'm beginning to unwind these paper positions as they get into long term gains and replacing them with physical positions now. Having held both SLV and GLD for a while, I can say SLV is blowing the doors off GLD in performance.
Today is a typical example of performance: SLV +2.18% while GLD was up only .67% while the SP500 was up 1.04%. Thanks Special-Ed for the info- I appreciate it
#106
Moderator Alumnus
Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).
"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."
The M3 "broad" money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.
Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.
"For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said.
It is unclear why the US Federal Reserve has allowed this to occur.
Chairman Ben Bernanke is an expert on the "credit channel" causes of depressions and has given eloquent speeches about the risks of deflation in the past.
He is not a monetary economist, however, and there are indications that the Fed has had to pare back its policy of quantitative easing (buying bonds) in order to reassure China and other foreign creditors that the US is not trying to devalue its debts by stealth monetisation.
Mr Congdon said a key reason for credit contraction is pressure on banks to raise their capital ratios. While this is well-advised in boom times, it makes matters worse in a downturn.
"The current drive to make banks less leveraged and safer is having the perverse consequence of destroying money balances," he said. "It strengthens the deflationary forces in the world economy. That increases the risks of a double-dip recession in 2010."
Referring to the debt-purge policy of US Treasury Secretary Andrew Mellon in the early 1930s, he added: "The pressure on banks to de-risk and to de-leverage is the modern version of liquidationism: it is potentially just as dangerous."
http://www.telegraph.co.uk/finance/f...recession.html
"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."
The M3 "broad" money supply, watched as an early warning signal for the economy a year or so later, has been falling at a 5pc annual rate.
Similar concerns have been raised by David Rosenberg, chief strategist at Gluskin Sheff, who said that over the four weeks up to August 24, bank credit shrank at an "epic" 9pc annual pace, the M2 money supply shrank at 12.2pc and M1 shrank at 6.5pc.
"For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said.
It is unclear why the US Federal Reserve has allowed this to occur.
Chairman Ben Bernanke is an expert on the "credit channel" causes of depressions and has given eloquent speeches about the risks of deflation in the past.
He is not a monetary economist, however, and there are indications that the Fed has had to pare back its policy of quantitative easing (buying bonds) in order to reassure China and other foreign creditors that the US is not trying to devalue its debts by stealth monetisation.
Mr Congdon said a key reason for credit contraction is pressure on banks to raise their capital ratios. While this is well-advised in boom times, it makes matters worse in a downturn.
"The current drive to make banks less leveraged and safer is having the perverse consequence of destroying money balances," he said. "It strengthens the deflationary forces in the world economy. That increases the risks of a double-dip recession in 2010."
Referring to the debt-purge policy of US Treasury Secretary Andrew Mellon in the early 1930s, he added: "The pressure on banks to de-risk and to de-leverage is the modern version of liquidationism: it is potentially just as dangerous."
http://www.telegraph.co.uk/finance/f...recession.html
#107
Moderator Alumnus
Joseph Stiglitz, the Nobel Prize winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”
A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.’s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.
While Obama wants to name some banks as “systemically important” and subject them to stricter oversight, his plan wouldn’t force them to shrink or simplify their structure.
Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.
---
“It’s an outrage,” especially “in the U.S. where we poured so much money into the banks,” Stiglitz said. “The administration seems very reluctant to do what is necessary. Yes they’ll do something, the question is: Will they do as much as required?”
Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is “far from being out of the woods” even if it has pulled back from the precipice it teetered on after the collapse of Lehman.
“We’re going into an extended period of weak economy, of economic malaise,” Stiglitz said. The U.S. will “grow but not enough to offset the increase in the population,” he said, adding that “if workers do not have income, it’s very hard to see how the U.S. will generate the demand that the world economy needs.”
The Federal Reserve faces a “quandary” in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.
“The question then is who is going to finance the U.S. government,” Stiglitz said.
http://www.bloomberg.com/apps/news?p...d=aYdgQkXu9eBg
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
Stiglitz’s views echo those of former Federal Reserve Chairman Paul Volcker, who has advised President Barack Obama’s administration to curtail the size of banks, and Bank of Israel Governor Stanley Fischer, who suggested last month that governments may want to discourage financial institutions from growing “excessively.”
A year after the demise of Lehman forced the Treasury Department to spend billions to shore up the financial system, Bank of America Corp.’s assets have grown and Citigroup Inc. remains intact. In the U.K., Lloyds Banking Group Plc, 43 percent owned by the government, has taken over the activities of HBOS Plc, and in France BNP Paribas SA now owns the Belgian and Luxembourg banking assets of insurer Fortis.
While Obama wants to name some banks as “systemically important” and subject them to stricter oversight, his plan wouldn’t force them to shrink or simplify their structure.
Stiglitz said the U.S. government is wary of challenging the financial industry because it is politically difficult, and that he hopes the Group of 20 leaders will cajole the U.S. into tougher action.
---
“It’s an outrage,” especially “in the U.S. where we poured so much money into the banks,” Stiglitz said. “The administration seems very reluctant to do what is necessary. Yes they’ll do something, the question is: Will they do as much as required?”
Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is “far from being out of the woods” even if it has pulled back from the precipice it teetered on after the collapse of Lehman.
“We’re going into an extended period of weak economy, of economic malaise,” Stiglitz said. The U.S. will “grow but not enough to offset the increase in the population,” he said, adding that “if workers do not have income, it’s very hard to see how the U.S. will generate the demand that the world economy needs.”
The Federal Reserve faces a “quandary” in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.
“The question then is who is going to finance the U.S. government,” Stiglitz said.
http://www.bloomberg.com/apps/news?p...d=aYdgQkXu9eBg
#108
Moderator Alumnus
The world has not tackled the problems at the heart of the economic downturn and is likely to slip back into recession, according to one of the few mainstream economists who predicted the financial crisis.
Speaking at the Sibos conference in Hong Kong on Monday, William White, the highly-respected former chief economist at the Bank for International Settlements, also warned that government actions to help the economy in the short run may be sowing the seeds for future crises.
“Are we going into a W[-shaped recession]? Almost certainly. Are we going into an L? I would not be in the slightest bit surprised,” he said, referring to the risks of a so-called double-dip recession or a protracted stagnation like Japan suffered in the 1990s.
“The only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.”
The comments from Mr White, who ran the economic department at the central banks’ bank from 1995 to 2008, carry weight because he was one of the few senior figures to predict the financial crisis in the years before it struck.
Mr White repeatedly warned of dangerous imbalances in the global financial system as far back as 2003 and – breaking a great taboo in central banking circles at the time – he dared to challenge Alan Greenspan, then chairman of the Federal Reserve, over his policy of persistent cheap money.
On Monday Mr White questioned how sustainable the signs of life in the global economy would prove to be once governments and central banks started to withdraw their unprecedented stimulus measures. “The green shoots are certainly out there – the question is what kind of fertiliser is being used on them,” he said.
Worldwide, central banks have pumped thousands of billions of dollars of new money into the financial system over the past two years in an effort to prevent a depression. Meanwhile, governments have gone to similar extremes, taking on vast sums of debt to prop up industries from banking to car making.
These measures may already be inflating a bubble in asset prices, from equities to commodities, he said, and there was a small risk that inflation would get out of control over the medium term if central banks miss-time their “exit strategies”.
Meanwhile, the underlying problems in the global economy, such as unsustainable trade imbalances between the US, Europe and Asia, had not been resolved, he said.
http://www.ft.com/cms/s/0/e6dd31f0-a...44feabdc0.html
Speaking at the Sibos conference in Hong Kong on Monday, William White, the highly-respected former chief economist at the Bank for International Settlements, also warned that government actions to help the economy in the short run may be sowing the seeds for future crises.
“Are we going into a W[-shaped recession]? Almost certainly. Are we going into an L? I would not be in the slightest bit surprised,” he said, referring to the risks of a so-called double-dip recession or a protracted stagnation like Japan suffered in the 1990s.
“The only thing that would really surprise me is a rapid and sustainable recovery from the position we’re in.”
The comments from Mr White, who ran the economic department at the central banks’ bank from 1995 to 2008, carry weight because he was one of the few senior figures to predict the financial crisis in the years before it struck.
Mr White repeatedly warned of dangerous imbalances in the global financial system as far back as 2003 and – breaking a great taboo in central banking circles at the time – he dared to challenge Alan Greenspan, then chairman of the Federal Reserve, over his policy of persistent cheap money.
On Monday Mr White questioned how sustainable the signs of life in the global economy would prove to be once governments and central banks started to withdraw their unprecedented stimulus measures. “The green shoots are certainly out there – the question is what kind of fertiliser is being used on them,” he said.
Worldwide, central banks have pumped thousands of billions of dollars of new money into the financial system over the past two years in an effort to prevent a depression. Meanwhile, governments have gone to similar extremes, taking on vast sums of debt to prop up industries from banking to car making.
These measures may already be inflating a bubble in asset prices, from equities to commodities, he said, and there was a small risk that inflation would get out of control over the medium term if central banks miss-time their “exit strategies”.
Meanwhile, the underlying problems in the global economy, such as unsustainable trade imbalances between the US, Europe and Asia, had not been resolved, he said.
http://www.ft.com/cms/s/0/e6dd31f0-a...44feabdc0.html
#109
Safety Car
most sectors are...wait for insurance and CMBS...i specialize in Comm. R.E. the other shoe will drop...and it may not reach a full trough for close to another 2 yrs.
#110
I feel the need...
Roach Says U.S. Economy Is Vulnerable to Relapse
The U.S. economic recovery will be “anemic” and prone to a relapse because it lacks momentum, Morgan Stanley economist Stephen Roach said.
“The economy is growing very close to what people refer to as a stall speed,” Roach, chairman of Morgan Stanley Asia, said in a Bloomberg Television interview today. “It lacks a cushion should there be something unexpected. When those shocks come, you don’t have the cushion and you’re vulnerable, you could have a relapse. Any recovery from a relapse will also be anemic. This is not the environment for a V-shaped recovery.”
The economy has lost about 6.9 million jobs since the recession started in December 2007, the worst of any downturn since World War II.....
“The economy is growing very close to what people refer to as a stall speed,” Roach, chairman of Morgan Stanley Asia, said in a Bloomberg Television interview today. “It lacks a cushion should there be something unexpected. When those shocks come, you don’t have the cushion and you’re vulnerable, you could have a relapse. Any recovery from a relapse will also be anemic. This is not the environment for a V-shaped recovery.”
The economy has lost about 6.9 million jobs since the recession started in December 2007, the worst of any downturn since World War II.....
#111
Registered but harmless
Join Date: Aug 2005
Location: Los Angeles, CA
Age: 59
Posts: 14,846
Received 1,106 Likes
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764 Posts
Bernanke says recession ‘very likely over’
"He warns of ongoing pain in labor market under expected growth rate
AP, updated 2:34 p.m. PT, Tues., Sept . 15, 2009
WASHINGTON - Federal Reserve Chairman Ben Bernanke said Tuesday the worst recession since the 1930s is probably over, although he cautioned that pain — especially for the nearly 15 million unemployed Americans — will persist.
Bernanke said the economy likely is growing now, but he warned that won’t be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 percent, from rising.
'From a technical perspective, the recession is very likely over at this point,' Bernanke said in responding to questions at the Brookings Institution. 'It’s still going to feel like a very weak economy for some time because many people will still find that their job security and their employment status is not what they wish it was.'
..."
http://www.msnbc.msn.com/id/32858855...my_in_turmoil/
I'm surprised no one posted Bernanke's opinion today in this thread.
AP, updated 2:34 p.m. PT, Tues., Sept . 15, 2009
WASHINGTON - Federal Reserve Chairman Ben Bernanke said Tuesday the worst recession since the 1930s is probably over, although he cautioned that pain — especially for the nearly 15 million unemployed Americans — will persist.
Bernanke said the economy likely is growing now, but he warned that won’t be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 percent, from rising.
'From a technical perspective, the recession is very likely over at this point,' Bernanke said in responding to questions at the Brookings Institution. 'It’s still going to feel like a very weak economy for some time because many people will still find that their job security and their employment status is not what they wish it was.'
..."
http://www.msnbc.msn.com/id/32858855...my_in_turmoil/
I'm surprised no one posted Bernanke's opinion today in this thread.
#113
Registered but harmless
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Then how about economists generally? I think Roach and White in the posts by Silver and Fibo above recognize that the recession is over or ending although certain risks remain.
It seems to me that the economy is picking itself back up and we are in recovery, despite the various systemic vulnerabilities and issues mentioned above.
It seems to me that the economy is picking itself back up and we are in recovery, despite the various systemic vulnerabilities and issues mentioned above.
#114
Then how about economists generally? I think Roach and White in the posts by Silver and Fibo above recognize that the recession is over or ending although certain risks remain.
It seems to me that the economy is picking itself back up and we are in recovery, despite the various systemic vulnerabilities and issues mentioned above.
It seems to me that the economy is picking itself back up and we are in recovery, despite the various systemic vulnerabilities and issues mentioned above.
#115
Moderator Alumnus
The federal government and states are girding themselves for the next foreclosure crisis in the country's housing downturn: payment option adjustable rate mortgages that are beginning to reset.
"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.
"That's the next round of potential foreclosures in our country," he said.
Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures.
In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting.
"It's the other shoe," he said. "I can't say it's waiting to drop. It's dropping now."
The mortgages differ from other ARMs by offering an option to pay only the interest each month or a low minimum payment that leads to a rising balance in the loan's principal.
When the balance of the loan reaches a certain level or the mortgage hits a specific date, the borrower must begin making full payments to cover the new amount. The loan's interest rate also may have been fixed at a low level for the first few years with a so-called teaser rate, but then reset to a higher level.
Because the new monthly payments can be five or 10 times what borrowers are accustomed to paying, they "threaten a much greater hit to the consumer than the subprimes," Goddard said, referring to the mortgages often extended to less credit-worthy borrowers that fed the first wave of the financial crisis.
http://www.reuters.com/article/newsO...58G5U320090917
"Payment option ARMs are about to explode," Iowa Attorney General Tom Miller said after a Thursday meeting with members of President Barack Obama's administration to discuss ways to combat mortgage scams.
"That's the next round of potential foreclosures in our country," he said.
Option-ARMs are now considered among the riskiest offered during the recent housing boom and have left many borrowers owing more than their homes are worth. These "underwater" mortgages have been a driving force behind rising defaults and mounting foreclosures.
In Arizona, 128,000 of those mortgages will reset over the the next year and many have started to adjust this month, the state's attorney general, Terry Goddard, told Reuters after the meeting.
"It's the other shoe," he said. "I can't say it's waiting to drop. It's dropping now."
The mortgages differ from other ARMs by offering an option to pay only the interest each month or a low minimum payment that leads to a rising balance in the loan's principal.
When the balance of the loan reaches a certain level or the mortgage hits a specific date, the borrower must begin making full payments to cover the new amount. The loan's interest rate also may have been fixed at a low level for the first few years with a so-called teaser rate, but then reset to a higher level.
Because the new monthly payments can be five or 10 times what borrowers are accustomed to paying, they "threaten a much greater hit to the consumer than the subprimes," Goddard said, referring to the mortgages often extended to less credit-worthy borrowers that fed the first wave of the financial crisis.
http://www.reuters.com/article/newsO...58G5U320090917
#116
I feel the need...
U.S. Risks Japan-Like ‘Lost Decade’ on Stimulus Exit, Koo Says
U.S. officials contemplating an exit from record fiscal stimulus are in danger of repeating mistakes that plunged Japan into its lost decade of stagnant growth, according to Richard Koo of Nomura Research Institute Ltd.
“This isn’t a cold, its more like pneumonia,” said Koo, author of “Balance Sheet Recession,” a 2003 book about the malaise that hit Japan after its stock and real-estate markets crashed in 1990. “We still need more government spending,” he said, adding it could take “three to five years to get out of this mess, even under the best of circumstances.”
Koo’s comments echo the view of economists including Nobel laureate Paul Krugman, who warn that the U.S.’s likely return to growth in the second half of 2009 doesn’t mean a sustained recovery is assured. The Obama administration aims to rein in a record $1.4 trillion budget deficit as growth returns, seeking to safeguard the value of a declining dollar.
“If you learn your lesson from the Japanese experience, you don’t remove your fiscal stimulus until private sector de- leveraging is over,” Koo, 55, chief economist at the research arm of Japan’s biggest brokerage, said in an interview at his Tokyo office last week.....
“This isn’t a cold, its more like pneumonia,” said Koo, author of “Balance Sheet Recession,” a 2003 book about the malaise that hit Japan after its stock and real-estate markets crashed in 1990. “We still need more government spending,” he said, adding it could take “three to five years to get out of this mess, even under the best of circumstances.”
Koo’s comments echo the view of economists including Nobel laureate Paul Krugman, who warn that the U.S.’s likely return to growth in the second half of 2009 doesn’t mean a sustained recovery is assured. The Obama administration aims to rein in a record $1.4 trillion budget deficit as growth returns, seeking to safeguard the value of a declining dollar.
“If you learn your lesson from the Japanese experience, you don’t remove your fiscal stimulus until private sector de- leveraging is over,” Koo, 55, chief economist at the research arm of Japan’s biggest brokerage, said in an interview at his Tokyo office last week.....
#118
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3 months since my last post most of our manufacturing comapnies are still not producing. No real layoffs or rehires since july that we have seen. I would expect mid to late spring we may see an increase in production and sustaining it.
It seems like some of the companies that have been trying to ride out this situation may not make it. A couple larger sheet metal companies have exchanged hands after money issues.
It seems like some of the companies that have been trying to ride out this situation may not make it. A couple larger sheet metal companies have exchanged hands after money issues.
#119
Team Owner
We already had the lost decade. Dow 10,000 is so 1999.
I'm not liking the recent stock market action either and I'm currently in sell mode.
I'm not liking the recent stock market action either and I'm currently in sell mode.