Market crash: are we there yet ?

[Sailormann]

Far from over. You folk (the US) have not started to make any appreciable progress in the repatriation of your manufacturing sector. You are shipping all your disposable income over to the Orient to pay their workers to build things that you're perfectly capable of making yourselves. Then you're shiopping the rest of your money over to the Orient and the Middle East to pay the interest on the loans that those countries gave you to buy the things that they were making.

Problem is - when you make the goods here, your workers want to be paid a living wage (greedy huh ?? - perhaps the new administration can pass a law outlawing wage demands or something...), hence your arriviste (newly-moneyed) classes can't afford to overindulge in US-made goods the way they can in foreign made crap. Short term approach. Nothing is coming in to mitigate the outflow.

You (the US) are still spending more than you earn. You (as a collective group) will be forced to notice things next March. It would be a good idea at that time not to have too much cash or commercial paper of any kind and it should not be held for you by anyone other than the most stodgy and solid of banks.

Buy good stuff (land, gold, Old Masters, more land, etc.) Keep some cash on hand because deals will be exceptional around August.

Come to terms with the fact that you will never, ever personally be as rich as you once were. Actually, most of us in North America are going to be seeing some of our wealth erode.
Enjoy life - it is still a beautiful world.

[camaraderie]

Sailormann...what happens next March?

[Sapperwhite]

Originally Posted by camaraderie

Sailormann...what happens next March?

Let's just say I still have that boot leather and turnip stew recipe if anyone wants it

[Sonofasonofasailor]

The real estate ride ain't even close to being over! There will be more adjusting ARM's in 2009 than there have been in 2007 & 2008 combined. Guess which loans are most likely to default and end up in foreclosure? 2010 is looking just as bad. Until the foreclosure cycle has run its course the market cannot function normally no matter what the guv does to prop it up. On top of that, homeowners who are headed toward foreclosure are buying smaller, cheaper houses at a fixed rate BEFORE they get foreclosed upon so they can walk away from the house that is under the outrageous interest rate of their ARM.
Banks need to renegotiate (not refinance as often that is not possible due to declining values of RE) these ARM's that are due to adjust BEFORE they adjust. If they don't both homeowners and lenders are going to get flushed. Of course most banks will not do this as they will wait to be bailed out but eventually that will run out, there is not enough to bail out every bank or person.

[sailaway21]

The Feds, in the person of lifelong Democrat Treasury Secretary Paulson, are making another big error. That lier, a scant couple of months ago, said that the backing of Fred & Fannie was so we wouldn't need to use it! Coupled with the foolish and premature bailout of Bear-Stearns we see what the game plan really is; protect Wall Street. This is one-way capitalism and it doesn't work-never has, never will.

Some thoughts stolen from Glen Beck this day.
We hounded Ken Lay to death over Enron. Why should the executives of Freddie and Fanny get any less for far greater crimes? this is going to be a trillion dollar bailout by the American taxpayer before it's done. And, like most government economic actions, it's going to delay the inevitable medecine and lengthen the problem. These guys were receiving bonuses even after it was apparent they were cooking the books. What's up with that?

Secondly, why are we not letting the shareholders of Freddie and Fannie take their beating? This is private money invested in the market that anywhere else would have vaporized by now. Like the overall bailout of the subprime mess this is nothing more than a transfer of wealth to those who made poor investments. The nature of the bailout is such that claims against it will escalate for quite some time. We're merely rewarding the pigs we've discussed earlier. Fred and Fannie got into what was heretofore Ginnie's market. What's up with that?

Wall Street greeted the news as they would any government subsidy to parochial interests with a hurray. Interest rates fell on the news, as if they needed to go lower for anybody with any type of credit rating at all? And where in the heck did we get this notion that everyone in the US should own their own home, regardless of financial wherewithal? Landlords exist just to take the risks that banks should not touch.

Most ominously, we are creating an atmosphere where the phrase, "too big to fail" has a fear-drenched sensibility to it. Bull tookey! Home construction is one of the most dynamic forces in the country in that people get in and out of the home-building business with great regularity the capital costs being rather low. That being said, there's another large industry with high capital costs and a very broad nationwide impact in deep trouble itself that thinks it's just as deserving of a federal bailout as is the mortgage industry. the big three automakers would like to see about a $50 billion loan guarantee themselves. They're in deep trouble and see no reason that the fat cats of Wall Street should get bailed out while they struggle to sell cutting edge technology SUV's to Americans who no longer want them. And just to bolster their case, this last month saw the largest number of layoffs for any one month in American automobile history.

Fear of a market crash, and the penalties of the business cycle, are going to ensure that we have a prolonged period of economic doldrums and that it will last far longer than it would if nothing were done at all. The government should not be your mama. She's a whore no matter how you dress her up.

[sailingdog]

Sway-

Well said...even if you borrowed the words...

[chucklesR]

A whore no matter how you dress her up? Oh I see, she takes your money and you get screwed, no kisses.

[camaraderie]

....and neither McCain or Obama will be able to say no to a bailout of the car companies with Michigan perhaps holding the deciding electoral votes. Screwed again!

[sailhog]

Mortgage rates went down a full half point yesterday, the dollar shot up, which made fuel less expensive -- all because of the "bailout." Some analysts think the government could break even on this, while investors are the ones who are really taking it in the shorts. I think Paulson and the Administration made the right call on this one.

[Rickm505]

Originally Posted by sailaway21

Recession, what recession?
Jerry Bowyer on 3.3 Percent Second-Quarter GDP Growth on NRO Financial on NRO Financial

From Today's Associated Press

"......Skeptics have extra criticisms for the most recent quarterly read, saying long-held methods of calculating the figure made the second quarter look much better than it was.

To make GDP reflect ongoing business, one-time write-downs are excluded. That makes good sense, except when an industry that comprises a huge sector of the economy is wracked by losses from billion-dollar write-downs, as the financial sector has been.

In the second quarter, Wachovia Corp. lost $9.11 billion, Citigroup Inc. lost $2.5 billion and the nation's thrift banks, which loan most of their money to consumers, lost $5.4 billion. After stripping out those and other write-downs, however, the GDP calculation for the second quarter computed financial companies' profits grew 24.7 percent.


As David Rosenberg, Merrill Lynch's North American economist, put it, "Are you kidding me?"

Then, there's the inflation picture.
To calculate growth, the government tries to strip out the illusion of growth that comes with higher prices. Nominal GDP, which includes inflation, can look great; but strip out that inflation and the picture can change markedly.
"If there's a lot of inflation, nominal GDP will go up," said Peter Schiff, president of Euro Pacific Capital. "The nominal GDP of Zimbabwe is going through the roof, but the economy isn't growing, inflation is just going up."

Matching ‘anecdotal evidence with the numbers’
To strip inflation out of the data, the government devises a "deflator" that subtracts inflation from nominal GDP.
In the second quarter, that deflator was 1.3, a figure that was half what it was in the first quarter and tied with a 10-year low. Starting with nominal GDP of 4.6 and subtracting that 1.3 deflator, we get real GDP of 3.3.

If the government had used the same deflator as it did for the first quarter, 2.6, GDP would have only been 2.0. Schiff and others say the deflator made inflation look much weaker than it was and the economy look much stronger.

"The irony is a low inflation number gives us the growth," Ryding said.

They have a point. Consumer inflation for July was the fastest it had been in a generation, moving up at a rate of 5 percent for the previous 12 months.
Had the deflator been that large, we would have seen negative growth for the second quarter........."

__________________________________________________ ___

This is exactly what I've been saying and Sailaway and Chuckles are trying to ignore. We have no growth. What we do have is a Republican administration spinning numbers away from recessionary numbers in an election year.

Incidently, the experts quoted above are conservative Republicans. The numbers released by the Bush administration are stinking up Wall Street so bad that even Republicans have to speak out.