Market crash: are we there yet ?

[TropicCat]

Originally Posted by chucklesR

Dow's up 889 points( 10.%) 7 days after a much hyped "crash this week" prediction and silence resounds throughout the thread...

I already gave my predictions. A continuing lowering DJI bottoming out at 7000 in the spring of 2009.

What happens on an average trading day doesn't concern me. That gain you mentioned has already been reversed, as you can plainly see, and your post clearly a case of premature postalation.

Besides, I've been busy..

[TropicCat]

Originally Posted by PBzeer

Well, Rick should be a happy camper today, we finally had a quarter of negative growth. Now he's halfway to an official recession.

John, I maintain we entered recession in 4th quarter 2007, and have been in one ever since. The BLS has revised growth downward twice this year for those quarters. Now that the election is over, I think they will revise them the rest of the way.

Food for thought is this primer, which will take about 5 minutes of your time. It covers the relationship between CPI and GDP and why the numbers BLS publishes are wrong and quantifies my insistance that we have been in recession.

Crash Course Chapter 16: Fuzzy Numbers | Chris Martenson

It's a solid presentation that I stumbled across tonight while searching for something else (isn't that always the way) and it states my case much better than I do..

[therapy23]

Originally Posted by TropicCat

Crash Course Chapter 16: Fuzzy Numbers | Chris Martenson

It's a solid presentation that I stumbled across tonight while searching for something else (isn't that always the way) and it states my case much better than I do..

Thanks for that.
It explains what I have been complaining about for years and years.
What I don't understand is why most can't figure out that they can't buy as much (of anything) as they used to. I certainly cannot buy as much.

[TropicCat]

Originally Posted by therapy23

Thanks for that.
It explains what I have been complaining about for years and years.
What I don't understand is why most can't figure out that they can't buy as much (of anything) as they used to. I certainly cannot buy as much.

Yeah, people 'hear' what they are told to 'hear'. I blame the media for not taking BLS to the woodshed over the GDP numbers. Especially the Financial media. Unfortunately they are conditioned that bad news affects the market, so we haven't had accurate information from them for years. Yet people who should know better about trusting government numbers cling to GDP and CPI numbers like it's the bible.

The economist John Williams who is referenced in the presentation was hired by (I think it was)Boeing some years ago because they were successfully using the BLS GDP numbers to estimate future domestic aircraft sales. It worked great until Clinton made the last set of hedonistic adjustments and suddenly the Boeing sales forecast model didn't work any longer.

Williams found that when he removed the BLS 'adjustments' that the model once again tracked perfectly with GDP. This in itself was the basis for the series of presentations, as they are non political and accurate enough for Boeing. Williams has a website where he publishes some of the data for free.

You have to watch the presentation to get a sense of the adjustments we're talking about.

Crash Course Chapter 16: Fuzzy Numbers | Chris Martenson

It's worth watching.

The smoking gun, of course, is the savings rate in this country. For the last 4 years it's been below 1% of income. Consider that people aren't buying houses or cars or much of anything else these days and the uptick in savings is a whopping 3% of income. Consumers save more than 10% of their paychecks in creditor nations such as Germany and Japan. We Americans simply don't have the income to save. Yet according to official government numbers, people are stuffing their mattresses with cash... or that presentation accurately describes what's really happening.

[Idiens]

Thanks for the link TropicCat - the whole course is worth listening to.

[PBzeer]

While a case can be made for lower savings rates because of lower income, the more pressing effect of personal debt is a far greater factor. As debt increases beyond even pollyannish gains in income, it seems clear that is where the real problem lies, in regards to savings.


Pretty hard to put any aside, when you're paying that much just on debt service.

[TropicCat]

I think both our posts are contributing factors.

The new unemployment numbers were just released.

It's not so good....

[PBzeer]

There currently is not, nor has there been for many years, any incentive to save. People will not put off the pleasures of today, if there is no reward for doing so. When you throw in the rise in 401k's and other retirement accounts, most people view that in the same way savings accounts used to be.

When you add that in, with the level of personal debt, there is really no reason to have any expectation that savings rates will rise. For better or for worse, Americans, by and large, have become investors, rather than savers. The question now, is what effect the Dem Congress will have on that dynamic.

[TropicCat]

Originally Posted by PBzeer

There currently is not, nor has there been for many years, any incentive to save. People will not put off the pleasures of today, if there is no reward for doing so. When you throw in the rise in 401k's and other retirement accounts, most people view that in the same way savings accounts used to be.

When you add that in, with the level of personal debt, there is really no reason to have any expectation that savings rates will rise. For better or for worse, Americans, by and large, have become investors, rather than savers. The question now, is what effect the Dem Congress will have on that dynamic.

It's disingenous to ignore reality.

"....October's decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned out to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million jobs have disappeared. Over half of the decrease occurred in the past three months alone.

About 10.1 million people were unemployed in October, an increase of 2.8 million over the past year. A year ago, the unemployment rate stood at 4.8 percent....."

Also the 10.1% is the U3 number, not the 15% U6 number which includes those who gave up looking for a job. You need a job to have a 401K plan. If not, people liquidate it in order to live.

One last point. We lost 600,000 jobs in the first 6 months of 2008 yet the government tells us we were in a growing economy? And you believe them?

1+1=2 in Florida, they must have a different law of math where you live.

[PBzeer]

The point is, regardless of economic conditions now, or in the past 20 years, there is NO INCENTIVE for people to save rather than invest. Employed, unemployed. Higher wages, lower wages. Without an incentive to save, people will continue to use their money in other ways. And when you add in the increase in personal debt, which is higher than the decrease in wages, there is less available disposable income to use period.

To try to tie a lower savings rate to lower median wages only makes sense if you exclude every other factor, all of which have a larger negative impact. You can't simply mandate higher wages, except in government and quasi-government institutions, which are also the only ones not currently being negatively impacted by rising unemployment. What those entities all have in common though, is that they don't directly enhance available revenue, to positively fund those increases.