Market crash: are we there yet ?

[Cruisingdad]

Holy Crap! I watched the segments with this guy, and decided to head home and start planting a garden and sell the boat!

Inflation Not a Problem "Deflationary Depression" in Our Future Prechter Says: Tech Ticker, Yahoo! Finance

Talk about a bear!? Geez. But that is not what is scary... what is scary is that he makes sense.

Windy... your take? Rick? Cam? Others?

Brian

[sailaway21]

Originally Posted by wind_magic

I've said before that I believe most of the technology that we are so proud of now has less to do with any new ability to innovate that we may feel we have learned and more to do with simple numbers. When you get billions of people working on things you end up with cellular telephones, simple as that, it isn't that we have over night (few thousand years) become exceptionally bright. But that can work in the opposite direction too, if the population decreases we can lose the ability to do things, lose the ability to fix technology that we still use, and all the rest. Just because we have at one time known how to make cellular telephones doesn't mean we'll always have the population to do it, things like that are inter-related in a huge network that has to work right in order to produce things like that.

Edit - Technology is not a one way street, or, said another way, can you fix a nuclear reactor ?

An excellent point, Windy. We couldn't begin to build a clipper ship today that would equal one of the originals in quality of construction, even using modern tools. That is, build one as an exact replica that worked. The skill set is lost and the knowledge of why certain things were done "just so" is lost as well.

[wind_magic]

Originally Posted by sailaway21

An excellent point, Windy. We couldn't begin to build a clipper ship today that would equal one of the originals in quality of construction, even using modern tools. That is, build one as an exact replica that worked. The skill set is lost and the knowledge of why certain things were done "just so" is lost as well.

Good example, the one that came to mind for me was damascus steel, a beautiful steel legendary for its sharpness, used in making swords and other weapons - the technology was lost and nobody knows how it was made. Today we use pattern welding to make a similar looking metal, but true Damascus steel isn't pattern welded, the ability to make the real metal is simply gone. We used to know how to do it, now we don't.

[danjarch]

CD, I'm sure you'd like a better take on this but drastic deflation is possible. There are billions in commercial loans coming due where the properties are sitting half empty and the owners don't have the money to make the pay offs. Then there is the 12% of prime loans that are behind and the rising unemployment means more of those to come. Add in the prime and subprime car loans, the rising delinquentcies in the credit card industry, and then there's the commercial paper, the inventory loan market, and the equipment loan markets. All these are being keep propped up either a little or a lot by the cheap money being loaned by the fed.

The problem with all this, is that in no realm does the fed have enough money to hold it up if the rate of defaults and the deflation keeps growing. Your basicly talking of tens of trillions to maybe even over a hundred trillion in losses. The TARP, the PIPP and a bunch of other government programs are trying to get all those toxic asset moving again but it still remains to be seen what is going to happen.

Taking all together, yes we could see house prices drop again as lenders require more money down, toughen standards and/or switch to the old style of 2 to 5 year loans with balloon payments. Same for cars, boats, equipment, inventory, and commercial paper. If that comes to pass, you can imagine just how few buyers would come to look at your catalina. This would cause drastic deflation because few American have any real savings to speak of and most of those who do, have them locked up in 401k's or IRAs so they would have to take steep loses just to get at that money.

But just to make sure your really scared. If all that came to pass then the deflation wouldn't last long, we would trip into hyperinflation with in months since all possible hope of the Chinese getting there money back would be gone and they would just start ditching their US bonds. The Saudis, the Nigerians would stop accepting US dollars for oil, and on and on and on. You'd really be dealing with the end of America scenario.

[chris_gee]

In theory you can always deflect deflation by expanding money supply. However that is not just giving it to banks, but ensuring it gets into the community and turns over.
It is hard to imagine consumer spending increasing much when it is limited by high debt, high unemployment, reducing wages and greater uncertainty. All those things also make the banks less willing to lend, let alone any issues they have with commercial real estate securities going sour.
Some of the sharp downturn in manufacturing may have been due low stocks being carried because of just in time manufacturing so an improvement could be faster when restocking is resumed, but capacity utilisation is very low which affects profitability.
The markets are up but I suggest that is due to three things. The banks can borrow cheaply and use this to speculate. Two most of the turnover around 80% is within day trading as those with advance knowledge game the system. Three is the psychological factor call it denial, or optimism or being seduced by the PR.
Certainly a lot has been thrown at propping up the system but some question that beyond the necessity of keeping the ship afloat in the meantime if the fundamentals of spending too much and borrowing too much have been resolved.
My pick is a slow recovery as these things are worked through over some years, with a good chance of a further major downturn as more cockroaches emerge from the woodwork.

[TropicCat]

GDP revisions released today. Remember Chuckles and I arguing over whether or not we were in a recession, back in 2008? Chuckles was standing by Gov data which said things were fine while I was arguing that main st. was collapsing.

Here are the revised GDP numbers: Notice what they show for 2007.



Earlier GDP releases showed 2007 in a nice growth curve. The fact that secondary mortgage markets had collapsed, banks were failing and real estate was collapsing didn't phase those great looking GDP numbers one bit. Yet the fact is they were very wrong, and our government published them anyway. A lot of people, like Chuckles, believed them.

So, my question is.... was Chuckles hoodwinked? Sandbagged, lied to? Or was this an honest mistake caused by the obvious challenges of measuring GDP in a dynamic environment?

I believe the difference between a positive 3% and a negative 4% growth in GDP is way outside of the margin for error. I think we were lied to.

Now we're being told that the recession is over. Yet employment is still falling, exports are still falling, foreclosures are still at record levels, consumer spending is still falling... but the recession is over?

Foreclosure rates are up 32% between July 2008 and July 2009. 1 in every 154 homes in Florida is in the foreclosure process. 1 in every 123 homes in California is in the foreclosure process. 1 in every 56 homes in Nevada is in foreclosure. 361,000 households received foreclosure notices in July 2009. As of May 2009, nearly 35 million Americans were receiving food stamps, a record. This signals an end to the recession?

Fifteen states and the District of Columbia reported jobless rates of at least 10.0 percent in July. Michigan continued to have the highest unemployment rate among the states, 15.0 percent. Rhode Island recorded the next highest rate, 12.7 percent, followed by Nevada, 12.5 percent; California and Oregon, 11.9 percent each; and South Carolina, 11.8 percent. The rates in California, Nevada, and Rhode Island set new series highs, along with the rate in Georgia (10.3 percent). Bureau of Labor Statistics, 21 August 2009.

End of recession? Thoughts?

[Cruisingdad]

Originally Posted by TropicCat

GDP revisions released today. Remember Chuckles and I arguing over whether or not we were in a recession, back in 2008? Chuckles was standing by Gov data which said things were fine while I was arguing that main st. was collapsing.

Here are the revised GDP numbers: Notice what they show for 2007.



Earlier GDP releases showed 2007 in a nice growth curve. The fact that secondary mortgage markets had collapsed, banks were failing and real estate was collapsing didn't phase those great looking GDP numbers one bit. Yet the fact is they were very wrong, and our government published them anyway. A lot of people, like Chuckles, believed them.

So, my question is.... was Chuckles hoodwinked? Sandbagged, lied to? Or was this an honest mistake caused by the obvious challenges of measuring GDP in a dynamic environment?

I believe the difference between a positive 3% and a negative 4% growth in GDP is way outside of the margin for error. I think we were lied to.

Now we're being told that the recession is over. Yet employment is still falling, exports are still falling, foreclosures are still at record levels, consumer spending is still falling... but the recession is over?

Foreclosure rates are up 32% between July 2008 and July 2009. 1 in every 154 homes in Florida is in the foreclosure process. 1 in every 123 homes in California is in the foreclosure process. 1 in every 56 homes in Nevada is in foreclosure. 361,000 households received foreclosure notices in July 2009. As of May 2009, nearly 35 million Americans were receiving food stamps, a record. This signals an end to the recession?

Fifteen states and the District of Columbia reported jobless rates of at least 10.0 percent in July. Michigan continued to have the highest unemployment rate among the states, 15.0 percent. Rhode Island recorded the next highest rate, 12.7 percent, followed by Nevada, 12.5 percent; California and Oregon, 11.9 percent each; and South Carolina, 11.8 percent. The rates in California, Nevada, and Rhode Island set new series highs, along with the rate in Georgia (10.3 percent). Bureau of Labor Statistics, 21 August 2009.

End of recession? Thoughts?

There is no end in sight. I am squarely long on this being very bad. Hey, I don't care if employment falls to 1% and we are building houses like there is no tomorrow, the honest truth is that the dynamics of what started this mess are not only as bad as when this started, they are worse. We are further in debt. Our debt will continue to rise, no matter what. Talks are serious about dropping the dollar. Many, many people are unemployed and the numbers are rising. And I venture to say that the number of foreclusres will continue to rise for a very, very long time. I have a friend that is a lawyer that does foreclosures. He said that banks are doing anything they can to keep from re-poing properties right now, especially businesses. At some point, they do nto have a choice. Then, they do anything they can to dump them for pennies on the dollar as the tax obligations and over appraised values cost more than keeping it in the first place. THis in turn puts considerable downward pressure on anyone else in the business. It is a vicious cycle downward.

Being as I am in employment, I will tell you that this is not only the worst I have ever seen, the future right now looks worse than I have ever seen... and that is as of today. I see no end in sight. What I see is another bubble forming in the stock market, brought about by the injection of billions/trillions of fake money by the fed. None of this stock market is based upon growth by the companies. Their earnings are horrible and their future prospects not much better. It is all speculation, again.

What I see is things ticking up for some amount of time, albeit slowly. Then I expect another huge bubble to form - probably in the stock market. Then the credit or business real estate market will begin its collapse. This will be brough tupon by a number of factors, but especially the continued unemployment, foreclosed propoerties, and downward profitability. This in turn will cause the stock market bubble to burst again and we will be right back where we started or worse. This process may take weeks or years. Heck, I would even throw out decades. But the truth is that we are vastly in debt and not only is it going to get worse, it is going to escalate and there is no way for any of us to pay it off. We simply cannot be taxed enough to get us out of debt. China will take over as the world power, followed by or proceeded by the failure of the dollar as the world currency. At that point, banana republic probably isn't far off and I would see hyper-inflation spiralling like Nazi Germany.

I am sorry, but between what I see in the debt of our country, the precarious position of the dollar, the horrendous unemployment, the continued lack of manufacturing, and the inflated prices of the stock market, my prognosis is terrible. I am more interested in knowing how my scenario could not pan out? Short term? Who knows. THat is Vegas gambling. Long term? How can you see anything pretty coming from it?

My opinions.

- CD

[Cruisingdad]

Wow!!! First, I want everyone to look above at my time stamp to see that I did not just see this and then type it here. This just came out at 1130 (at least 1130 my time).

The Most Dangerous Words on Wall Street "The Crisis Is Over": Tech Ticker, Yahoo! Finance

The Dollar Will Fall, The Only Question Is : Tech Ticker, Yahoo! Finance

This is EXACTLY, almost verbatim, what I was saying. Freaky!!! I agree with him 100%. His approach at investing and the life of the market in general is a combination of education, fundamentals, and common sense. That is precicesly how I look at it. Just plain freaky.

All you people that are bullish on the economy, go have fun. I have no doubt you will be right for a while. But without some kind of miracle or massive, unprecedented, unbelieveable change in dynamics and fundamentals, the 'collapse' is coming. Maybe you see it next week, next month, next year... or a decade from now. I cannot say. But the underlying fundamentals have not gotten any better, they have gotten worse. There is also no change in the foundation to support this rally. I somtimes wonder if people invest in the stock market because they have nothing better to do. It is like the people in Florida that were still building houses and trying to flip them a year after the crash. They simply know of no other way to make money anymore.

Another investor said yesterday that the market is making no sense right now and is broken. Something like 25% of all transactions are based around CITI, BofA, and a couple of other intituions, all handled by Goldman, and all for a very small percentage movement. Why the volume and why the small moves? 25%!?

Another point the investor today said which I have been saying for a very, long time (well before this crisis this year or last) was that we are still in a bubble and have not paid for or recovered from the dot.com. Remember me telling you about me leaving S Florida and how I felt that all the dot com bubble did was move into real estate? I have been saying this stuff for years.

I think my favorite quote (which I will paraphrase from him) is: "What I don't understand is that the people that are all saying the crisis is over are the same people that totally missed it in the first place. And people are listening to them, again. Insanity is doing the same thing and expecting different results."

Watch those articles. Who knows... they might just save your financial life. If nothing else, at least understand that the fundamentals of our economy (and for the most part the world economy) have not changed. The only people that are saying that they see it over are the elite and those whose motives I question in the first place. Those of us on the street that live/die by what is really happening are not so rosy. In fact, we will tell you that it has not improved at all. In some respects, maybe it has gotten worse.

Watch the articles, guys. They are spot on. And the prudent thing to do is at the very least, think about how you can financially and personally prepare yourself should they be true. I am not telling you to go sell your life and live in a bomb shelter. But I am saying that the prudent course of action is to consider all possibilities, look at them from a logical and completely unemotional point of view, and make the appropriate preparations based upon not only the percentage chance of the things happening... but also upon the level of impact it would have on you and your family.

- CD

[TropicCat]

Goldman Sachs has been running our government for years. The numbers coming out of Washington have made little sense for years. Just take a look at that graph I posted. A year or two down the line, they quietly revise the numbers closer to reality.

The stock market is not the bell weather, it's only 1 single indicator which has gone whacko as the high frequency trades are distorting everything. Even Warren buffet can't figure it out.

I agree with Brian, we have entered a Depression and the people who we depend on th fix this, don't appear to be aware it's even happening.

[JohnRPollard]

CruisingDad,

I happen to agree with your assessment that the fundamentals remain badly damaged, and are far from on the mend if not continuing to get worse. So I understand your pessimism. And I tend to agree that things will get much worse if we continue along this course.

We got into this mess by progressively leveraging nearly every sector of our multi-faceted society -- federal and state governments, businesses, and individuals. That trend played nicely into the hands of an enduring aspect of capitalistic society -- the necessary evils known as corporate and personal greed. Everyone with influence -- from self-interested labor union bosses to smarmy K-Street lobbyists to slimy politicians to the worst of all Wall Street Money Grabbers -- took advantage of the loose credit and investors' faith to line their own pockets as thickly and quickly as possible. Short term gain above all else!

The American middle class seems to have paid the highest price for the run up. Hard work and savings, invested in good faith, erased almost overnight. But not the debts simultaneously incurred. It is a bitter lesson for many, but one my own parents and others of their generation could have easily foretold: There is no such thing as a get-rich quick scheme. Money doesn't grow on trees - it comes from years of hard work and savings.

That is, unless you work on Wall Street -- where the money grab continues unabated and annual bonuses flow like mega-jackpot lottery payouts. Bonuses paid by skimming a cut from middle class retirement investments, and of course from bail-out money.

The news gets worse for middle class Americans. With Obama at the helm, and a complicit Congress, in just half a year the annual federal deficit has MORE THAN QUADRUPLED from the record deficits of the Bush years. The National Debt increases by another million dollars every twenty seconds or so. The Obama Administration has requested that the current national debt ceiling of $12.1T be raised yet again. And the Administration's own OMB now estimates that the cost to american taxpayers of Obama's political agenda will add an additional $9T+ by 2019 to the national debt.

Which will put us well over $20T well before the end of the next decade. That amounts to better than $65,000 of national debt for every american man woman and child. The figure would be scarier still if it was calculated per family. And if it included state as well as local debt. To say nothing of personal debt.

Most of us understand that the very first remedy for overspending is to cut spending. We all live by this code within the confines of our modest family budgets. In the sometimes complex realm of economic quantitative analysis, it is an elegantly simple solution: Spend no more than you have. And preferably a bit less, thereby allowing some savings.

Incredibly, our elected leaders still fail to grasp this -- even after a monumental financial meltdown caused by excess and crushing leverage. Remarkably, their remedy for debt-induced recession is more debt. It is as though our elected officials are congenitally incapable of balancing their own checkbook, much less the national ledger.

Worse still, even with massive long-term shortfalls projected for current entitlement programs, there are those who seek to expand the federal government by offering up additional costly entitlements. This before we have even figured out how to pay the future obligations for the ones we already have. Or paid off the notes incurred for essential government services already rendered.

Insurmountable doom, you say.

Maybe. Or not.

We can throw our hands up in the air and give up. Or get distracted by pointing fingers and laying blame all over the place -- there's more than enough to spread around -- and that's exactly what our so-called leaders would like nothing better than for us to do. Assigning blame is useful only so far as it helps us understand the origins of the underlying problem. But those origins are already well understood: Debt.

Debt is the problem. But I emphatically disagree that nothing can be done about it. It is not too late. We still have a chance to wrest the helm from those that would ruin us in shoal waters. We can tack this ship of state and change course.

The bottom line is that as individuals in a free society we are ultimately responsible for our own fate. We still have a chance to alter course.

Despite all the campaign propaganda and cute slogans, we ende dup with more of the same in the last election. MUCH more of the same. Or perhaps we should call them "more of the shame".

We need new leaders. We can replace the current crop of spenders. We can elect a responsive and financially responsible government.

There is a national election to be decided in 14 months. I would encourage everyone to support candidates -- regardless of party affiliation -- that pledge to make the reduction of our national debt their number #1 priority. Not "one" of many number one priorities (as we have at the moment). THE #1 priority.

Bit by bit, dollar by dollar, we can get ahead of this. Yes, it will take decades, not to mention a sea-change in how we manage our financial affairs, as a country and individually. It will take hard work, sacrifice, and discipline -- virtues with which Americans of past generations were amply endowed. Virtues I'm certain we still possess, if only latently.

It will be a long, hard, beat to weather. But our ship is weatherly, and our crew though green is strengthened by the knowledge that their forebears have endured and overcome greater adversity. We are prepared to do what must be done, and lack nothing but steady command at the helm -- the sort that doesn't cower at the sight of a lee shore or run for harbor at the first hint of storm clouds, but instead reefs down smartly, bears up, and sets a steady course to windward.