Market crash: are we there yet ?

[Cruisingdad]

Originally Posted by Bene505

Though of this thread when I saw this...

Boy, that was scary.

- CD

[chris_gee]

[quote=TropicCat;519181]Brian,

"Economists Thomas Piketty and Emmanuel Saez have made careers of studying US income inequality using IRS data, which goes back to 1913. The most recent data available (for 2007) showed that the top 1% of US households received 23.5% of all income (the second highest on record, after 1928), while the top 10% received 49.7% of income (the highest on record).

The top .01% earners, 14,988 fortunate folks, had an average income in 2007 of $35,042,705. They had an average federal tax burden, according to Piketty and Saez, of 34.7%, leaving them after tax income of $22.9 million. If you assume a 50% savings rate among this group, you get total savings of $171.5 billion. This is nearly ONE HALF of the total savings for the entire country implied by a savings rate of 4.2% ($365 bn) reported in this month’s Bureau of Economic Analysis data."

Now where have I read that before? Oh right. Guest Post: “The Savings Rate Has Recovered…if You Ignore the Bottom 99%” « naked capitalism

"Economists Thomas Piketty and Emmanuel Saez have made careers of studying US income inequality using IRS data, which goes back to 1913. The most recent data available (for 2007) showed that the top 14,988 households (0.01% of the population) received 6.04% of income, the highest figure for any year since the data became available. The top 1% of households received 23.5% of income (the second highest on record, after 1928), while the top 10% received 49.7% of income (the highest on record).


The fortunate 14,988 had an average income in 2007 of $35,042,705. They had an average federal tax burden, according to Piketty and Saez, of 34.7%, leaving them after tax income of $22.9 million. If you assume a 50% savings rate among this group, you get total savings of $171.5 billion. This is nearly ONE HALF of the total savings for the entire country implied by a savings rate of 4.2% ($365 bn) reported in this month’s Bureau of Economic Analysis data."


Copy and paste plagiarism? That used to get a fail grade.

[danjarch]

Cris, I don't think rick was trying to claim that as his own words.

Bene, that commercial gave me the willies the first time I saw it. Scary stuff.

Windy, thanks for the insight on the cash forex.

[wind_magic]

Originally Posted by danjarch

Windy, thanks for the insight on the cash forex.

The cash forex market is very interesting. I've said before in this thread that I think anyone who is investing should learn about the cash forex market before they even learn about the stock or bond markets. Investors may or may not invest in stock, they may or may not invest in bonds, but everyone who has two pennies to rub together is exposed to foreign currency exchange risk in the forex markets whether they like it or not.

[TropicCat]

No Chris, I wasn't.

Here's a puzzling scenario. The recession will be declared over soon. Unemployment will be called a lagging indicator. So we will see GDP numbers showing us that growth occurs when close to 17% of the workforce is unemployed. This is forecast to continue rising. Given that 70% of GDP is consumer spending...and given that we will have close to 20% of the working population who can't spend....Just how is this possible?? Granted that full employment is usually cited at 4-5% U3 unemployment rate (say about 7.5% U6??).

So, 80% (workforce still working) then add the 7.5% U6 number to allow for the full employment factor= 88% of 70% (of the economy)is a drop in consumer spending to 60% of the economy...right? GDP should be impacted by -10%. If they declare the recession over and a return to growth in GDP, what math can they be using? I realize I didn't allow for unemployment insurance. A recent Princeton survey found less than 40% of the unemployed were still receiving it. Which calls into question the accuracy of the U6 unemployment number ...it's too low.

Anyone?

What the Hell is GDP measuring these days? China's imports??? Or is this the new math? Or is it one guy with a computer who asks whoever comes into his office "how much of an increase in GDP do you want this quarter?

[TropicCat]

Originally Posted by Cruisingdad

Oh... this is almost magical:



What say you to that, RIck and Windy!!! That is from your link, Windy. That is all it would take. Slowly buy gold, slowly dump the dollar, keep your yuan levereged well aginst other currencies that are falling, back your currency in gold, then make a really good case to dump the US dollar. Logical.

As a country, we better get our heads out of our butts and start putting in place a strong, well conceived strategy that averts what they are obviously doing or trying to do. And that strategy better not include warships (but I bet it will before it is all over).

- CD

Apparently Washington no longer has to concern themselves with what happens on Main St. USA. Both Obama and Bush brought in Goldman Sachs to run the Treasury and don't forget Bernake was New York Fed. They are only concerned with what Wall St. wants.

You are looking at their strategy. The best anyone can say about it is that it's a delaying action in preserving the dollar as the reserve currency. They all seem to feel that's the entire 'ballgame' and their answer is to pump the DOW and hope for the best.

[Cruisingdad]

1.3 million to lose jobless benefits by year's end - Yahoo! Finance

Will get interesting after 1.3 million lose their benefits!! THis does not include those that have already lost their benefits. On the positive side, the unemployment will go down!!!

- CD

[TropicCat]

Hey Unemployment will plummet to those who read the newspaper. CD, I believe you've uncovered their strategy. Just wait long enough and unemployment will be almost zero. Nobody will be working but heck, don't sweat the details.

Besides, it must be true because we'll read it in the newspaper.

[TropicCat]

Why I'm certain this is only going to get worse. Fact.. not opinion.

The Financial Accounting Standards Board implementing FAS 157 and FAS 159 November 15, 2007 at the height of the mortgage market meltdown. Under the suspension of the FSAB accounting rules, banks don’t have to write down Level 3 assets to market value, if they state that they have no plans to sell the assets for an extended period. So, if the bank forecloses on a home and then says that it’s not going to sell it, they can keep it on the bank's books indefinitely at its full book value.

So… think about the effect this has had. If you own a home on which you owe $300,000 and lost your job. You then manage to find another job but it only pays 1/2 what you were making. You call your bank and ask for a loan modification only to find that the bank isn't interested. They calmly inform you to pay up or face foreclosure. Your bank knows the house will now appraise at $150,000. They also know if they go ahead and foreclose and keep the home on their books, they won't have to write down it's value. In other words, the bank forecloses and will not have to show a loss. They don’t have to write it down because they say they’re not planning on selling it anytime soon.

You lose your home but the bank's CEO get's a bonus. And with the FDIC loan freebies, they can sit there for years before they even consider trying to sell that house. When they do sell, the odds are that the market will probably be better.

In short, there is an incentive in place to prevent banks from modifying loans. There is no incentive for banks to work with their customers. The foreclosure situation will not stabilize under these conditions until the job market stabilizes. Not the other way around. We all know why job market is still declining.



Now, there isn't an economist out there who can map a way out of this recession without a housing market recovery. Since, there is no way out, this recession can only deepen.

Here's the scary part. They all know this. Yet the rules were changed to prevent bank loses, not consumer loses. But without consumers, there is no economy. Go figure....

Lastly..this just in from itulip.com. the Bureau of Labor Statistics publishes a number from the Household survey that is comparable to the nonfarm survey (dubbed the population and payroll-adjusted Household number), and on this basis, employment sank — brace yourself — by over 1 million, which is unprecedented. Geithner got on TV and told the world things were looking up?????????????????? and the dang Stock market went up?????????????

We're screwed.

[wind_magic]

Originally Posted by TropicCat

Your bank knows the house will now appraise at $150,000. They also know if they go ahead and foreclose and keep the home on their books, they won't have to write down it's value. In other words, the bank forecloses and will not have to show a loss. They don’t have to write it down because they say they’re not planning on selling it anytime soon.

Thus the term "zombie bank" ala Japan 1990's ...

Originally Posted by Wikipedia

A Zombie Bank refers to a financial institution with an economic net worth that is less than zero, but which continues to operate because its ability to repay its debts is shored up by implicit or explicit government credit support. The term was first used by Edward Kane in 1987 to explain the dangers of tolerating a large number of insolvent savings and loan associations and applied to the emerging Japanese crisis in 1993[1][2]. Zombie institutions face runs by uninsured depositors and margin calls from counterparties in derivatives transactions. They engage in high-stakes gambles for resurrection that undermine industry profit margins and spread insolvency to healthy competitors. If their insolvency is left unresolved, more and more institutions fall into distress and a crisis develops when the wisdom of the government's bailout program comes increasingly to be called into question. [1] [2]

Neither living or dead, just existing ...