Market crash: are we there yet ?

[fjon]

Matt Taibbi has been doing some fine investigative work lately and this is his latest.

Wall Street's Naked Swindle : Rolling Stone

[danjarch]

Gees, Fjorn, that was just a lovely read. Thanks for the link.

[TropicCat]

Divergence

Here we are approaching the end of 2009 and with the notable exception of the Stock Markets our economy is in as much trouble now as before all the stimulus bills of two administrations were enacted. It should be clear to even the casual observer that divergence is in play at many different levels of our economy, and that this divergence is detrimental to the economy of the United States and to 95% of all Americans.

Divergence between the DOW and Main St is capturing all the news headlines, yet apparently this is insufficient for government policies to be changed other than a quick look at how Wall St. bonuses are paid. Are our elected and appointed officials responsibly addressing the needs of all Americans? I think not.

Divergence between the income of the top 1% of our population and the rest of American workers has outright broken all tracking charts. It's never been more lopsided as government policies have become so slanted against Americans that no one bothers to justify them any longer. Are our elected and appointed officials responsibly addressing the needs of all Americans? I think not.

Divergence of the needs of Multinational corporations vs the needs of Americans has demonstrated clearly that what's good policy for multinational corporations is no longer good policy for American workers. Free trade is now standing naked and exposed for the bad policy it was and still is. Are our elected and appointed officials responsibly addressing the needs of all Americans? I think not.

Our Trade policies are the 600 pound gorilla that no one wants to talk about yet are ultimately responsible for what every economist is calling a jobless recovery. If it's a jobless recovery, folks ... it isn't a recovery...period. Jobs are gone, they're not coming back. Yet, without those jobs the housing market will continue to languish, foreclosures will continue to set records, bankruptcies will continue to grow unabated, and the bottom line is that consumer spending, which is 70% of our economy, will never recover. Therefor, America will not recover. For the record, these are no longer just manufacturing jobs, white collar jobs are being outsourced at record levels.

Until we start hearing about how this is going to be addressed, Washington is just pandering, and not serious about solving the problems we face. Consumer spending IS our economy. Consumers have to have income in order to spend. It's pretty basic economic theory, yet there it is and yet just who is addressing this? Until we begin hearing murmurs of trade policy reform from Washington, everything we read is just so much mumbo jumbo and elected and appointed officials are not responsibly addressing the needs of all Americans.

Just my opinion

[mdbee]

OK, I would like to get some thoughts on what is going on in Washington. Normally I side on greed and incompetence as the major motivating factors.
Actual conspiracies take a lot of fore thought and planning.

Glen Beck, whether or not you agree with his way reporting, has come up with a surprising number of lings between Obama and extreme socialist supporters.
Although the White House scoffs at FOX and Beck, they haven't been able to deny the connections. (usually the reports include video or audio tapes of members of the White House team praising Mao, Marx or Chavez)

He has also laid out how this has seem to slowly come together after years of seemingly innocuous actions by the usual tam of suspects. George Soros, left wing politicians, union people etc.

Could there be an overall plan to put us into the toilet, so as to transform our system from within? Like he promised during the campaign? "CHANGE."
Also wasn't all of this forecast by Nikita Kruschev?:

"You Americans are so gullible. No, you won’t accept communism outright, but we’ll keep feeding you small doses of socialism until you’ll finally wake up and find you already have communism. We won’t have to fight you. We’ll so weaken your economy until you’ll fall like overripe fruit into our hands."

I feel like we are heading into an abyss, without a leader to help turn this around.

[wind_magic]

Appreciate your comments mdbee, but we try to keep the politics out of this thread so that people will stay on topic and people with all kinds of perspectives will feel free to post to the Market Crash thread. Make the same post over on Democrats vs. Republicans and I'm sure you'll get plenty of discussion.

[mdbee]

Sorry about that I should have phrased by post differently. Although it was posed as a political question, my real question has to do with economics.
Do we have a chance of a turn around, with the types of actions being made?
I shouldn't have questioned the motives.

Given a "free market" and some traditional stimulus (and some time) I think we would pull out of this quicker.

Originally Posted by wind_magic

Appreciate your comments mdbee, but we try to keep the politics out of this thread so that people will stay on topic and people with all kinds of perspectives will feel free to post to the Market Crash thread. Make the same post over on Democrats vs. Republicans and I'm sure you'll get plenty of discussion.

[TropicCat]

There seems to be some issues with the recent good news of 3.5% increase in GDP. Ordinarily, these reports aren't looked at too closely, but since this one supposedly signals the end to the Great Recession, folks have been peeking under the hood so to speak, to see how the increase was calculated.

A few notable points have been raised:

I. Cash for Clunkers was both good and bad. Good for this quarter, but horrible going forward.

1.66% of the 3.5% GDP increase was attributed to 'Cash-for Clunkers'. This isn't a sustainable program and since it's already ended, we won't be seeing an increase going forward. However, this very same program has impacted another set of important numbers. The same GDP report tells us that Personal outlays increased $148.2 billion (5.8 percent) in the third quarter, compared with an increase of $8.2 billion (0.3 percent) in the second. Personal saving (disposable personal income less personal outlays) was $364.6 billion in the third quarter, compared with $533.1 billion in the second.

The personal saving rate was 3.3 percent in the third quarter, compared with 4.9 percent in the second. This had to be "cash for clunkers". Acquiring new debt is the worst sort of "spending" as you're replacing a paid-off car with one that now comes with a payment book.

II. Personal Income is collapsing: In short, less income, less savings, more taxes.

Gross personal income decreased $15.5 billion (0.5 percent) in the third quarter, in contrast to an increase of $19.1 billion (0.6 percent) in the second. At the same time, Personal current taxes increased $4.8 billion in the third quarter, while it decreased $119.1 billion in the second. In short, Taxes up, income down.

Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, instead of the increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent. Disposable personal income decreased in nominal terms by 5.9% while in real terms (inflation adjusted) it decreased by 7.2%.

Would someone explain to me how a decrease in purchasing power ends a recession?

III. Complete and utter confusion:

From Market ticker.com:

"Looking inside the data, the "big change" in private domestic investment is all residential fixed - up 23.4%. I don't believe it. I've been scouring the homebuilder earnings releases and data, and I don't see the numbers that support this. An improvement over the ditch-diving of the last many quarters, yes - but a 23.4% increase, a swing of fifty percent from Q2-Q3? Oh hell no. Where is it? It's not in Home Depot's or Lowe's quarterly results, it's not in the home builders, and I can't find it in the suppliers (lumber companies, etc) either. This sort of move would result in monstrous top-line revenue increases reported by firms in this sector and that simply has not happened.

Nor do the export and import numbers look right. Port of Long Beach and LA anyone? Those numbers also don't add up - swings of 20-25% in one quarter? Not reflected in container volumes and freight loadings. Yet it has to be - how do you get something in or out of here without it going through a port?"


So, GDP was up 3.5% ... maybe.... yet nothing in the report suggests a real recovery is underway as none of the gains are repeatable. How could they be? Consumer spending is 70% of the economy, yet we are still losing jobs. People without jobs can't buy anything.

[danjarch]

Yep, it's scary.

[kootenay]

For the most part tropic Cat is right but as much as touting an increase in GDP partly based on governments infusion of dollars, pounds, euros etc as a recovery I really dont think a .7 % decrease in income or tax revenue is a collapse in income. I do think that this situation will take a few years for the mud to settle.

I doubt if the US will do what it takes to reduce debt anytime soon but I do think the issue has been finally been raised to high enough level that every future government will be forced to ever more deal with the debt as an issue. Perhaps one day the people will actually be able to change the system to disconnect the industry lobbies from the political structure and then you will be actually able to cut budgets. But on that important part of the solution I'm not going to hold my breath.

One other thing, I do think that folks with money parked in Money Market funds and hiding quivering in the corner have been missing wonderful money making opportunities. My portfolio is up 70% so far this ytd and including the losses from last fall I am still up 43% since August of last year. Sitting back making no money on MMF's is just a complete waste of a hell of an opportunity.

[wind_magic]

The bulls have had their fun, it is time for the bears to deliver more pain.

I hereby declare this rally over.