Market crash: are we there yet ?

[fjon]

Yep. This chart is updated thru Sept. The Oct. numbs are looking awful.

[kootenay]

They may be awful but not suprising. One would expect that after the experience of last fall that both unemployment and consequently revenue would fall. This will take a few years to play out. In the mean time there is still lots of opportunity.

[Cruisingdad]

17.5% of the people in our country (at least) are unemployed. I would suspect the real unemployed AND underemployed number at well over 20%.

With those numbers, that means that at least 1:5 people are not buying anything that is not mandatory for survival. Yet, these companies are showing profits? The stock market is over 10,000? Talk about a disconnect!!! How do you show a profit when 1 out of 5 people (at least) is not buying your product? I tell you how: you fire employees and cut back on everything and everyone. Of course, that can only get you so far. After a while, productivity can no longer rise and you might se it fall exponentially. Coupled with that will be the continued lack (if not growing lack) of people to buy your products.

I am still squarely in the double-dip corner. And I sure feel for the people who are unemplyed because I doubt it will get better any time soon.

My opinions.

Brian

[kootenay]

This is an article from the Globe and Mail's Globe investor web site. Its a subscription service so I will post the entire article. It short but cant post a link. It will give you an idea as to what is going on in the Great white north.

Canada's job market in deep freeze

More than 43,000 Canadian jobs vanished in October, suggesting that after two consecutive months of gains, companies are waiting for more signs of a sustained recovery before they begin hiring again.

Canada's unemployment rate rose to 8.6 per cent, up from 8.4 per cent a month earlier, and a continued trend to self-employment shows the cold job market is forcing many to create their own work.

But behind the bleak headline number that was released by Statistics Canada Friday, there is a subtle shift in the wind.

The economy has now added full-time jobs for two months in a row as part-time work receded, suggesting there are at least some signs of optimism. Also, higher-paying jobs were created in October in areas such as construction, while positions were shed in the lower-paying retail sector.

“The details of the report were mostly weaker, with the only positive news that the entire drop was in part-time jobs, while full-time positions recorded a decent gain,” Benjamin Reitzes, an economist at BMO Nesbitt Burns, said Friday.

Like I said it will take time for this to play out. But we are going to have to look beyond the headline for the real indicators.

[SailKing1]

I brought on an HR consultant a couple of years ago. One of her responsibilities is providing hiring services for our clients. For the last 90 days or so we have had an influx of hiring request. My clients are beginning to hire a wide range of employees and we are starting to get many new clients wanting our hiring services. Ironically this started as a service available to help clients and now is turning into a solid revenue stream.

Why are these people hiring? Many cut back dramatically last year out of panic and survival. Some people use the opportunity to let go marginal employees. They are now beginning to feel thins are under control and that has led to hiring and or replacing those that are gone.

[kootenay]

Interesting article in the Globe and Mail. Here's a quote,

China, helpfully, has sent those many of those dollars back to help the U.S. government keep the lights on. But buying the low-yielding T-bills of a high-deficit country with a depreciating currency does not make a wonderful investment. Sooner or later, China and other foreign holders of U.S. dollars will demand something with a little more upside, no?

That may come in the form of higher interest rates that squelch growth. Or it may come through trading some of their U.S. dollars for ownership of some prime American companies. China has tried this before: A state oil company tried to take over Unocal in 2005, then abandoned it because of a wall of political opposition.

But the U.S. has less moral authority with which to block such a move now, especially if China starts to play nice(r) with its currency. And heaven knows that, after the crash, there are a lot of investors who'd happily take the takeover premium and run. The list of big-name U.S. companies whose shareholders have earned nothing over the past 10 years is a long one.

As Mr. Buffett put it that day two winters ago: “The truth is we're selling America to the rest of the world. It's just a question of [in] what form we sell it to them.” It's also a question of when. As the dollar sinks, the era of the foreign acquirer seems to get closer.

As dollar tumbles, America is up for grabs - The Globe and Mail

I cant count the number of canadians who I have talked to in the past month who are looking at this as a buying opportunity with the Canadian dollar nearing parity. One couple bought a 2004 Beneteau in Florida and while down there were working on a couple of condos. Another is looking at property just south of us in Sandpoint Idaho. A buddy is looking at expanding his business and buying a US company to do it. ( hes into machine shop stuff and feels he can buy one in the US move the equipment lock stock and barrel to a new location up here cheaper than a Canadian startup)

[danjarch]

Hey, Windy, what's your thoughts going forward on inflation. Sp far you've been on the money about continued deflation. You think it's still going to hold for awhile or are we starting to see a change?

[wind_magic]

Originally Posted by danjarch

Hey, Windy, what's your thoughts going forward on inflation. Sp far you've been on the money about continued deflation. You think it's still going to hold for awhile or are we starting to see a change?

Nah, more deflation.

You can see the markets are still being driven by the currencies, right now I believe we are at the end of a bear market rally that has seen everything move up from the 7k'ish lows on the Dow, all precious metals, oil, all stocks, all bonds, everything. Before that everything was going down in price, all the above. When "everything" goes one way and then the other you know that it isn't the price of the assets that is changing, it is the price of the currency that is changing. Deflation is all about demand for hard cash, and despite all efforts to devalue the dollar including outright buying of Treasuries by the Fed, demand for currency is still at an all time high. Yes, traders were willing to move cash into stocks, etc, for this little bump, but we hit the ceiling on the 10k level that we traded years ago and of course haven't been able to break through it because that is the level where a lot of investors started losing money so they are willing to sell it. We have also trended up to the downward sloping trend line from the 14k highs, perfect spot to either "V" bottom or finish moving to DJIA 5000 (you read it right, five thousand). I would not bet on a "V" bottom. The S hasn't really hit the F yet, this bubble has been in the works since Reagan, you just don't undo that kind of asset price inflation in a year or two .. there are kids graduating from college now who have lived their entire lives in this financial bubble.

It is interesting to watch the precious metals and other asset prices here, however, and also most importantly to watch what the Fed does. Here's why - eventually when the deflation does end all of this is going to turn around, and that is when I think we have to worry about inflation in a huge way. Why ? Because the people who print the currency always try to take the easy way out, simple as that. On the one hand they argue that they have to expand the money supply as the deflation worsens, and on the other hand when the deflation ends and we start a recovery they say they can't tighten because they will kill the recovery. Well you just can't have it both ways. You either don't ease and let the deflation work itself out or you have to tighten once the deflation is over, you just can't have both or you screw the currency up. Yet that is exactly what they will try to do, and this bear market rally is the perfect microcosm, you can see exactly what they are going to do right now as the dollar sinks against everything else (it was so strong it had to drop a little). During the worst of the first leg down in the markets the Fed said it had to do "quantitative easing" (buying Treasuries) to pump money into the economy because banks weren't doing any lending, yet when the markets started to rally from the lows the Fed now says it can't stop all the "stimulus" because it would kill the recovery. Now imagine we've gone down another leg, that housing has gotten even worse, that people are scrambling to get their hands on every $us out there by any means necessary including firing everyone who works for them, dumping all their assets into the markets, etc, so that they don't go bankrupt ... that drives the price of $us and other currencies through the roof, what will the Fed do then ? Yes, they'll hook the energizer bunny up to the printing press and it'll keep going, and going, and going ... because nothing outlasts the energizer bunny, and nothing outlasts the progressives' belief that they can print their way out of a deflation. And then the deflation will end ... and it is goodbye currency, 20$us/gallon milk, and all the rest.

Short version - people still have mortgages to pay, they haven't quit selling stocks and other assets to raise cash yet, they've just taken a little break ... bubbles pop, that's what they do ... paper burns - first the speculative stuff like insurance and derivatives, then stocks and bonds, etc, the last paper to burn is the currency. Eventually people get religion and stop wasting their time with snake oil like quantitative easing and start doing the things that create meaningful recovery such as balancing budgets, living within their means, etc, but that is all a long ways off. Decades of spending like there is no tomorrow doesn't just stop over night, people are reluctant to take off the rose colored glasses.

Just one person's opinion, and an opinion is all it is.

[danjarch]

I agree with most of what you said, and that's what I'm seeing in my world. I'm still doing more repairs and discounting a bit to stay busy. I usually do more upgrades and almost never discount. But I was curios as to what you thought.

Maybe we'll get lucky and Greece or England will get hammered in the bond markets. Giving enough of a scare to the rest of the world and maybe our guys as well.

[TropicCat]

I would love to see what statistics the pundits who are declaring that a recovery has started, are looking at. Everything I look at says the opposite.

Hopefully our next administration will have the cojones to address the underlying problems as this one has been effectively neutered.