Well, the NBER finally made official the call that readers of this and many other blogs have known for along time. We're in a recession and it started back in 2007...December to be exact.
What was obvious to a few has now become impossible to ignore by everyone.
Monday, December 1, 2008
Thursday, November 20, 2008
New frontiers
Earlier in the summer I made a couple of notes in my blog entries...
"Market's Closed! (July, 2008)"Things we've never seen before are going to start happening over the next year or two. Considering we've already seen some once in a life time kick saves from the Fed and Government, that's saying alot.
"Jumping into the Poole (July 2008)"Too many fools, too many shoes and way to late in the game to stop it. As I've said before. Protect your assets, eliminate debt, stay liquid and mobile and be prepared for the worst. Things are gonna happen over the next 3 years that nobody is ready for. "
...the S&P 500 was around 1300 at the time...806 today ~ -35%
Here's an interesting entry from Barry Ritholtz today ...
Record-Breaking Data Everywhere!
One of the interesting aspects of this unprecedented housing collapse, credit crisis, economic recession and market crash has been all the new records we keep seeing:
• Over the past year, the S&P 500 index lost ~$1 trillion more than the entire 2000-2002 bear market, according to Standard & Poor’s. From the October 2007 highs of 1,565, to yesterday’s close of 806.58, the S&P 500 market capitalization lost $6.69 trillion. That’s almost $1 trillion more than entire 2000-03 bear market losses of $5.76 trillion. (Marketwatch)
• The S&P 500 hasn’t been this far below its 200-day moving average on a percentage basis since The Great Depression. (Doug Kass)
• CPI: U.S. consumer prices in October registered their largest single-month decline since before World War II. It is the largest monthly drop in the 61-year history of the data;
• PPI, down 2.8% for the month, was also record breaking drop.
• The dividend yield on the S&P 500 is now greater than the yield on the 10-year Treasury. That hasn’t happened since 1958. (Barron’s)
• First-time claims for U.S. unemployment insurance rose to the highest level since September 2001. The total number of people on unemployment benefit rolls jumped to the highest level since 1983.
• Housing starts fell to 791,000, off 38% from a year ago. That’s the slowest pace of starts since data began being compiled in 1959. Starts are now down 65% from the early 2006 peak — this has become the very worst housing downturn on record.
• Permits for new houses, at a 708,000 pace, were off 40% from a year ago, also the lowest total since it has been tracked starting in 1960. Put this into context of population — in 1960, the total U.S. population stood at 180 million — 60% of today’s 300 million.
• more Doug Kass: The 30-year return for BBB-rated corporate bonds is now greater than the 30-year return for stocks. So it has not paid to take equity risk for 30 years! (The Street.com)
• The TIPS Spread ( Treasury Inflation Protected Securities versus the 10-year Treasury) is at a record low 54 basis points (1997)
• The Russell 3,000 now has 1228 stocks a share price under $10. That’s 42% of the index. At the market’s 2002 lows, there were significantly less stocks trading below $10/share — just 884 (Bespoke Group).
"Market's Closed! (July, 2008)"Things we've never seen before are going to start happening over the next year or two. Considering we've already seen some once in a life time kick saves from the Fed and Government, that's saying alot.
"Jumping into the Poole (July 2008)"Too many fools, too many shoes and way to late in the game to stop it. As I've said before. Protect your assets, eliminate debt, stay liquid and mobile and be prepared for the worst. Things are gonna happen over the next 3 years that nobody is ready for. "
...the S&P 500 was around 1300 at the time...806 today ~ -35%
Here's an interesting entry from Barry Ritholtz today ...
Record-Breaking Data Everywhere!
One of the interesting aspects of this unprecedented housing collapse, credit crisis, economic recession and market crash has been all the new records we keep seeing:
• Over the past year, the S&P 500 index lost ~$1 trillion more than the entire 2000-2002 bear market, according to Standard & Poor’s. From the October 2007 highs of 1,565, to yesterday’s close of 806.58, the S&P 500 market capitalization lost $6.69 trillion. That’s almost $1 trillion more than entire 2000-03 bear market losses of $5.76 trillion. (Marketwatch)
• The S&P 500 hasn’t been this far below its 200-day moving average on a percentage basis since The Great Depression. (Doug Kass)
• CPI: U.S. consumer prices in October registered their largest single-month decline since before World War II. It is the largest monthly drop in the 61-year history of the data;
• PPI, down 2.8% for the month, was also record breaking drop.
• The dividend yield on the S&P 500 is now greater than the yield on the 10-year Treasury. That hasn’t happened since 1958. (Barron’s)
• First-time claims for U.S. unemployment insurance rose to the highest level since September 2001. The total number of people on unemployment benefit rolls jumped to the highest level since 1983.
• Housing starts fell to 791,000, off 38% from a year ago. That’s the slowest pace of starts since data began being compiled in 1959. Starts are now down 65% from the early 2006 peak — this has become the very worst housing downturn on record.
• Permits for new houses, at a 708,000 pace, were off 40% from a year ago, also the lowest total since it has been tracked starting in 1960. Put this into context of population — in 1960, the total U.S. population stood at 180 million — 60% of today’s 300 million.
• more Doug Kass: The 30-year return for BBB-rated corporate bonds is now greater than the 30-year return for stocks. So it has not paid to take equity risk for 30 years! (The Street.com)
• The TIPS Spread ( Treasury Inflation Protected Securities versus the 10-year Treasury) is at a record low 54 basis points (1997)
• The Russell 3,000 now has 1228 stocks a share price under $10. That’s 42% of the index. At the market’s 2002 lows, there were significantly less stocks trading below $10/share — just 884 (Bespoke Group).
Wednesday, November 19, 2008
More Keysian nonsense worldwide...and a rant
http://www.nakedcapitalism.com/2008/11/taiwan-to-hand-out-shopping-coupons-to.html
Taiwan is handing out $100 in shopping coupons to every citizen (works at registered stores and restaurants). Don't laugh, this idea has been kicked around by officials in the US. It's this type of STUPID BACKASSWARDS logic that is pervasive world-wide. Keynes must be rolling over in his grave as the world's knuckleheads continue to bastardize his legacy and theories. I'm not sure how any good ideas will get implemented, when the overwhelming number of both educated and uneducated leaders rely on unsound and proven to be rediculously ineffective policies, to try and manage this worldwide crisis.
Facts:
Taiwan is handing out $100 in shopping coupons to every citizen (works at registered stores and restaurants). Don't laugh, this idea has been kicked around by officials in the US. It's this type of STUPID BACKASSWARDS logic that is pervasive world-wide. Keynes must be rolling over in his grave as the world's knuckleheads continue to bastardize his legacy and theories. I'm not sure how any good ideas will get implemented, when the overwhelming number of both educated and uneducated leaders rely on unsound and proven to be rediculously ineffective policies, to try and manage this worldwide crisis.
Facts:
- You can't avoid a recession/depression following the greatest worldwide credit bubble in history. It's necessary and good for the long-term health of economies.
- Any money used to bailout or stimulate broken economic models is lost and wasted money in the form of taxation without representation. Yes, debt spending is a form of taxation. No, there has been little to no referendum on the majority of these spending decisions.
- Keynesian policies of stimulating economies CANNOT work when funded through debt and applied to broken models with insolvent companies.
- Sustainable economic growth can only come from internal investment based on savings (not debt based). We have NO savings. That will take years to reverse.
- Excessive debt backed by inflated assets must be destroyed either through defaults, bankruptcies or restrustructuring of loans through principle reduction. PERIOD.
- You CANNOT target asset prices as a solution to a debt bubble. It only delays the necessary processes of returning to equilibrium. Go ask Japan or the small group of smart economists who were alive during the Great Depression.
- We are in DEFLATION. Do not listen to any other BS regarding disinflation, etc. We've been in deflation for almost a year...I called it back then even when almost every single investment bank, economist, central bank and government was calling inflation during the commodity bubble (which I also called).
- Most economists, financial analysts, bankers, governement officials, etc...have no clue about how economies work. This stuff isn't rocket science, it's dumbfounding to me the ignorance worldwide.
- This ignorance benefits only the wealthy. PERIOD. Does that make it premeditated ignorance?...to be determined.
- There are criminals on both Wall Street and in the federal government who have blatanly lied under oath. Where is justice? If their excuse is they didn't lie, then they should be fired for incompetence and failure to fulfill their duties or removed from office immediately. PERIOD.
- This country is full of a bunch of apathetic, lazy, spoiled, selfish fucks. It will take years and maybe a generation to break the back of this lack of initiative and drive. Let's hope free markets and capitalism survive the transition.
- We haven't had true free markets or capitalism in this country in decades. Let's give it a try for once.
- There are solutions to this crisis. Myself and others have addressed these countless times. Why are governments ignoring these voices? Who benefits from this?
- Americans are asleep at the wheel and punishing their kids and their kids' kids because of their apathy. When will they wake-up and force the government to make smart choices that don't ruin the future of their kids through excessive debt?
- Voting for Obama was not the wake-up call. It was a great day historically for America, but far from change or a solution. Will people go back to the couch and hope change appears miraculously?
- Fact: I'm a ranting lunatic...does anybody even read this anymore?
Tuesday, November 18, 2008
Krugman starting to wake up...I hope
I've given alot of grief to Paul Krugman, our liberal nobel prize winning economist. He did a good job predicting the downturn in the economy, but I've railed against his Keynsian theories that promote massive economic stimulus from the government. His latest article suggests he's starting to understand the problems that lie at the core of Keynsian policy in our current environment. Have a looksee...
After the Stimulus
http://krugman.blogs.nytimes.com/2008/11/17/after-the-stimulus/
For the coming year, and probably well beyond, the economy will be on life support — sustained by massive fiscal stimulus. (Either that, or we’ll be in a very deep slump.) But eventually the economy will have to come off life support. What will take the place of the stimulus?
I don’t really know the answer.
I really don't know the answer. That's a telling statement. It's also the primary reason that this stimulus WILL not work. The reason he doesn't know the answer is that he KNOWS that the economic model that the economy is currently based on is broken and kaput. All a stimulus does is try and reignite the old model. It doesn't promote the proper allocation of funds to NEW economic models. This is the CORE PROBLEM when stimulus is provided to an economy that is FUNDAMENTALLY failing. Stimulus can work under some scenarios, but generally they don't involve DEBT stimulus and they generally are applied to economic models that are viable, but have sustained an unexpected shock causing interruptions in the flow of GOOD CAPITAL to GOOD MODELS. This current stimulus is 0 for 2 on both those fronts. Instead of the stimulus coming from built up surplus during the good times, it is coming from foreign financed DEBT. And further, the stimulus is going directly to companies that are mired in flawed sectors based on unsustainable business models (financial, housing, auto, governments).
Krugman is stuck in the trap that all "blinders wearing" Keynsians get stuck in. Eventually you can no longer prop up a failed economic model with more stimulus. The law of diminishing returns kicks in. You gain less and less for every dollar spent and eventually you get no benefit. At the same time, that money has failed to be allocated to new and better economic models that would provide the ACTUAL growth needed to move this country forward under a sustainable model. The real question is will the Keynsians actually UNDERSTAND this and make the necessary adjustments to their logic or will they continue to move forward with ill-advised stimulus injections HOPING that better days lay ahead. Hope is a HORRIBLE way to run a business. It's a great way to destroy an economy however.
After the Stimulus
http://krugman.blogs.nytimes.com/2008/11/17/after-the-stimulus/
For the coming year, and probably well beyond, the economy will be on life support — sustained by massive fiscal stimulus. (Either that, or we’ll be in a very deep slump.) But eventually the economy will have to come off life support. What will take the place of the stimulus?
I don’t really know the answer.
I really don't know the answer. That's a telling statement. It's also the primary reason that this stimulus WILL not work. The reason he doesn't know the answer is that he KNOWS that the economic model that the economy is currently based on is broken and kaput. All a stimulus does is try and reignite the old model. It doesn't promote the proper allocation of funds to NEW economic models. This is the CORE PROBLEM when stimulus is provided to an economy that is FUNDAMENTALLY failing. Stimulus can work under some scenarios, but generally they don't involve DEBT stimulus and they generally are applied to economic models that are viable, but have sustained an unexpected shock causing interruptions in the flow of GOOD CAPITAL to GOOD MODELS. This current stimulus is 0 for 2 on both those fronts. Instead of the stimulus coming from built up surplus during the good times, it is coming from foreign financed DEBT. And further, the stimulus is going directly to companies that are mired in flawed sectors based on unsustainable business models (financial, housing, auto, governments).
Krugman is stuck in the trap that all "blinders wearing" Keynsians get stuck in. Eventually you can no longer prop up a failed economic model with more stimulus. The law of diminishing returns kicks in. You gain less and less for every dollar spent and eventually you get no benefit. At the same time, that money has failed to be allocated to new and better economic models that would provide the ACTUAL growth needed to move this country forward under a sustainable model. The real question is will the Keynsians actually UNDERSTAND this and make the necessary adjustments to their logic or will they continue to move forward with ill-advised stimulus injections HOPING that better days lay ahead. Hope is a HORRIBLE way to run a business. It's a great way to destroy an economy however.
Sunday, November 9, 2008
Denninger's latest and greatest
I've been following Karl Denninger's blog for the past year. The guy is a major ranter, but he is also one of the most intelligent writer's out there when it comes to understanding this mess and how to correct it. His latest post is excellent and he eloquently describes the "confidence" game that I've ranted about in the past. Please read:
http://market-ticker.denninger.net/archives/651-Yes-We-Will-Have-A-Depression.html
http://market-ticker.denninger.net/archives/651-Yes-We-Will-Have-A-Depression.html
Friday, November 7, 2008
How low can we go...
Here's a clip from a Krugman article in the Times. He's half right and half idiot.
GURK ZIRP
That’s Zero Interest Rate Policy — which is now, in the wake of this morning’s terrible employment report, inevitable. Yes, we’re Japan.
Add to this the news of a retail sales collapse, and we’re looking grim, grim, grim.
Monetary policy obviously isn’t enough. It’s time to raise Keynes: we need big fiscal stimulus, now now now.
Any way we can get current management at Treasury to take early retirement, and get the new guys in right away?
Add: The unemployment rate has now risen more than 2 percentage points from its pre-recession low. In 1990-1992 the unemployment rate rose 2.6 percentage points. Given what’s happening to retail sales, manufacturing, and so on, it’s now a certainty that unemployment has a lot further to rise. So the “worst recession in 25 years” thing is now baked in. The only question is whether we hit “worst slump since the Great Depression” territory.
So, he's right on ZIRP (world going there also), correct about Japan similarities, correct about how fing bad this is going to be, but he along with the majority of our leaders are COMPLETELY RETARDED when they talk about Keynes and Keynsian policy as the answer to this mess. Throwing fiscal stimulus in the form of BORROWED MONEY TO PAY OFF MORE DEBT AND INTEREST is a TRAP. It will crush our economy just as I've been predicting for over a year would happen and then would be implemented. Even my hero David Walker is promoting some of this Keynsian non-sense. I still love him to death (he was on Squawk Box this morning...more on that in a moment), but fiscal stimulus WILL NOT AND CANNOT WORK in an over-leveraged debt driven economy. Has anybody learned from our past experiences and experiments with these methods? Does anyone really understand the mechanisms behind debt bubbles and debt collapses, consumer driven recessions, etc... They are different animals and beasts completely from a lack of liquidity in the system. They are INSOLVENCY and DEBT problems. You must eliminate, reduce or default on the debt to recover...PERIOD. It is SO FUCKING SIMPLE yet not one sound bite in the media has made any sense other than a few marginalized "doomsdayers". We are heading straight into the perfect storm and our leaders are insisting on pushing down the throttle and driving through it. That mindset will seal the collapse of our economy.
GURK ZIRP
That’s Zero Interest Rate Policy — which is now, in the wake of this morning’s terrible employment report, inevitable. Yes, we’re Japan.
Add to this the news of a retail sales collapse, and we’re looking grim, grim, grim.
Monetary policy obviously isn’t enough. It’s time to raise Keynes: we need big fiscal stimulus, now now now.
Any way we can get current management at Treasury to take early retirement, and get the new guys in right away?
Add: The unemployment rate has now risen more than 2 percentage points from its pre-recession low. In 1990-1992 the unemployment rate rose 2.6 percentage points. Given what’s happening to retail sales, manufacturing, and so on, it’s now a certainty that unemployment has a lot further to rise. So the “worst recession in 25 years” thing is now baked in. The only question is whether we hit “worst slump since the Great Depression” territory.
So, he's right on ZIRP (world going there also), correct about Japan similarities, correct about how fing bad this is going to be, but he along with the majority of our leaders are COMPLETELY RETARDED when they talk about Keynes and Keynsian policy as the answer to this mess. Throwing fiscal stimulus in the form of BORROWED MONEY TO PAY OFF MORE DEBT AND INTEREST is a TRAP. It will crush our economy just as I've been predicting for over a year would happen and then would be implemented. Even my hero David Walker is promoting some of this Keynsian non-sense. I still love him to death (he was on Squawk Box this morning...more on that in a moment), but fiscal stimulus WILL NOT AND CANNOT WORK in an over-leveraged debt driven economy. Has anybody learned from our past experiences and experiments with these methods? Does anyone really understand the mechanisms behind debt bubbles and debt collapses, consumer driven recessions, etc... They are different animals and beasts completely from a lack of liquidity in the system. They are INSOLVENCY and DEBT problems. You must eliminate, reduce or default on the debt to recover...PERIOD. It is SO FUCKING SIMPLE yet not one sound bite in the media has made any sense other than a few marginalized "doomsdayers". We are heading straight into the perfect storm and our leaders are insisting on pushing down the throttle and driving through it. That mindset will seal the collapse of our economy.
Back from the dead...hopefully
Sorry about my absence...been slammed on time. Some posts are coming...
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