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Interesting thing is though, Big Ben being the great scholar that he is of the great depression has done everything opposite of what was done back then.Quote:
Originally Posted by Benny Profane
He has thrown in America's future at bailing this out and propping that up, when last time around, they said, "fuck it, capitalism baby, either sink or swim as we are not bailing your ass out".
Sure banks collapsed, businesses went under, real estate and stock values plummeted, etc, etc., but eventually, America came out of the whole thing as the most powerful economy on Earth.
Now look at us. We have mortgaged our souls to bail this out and prop that up. Sure, many of us have avoided the short term pain of the 1930's, but I am convinced this country will never return to it's former economic glory. Our children and their children's children are fucked IMO.
We will see. I think this is going to take at least 10 years to play out. I am just waiting for the next economic shoe to fall and the domino effect that eventually causes everything to blow up when the guberment says "sorry we can't pay the states the Federal Guberments share for education, roads, and the other stuff we promised to handle with your tax dollars. And well, there is no health coverage, your medicare is gone as are your social security benefits. Fucking China dumped all their US assets on the world market and now we aren't worth anything and no country will buy our debt so we are bankrupt. Carry on".
I really hope I am wrong. End rant
WH.G finally comes through with a coherent, readable monthly outlook.
www.pimco.com
Buy Utilities seems like a good strategy for the conservative investor.
Gimme a break.Quote:
Interesting thing is though, Big Ben being the great scholar that he is of the great depression has done everything opposite of what was done back then.
He has thrown in America's future at bailing this out and propping that up, when last time around, they said, "fuck it, capitalism baby, either sink or swim as we are not bailing your ass out".
Sure banks collapsed, businesses went under, real estate and stock values plummeted, etc, etc., but eventually, America came out of the whole thing as the most powerful economy on Earth.
If unemployment was at 23% like it was in the 30s you would be screaming for his head on a platter.
Oh, wait, blue skies up ahead, the housing market is "stabilizing", uh.....
http://www.nytimes.com/2009/11/20/bu...l?ref=business
Now, where oh where will the 70% consumer economy get their spending cash with no job and no home equity? Hell, no home?
It all about the dollar these days. It goes up, market goes down, and the other way around. The "retail" investor is still in bonds. You know that the next crash is around the corner when Mr and Mrs America start piling whatever meager savings they have into the stock markets.
Yep, that is what I keep reading too: "Analysts said the dollar was the biggest force behind Thursday's trading, as it has been in recent months. A stronger dollar makes commodities more expensive to foreign buyers, and companies that produce the commodities make less money from them". http://www.msnbc.msn.com/id/34036815...s_and_economy/Quote:
Originally Posted by Benny Profane
But I think it is all bullshit. The market has been moving on low volume for a long time now. I think the big guys are trying to eek out up days to sell into which creates the next down day. The last of my covered call positions get called out tomorrow and I think I will sit tight for awhile waiting for the fall if retail sales disappoint in the coming weeks. Just my 2 cents.
Keep drinking the koolaid buddy. I am certain it is well over the 17% reported here. http://scallywagandvagabond.com/2009...-rate-is-17-5/Quote:
Originally Posted by nealric
http://www.nytimes.com/2009/11/07/bu...fWMHr4Hya50DRA
And I have been screaming for his head and the rest of the fucking useless politicians running this scam on the American people.
The charts are almost perfect mirror images of each other.Quote:
Originally Posted by Benny Profane
"The Fed is trying to reflate the U.S. economy. The process of reflation involves lowering short-term rates to such a painful level that investors are forced or enticed to term out their short-term cash into higher-risk bonds or stocks. Once your cash has recapitalized and revitalized corporate America and homeowners, well, then the Fed will start to be concerned about inflation – not until. To date that transition is incomplete, mainly because mortgage refinancing and the purchase of new homes is being thwarted by significant changes in down payment requirements. The Treasury as well, has a significant average life extension of its own debt to foist on investors before the Fed can raise short-term Fed Funds."Quote:
Originally Posted by Brock Landers
If you are going to play that game (official unemployment numbers undercounting), unemployment was probably 40% in the 1930s.Quote:
Keep drinking the koolaid buddy. I am certain it is well over the 17% reported here.
Bottom line is that things aren't anywhere close to 1930s bad- and if they were, people would be clamoring for more bailouts.
Have patience. It took a while for the 30s to be the 30s. We are only a little over a year into this. There was a very nice rally right after 29. Then things really went to shit.
So true. If people want to bitch about what Bernanke has or hasnt done, despite studying the Depression for most of his life, you may be sitting a little too comfortably and have no idea what 12+ years of poverty and depression and homelessness and 40% unemployment are truly like.Quote:
Originally Posted by nealric
FDR and the govt stopped involvement in the economy and things went to shit so badly and for such a long time, you cannot even compare how things are right now. Boo hoo, I cant afford a baseball ticket or I have to downsize my 5-series.
What Bernanke and the rest of the government has done is avoided a decade-long (minimum) situation that only a World War can fix
Exactly! Because the government stopped its involvement! This is exactly why rates are still low and there are more programs to keep the economy afloat. Otherwise, it sinks like a stone like the 1930sQuote:
Originally Posted by Benny Profane
Forget about the 30s. That was too long ago. Most of America lived on farms. 5% owned stocks before the crash.
Reference Japan in the 90s to today. Yeah, different economy and culture, but a much more similar situation to ours. It all started with a huge banking failure brought on by a residential and commercial real estate bust, with the government propping up the cronyism in the banking industry and auto industry afterwards with stimulus spending. Sound familiar? How'd that work out?
At this point we are just approaching the depth of the 79-83 recession. The difference is this one came swifter. The 79-83 recession was much worse than now imo because inflation was rampant, Interest rates were astronomical, and wages were very low relative to prices.
High cap equities derive so much income internationally (Intel 85% for example) that they are buffered from weakness in the US economy.
That said I have moved to 50% income to 50% equity. If we can get to 1200 Sp00 this year I'll go to 70/309 minimum looking for at least a 10% pull back next year.
If most of America living on farms meant the depression didnt really have an effect, what do you mean? Sure there were more farms. But not everyone in the U.S. works for Goldman today either. Back then the trouble with the banks and the general economy was the inability to promote growth. Which means jobs. The value of stocks themselves going down was only one piece of the puzzle. Now its a greater piece, but the fact that a 12 year shitty economy existed doesnt matter if it was 1930s or even earlier. Shitty economy with high unemployment would not be tolerated today. And Bernanke hasnt.Quote:
Originally Posted by Benny Profane
As for Japan, one of the major reasons for continued shittiness is the whole cultural idea of saving. They save too much money to dig themselves out of a recession. You know how the government is trying to promite spending and consumption and all that? The Japanese stick the money under a mattress. When you take this idea and multiply it by many trillion dollars, the government doing their fiscal things doesnt matter, there is no fuel to fire up the economy
I'd concur that the collapse of Japan's asset bubble in the early 90's is the closest parallel to our recent adventures. On the other hand, the Japanese consumers had a positive personal savings rate, very little personal debt and the nation as a whole had a positive balance of payments. As such one could argue that our situation is even worse than theirs was.Quote:
Originally Posted by Benny Profane
A little history quiz: When did the Nikkei index hit its all time high?
That is more my concern for sure than a 1930ish meltdown in employment. If the stock market tanks, I will trade the fucker down, so that doesn't worry me. If real estate values tank, I will be pissed I didn't sell some stuff, but I doubt I will lose money on homes bought in the 1980-1990 and then maybe my kids can afford to buy something. No, what really pisses me off is the fucking deficit spending and bail out mentality of our government. Kind of like these assholes:Quote:
Originally Posted by Benny Profane
"We do think that the combination of these measures will help to prop up the Japanese economy, particularly once the fiscal spending measures come into play around the second half of this year," said Collyns at a news conference in New York. "So we do expect Japan, in fact, to register a couple of quarters of positive growth later this year.''
IMF expects the April stimulus package of 15.4 trillion yen to help the country through 2009 and 2010, as Japan has been aggressively propping up its economy and coming out with various measure in the wake of the global financial crisis.
But the report warned that the series of fiscal stimulus steps that Tokyo has taken had expanded its deficit to an increasingly precarious level. ''With the deficit projected to be close to 10 per cent of GDP in 2009 and net debt to exceed 100 percent of GDP, room for additional stimulus is close to being exhausted. Attention should shift now to putting in place an ambitious medium term plan to secure fiscal sustainability,'' it said. http://www.domain-b.com/economy/worl...recarious.html
Totally agree the consumer there is in way better shape than credit maxing out Americans with no savings.:rolleyes:Quote:
Originally Posted by wcf3
The Nikkei average hit its all-time high on December 29, 1989 when it reached an intra-day high of 38,957.44 before closing at 38,915.87. Its high for the 21st century stands just above 18,300 points.
It will be interesting to see US repeat the same cycle.
Japan in the last year has changed a lot. People there are truly sick of the way things have been handled over the past 20 years and have elected a new political party to oversee the govt. They even expect to appreciate the currency, among other steps to try and boost the economy internally. Nothing has worked in the past 20 years sitting back and waiting, theyre at least being much more proactive now. Time will tell though
You're assuming that Fed policies are working. Show me the evidence. Unemployment is heading to record highs, hundreds of smallish banks are failing annually, and private credit is frozen. The only thing he's done is prop up our financial industry and a very sick and bloated housing market with your tax money. Talk to me next year at this time and tell me what a genius he is.Quote:
Originally Posted by Brock Landers
I wish I could find the web site (somebody at the WSJ was running a blog) that went back to the same day of the year in 1930 and reposted newspaper articles and statements from the powers that be at the time. It's almost creepy how much the same a lot of attitudes were, reflecting the optimism in the face of what we know now was impending disaster. Like a parallel universe in history.
You're confusing the Chinese with the Japanese. Yes, they were big savers up to ten years ago, but that savings rate has dropped dramatically in the past few years, probably because of the lack of any hard assets to draw from.Quote:
Originally Posted by Brock Landers
Some other items to consider:
- a significant piece of the depression was a horrific downturn in the Ag economy (where about half of all jobs were), this was the time of the dust bowl drought years, which were preceeded by years of record crop yeilds because of advancements in farming machinery, then during the 30s we couldn't ship food internationally because the world was at war (and we tried to stay out of it).
- Population profiles: 1)in the war and just after we had more men and women get job training than ever before and 2) we have a majority of the invested population approaching retirement (divestment) age
i'm going to take a shot at explaining the carry trade and what is going on with the correlation between the equity mkts. and the dollar. if you know this already, a condescending thanks is fine. otherwise, benny, you can go off on some tangent and or quote something from the NYT in retort.Quote:
Originally Posted by Benny Profane
since rates are zero, and all financial institutions are both banks and trading houses, when they have access to basically free money from the fed, they need put it to work. this (for better or worse) is what trading firms and banks do.
the carry trade in its current iteration being done by banks' trading arms (a result of the repeal of glass steagall) and hedge funds is to borrow dollars (even via the fed at fed funds rate - how convenient!) and buy risky(ier) higher yielding assets. its done by algorithmic trading almost everywhere, but doesn't need to be. this is part of the reason why goldman sachs is making $10B per quarter...and along the continuum of risky trades, this one is almost riskless as long as you can exit quickly, so it is usually done with highly liquid assets like equities, gold, oil, etc.
its being done with the assumption of interest rate / exchange parity. however, the macro assumption kicker is that the fed will not increase rates for a certain period of time, so the carry trade is being "intelligently gamed" in the sense that traders assume no movement in us interest rates for a certain period. as long as the dollar continues to hold or devalue, when the carry trade is unwound, the risky asset has produced a higher yield and the funded position did not produce any risk. i.e. the dollar or interest rates did not move against the trader. when the dollar begins to rise in price, the trade is unwound - usually via trading algos. risk has been pretty binary in the markets due to the correlations - the risk trade is either on, or its off. when sell offs start to gain momentum, the risk trade seems to exacerbate as everyone runs for cover.
foreign investors find US equity mkts attractive when the dollar is weak vs. their currency (they see the US as a bargain, just as foreign investors fill the void of property in NY when values fall and the dollar is weak) and US companies with large international exposure strengthen when the dollar weakens because more of their revenues are non - dollar. this and other factors definitely make those companies more attractive when the dollar weakens.Quote:
Originally Posted by liv2ski
and, yes, since most commodities are dollar denominated, when the dollar drops, they are cheaper to others with stronger currencies relative to the dollar (though not all foreign buyers, universally) which tends to put upward pressure on dollar denominated commodities.
No NYT, and no retort here. I'll just link to Dr. Doom for his warnings.Quote:
Originally Posted by mtnwriter
http://www.rgemonitor.com/roubini-mo...nevitable_bust
Right. And that was the point I was making when I said most of America lived on farms at the time. That event was a killer to our economy, but the risk of that has been spread throughout the world since then with modern trade policies and the availability of farming technology to all. Drought in Russia in the 60s? No problem, Captain America to the rescue, even if there's a "cold war".Quote:
Originally Posted by Platinum Pete
There is NO SUCH THING AS A "SAVINGS GLUT". Period. I'll prove it now.Quote:
Originally Posted by Brock Landers
In a system of fractional reserve banking, money is created when loans are made, and money is destroyed when loans are paid back...or defaulted on.
Therefore, more savings = more money available to loan. Keynesians don't understand this, which is yet another reason why Keynesian "stimulus" fails, has always failed, and will always fail.
If no one is borrowing this huge pool of available money, there are two possible reasons:
1) Interest rates are too high, making it too expensive to borrow money. (This can only happen when a government-controlled central bank fixes rates by edict, because otherwise the market would find an equilibrium price.)
We know this isn't Japan's problem, because they've fixed interest rates at zero for decades in an attempt to spur borrowing.
2) Banks cannot find anyone they are willing to risk lending money to at the current interest rate.
3) Businesses and individuals cannot find any project or asset for which they are willing to risk borrowing money at the current interest rate.
And now we arrive at the crux of the problem. Interest rates are already as low as they can go -- so if there was any reason to borrow money, someone in Japan would do so and profit dramatically. The cultural argument is silly, because it only takes a tiny fraction of people and businesses to take advantage of economic opportunity -- and the smaller the fraction, the greater the distortion in the market, and the greater the profit they would make.
So why is Japan still stuck in a recession?
It's simple: Because debt must be paid back -- or defaulted on.
Japan has chosen to pay back all the debt accumulated during the insane excesses of their own real estate bubble during the 1980s. They did what we are doing now: bail out their banks, and allow the banks to carry bad loans on their books forever instead of taking the loss.
But those losses are still out there, and the Japanese are still paying them off, and THAT is why they are still in recession. That Tokyo shoebox apartment that sold for $1.5 million on a 40-year mortgage in 1989 and is still only worth $500K twenty years later? That loan is still being paid off, because the banks are allowed to pretend it didn't default long ago. All Japan's productivity is still being sucked up to pay off debts from the 1980s! That's why they're still in a recession!
The only way to get out of a recession or depression is to MARK ALL ASSETS TO MARKET. Only when all the losses are recognized, and the losers go bankrupt, can those assets be purchased at a price that allows them to be put to productive use. Otherwise all their productivity will be sucked up to pay off an unsustainable debt load. THAT is why Keynesian stimulus doesn't work: our depression has bee caused by too much debt, and you cannot get out of debt by going into more debt. You can only write it off, take the losses, and move on.
But we're not, and neither did Japan. We are sucking the middle class dry in a doomed attempt to pay off the banks' irresponsible loans, sacrificing our entire economy so that Goldman Sachs, Bank of America, Citigroup, JP Morgan, and other Wall Street firms can pretend they're not utterly bankrupt.
your view is almost like that of an economist's or engineer. its theoretical and doesn't account for the very complex pas de deux between the US & china involving currency manipulation, manufacturing reallocation from west to east, and now a revaluation of the USD being subtly deflated against the RMB. debt must be paid back or defaulted or restructured or devalued. there are several ways to skin a very delicate dragon.
all these comparisons to the US and japan are interesting and warrant consideration, but the US and japan have more differences than similarities vis a vis cultural mores, raw materials, pure population demographics, workforce, societal age (japan is an aging society), etc, etc.
step one to fix our system was to reliquify and allow the sytem to pull itself back from the abyss. step two will require the financial systems to deal with the reality of the problem. historically, the US has been successful because it has fessed up to and solved its problems. this will be the hard part, much like the day of the hangover, we need to get up and go out for a metaphorical run to clean out our system.
if we don't fess up to the excesses and deal with them once we are strong enough to do so, then we are potentially headed down the path of japan...
Soooo.....you agree with Spats?Quote:
Originally Posted by mtnwriter
But, when will we be "strong" enough"? How will we know? And, once we get there, won't we just slap ourselves on the back, high five, say something about our ability to "fess up", and just jump right back into the bubble machinations?
roubini is a bright guy and he sees the angles and implications. hmmm...i wonder why he isn't one of the best and brightest fixing the problem, instead of just monday am qb'ing it from the sidelines, though.Quote:
Originally Posted by Benny Profane
admittedly, what the fed and treasury are doing to heal the system is not without potential danger and consequences. there are also inherent dangers in surgery, but sometimes the benefits outweigh the risk. i see some similarities to the space program. at the end of the day, you are using extremely dangerous rocket fuel (or liquid oxygen) to propel you into space. a lot of potential upside but not without peril. safer to not leave the cave for sure...
as to when will we be ready to deal with our problems? its a multilayered 3D jigsaw puzzle. each piece will need to fall in place. we are a resourceful society. if we could solve green technology / efficient zero carbon harm issues and export to developing countries, we could get this monkey off our back, rebuild the education system and retask our workforce. maybe even stop all this vampire shit and paris hilton worship for the final act...maybe too much of a stretch on that one. timeframe is completely unknowable because we as a society tend to solve our problems creatively and non-sequentially.
Everything the Fed and Treasury have done has enriched the banking oligarchs at the expense of the middle class, while prolonging the depression and making the inevitable crash exponentially worse.Quote:
Originally Posted by mtnwriter
This article sums it up:
http://www.thedailymash.co.uk/news/b...-200810081308/
thedailymash.com? what the fuck is that? a porn site?
i dont know why the fed and treasury doing what theyve done has prolonged anything. the depression lasted over a decade because the govt did relatively nothing. i'd rather take my chances letting the fed and treasury do their thing than a decade of depression.
Quote:
Originally Posted by Brock Landers
+1. The conservative answer is always do nothing and then cut taxes. How's that worked for three decades?
The current stock market rally has come on decreasing volume. Not a good sign. A top is near and what will follow won't be pretty.
70% of GDP is created by Main Street, & We The People have gotten nothing from Obama's continuation of Bush's policy of bailouts to take care of Wall Street only.
A metals correction should accompany the first leg down while the dollar rebounds, but longer term, the dollar will achieve all time record lows while metals do the opposite. All the while equities will plummet. Look out below!
Not really.. Low volume is a concern in the short term but not critical. Consider that the massive decline from 1120 SP00 to 750 SP00 was on large volume and the move to 666 from 950 was on lessor volume. So, now we have filled the large volatility gap to 1120 after the volume decline. This is perfectly normal in a functioning market where 1100 was perceived as value at the time of the collapse. Now you have lower rates and a weakening dollar of which both are supportive to equities. Volume will pick up if we get a momentum move above 1120.Quote:
Originally Posted by powpig
I do expect a pullback on volume sometime after the first of the year which has been the pattern for many years now.. The key will be what it does with the pullback. The "public" is itching to get short this thing and they will get there wish but my best guess is there will be a secondary rally next year which could take the SP00 to new alltime highs on volume shaking every last public short out of the market.
This decline/crash was different than most I've seen in that there was a large portion of inividuals that made money on the short side. That is unusual and singularly leads me to continue believing that this market will go higher than anyone expected. |
That said I sold 15% of my stock holdings last week and will sell more on rallys the next two weeks. I would be a buyer on pullbacks of ten % in the first quarter of next year.
4matic: The "conservative" answer is the same as the "liberal" answer, as I've said for years. Both parties completely support price-fixing of money and unlimited power of the central bank...although things have got so bad now that the Grayson-Paul amendment actually passed the House Banking Committee. (Grayson is a Democrat, in case you didn't notice.) Classical liberalism has few friends in government.
It's the British version of The Onion. I wouldn't link NSFW without saying so.Quote:
Originally Posted by Brock Landers
Because our problem is debt far in excess of actual productive capacity to pay it back -- and going deeper into debt does not fix the problem. Just like if you can't afford your car payments, borrowing money to pay them does not fix your problem.Quote:
Originally Posted by Brock Landers
Actually, the Great Depression lasted so long precisely BECAUSE the government kept trying to "fix" the problem. The "depression" of 1920-1921 was over in 18 months because the government didn't intervene -- they let asset prices deflate until they were in line with underlying productivity and income.Quote:
Originally Posted by Brock Landers
http://en.wikipedia.org/wiki/Depress...920%E2%80%9321
"The recession of 1920–21 was characterized by extreme deflation — the largest one-year percentage decline in around 140 years of data.[2] ... This is worse than any year during the Great Depression."
Once again, depressions are caused when the debt level in the economy gets so high that everyone's profits are all sucked up by debt repayment, instead of being spent on actual goods and services, thereby creating productive economic growth.
Therefore, it's easy to see that the only way to emerge from a depression is to get rid of debt. There are only two ways to get rid of debt:
1) Pay it back -- but trying and failing to repay excessive debt is what caused the depression in the first place.
2) Default -- which means someone, somewhere, has to take a loss.
Japan has been trying 1) for over twenty years. Their government has been spending on stimulus package after stimulus package in an effort to restart the economy. All it's done is drive them deeper into debt, which now exceeds 200% of GDP, and their economy is no better than when they started -- except they now have a crushing debt load which they will never, ever be able to repay.
We are going down the same path, except we're not even spending money on roads and public works like Japan has -- we're just giving it away to the same big banks that caused the crisis by issuing too much debt and taking on too much risk in the first place!
Ask yourself this: how come all the "mainstream" Keynesians and monetarists were all blindsided by this crisis, and the only people that saw it coming were the Austrians -- just as the Austrians were the only ones to predict the Great Depression?
"A great crash is coming, and I don't want my name connected in any way with it." -Ludwig von Mises, 1929
In the real world, when a mass of people/businesses fail to repay loans (default) the price to borrow money- even for very very creditworthy and fantastic companies- goes up greatly. So greatly that letting the economy just blow up is not a viable option unless we want 1935 Depression era unemployment (since businesses can no longer borrow...they fail...and everyone employed goes hungry). Someone, somewhere doesnt take a loss. Everyone everywhere takes a loss. McDonalds cant borrow anymore. Done. THey are out of business along with thousands of employees. Same for thousands of other companies. This is exactly what the government did not want to happen. This is why rates went low, so credit and borrowing could occur and businesses had half a chance to stay in business. Otherwise most would have failed. Then what? Businesses fail because the govt did not intervene...and everyone goes hungry! Yay! Wait- thats exactly what happened in the Depression. So youre right, fuck the government and their policies of not letting its constituents go hungry and lose jobs. Thats exactly who I want to elect- someone who is going to let business and commerce go to shit.Quote:
Originally Posted by Spats
Want to save up for a tractor to plow your field? Just grow $35,000 worth of crops to buy it with cash (without of course the aid of said tractor). Its unrealistic.
The government debt problem is a different issue on the same problem. Yes, the government needs to control spending. But starting here with the stimulus package is not where it should start.
I hope Spats is wrong, but, I think not. The only other alternative is hyperinflation, but, that's even worse. All this is happening when a huge portion of our population is going into Medicare land while the Dems are attempting to start up what may be one of the costliest entitlement programs in our history.
This was a depressing read this morning:
http://www.nytimes.com/2009/11/23/bu...s.html?_r=1&em
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