The US economy cannot have a real, sustained recovery until we start building more of what we use. That won’t happen until the dollar is allowed to reach it’s real economic value based on trade deficits. The current value is artificially high because the dollar is used as the world’s reserve currency.
Recent rally is all about convincing naive 401K crowd return back into this pyramid scheme. But it’s not going to happen. Baby-boomers will be sellers for many years ahead.
The real US global public debt is much more than declared.It’s about 117% considering the debt guaranteed to FNM and FRE.The are still too liars.
The markets will surge temporarily. But don’t get too excited, it’s all B.S. If the DOW hits 9200 get out fast!
Your government is lying to you. All the stats they spout are manipulated and engineered. It’s business as usual.
Regular people don’t have much money and ain’t buying anything. Most college degrees are overrated. Jobs don’t pay jack. The work culture is too stressful.
Don’t dare get sick, medical costs will bankrupt you. One gets better services as a prisoner or welfare recipient.
Stop rewarding bad behavior and reward the hard working salt-of-the-earth people.
America is due for a revolution.
1. Berkshire Hathway, The conglomerate posts much lower sales and a net loss on continued hits to its derivative-related insurance contracts.
2. Bill Gates sell 2 million shares of Microsoft
The above are not economic indicators, but certainly tell us what economic situation like this one can do even to the most seasoned stalwart investors.
The indicators if someone cares to look at are
1. US Debt stands at 77% of its GDP
2. US Debt grows at $2 billion per day
The investors have gone too far too soon on current stock market rally – This has happened because seasoned and knowledgeable fund managers are buying because they can hedge the losses. The unsuspecting household investors are buying because they truly believe that the past three years of stock market slide is a bad dream.
So here is a tip – DJIA is has almost completed its upward run which started the week of March 8, 2009.
Now is the time to be extremely cautious, because when the market starts sliding it may very well retest its 7000 floor.
For sake of gurus and pandits, I have to admit, I really do not care how SP500 performs. Pardon my French Jim Cramer.
Alizée does deserve an invitation from White House. I for one look forward to her visit.
The everitime speakings of President Obama are always to give trust.This is now however a lethal boomerang because i boosting without solid basis stocks and inflaction in Usa.Many US people have NO IDEA of USA at the and of this long crisis (it’ll last also 3 years again).USA will have an economy similar to Brazil.
As La Monica said this V rebound in stocks makes this process faster and faster.It’s like a collective suicide.
Ratings societies will downgrade many US bonds and this will be one of the causes of new cracks in stock exchanges.Today Moody’s said that US public debt will be worse very quickly than the italian,spanish,british and irish ones.EU global debts (private+public)/gdp is 140%.The same data for USA is 862%…..here more than something is out of control!
I think US gouvernment is telling the truth not all together but month by month to avoid a crack.The markets are too high and inflaction and boosted prices with low level trades will make them explode.$ and Wall street will fall headed by Nasdaq and financials.
It’s a psychiatric situation!
I want to comment/clarify an issue that a number of the other writers have homed in on.
A lot of the lowered economic numbers are due to falling prices: we are buying the same or more units of stuff at a fraction of the price. This indicates that we are in more of a depression (falling prices) than a recession (falling GDP).
Recent data issued by Liz Ann Sonders (Schwab) indicate that the CPI may have dropped as much as 5.6% in just the last 6 months (not counting real estate). Big drops in the costs of oil and housing are saving Americans large amounts of money, and we are using that money to buy other things that we actually need. THAT’S how consumer spending goes up in this environment. In an environment of falling prices, people should and will reduce their debt and borrowing, as deflation is very painful for people who are overloaded with debts: renegotiate them. This shows up in dramatic reductions in all types of borrowing: consumers and businesses are rational.
This is structural change for the better. Going forward, we will spend less money on real estate, gasoline, and a variety of other excesses, using our money much more wisely for essentials that economically improve our lives. We will also export more, import less, produce more, consume less, save more, and spend less.
It’s like getting back into the workout routine after an extended, lazy vacation. At first, it’s a bit of a shock; after a while, being back in shape feels great.
A story on the CNN Money page today mentions a drop in consumer borrowing by 5.2% from last year.
So, borrowing is down. Average work week is less. Real wages are down. Self employment income is down. Small business profits are down. Employment is down. Dividend income is down. Interest income is down.
I don’t care WHAT “they” say about spending picking up. It aint happening.
I can’t imagine what the stock market is thinking.
Going back to the old ways is not going to bring any lasting or real prosperity. The current “buy whatever” because its cheaper than what it has ever been is a fool’s philosophy. We are never going back to $800,00o Mcmansions if the average family income is only $45,000 or so. It can’t happen! People buying things (stocks, bonds, houses, cars) thinking they are getting a deal before prices go up are out of touch. Prices are low because there is nothing there to support them. The first crash wipede out much of our 401k’s and the next downward plunge will take the rest. Remember, “a fool and his money are soon parted”.
I could list a ton of reasons why the recovery is a long way off, but many have already been mentioned here. I just wanted to put in my two cents about the banks. Everyone thinks things are getting better. But it’s funny. I work for a major bank, and in order to cut costs, they are eliminating our cash balance plan. So the big wigs profit from stock options as the stock goes up because our profits are up because we cut costs, while the employees who work hard to make the bank profitable get absolutely screwed. Gotta love capitalism! I’ve had enough of this. Seriously. It’s time for a revolution. The rich need to realize they would have NOTHING if it weren’t for the workers in their companies. Time for a nationwide walkout if you ask me!!!!!
Consumer spending is not coming back to 70% of GDP. Consumer spending went from 60+% to 70+% by borrowing and spending equity in housing and inflated 401-K valuations. That is gone and it ain’t coming back – not in real terms.
Mortgage resets are not over. 2009 is a slow year for them, but in 2010 – 2012 they come roaring back. The sub-prime mortgage crash is only the first round. The second round starts just in time to “bob-n-weave” with high unemployment.
The second round will be just about in time for Mr. Market to snatch the inflated (if not a full fledged bubble) stock valuations back to earth once again.
I personally don’t see any recovery anytime soon. I am still watching every cent. After two months of needing new shoes desperately, I went out and bought a pair. I need new glasses, I need dental work and haven’t had a physical in years. With the realization that the company I work for will probably be out of business by the end of the summer, I am hoarding every cent. This may be a temporary upward blip, but with the increase in foreclosures and other defaults within my circle of friends, I don’t see any light at the end of the tunnel, except for the train. I am fortunate, because I do have enough savings to couple with my eventual unempoyment benefits to last a year or so. I don’t have much credit card debt, except on one card which was used for veterinary expenses. It would be very easy to just say the hell with it and stop paying everything. I understand why people do that.
Additionally, the state of our education system is a direct threat to our capability to remain competitive in the global economy. So I’ll add a few more bullets to my previous list, if the CNNMoney.com editors will indulge me:
* Higher education costs are completely out of control (wages are decreasing and tuition costs increase much faster than the rate of inflation each year)
* Education quality is sorely lacking. U.S. students have been falling behind in math and science for many years now, and that trend seems to be accelerating.
I hope the future proves me wrong, but I am not very bullish on the United States’ prospects.
* Inflation
* Commodities speculation
* Preservation of (still) historically high housing prices due to gov’t interference
* Inflammatory conditions in the middle east
* Healthcare costs
* Ever-increasing entitlement costs
* (Continued) Wage erosion due to unfettered competition with workers in third world countries
* Still-rising unemployment (Sure, there were fewer job losses last month than the month before, but jobs are still being lost, which means unemployment is still rising)
* “Cut-taxes-and-spend” economic policies by the current administration & Congress
* Government budget deficits increasing at an unsustainable pace to unsustainable levels
* Low oil prices have resulted in less exploration investment; we are heading for an oil super-spike that will make us wish for $150 oil again
* Many of the institutions that contributed to real-estate price increases and mortgage fraud are not only still in business, but they have the same leadership.
As far as I’m concerned, even if we manage to pull out of the current recession (whether in actuality or due to government interference/indicator manipulation), there’s another one waiting for us right around the corner. A number of people believe high oil prices were a catalyst for the decimation of our economy last year, and high oil prices are likely to make a comeback due to supply limits and rampant, irresponsible speculation.
I also believe that a recovery to pre-2008 levels of borrowing (consumption) is neither possible (sustainably, anyway) nor desirable. I think our biggest problem going forward is that our government is going to do everything in its power (and increase its range of power when it needs to step in further) in an attempt to restore those levels of consumption.
So, yeah, economists can talk about a recovery all they want. If it happens, it won’t be “V-shaped,” and it’s not likely to last long.
You know if you ever have had the wind taken out of your sails, well in a way this sums up the economy now and in the future. While at this point I belive the 50% of what I see and nothing of what I hear, it is anybodies guess. First you have to have the big companies get enough payroll beat down, and that is just what they are doing payroll beat down to improve there bottom line. And really I cant see how you can have imporvement if you dont address the underlying problems. First you give everybody free credit, they you call it in and then on top of it all you devaluate the home, now what to people, not pay. So the banks will cry more bad loans and the cycle will just begin again. I think two things have to happen, one is credit education and the next is line everybody up and renegociate the credit they have. Some will have a harsh reality and others can just move on. I have to say at this point I am just get tired of the whole thing. People want to just point to certain factors that just favor them but bottom line there is a lot of blame to go around, so now finger pointing needs to stop, and the rebuilding of trust needs to begin. As far as the stimulas goes it passed lets get the job market going and small business loans up and running again.
Energy is a big concern. If I remember correctly, it was $4 gasoline that happened first, followed by a sharp increase in mortgage defaults. Candidate Obama stated that $4 dollar gasoline was a good thing but he would prefer a more gradual increase. He also stated that he wanted to bankrupt the coal industry. Now we have cap and trade looming. We have more restrictions on drilling and developement of nat’l gas and nuclear. We have no technology that can rapidly replace a significan percentage of fosil feul. This is an important issue to anyone who has eyes to see.
Risks to long term recovery: “Commercial Real Estate”
It seems to me that everyone is forgetting about the commercial real estate market. How long will it be before major commercial real estate loans go into foreclosure and the banks are forced to deal with the fallout.
From my perspective, the next logical fall-out from this recession is widespread default of commercial real estate loans. Which will further cripple the banks, possibly creating another system meltdown.
Talk about the stupidity of man and his ability to travel the same failed paths he fell on previously.
All of a sudden, based on nothing more than a few words from the very same people who didn’t see the downturn coming, and the recession is over. Get real people. check with your friends and neighbors. No one has changed their expenditures since before Christmas. No one is running out and buying things. People are still cutting back. People need to watch who is releasing these “green shoots” and realize they are only saying what is in their best interests. Credit markets are still very tight, jobs are still being lost and we are not producing anything of measure. People need to be realists and realize the old ways of spend and borrow are over for good. Businesses won’t pick up until people begin to buy the things they need. Look how much gas prices have risen since Christmas (>50 cents) with low demand and high stockpiles. something’s definitely wrong here and if people are not prudent enough to realize it, then they deserve the losses they will soon be experiencing.
If the best case scenario happens and the contraction in the economy somehow ends this summer, unemployment could rise for 6 months to a year. Just how the housing market can stabilize in that environment is beyond my understanding.
Falling house prices puts pressure on investment portfolios having mortgage packages. It will put horrible strains on consumers whose equity will vaporize further. Banks will have more underwater mortgages and foreclosures and get sicker.
I read somewhere probably a CNN money article that they don’t expect 75% of the stimulus to be spent until summer 2010. That will cushion, but it won’t goose the economy.
Then we have out of control medical care costs consuming a larger share of GDP and producing nothing.
Foreign affairs aren’t going our way either especially in Pakistan. The worst case scenario there can keep you up all night. Don’t even think about it.
I started this with a best case scenario of contraction ending this summer. It may not.
I hope someone posts some believable good news.
If I remember correctly, this whole mess started when the 2 and 3 year adjustable rate mortgages (popular with subprime financing) began to reset in late 2006. During 2005, 2006 and 2007 the majority of loans were 5 year ARM’s because Alt A became far more flexible, and had far better rates, than subprime. While a lot of the properties may have already been lost in the turmoil, I think that a lot of them are still bracing to be reset / foreclosed / abandoned. How can this not be a big event?
Rising unemployment is the greatest threat. We need to make sure that the ARRA Stimulus Program actually produces new jobs, rather than lining the pockets of big companies (some foreign ones). It’s the biggest game in town, and the only game in some towns.
Speculation is the second biggest threat, potentially driving oil prices back up to unsustainable levels again. High oil prices are devastating to the economy, so we need to do something to reign in the biggest speculators, like Goldman Sachs.
Trade is another problem: we import too much and export too little, sucking cash out of the economy.
Protectionism is not a problem; how can you call a country with a $500 billion per year trade deficity protectionist anyway ?
Real estate is a small problem, mainly due to excessively high prices, that hurt competitive businesses. This problem is self-healing, as prices are coming back down to earth.
The banking system is not a problem; we have way too many banks, especially big banks. If a few of the weakest ones fall over, others will step forward.
In addition to the risks you mentioned, I would add the following:
1) Inflation – with the government adding so much liquidity, there will be inflation in the things we need, gas, food, etc (the things we want will deflate, housing, autos,etc). The Fed will not dare raise rates even as the economy recovers because it will be a fragile recovery held together by Fed liquidity.
2) The failure of GM and Chrysler will have a multiplier affect on jobs and the economy
3) The Federal budget deficits unbounded expansion will mean foreign CBs/invsetors will dump US debt and send the US$ lower, endangering the creditworthiness of the US. Any recover will be slow at best and that means the deficits will continue to grow and it also means more bailouts and stimulus. $20Trillion in 7-8 years rather then the CBO estimate of 10 years.
4) Consumer debt will take a long time to rectify and that means the consumer which now represents 70% of the US economy will be absent.
5) The banks will be under a lot more pressure due to the mortgage resets into 2011 as well as credit card defaults and commercial real estate problems.
how about everything that got us into the mess in the 1st place! real estate was never addressed properly and it fueled all the heyday. banks remain weak. stimulus money is ramped UP to a trickle, all the bad debt remains hidden, people spending less, and on and on. the only bright spot….we are becoming numb to the bad news. not much recovery till 2013.
Risks to recovery?
How about: US citizens (Lets stop being “consumers” and start being “citizens” folks) still being heavily indebted. Remember the last ‘jobless’ recovery the average American had credit available.
Or, how about: the US Government(s) deep in debt, and still over spending and losing ground. I do not recall (someone pipe in if I am wrong on this) that during the last several downturns that states being almost universally out of money. Tax hikes are on the way all around, no matter what Capital Hill may say. Services are going to be cut, safety nets are going to get more porous, and infrastructure is going to get worse, not better.
Or, what about: Still consuming more then we produce. Honestly, this can’t go on forever.
Or, there is: Inflation. The current numbers that say we don’t have inflation are a bit lopsided. What we don’t need (at least not yet) is down and what we do need is up. So cars are down, clothes are down, toys are down, entertainment is down, electronics are down, software is down. What is up? How about basic food stuffs? How about energy? How about health care? How about taxes? How about rents?
Oh right, wages are down too. So are work hours, so is the number of people employed, so are small business profits.
I don’t think we will be down “forever”. This is not the end of the world. But I also don’t think there is any way out other then the long hard road.
I know a lot of people have been “enchanted” with Barack Hussein Obama as their President, and have fallen under his phoney “gift” of gab (with a teleprompter, mind you!)(remember he is “just words” because his “words” do not at all match his actions (ie.,”I do not want to run car companies and banks”(yeah, right!) and his “hate America first” and “hate capitalism, embrace facism” mantra, but I hope someone else out there read what I read yesterday on the news that the banks that want to pay back the tarp money, and not be under the facist reign of the democrat party ,have to prove they can function as a “bank” without the FDIC backing of the government; does this sound to you that Barack Hussein Obama really wants banks to not be under total government control??? The long term risks I see to the recovery is the outright risk of having Barack Hussein Obama as prez as he has no good intentions for our country at all!!!Do not listen to what he says!!! Watch was he has done and is doing!!!He is purposely dragging America down!In the words of Rahm Emmanuel “Barack Hussein Obama,Rahm Emmanuel,Nancy Pelosi,Harry Reid,Chuck-u Schumer,Barney Frank,Chris Dodd (and the list goes on for outright Hate America First Politicians) are a CRISIS AMERICA CANNOT AFFORD TO STAY IN POWER!!!THEY MUST GO IN 2010 AND 2012!!
Recovery you say? Since you were the one to invoke the “recovery” word, I will speak to that point specifically.
If by recovery you are referring to a supposed recovery that facilitates the return of easy credit, the urban sprawl of McMansions, ludicrous mortgage practices fueled by Wall Street Securitization orgies, credit card irresponsibility an absence of logic and the political will to tell the truth, then one hopes that a recovery is indeed far, far off.