Econ 2009

[cheesehead]

Originally Posted by Fusion_power

Does anyone want to take on the project of identifying ways to 'hedge' against inflation?

IIRC, back in the 70s collectibles did well ... because the Baby Boomers were just getting into collectibles. Houses did well while Baby Boomers were buying. When Boomers started putting their IRAs into stocks, ...

Hmmm ...

Funeral homes? Cemeteries? Cremation urns? Multimedia (solar-powered) burial monuments?

Pre-paid funeral scams? (There was one featured on one of those investigative journalism shows recently.)

[AES]

Originally Posted by cheesehead

Just to be clear: I meant that the criticism of "his fellow democrats" was fair enough.

Just to be clear: I was voicing an opinion regarding legislation and LAW, that (IMO) defies common sense.

[AES]

Put forth your argument that the publicly funded destruction of privately held assets is beneficial.

[ewmayer]

Originally Posted by Fusion_power

Today's economic news includes statements by both Greenspan and Geithner that the economy is at the bottom and has actually trended upward a tiny amount.

Greenspan denied that there ever was a real estate bubble or subprime mortgage "problem" to begin with. Geithner, like Paulson before him, is paid to lie about the state of the economy.

Jobs creation is lagging and layoffs continue at a very high level. Extending unemployment benefits is on the table as a stopgap measure. There are 1 million unemployed with expired benefits in the U.S. at this time. Presuming each gets $400 per week, that means $400,000,000 per week for at least 6 months or a total bill in the range of $10 Billion.

You're forgetting that there are another 1.5 million exhaustees expected by year`s end ... this, rather than any kid of economic "green shoots" or jobs created from the Obama stimulus package, is the reason the continuing unemployment claims have been leveling off and are being busily spun as "better than expected". I guess most people (or at least most stock market investors) simply like being lied to, all day, every day.

Putting aside Ewmayer's PermaBear viewpoint, lets ask if the economy is really starting to improve.

1. There are modest signs of housing prices recovering.
2. New unemployment claims are less on average than 3 months ago.
3. There are signs that Ford, GM, and Chrysler are benefitting from the clunker program.
4. Corporate earnings are significantly better than expected.
5. New home construction is actually improving.
6. People are starting to spend money again albeit cautiously.

I will remain bearish until I see some convincing macroeconomic *data* (as opposed to spin, misleading statistics, unfounded hopes, circular the-economy-is-improving-because-stock-markets-are-up-on-hopes-of-an-improving-economy 'reasoning' and outright lies) that point to an actual improvement in economic fundamentals. Aside from improved bank bonuses thanks to taxpayer rape, I see nothing that points to anything of the like. As to your alleged positives, here are my comments:

1. There are signs of house prices having (at least temporarily) halted their slide in the most price-beaten-down sectors of the country and the housing market. That is a positive insofar as it says that when housing prices do become affordable, the buyers will return. Weighed against that are that high-end RE prices have yet to correct in a significant way, many banks are intentionally *not* foreclosing (because it puts them on the hook for maintaining the property) and a huge number of foreclosed (or soon to be so) homes are intentionally being kept off the market in order to not depress prices further. And millions of folks who are or have been just hanging on will have no choice but to default because they lost their jobs.

2. New unemployment claims are still running at the horrendous level of nearly 600,000 per month. Describing that as "jobs creation is lagging" is disingenuous. Jobs creation is virtually nonexistent, and jobs destruction is still occurring at an extraordinarily high level.

3. Ooh, the clunker program ... a.k.a. Yet Another Auto-Industry Bailout - You think that's a sustainable economic model? Whatever happened to selling a car to a buyer who can afford one, at a profit, and without a huge government subsidy?

4. Corporate earnings were, with very few exceptions, horrendous - especially in the manufacturing sector. But lower the bar enough and - surprise! - even a legless midget can vault over it. Classic example was CAT: earnings down 40%, but they are (a) not currently in Chapter 11 or on government life support, and (b) they gave "positive guidance", and their stock rocketed upward as if they'd broken all sales records in their company history.

5. Please provide the data that show that new home construction is "improving", taking account of both seasonality and statistical error bars.

6. Please provide the data that show *any* appreciable uptick in consumer spending.

Balancing that are these negatives:

1. The $bailout and $stimulus are starting to run out for the former and starting to have effect for the latter, neither will sustain growth long term.
2. Credit card defaults have barely started to affect banks. Expect several MAJOR bank failures near term, just not the 'too big to fail' Citi, JPM, etc.
3. Overall debt levels on an individual basis are unsustainably high.
4. Corporate debt is triggering bankruptcy.
5. Government debt has increased to meteoric levels that cannot be sustained long term.
6. Overprinting of money has injected so much new money into the system that inflation is not just a possibility, it is guaranteed.

Not much added comment needed there, except I would note with respect to item (6) that it is far from clear whether the money-printing has been anywhere near as fast as the overall asset-price deflation. But much of that "free government cash" is being used by those who have first access to it to bid up the prices of stocks and commodities.

While there are plenty of other items that could be listed with the above, overall, the positives and negatives seem to be balancing out to at least some extent for some length of time.

If you call 6 very weak and dubious "positives" weighed against 6 really big, indisputable (except maybe for the inflation meme) negatives "balancing", so be it.

Now don`t get me wrong - I genuinely *want* to see us get back on track to a sustainable non-Ponzi economy, but what I instead see is the government bailing out the same Big Finance mafia which did so much to get us into this debacle at any cost, without any serious talk of real reform of the financial sector, the real-estate industry or of the government finances themselves - as I posted in the reader comments to a ZeroHedge article (which posited that the macro economy is now at last on a path to "new, sustainable equilibrium") earlier today:

"Good luck paying down that bubble-priced mortgage and "now 20% more!" new-improved credit card interest rate on your new "now even closer to zero!" salary as a Wal-Mart-greeter. Assuming you were lucky enough to get that job over the 499 recently-unretired applicants you were competing with, that is.

Seriously, the issue is getting back not only to living within our individual means, but also back to a truly productive economic model, one in which most Americans actually produce something (whether a good or a service) of genuine value, and can make a decent living doing so. Not one in which selling each other ever-more-price-inflated real estate constitutes "GDP growth", or in which the creation and sale of fraudulent financial products is our leading growth sector.

And as long as the banksters, realtors, billionaire net-exporters-of-real-jobs and their paid lackeys in government are running the show, it just ain't gonna happen."

The one significant conclusion you can reach is that TAXES will INCREASE while inflation erosion reduces buying power. I can see a time when a pauper will make $50,000/year?

Does anyone want to take on the project of identifying ways to 'hedge' against inflation? Putting money in the mattress won't do the job and putting it in a bank at 1% or less interest is barely better.

DarJones

"Ways to hedge" depends entirely on where one thinks the economy is headed in the coming years: For instance of you`re convinced that high price inflation is coming, it would make sense to purchase high assets likely to rise along with prices, whether that means precious metals, oil futures or some currency you think will strengthen against the dollar as a result of U.s. monetary policy.

OTOH, if you believe housing has bottomed in your area (at least in some broad price range) and have the cash/credit needed, you could contemplate buying some allegedly-bargain-priced real estate as an investment property, assuming you have a good chance of renting it out near-term for at least as much as is needed to cover the interest payments (preferably plus a bit more, and leaving aside a reasonable amount for maintenance).

If you believe (as I do) that the stock market has gotten way ahead of economic fundamentals and is once again in speculative "irrational exuberance" mode, you'd be getting short (as I am), but not discounting that the bulls could still rampage for another several months.

If you don`t know what to think, stay in cash and make every effort to live within your means. No one ever went broke spending less than they earned.

And actually, last year, this latter strategy of putting your money "under the mattress" would have served you well compared to just about every other possible investment class. Don't be dissin' the mighty mattress...

[cheesehead]

Originally Posted by Fusion_power

Does anyone want to take on the project of identifying ways to 'hedge' against inflation?

Three letters: O I L

[__HRB__]

Originally Posted by cheesehead

Three letters: O I L

When the shoeshine starts giving tips it's time to take (some) profits.

[garo]

Read the last para for an apt description of what Obama seems to be becoming according to a lot of his ex-supporters.
http://www.guardian.co.uk/environmen...taintop-mining

[Fusion_power]

Ewmayer,

Just to set the record straight, my post above was intended to provoke thought and repartee. Don't get the idea that I believe we are actually recovering from the economic tsunami of the past few years. There are way too many people who want something for nothing and too few who still know how and are willing to work producing goods and services.

Today's news sees a major loss posted by GMAC. We can presume the clunkers program will help on that front, but it won't turn a sows ear into a silk purse.

I am too cynical to accept this entirely, but for a short version of reality, it hits pretty close. http://www.storyofstuff.com/blog/

DarJones

[__HRB__]

Originally Posted by garo

Read the last para for an apt description of what Obama seems to be becoming according to a lot of his ex-supporters.
http://www.guardian.co.uk/environmen...taintop-mining

Surprise! Now the Pres. is even stating that he's not anti-business (!!!):

http://www.msnbc.msn.com/id/32238072/ns/business-us_business/page/3/

"My working assumption has always been, if the market could do it better, have the market do it. I have very little confidence in, as I said, some sort of command-and-control regulatory regime. I think businesses create jobs. And I'm a big believer in the profit motive and think free-market pricing is the best way to figure out how to distribute goods and services in a complex economy. In that sense, maybe I spent too much time at the University of Chicago, but I'm pretty steeped in what would be considered a very mainstream view of the economy and government's role in it."

What a relief! Obama actually is a shill for the evil corporationy capitalists in their evil corporationy buildings, being all evil and corporationy!

On the other hand, maybe the birthers do have a point after all. Maybe Obama was born in the USA of an orthogonal dimension, where delusions are real if one is a big believer!

[ewmayer]

Federal Tax Revenues Plummet Most Since 1932: The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab.

The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.

Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.

The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression.

My Comment: Of course, the "robust V-shaped consumer-led recovery" most economists and the equity markets seem to be expecting would help boost at least the corporate-profit bottom line. Due to likely-to-be-persistent high unemployment and the deflation of the housing-price bubble, payroll and property tax revenues will remain at dramatically lower levels for years to come. Which begs the question: Since payroll taxes reflect incomes and the level of employment, if those stay low, where is this "consumer-led" recovery going to come from? another credit bubble? Uh, we tried that, with disastrous consequences. Not gonna happen.

The article also mentions the implications for the Social Security Trust Fund, to which Mish rejoins, "Social Security Fund? What Fund? There is no fund and there is no trust either. All that exists of Social Security is a bunch of IOUs and unpaid promises that most believe cannot possibly be met."


There seems to be at least a small "green shoot" on the market-manipulation front, but I want to see real follow-through on this, on HFT (especially w.r.to safeguards against an algo running amok and causing a 1987-style meltdown ... or meltup ... oh wait, that`s what we`ve had the last 5 months...) as well as on "dark pool" trading:

Breaking News: SEC to Ban "Flash trading":

WASHINGTON, DC—U.S. Senator Charles E. Schumer (D-NY) announced Tuesday that the head of the Securities and Exchange Commission (SEC) has personally assured him that the agency plans to ban the practice of so-called “flash trading” that gives advance knowledge of stock orders to certain traders. SEC Chairman Mary Schapiro informed Schumer of the imminent ban—which she said would occur as part of a larger look at dark pools and high-frequency trading—in a personal phone call late Monday. The call came in response to a letter Schumer sent last month saying that the SEC should eliminate the practice or else he would offer legislation to do so.

In a statement Tuesday, Schumer praised the decision, adding that he believed the SEC would stay vigilant against future market innovations that might similarly harm transparency in the markets.

“We salute the SEC for moving forward with this ban that will restore integrity to the markets. The agency is absolutely making the right call by stepping up and ending this unfair practice,” Schumer said.

“It is also important to make sure flash orders aren’t just the tip of an iceberg lurking in the dark reaches of the market,” Schumer added. “There is a lot of mystery about what goes on in dark pools and in the realm of high-frequency trading generally. I am confident the SEC will be able to separate valid innovation from other practices that give certain traders an unfair advantage over others.”

My Comment: I sounds like Schumer really intended to say "...*are* just the tip of an iceberg..." in that last quote. I wonder if da prop-traydah boyz over at 85 Broad Street (a.k.a. world headquarters of Giant Squid Inc ... get it, "squid ink?" Damn, I made a funny) will try one last furious market ramp-job-slash-short-squeeze before they are once again forced to "innovate in the financial markets" in order to pay their million-dollar bonuses.

[cheesehead]

Originally Posted by ewmayer

Federal Tax Revenues Plummet Most Since 1932: The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab.

... and that's exactly, precisely what many conservatives have actively worked toward (and prayed for in many cases, I'm sure) for nearly three decades.

IIRC the slogan has been "Starve the Beast".

No wonder they oppose measures that might reduce the recession's severity and length!

No wonder the GOP's the party of "no".

They're quite happy to see status quo as long as a Democrat is in the White House.

As I've pointed out before, in the late 1970s many conservatives (sometimes I have used plain "conservatives" to represent this group) decided to give up fiscal responsibility in order to get more political power. I do occasionally see a few conservatives express genuine desire to achieve fiscal balance nowadays -- wish there had been more during the Reagan and Bush administrations -- but the fiscally-irresponsible majority portion of GOP is generally happy to see ballooning deficits regardless of what they say.

Think: which party's members are more likely to own Treasury bonds, from which a portion of their personal income comes? They don't want to see defaults from too great a crisis, but they certainly approve of the government's dependable payments to them, and unlike unemployment benefits, there's always enough money to continue those payments.

Lower taxes plus more government-guaranteed income, for the wealthy in each case, are fantastic achievements of Republicans of the past three decades!

Next time you hear a conservative decrying government disbursements for welfare or entitlements (e.g., Social Security), think about the government disbursements reliably going into their pockets, guaranteed by the strongest nation on Earth and currently administered by Democrats!

The Democratic party has been well and truly played for suckers for 30 years.