Posted (Van Santos) in Business on December-13-2009
My views on the economy are, well, pessimistic at best and apocalyptic at worst. Anyone who reads the site on a regular basis is well aware of that, so I will not continue on explaining why I hold those views. What I do find interesting, however, is the administration cannot get send a consistent message out.
By a technical definition, yes, the recession is over – the GDP was positive as of the last report. This was thanks for the government spending, but if you look the economic data out (Non-manufacturing index, even some regional fed reports) you can see contraction or signs of contraction. If that is the case how will we see job growth in a matter of months?
Anyway.
White House economic adviser Christina Romer said “Of course not. For the people on Main Street and throughout this country, they are still suffering, the unemployment rate is still 10 percent.”
And that is the key, I think.
The technical definition is positive but it due to limited and very specific factors, the people who drive the economy – the consumer – still hurt and are not spending. The very engine that drives the economy is broken and once the government spending dries up we’ll be heading back into what every economist will be able to call “a recession” once again.
Posted (Van Santos) in Business on November-18-2009
A number of things to take note of
Alvaro de Molina, GMAC Financial Service head, out
Only 19 months as head of the troubled financial services unit, not a good sign, and he was kicked out by the board no less. I wonder how much this action speaks about the current condition of the company. Michael Carpenter is taking over who, ironically, was a director at the now in bankruptcy CIT Group.
And speaking of CIT – Goldman Sachs goes after the business
One major worry about the CIT bankruptcy was the ability for small business to obtain credit. While contracting is still taking place, it looks like Goldman Sachs is going after CIT business while the company is in bankruptcy. The story doesn’t explicitly state it, but when you are targeting 10,000 small business customers for credit – and the company that would service such a market is in ruin – not hard to put the pieces together.
Oh, yea, and on the topic of taxes
Yesterday I posted a graphic from mint.comregarding taxes in the US. As I did not go into more detail, I want to point out one thing – 5% of the population pays 60% of the income taxes.
President Obama warns of double dip recession
Just a few short months ago President Obama was standing in front of congress, touting his policies, and taking credit for the “economic recovery”. Today he is warning that his very same policies could fuel a double dip recession. A number of people have been saying this for months – myself included: Chances for the recession to pick up next year are near 100% once government spending stops.
People needs to come to terms with high jobless numbers, lower paying jobs, and a lower standard of living. How is that for change?
The Dollar
The USDX is quickly heading back toward 75 today, and gold has hit another high. The signs as to why this is happening are just all over, people just need to look. Despite the administration saying they have a strong dollar policy there is little evidence to support those claims.
Finally, the post office records huge loss – again
The post office recorded a $3.8 Billion dollar loss and, once again, is thinking of cutting Saturday service. How the USPS is around still amazes me. Most mail I get is junk, nothing of any value. FedEx and UPS have put them to shame and can provide better, quicker, services… All the USPS manages to do is drive up cost, cut employees and watch satisfaction ratings drop…
Note to President Obama – as others have pointed out, using the USPS as to a ’successful’ government run program is a poor move, especially when trying to pitch health care.
I have no real easy way to begin this post, so I will be direct and to the point: The stress on the economy is worse now than it was last year at this point, and I fear the situation will become significantly worse in the very near future.
While I am not an economist, nor do I claim to have any economic knowledge others do not, looking at the data presented in the public domain really makes me to question what is going on in our economy – and – it makes me believe something isn’t right.
The media will point to improving economic numbers, but what is being reported as “improving” is less than encouraging. How about we look at what is improving by focusing on what is NOT improving.
Negative
Port traffic is down 15% YoY (less goods going in and out)
Hotel occupancy down 15% YoY
Auto Sales down to spring 2009 levels after cash for clunkers ended
With all seriousness I have to ask the obvious question – How can economists say that we are currently improving? Just about everything is point to poor economic performance.
Do you happen to remember the trigger for our recession / depression? It was the banking crisis that started in late 2007 and came to a head in 2008. Has that underlying, fundamental, issue been addressed?
Joseph Stiglitz, the Nobel Prize- winning economist, said the U.S. has failed to fix the underlying problems of its banking system after the credit crunch and the collapse of Lehman Brothers Holdings Inc.
“In the U.S. and many other countries, the too-big-to-fail banks have become even bigger,” Stiglitz said in an interview today in Paris. “The problems are worse than they were in 2007 before the crisis.”
…
Stiglitz, former chief economist at the World Bank and member of the White House Council of Economic Advisers, said the world economy is “far from being out of the woods” even if it has pulled back from the precipice it teetered on after the collapse of Lehman.
“We’re going into an extended period of weak economy, of economic malaise,” Stiglitz said. The U.S. will “grow but not enough to offset the increase in the population,” he said, adding that “if workers do not have income, it’s very hard to see how the U.S. will generate the demand that the world economy needs.”
The Federal Reserve faces a “quandary” in ending its monetary stimulus programs because doing so may drive up the cost of borrowing for the U.S. government, he said.
“The question then is who is going to finance the U.S. government,” Stiglitz said.
The potential nail in the coffin is the U.S. debt. Remember the 12 Trillion number above? Yea, that. The Congressional Budget Office is well aware the debt is out of control and has waved the warning flag – the United States may be unable to service its debts.
If the ratio of debt to GDP continues to rise, lenders may become concerned about the financial solvency of the government and demand higher interest rates to compensate for the increasing riskiness of holding government debt. Eventually, if the debt-to-GDP ratio keeps increasing and the budget outlook does not improve, both foreign and domestic lenders may not provide enough funds for the government to meet its obligations. By then, whether the government resolves the fiscal crisis by printing money, raising taxes, cutting spending, or going into default, economic growth will be seriously disrupted.
…
The systematic widening of budget shortfalls projected under CBO’s long-term scenarios has never been observed in U.S. history.
The government is basically telling use that the United States is on the path to bankruptcy, if it is not already there.
Just to recap – The underlying banking issue is not under control, the government debt is nearly unsustainable, and our economic numbers do not point to a turn for the positive.
From my perspective, the economic reality we live in points to the United States sitting on the brink of economic hardship unlike anything this nation has ever faced. As the US is the largest consumer economy in the world, the collapse would send shockwaves to every corner of the globe.
So, what could be the cause?
Since the banking system is basically bankrupt, and the FDIC is out of money, the collapse of a “too big to fail” bank could easily be the trigger… As could a massive decline in the price of the dollar… or other world government deciding they will no longer loan money to the U.S. Basically major market event that would stress the financial institution has the potential to be the trigger for the next leg down in this economic cycle.
Such an event could come at any time, and what scares me the most is my fear that the trigger may be sooner than later.
Why do I have a feeling Fed Chairman Bernanke’s comments of “green shoots” will haunt him for the rest of his days. Sure, he was trying to inject confidence in the market but without any real evidence of a recovery. Economist Nouriel Roubini is once again point out there are weeds in with the “green shoots”
Here are the highlights:
growing divergence between business sentiment surveys
and industrial production, which is down sharply and receded another 1.1 percent in May
U.S. jobless rate, already at a 26-year high of 9.4 percent, would reach 11 percent before it begins to ease
few engines for growth given that U.S. consumers are tapped out
Rampant inflation could lead to negative economic cycles like the ones that plagued much of the industrialized world in the 1970s
People continue to cheer when 500K jobs are lost instead of 600K, or when retail sales are down but not a much as the month previous. Bottom line, we are not in a recovery as of yet. You can cheer all you want but you are, ultimately, just cheering bad news.
I still expect that economic growth in the U.S. is going to be negative through Q4, and that we’ll see positive growth in Q1,” Roubini told Reuters in an interview on the sidelines of the Seoul Digital Forum.
“The U.S. recession is going to be U-shaped, lasting roughly 24 months,” he added. “Compared to the current consensus that says we are practically at the end of the recession … my view is: no, it’s going to last another six to nine months before it’s over.”
…
Roubini stood by a recent article in which he mentioned the possibility of a “perfect storm” in 2010.
“There is even a risk of a double dip, a W-shaped recession at the end of next year,” he said, a combination of rising oil prices, rising public debt and increases in real interest rates, rising concerns about inflation and the expiration of a number of tax cuts in the United States.
While I was originally skeptical of Roubini when I first read his work, I’ve since come to pay attention to his works. The price of oil – remember yesterday how Saudi Arabia thought the world could handle $80 oil… yea, not so much – the debt we’ve put on the books in trying to save the economy, and inflation may do use in when it comes to economic recovery.
Sure, anything can change. We are not even out of the woods with our current situation, so talking about what may come next is pure speculation, but I’ve had a lot of fear about energy, debt and inflation ever since the crisis started up. I’ve always thought it would come back to haunt us. I’m glad to see I’m not the only one.
The latest unemployment numbers are out and the situation continues to look grim. While layoffs slowed to 539,000 jobs lost in the month of April, down from 699,000 jobs in March, the unemployment rate continues to rise. The official government reported number currently stands at 8.9%, though the argument could easily be made that true unemployment is significantly higher.
Yes, the job loss rate slowed in April. That is nothing to get excited about, especially when you consider that this is the 16th consecutive month of job losses AND there is no sign of increased hiring activity. Simply put, the U.S. economy is far from recovery.
Only 4 months into the year, I still hold to my view that unemployment will hit 10% by the end of December.
UPDATE: The TRUE Unemployment number is…
Above I noted that the 8.9% unemployment rate is debatable. Why is that? The 8.9% represents “Totally unemployed, as a percent of the civilian labor force”.
Got that? Good. When one looks at“Total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally attached workers” then unemployment jumps to 15.8%
But what is this whole “marginally attached workers” thing you speak of?
Simply put, a marginally attached worker is a person who currently is neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the recent past.
They are the despondent, those who have given up hope. So, take those who still are looking for work (hopeful) and those who are not (given up) and one arrives at 15.8% – that is your TRUE unemployment number.
Since the second half of last year the stock market has been in a free fall and just about every economic forecast paints a picture of doom. Oh, yea, and there is enough collective data to show the United States is in the worst recession since World War II.
Confronting misgivings, even in his own party, President Barack Obama mounted a stout defense of his blueprint to overhaul the economy Thursday, declaring the national crisis is “not as bad as we think” and his plans will speed recovery.
Challenged to provide encouragement as the nation’s “confidence builder in chief,” Obama said Americans shouldn’t be whipsawed by bursts of either bad or good news and he was “highly optimistic” about the long term.
Just to recap how things are “not as bad as we think”…
The government has passed two bail-outs – one for $700B, one for $787B
GM and Chrysler are on the brink, all currently getting government funds to keep them operating, all face the worst sales market in 40 years
The credit market is close to frozen, people – let alone companies – cannot obtain credit
Year over year Retail Sales are down 12%, the most in the last 20+ years
Foreclosure rates for U.S. houses are at historic highs
Consumer Confidence is at historic lows
But no, it’s not that bad…
The reality, assuming we are all operating in reality, all points to a true economic meltdown that the world has not experienced in over two generations. There is no question about it, things ARE as bad as we think. The question is will they continue to get worse.
Posted (Van Santos) in Just Stuff on January-19-2009
Tomorrow Barack Obama will be sworn in as the 44th President of the United States and has a daunting task facing him come 12:01 PM. He steps into office with an economy that is deep in recession, unemployment rising on a seemingly weekly basis, foreign conflict continually erupting and a Democratic party that seems to be at odds with him over several issues. Still, at this point the man can do no wrong.
Obama’s pick to be treasure secretary, Timothy Geithner, forgot to pay income taxes for 2003 and 2004 even though he signed an employment agreement saying he would do so. Bill Richardson, his nominee for Commerce Secretary, had to withdraw his name from consideration because of a Grand Jury investigation. The Obama team was well aware of the investigation, so why even pick him? Or take Rahm Emmanuel, the incoming White House chief of staff, who has already been linked to the Rod Blagojevich scandal. Camp Obama won’t even explain the level of detail that Emmanuel did/did not talk to Blagojevich.
Why hasn’t the press, or the public, demanded answers from the incoming president? Why hasn’t the press jumped all over Geithner for not paying taxes? How can someone who forgot to pay their taxes be trusted to the the Treasury Secretary? Why hasn’t anyone truly pointed out the inconsistencies from Camp Obama on the Blagojevich scandal?
It’s all about hope….
The general public has hope that Barack Obama can take on the financial crisis the world is facing. People believe that Obama can “clean up” the image the United States in the eyes of the world. The public hopes he can fix the situation in Iraq, and the nation hopes that Barack Obama will move away from the politics of scandal, leading the nation on a new path of leadership.
It’s funny, however, that the very actions the nation is enraged over – the deception, and the dirty politics of the current administration – are already taking place but no one seems to care. People are willing to overlook the “little” things simply because they have hope for the future with Obama. Even if we give Obama a pass on his missteps now at what point do we stop compromising our beliefs in what is right for the potential of what could be? If a year from now the economy is in worse condition, will we be willing to look past the potential scandals?
While Barack may do no wrong in the eyes of the public (for now), how will the stock market react? Will the market be awaiting a new era with baited breath, like the rest of the nation, or will the realities of our current economic situation triumph? It will come down to the tone Obama sets. The market needs something to hold onto, some hope that the government has a plan to address the ills of the nation.
But does he? That is what the market will want to know, and they will want to know very quickly. Also, if the market continues to trend lower, does that indicate there is little faith in what Obama plans to do?
At roughly Noon Eastern, Obama will be sworn in, and I’ll be watching, but his polish my wear off very quickly if he do not live up to the standard he has set.
With a new years comes hope of better times for the stock market. Here is a remind of how far we’ve fallen in the last year, thanks to dshort.com. While the decline is significant, make sure you take notice of the other bear markets as well.
Obviously, as during any bear market up and downs seem to come for no reason while the bottom is being established. The question that is now in mind is this: is a bottom in place?
Posted (Van Santos) in Business on December-30-2008
Jim Rogers is a hedge fund pioneer who retired at the age of 37, he is always a great interview and you need to take a listen to what he is talking about now.
If you don’t wish to view the video, here are the highlights:
Worst recession since WWII in the US
Could be as bad as the depression because politicians are making big mistakes
Worried because Mr. Obama wants to tax capital and move toward protectionism
China will be the great country of the 21st century, no way seen how American will be the great Country of the 21st centry
America is propping up everyone in sight, which will lead to run away inflation
American Government needs to let companies fail
Commodities are in short supply and will continue to over the next 10 years, we will have serious supply problems
