Debt Debt Debt

[Digs]

Two market plays that will rock your world in 2007

- USA Consumer housing with the massive debt burden, trillions of dollars of mortgages to role over in the next 9 months.

- Hedge Funds, trading with huge margin(debt). These fools will be exposed. This is a iceburg, USA stock market is the Titanic ...

....

 

[traderyin]

Quote from Digs:

Two market plays that will rock your world in 2007

- USA Consumer housing with the massive debt burden, trillions of dollars of mortgages to role over in the next 9 months.

- Hedge Funds, trading with huge margin(debt). These fools will be exposed. This is a iceburg, USA stock market is the Titanic ...

....

I sure hope Titanic will tip over the iceberg. Then we'll get the Fed to cut rate. Your argument., sir, has been around for quite some time. Just to let you know.

 

[bsparkyman]

Quantify numbers if you will to gdp. Same with deficit. No problem. Now go build your y2k bunker and stock it with bottled water and gold ingots...

 

[S2007S]

Quote from traderyin:

I sure hope Titanic will tip over the iceberg. Then we'll get the Fed to cut rate. Your argument., sir, has been around for quite some time. Just to let you know.

this argument has been around for quite sometime is right, I have been mentioning the same case with over $1.5 Trillion of ARMS resetting for months. It seems the worse the news out of the housing sector the better the markets perform.


Foreclosures will skyrocket in 2007 as ARMS reset. Housing prices still have room to fall. I think an easy 8-15% by the end of 2007 is possible. Also, consumer spending will stall as their houses will no longer be used as ATM machines. With the avg savings at -1% where will the consumer get money to buy the things they want. Remember GDP is 2/3 of consumer spending.

 

[billdick]

Quote from S2007S:....With the avg savings at -1% where will the consumer get money to buy the things they want. ...

This may be not only wrong, but Illogical. I am not sure of the numbers, but the "baby boomers" are starting to retire. They have just been at their peak earning years and during the last decade began to realize that they should have saved much more for their retirement when they were younger - so they saved like crazy for last 5 to 15 years. Their kids (now thru college) cut their expenses and facilitated this great increase in their saving rates, in most cases. Also they began a big push to save more because they realized that their Social Security income not only would be inadequate to continue the life style they had become accustomed to but might even not be paid (in dollars worth much or "capped" - as those still working to pay it may not be able to etc.)

Now instead of saving, they are drawing down savings. This change may be the major factor in the negative savings rate. If so, it means the opposite of you implication. Namely money that was being saved is now being spent on consumables. (It was being spent on longer term investments, such a new shopping centers, high rises, factories, etc. by the agencies holding it for them while they were saving, so what this negative saving rate surely does mean is a reduced rate of investment and an increased rate of consumption. - A sure fire formulae for more problems a decade hence. I am retired, and feel sorry for those who thus will have less competitivie production tools, outsourced jobs, lower real wages if they have any job, etc. and yet are expected to pay my inflation adjusted Social Security)

 

[bsparkyman]

The average savings rate is not -1%. Government numbers do not count the entire black market economy which is growing faster then the legit economy. Illegal and oftentimes legal profits are not reported as imcome or savings, jobs etc in govt reports. Some is laundered, but most is spent by the consumer in cash. Even consumer spending will be skewed with the larger share of transactions done online, do you really think the guy you bought your digital camera from on ebay is reporting that as income? Half the stuff was boosted or fell of a truck. Do some research on the growing black market economy and you will take govt reports with a grain of salt...

 

[S2007S]

Quote from bsparkyman:

The average savings rate is not -1%. Government numbers do not count the entire black market economy which is growing faster then the legit economy. Illegal and oftentimes legal profits are not reported as imcome or savings, jobs etc in govt reports. Some is laundered, but most is spent by the consumer in cash. Even consumer spending will be skewed with the larger share of transactions done online, do you really think the guy you bought your digital camera from on ebay is reporting that as income? Half the stuff was boosted or fell of a truck. Do some research on the growing black market economy and you will take govt reports with a grain of salt...

oh, so now govt reports dont mean anything....

 

[S2007S]

Quote from billdick:

Also they began a big push to save more because they realized that their Social Security income not only would be inadequate to continue the life style they had become accustomed to but might even not be paid (in dollars worth much or "capped" - as those still working to pay it may not be able to etc.)

disagree, read the statistics of how much the avg. baby boomer has for retirement.

 

[billdick]

Quote from S2007S:
disagree, read the statistics of how much the avg. baby boomer has for retirement.

Would be glad to. Give a reference, but you missed my point.

My point is that the demographic bulge, called "baby boomers," was in their peak earning years. Only in the last decade did they realized they must greatly increase their saving rate and with kids finally out of college, were able to save much more annually. I did not say that they saved sufficiently. Perhaps could not in only a decade even saving half their salaries. That is your point, and it may be true - I need to see the data.

You did not address my point.

Which was:

The switch from being the world's greatest savers to people drawing down their saving to meet current expenses is obviously a large factor causing a lower (negative) saving rate and probably indicates an increase in consumption, not the decrease you illogically stated.

As only the front wave of the baby boomers are starting to be negative savers (instead of the greatest positive savers in history), I expect the saving rate will continue downward until they have all retired.

 

[scriabinop23]

Quote from Digs:

Two market plays that will rock your world in 2007

- USA Consumer housing with the massive debt burden, trillions of dollars of mortgages to role over in the next 9 months.

- Hedge Funds, trading with huge margin(debt). These fools will be exposed. This is a iceburg, USA stock market is the Titanic ...

....

what if those hedge funds are leveraged huge on short positions? furthermore, i think total hedgefund capital in the US equities markets is dwarfed entirely by 'long dumb' institutional + retail interest.

by the way, billdick's point on the current retiring generation going into drawdown mode is a very good one. but without good analysis of monetary flows and what the post-boomer generation is actually investing, you can't derive any meaningful guess to whats going on.

Anyone have any data references here?

googled a little, and saw this - exact same discussion with no meaningful conclusion:

http://usmarket.seekingalpha.com/article/18216

One can suppose though that boomers going into drawdown, looking at personal savings rate charts, and you see that perhaps no one else is saving or investing. If thats the case, then you could extrapolate that in tough economic times, consumption will quickly follow down with it. Or cause effect could be reversed - the outcome is the same.

http://money.cnn.com/2005/08/02/news/economy/savings/index.htm
http://money.cnn.com/2006/12/21/news/economy/savings_rate/index.htm

so when the housing ATM runs out, the economy stops growing. right?

what if the fed renews the housing ATM (thru rate lowering), politicians continue to be irresponsible by continuing lowering of taxes, and unforeseen benign weather and political events cause commodity prices to further back down ?

Some of that will inevitably happen, and likely continue to delay the seemingly obviously impending dollar devaluing, recessionary, and crash-causing situations we're all forecasting.

all we need is some wage inflation and simultaneous commodity price backdown to pay off those old debts, and get into slightly better savings habits.