Kudlows goldilocks economy.....

[Jayford]

Quote from domestic:

jayford, i agree with all the points you have outlined and up until 2 months ago i would have backed the thesis; but now i may be getting slightly bullish. for me, i have been at this for 20 yrs and pretty much was weaned on the s & l crisis which hit us hard. one of our businesses is in the construction industry(nice sized) and as the credit crisis hit last year we plummeted; but in the last few months things have reversed so strong to a back log through the end of 08. honestly, i truly believed a minimum of 3 years of rock bottom; but i cannot deny the traffic and spending i am witnessing. i kinda wanted a real estate crash to cleanse the excesses and people who never deserved sucess; but again, i am seeing light here.

Depends where you live for the RE of course. Its crashing here in Cal. Inventories are still rising. Some states weren't hit at all (Texas, NC, Oregon).

The scary thing for me is, what is going to drive the next expansion? It was tech in the 90's, and then the housing led expansion which fueled massive consumer spending. The consumer is now in debt to his eyeballs. It will have to be something else. A "Green Revolution" could certainly do it, even bigger than the tech boom. I think we are years away from that however.

I see a relatively shallow, but long lasting recession, and then years of flat to slow growth until some of the debt loads are worked off, or a major unforeseen trend emerges.

I was also at this game during the S&L crisis BTW. That was nothing compared to this. Lots of small banks went under, but the entire thing was small enough for the gov to put breaks on it, and it was largely domestic. We are looking at trillions in losses this time around, and its global.

 

[makloda]

Quote from Jayford:
You guys should listen to Roubini at RGE monitor. He has no vested interest in his calls except to prepare his clients for what is around the corner. This guy is good.

Roubini has been preparing his clients for 'doomsday' since 2005/2006. Not sure how listening to him makes you get a higher quality intermediate term outlook on the economy.

Is the economy headed to a soft landing?
New York University professor Nouriel Roubini gives 70% odds of a recession by year's end.
Date: Aug 23, 2006
http://www.usatoday.com/money/economy/2006-08-23-recession-usat_x.htm

"If oil prices remain at current levels, there is certainly a high probability of a significant slowdown," says Nouriel Roubini of New York's Stern School of Business.
Date: August 26, 2005
http://www.highbeam.com/doc/1G1-135684730.html

A broken clock is right twice a day.

 

[HedgefundTrader2]

Quote from Jayford:

I'm a day trader. I could care less. I make money either direction. Just calling the economy as I see it (as the VAST majority of credible economists see it).

Hedge, you truly are an impressive moron.

Making nickles and dimes scalping ticks, you donot even rise up to my level bro.

 

[HedgefundTrader2]

Quote from Jayford:

You guys should listen to Roubini at RGE monitor. He has no vested interest in his calls except to prepare his clients for what is around the corner. This guy is good.

What does he say?

We are in about the third inning of the credit crisis, and its going to spread to consumer loans (credit cards) which are at a ridiculous debt level never before even contemplated. This is based on disposable income percentages, so inflation and GDP growth do not skew the numbers. Its UGLY. Continued job losses, according to Roubini, are going to bring a tidal wave of credit card defaults, which are already growing.

The economy is 70% based on the consumer.

Nouriel Roubbini the prophet of doom and despair ? Riding on a dark horse this idiot has never been right./

He is a fortune teller from the dark side of the moon.

 

[ByLoSellHi]

Kudlow's Goldilock's economy was built on one of the biggest asset bubbles known to the history of mankind: the housing bubble.

At the same time high wage manufacturing jobs were disappearing from U.S. shores, the construction worker (drywallers, carpenters,bricklayers, trim carpenters, plumbers, HVAC, landscapers, electricians, roofers, window and door salesman, insulation installers, kitchen cabinet, marble/granite installers, basement wall and concrete companies, material truck drivers, etc.) real estate agents/brokers, mortgage brokers, bank lending agents, underground excavators, paving companies, etc., etc. were masking the loss of manufacturing jobs, as the housing boom fueled money expansion at a frenzied rate. Everyone with a pulse, who wanted in on the action, could get flush with cash very fast, especially in the boom coastal areas, Arizona, Vegas, etc.

So, while manufacturing jobs, including skilled labor ones, that paid good wages, had good benefits and pensions plans and 401(k) plans were being outsourced, no one cared as much, because those guys could catch the action in the residential, commercial and office boom.

The residential boom has gone bust, the office market has slowed considerably and even commercial real estate development is showing severe stress cracks lately.

There's no more facade. You can't hide the structural hollowing out of good jobs in the U.S.

Manufacturing supported everything from real estate/construction to restaurants to IT workers to law firms; and especially Wall Street, where all that money was being recycled, corporate profits and share prices were rising, and a respectable portion of that flush cash came from the real estate boom.

I attend the ICSC (International Council of Shopping Centers) convention each year in Las Vegas.

If you could only see the difference in mood and confidence between, say, 1994/1995 and this year's conference, you'd be simply amazed. The parties were much smaller, the voices much more restrained, the spreads were less lavish and even the bets smaller.

For every manufacturing job that we lost in the U.S. over the last 8 years, another 10 jobs probably went down the drain. That's a massive multiplier.

And it was a bi-partisan snow job on America, too. While Bush's father saw the passage of NAFTA, Clinton exacerbated the situation by giving China Most Favored Nation Trade Status.

We have incompetent, corrupt and disloyal people running the government, on both sides of the aisle.

Welcome to your new United States. Until we have an electorate that awakes from its slumber, the middle class will continue to shrink, and the gap between rich and poor will continue to widen.

No nation can maintain greatness without a vibrant middle class. It is impossible. The fat, meaty center is what sustains everything else in a consumer-dependent economy.

 

[makloda]

ByLo, you make very good points and very accurate observations. Aside from all hard facts and economics, America is still a great country and has great and unique people. And I am a European that says that.

The US has pulled through the 70s, 81/82, 1990/91 and the DotCom/9-11 depression.

Every time, the US was psychologically knocked out and people were seeing 'the rest of the world taking over' (Japan in the 80s and 90s, Tiger Asia in the 90s, China in the 2000s). Will it be any different this time around?

The #1 competitive advantage that the US has compared to Europe IMO is the flexible labor market (where Europe's labor market is terribly rigid and very costly for employers). In the US, people are fired quickly in order to downside and remain competitive and then hired just as quickly. It looks gloomy when people are being layed off in droves but when things eventually turn around the US is much quicker than Europe to take advantage of new-found growth thanks to this flexibility. Melt off the fat in the cold Winter days and add it back quickly when Spring comes.

Where is the healthy portion of good ole' American optimism that we Europeans always seemed to lack?

 

[ByLoSellHi]

Quote from makloda:

ByLo, you make very good points and very accurate observations. Aside from all hard facts and economics, America is still a great country and has great and unique people. And I am a European that says that.

The US has pulled through the 70s, 81/82, 1990/91 and the DotCom/9-11 depression.

Every time, the US was psychologically knocked out and people were seeing 'the rest of the world taking over' (Japan in the 80s and 90s, Tiger Asia in the 90s, China in the 2000s). Will it be any different this time around?

The #1 competitive advantage that the US has compared to Europe IMO is the flexible labor market (where Europe's labor market is terribly rigid and very costly for employers). In the US, people are fired quickly in order to downside and remain competitive and then hired just as quickly. It looks gloomy when people are being layed off in droves but when things eventually turn around the US is much quicker than Europe to take advantage of new-found growth thanks to this flexibility. Melt off the fat in the cold Winter days and add it back quickly when Spring comes.

Where is the healthy portion of good ole' American optimism that we Europeans always seemed to lack?

mak, the last time we had a situation like this was in the very late 70s and early 80s.

The enemy then was interest rates - a mortgage was 14%.

There were union strikes, inflation, layoffs, high interest rates, but not the dismantling of factories of a permanent nature.

Once the rates came down, and strikes were settled, people went back to work, and the expansion (helped by Reagan's tax cuts, by the way) came back.

But you didn't see massive factories being shut down, with all of the presses, stamping equipment, and other machinery being auctioned off to be sold to scrap yards or to be shipped Mexico or China, which is what's happening now; you can trust me on that.

Families that dealt with the auto industry, making everything from bolts to seats to sunroofs for decades are no more. They simply can't compete with oversea rivals or our neighbors down south.

There is no red tape in terms of labor laws, environmental regulation, or other add on expenses in those countries.

Manufacturing is flowing to the lowest cost nation. It's a race to the bottom. EVEN CHINESE COMPANIES ARE NOW LOOKING TO VIETNAM OR MORE RURAL AREAS OF CHINA TO SLASH ALREADY LOW LABOR COSTS.

So, the difference this time is structural.

Can it turn around? Yes, but it would require a new paradigm and level of cooperation among nations I think is unlikely to prevail.

Here's the rub: I'm a capitalist. And I'm not one to tell anyone that someone in Mexico or China that's willing to work as hard or harder than their American counterpart for 1/20th the wage that they can't.

But in coming to this realization, we have to prepare to deal with aftermath of the structural changes that are now ravaging the U.S., and attempt to craft an intelligent policy about how we're going to create a new set of high-wage, high-skill industries, on a scale large enough to reinvigorate the middle class.

By the way, Germany is going through this process right now, too, with a lot of assembly/manufacturing jobs gone to Poland, The Czech Republic (great skilled workers there), and the former East Germany.


As to the post-9/11 period, the housing boom helped mask the hollowing out of manufacturing jobs. It could only run for so long however, as it was a literal 'house of cards' (pun intended), built on massive speculation, easy credit and the madness of crowds.

 

[HedgefundTrader2]

Quote from ByLoSellHi:

Kudlow's Goldilock's economy was built on one of the biggest asset bubbles known to the history of mankind: the housing bubble.

At the same time high wage manufacturing jobs were disappearing from U.S. shores, the construction worker (drywallers, carpenters,bricklayers, trim carpenters, plumbers, HVAC, landscapers, electricians, roofers, window and door salesman, insulation installers, kitchen cabinet, marble/granite installers, basement wall and concrete companies, material truck drivers, etc.) real estate agents/brokers, mortgage brokers, bank lending agents, underground excavators, paving companies, etc., etc. were masking the loss of manufacturing jobs, as the housing boom fueled money expansion at a frenzied rate. Everyone with a pulse, who wanted in on the action, could get flush with cash very fast, especially in the boom coastal areas, Arizona, Vegas, etc.

So, while manufacturing jobs, including skilled labor ones, that paid good wages, had good benefits and pensions plans and 401(k) plans were being outsourced, no one cared as much, because those guys could catch the action in the residential, commercial and office boom.

The residential boom has gone bust, the office market has slowed considerably and even commercial real estate development is showing severe stress cracks lately.

There's no more facade. You can't hide the structural hollowing out of good jobs in the U.S.

Manufacturing supported everything from real estate/construction to restaurants to IT workers to law firms; and especially Wall Street, where all that money was being recycled, corporate profits and share prices were rising, and a respectable portion of that flush cash came from the real estate boom.

I attend the ICSC (International Council of Shopping Centers) convention each year in Las Vegas.

If you could only see the difference in mood and confidence between, say, 1994/1995 and this year's conference, you'd be simply amazed. The parties were much smaller, the voices much more restrained, the spreads were less lavish and even the bets smaller.

For every manufacturing job that we lost in the U.S. over the last 8 years, another 10 jobs probably went down the drain. That's a massive multiplier.

And it was a bi-partisan snow job on America, too. While Bush's father saw the passage of NAFTA, Clinton exacerbated the situation by giving China Most Favored Nation Trade Status.

We have incompetent, corrupt and disloyal people running the government, on both sides of the aisle.

Welcome to your new United States. Until we have an electorate that awakes from its slumber, the middle class will continue to shrink, and the gap between rich and poor will continue to widen.

No nation can maintain greatness without a vibrant middle class. It is impossible. The fat, meaty center is what sustains everything else in a consumer-dependent economy.

Real Estate never goes down. Home values in America double every 10 years. Learn to read real estate cycles. Doom and Gloom has no place in this life, it leads to failures and losses.

Donot stick to that prophet of doom and gloom Nouruiel Roubini, he will make you sicker than you need to be.

 

[HedgefundTrader2]

Quote from makloda:

ByLo, you make very good points and very accurate observations. Aside from all hard facts and economics, America is still a great country and has great and unique people. And I am a European that says that.

The US has pulled through the 70s, 81/82, 1990/91 and the DotCom/9-11 depression.

Every time, the US was psychologically knocked out and people were seeing 'the rest of the world taking over' (Japan in the 80s and 90s, Tiger Asia in the 90s, China in the 2000s). Will it be any different this time around?

The #1 competitive advantage that the US has compared to Europe IMO is the flexible labor market (where Europe's labor market is terribly rigid and very costly for employers). In the US, people are fired quickly in order to downside and remain competitive and then hired just as quickly. It looks gloomy when people are being layed off in droves but when things eventually turn around the US is much quicker than Europe to take advantage of new-found growth thanks to this flexibility. Melt off the fat in the cold Winter days and add it back quickly when Spring comes.

Where is the healthy portion of good ole' American optimism that we Europeans always seemed to lack?

RIGHt here dude. Healthy optimism in all my posts. I have been saying this for the last 6 months and there has not been a single major event that has taken down America, yet these weaklings are crying rivers.

 

[ByLoSellHi]

Quote from HedgefundTrader2:

RIGHt here dude. Healthy optimism in all my posts. I have been saying this for the last 6 months and there has not been a single major event that has taken down America, yet these weaklings are crying rivers.

Optimism without the ability to observe or accurately comment on objective reality is akin to blind faith. Roll that dice and pray you make your numbers.

Realism is a much better lens to be able to react intelligently and protect one's ASSets.