Quote from misterno:
There will be no collapse. There will be adjustment
Peak Oil will hit and oil prices will rise gradually triggering price adjustments for all goods and services. Cars, houses, everything will get smaller and more efficient and more expensive. Public transportation will explode, almost everyone will use it.
Food will get more expensive, people will stop wasting food because it will be expensive. Organic farming will surpass traditional farming. Airlines will take a big hit but railway transportation business will explode.
Ethanol business will die bur solar and all other alternative energy systems will flourish because the only alternative "OIL" will be expensive.
99% of the cars sold will be tiny even smaller than a Hyundai Accent or similar. As a result of expensive food, billions of people will die.
Many many new kinds of businesses that we never heard of will come to life but more will bankrupt as a result of expensive energy and food.
There will be no collapse, there will be adjustment.
Nice read of the best case scenario. I agree.
But "the herd" is nervous, looking at a lot of different worries depending on who and where they live. It will take much less now to spook them into stampede than it would in 2005, for example.
Specifically, I worry about:
1. Bank runs and subesquent closures for that reason. There was a soft run in late 2008. I've been soft running my own accounts, in peaks and dips all thru this crisis, to build stockpiles of currency and PMs. A trader in New York reported in an interview that he watched $5 trill leave the US during October of 2008, and was thinking of buying guns, ammo, canned food, and an inflatable boat at Walmart, just so he could get off Manhattan Island. He still doesn't know why that run ended, before crisis, nor do I.
2. Bank holidays. Obama's in a tight spot, and it's getting tighter. his response is to charge the moon. He reminds me of a deadbeat running up every credit card he owns, because the deadbeat knows they are fixing to cut off the cards, and send out the repo trucks. Some libs are already making noises about seizing 401s or rolling them into dismal perfforming treasuries. Reckon they will give you plenty of warning, time to cash out, before they execute a move like this?
3. Government default, resulting in item 1 or 2 above. Or both. let's see, right now Greece, Ireland, Italy, Spain and Portugal are having trouble servicing debt. Iceland and Argentina already defaulted. Dubai got bailed out. I think some of the "green shoots" reported here are lies. That puts all such reports as suspect. The Feds here are looking at cutting postal service to 3 days per week.
It's not just sovereign governments I worry about. Just about every state is showing budget shortfalls. Some are in real trouble. Cali is printing IOUs, but refusing to accept their own IOUs as payment. 14 states are looking to move to a 4 day school week. Mom will have to quit work or pay expensive child care.
Municipalities are in trouble too. One city cut its entire police force. Another closed half of all its schools. Cops nationwide have been put on the street with instructions to generate revenue, ticket now, ask questions later.
4. Downturns in China. China has put every nickle in every sector, on "growth", the ball is spinning around the wheel and nobody knows where it will land. If any piece of the puzzle falls out, double zero, they could have a real problem, which almost instantly would become our problem.
5. Trade wars or disputes with China. They play hardball, we play hardball, nothing new there. But they are our bankers and we need their and other loans just to service our debt. Any problems in the borrowing pipeline can lead to default, wicky, wicky.
6. Corporate default. Off balance sheet debt. Insiders tell me one major bank still holds 600-900 billion of it, down from $1.3 trill before the 08 crash.
Mortgages behind a full year are in limbo. The banks don't want the bad loans on the books and they don't want new RE tanking prices on defaulted RE currently on the market.
Commercial RE is still a concern.
Some big players in other fields tried to play ball with the banks and got into a ton of MBS and CDS, GE comes to mind.
Toyota, GM and Chrysler are still in ICU. Any big corporate bankruptcy, especially any surprise bankruptcy, can lead to items 1, 2 or 3 above.
My ML and Chase brokers agree that Q2 is the first quarter the US economy leaves life support/ stimulus. Q2 report periods, July-August, are a concern.
7. Bonds auction appetite. The "mystery buyer" is alive and well. Pretty obvious to me his initials are "QE".
8. Unemployment. It affects every risk on this list.
9. Unemployment benefit expiration. You ain't seen bad yet, but it's coming. The gubmint seems to be running out of money faster than people are finding jobs. See item 10 below.
10. Social services and entitlements cuts. There doesn't seem to be enough money to cover these. Gubmint is squirming and twisting trying to avoid this fact. These people were sold on hope, change, and "easy street coming." I talked to them before the election, numerous times. The quote I remember best was "Obama...or else."
"Or else" is...a concern.
Those are the big ones.
The dominoes are lined up. Many of them are wobbling. The herd is uneasy.
You say we squeak thru. I won't argue the prediction, but I lack your apparant confidence.
I'm not betting my lungs on further dislocation, and I'm not betting against it either.
I'm covering both.
