Libertad - Thanks. You hit the nail on the head. The endless media spin and economic cheerleading does very little to change facts on the ground...
Jayford - Couldn't agree more. I got into it a few weeks back with a greenhorn permabull and went down my laundry list of reasons how the economy is screwed. Not the least of which is the old tried and true "weak dollar = strong market" argument, thats been played out here a zillion times. Point being, if Europe or Japan were as strong as we thought (false hope), they'd suck up our cheap equities and Real Estate for pennies on the dollar. Euro at 100% appreciation and Yen at 30% versus USD since 2000...
Where is this tidal wave of foreign support for the Dow or US RE??? Nowhere to be seen....And for the reasons you mentioned. This was a global credit boom, a global RE boom, a global commodity boom. Now its a Global Recession. How can we rationally expect the Japanese or Europeans to bail us out when most European banks are underwater from US and EU CDO? And the Japs have yet to recover from their own RE clusterf*ck circa 1990's - a crippling debacle we just stepped in ourselves??
Emerging was the driver of this recent 'boom'. Not unlike selling our body parts to organ harvesters for a quick buck.
Yes, there are far too many cracks in the pot. Without sounding the alarm, I believe it will get much worse than typical recession.
Here is why:
We have no manufacturing.
Industrialized economies recycle money locally far more than any import-based economy; through the layered myriad of component manufacturers, assemblers and resource extractors responsible for adding value to any one finished product. Instead of 20 or 25 American companies having a direct hand in building one American product, now theres 2 or 3: the importer, marketer and call center. Which ironically, was exported to India!!
What America did is export its value-add overseas. We no longer make or engineer products. We market, we finance, we service and we speculate. Thats it.
And when consumers can no longer afford to buy the underlying our economy is based on, we're fucked. The economy will collapse because its based on servicing discretionary consumables that only a small handful will soon be able to afford!!! This is what is meant by "house-of-cards", in every sense of the term. It gives me chills, but this is not hyperbole. Anyone who disagrees, I would love to hear your argument.
What kept this charade going for the past decade is credit. We spent beyond our means, which propped a rotting a economy and all the non-industries of service and finance atop of it, that employed the Country.
The era of cheap money is gone and America will get flushed out in a very bad way. Reams of layoffs. Unemployment not seen since the depression. The only tangible product Made-in-America is War. Defense. War for profit.
Anyone still following my long-winded diatribe. About the Market. The market will Crash. If rates near 7%, all types of institution and hedge funds will pull out of equities en masse and dump into T-Bills and Bonds. The leading indicator here will be Fed IB's loading up on T-Bills and Bonds. Watch for it.
Most funds can't beat the S&P ( ~11%, per year). When rates get within that ballpark, game over for the market. Investors will pull everything from a market that-by-then will have bled them of some 20-30% of their invested wealth.
I see very bad times ahead.
All Bernacke can do is juggle. Maybe keep rates at 4-5% for a long time. At that point, M3 will be doing 10% a year easy, and so along with it, commodities.
All this will do is delay the inevitable. If he continues to print, the destruction of private savings will be unimaginable.
Jayford - Couldn't agree more. I got into it a few weeks back with a greenhorn permabull and went down my laundry list of reasons how the economy is screwed. Not the least of which is the old tried and true "weak dollar = strong market" argument, thats been played out here a zillion times. Point being, if Europe or Japan were as strong as we thought (false hope), they'd suck up our cheap equities and Real Estate for pennies on the dollar. Euro at 100% appreciation and Yen at 30% versus USD since 2000...
Where is this tidal wave of foreign support for the Dow or US RE??? Nowhere to be seen....And for the reasons you mentioned. This was a global credit boom, a global RE boom, a global commodity boom. Now its a Global Recession. How can we rationally expect the Japanese or Europeans to bail us out when most European banks are underwater from US and EU CDO? And the Japs have yet to recover from their own RE clusterf*ck circa 1990's - a crippling debacle we just stepped in ourselves??
Emerging was the driver of this recent 'boom'. Not unlike selling our body parts to organ harvesters for a quick buck.
Yes, there are far too many cracks in the pot. Without sounding the alarm, I believe it will get much worse than typical recession.
Here is why:
We have no manufacturing.
Industrialized economies recycle money locally far more than any import-based economy; through the layered myriad of component manufacturers, assemblers and resource extractors responsible for adding value to any one finished product. Instead of 20 or 25 American companies having a direct hand in building one American product, now theres 2 or 3: the importer, marketer and call center. Which ironically, was exported to India!!
What America did is export its value-add overseas. We no longer make or engineer products. We market, we finance, we service and we speculate. Thats it.
And when consumers can no longer afford to buy the underlying our economy is based on, we're fucked. The economy will collapse because its based on servicing discretionary consumables that only a small handful will soon be able to afford!!! This is what is meant by "house-of-cards", in every sense of the term. It gives me chills, but this is not hyperbole. Anyone who disagrees, I would love to hear your argument.
What kept this charade going for the past decade is credit. We spent beyond our means, which propped a rotting a economy and all the non-industries of service and finance atop of it, that employed the Country.
The era of cheap money is gone and America will get flushed out in a very bad way. Reams of layoffs. Unemployment not seen since the depression. The only tangible product Made-in-America is War. Defense. War for profit.
Anyone still following my long-winded diatribe. About the Market. The market will Crash. If rates near 7%, all types of institution and hedge funds will pull out of equities en masse and dump into T-Bills and Bonds. The leading indicator here will be Fed IB's loading up on T-Bills and Bonds. Watch for it.
Most funds can't beat the S&P ( ~11%, per year). When rates get within that ballpark, game over for the market. Investors will pull everything from a market that-by-then will have bled them of some 20-30% of their invested wealth.
I see very bad times ahead.
All Bernacke can do is juggle. Maybe keep rates at 4-5% for a long time. At that point, M3 will be doing 10% a year easy, and so along with it, commodities.
All this will do is delay the inevitable. If he continues to print, the destruction of private savings will be unimaginable.
