then scroll down to Thursday ...
Nationwide Housing Prices data due
M3 money supply data due
Services Index due
New Unemployment Claims due
GDP data due
new home sales data due
after which FED Gov Ben Bernakke attempts to spin the bad news !





then scroll down to Thursday ...
Nationwide Housing Prices data due
M3 money supply data due
Services Index due
New Unemployment Claims due
GDP data due
new home sales data due
after which FED Gov Ben Bernakke attempts to spin the bad news !





My guesses:
Nationwide Housing Prices data due Down.
M3 money supply data due Within the Fed's target range.
Services Index due No clue.
New Unemployment Claims due Up slightly from last week.
GDP data due Healthy growth rate.
new home sales data due Way down.
Nothing yet to change my prediction that we enter a recession by the end of Q4 2007.
We're already in a recession. We've just got enough TV and credit that we don't care. But when the bottom drops out of the credit industry, as it inevitably will, then we'll be way past a recession and into a Depression, and it'll be 1930 all over again.





^^^ I'm not all that certain that the Fed and other central banks won't be able to continue their 'magic show' for another couple of quarters. However, you are absolutely correct that the American consumer / standard of living is now dependent on spending something like 6% more after-tax money than they are earning ... such that when available credit really starts to dry up Americans will wind up taking a 10% de-facto 'pay cut'. With a lot less money to spend on non-essential items, and with heavy debts closing in, I am absolutely certain that houses / cars / 'toys' etc. will have far more motivated sellers than creditworthy buyers.
As you point out, lots of motivated sellers vs few qualified buyers could result in very significant price deflation for these items. However, there is NO danger of price deflation for things such as energy / food / health care / insurance / state & local taxes etc.
Wow, and I thought I was a pessimist! Using real estate is done for a while, as far as a booming sector. Buying opportunities. Mortgages below $400K are still fine. Areas where housing costs are less than $250K are still growing.
So yeah, California is fucked. But we'll get through it, there won't be a depression. Recession for sure though.
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M





the scariest part for me anyhow is that the circumstances surrounding this coming "recession" are different than any previous historical example.So yeah, California is fucked. But we'll get through it, there won't be a depression. Recession for sure though.
#1 - we've never had a situation where the public sector was such a large slice of the US economy ... such that this "recession" will be accompanied by big tax increases on those still working in order to allow state & local govt's to continue to pay for social welfare benefits, unemployment benefits, medicaid etc.
#2 - we've never had a situation where the average American was so deeply in debt ... such that the number of Americans who will be forced into bankruptcy may be shocking
#3 - we've never had a situation where the average American is so unprepared to function in a non-cash / non-commerce based environment. For example, in previous "recessions" it was still a simple enough world for some Americans to fix their own cars - but today that car must be plugged into a proprietary computerized analyzer at a dealership. Same holds true to a lesser degree in regard to lack of personal knowledge re home remedy medical treatments, growing and preserving your own food, self defense against the criminal element etc.
#4 - we've never had a situation where Americans are so 'unconnected' with their families and neighbors. In previous "recessions", if things really got bad there was usually a family 'homestead' somewhere that troubled family members could go back to, with lots of relatives willing to share supplies / food etc. to help out. But today most families are fragmented to start with (due to divorces etc.) and the family 'homestead' has already been sold to a developer, with family members now scattered across several different states !
#5 - we've never had a situation where the skills that unemployed Americans are able to offer to a prospective employer are of so little immediate / competitive value. Practically every mid-level professional job today also requires extensive knowledge / experience regarding one specific aspect of that field / industry. Thus few employers are going to be willing to make a huge investment in retraining some American with basic qualifications. This will especially be the case when there are already lower cost options available by outsourcing to India / China, which may result in firings rather than hirings by economically stressed US companies. And in regard to unskilled labor, fugeddaboudit. Economically stressed companies are not going to shy away from employing illegals for unskilled labor if it means a 3:1 cost savings for them by avoiding minimum wage pay rates and mandated benefit costs (i.e. a possible bust and fine is vastly preferable to the company going bankrupt).
#6 - there has never been a situation where the comparative exchange rate / reserve currency status of the US dollar has been so challenged, while at the same time the commodities market has been so globalized. In essentially all previous "recessions", a reduction in US economic activity was sufficient to reduce demand for commodities thus driving down their US dollar price of gasoline / food / construction materials etc. However, during the next "recession" it is entirely possible that demand for commodities will continue to be strong (driven by India / China for example) resulting in the US dollar price of those commodities to continue to rise at the same time that after-tax US dollar paychecks are falling or disappearing.
#7 - there has never been a time when such a large percentage of US business activities and jobs are dependent on providing 'services' to other Americans rather than 'producing' something with added value. If many of those other Americans no longer have the disposable cash available to pay for these 'services', 'service' industries and workers will quickly be devastated. After all the only Americans who are truly 'safe' from a recession are the top 5% (or less), and these 5% can only buy so many restaurant meals, can only buy so many pets that need walking and grooming, can only buy so many houses that need cleaning / pool service / lawn care ...
Last edited by Melonie; 09-28-2007 at 03:16 AM.





well, americans who live like it was 1930 more or less are safe, those who grow their own food, produce their own energy, live in communities where everyone mutually supports each other, etc. it's called communitarianism and some people, but of course not nearly enough, are doing that.
i do agree that it's not going to be pretty for americans when all the bills come due. and america falling apart may well be among the straws that break the global back and lead to a global depression.
and THAT will be VERY interesting times...
I'm just confused because I keep hearing that there's GOING to be a recession, and it looks to me like we're already in it. Maybe it's just California, I dunno. But the economy here is really bad and everyone who isn't already obscenely wealthy is getting more and more poor every day.
That may be a bit extreme. Families who live below their means, save, invest, and have decent job security will be fine. However, that percentage of the population is getting smaller and smaller. Some of the culpability lies with sociopolitical change. Ie, less-skilled jobs being exported, etc. But some of the fault lies with people who want all their bling right now, who just HAD to get a fucking house even though they couldn't afford it, who want to get rich fast, quick, and easy.
There just isn't enough "luck" to go around. I see successful people every day. There is nothing inherently special about them. They are not smarter than you or me. They've just been proactive and taken the proper steps to get ahead, even in an economic downcycle.
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M





There is no more m3 money supply data, and good riddance.
The Fed atm is pursuing opposing policies at the same time. It is cheapening money via the interest rate cut, but it is dis-inflating via FOMC.
As far as a recession goes, it really depends on what you define it as. Some industries have already "recessed", and the economy did have a few moments of negative growth recently.
On Melonie's points
#7 There is nothing holy about manufacturing or "producing" something. A service based economy is great if that's what the country is competitively advantageous at. We produce a lot of food and capital goods, but that seems to always be ignored. We build a lot of cars(Nissan has several plants here, for example, so not just 'American' cars,which are built in Mexico or Canada).
#6 the reserve currency status of the dollar is really our major problem. we are so used to being subsidized because of it, our economy suffers in terms of its own power. The decline of the dollar I think would be great for America in the long term. Bad for the subsidized sectors of economy, but oh well, screw them
#5 In many cases, Americans are overeducated. It really depends on so many things. As long as the labor markets send out the right price signals, there is nothing to worry about here
#4 Moral issue, not an economic issue. I don't support any kind of morality legislation encouraging close-knit families. Or the opposite
#3 Myth. Cars are actually easier to work on today, they just require different forms of knowledge. Tuning an EFI based car is actually way easier than tuning a carb-based hotrod of yore. There is a dismantled car in front of my place at any given point in time.
#2 very true, but also very rational of the borrowers. Under heavy periods of inflation, people realize saving is a losing proposition, so they don't. Inflation has this as a sociological side-effect, it makes us very present-oriented
#1 Also very true. I'm in favor of reducing the "public" sector of the economy to 0%



Not sure if going OT or not here, but I've tried listening to the John & Ken show on L.A. radio just a couple more times. I think it was John who suggested the following: the people who founded many of the "Dot-Gones" did so primarily to extract large sums of money from Venture Capitalists (whom some refer to as "Vulture Capitalists"), rather than starting a productive internet-based business.
Then, after the financial implosion of these internet sites, many of the same people were off to the "next big thing." The "next big thing" being real estate investing, e.g., "flipping" houses. Or offering "creative" mortgages.
Now, he has gone on to suggest many of the same people are starting businesses to sell "carbon credits." The example he gave was of a new company buying carbon credits from a farmer for $2.00 per ton. And then turning around and selling some of those carbon credits to the producers of "An Inconvenient Truth" for somewhere around $12.00 per ton.
I'm not sure how well this view actually holds up, but does it at least sound plausible to anyone else here?
Yes, Phaedrus, perfectly plausible since we all know that Gore is the antichrist, responsible for all things evil. Is there something on earth you CAN'T tie to Gore and global warming?
"Have you ever been to American wedding? Where is the vodka, where's marinated herring?" - GB
"And do the cats give a shit? No, they do not. Why? Because they're cats."-from The Onion
Originally Posted by Mia M





... with the secondary question being ... exactly who is being affected ?The question isn't whether it's begun, it's whether it continues to spread
in general, the 'very rich' are seeing the rate of return on their investments increase as a result of dollar inflation. This is particularly true if a significant portion of their investments have been made in countries / businesses outside the USA.
in general, the 'middle class' are seeing major price increases in 'necessary' areas such as property taxes, state and local income and sales taxes, health insurance costs, college tuition, gasoline / energy / utility bills. At the same time, they are seeing little compensating increase in savings/CD interest rates, or in the rate of return on their (mostly) US based 401k / IRA investments. As a side note, statistics show that 'middle class' homeowners had been using cash-out refi's and home equity loans to provide a de-facto 'second paycheck income' equal to some 6% of their actual after-tax incomes for the past several years. With the turnaround in real estate market values, with the tightening of creditworthiness standards and the issuance of new regulatory guidelines for mortgage lenders etc, those de-facto 'second paychecks' have now disappeared - which represents an even more rapid shrinkage of available 'discretionary' dollars for 'middle class' consumers to spend.
in general. the 'poor' are seeing marginal price increases just starting to take effect now i.e. a 14% price increase on the McDonald's menu. However, the social welfare benefits available to the 'poor' are not declining, and in many cases automatically compensate for price increases (i.e. subsidized rent, subsidized utilities, medicaid)
IMHO it is guaranteed that adverse economic conditions are going to continue to spread ... based on the simple premise that rapidly rising prices for 'necessities', rapidly rising state and local tax rates, stagnant paycheck incomes, and ongoing loss of 'upscale' US private sector jobs to outsourcing force US consumers to spend less money on 'discretionary' items.
The severity and rapidity of adverse economic conditions has been most apparent in places like California and Michigan and Florida precisely because they were the previous beneficiaries of equally rapid 'positive' economic conditions (i.e. huge housing price rises, huge union industry paychecks, hugely profitable mortgage loan and real estate sales businesses). However, an entire host of nationwide corporations which are dependent on 'discretionary' spending by US consumers are now changing forecasts and issuing earnings warnings i.e. Home Depot & Lowes, Dell & Apple, Starbucks, Applebees and a host of other companies. This indicates that the decrease in 'discretionary' spending is now occurring on a nationwide basis.
IMHO this cutback in 'discretionary' spending does not bode well for strip clubs and dancers, since lap dances and VIP's must compete for an ever shrinking pool of 'discretionary' customer dollars.
I hesitate to go 'looking for trouble' in regard to discussing the moral hazard involved in making business / investment decisions which are based on gov't policies instead of sound business fundamentals. However, in many cases this is a undeniable phenomena.I'm not sure how well this view actually holds up, but does it at least sound plausible to anyone else here?
In the case of the dot-com's, arguably it was gov't tax policy re stock options accounting which provided an environment where many dot-com principals were able to pocket huge amounts of venture capital in the form of personal enrichment with little or no repurcussions upon bankruptcy of the company. This 'loophole' was eventually closed, and with it the motivation was removed.
In the case of house flipping, arguably it was fed and state gov't policy re bankruptcies which provided an environment where many flippers were able to borrow their way into bankruptcy but still emerge with a significant portion of the property value in their pocket (thanks to state 'homestead' laws preventing foreclosure on a primary residence). This 'loophole' was eventually closed too, and with it the motivation was removed.
As to the fledgeling 'carbon credits' business, like the business of wind farms or the business of ethanol refineries, the basis for these businesses within America at least stem from the existance of gov't regulations / mandates / tax credits / tariffs rather than from economic fundamentals. So far these gov't subsidized industries continue to be very profitable for investors (arguably at the expense of the US taxpayer as well as at the expense of the US consumer).
~
Last edited by Melonie; 10-01-2007 at 05:43 AM.
I do think alternative energy is going to be the next "thing." Whether it is new solar tech coming on line, bio-fuels, or these so called "carbon credits" (how the hell does one really price those?) - this will be the next thing I believe. There is a world wide demand, it doesn't really cost that much to manufacture these things like in the 70's, and a lot of things, like solar panels, are becoming economically viable with new technologies.
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