2009 Outlook and Beyond: Let Truth Be Your Guide 12 comments
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I find it very peculiar the latest articles posted point out optimism on oil (USO) and recommend various stocks/ETFs SPY, LUFK, SIGM, etc... all because they are so cheap relative to where they have been.
Let's think really hard whether it is prudent to extrapolate past performance for future results. The world as we know it will never be the same. The last 10+ years were driven on huge amounts of leveraging designed in large part by the US government by keeping rates artificially low and relaxing credit standards. The essence of the US government action I believe was not intentionally designed for the results we are seeing, but was a result of the lack of understanding or willing to understand the unintended consequences of their policy.
An example of an unintended consequence, lower credit standards in order to let more people live the supposed American Dream, would have probably been controllable if it really did only that, but the reduced standards were taken advantage by all - including the wealthy - and why not, interest rates were low and things were so good. (This started all the way back in the Clinton Administration, so the New York Times is wrong to bash Bush for this – he's got enough legitimate faults, no need to create one.) We all consumed at levels unheard of.
We accepted the new norm of buy now pay later – hopefully never. Government and society accepted this new standard.
Everything was good except for those annoying people Peter Schiff, Nouriel Roubini, Gary Schilling, etc… If we could keep it all quiet we would never have to face the truth.
Well the truth always prevails and now if we learn to accept the truth, things will get better faster. However for some reason people cling to the near path – a myth - believing we can continue the borrowed life we created.
These are the truths we all need to embrace, and the sooner we do, the better we will be:
- Consumer spending will never be at the same level over the next 5+ years as it was in the past 10 years.
- 70% of our GDP has been based on consumer spending.
- Combining #1 & #2 means we will have some pains over the next few years as we convert our economy to being more balanced on our other sectors – industry and agriculture.
- If we try to keep #2 constant (huge stimulus package – bailout of sectors involving consumer spending e.g. Autos, Commercial Real Estate, Home Developers, etc…) we will only increase our pain – the truth will prevail.
- Our economy and worldwide infrastructure was designed for anticipated growth, not for today's levels.
- #5 means we do have a surplus in all categories from houses to oil production. This will take time and pain to return to balance. The less pain, the more time it will take.
- A sliver bullet of technology could make it all better – is there another PC revolution like technology?
So if we embrace those truths and no one sees #7, then I would be very skeptical of anyone's recommendation that is based purely on historical fundamentals.
The future will no longer be as prosperous as in the past few years. However, as we begin the new year let me leave you with a positive optimism of the true American spirit.
Our quality of life will diminish only in terms of recent understanding of the measure of quality. We have based our lives on accumulating and purchasing goods. We compared ourselves to our peers based on this. However as many can attest, money does not guarantee happiness.
It is that message that leaves me with hope that we will as a society value our time with our love ones and not what we can purchase to please our love ones. We will as a society dine out less, watch less movies, purchase less goods, but this does not mean a reduction of happiness.
Take this opportunity to reprioritize your life. Accumulation of wealth and goods does not guarantee happiness or a positive legacy for your namesake.
Much happiness to you and your family.
"When I tell any truth, it is not for the sake of convincing those who do not know it, but for the sake of defending those that do."
~William Blake
"New opinions often appear first as jokes and fancies, then as blasphemies and treason, then as questions open to discussion, and finally as established truths."
~George Bernard Shaw
"The great enemy of the truth is very often not the lie -- deliberate, contrived and dishonest -- but the myth -- persistent, persuasive and unrealistic"
~John F. Kennedy
"It is error alone which needs the support of government. Truth can stand by itself."
~Thomas Jefferson, Notes on Virginia
Stock position: None.
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The alternative to the American Dream is called the European Dream I believe www.utne.com/2004-09-0...
You are right that happiness can be found without finding the goods in stores. If we all realized this truth, we wouldn't have been in this mess at all.
The article you sent me I will be honest I couldn’t read all of it - yes I believe in hearing and supporting the right of other peoples opinion its just too early in the morning to read it completely. I will try it again some other time. However the gist of it is no where close to my belief. UK is and will be in a worse off situation than the US. The EU socialist structure will keep it limited. The US is likely to approach the EU structure - higher taxes but hopefully we never get to them. The US still has mobility in classes though not guaranteed. I would argue/debate/support the US still holds the greatest promises for rags to riches. This will keep the US dominant. Hopefully the politicians will realize that this is what is keeping this country great. Complete socialism = everybody poor/sad/mediocre except for the very few. The truth is Capitalism will always have poor but there is at least hope (at times can be small nonetheless exist) one can be at the right place at the right time and apply oneself to become successful.
This country needs to maintain that hope of potential. You can see this in the general public not wanting to tax to infinity the well off. If we get to that point then the public is agreeing there is no hope for them and their children to one day succeed.
I was just trying to keep things real and true. I am very upset with the adminstration but getting to the point of contriving things to be upset about will lead to missunderstanding & worse yet rewriting of history therefore leaving one to repeat history.
“If history repeats itself, and the unexpected always happens, how incapable must Man be of learning from experience.” George Bernard Shaw - I think this occurs because we attempt to re-write history to please our emotions.
The housing bubble began with relaxing credit standards for Freddie and Fannie under the premise of allowing more people to buy houses - particularly minorities. People who objected were deemed un-american for not wanting people to own homes. Once the bubble started no one wanted to or brave enough to close it before it got this big - including the Bush adminstration.
Hopefully I cleared this up - I believe the worse sin is being a hypocrite so I take your statement seriously.
On Dec 28 11:24 AM satguru wrote:
> Perhaps the writer needs to live by the truth first. It is always
> in a Republican administration that all hell breaks lose. He says
> why blame Bush. Hell! it was on the Bush watch that we had 9-11,
> it was on the Nixon watch we had the oil crisis in the 70s, it was
> on Reagan's watch we had the huge budget deficits, it was on Bush
> Sr's watch we had the Savings and Loan debacle and now this on Bush
> Jr's watch. SO cut your BS!!! We are in a heap of trouble and it
> will take years to unwind. WE DON"T NEED ADVICE FROM YOU WINDBAGS!!
> JUst a bunch of money grabbing hypocrites and a hypocrit is worse
> than a liar!
idea of a beatific poverty is the greatest myth of all.
Unless you are employed in one of those industries that depend on those expenditures.
Supply & Demand have and will, dictate what happens in the economy.
The basic economic assumption of Growth has been slowing and will now go into reverse.
Baby Boomers earning & spending capacity and the Oil production have now Peaked.
You tell me, WHAT IS GOING TO REPLACE THE BOOMER DEMAND & THE OIL SUPPLY that is sustainable, over time ???
Boomer demand was being spent - they participated in taking home equity loans buying multiple homes and purchasing numerous goods. The sad story boomers started to believe home equity would be part of their savings so they spent more of the cash in hand - sort of like holding a stock thats quadruple they started spending before they cashed out. As all traders know you cant book a profit till you sell it. In addition the greed was even stronger, many people with 401Ks with nearly a million dollars kept their money in stocks even though they were approaching retirement. They wanted the 12% gain not the 3% from money markets. However they all suffered for this greed. Unfortunately I personally know many and they all could of easily lived a nice retirement before this year but got greedy and kept it in stocks - now 40-70% lower. Businessweek had a very sad article on gentleman who did exactly what I said above.
So yes Fundamentals - Supply & Demand will dictate what happens. We are in agreement here what we may differ is the supply/demand outlook. Oil will rise eventually but I think it may take a little longer than many people think. $30-$40/bbl was considered a high base forecast just 5 years ago. In my own forecast models I do have much higher oil outlook, but how I reckon it will get there is due to inflation from printing 8.5 trillion dollars.
DavyJ - your right on a personal level but when discussing macro economics you really need to remove yourself from that. The pain is the transformation needed to have a balance economy not just based on our consumer spending.
Summary points:
BOOMER DEMAND less than what was forecasted a year ago but will still be there - MAIN DRIVER: Boomers money reduced
OIL SUPPLY will be needed but not as much as forcasted a year ago - MAIN DRIVER: Demand reduced and large supply coming online as investments in the oil market are very chunky - e.g. check out crazy horse development out in the gulf.
On Dec 28 08:00 PM perceptions_now wrote:
> The basics of economics have been and are, being ignored!!!
>
> Supply & Demand have and will, dictate what happens in the economy.
>
>
> The basic economic assumption of Growth has been slowing and will
> now go into reverse.
>
> Baby Boomers earning & spending capacity and the Oil production
> have now Peaked.
>
> You tell me, WHAT IS GOING TO REPLACE THE BOOMER DEMAND & THE
> OIL SUPPLY that is sustainable, over time ???
no one wants to be happy with less. for the 85% of americans who want to be employed and are employed, this can be a time of great opportunity. change benefits those who are nibble and quickly adapt to the change.