First Call of a Double-Dip Recession: Setting Up a Market Bottom? 48 comments
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Google Trend Search: Great Depression
I have said before that the stock market will not put in a convincing bottom until there are widespread calls for a double-dip recession. Well, we are now seeing the first call from Niall Ferguson in a FT article entitled An imaginary retrospective of 2009:
2009 proved to be an annus horribilis. Japan was plunged back into the deflationary nightmare of the 1990s by yen appreciation and a collapse of consumer confidence. Things were little better in Europe. There had been much anti-American finger-pointing by European leaders in 2008. The French president Nicolas Sarkozy had talked at the G-20 summit in Washington as if he alone could save the world economy. The British prime minister Gordon Brown had sought to give a similar impression, claiming authorship of the policy of bank recapitalisation. The German chancellor Angela Merkel, meanwhile, voiced stern disapproval of the excessively large American deficit.
While Ferguson doesn’t actually come out and use the “double-dip” term in the article, a rose by any other name smells just as desperate and despondent.
Still a little too soon to buy
While this is the first call of a double-dip recession from a leading bear, I would like to see the double-dip term creep more into the consensus. A Google search of “double-dip” recession still shows entries dating from 2002 and 2003 on the first page.
I would like to see other doomsters and leading bears like David Rosenberg, Nouriel Roubini and Stephen Roach call for a double-dip before I can believe that a bottom is in convincingly for equities.
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This article has 48 comments:
Also, do you have any idea what accounts for the dramatic periodicity in your Google data? Your chart shows a huge annual cycle, with troughs in the summer months. Is this raw search volume? If so, you should really normalize against overall search volumes (eg, what percentage of searches are for "Great Depression", as opposed to the nominal search numbers).
www.safehaven.com/arti...
Earnings Index Bottom
Dec 2001 Oct 2002
Dec 1992 Oct 1990
Mar 1983 Aug 1982
Sep 1975 Dec 1974
Dec 1970 Jun 1970
Earnings bottom anywhere from 11 months before to 26 months after the index bottoms. The average value is 8 months after.
Since earnings usually bottom at or slightly after the end of a recession and the stock market is usually considered a leading indicator, one would normall expect the market to bottom some time before earnings do.
Suppose the the current Nov 2008 bottom actually is the bottom. If so one would expect the recession to come to an offically end 2Q 2009 and earnings to bottom 2Q or 3Q 2009.
A double dip recession would imply a strong recovery that starts mid year 2009 and lasts until late 2010. In anticipation the market retests the Oct 2008 bottom or forms a lower low in late 2010 or 2011.
This is what I thought would happen back in Dec 2007 (except the recovery would start in late 2008 and last until late 2009 or early 2010). See www.safehaven.com/arti...
I was wrong. There was no double dip recession, instead we headed right into the main event and with a financial panic to boot. The 2010 bottom I envisioned came two years early and sort I was forced to buy last November instead of in 2010 (see www.safehaven.com/arti...)
On Jan 02 03:30 PM Anthony Alfidi wrote:
> Waiting for leading commentators to call a double-dip might take
> a while. Markets typically don't rebound until after corporate earnings
> have bottomed and begun to ascend.
We could make a list, but I won't. About 2 weeks ago I caught something, which was probably on PBS. I think the guy being interviewed was with the Mortgage Bankers Association...anyway he put up a chart showing a timeline showing roughly 4 years, with today right in the center. On either side of today were bar charts showing the number of mortgages which were expected to reset each month.
For the two years prior to today the chart looked like a huge mountain with very broad shoulders. And for the two years which are still to come, the chart looked like a slightly taller mointain, maybe by 10% or so, and this mountain had shoulders which were even broader. What the chart was showing was primarily sub-prime mortgages which have already reset, a lull which is happening right now, and then what are primarily Alt-A, and Option Arms do to reset in greater volume than has already happened with the Sub-Prime. Simply put, this is the second dip.
I don't believe our economy will have enough time to recover from the recession we are currently in before the second, more massive wave of resets hits. The Bankers and lenders who are holding these assets on their books know exactly what's coming. They know that only the strongest will survive. So many financial institutions are just barely holding on by their fingernails right now...even with the tarp money. I think the number is 26 banks failed in 2008. Some of those banks were huge. With the new rightdowns coming throughout 2009 and 2010, and no hope of being able to offer new shares to the public sucessfully, which had worked in early 2008 for many banks, but is impossible now. I'd expect to see somewhere between 300 and 1,000 banks fail over the next 2 years.
And just a side note to all: If the big 3 Auto makers can't build and sell cars and trucks and make a profit doing so, they don't have a viable business model. The only way GM made any money in recent years, was by GMAC financing. By collecting interest over the term of the loans, they made up for the losses they generated by building the cars and trucks. Then they sold half of GMAC to Cerberus, which happens to own Chrysler. The only thing GM did which made them any money at all... and they sold half of it, to their competition.
The solution: Variable Rate Mortgages are banned. Any mortgage may be refinanced at a fixed rate of 4% or less. Appraisers are no longer allowed any contact with lenders. They only work for buyers and sellers, which means they'll probably have to advertise their services. Previously written Variable Rate Mortgages will be considered to have been written fraudulently, and therefore those who defaulted will have their credit history esponged, and their FICO score repaired...and the lenders will for the most part get off scott free, or be required to write the new Fixed Rate Mortgages for a very small flat fee. Fannie and Freddie can go to the discount window and borrow as much as they want at 0.5%, and pass through the savings to every lender who wants to write the new mortgages. There will be no more slicing and dicing of mortgages. When mortgages are bought and sold, each mortgage will be distinguishable.
Utopia right? Well, lets just make sure it happens this way.
Yet when it is up, so few try to call the top?
One of life's mysteries, I guess.
We are in a panic to get long rally.
At any hint of weakness, the government will promise a bigger stimulus. Today the buzz was Obama boosting America's space program. Maybe he will put all the toxic assets on the bank's balance sheet into a rocket and launch it to the moon.
If the government's mantra is to spend spend spend the TBT is a good play and still be intellectually honest instead of trying to gauge the mood of the market every day.
I saw a good sign when I read that savings increased to $270 bln from $70bln for the month of october YoY. that is very good the only issue now is how will unemployment play into all this?I expect we will see 10% unemployment by May or june unless somehow the new administration pulls a rabbit out of their hat.
I am still unconvinced, the only thing I find attractive right now is food and energy because they are just too damn cheap. Solar stocks have also been beaten beyond death and I think that they represent a good value at current prices but need to be picky and make sure they have enough cash to keep running.
www.charlesarthur.com/...
From the sound of things the future ARMs resets are possibly even more toxic than the sub prime ARMs. I am getting in on the dead cat bounce we will be having but I will pull out before too long. I will then short the market if/when it starts going down on the next leg of the bear market. There are many catalysts which could start the next leg down, including a wave of failed banks and/or the failure of one or more of the big three auto makers. Nothing would make me happier than to be wrong on this.
Noone new they were in the great depression until October 1930 or after. This is the stage we are witnessing now, the December to April rally when we think the low has been put in, but it has not. Again we will see the next wave of CDS (credit default swaps) lead to a wave of bankrupt companies, hedge funds and banks over the next 6 months to a year.
When comparing the chart from 1929 to 31 with the current scenario today you will have to use a 5 year (Dow Jones) chart to see the similarity. In comparison you will note that it took two years for the bear to end in 1929,31, whereas today a five year chart may be needed to get the sane result. In 1929 America, England and several other countries which were large enough to create a global economy made up the damage (note Japan was not one of them).
Today the economy is 1000 times + larger given the global economy and the CDS market even drawfs this by a large magnitude. In effect the great depression may end up looking like the "second biggest great deppression" in comparison to the scale of the current crisis. To call a double dip recession i believe is a forgone conclusion, the question is "will we have a double dip recession into depression"?
If this is the case, we will again see a further bottom come October 2009, but that may only be again a temporary low, another not to be seen untill the next year 2010. This may sound so bearish as to be ridiculous, but once you compare todays 5 year chart against those of 1929,30 and compare the size of the economies you may like to reconsider if this is not so far off.
Personally, the scary similarity between todays charts and those of 1929,30 leaves me in no dought whatsoever we are going to hit a depression that makes the 1929,30 depression look like "the second biggest great depression".
Im sure many here will remember the Asian financial crisis, and how small that now appears compared to the current crisis. That bear market lasted 2 years, so do the sums on this one. If this bear has bottomed in one year, this would be nothing short of a complete miracle and pigs might fly.
When BO nationalizes healthcare, with U.S. pharmaceuticals be spared? I doubt it.
The problem is that RE appraisal is a sham. I've said for years that all one needs to be an appraiser is a car and a camera beacause all they do is drive by and take a pic. Oh yeah - they need to know the amount of the mortgage so they can value the property one dollar higher. Oh yeah - one more thing - they need access to a computer so they can get their online training.
On Jan 03 07:01 AM mikeinalona wrote:
> Fitz919-I'm pretty sure the chart you are referring to is from Credit
> Suisse, It is the adjustable rate mortgage schedule, and is very
> scarey indeed. Here is a URL to one website using it but you can
> google "credit suisse mortgage reset graph" and come up with a number
> of other sites who are displaying the graph.
>
> www.charlesarthur.com/...
>
> From the sound of things the future ARMs resets are possibly even
> more toxic than the sub prime ARMs. I am getting in on the dead cat
> bounce we will be having but I will pull out before too long. I will
> then short the market if/when it starts going down on the next leg
> of the bear market. There are many catalysts which could start the
> next leg down, including a wave of failed banks and/or the failure
> of one or more of the big three auto makers. Nothing would make me
> happier than to be wrong on this.
For a considerable period it appeared that the processes of so-called "financial innovation," in which ever more complex schemes were devised to make money through the manipulation of money, could overcome the fundamental laws of the capitalist economy. However, no amount of financial manipulation could alter the fact that, in the final analysis, the accumulation of capital depends on the extraction of surplus value from the working class in the production process.
The eruption of the present crisis signifies that the financialization of the past three decades has reached the point where the claims of finance vastly outweigh the mass of available surplus value. Two processes have been set in motion as a result. On the one hand, capital must launch a full-scale assault on the working class in order to drive up the accumulation of surplus value and, on the other, each section of capital must seek to drive its rivals to the wall.
In the face of this breakdown, the political and ideological representatives of the capitalist ruling classes are desperately trying to promote the illusion that they have some antidote to the crisis.
After three decades dominated by the so-called "efficient markets hypothesis"—the claim that market prices are always correct—a new myth is being hastily manufactured: that Keynesian economic measures based on increased government spending and deficit financing will eventually restore the health of the capitalist economy.
Anybody have any idea why I don't get that?
TIA
jwg
On Jan 02 09:06 PM DavyJ wrote:
> Why is it that when the market is down, so many try to call the bottom?
>
>
> Yet when it is up, so few try to call the top?
>
> One of life's mysteries, I guess.
On Jan 02 07:42 PM Fitz919 wrote:
> I don't see much logic behind the author's assertions. If their is
> to be a second dip, what will cause it? That's the question of the
> hour.
>
> We could make a list, but I won't. About 2 weeks ago I caught something,
> which was probably on PBS. I think the guy being interviewed was
> with the Mortgage Bankers Association...anyway he put up a chart
> showing a timeline showing roughly 4 years, with today right in the
> center. On either side of today were bar charts showing the number
> of mortgages which were expected to reset each month.
>
> For the two years prior to today the chart looked like a huge mountain
> with very broad shoulders. And for the two years which are still
> to come, the chart looked like a slightly taller mointain, maybe
> by 10% or so, and this mountain had shoulders which were even broader.
> What the chart was showing was primarily sub-prime mortgages which
> have already reset, a lull which is happening right now, and then
> what are primarily Alt-A, and Option Arms do to reset in greater
> volume than has already happened with the Sub-Prime. Simply put,
> this is the second dip.
>
> I don't believe our economy will have enough time to recover from
> the recession we are currently in before the second, more massive
> wave of resets hits. The Bankers and lenders who are holding these
> assets on their books know exactly what's coming. They know that
> only the strongest will survive. So many financial institutions are
> just barely holding on by their fingernails right now...even with
> the tarp money. I think the number is 26 banks failed in 2008. Some
> of those banks were huge. With the new rightdowns coming throughout
> 2009 and 2010, and no hope of being able to offer new shares to the
> public sucessfully, which had worked in early 2008 for many banks,
> but is impossible now. I'd expect to see somewhere between 300 and
> 1,000 banks fail over the next 2 years.
>
> And just a side note to all: If the big 3 Auto makers can't build
> and sell cars and trucks and make a profit doing so, they don't have
> a viable business model. The only way GM made any money in recent
> years, was by GMAC financing. By collecting interest over the term
> of the loans, they made up for the losses they generated by building
> the cars and trucks. Then they sold half of GMAC to Cerberus, which
> happens to own Chrysler. The only thing GM did which made them any
> money at all... and they sold half of it, to their competition.
>
>
> The solution: Variable Rate Mortgages are banned. Any mortgage may
> be refinanced at a fixed rate of 4% or less. Appraisers are no longer
> allowed any contact with lenders. They only work for buyers and sellers,
> which means they'll probably have to advertise their services. Previously
> written Variable Rate Mortgages will be considered to have been written
> fraudulently, and therefore those who defaulted will have their credit
> history esponged, and their FICO score repaired...and the lenders
> will for the most part get off scott free, or be required to write
> the new Fixed Rate Mortgages for a very small flat fee. Fannie and
> Freddie can go to the discount window and borrow as much as they
> want at 0.5%, and pass through the savings to every lender who wants
> to write the new mortgages. There will be no more slicing and dicing
> of mortgages. When mortgages are bought and sold, each mortgage will
> be distinguishable.
>
> Utopia right? Well, lets just make sure it happens this way.
On Jan 03 01:24 AM Fitz919 wrote:
> If our Government is going to spend, spend, spend, it makes sense
> that they have actually had to out-source some of the Treasury's
> work. Some of our US Dollars are now being printed in Switzerland.
> The story broke roughly a week ago. Our Govt printing presses can't
> print Dollars fast enough. If they are printing all this the money,
> and then spending it, why do we have to pay taxes? LOL
On Jan 03 09:25 AM maxe wrote:
> If you look at the 1929 crash (Dow Jones graph ,but not aat Wikipedia) you
> will see that after the initial bear market in 1929 there was a large
> bear market rally into 1930, starting in December 1929 and ending
> in mid April 1930, this was when the majority of companies started
> to go bankrupt and led to the new and final low being posted in late
> October 1930.
>
> Noone new they were in the great depression until October 1930 or
> after. This is the stage we are witnessing now, the December to April
> rally when we think the low has been put in, but it has not. Again
> we will see the next wave of CDS (credit default swaps) lead to a
> wave of bankrupt companies, hedge funds and banks over the next 6
> months to a year.
>
> When comparing the chart from 1929 to 31 with the current scenario
> today you will have to use a 5 year (Dow Jones) chart to see the
> similarity. In comparison you will note that it took two years for
> the bear to end in 1929,31, whereas today a five year chart may be
> needed to get the sane result. In 1929 America, England and several
> other countries which were large enough to create a global economy
> made up the damage (note Japan was not one of them).
>
> Today the economy is 1000 times + larger given the global economy
> and the CDS market even drawfs this by a large magnitude. In effect
> the great depression may end up looking like the "second biggest
> great deppression" in comparison to the scale of the current crisis.
> To call a double dip recession i believe is a forgone conclusion,
> the question is "will we have a double dip recession into depression"?
>
>
> If this is the case, we will again see a further bottom come October
> 2009, but that may only be again a temporary low, another not to
> be seen untill the next year 2010. This may sound so bearish as to
> be ridiculous, but once you compare todays 5 year chart against those
> of 1929,30 and compare the size of the economies you may like to
> reconsider if this is not so far off.
>
> Personally, the scary similarity between todays charts and those
> of 1929,30 leaves me in no dought whatsoever we are going to hit
> a depression that makes the 1929,30 depression look like "the second
> biggest great depression".
>
> Im sure many here will remember the Asian financial crisis, and how
> small that now appears compared to the current crisis. That bear
> market lasted 2 years, so do the sums on this one. If this bear has
> bottomed in one year, this would be nothing short of a complete miracle
> and pigs might fly.
On Jan 03 10:43 AM 2houndz wrote:
> @jepittman - I'm with you up until your comment about apparaisers
> not having contact with the lenders. Who do you think they are working
> for? Not me as a buyer. I do my own due diligence and know what the
> house is worth. They are working for the lender to assure him that
> the underlying will cover the note, which is necessary and reasonable
> in concept.
>
> The problem is that RE appraisal is a sham. I've said for years that
> all one needs to be an appraiser is a car and a camera beacause all
> they do is drive by and take a pic. Oh yeah - they need to know the
> amount of the mortgage so they can value the property one dollar
> higher. Oh yeah - one more thing - they need access to a computer
> so they can get their online training.
On Jan 02 07:42 PM Fitz919 wrote:
> I don't see much logic behind the author's assertions. If their is
> to be a second dip, what will cause it? That's the question of the
> hour.
>
> We could make a list, but I won't. About 2 weeks ago I caught something,
> which was probably on PBS. I think the guy being interviewed was
> with the Mortgage Bankers Association...anyway he put up a chart
> showing a timeline showing roughly 4 years, with today right in the
> center. On either side of today were bar charts showing the number
> of mortgages which were expected to reset each month.
>
> For the two years prior to today the chart looked like a huge mountain
> with very broad shoulders. And for the two years which are still
> to come, the chart looked like a slightly taller mointain, maybe
> by 10% or so, and this mountain had shoulders which were even broader.
> What the chart was showing was primarily sub-prime mortgages which
> have already reset, a lull which is happening right now, and then
> what are primarily Alt-A, and Option Arms do to reset in greater
> volume than has already happened with the Sub-Prime. Simply put,
> this is the second dip.
>
> I don't believe our economy will have enough time to recover from
> the recession we are currently in before the second, more massive
> wave of resets hits. The Bankers and lenders who are holding these
> assets on their books know exactly what's coming. They know that
> only the strongest will survive. So many financial institutions are
> just barely holding on by their fingernails right now...even with
> the tarp money. I think the number is 26 banks failed in 2008. Some
> of those banks were huge. With the new rightdowns coming throughout
> 2009 and 2010, and no hope of being able to offer new shares to the
> public sucessfully, which had worked in early 2008 for many banks,
> but is impossible now. I'd expect to see somewhere between 300 and
> 1,000 banks fail over the next 2 years.
>
> And just a side note to all: If the big 3 Auto makers can't build
> and sell cars and trucks and make a profit doing so, they don't have
> a viable business model. The only way GM made any money in recent
> years, was by GMAC financing. By collecting interest over the term
> of the loans, they made up for the losses they generated by building
> the cars and trucks. Then they sold half of GMAC to Cerberus, which
> happens to own Chrysler. The only thing GM did which made them any
> money at all... and they sold half of it, to their competition.
>
>
> The solution: Variable Rate Mortgages are banned. Any mortgage may
> be refinanced at a fixed rate of 4% or less. Appraisers are no longer
> allowed any contact with lenders. They only work for buyers and sellers,
> which means they'll probably have to advertise their services. Previously
> written Variable Rate Mortgages will be considered to have been written
> fraudulently, and therefore those who defaulted will have their credit
> history esponged, and their FICO score repaired...and the lenders
> will for the most part get off scott free, or be required to write
> the new Fixed Rate Mortgages for a very small flat fee. Fannie and
> Freddie can go to the discount window and borrow as much as they
> want at 0.5%, and pass through the savings to every lender who wants
> to write the new mortgages. There will be no more slicing and dicing
> of mortgages. When mortgages are bought and sold, each mortgage will
> be distinguishable.
>
> Utopia right? Well, lets just make sure it happens this way.
That said, the chart was prepared almost 2 years ago. We don't know how many of those mortgages have been refied or have already defaulted. We also don't know (but can suspect) that the government's efforts to push fixed mortgage rates to artificially low levels will be successful in the short term and that many of these loans will somehow be rolled (despite negative equity) into fixed rate loans before the lid pops off the inflationary bubble the government's creating.
ARM resets are a worry but there is time to find a solution. One of the solutions is to keep interest rates low so they reset lower than they were issued. We are pretty close to that now. But I would not buy any bank stocks because this means banks are not going to make any money for a while.
Here is a good article on the topic from Seeking Alpha:
seekingalpha.com/artic...
Keeping my finger on the trigger and my targets short...
Have a gander at Fitch's report "Option ARMs: It's Later Than It Seems."
Cute clauses in option ARM's that put them into hard resets EARLIER than their 5-year timeline. Primarily, paying the minimum monthly payment which the majority have done versus interest only or interest plus principal. The clause? Their principal cannot increase to more than 110-115%. Read up, dude. This is scary crap.
www.totalsecuritizatio...
I've seen redrawn charts of how this is unfolding at Reggie Middleton's site. He shows how the recasts are now unfolding, it's like the 3rd or so chart down. Less peaky, but earlier and more extended without the breather from the subprimes:
boombustblog.com/index...
No need for anyone to get all catchy-phrasey with "double bottom" memes. We're not really coming up for air any time soon.
On Jan 03 05:38 PM DougM wrote:
> Fitz919, as another poster has indicated, I believe you're referring
> to the Credit Suisse ARM reset chart, circa early 2007. A tidal wave
> of toxic "pick-a-payment&am... option-ARMs and "liar's loan" Alt-A
> loans are due to reset in 2009 and 2010. That housing bubble is a
> gift that just keeps on giving.
>
> That said, the chart was prepared almost 2 years ago. We don't know
> how many of those mortgages have been refied or have already defaulted.
> We also don't know (but can suspect) that the government's efforts
> to push fixed mortgage rates to artificially low levels will be successful
> in the short term and that many of these loans will somehow be rolled
> (despite negative equity) into fixed rate loans before the lid pops
> off the inflationary bubble the government's creating.
On the plus side, many countries have started stimulus packages which could do a lot to stem this downward spiral. China's is looking fairly successful. One sign of this is the recent bottoming (or apparently so) of the Baltic Dry Index. This should be good for shipping companies. Apparently the iron ore price negotiations with China are close to being settled for 2009 (if they have already been I apologize for not knowing). This is another sign that the Chinese economy is getting ready to chug forward. But I digress. The real news right now is the Obama stimulus package. The markets are turning up in response to this relatively assured future good news. If this stimulus package is well designed, it could do a lot to stem the downward spiral. Also the Fed has cut interest rates to near 0%; and it has said it will take many other aggressive actions to stem the downward spiral. How all of this plays out has yet to be determined. If Obama and the Fed and the Treasury can keep the CDS problem from becoming a huge downward spiral, their actions might also be enough to give the US economy a nudge upward. It is really hard to say for sure how all of this will play out. Short term it would seem the markets should rally in January based on the economic optimism these actions should generate. Longer term the actual economic problems we encounter will likely determine how deep and how long this recession lasts. With a 300 pt up day on Friday (and a general up movement for the last week), I am looking for the market to give back a little before it resumes its "feeling better about our chances" near term rally. The manufacturing news Friday, plus the second straight weekly shrinkage of the commercial paper market, plus the Times article about the British banks needing a second bailout would by themselves indicate a shaky start on Monday. If you add the likely dismal car and truck sales numbers to this, it seems very likely. Good luck to all you hardy investors. Don't get too set on any one belief. Be nimble.
YES! Yours is the first remark I've seen yet characterizing the new age of investing (I'm stretching, I realize, you were appropriating that to all opinion, but it still applies) as "velocity of opinion." I have been pondering something similiar myself. However, I'd venture that that is only the half of it.
The brokers and analysts have nothing now to offer given the more leveled playing field offered to the common man/woman with volumes of information at their fingertips. So not only are we of the age of "velocity of opinion," but "volume*velocity of information."
In fact, the analysts now seem to be behind the news. One may look no further than the latest downgrades to already beaten up shares of stock. They're almost comical in their late nature. Whereas the active investor has all the time he wishes to devote to seek out new sources and opinions on his particular interests.
On the other hand, I couldn't understand for the longest time how people in supposed authority did NOT know this was coming. It seemed like all at once people got a clue whereas I expected a longer ongoing decline in 2008, and instead it was as if the toilet got flushed all at once. I think I blame the bottom-callers.
Every time we reach a trench, there's a collective that pops out saying a bottom is in. Generally speaking, I'd call that a "Mission Accomplished" call. :)
I, for one, because of personal history, i.e. being sentient through the 80's and 90's knew damn well the real estate market was going to explode, but hadn't a clue as to the new and ridiculous mortgage products utilized in creating it until I started looking into it about a year and a half ago. And even then it seemed I knew more than the "professionals" by doing so. In fact, it still does.
How can anyone be calling a bottom in the real estate market by mid 2009 if they really knew ANYTHING about the hybrid toxic loans? Therefore, how can anyone call a bottom to the market when the financials haven't bottomed because of all this toxic crap on their books? Fingernails meet ledge edge...that's all we've got.
On Jan 02 03:19 PM Crocodilian wrote:
> Very creative use of Google to measure zeitgeist, but this mode of
> analysis has the potential for rapid feedback distortions. That is:
> Have you considered that your contrarian schema may itself propagate?
> The "velocity of opinion" has increased dramatically in the Twitter
> age.
>
> Also, do you have any idea what accounts for the dramatic periodicity
> in your Google data? Your chart shows a huge annual cycle, with troughs
> in the summer months. Is this raw search volume? If so, you should
> really normalize against overall search volumes (eg, what percentage
> of searches are for "Great Depression", as opposed to the nominal
> search numbers).
Over the past few decades millions of Baby Boomers (like myself) entered the stock market and regularly invested our excessed dollars into our 401Ks. 403Bs, IRAs, and so forth. Along the way, I had ammassed a small amount of money through the market to help supplement my retirement income when that stage of life began. Unfortunately, I and many others like myself, have witnessed the loss of most of what was accumulated in stocks over the past four decades. Once in 2000 and again at the end of 2008. Realize, that the rise in the stock market over the past four decades was a direct result of the Baby Boom generation.
Do you think at 60 years old that we Baby Boomers are going to continue investing in stocks for 10-15 years accumulating a small sum
to help at retirement time only to watch the portfolio disintegrate in 10-15 weeks?
Many Baby Boomers no longer have the long term horizon needed to build up a healthy stock portfolio. No, we are done. My fellow Baby Boomers have pulled their funds away from stocks and do not plan to return.
So, the real question to ask ourselves is what type of long term return will the stock market offer if the great number of stock market investors of the Baby Boom generation stops investing in the stock market?
Yes, there will be rallies. However, we could be entering a long period in which the market meanders and may not see new highs for a few decades. We Boomers helped to create the great bull markets we have witnessed since the August 1982 DOW low of 782 and without our dollars remaining invested or moving into stocks it could be many decades before we see 20,000 on the DOW.
That said, the chart was prepared almost 2 years ago. We don't know how many of those mortgages have been refied or have already defaulted."
I hope no one forgets that unemployment is cited as the newest driver to increasing defaults and foreclosures. The Credit Suisse chart didn't address that. These are anecdotal examples, but I've seen my business fall off by more than half and I'm hearing about layoffs in local companies.
Great comment thread on this post, very educational.
If an appraiser never has any contact with the lender, and never even knows who the lender is, you may have a better shot at a fair appraisal.
Yes an appraiser can still be a scam artist...maybe we need to have 3 separate appraisals, or only choose appraisers by referral from people you trust, and who have lots of experience buying and selling properties.
Appraisers working with lenders could have easily inflated home prices by 20 to 40% in just a few years. And now they are coming down by that amount.
On Jan 03 10:43 AM 2houndz wrote:
> @jepittman - I'm with you up until your comment about apparaisers
> not having contact with the lenders. Who do you think they are working
> for? Not me as a buyer. I do my own due diligence and know what the
> house is worth. They are working for the lender to assure him that
> the underlying will cover the note, which is necessary and reasonable
> in concept.
>
> The problem is that RE appraisal is a sham. I've said for years that
> all one needs to be an appraiser is a car and a camera beacause all
> they do is drive by and take a pic. Oh yeah - they need to know the
> amount of the mortgage so they can value the property one dollar
> higher. Oh yeah - one more thing - they need access to a computer
> so they can get their online training.
On Jan 02 07:38 PM RomanFinancial wrote:
> I wouldn't try to catch falling knifes. Your best bet is to watch
> level II quotes on QQQQ's and predict the only safe industry - pharms.
On Jan 04 03:18 PM iThinkBig wrote:
> Pharms are not safe. They are at the political whim of Washington
> right in the crosshairs. I have a strong position in Consumer Healthcare
> marketing and work with big pharma. I advise awaiting until the end
> of Q1 to see what the Administration and Congress forward policies
> are before investing in pharma. Right now, pharma just beginning
> to gobble up biotechs. May be good time to buy next year but definately
> plan on holding five years.
Why there should be such a seasonality is not immediatly clear, I suspect (as a parent) it has to do with student's writing term papers for their high school or college history classes (Google now being the first reference these days rather than the library). The drop in the summer is the give away I think as well as the New Years week dip (when students are on vacation). I'm not sure what all this has to do with the stock market other than more social studies teachers are using the current economic crisis as a "teachable moment" to assign more term papers on the Great Depression.
Still, I confess to having bought JK Gailbraith's The Stock Market Crash of 1929 last month. So maybe there is something predictive about it after all!
although I confess to buying a copy of JK Gailbraith's The Stock Market Crash of 1929 last month.
On Jan 03 10:58 AM moose60061 wrote:
> Does anyone realize the mortgages due to reset may now reset at a
> rate much lower?/ Seems everyone thinks the ARM's will adjust much
> higher, yet the rates these mortgages are linked to have gone down.
>
Keep in mind that virtually no homes are transacted with the help of an apparaiser who is representing the buyer. It just doesn't happen very often. The appraiser is almost always working for the lender, so of course they talk. The culture has always been to not be a deal killer, so they almost always come back with a value that keeps the loan moving forward.