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Forget next quarter - David Rosenberg figures GDP could go negative this quarter, planning for a...
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Saturday, August 21, 2010, 8:55 AM ETForget next quarter - David Rosenberg figures GDP could go negative this quarter, planning for a -1.5% rate vs. others' 2.5-3.5%. It's not about a double-dip, he says; the recession never ended.
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consumer goods imports....more than they are doing now....you
believe that then we will go negative....
GDP is a highly inaccurate estimate, to begin with, and is influenced by factors, like net trade balance, that don't necessarily indicate failing economic strength, even when it's declining, i.e., imports growing faster than exports.
Just keep a close eye on aggregate corporate revenues. They were up 5.5% YOY in the latest quarter, with more companies (about 70%) reporting increased revenues than in Q1 (about 60%). If and until this number goes flat or negative, the economy is gradually strengthening.
Disregarding your feeble insult:
It doesn't matter whether we export more or less, as long as aggregate coporate revenues continue to advance. That's the whole point.
The fact that trade balance can yo-yo the GDP numbers all oer the place is why aggregate corporate revenues are a superior and far more accurate indicator of economic performance. They can't be jiggered; they aren't estimates; they aren't perpetually "revised;" and they aren't subject to "political windage." They're just hard, cold, accounting data.
Thanks for clarification. Think we should all avoid the "personal commentary."
P.S. SA needs to make it so that when somebdy hits "reply," it automatically inserts to whom the reply is directed. Think I'll recommend that to them.
Agree tack. GDP is a highy "flexible" (see: manupulated) data source. When/if the 70% consumer based GDP model is used, that's when we'll have a better idea of when we'll come out of recession. (yes, I'm in the camp of "we never left it").
I personally want to see people employed....and I hope you do too...
we can disagree about the methods to get there....
political discussions are generally a waste of time in my book...in
my many years of bond trading I found when people let their politics
get in the way they eventually lost money....
A healthy economy needs to be "operated" like any other system - ours is stumbling around like its being manipulated by fools. Personally I enjoy watching China - so far they seem to be successfully growing their economy and raising the standard of living in that country.
The poorest people in American, on the other hand, already live higher quality lives than most people in the history of human kind. So it's tough to make it much better from that point.
The fact that China went from $1/day to a thriving / growing middle class while ours has shrunk is kind of telling for me, as far as who is managing their economy better.
I am not making the point that we should operate our economy like China. Each economic system is different, that is consistent with the culture. One question: Does the economic system drive the culture or does the culture drive the economy ?
www.consumerindexes.co...
A recession would be a great improvement.
Not a recession at all for the ruling Troika of Big Govt, Big Money and Big Media but a boom that only grows better and better every day and every way. It was and is and in the absence of a middle class rebellion the best of times for the Bosses.
Not a recession for the lower class...but merely a stagnation in real income transfers from the middle class...even the stagnation is obscured by money illusion.
raised their savings rate to 6.2% and disposable income went up
4.4% in the second quarter and 3.75% in first quarter....sub par growth due to buying too many foreign goods and saving more....
SUCCESS!
So, now what?
"
The number of workers making hardship withdrawals from their retirement accounts reached a record high in the second quarter as the sagging economy drains household wealth."
See full article from DailyFinance: srph.it/dlU13G
Over 75% of individuals with income earn less than $50k per year; only 6% earn more than $100k. While the cost of living (i.e. cost of survival) is rising, real incomes are falling. 75% of "consumers" are struggling to make ends meet. I have a hard time believing that the people who make up the majority of "average consumers" are saving more while their disposable incomes are falling. Is it really fair to say that American consumers are saving more without differentiating between high-income versus low-income earners? I'd be curious to see these same statistics broken-down by income levels.
stop spreading half-truths and misinformation... b(ig)bro(ther) has done enough damage
Now, I speak of the traditional sense of "GDP" where the consumer (70% of "real" GDP) is contributing at a healthy clip.
The current GDP (see: Govt Driven Ponzi), is not a recovery, nor a legitimate definition and benchmark of domestic health.
it is 4.84% of GDP....highest level since 1992....
What is the purpose of the deficit spending? The government is spending around twice what it collects, more than 10% of GDP in order to boost the economy, and yet Q2 growth is around 1%, the jobless rate is showing no signs of coming down and the balance of trade is getting worse. So, we are living on credit and getting further in debt, failing to boost domestic industry and sticking our head in the sands about the future The big problem is we are heading to an outcome that could be so ugly that it is beyond the comprehension of those who have spent their lives being brainwashed in the concept of USA supremacy; the biggest, richest most powerful etc etc. When the Chinese are dumping Treasuries and buying Spanish government bonds, along with JGBs and Korean debt, you need to ask what are they worried about.
There is combination of arrogance and ignorance in American society that could lead to disastrous consequences.
Some excellent commentary.
Yes, government, where it presents itself almost anywhere, is a leech on society and wealth creation. Deficit spending, even if not ruinous, merely escalates inflation, eventually, making it necessary for investors to run ever faster to keep up with changes in nominal pricing. And, despite all the infatuation with government bonds, for the moment, all the worldwide monetary creation will ultimately be inflationary, as it always has been and must be. The laws of economics are ultimately immutable: if you increase significantly the supply of one thing (money) far faster than the supply of what it buys (goods & services), then, you get inflation.
At the same time --and, this is speaking especially as an investor, not a "citizen" -- it's important to separate nationalistic desires and patriotism from investment strategy required for each individual and family to prosper in the world, as it's presented, not as they wish it to be. Investors will benefit if they think just like multinational corporations, i.e., don't think of oneself as American; think globally and deploy capital n a manner to maximize gains, regardless of what happens, specifically, to the U.S. standard of living. This is all one can do; try to stay ahead of the game. All the rest is hand-waving.
The present situation reminds me of real-life stories (books/movies) where a group of people find themselves in a crisis (shipwreck, airline crash, avalanche, forest fire, etc.). Some of the people panic and scream, "we're all gonna die," and, often, they do; others, usually a minority, stay cool and calm and figure out how to escape the peril, and they survive and prosper.
Now, is a time for careful thought, analysis and capital allocation, rather than lots of harangues and emotionalism, at least if one's goal is to make money.
So real unemployment may not be nearly as bad as the numbers indicate.
Retails are continuing to sell goods, so people are making money somehow.
Yes, get rid of the government and everything will be okay. Just look at Somalia. They have almost no government, and look how great everybody is doing over there!
Paul H.M., your comments are so blatantly ignorant, I'll just have to assume they're sarcasm...and hilarious sarcasm at that.
Nobody in here said 'we don't need Government'
So, your are arguing within yourself
Anyway, it seems that the contrarian approach would be to take the under on the economic consensus since the expectation is stil for the 2.5-3% growth range - the over seems very unlikely.
Existing home sales will be "weaker than expected" next week and so if you know this is about to happen but it is still "surprising" to the vast majority of economists and financial touts, how would you trade on that data?
For Wall Street it ended because they were bailed out by Washington and the markets went up. For Washington the recession ended because they spend other people's money (ours) and get their palms greased by corporations, unions, banks, etc.
For high income individuals and families whose income is generated from parasitic non-productive activities (e.g. - lawyers, CEO's, hedge fund managers) the recession never ended because their income stream was never truly affected, only the perception.
For the rest of us, THE RECESSION NEVER ENDED whatever the GDP or CPI says. The majority of families and individuals are out of work or out of money or toiling more in order to pay increased taxes, premiums, fees, non-discretionary costs, and ultimately pay for the sins and crimes of the spineless greedy gutless narcissistic weasels in Washington and Wall Street who don't give a damn about anyone else.
There has been NO recovery. How can there have been one if the numbers of food stamp (SNAP program) users keeps growing MoM? Unemployment with no improvement? Just the number of withdrawal by people from their 401Ks to live, tells a story of ongoing struggle.
All this conjecture of what constitutes GDP, CPI, etc. Just masks the bottom line - this is a depression for the vast majority of citizens. The only difference between now and the 'Dirty Thirties' is the number of safety nets that hide the problem. eg. Food stamps now - back then, bread lines and soup kitchens. Unemployment benefits now - back then, relief work at work camps. People trapped in place by underwater mortgages and high debt loads - back then, massive unemployed population migrations.
Make no mistake. For the majority this is a depression.
My wife just rejoined the workforce (since our son is old enough to daycare), and it only took her a couple of weeks to find a job.
I guess things are much worse in other parts of the nation.
And in my neighborhood, houses rarely stay on the market for more than a couple of weeks.
So I'm not seeing any signs of "recession" here. Hopefully the rest of the country can catch up to us.
If you don't have a job, shouldn't you be looking for work rather than posting on an investment website?
And if you do have work, what are you complaining about?
June 2009 - lost $20/hr job
Oct 2009 - took first job that would have me (part time at 7.50/hr, augmented unemployment 'insurance')
Dec 2009 - made full time project (12.50/hr)
March 2010 - made full time permanent (13.75/hr)
Please correct me if I'm wrong, but I think that means I'm making 68% of what I used to make.
I confess, I'm working for a local government entity, so yes, I am one of those overpaid/underworked people taxpayers are complaining about. I won't get a raise this year, but I also (hopefully) won't lose my job this year (fingers crossed). I have the fed taxes, the social security tax, mandatory retirement savings (yes, I am not allowed to opt out of retirement savings), and mandatory health insurance (this was even before the healthcare 'plan' passed).
Next year, my share for mandatory health insurance will go up (thanks for 'fixing' me over). Additionally, the Evil Bush/Republican tax cuts will expire, meaning more of my bi-weekly take home pay will not be taken home by me (yes, I know, I'll get a refund, when I file my 2011 taxes in 2012, but what do I do in 2011 to make up for that).
I would love to get a part-time job to help with the bills. However, because I had to file for Chapter 7 bankruptcy in January 2010, I'm not even considered (people with good credit are much better employees don't you know). So now, I make just enough to cover bills, no eating out, no savings, and no credit line. I'm not even a paycheck away from disaster, I'm literally a refrigerator, washing machine, or car engine repair away from disaster.
Don't tell me this is a recession. This is what my grand-parents told me the depression was like, only you had the opportunity to better yourself back then.
Look at a holiday like Columbus Day (or is Indigenous People day?) when government workers generally get off but normal workers don't. The traffic here drops by 50% on a day like this.
Your state is broke, insolvent, or do the figures not matter when they are in your backyard?
Get a grip.
Think of our society as a pyramid with the "elite" at the very top, the political/ruling class underneath, then the "well off" next - the three making a really small wedge, then the huge slice of middle class and poverty on the bottom.
There is much movement between the top three tiers, with very little, to no statistical probability of movement from the bottom of the pyramid to the very top two tiers. You might hit the third tier if really lucky/smart.
Here is the problem folks. All the people at the top of the pyramid got/get there due to money produced by the American working middle class (non-union, golden parachute) and now, the world's future middle class.
Simple math is that if you take money from one strata and gift it to another, the paying strata shrinks - it has too.
That former growing middle section had ENORMOUS purchasing power when we had real jobs, then liar loans and cheap interest credit cards. We no longer have either.
Now we can pretend that as long as the money is "still in the system," be it in government/government worker hands, or the elite, that everything is going to be ok, even as we see more and more of the middle fall into poverty.
Here is realty, it is working, and will continue to work, the EXACT opposite.
Contrary to popular belief, ten guys making one-hundred million each a year (one billion a year), will NEVER equate to the purchasing power of 20,000 people sharing the same income ($50k annually). Twenty THOUSAND houses, forty THOUSAND cars, 1.2 kids and college educations, boats, motorcycles, remodels.
So, by allowing the continued transfer of the middle class to the top, all we are doing, and have been doing is circling the gd drain.
Now we can pretend that the scraps left on the table will be enough for the bulk of our society, or, we can prepare for the future that is coming.
No matter the freakin' GDP numbers.
After all, most human in history would not have the luxury of sitting in front of an internet-connected (where are you getting the money for you internet, since things are so bad?) computer and typing pages and pages of comments.
If you have time to post here, the system must be working better for you than for most.
The fact that so many people have time to post on this websites tell me that whatever recession we happen to be in, it's very mild by historical standards. We're living the good life...so enjoy it instead of stressing!
A lot of people have given up looking for work. Remember there are still 5-6 people ON AVERAGE for every available job. Employers who advertise on places like Craigslist get 100's of resumes for a single position!
It is also Saturday, so not a prime time to hunt for work.
And go into any local library and see how many people are sitting at the free internet terminals. At any time of the day, the internet terminals are nearly all full and their are people waiting to get a seat. There are a lot of people who can't even afford internet service.
A lot of what you say is true and I agree with it.
What you may be neglecting, and who could blame you sitting in your fully employed, foreign and government home purchasing heaven, is that the people which are paying for your lifestyle (taxpayers/customers /whomever) are shrinking in number and shrinking in net worth and income.
Bankrupting, or firing, your customers is NEVER a good idea for the long term health of a company, or country. Ask the auto companies how well it worked out when they decided to offshore their supplier base. A base that used to buy new cars every year and that now are located in Asia making $1.25 an hour.
Keep in mind as so many fall below "poverty" (and yes, I see the lunacy of our poor having $100 shoes and $100 a month cell phone plans), someone will have to pay for them.
That, would be you and your circle of influence. Mine too, after all I'm the "rich, evil, small businessman" that screws my workers and cheats the tax man. Neither of which is true, but I am made to pay for it nonetheless.
And if we don't open our eyes and stop this disaster, so will we. Pay and pay and pay, until we find ourselves below that magical poverty line.
Ivory towers don't seem to be just for professors anymore.
Earnings keep going up. So no matter how the bears want to spin it, I can't see the market crashing too far as long as earnings keep going up.
Did you miss the latest statistic that claims for unemployment benefits hit 500k? That is form people who have lost their jobs.
Unfortunately, in Q1, 60% of companies reporting reported increases in top-line revenues (2.5%), and in Q2 70% of companies reported revenue gains (5.5%). These are unaffected by whatever cost cutting further down the income statement and reflect that companies are either selling more (so much for declining unit sales) or charging a lot more (so much for deflation), or both.
Now, maybe, all those revenue gains will suddenly halt and reverse and will plunge into the abyss, but until signs appear that revenues are declining, not advancing, I wouldn't get the pallbearers all dressed up, just yet.
For US this is not good news. It portends our futures when "our" employers decide to locate to where their profitable divisions are located (hint, not here).
Take another look at those top line #'s. The revenue 'beats' were largely measured against 'expectations'.
If you rerun the #'s and look at t 5 quarter trend to see who's grown the top line on a sequential AND same quarter year over year basis, you'll see that it's a pretty short list.
Even at that, when you think about how many co's are going to be able to show growth on a 3q09 vs 3q10 and a 3q10 vs 2q10 basis, you will understand some of the pessimism.
THAT is my point.
Unless you really believe that a few people earning money on stocks can support our entire economy.
The end game, throughout history, is not optimistic for what will happen when the wealth goes away. And by nearly EVERY metric, the wealth of the masses (not just the top 5%) is FLEEING and won't be coming back anytime soon.
I'm talking about "revenues," not earnings, although they're increasing even faster, of course, due to cost cuts. Did you mention "earnings" in error?
The notion persists that the entire economy is being held aloft by a handful of scammers in the stock market and running banks, rather than the entirety of the employed population, as if a few tens of thousands of people could hold aloft a nation of 330 million. It's classic class warfare and demagoguery, nothing more.
Of course, the wealthy always do better than everybody else; that's just the way it is. Or, we can adopt a communist model, where we're all equal in near poverty, like the old Soviet Union. Maybe, some would prefer that, as long as no neighbor has it better than they do.
I keep a close eye on data, rather than opinions, forecasts, estimates, sentiment or any other intangible, subjective element. Maybe, other folks eschew such an approach, but for me, tuning out the "noise" has worked very, very well for fifteen years, even the last three. I'm not about to abandon my approach now.
I expect choppy, uneven growth and a volatile, uncertain market, which is why I recommend a portfolio heavy in income and value plays, especially preferred stocks, and light or absent growth stocks. Such a portfolio will perform even in flat to down markets. As for bonds, I think high-yield corporates are extremely attractive at current spreads, but that Treasuries are a time bomb, just awaiting the right catalyst.
My goal is to make money investing, not solve the world's problems or predict the hour of it's decline into the final hell, which has been a societal pastime through the ages, but not a very profitable one.
Earnings are not up due to organic growth. ..."
As for revenues, my assertion is that topline revenue growth due to increasing Asia/SAmerica/wherever and continued DECREASE in American sales is NOT any sign of the financial health of THIS country.
Yes, McDonald's, Coke's and even John Deere's earnings were up, but they were up everywhere except the US.
Nobody can convince me that the wealth in a the pocket of a few shareholders and taken from the American masses will EVER lead us to the promised land - the end of this damn recession/depression.
Thanks for your thoughtful response Tack.
Thanks for clarification. I have already sent a suggestion to SA that when somebody hits reply button that the person to whom reply is addressed automatically be inserted.
We'll just have to see where things go. As an investor, I am less concerned about source of growth than that there is some. For the moment I remain in the camp that the pessimism and forecasts of impending doom are overstated. None of this, however, should be interpreted in the slightest, as support for the Administration and its anti-capitalistic policies.
Demographics are what will kill the west....the question is...can the east transition to creating domestic demand fast enough...I personally think not.
While exchanging with Tack, I stated the exact same thing.
The West gambled on the "thinking" economy without taking into account the masses not capable of such a thing. The east worries about work for the lower IQ masses and lets their production, and then salaries, float all boats (and it does much better than "trickle down").
We, the West, are in for a world of hurt as the Asian economy grows and drawfs all that we once were.
I've always enjoyed your passion and clarity too. I'm working on the clarity.
however market can crash way too far just few days before it officially disclosed to you that earnings don't keep going up
the whole purpose to be in SA is to get advanced warning
Here's what I see for the upcoming week (I'll report back next week to see how I did here, just for kicks):
1) existing home sales weaker than 'expectations'
2) Initial claims better than 'expectations'
3) GDP with a 'one' handle, even though many are 'expecting' it, it will still hurt psychologically, but will probably come in 'in line with expectations'.
Gotta love that last one; in-line with expectations while throwing a one-handle. The talking heads are going to be spinning like crazy with that....
Here's one of his prior gems from the genius forecaster. I am sure his firm clients are ecstatic about going in cash in April 2009. Where are your customers yachts, David?
From April 2, 2009:
S&P 500 will hit new lows, in our view
We remain of the view that the risk of earnings disappointments will take the S&P 500 to new lows before the bear market runs its course. Based on the outlook for corporate profits and the typical trough P/E multiple that characterized recession bear markets, it would not surprise us to see the S&P 500 gravitate in a 475-650 range for an extended period of time.
Read more: www.businessinsider.co...
Being off on timing, and being off on absolute direction are two different things. Market timing is a fools game. Researching fundamentals on the other hand will ultimately pay off.
Do you carry insurance?
Why?
If you haven't been sick, had an accident, had your house burn down or trash your car, then what are you paying the insurance for?
Just because something hasn't happened YET, doesn't mean you shouldn't prepare for the possibility.
The market is rigged and corrupted, not being able to accurately forecast THAT isn't a negative thing.