Alex_G

New Jersey's Pension Crisis: A Canary in the Coal Mine?

This is a problem all over the world, more so in Europe, less so in Japan (very high savings rate).

As the developed world ages and doesn't produce children even to the replacement rate, there will have to be a mass migration from LDC's, or a massive cut in retirement/healthcare benefits.

Buffett's Latest NYT Op-Ed: The Greenback Effect

Zach,

M3, or bank credit, is still falling off a cliff. Wealth losses are well over $10 trillion. Banks are holding the cash for future commercial loan losses, and are only deploying capital for trading.

The "money being printed" so far is 1/5th of money, or wealth, lost. The world is just now realizing that non-stimulus growth hinges on the American consumer coming back to the trough. Good luck with that.

Inflation will not happen until the bank reserves are leveraged to provide consumer loans, and consumers begin to compete for goods with their "excess dollars".

Foreclosure Chart of the Day

Yes, increased savings AND consumer spending is indeed an impressive feat, brought to you by increased "personal income", which was brought to you by one-time government handouts.

This is, of course, unsustainable, unless DC borrows more money to do this. You simply can't increase both in a flat or declining personal income environment.


On Jul 29 02:00 PM Tack wrote:

> Consumer spending has actually been increasing, lately, even as savings
> rate has escalated. This is an impressive feat, but the pessimists
> always seem to focus on savings, as if it were a negative. In fact,
> it's the opposite, like water behind a hydroelectric dam, that can
> be released at anytime the consumers decided to get back in the water.
> This is, in fact, very positive.
>
> Coupled with the bank's excessive levels of cash reserves, presently,
> we have a situation where lending and spending can meet in a fortuitous
> way. My guess is that it will happen faster and more robustly than
> the pundits expect.

Deflation at Work

M3, or bank credit, is still falling off a cliff. Wealth losses are well over $10 trillion. Banks are holding the cash for future commercial loan losses, and are only deploying capital for trading.

The "money being printed" so far is 1/5th of money, or wealth, lost. The world is just now realizing that non-stimulus growth hinges on the American consumer coming back to the trough. Good luck with that.

Finding the New Normal in Investment Returns

I really think that the US is heading for a European style economy, which includes higher taxes, higher base unemployment and most of the gains in employment coming from the Govt sector.

Very little of the stimulus is "investment", just keeping people afloat.

AIG Is Dead, Long Live AIG

So, at the current price of 54, the stated market cap is over $7bln. We're told the Govt owns 80%. Does that mean the implied mkt cap is over $35bln? Anybody?

Alex

We Needed Government Aid Sooner

Richard,

I think you are forgetting what got us here in the first place. The largest housing bubble in our history, the use of inflated values to consume more than we make, and the extra debt taken on fuel the consumption.

Cash for Clunkers would not have saved the over-built auto industry.

$8,000 tax credit would not have made vastly overpriced houses affordable in the long run.

50% of economic growth from '02-'07 was fueled by the vapors of an asset bubble. It was time to pay the piper.

Grab Your Shorts, The Correction Has Begun

Current equity bear, added in march, been taking money off the table the last 2 weeks, went all in w/ leverage in distressed debt starting in April, have taken the leverage off the debt but have kept the profits invested. So, yes, we have made a boatload this year.

The consumer is dead for 3-10 years, depending on if we become Japan or Japan light. The people that think the consumer will spend as they have the last 10 years just don't understand the metrics.

Alex


On Aug 19 07:09 PM Rick Urban wrote:

> All I can do is to ask you bears out here: DID YOU MAKE MONEY THIS
> YEAR? The way you view the world, I doubt it. The growth will come
> where it always comes from. Consumer! It may take some time, but
> it'll come. I don't understand why it is so hard to comprehend.
>
> Yes, perhaps we pilots are all the same, however being a pilot or
> an investor requires among other things discipline, taking calculated
> risk, homework, planning and fear control.☺
>

Foreclosure Chart of the Day

Tony, if you go to their web site and read the old reports, you'll see that they called this early and with accuracy. If their bent to siding with the consumer is leftist, so be it.

An Unpleasant Comparison: Demographics and Deflation

Actually, there are millions of educated, skilled workers just dying to emigrate to the USA, but government puts limits on the number that can come.

Imagine an entire new generation (ok, part of one) that cost nothing to raise or educate, ready from day one to contribute to the economy (and pay taxes).


On Jul 09 05:56 PM GeminiAtlas wrote:

> Adding more uneducated, unskilled, poor people won't help the economy.
> In the 19th century the skills matched the jobs (repetitive, no need
> to read, etc.), so it helped the economy. Just adding more unskilled
> folks to the melting pot will make things worse. More skilled people
> are needed for this economy in certain sectors.
>

12 Indications That a New Bull Market Is Upon Us

So, is it a new bull market (one of the shortest bull markets in history) or huge bear market rally after an enormous panic sell-off? Either description is one and the same. I think only a meaningful economic recovery would give us sustained market gains, and the cards are stacked against it.

1) Consumer spending will be muted at best for the next 5 years or so,

2) higher taxes to pay for large increases in debt, which will also retard growth,

implying at best 1.5% average GDP growth from a reduced base.

There is tremendous overcapacity built into our economy right now, and that would also have to be filled to get real growth moving again.

AIG Is Dead, Long Live AIG

In other news regarding Govt owned financials, FRE common is trading higher than their $25 par pfd. Any rational explanation would be appreciated.

The Consumer Recovery Will Take Time

The savings rate for the most prolific spenders (baby boomers) is going through the roof as they need to replace the savings they have lost in the asset meltdown. No home equity and lower credit card limits will also take it's toll. Anyone who thinks the consumer will take us out of this is just dreaming.

Look for the consumer to be 60-63% of a lower GDP going forward, which will also hurt emerging markets that make a living exporting to the US and EU.

The Facts About GDP and a U.S. Recovery

The 2 things the obama admin is not doing are spending stimulus dollars on:
1) infrastructure that will provide economic benefit and

2) energy initiatives that will REDUCE the out-flow of money to foreign energy companies (if you take out oil purchases, our trade deficit is nearly 0) and INCREASE payments to domestic energy companies. Jobs and revenue here instead of overseas.

Revenue Growth: The Market's Next Catalyst

Terence,

The charts and statistics you use are all over the internet and not new. What you don't tell us is where, specifically you see the rise in demand (don't say pent up) coming from.

Current spending is fueled by Govt stimulus, and can't be maintained in perpetuity. It needs to be replaced by other sectors. Tell us which these are and were the spending power is going to come from.

I await your reply.