Dusty

Great Depression 2? Not Even Close.

It would appear that this article completely misses the disparities between the happy numbers from the Beltway and the numbers of U3 and U6, let alone the numbers estimated by the few sources trying to determine current reality.

The current state of the economy is also not even close to where it is going. The housing-driven crash of Subprime that brought us to where we are now is only a prologue.

The housing-driven crash of Alt-A and its affiliates is barely starting to tickle awareness of its existence. By the end of the year (2009) it will be a major force. In 2010 and 2011 it will be a tornado tearing down the wealth of the nation, blowing away the wealth of the middle classes and more.

It will be late in 2012 before we can step back and even begin to survey the damage, two years to try and clear the wreckage, an average after one of these events of an additional 5 years to recover beyond that.

It may well be 2013 or 2014 before a realistic evaluation can be made of what kind of Recession or Depression this is. For now we should all consider that it will be far worse than our personal experiences can imagine and try to prepare accordingly.

---------Dusty.

Scary Numbers

On Friday night I got an E-mail from my son. He commented that on the commuter train "you can see the fear in their faces," and at work, "you can hear it (fear) in the voices on the phone."

This is from the the Market reaction to the next bump on the trail; there is a bigger one due in the fall. The real mountain crossing starts with calendar 2010 and will take more than two years (30 months). The first trek across the peaks (2007-2008) took 18 months.

If this week is the anticipation of the mortgage resets for March, the Dow Jones and the S&P 500 may hold for awhile. A slight recovery and a lot of volatility until the leaves begin to turn to their autumn hues.

Beyond that, maybe we all need to research how our parents, grandparents, nation really endured through the 1930's.

The Mauling of the Dow

Great introduction! Where is the rest of the article?

"How bad is it going to get?" is easy. Repeat the 1st and 2nd quarters of this year except start from our current lows instead of the levels of last October and part of November. We have a "Hindenburg" indicator and several other things telling of a serious drop. Mortgage Resets (Credit Suisse) by Alt-A and Agency Resets will generate as many or more foreclosures in the Fall as in the Spring. Job layoffs and business bankruptcies and small businesses just closing doors should skyrocket because of inflation and consumers with no money or afraid to spend on more than minimum essentials. Look for the January equivalent drop in August, then that long bumpy downhill slide to somewhere in the late winter. Should be very interesting about Election Day time.

Sell stocks? Maybe do whatever Mr Faber had in mind by his use of the word "Tactical." I am trying to move into securities that have a global footprint and preferably are based in other countries and other currencies and hopefully that pay some dividends. Worst case, those dividend payments might be the only real money available to hand. Check out Zimbabwe.

Double Bottom Forming or Just a Pit Stop on the Way Down?

The Genie in my Bottle of Smoke says this is end of quarter, end of first half. Some big money funds must move around a little bit, breathe(?). Last day or two of June, first few market days of July. Keep your seat belt tight. Then we decend to a late summer crash (Ref: Royal bank of Scotland, others). That will carry us into Alt-A housing and credit mess Part 2 (Ref: Credit Suisse Mortgage Resets chart) and more. We are really not even half way down the first big drop on the roller coaster.

What is scary is that the Genie may have it together. I am holding what cash I can.

Preparing for the Fall, Part II

During most of the First Quarter, Credit Suisse had a graph about mortgage resets easily accessible on the internet. The US economy/market has followed that graph like a champ; the market has been a negative mirror image. Subprime is largely ending now, June '08. The market is bouncing around because it does not know which way to go. In September through January the name of the game should be "Alt-A." The Alt-A loans will be riding on top of "Agency Resets." Fall will be a replay of the 5 or 6 months now ending. Then it gets better, but not much. This summer might be a good time to be sure your parachute and seat belt straps are tight. We can look forward to real improvement, according to that Credit Suisse chart, in June of 2012.