JCC

No Chance of a 'V' Recovery

Agreed - Furthermore ECRI predicted the current mess a little late in March 2008, which was plenty of time to get out and preserver your capital.

ECRI has done pretty well in the economic prediction business.


On Oct 03 07:43 PM Owen B wrote:

> You wrote, "ECRI has been wrong before and they were in 2007 about
> the strength of our economy"
>
> But I've heard ECRI state that GDP growth reached a 4-year high in
> mid-2007. Is that not true?

No Chance of a 'V' Recovery

Again - 80% of consumer spending is from the 20% that is the most wealthy. This concept (Pareto Principal) is one that is well known to those manufacturing and economics, but somehow is not well known in many other fields.

Again, this why you will start to see recovery in consumer spending before unemployment shows significant reduction.


On Oct 02 06:42 PM bottoms-up wrote:

> Usually it would be a lagging indicator, but nobody factored in the
> percent of the economy based on consumer spending. That is the new
> kid in town and nobody can predict how this consumer society can
> spend without jobs and/or the abuse of credit.

No Chance of a 'V' Recovery

One other important point often forgotten is the Pareto principal or law of large numbers. With this principal we find that in any large group 20% of the members create 80% of the results. So in a company 20% of the parts equate to 80% of inventory value. In an economy 20% of the members hold 80% of the the wealth. So when that wealthy 20% starts to spend, we can start a recovery.

That is one reason why unemployment is a lagging indicator. Because of this, recovery starts in advance of employment recovery.

No Chance of a 'V' Recovery

You raise some interesting arguments, but there is other important data:

1. ECRI's WLI is pointing to a robust recovery.
2. The housing market often leads us out of recession and the housing market is showing signs of recovery.
3. Developing economies in India and East Asia are recovering nicely.
4. The Atlanta Fed reports that Global Trade increased at it's fastest pace in 5 years.
5. Foreign demand is expected to add ~1.3% to US GDP in 2010

Could it be that proponents of a "ready-aim-fire" economic theory might be upset by the the "ready-fire-aim" approach? If we end up with a strong V shape, will you change your minds?

What if It Is a 'V' Recovery?

If you look at current information, you might find that you agree with Lakshman and ECRI. I have smiled at many on Seeking Alpha who have been predicting a crash, which the market and economy continues to improve. A close friend called a few days ago to say that the party is over and it is time to sell. Reviewing the signs, has showed the opposite. I agree with the ECRI recommendations.

So I see continued advance for the next 6 to 9 months. I don't know what will follow after that, but think that world wide economic policies will show the future. That is is subesequent results will be heavily based upon exit strategies that might require a tight roap waker.

Interestingly enough, actual results often appear to be the opposite of many posting on this site. So from a contrarian perspective, look at those yelling and turning blue on Seeking Alpha, and take the opposite direction.

Four Reasons We're Headed Even Higher

It is amazing to watch all of the nay-sayers yelling and screaming as the market rises. So many hate what has happened, and therefore have become emotional automotons. When you let your emotions rule, it prevents logical thinking. As a matter of fact, the emotional reaction that many have is equivalent to lying to onesself.

So yell and scream and point down as the market goes up. Vent your anger at specific companies because they got help, and watch the stock rise. Have a fit over the current deficit, and forget the history of WWII. When we continue to to lie to ourselves, we will not make good investments.

When others reap the rewards we will say it is impossible, because of @*^%#**&^!!!!!!!

Morgan Stanley Sees V-Shaped Recovery: I See W-Shaped Recession

Well Edward, it is not only Morgan Stanley, but others are now predicting 3% growth for the second half of this year. Goldman Sachs, The Federal Reserve, Morgan Stanley and others recently came out with similar predictions. Furthermore the market appears to be accepting this conclusion.

In a week or so we will see what Roubini and Krugman think.

I don't know how long this will last, but right now, the green shoots are growing rapidly. It is even being noticed by many small businesss owners. In some cases like in banking we even have green trees.

Suffice it to say that It is way early to predict a W shaped recession.

Global Markets July Review: Rally Without a Cause?

Could it be that the relationship that Financial Institutions have to the rest of the economy is a significant factor? After all, monetary flows are the lifeblood of the world econcomy. Monetary flows collapsed in September 2008, and since have been restarted with world wide efforts.

Recognizing the near normalization of monetary flows provides a good reason to bet on the future.

Perhaps There Are Unseen Green Shoots

On Jul 19 08:39 AM Quaker wrote:
""I believe that we're in a systemic change in currency and trade regimes worldwide, similar to that which happened in the late 20's in Germany and in 1870's in London and Amsterdam. The changes we're going through are more historical than economic. The reason we got into trouble was the China, Saudi trade caused an excess of dollars to enter the market and and excess of IOU's to be issued. This caused interest rates to get absurdly low and destroyed worldwide equity.""

Well Quaker - Those who read Kevin Phillips book "Bad Money" will at least partially agree with you. Look at the history of Europe and you will see a similarity as they progressed from a manufacturing based economy to a financial economy. This of course appears to be what the USA is going through.

Look at the charts of China, and you will see that they are the only ones that have been growing consistently since November 2008, and of course China is a manufacturing economy. I see green shoots in Asia.

By the way, Goldman Sachs has also been growing consistantly since November 2008, and now they appear ready to explode to the upside. I see fast growing trees in financial stocks.

Looking at history, the change in economic leadership should be gradual and painful. Asia needs us as a marketplace!

In the meantime, be careful with your investments. Specific financial stocks might be a great investment. Multinational companies are better suited to grow in the coming world economies. Resources will again be stretched, and provide for good investments. Technology leaders also will provide opportunity.

Hansen - This is a good article, and it's nice to see something factual and reasonable among all of the ridiculous opinions. Good work!!

The Economic Trifecta: Inflation, Devaluation, High Interest

Steve - I appreciate your intelligent argument. I agree that the danger of inflation is not eminent, but it is certainly possible upon recovery. You are correct that it could be avoided with an L shaped recovery. I submit that it is also possible with a U shaped recovery, depending upon the economic policies used at that time.

Currently monetary velocity has slown to a crawl, which if anything is a deflactionary factor. When velocity increases, then we must very carefully manage the monetary supply to avoid significant inflation. This might be difficult but it can be done.


On May 31 10:29 AM Steven Hansen wrote:

> "First the attribution of the quote was wrong. It was Laurel and
> Hardy, not the Three Stouges.' - Dave Wrixon
>
> Your are right. i was so concerned about getting the phrase correct
> that i did not realize the attribute was to the wrong people.
>
> Let me be clear on the point of inflation - i do not see this as
> an eminent problem. but if i would have written one year ago about
> fears of deflation, what would you have thought?
>
> you cannot keep taking different drugs and not expect a reaction
> between the drugs. the fed is conducting monetary policy on the foundation
> of computer models. if anyone has some statistical information relating
> to similar economic conditions from the past, please share it.<br/>
>
> i find it interesting that the punters believe
> - we are exiting the worst global economic situation since the great
> depression,
> - the government can spend money like there is no tomorrow,
> - the fed can massively expand the money supply,
> - that we can destroy massive amounts of wealth,
> - the boomers are exiting stage right,
> - we can dramatically increase our taxation,
> - the whole world can engage in QE
> and you can predict the outcome. not one swinging dick can say what
> will happen next.
>
> i remain convinced that when a recovery occurs - there will be inflation.
> however, if this is a L shaped recovery, i would agree inflation
> most likely is not a concern.

The Economic Trifecta: Inflation, Devaluation, High Interest

We exited World War 2 with debt being the quivalent of 120% of GDP. At that time, similar to today, many were crying about eminent out of control inflation. It did not happen!!

The Bank of Japan made huge debt purchases between 1997 and 2003. Many predicted run away inflation. What happened - Prices fell.

You reported a lot of interesting data, and it is generally a good article. But like many, the article fails to predict based upon factual analysis. Maybe we will have hyper-inflation, but it is by no means necessary, not is it a a foregone conclusion. Proper handling of the economy can avoid an inflationary conclusion.

Furthermore, in the short term a major worry is deflation.

Sucker's Rally Approaching an End

Sorry Hot Richard - You are wrong - It took the 40% stimulus of WW2 to finally break the back of the depression.

We had started to recover by 1937, and then let up on stimulus and we had double dip. Like today people were crying about the deficit. Well the 40% of WW2 created a hell of a deficit.

Hopefully we can avoid the double dip fate, but if the fiscal hawks have it their way, we will repeat.

So go study your history books.


On Apr 13 10:21 AM Hot Richard wrote:

> Geoffster wrote "It took WW2 to get us out of the depression."<br/>
>
> Nothing personal, but no it didn't. And Hoover wasn't a deregulating,
> small government President (nip that in the bud right now).
>
> Hot Richard wishes people would throw off the yoke of their American
> Government supplied education and really learn about the Great Depression.

Sucker's Rally Approaching an End

Sorry Hot Richard - You are wrong - It took the 40% stimulus of WW2 to finally break the back of the depression.

We had started to recover by 1937, and then let up on stimulus and we had double dip. Like today people were crying about the deficit. Well the 40% of WW2 created a hell of a deficit.

Hopefully we can avoid the double dip fate, but if the fiscal hawks have it their way, we will repeat.

So go study your history books.


On Apr 13 10:21 AM Hot Richard wrote:

> Geoffster wrote "It took WW2 to get us out of the depression."<br/>
>
> Nothing personal, but no it didn't. And Hoover wasn't a deregulating,
> small government President (nip that in the bud right now).
>
> Hot Richard wishes people would throw off the yoke of their American
> Government supplied education and really learn about the Great Depression.

Oil and Stocks Have Bottomed, But Their Paths Forward Vary

A very intelligent article, that will probably be hammered for the comments in the last half. The conservative crowd will have a fit.

For the investment crowd, there is a lot think about and profit from over the next two years. Banks / financials, energy (oil, gas, batteries, etc.), and Asia. A lot of economic damage has been done, which will take some time to recover.

We have golden opportunities.

New Bull Market or a Bear Market Rally?

It was the freezing of monetary flows, heavily from banking and from other financial institutions that started this mess. This happened before in 1929 and 1873. For now we have turned the tide with banks. If we don't repeat the mistake of 1937 (second dip in great depression recovery), it looks like we have seen the bottom, and have started a gradual recovery.

Too much economic damage has been done, to see a robust recovery in most sectors. I say most, because, this excludes banking, finance, energy and some Asian economies. Pick the right banks and financial institutions and you should rather quickly double your money.

Energy should start it's recovery shortly, because the world needs energy. This recovery should roughly coincide with the recovery of the stronger Asian econmies.

It might take a little longer, but the worlds thirst for product should give a boost to some Asian economies, probably late 2009 into 2010.

We have a golden opportunity in front of us, if we continue to move forward intelligently.