LilBob

Consumer Credit: Dreadful

On Nov 07 03:29 PM neontyper wrote:

> Most of the people you know are maxed out? Most of the people I know are not. So neither is a norm then.

I have to side with Neon here. Most of the people that I talk to are in nearly the exact same spot that I am personally-having either recently paid off, or nearing the point of paying off all of their credit cards and minimizing other expenses, they are trying to hustle second jobs or contract work on the side and are talking about trying to use cash more and only use the credit card for things like plane tickets, where using cash involves a huge last minute premium penalty.

Consumer Credit: Dreadful

double typo-other way around

Consumer Credit: Dreadful

typo...where the benefits (not costs) associated with exercising credit options no longer appear to outweigh the costs...

Consumer Credit: Dreadful

No meaningful economic recovery can or will occur until the consumer has purged his balance sheet of the inappropriate debt he has and is once again able to earn and borrow.


Truer words were never spoken. Credit is not a creator of demand, credit is a vehicle of existing and pending demand. Right now we are in a "credit hangover" period when consumers are deleveraging and paying down balances. As soon as consumers have reached the point where the costs associated with exercising credit options no longer appear to outweigh the costs of exercising said options, then we will start to see a resurgence in consumer credit. Unfortunately with some of the ridiculous behaviors that the credit card companies have been engaging in as of late, that industry may be pounding the nails into its own coffin.

Gold Transforming into a Completely Demonetized Wealth Asset

I really have to compliment this author on some of the finest hucksterism I've ever seen. You know you're seeing some fine work when halfway through the article you find yourself thinking of that A&E documentary about the old patent medicine business. Now, I've seen cheerleading bull before, where you have someone trying to real in the little fish and drive an investment bubble, but this is especially well done. Mighty fine hucksterism FOFOA, mighty fine indeed.

Are We Becoming a Nation of Renters? Investing for the New Housing Dynamic

I have to side with Marty on being skeptical of apartment REITs. While I do agree that there are obvious economies of scale presented by multi-unit residences, there is such an enormous backlog of oversized homes that could (and will eventually) be converted to multi-occupant dwellings, and so many multi unit properties sitting in urban neighborhoods waiting to be renovated as soon as rising gas prices prompt more Americans to move back towards the cities that I just don't see any rational demand for new construction; especially when many of those older homes in the cities have hardwood floors, large windows and unique architectural details that make new construction look like a housing project by comparison.

Announced Job Cuts Now at Below Average Levels

"The Challenger report is one more indication that a return to US job growth is just around the corner."

More of the "economy snapping back like a rubber band theory"...We aren't going to see a restoration of retail sales and sales-floor jobs for at least a few years while badly burned consumers continue deleveraging; not that it matters that much as most of the big discount retailers that fueled job growth don't offer high paying jobs with benefits anyways. In fact-according to some-many of them don't even seem to be bound to Federal Labor, OSHA or State Department of Labor standards when it comes to such things as Family Leave, Overtime Pay or Working Minor Labor Laws.

That leaves construction, manufacturing, professional services and transportation as the big job providers. The country's so overbuilt we aren't likely to see a return of construction jobs anytime soon. Manufacturing hasn't seen a strong enough decline of the dollar to reverse out-sourcing trends, so barring massive changes in fuel costs or shipping regulations manufacturing isn't likely to come snapping back. Professional Services...doctors, PAs and RNs are all pretty secure but just about every other sector of the economy is still getting hit hard, especially Public School Teachers and State University Professors. Transportation tends to slow down when people don't have a great need to move either themselves, or materials from place to place. So...where are these jobs coming from again?

Credit: Too Important to Be Left to Private Banks

I really dislike when we see the response of: "Well, looks like oligopoly isn't working, guess we'd better go to a public system!" When what we really need is some weilding of anti-trust legislation. Rather than having the government run the credit system, we'd be far better off dividing up the "Too Big To Fails" into a bunch of smaller "No Longer Too Big To Fails" that can go ahead and fight it out in the free market.

What Is Decline in Nonresidential Construction Telling Us?

Non residential construction is in rapid decline because the whole country is overbuilt and current office and retail space inventories are already leasing at steep discounts. The only commercial construction that appears to be going on right now is for nationwide chains that are picking up real estate for new locations on the cheap and then building according to their company specific floorplans. A friend of mine is in construction and he was telling me that people are getting real stingy right now on office fit outs-frequently leaving the architects out entirely and asking office staff to just arrange the equipment around so it fits.

Marc Faber: ‘Gold a Bargain Compared to S&P500′

On Nov 02 03:44 AM Fibozachi wrote:

> Just amazing how such sensationalistic pieces detailing the "imminent"
> explosion to "insert xyz thousand here" are accepted while quality
> pieces of analysis that point toward the downside are shunned.<br/>
>
I'm siding with Fibozachi here. Let me "splain" something to you here folks. There's a particular pattern that's emerged over the last ten years and it's pretty consistent; here are the steps:

1. A particular investment segment goes bullish amid an otherwise lackluster or weak economy and a great deal of money is poured into that area of the market or that particular commodity.

2. After equity prices in that market sector have been run up to a level that-under normal circumstances-would be considered to be ceiling territory "analysts" and Economist types start predicting outrageous and unprecedented levels of future value, creating a great deal of hype that lures in a lot of retail investors and less savvy brokers.

3. A significant cadre of large institutional investors and more savvy brokers cash out of that equities sector having-through the law of supply and demand, increased dollar velocity in that market sector etc.-essentially picked the pockets of a lot of less savvy investors.

How many times over do you have to see this happen before you start to realize it might be the work of some unscrupulous individuals who are hoping to capitalize on the irrational exuberance of the little fish?

October Ends in Concern over the U.S. Economy's Ability to Generate Growth

Our economy will not improve until we restore the cyclical nature of capital necessary to sustain a consumer based economy. You cannot grow an economy which is based on 70% consumption when wages are stagnant. Out-sourcing and extensive use of credit instruments only keeps the part going for so long before you end up with a "Killing the goose that laid the golden egg" scenario. Effective growth of a consumption based economy requires maintenance of strong domestic production to foster growth. Credit is not a creator of demand-it is a vehicle of current and pending demand-but creditors don't GIVE money away, those balances have to be paid eventually. American business has out-sourced and credit-carded up this economy to spur greater quarterly profits for some years now and the well has gone dry. Until we see an effective restoration of the consumer base in this economy we'll all be pulling at straws hoping for occasional bits of good news and the whole process has about as much credibility as a gypsty poring over tea leaves.

Marc Faber: ‘Gold a Bargain Compared to S&P500′

Anytime I see ecstatic quotations of outlandish values, such as:

<it>"At present, gold sells at about the same level as the S&P 500, but if I am right about the size of future US fiscal deficits and about the Fed neglecting to protect the purchasing power of the US dollar, I could envision a time when gold will sell for at least two or three times the value of the S&P 500."...</it>

it reminds me of past claims of assets reaching ridiculous and unsustainable levels-remember the claims of $200/barrel oil, $20/gallon gas, etc in the summer of 2008?-and I'm instantly turned off. Once these kinds of stories and claims start appearing it's a pretty good sign that the end of the asset bubble is nearing and it's almost time for the next big market collapse, the one that we'll be told "was completely unexpected, no one could have possibly seen this happening to the market". Right now is probably a good time to start cashing out of gold.

Another Jobless Recovery, Part 1

On Nov 01 02:34 PM LilBob wrote:

> "Jobless Recovery": A popular oxymoron in an economy which is based
> on consumption. A form of rationalization turned to by those who
> want to deny the likelihood of a prolonged economic recession.

Just for fun I want to see if I can start a phrase. To me the notion of a "Jobless Recovery" is about as likely as "Follicle Free Hair Growth" ergo, anyone who uses the phrase "jobless recovery" when not being ironic, I will refer to as a "toupee economist".

Another Jobless Recovery, Part 1

Some day we may see an entry in dictionaries of slang:

"Jobless Recovery": A popular oxymoron in an economy which is based on consumption. A form of rationalization turned to by those who want to deny the likelihood of a prolonged economic recession.

Derivation: This term gained widespread usage in the summer through winter of the 2008-2011 Recession by those who did not want to admit that increases in the stock market were largely attributable to retail and institutional investors placing large amounts of funds into market equities rather than personal consumption or institutional hiring. The utilization of this fallacy was crushed when widespread realization of the drastic increases in market average P/E ratios led to comparisons to the "Doc.com" bubble of the early to mid 90s and resulted in a crisis in investor confidence.

USD Outlook: Short Term Up; Long Term Down. Here's Why

"the banking and housing sectors, which led the US in and will lead it out of the current crisis, cannot recover unless Americans can pay their debts and spend enough to allow commercial real estate and debt to recover."

That's the rub right there. Essentially that statement is tantamount to saying that we need American consumers to bail out overly optimistic real estate speculators who built like fools. Consumer deleveraging is ongoing and is likely to take several more years. Once consumes have dug themselves out of debt, don't expect them to go rushing to bury themselves again. Even if employment does start to pick up wages for the typical working class American are going to be stagnant for many years as domestic job competition now complements out-sourcing as a means of pushing down wage-rates. Someone who's making $300/wk stocking retail shelves isn't going to be able to bail anyone out. Also don't forget that housing still has a long way to fall as we are comparing property values to base-lines that existed prior to an additional 3 to 4 years of out-sourcing of jobs. This country still hasn't seen the full effect of ghettoization that will occur as a result of the transition to a service and retail based economy.