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What Type of a Corner is the Economy Turning?

Simply look at the US Personal Consumption Chart you have, do you think the consumption correction will be finished? Looking at your chart will lead to an easy assumption that we already see the bottom in consumption contraction in December.

However, there is a difference between looking at past data to determine the next trend than thoroughly analyze what is happening around us and reasonably predict what will happen next.

My view is that this type of recession will ultimately cause another next leg down in consumption contraction. This will really surprise the market because it is now not expecting that.

Economic Data: Good News vs Bad News?

If you sit back and think about the market & economy now, there are several questions you should ask your self.

1. Consumption has only been declining for a very short period of time (just a few months). Do you think it makes sense that the consumers can quickly recover and lead us out with more consumptions? Or, do you think the temporarily increase of consumption is just a head fake?

2. Notice that recent rise in the market is primarily based on
a. gov't saying that they see "recession is easing"
b. pace of decline has slowed somewhat compared to last year
c. earnings is not as bad in the 1st quarter relative to expectation
d. banks said they are okay.
Do you think the above reason are enough to pull us out?

3. Related to point 2 above.
a. the next 2 to 4 months, it will be important that the true economic data can back up what the gov't is saying. If it doesn't we will head back down very quickly
b. what if pace of decline picks up again or they continue to decline to a lower level?
c. compared to the current top line revenue of many major companies, if top line revenue falls another 10 to 20% from the current level, what will happen to the overall market?
d. regarding the banks, it is very hard to dissect their problems because of the complexity of the balance sheet and how they do their accounting.

I think from May to September, we will see big movement. My view is that we will head back down.

John Hussman: It's Not Over Yet

Seems like Cetin is very optimistic. I agree that in the Long run, when you are talking about 5+ years, it is no doubt that stocks are your best choice. It's because stocks mimics the overall improvement in the world economy. Unless you think the world is not going to resolve & improve, then you can be as bearish as you want.

As an investor, trader, or whatever you call it, I believe you just have to choose a strategy that fits you. You can pick your investing/trading strategy long term, short term, or medium term. It doesn't matter. You just have to have a strategy that you believe it will work.

Personally, I think the real economy won't recover this year, but the stock market may bottom out end of this year or beginning of next year. Again, this is my pick.

There are many surprising element that can kill the market in a matter of months. The two key points are:

1. The market finally got disappointed. What gov't done is not yielding the result that the market wants. In a way, market expect continuance of improvement statistic. But reality is that we will probably see more negative statistics once again.

2. This is a question you will need to ask yourself. Why does a slow down pace in decline means the next movement is automatically UP? What if the pace of decline is just temporarily slowing down and then falls again to another level? My theory is that declination doesn't have to be a straight line. We will probably see another wave of consumer spending pulling back starting very soon especially due to the continuous unemployment, over-leverage, + credit line cuts. This will affect the stock market tremendously.

Overall, I am expecting a major pull back in the stock market. Perhaps dow below 6000 by September.

Weekly Observations: Even with Government Intervention, Deflation Risks Continue

Great analysis. Recent market rally is very misleading. Once the market sees that the gov't intervention is not big enough to turn back the tide, it will then understand the severity of this recession. This type of debt deflation, & world wide consumer-led recession, hasn't occurred in the past 100 years. I don't think we can compare this to the depression in the 1930's because the world back then was not as interconnected compared to now.

Credit Card Crunch: Creating a New Generation of Subprime

very well analysis.

Bank Delinquency Rates Lower than in Previous Recessions

What about if this recession prolongs for another year or 2. This means the delinquency rate for all types of loan will shoot higher. Give or take the acqui & bus. loan delinquency rate should shoot up to atleast 6 to 9% & all loans at all commercial banks most likely will new high for the last 30 years. The magnitute of this type of worldwide recession is a lot greater than 1990-1991 and 2001. Don't you agree? This means any more unexpected prolong drag in the economy will kill the market.

History Says That We'll Be Fine

I think too many of us are focusing the past to predict what will happen in the future. I believe pass recessions and booms are unique during their times. For example, the internet bubble was due to irrational hope that all technological companies will be profitable. Those were nonsense. The internet crash was very extreme, and this is why almost after 8 years, you still don't see the Nasdaq fully recovers to the 5000 point range. During that time, I believe the internet crash was some what limited in its influence on the overall economy. It really didn't affect a majority of the American citizens. Nevertheless, it was not as global anyway.

This time, the financial crisis is actually not limited to the financial companies. I think it makes more sense to believe that the crisis has a lot more reach, and therefore should be more severe and long lasting. This bubble has created a false sense of wealthiness. For the past 20 years, how much growth in the economy was actually engineered by borrowed funds instead of real spending power? If your financial leverage has now being drastically diminished, can the economy really keep up the growth. For the United states, this means that you are expecting the Americans to still spend more than previous years. In order for us to recover, you have to believe that the American spending habits will only temporarily weakens, and then pick up the steam later. However, if you believe the American spending habits will weaken for a prolong period, then simply put it, we won't recover soon.

To gain knowledge and insight, I believe all of us should spend time in seeing what is happening around us at the current moment. Don't just always look back at pass incidents.

Julian Robertson: Some Buying, but Bearish on the Economy

The credit issue was worse than many had expected. This is what took us down to 8000.

I will say that consumer spending retrenchment will be worse than many expected in the upcoming months and quarters. This is what will take the Dow again to the 7000 range.

Still Bullish on RIMM - Cramer's Lightning Round (10/6/08)

He has no credential. Few weeks ago he called the bottom, and now he said sell everything. He's an okay entertainer (i sort of admire his capability in continuously finding financial related subjects to keep on talking during his show time) However, he is just not accurate.

Too bad he's not always wrong. If so, i can just bet on the other way.

The Die Is Cast

Basic economics: Demand vs. Supply. If you think about it, demand on a vast majority of goods will continue to go down, therefore, we will be in for some pains ahead. Previous years earnings and growth in prior years will need to be adjusted to reflect the current situation. The demand curve won't improve because we're just in the beginning cycles of consumers demanding less.

I believe when you see a great deal of companies report "same stores sales growth" are negative, then the system is probably in the cleaning process.

Buffett Puts Money to Work; Buys General Electric Preferred Stock

Let me play devil's advocate. He said the gov't is the only who has the capacity to save the economy from collapsing. Yet, he said you should never borrow money to invest. But in a way, isn't the gov't borrowing the 700 billion to invest in this junk debt?

Afterall, I don't think his approach is really calling a bottom in Wall Street. He only loses if Goldman and GE defaults and these are very unlikely. At the same time he guarantees himself a very good yield. I think Mr. Buffett also wants to do his part in helping the US economy. If he doesn't make a move to help out good companies like GE and Goldman, there are not too many investors who can.

The Main Street - Wall Street Bout, Round Two

If the growth of the past 10 to 20 years were mainly fostered by crazy leverage, then this needs to be corrected. Simply by issuing more debt and then encourage the citizens to use borrow funds to continue to spending only prolong the problems. Let me put it this way, if Americans cannot keep up their lifestyles without borrowing, then it is because they over spent and didn't manage their lives in the proper way.

Horrid Data: Housing, Jobs, Durable Goods

USD currency devaluation in a prolong period of time will be a disaster. It will cause a huge deals of inflation since we rely on import so much. 700 billion deal can only delay what is forthcoming. The canon is firing at you from every direction.

As Credit Markets Crash, Will Equities Follow?

I just can't see how the growth of previous years can still be engineered by consumptions. Borrowed Funds, Personal Income, Capital Gains are all increasingly diminishing. Americans have not been saving for years. If we haven't seen the down trend of consumptions, there can only be one reason. That reason is "NOT YET".

Why It's Time for Muni Bonds

You stat showing muni is safe. I buy that. Everything body has their own logic in determining their investment strategy. However, I would say don't always stick to old data in predicting what will happen in the future.

Your made a correlation that the US Gov't debt may become less save, and therefore, we should go buy more Muni state debt? I don't find that relationship make sense. If the US, as a country, has trouble in its debt issue, you wouldn't want to buy the munis too..... Think of it as a tree. If the tree's trunk has problem, ultimately it will affect the branches.