ebworthen

Home Depot Earnings Show Customers Are Returning

As Old Trader pointed out, no surprise that during Summer people are fixing up what they have.

Also, they may be fixing it up to sell.

Or, the banks are paying small contractors to fix up foreclosed homes that have been trashed and/or scavenged.

This is not a positive sign for the economy or the market, despite it's appearence.

The FDIC Is Broke. Now What? (Part II)

You said: "A Massachusetts bank that has defied the odds and remained free of bad loans amid the economic crisis is now being criticized by the Federal Deposit Insurance Corp. for the cautious business practices that caused its rare success."

The FDIC wants them to be "normal", meaning, lend money even to those of bad credit to "keep the economy going".

The biggest bank is the responsible citizen's payroll.

Bank, Insurance company, or Automaker failure? No problem, just hit the taxation ATM to "make it all better".

Of course, sooner or later, this collapses into runs on the banks, a great depression, and/or anarchy.

As Market Drops, It's Time to Buy

What's your time frame?

I wouldn't be buying anything here that you aren't going to sell quickly on an up day.

September and October doth approach.

A much bigger correction than Monday's is coming.

The buying on Tuesday was speculative, and won't have long term legs.

If you are pumping and dumping, fine. But if you want to buy and hold, wait until we go below the March lows this Fall/Winter.

Has the Rally Already Exhausted Itself?

There is a good likelihood we are rhyming with Autumn 1930.

No one wants to believe that, but look at Doug Shorts charts.

The difference this time is the quick flooding of the banks with taxpayer money at 0% interest, and the massive amounts of unemployed having a 6-month backstop of unemployment benefits.

If profits are up from laying people off, and their unemployment runs out in 6 months, we have a problem coming. It's only been ten months since the October crash. In the next couple of months, unemployment will run out for all the people laid off since.

Combine that with Alt-A and ARM resets, commercial real estate tanking, increased taxes at the local, state, federal level. Believing that things are going to recover like our recent bubbles, and not be more akin to Autumn 1930, is smoking the hookah.

How to Tell a Real Economic Recovery

Right. When employers start hiring, the economy will be turning around.

In 1934 employment started going back up.

The stock market fell along with employment.

My point being, the stock market doesn't hire people. It can go up on speculation, but people without jobs don't pay bills and buy stuff, and will pull it down sooner or later.


On Aug 18 02:58 PM chap08 wrote:

> But employment wasn't a leading indicator in the 30s either. It never
> is and never can be, because employers do not recruit people unless
> they can see work for them to do.

Coming Soon: Banking Crisis of Historic Proportions

Autumn 1930 is all you need to know.

Autumn 1930.

Compare the charts, scenario, socio-economic conditions. Stock market crash from over-leveraging, unmeployment, ineffective stimulus, election of a left leaning heavy handed President, taxes, control of banks and industry, confiscation of gold (hasn't happened yet - but most people's retirement funds are held hostage), etc. etc.

We will be going below the March lows sooner or later.

This is not your Father's recession, or his Buick (now owned by you and I and the UAW).

The pop in the market has been more extreme than Spring/Summer of 1930 because of the knee-jerk flooding of the banks with taxpayer cash and the hasty RIF's and reduction in hours of employees, thus propping up the market. The social safety net is larger now, but will only make the pops and crashes more extreme.

Run for cover.

How to Tell a Real Economic Recovery

True in post WWII recessions.

However, our current circumstance aligns only with 1930.

Employment will be the leading indicator, and the market and corporate profits lagging indicator.

There is enough of the population uenmployed, underemployed, over-leveraged, over-taxed, nickle and dimed to death from every corner, that the contraction of consumer spending will be the anchor that keeps the good ship lollipop from sailing back out to the Sea of Quarterly Profit and the Piracy of Banks and Government.


On Aug 18 09:59 AM chap08 wrote:

> User 353732 says: "When did fewer jobs, lower household income(for
> 90% ,at least, of American households), less business revenues and
> falling tax revenues indicate a real recovery?".
>
> The point is that these things never indicate a recovery, they only
> confirm a recovery once it's happened. For indicators of a recovery
> you need to look at monetary conditions, delta in new unemployment
> claims, new orders etc. These are the things that have proven to
> be leading indicators in the past.
>
> I'm not telling you that there is a strong, durable recovery taking
> place, I'm just saying look in the right place.

Clarifying America's No-Win Economic Dilemma

Yes, that is what he said. Why?

Gold is a universal currency. Even in deflation it's value holds constant or goes up. Gold prices went up 65% from 1929 to 1938 during deflation.

During inflation, as the purchasing power of a dollar drops incessantly, the value of gold does not because it is not a fiat currency but a tangible asset valued by all cultures and useful in personal and industrial applications. The best crown you can get for a bad tooth is still gold.

If dollar value drops, the cost of things we produce drops for the rest of the world. What we produce the most of that the world also values the most is food. We kept millions of Russians alive through the past 50 years via exports, and have saved millions of lives with our improved rice and other cereal grains in Asia and South and Central America.

When there are socio-political crises at home or abroad, commodities are what have value.

Why would someone invest in equities at this point? Yes, I might miss a vaporous nitrous oxide fueled ride up to DOW 15,000 if the stars align, but it will come back to the reality of fewer jobs, less spending, higher taxes, and much lower corporate earnings sooner or later. I don't want my ability to have heat and food dependent upon a corrupt government in collusion with Banks and Coporations maximizing their portfolios at my expense on a quarterly basis, thank you very much.


On Aug 18 08:50 AM Tony Petroski wrote:

> Let me get this straight. Buy gold because it protects against both
> inflation and deflation. Round that out with Chevron because China
> and India are rising?

King of Currency: The U.S. Dollar Hedge

Side note: From 1929 to 1938 the price of gold went up 65%.

Today in Commodities: Seeds of Change

Inflation? Not yet.

Inflation will kick in when the FED finally decides to put the brakes on easy money.

They will have to sooner or later, and will probably resort to "later".

What if the Chinese and the Russians gradually unpeg from the dollar?

A lot depends on your time frame, no?

With the massive increases in money supply can dollar value hold?

King of Currency: The U.S. Dollar Hedge

A cogent blog.

Overall a perverse situation, as you mentioned.

A 50% run up in equities based on fallacious assumptions regarding earnings.

Companies cutting employees because of reduced earnings.

Consumer confidence reduced because of more unemployment, fewer hours, thus less confidence.

Figures from the government difficult to decipher on purpose; they are massaged to make things look better than they are to prop up the market.

Spare cash coming into the U.S. to fund the deficits, money being given to banks for free to lend to the not so confident and increasingly jobless U.S. consumer who is already over-leveraged.

Hedging the dollar on a 4-hour basis, long or short, based on the see-saw of overvalued equities versus treasuries and commodities.

A perverse situation indeed.

Why Health Reform Won't Distort the Insurance Business Model

INSURANCE IS THE PROBLEM.

Very scary story for you:

Giant pool of money from good citizens paying insurance premiums out of their paycheck. Insurance companies have little or no competition.

Lawyers go after big pool of money.

Pharmaceutical and medical supply companies go after money.

Doctors perform tests or surgeries to cover their posteriors or to crank out lots of income quickly.

Pool of money shrinks.

Insurance companies raise premiums and deductibles.

Average consumer pays more for less.

Illegal aliens and the poor get care they can't or won't pay for.

Cost passed on to responsible average citizen via higher health insurance premiums, deductibles, and every cost on down the chain.

Pool of money gets smaller.

Insurance companies raise premiums and deductibles, deny coverage for more things.

Then...Big Government says it will come in and make it better...just like Amtrak, Fannie/Freddie, FHA, Social Security, and the Congress.

Aaaaah!

Rational Market Theory and Black Swans in Healthcare Reform

You have a point about costs and insurance companies.

They are the way they are because of lawyers, not a lack of government involvment.

If I directly paid my doctor and I could go to another doctor at will the service would be like paying a plumber or electrician. However, there are twelve middlemen and three lawyers between me and the doctor, and two insurance companies at least.

Auto insurance is little different, but you can afford to leave the car in the garage for a couple of months, not your heart or kidneys or body.

Healthcare is broken, but getting the governemnt involved is like bringing another drunken schmoe into the bar to try and stop the fight.

End insurance alltogether, eliminate malpractice suits (simply remove a doctor's license if negligent), and return to paying the person who does the service not 15 intermediaries each taking cream off the top to pay themselves 2-20 times the median income.

The Stock Market Is Disconnected from the Economy

Exactly, and corporate profitability has been propped up by laying people off and cutting their hours.

People without jobs or cut hours spend less at WalMart on stuff made in China.

The appeareance of recovery has been bought with over a trillion of borrowed taxpayer revenue yet to be collected when trillions are owend that can't be paid already (SS, Medicare, etc.).

Why are we pretending that things are better; to enjoy the moment?


On Aug 16 12:54 PM CautiousInvestor wrote:

> The current market, which is richly valued, allows no room for error
> and remains dependent upon Fed liquidity, unswerving faith in China's
> recovery and a better than expected recovery in the US.
>
> Looming in the background are avalanches of debt, administration
> policy and the performance specific components of the recovery, particularly
> consumer spending, employment and corporate profitability.

The Stock Market Is Disconnected from the Economy

It's been a Spring of hope and Summer of distractions.

On very low volume and speculative and Hal 9000 trading things have gone way above substance, it is teetering on the top step of the ladder trying to screw in the lighbulb.

Come Fall and back to school and falling leaves, the day traders, pumpers and dumpers, and GS computers will take their profits. Someone is going to lose their shirt, let's hope it's not the retirees and those close to it.