frosty

Worst Job Losses Over, But Unemployment Remains Critical

The layoff news should be read cautiously. Another source reports that hours worked declined in May, equivalent to 130,000 lost jobs. Also, it's now summer and 2MM college grads are trying to enter the work force as well as 1.5MM high school grads (those not planning to attend college). The unemployment rate is likely to ramp up rapidly, even given seasonalization. We're in an interesting era when 'less bad' news is interpreted as being good news, but now today's good news turns out to be 'less good'.

There is other 'less good' news. Inventory takedowns - demand appears to be falling faster than inventory reduction so that inventories remain relatively high and manufacturing is not yet picking up => no ramp up in jobs is yet occurring. Also, the Baltic Dry index may be moving up (the good news), but US railcar traffic is still trending down (another proxy for manufacturing activity) as is air freight traffic. There certainly is a 'wall of worry' which appears to have run up against a ceiling. A 'V' recovery would certainly be historic, however a 'W' recovery seems more likely. Check here 'dshort.com/charts/bear...' to see how previous bear market recoveries progressed.

Unemployment Data: Nothing to Cheer About

Many of this year's 2MM college graduates have hit the street looking and immediately joined the 9.4%. The rest will hit the street over the next 4 months. Even if fewer and fewer jobs are uncreated, more and more people will be seeking alpha (bad pun isn't it?). This is not good news, it's a tragedy.

40,000 Jobs Lost as GM Becomes Biggest Ever U.S. Company Failure

Cooper wrote, "Now is it not equally possible that oil prices will come down as the global recession proves to be longer and deeper than recovery optimists believe right now?" We may end up back in Kansas but it won't be the same after the tornado.

So if the recession proves longer and deeper, it seems that auto demand would be skewed toward cheaper (smaller) cars for the, perhaps, several year duration of the recession . But then after the recession, what happens to oil/gas prices? Up, up, and away? Probably another demand skew toward more fuel efficient (smaller) cars.

Only breakthroughs in fuel efficiency have the potential to resuscitate large cars/suvs. Remember, these became popular when gas was $2 and under - most experts now see $4/gallon or more in our long term future. Do the math: 15,000 miles per year, 15 miles per gallon = 1,000 gallons per year x $4 per gallon = $4,000 per year for gas. Next to mortgage/rent that would be the biggest monthly expense for most families. At 30mpg, the bill drops to $2,000 per year and 45mpg it drops to $1,333.

High salary people may continue to want dinosaurs, but average workers who are presently taking pay cuts and worrying about losing their jobs can't afford the luxury even with the 'lease' affordability deception. Personally, I would bet on a long term (10 or more years) demand shift toward smaller cars.

Roubini the Revisionist

Economists are much better historians than forecasters. Economics is the SCIENCE of analyzing the past (they use a lot of math) and the ART of forecasting the future (visionary stuff). Some economists get it right or lucky. Roubini has done it a couple of times. Will he in the present or future?

McCullough plays a tight range--918 to 896 is an hourly range. He uses an economic (revisionist) forecast to substantiate this call? I don't get it--focusing on a yearend end of recession call to set a short term target?

Economists are trimming their outlook for the U.S. economy despite recent 'green shoots,' with H2 looking increasingly soft. "Economists look for the recession to end soon, but that the economic recovery is likely to be considerably more moderate than those typically experienced following steep declines," NABE president Chris Varvares says.

These are the economist who didn't see the recession coming until after it had started! Economists function better as historians than forecasters.

Housing Starts at Underappreciated New Low

Another way to look at declining housing starts is the closer to zero new starts go, the sooner the unsold inventory will go, and then price stabilization should occur. At that point, we're at restart.

Housing Starts at Underappreciated New Low

With an 11 to 13 month inventory of homes on the market, it's a wonder that housing starts are above zero.

Monday's Closing Update: Housing, Financials Rally Broader Market

Hard to believe people are bullish because they think we need more new houses.

The Debate About 'Green Shoots'

Two months of less bad unemployment increases may or may not foretell a trend. Let's see what the next two months bring with 2 million new college grads coming into the workforce. I also take note that in Chinn's graphs, hours worked are declining more rapidly than employment. Fewer hours = fewer $wages = fewer $spent. Anectdotelly, many companies are resorting furloughs, reduced hours, shutdowns and other devices that keep employees but reduce payrolls. For me, these are good reasons to be cautious about 'green shoots' for at least a couple more months. I'm 95% cash as I wait for the bear rally to fade.

Mapping the Chrysler Fallout: Dealer Shutdowns

Soon, the Iphone will have a test drive ap and Amazon will begin selling Chryslers with free super-saver shipping.

GDP Report: Another Painful Quarter

Isn't the data seasonally adjusted and aren't the seasonals out of whack because of the perturbances in the global economy? Have any fellow bloggers or the author looked at this?

Wall Street Breakfast: Must-Know News

I read that 2/3 of companies reporting so far have beat estimates. And yet a vast majority of these reported losses or lower earnings and significantly reduced revenue. Beating estimates in this climate seems to me to be more a critique of they analysts' estimates (they were excessively pessimistic) than the positive spin it implies, that companies are doing better than expected.

Swine Flu: Why You Can Ignore the Hype

This is your prediction based on what? We are 1 week into the epidemic, the WHO and CDC are concerned enough to signal an alert and you say it's smoke? Right now, no one has any idea what the final outcome will be but we should be on the alert. Stick to investing. You are a poor epidemiologist.

Deflation Returns to Britain

If the value of everything falls (homes, businesses, investments), and the price of everything falls (tv's, cars, food, clothes), and if the amount people earn falls, isn't that 'deflation'? It turns out that the easiest of these to measure is prices and I would guess that, over time, it is the best way to measure inflation/deflation (as well as being the definition). Price changes may influence monetary policy however there is not a very good correlation between the two except during certain periods of time.

Isn't money like stock? If a company decides to split 2-1 what happens to the price/share? When a government increases the money supply, the same happens to value of currency. This gets quite confusing when most governments in the world do this at the same time because it amounts to every country devalueing their currency simultaneously. Somehow, markets are expected to sort out what the relative values are. We can only hope that they're efficient!

Closing Update: Streak Stretches Six

You forgot to mention WW IV.


On Apr 18 02:30 AM MarkitWacha wrote:

> One problem with the up, up, and away theory - CMBS. Commercial real
> estate will hit Chase hard. It's so bad, that a rational businessman/woman
> might want to close any real estate business and walk away from the
> mortgage. Anecdotal evidence suggests retail properties are down
> approx. 30%. Here's how I think it will play out:
>
> * In 3 months, office occupancy rates will hit new lows.
> * the retail story will linger, causing smaller retail bankruptcies
> as we drift further away from the 2008 Christmas season. 2009 Christmas
> will disappoint and we'll see strip malls turn into ghost barracks.
> The rebound will happen when unemployment drops to 6.5%, but no one's
> predicting that till 2012.
> * the corresponding reduction in property taxes will stress quite
> a few municipalities into crisis.
> * the muni bond market will deteriorate significantly.
> * mayors, citing budget crises, will cut city staff across the board.
>
> * Boeing will announce plans to leave Washington state. Microsoft
> will stop hiring in Washington in favor of Canada. Weyerhauser will
> split and report taxes like a REIT.
> * The Solar photovoltaics businesses and wind power generation businesses
> will be shocked. Electricity generation will dramatically drop in
> cost via traditional methods to ~8 cents/kWh. This will sap up demand
> for alternates as if it were cocaine in the 80s. After some major
> bankruptcies, electricity prices will bounce upward with the recovery
> in late 2010, but too late for the big alternate energy producers
> that couldn't get bridge loans.
> * California will threaten to default once on their bonds. The Federal
> reserve will bail them out, and politicians will jump in, trying
> to control Cali's budget from blackberrys in DC.
>
> The data suggest that this rally is driven by quants. I'm saddened
> that it's taking in what's left from the typical 401k investor. I
> can just see people throwing good money after bad, risking their
> tax return, hoping it will double to cover another mortgage.
>
> To take advantage of the second major bear market that's coming in
> this drama, short municipal bonds or municipal bond funds. Just in
> case the Fed becomes the backstop for munis, short the treasury bonds,
> via TBT, as well.
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