3/30/11: I am now in the "double dip" camp

[brosin]

After much deliberation, I have this bad news to share. I do not see a recovery showing its face anywhere other than in the stock market; by itself in a normal market environment, I would not find this to be a bad thing. However, the Federal Reserve has distorted asset classes to a never before-seen level, yet nothing seems to be getting better.

Housing prices have not even stopped falling, wages are not rising with still heavy unemployment, bank lending has been freezing up since November, and there is no shortage of global problems. I have seen things suggesting that more leverage is currently being employed than ever before. It is panic buying - people are more worried about missing out on a couple percent than they are about things being grossly overvalued in many cases, especially in things that are sensitive to consumer spending; even those sectors are turning a blind eye to consumer sentiment.

In other words, nothing seems to make sense - it is as if the *whole* stock market is running on bubble mentality. I do not care if the market decides to go up another 100, 200, 300 points - I will not be a sucker and be stuck holding the bag when it comes crumbling. Everything I watch has been crumbling for months, and the pace has quickened especially in the last 3-4 weeks.

I will be the happiest person in the world if it turns out many months from now that I am wrong. We are being swindled with smoke and mirrors and promises of free money. Unfortunately, reality is a bitch - asset classes can be distorted over the short term. In the long run, the market is far too big and figures things out.

I do not care how many people try to tell me that this is "normal" or "nothing to see here." Put in retrospect, this few year span is going to be known as the pump that allowed the powers that be to get out (for good). The world will be very different in 5-10 years, if not much sooner. GLTA.

[Rich]

damn, Bros.

That's a heavy duty statement.

Been working a lot lately so I haven't scoured the news like I usually do. I did see housing prices are still dropping. That ain't no good. 20% of Florida homes are vacant and I think it's like 11%? nationwide.

I don't know what the usual percentage rate is. Suffice to say, supply is way too high.

I did hear there was a good jobs number....maybe not good enough?

One thing is for sure, I haven't heard anyone mention double-dip in quite a while. Coming from you, I have to take notice.

[jack]

" I do not see a recovery showing its face anywhere other than in the stock market"

This also part of the Clemsom Prophesy!

[cosmic]

Rich, it's worse than you can imagine. In Miami they estimate it could be 18% of homes unoccupied. I think the national was 13% or something ridiculous. And new home builders are surprised?


I sort of agree with Jack/Clem/Bros here in that we are seeing something different than in the past. This is Ben's tinkering. He thinks he knows what has to be done differently than in the 20s and 30's. He could be right, but as Bros suggests the market is much larger than the POMO pump. We have seen how easy it is to get knocked off of highs in just a few short days. Those were very impulsive down waves.

Fiat hyperinflation will do as Clem suggests, and Bros, this is what it looks like I think.

[cosmic]

It sure looks like they are just 'making money' to get ready to paper over whatever is about to explode. It's the second chart that sort of clinches it for me.

[jack]

Mar 30, 2011 19:26:23 GMT -5 cosmic said:

Rich, it's worse than you can imagine. In Miami they estimate it could be 18% of homes unoccupied. I think the national was 13% or something ridiculous. And new home builders are surprised?


I sort of agree with Jack/Clem/Bros here in that we are seeing something different than in the past. This is Ben's tinkering. He thinks he knows what has to be done differently than in the 20s and 30's. He could be right, but as Bros suggests the market is much larger than the POMO pump. We have seen how easy it is to get knocked off of highs in just a few short days. Those were very impulsive down waves.

Fiat hyperinflation will do as Clem suggests, and Bros, this is what it looks like I think.

Nahhhhhhhhhhh...I don't believe it for a New York minute.

[Rich]

rather crudely done I know, but I keep thinking we're close to the top of that trend line and pomo ends in 2 months. That scenario looks like a real possibility.

The 1150 I threw in for fun...I do listen to the meat man



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[cosmic]

You can see from the chart why he likes that area.

[brosin]

Mar 30, 2011 19:26:23 GMT -5 cosmic said:

Rich, it's worse than you can imagine. In Miami they estimate it could be 18% of homes unoccupied. I think the national was 13% or something ridiculous. And new home builders are surprised?


I sort of agree with Jack/Clem/Bros here in that we are seeing something different than in the past. This is Ben's tinkering. He thinks he knows what has to be done differently than in the 20s and 30's. He could be right, but as Bros suggests the market is much larger than the POMO pump. We have seen how easy it is to get knocked off of highs in just a few short days. Those were very impulsive down waves.

Fiat hyperinflation will do as Clem suggests, and Bros, this is what it looks like I think.

The problem is that you can't see hyperinflation without true bank lending and consumer confidence to borrow. Just isn't happening IMO

But at least my GOLD play is up 5% this am ;D

[cosmic]

I think we need to look at the 1910s 20s and 30s perhaps for a correlation.

Is there a mesure which allows us to determine if...

- We are just bouncing back to a logical fib from the 666 low
- We are in a secular bull within a cylical bear
- we are in a cyclical bull having just come out of a secular bear

Bros, are you thinking double-dip before 2012 now, or have we kicked the can down the road enough?

Markets don't always need to go down sometimes there's a 'hover' setting.

[Rich]

lumber yards are still hurting as they rely much more on new construction.

[cosmic]

oh and mesure = measure

my 'a' key was sticking

[brosin]

I don't think there is much correlation to the early 1900s, mainly because the degrees we are talking about are much different. The Bernank is obsessed with not letting another depression happens, so much so that he is willing to throw the kitchen sink at the economy via the printing press.

He is playing a dangerous game, one that is in the process of creating a bubble - how far we are to the pop of that bubble is anyone's guess. So yeah, I don't know if the double dip is coming in the next 3-6 months or in the next 12-24 months... kind of like my "bear bus can go on without me 8/26/10" thread said (that I expected the market to get to SPX 1221+ within 1 year). I do know that things seem to be deteriorating rapidly from the lending side, so I would assume it is coming closer to the former timeframe rather than the latter.

[deadmoney95]

I respectfully disagree. You know my position on the significance of excess reserves, and skepticism about the FFR. I also don't know how to respond to categorical statements like "nothing seems to be getting better."

You cite a few examples like unemployment, but ignore the fact of increasing jobs being added to the economy let alone mute your pronouncement in light of that. YOu also mention no icnrease in wages, but that is the last thing we want to see right now, as that's when inflation really starts ramping up.

I guess the reason I'm bothering to post is that I take your opinion and analysis seriously, and so have to respond when you make certain reasonable statements (with which we can all wrestle and debate and engage in the discourse that makes this fun) and then sprinkle in doozies like "We are being swindled with smoke and mirrors and promises of free money." Is this figurative, or have you crossed the line into zerohedge territory? I'm asking seriously because at some point statemetns like the latter undermine the former analysis. Why should we bother trying to be objective if we've already deemed "the powers that be" to be "swindlers"? My response isn't to say they're all great and should be trusted wholeheartedly, but that, as in all things, the truth lies somewhere in the middle and surely that's what we should be focusing on.

I have to fly to London next week. Those folks are goign through some seriously tumultuous poop and so I will try to gauge some sentiment and report back to you all. From monitoring their press, they've been calling for armageddon quite openly for a while now. Somehow they still keep buying new soccer shirts every season though.

[cosmic]

DM, sometimes things are relative. I will say living in S. Florida - NOTHING IS GETTING BETTER. If you would like to read the last 10 issues of the Miami Herald as your proof positive, so be it. If you read it for any longer period, consider lining up a good therapist.

It is smoke and mirrors with companies sitting on cash rather than making risky investments like hiring. Do you really feel that THIS FAR into the recession-depression we should still have unemployment numbers in the 300K's?

Every real estate agent I've spoken too is scared to death. Admittedly they are all in the S. Florida market, but they are waiting for another shoe to fall.

State budgets are at tipping points and they're breaking up unions to get at the honeypots believed to be part of those union/state arrangements.

Food Cost Inflation is through the roof. I haven't eaten beef in months, and refuse to pay $7/pound for it. Chicken is still cheap and can be had for .69-1.29/pound. In Florida, how many lemons should I get for $1? How much should a gallon of grapefruit juice cost?

They've added tolls to every major road in S. Florida now, taxing commuters an additional ~ $4-10 a day. Non-toll routes are now a joke and can't be driven during certain hours. My drive would have added $2.25 each direction, so $4.50/day so $100/month - just to go to work.

It's going to implode - it needs to.

[Rich]

It was kind of surprising to me that QE2 was implemented last year.

I didn't think we needed it.

But Ben Bernanke (who went to HARVARD) did think we needed it.

scary

[jack]

Mar 31, 2011 12:40:44 GMT -5 Rich said:

It was kind of surprising to me that QE2 was implemented last year.

I didn't think we needed it.

But Ben Bernanke (who went to HARVARD) did think we needed it.

scary

Yer right!
www.answers.com/topic/ben-bernanke

Actually we both were - he got his undergrad at Harvard and his PhD at MIT
.

[Rich]

I'll tell you what, if he starts hinting around about a QE3 we better get ready to batten down the hatches.

[cosmic]

What choice does he have Rich? How are people going to pay $14 for a cup of coffee (have you seen that price soar lately?) without more ummm... yeah 'easing'

[Rich]

easing begets easing....the gift that keeps giving.

Man, I shouldn't have gone to Chicago. I'm getting bearish again.

[cosmic]

I think we can all agree that

Qualitative Easing would have been preferred to Quantitative Easing.

[brosin]

Mar 31, 2011 12:58:54 GMT -5 cosmic said:

I think we can all agree that

Qualitative Easing would have been preferred to Quantitative Easing.

The whole concept of easing is flawed to begin with when you consider what it is...

QE has the same effect as lowering rates - the only reason the Fed has been "forced" to do QE in its current form is because rates got to zero, i.e. the Treasury bubble hit its peak by DEFAULT.

So they were out of "standard" options and were forced to go to this non-standard option. But things have a lag effect - it is very possible that the first round of QE was "successful" in the sense that it provided liquidity in 2009 when the economy was still on unstable footing. Lending was doing fine throughout that period. It was then in the Summer 2010 when the market forced BB's hand and scared the snot out of him - don't think for a minute that he and others will not fall victim to fear and human psychology. The market tricked him into thinking it needed QE2 IMO, and he fell for it. The market has spewed up QE2 very clearly if you look at Treasury charts since November.

The fact that the Fed needs to do this AND the fact that here far down the road there are no real improvements while input costs are going up and up is a clear sign that there is a large disconnect between net gains and real gains.

[brosin]

To see bulls disagree with me is NOT surprising. To try and shrug what I say off as gloom and doom or that I am just a permabear who refuses to look at anything IS surprising, especially given my bias over the past few years; it is only in recent months when everyone was fully bullish - that was the lonely side to be on for quite the long time.

[Rich]

Another surprising fun fact:

Even upheaval on an historic basis in the Middle East....and the biggest earthquake/tsunami/nuclear catastrophe in many years....

cannot stop pomo.

unbelievable

[deadmoney95]

Mar 31, 2011 12:36:26 GMT -5 cosmic said:

DM, sometimes things are relative. I will say living in S. Florida - NOTHING IS GETTING BETTER. If you would like to read the last 10 issues of the Miami Herald as your proof positive, so be it. If you read it for any longer period, consider lining up a good therapist.

It is smoke and mirrors with companies sitting on cash rather than making risky investments like hiring. Do you really feel that THIS FAR into the recession-depression we should still have unemployment numbers in the 300K's?

Every real estate agent I've spoken too is scared to death. Admittedly they are all in the S. Florida market, but they are waiting for another shoe to fall.

State budgets are at tipping points and they're breaking up unions to get at the honeypots believed to be part of those union/state arrangements.

Food Cost Inflation is through the roof. I haven't eaten beef in months, and refuse to pay $7/pound for it. Chicken is still cheap and can be had for .69-1.29/pound. In Florida, how many lemons should I get for $1? How much should a gallon of grapefruit juice cost?

They've added tolls to every major road in S. Florida now, taxing commuters an additional ~ $4-10 a day. Non-toll routes are now a joke and can't be driven during certain hours. My drive would have added $2.25 each direction, so $4.50/day so $100/month - just to go to work.

It's going to implode - it needs to.

Cos, i appreciate your laying this all out, and guess we have completely different perspectives, as well perhaps as worlds that we're observing. It's no secret Florida was devastated by the recession like few other states. By contrast, D.C. where I work and Northern Virigina where I live have fared much better and rebounded much more strongly. Again, what's the average American experiencing? Presumably something in the middle, which is basically the sense I get from my friends and colleagues all over the country.

Some have businesses that are booming, others are slowly rebounding but feeling fairly secure. The ones that dropped out dropped out pretty quickly in fall 2008, precisely because credit seized up and they were told to take a hike. Many businesses are now getting those loans. Many are not. If i only talk about my friends who are getting business loans, I'm not beign fair or accurate. But neither is fair to say that banks aren't making loans and just sitting on the sidelines. Again, truth somewhere in between.

I appreciate this dialogue though. As I said, if I judged the situation by just what I see around me, I would have a distorted view of things.

[Rich]

The Y-town perspective

It has been bad for so long that this seems like more of the same, a little worse perhaps, but not much.

[cosmic]

I have a friend who moved from S. Florida to the DC area and he reports the same thing, the DC bubble (which includes surrounding hamlets of course) never really gets disturbed, just redistributed each time there's an election.

The REST of the country is scared shitless, and with good reason, they realize we are fcked.

www.nytimes.com/2010/12/05/us/politics/05states.html?_r=1

[drtracyb]

My realtor says they are expecting another wave of foreclosures and housing prices to drop another 10-15%. She told me not to even consider buying again for at least two more years.

[Rich]

It seems like Cali got ahead of itself...maybe the whole country.

Our little spanish type house in El Segundo is worth a million bucks?

It would go for about 40k in Youngstown

[natsalilfly]

Apr 1, 2011 11:28:09 GMT -5 drtracyb said:

My realtor says they are expecting another wave of foreclosures and housing prices to drop another 10-15%. She told me not to even consider buying again for at least two more years.

I posted this yesterday, it explains a lot about things in CA

realestate.yahoo.com/promo/cities-where-things-are-getting-worse.html