By Monty Pelerin, on January 5th, 2010
Four Horsemen of the Apocalypse
Despite the rising stock market, virtually everything else continues to deteriorate in the economy. An earlier post dealt with this anomaly.
There literally is not one thing that can be claimed as a positive. And that includes the phony GDP third quarter “improvement” and presumably a better (preliminary) number for the fourth quarter. Here is a quick (not all inclusive) list as to why things will get worse rather than better:
Bankruptcies and unemployment continue to increase.
Foreclosures are increasing and will get worse.
The Housing market will worsen as a result of more foreclosures and more mortgage resets in 2010
The Federal Government’s deficits continue to grow
Foreigner financing, necessary to support our deficits, is decreasing
The private sector continues to decline as evidenced by state income and sales tax collections
Private and state pensions continue to fall further behind actuarial soundness putting special pressures on local and state governments
States continue to spend beyond sustainable levels
Consumers will underspend for several years because of too much debt
Health care “reform” adds costs and problems to the out-years
Legislation passed and proposed causes small business to hunker down and refrain from expanding or hiring
The banking system continues to deteriorate
Credit is being increasingly withheld from small business and commercial real estate
The FDIC is out of money
Bailouts, promised to produce returns for taxpayers, are turning sour
Fannie and Freddie are now completely guaranteed by taxpayers
The FHA is repeating the same mistakes as Fannie and Freddie
There is no private mortgage market left; much of existing mortgage
Continue reading 2010 Will Be Worse
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By Monty Pelerin, on January 4th, 2010
Image via Wikipedia
Rosenberg is Right-On. Here is his daily email with links to the full piece. The only part that I might take issue with is his contrarian play on T-bonds.
The emboldening was added by me.
Breakfast with Dave
Read full article (PDF 902KB)
Read summary (PDF 427KB) TO READ ARTICLES, MAY BE NECESSARY TO REGISTER
January 4, 2010
REVIEWING SOME 2010 MACRO AND MARKET THEMES
Everyone is pre-occupied with the Fed’s exit strategy this year. But there is no such strategy because it is evident that the economy will never be able to recover without sustained doses of government stimulus. Interest rates are either going to be in a trading range or trend lower. We had mentioned emphatically a month ago that the Treasury market was at near-term risk, but looking ahead, bull flatteners in bonds are very likely going to be the best strategy, if for any other reason that the consensus is positioned the other way.
We had also warned that the bearish stance on the U.S. dollar was too broad and that we could see a near-term countertrend rally that would cause a reversal in commodity prices and gold, which would open up a nice buying opportunity; that time has come.
RECESSION MAY NOT BE OVER JUST YET
Quote of the month goes to … the former National Bureau of Economic Research (NBER) dean of dating business cycles, Martin Feldstein:
“The recession isn’t over.” In a Bloomberg Radio interview on December 17th.
That seems pretty blunt, doesn’t it?
Continue reading Rosenberg is Right-On, Again
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By Monty Pelerin, on November 30th, 2009
David Rosenberg
David Rosenberg’s morning post is always worthwhile. I particularly liked this reminder/warning: “there is still so much debt that is still being supported by questionable collateral.” And this comment: “we currently have a situation that is not consistent with a plain-vanilla recession but with a depression.”
To access his full report:
Read full article (PDF 572KB)
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By Monty Pelerin, on November 11th, 2009
Image by Seattle Municipal Archives via Flickr
David Rosenberg posts today on unemployment, estimating it going up to 12 – 13%, as measured by U3. It is currently 10.2%. Another rate, more reflective of actual unemployment is U6. It is currently at 17.5%. A third measurement, offered by John Williams at Shadowstats.com, comes in around 22%. (As an aside, Williams is a diligent statistician who has been tracking government statistics for years. He restates them to reflect methodological changes over the years. It is really quite striking the differences between Williams’ figures and “official” statistics in key areas such as unemployment, GDP etc. It is worth taking a look at his site if you are not familiar with it.)
I think Rosenberg will be low in his estimates. He uses the current underemployed and the record-low work week statistic as the basis of his projection. Nothing wrong here. But, in addition to these effects, we have others that will likely come into play. First, the extension of unemployment benefits will produce upward pressure on the unemployment rate as certain people will use the extended benefits to either defer their search or to search harder and longer. Second, I don’t believe the impact of the tax and regulatory framework has been fully comprehended by business. Is healthcare going to pass? In what form? What will this cost per employee? When are taxes going up? Who will bear the brunt of them?
Continue reading Unemployment 12 – 13% PLUS
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By Monty Pelerin, on November 5th, 2009
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Rosenberg in favor of gold and Treasuries (but Treasuries only near-term).
Breakfast with Dave Read full article (PDF 435KB)
November 5, 2009
QUICK TAKE ON THE FED
You read the various bank economic departments’ take on the Fed statement and it’s split evenly on whether it was “dovish” or “hawkish”. The fact that the Fed re-introduced “inflation expectations” and “resource utilization” into the communiqué was to explain why it expects to keep rates near zero for the rest of our lives (if not longer). What really caught my eye was that the press statement still characterized the economy as “weak”. Bernanke knows there’s rubble beneath the stimulus; and so does Carney.
GOLD-ILOCKS
We are still contemplating the massive gold purchase by the Reserve Bank of India — the largest in at least 30 years that took up half of what the IMF intends to sell. Look for China to come in next.
But here is the reality. All India did was bring gold to a 6% share of its total FX reserves from 4%. Fifteen years ago, that representation was closer to 20%. China has increased its gold holdings by 76% over the past six years but they are a mere 1.9% of the aggregate 2.2 trillion of reserves and Russia’s gold holdings is just under 5%. This is not the 1990s when
Continue reading Rosenberg on Gold
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Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
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