Maybe it is time for folks to think for themselves rather than wait for some government organization to label this a recession or a pullback or a downturn or whatever.
Cars are a problem, of course. Take out vehicle production and IP is up a big 1.1% y/y in April. WooHoo! Take out cars and tech, and IP is exactly flat from a year ago. Point being, hte slowdown in IP is very widespread outside of tech.
You'd expect production of items for export to increase due to the falling dollar, and you'd expect production of durable goods for domestic consumption to fall due to our recession.
It's hard to export services except in terms of their end outputs (DVDs, cutting edge technology devices, etc).
with the way the data is being manipulated it's pretty obvious that the "recession" just started and will be over before November 6th.
Add in complicit comments from the banking world that it's problems are "already 75% over" and you arrive at what date.
Watch the same trick played with gas as in August 2006 (coincidentally the ONLY time over the last 10 years that oil has gone down for any meaningful period of time) look at a chart...
Sad we are now going from socialism (bank bailouts) to communism (this IS the real news and that's that)
That is pretty much what I see happening in my part of the universe... it is intensely bad in automotive & anything housing related (building supplies, furniture, appliances).
It is quite bullish in commodities & commodity related capital goods & infrastructure. But those latter categories will NOT cover for the fall in auto & housing related however... ain't gonna happen.
The other thing (as we discussed in the last thread some)... I sense companies here and abroad are increasingly unwilling to suffer huge losses in the effort to protect market share - with the run up in material costs they can't afford it. Nor can foreign central banks continue to subsidize their currencies to protect exports to the US.
I think the re-balancing is gonna accelerate with increased lay offs being one of the most noticeable results. It will be especially ugly in white collar - that is where most of the bodies are, even for mfg firms.
"Dryfly says that maunfacturing is cranking. Perhaps not?"
I believe him. I believe that it's cranking because of the weak dollar; there's foreign demand, and also manufacturing moving back here from foreign suppliers.
But all that means little if demand drops off a cliff. Even foreign demand is contingent on their economies staying healthy, which is contingent on our economies staying healthy. I'll believe in decoupling when I see it.
"I think the re-balancing is gonna accelerate with increased lay offs being one of the most noticeable results. It will be especially ugly in white collar - that is where most of the bodies are, even for mfg firms."
I posted in last thread but I'll post it again here. These fundamentals of which you speak not matter in bizarro world.
Why can't we all just be happy and buy up everything we can so prices not fall down. Stock market will rally on deflation because Fed will cut, and stock market will rally on inflation because investors will move out of bonds and into stocks.
Elvis writes:
Dryfly says that maunfacturing is cranking. Perhaps not?
Elvis | 05.15.08 - 12:17 pm | #
Ironically - I was just asked to join a possible mfg start up... just this morning. If they get their ducks in a row I might do it. But I doubt they will... eyes bigger than stomach facing a very big plate.
Not surprising they want to feed off the screw ups and misfortune of other companies in their sector that have been pretty much taken over by accountants and deal makers... and no longer run by industry people.
Especially vulnerable are those owned by PE firms where the deals were designed to flip by now - they haven't. And liquidity is running out but leverage isn't going away. Even in a shrinking/recessionary market some of these folks make fat targets right now.
Whether they pull it off or others do - I see more opportunity for some one in this sector... biggest opportunity since the last big mess (early-mid 80s). Its shit storms like this that make the fields fertile.
I know his biz real well - told him I got a marketing plan on the shelf ready to roll - call me, do lunch, yadda yadda. We'll see. Probably nothing come of it but still ironic that I got the call today with these numbers out.
This is a little off-topic, but does anyone know if there is data showing how many borrowers getting loan "work-outs" wind up back in delinquency again?
I am wondering just how aggressive the work-outs that lenders have been making are in truly reducing the burden so that borrowers can successfully stay current. Sometimes I get the impression that many "work-outs" and just short-gap measures that just play around with payment schedules rather than actually reducing principal or interest rates.
dryfly - would you counsel your children against going into engineering now? Just curious - pretty much at that stage.
Also - what are the chances US engineering could make desalination workable (& saleable) economically (sorry to get back to that - just seems like a future to me)
dryfly, good luck, I hope it works out, esp. since the plan involves not PE extractionists but actual industry people more interested in making something than flipping. God knows we need more of that in this country.
I can certainly see that one result of this mess will be the engineers and techies taking companies back over to make them work now that the financiers have screwed things up. I really hope that can happen for some of these companies, at least.
We lost so much when the marketeers and financial "experts" took things over....
Outsider writes:
dryfly - would you counsel your children against going into engineering now? Just curious - pretty much at that stage.
Yes I do - but they need to know it is NOT a dead end unless they dead end themselves.
I have pressured my kids like crazy to study engineering even if they don't plan to be engineers (in which case study something else too - synergy!!).
So far one has done it all the way (finished with a degree in biomed engineering planning on going to professional school - PT or orthopedics)... Another is still in school but studying IT - probably do retail mgmt with it (already works retail)... The third is in HS and wants to do math & physics (I've pressured him to consider a double in Aero Eng besides - synergy!!).
The idea is that the world is so technical the only way to understand the connections is to have SOME technical training somewhere. The trouble with engineering is too many folks think you can only be an engineer after you study engineering (but somehow you can be anything if you study liberal arts?). I tell folks engineering is the liberal arts of science - it prepares you for anything technical related IF you let your mind be open & wander. Mostly eyes glaze over when I give them that speech.
Since the stock market is so much gambling rather than investing, I'll draw a parallel to poker:
I think banned by Rinholtz hit on something....I think that the Depression many expect will come in the form of a slow grinding underperformance...
As communications and information exchange is so instant and widespread these days it's very difficult for anyone to get ahold of information unavailable to others, so the volitility that comes from information dislocations are smoothed over.
This means gyrations in the stock market and other markets are less severe...thus the profit due to large swings is diminished.
Money is as liquid as information, so with a click of the mouse people can move money wher its needed. With this and the government's ability to create money, provide unemployment benefits, and backstop financial dislocatons...those expecting breadlines and 1929 crashes may be disappointed. It doesn't mean that it will be less damaging....just the damage will be done over time to everyone. Large gyrations are not only where the money is lost, but where it's gained. Losses will be socialized.
Now to my poker example. Pros depend upon amatures to make big money over time. Once the level of expertise at a given table is essentially level among all players then nobody gets the opportunity to win the big pots from the un or misinformed. They simply all pass money back and forth slowly, invisibly, and equally lose money to the rake/house.
That's where we are now....Dow 13000 flat for a decade would be much more devastation to everyone involved...
Those moving to cash underperfom inflation so might as well overpay for stocks for the next decade on the hopes of a non-existant upside. And then you'll arrive at retirement to find that you simply funded the salaries of those in the stock trading industry (like paying the salary of the poker dealer) and lost money to the opportunity costs of getting that 3-4% return in cash.
Also - what are the chances US engineering could make desalination workable (& saleable) economically (sorry to get back to that - just seems like a future to me)
Outsider | 05.15.08 - 12:45 pm | #
The thermodynamics are ugly - it is energy & capital intensive even if made as efficient as possible. The only way this goes commercial is to produce small amounts of potable water in areas that are so arid there really are no other options and even then it is VERY expensive.
You won't see desalination used for agriculture, watering lawns & golf courses or inexpensive bulk process industry. You might see it for human potable water sources once people understand potable water will eventually cost 10 to 100 times more than it does now. Paradigm shift has to happen first.
If your kids are interested in this - study a mix of Chemical Engineering (actual separations & thermodynamics) & Civil Engineering (industrial infrastructure & scale up).
It isn't gonna be easy but its a lot like Dawg's rants against 'Peak Oil' - cheap water is gone but water isn't gone - the supply demand price points shift. We'll see a lot less water wasted in the future.
If you look at CR's chart you'll see that even there the volitility is smoothed out over time. The recessions are less frequent and the swings are less volitile.
I think this anectodal evidence applies to much of the world today.
Dryfly,
I only jest. I believe what you are saying, but I also have a sense that industrial production is a dying industry in the US. Niches will always exist, but I think the decline is ongoing and irreversible.
BTW, be careful of those start-ups. 90% fail. So many things to overlook and potential problems that aren't considered, especially in a faltering economy.
Cure rates over time are strongly related to equity in the home, so in some areas it is not a promising outlook.
Cure ratios over 2 years vary with the economic environment. If the economy is bad, you expect your cure percentages to decline.
Cure ratios for different types of portfolios would vary quite a bit, but Fannie is a large sample. In 2006 a lot of their repurchases were coming from the midwest, and those have done pretty well.
The zanier the original total mortgage package, the worse the performance.
what's important is that were able that you can start it up , show positive #'s for one quarter after a 3 year start up phase, borrow against that to the tune of 15x sales, showing HUGE growth potential, ramp up , have a family, make tons of debt dollars, and then fold afterr three generations, never having produced any real equity.
now, lets not think of GM(legacy) or AMZN(shiny new)
OT observations- Visited a couple clients in Silicon Valley-Auto dealers both domestic and import- sales down-staffing down-(at bmw store Gen Mgr was desking deals and that's a rarity) outlook down - special finance deals-up - Service revenue- down - Drove up the peninsula and seems to me that commercial property market is looking similar to Dot bomb bust of 02. Lots of 4 lease signs. Stopped at former software company near oracle - Attrition doubled last qtr.
Ohh and all of a sudden skf dropped thru the roof...
The hardest part about going start up in tough times is getting financing. If you can do withoiut and be crafty and the business plan works, you can make a killing when things turn around.
The company I'm involved with just won our first contract with a city in Ohio and we have two other cities letting us write the bid sheets. The cities are desperate for revenue and we can potentially fill that gap. Advertising is the 1st thing to get cut back, but our pricing is still attractive and ridership should be increasing.
The NBER Business Cycle Dating Committee (BCDC) tracks four metrics to date the start and end of a recession. Each of these four metrics has turned south: one beginning in November (real manufacturing and trade sales), one beginning in December (industrial production), one beginning in January (payroll employment), and the final one beginning in March (real disposable personal income).
Today, the S&P 500 P/E stands at 22.1. In the nine recessions since 1950, at the beginning of the recession, the S&P 500 P/E ratio stood at an average of 13.4/median of 12.2.
Unless things are really, really different this time, when the NBER BCDC makes its announcement of 'The recession is on' (my bet is that they announce in July), we could then see the panicked reaction and stock market tumble that some of us have been awaiting.
"its very difficult for anyone to get ahold of information unavailable to others..."
Good post, but can't agree with this assumption. What about hedge funds and other proprietary traders, venture capitalists, foreign markets, etc? In fact there is probably more unavailable information now than ever before.
Jg,
The ? is how long can you hold out when your betting against the powers to be..I know my trading acct has a smaller number which based off the economy I know should be higher..
Just looking at CR's graph, in recent, previous recessions industrial production has turned south as much as a year before the recession officially began. Here, production turned south in the beginning of the year, and has only slightly declined.
Not that I think the other metrics are coming up roses. I think we're heading into a recession, but production isn't the most compelling data.... yet. If we check back in a quarter, I think we'll see further cliff-diving.
As long as I do not get a margin call and forced sale, I am happy to wait. So, I forego 2% interest income on my Treasury money market account, given that I have sold short; no big deal for me.
The market clearly moved down on concerns in February, August, and October, and January. Big selling volume swamped the PPT.
There are a number of holdout money managers and individuals, who think all is well; the bullish percentage is still nicely positive, and the put/call ratio is below 1.0. I think that the holdouts may wake up in July after Feldstein and team say, 'The recession is here, folks, and has been underway since Nov./Dec./Jan./Mar.'
Just my hunch on the psychology of the holdout money managers and individuals.
I could be wrong, and have been wrong so far in this downturn; I thought holdouts would have panicked by now. But, I'm guessing that the NBER declaration will have some effect.
jg said: "...In the nine recessions since 1950, at the beginning of the recession, the S&P 500 P/E ratio stood at an average of 13.4/median of 12.2...."
At the beginning of 5 of the last 6 recessions the simple yield-curve was inverted. At the beginning of 1 of the 6 recessions (1990) it was about 80 bp positive.
Right now, the simple yield-curve is over 200 bp positive and still rising. That's what it looks like coming out of a recession!
Even if the NBER ultimately announces that there was a recession from Q4 2007 to Q1 2008/Q2 2008, it's far more likely that we're exiting it now. The best "play" for shorting the SP500 is already behind us.
That's why everybody is either lowering forecasts or not providing guidance.
The credit crunch has now swept into the productive sectors of the economy, leaving commodity related and (to a lesser extent) tech industries to keep the economy above water. Retail is contracting in real terms, the ISM outlook survey is prediction contraction in real terms and 4 week rolling initial unemployment claims are up 14% YoY.
The worst is over for big financials(save Citi), the pain is about to begin for the regional banks who are getting buried in CRE, C/D and condo construction, which will be much worse for the overall economy.
Sebastian has established that something is "far more likely" than something else because, while lots of indicators say otherwise, the one he has chosen, and which he himself admits is imperfect, suggests the outcome he favors. I never realized that figuring the odds was that easy.
What is freaky is that capacity utilization has been essentially at or below 80% since 2001. By traditional measure, that level would signify the depths of recession.
My read: We have been in an extended recession since 2001, that is not manifest in the statistics being published. To whit, unemployment does not reflect taking a lesser or part time job, does not reflect those who are out of unemployment, does not reflect those going independent contractor who barely make ends meet.
Similarly, the drop in the dollar properly reflects inflation, not the GDP deflator, nor core inflation, nor PPI. If you depreciate the GDP with the dollar, you have an extended decline in the US economy. Couple that with the long term drop in capacity utilization, and frankly I would not call the post 2001 period a depression.
My own visual of the area shows building after building unoccupied, that formerly held employees. Where did they all go? Are they all hanging out at Starbucks? Or do they now work there?
The housing bubble was the last. Now the rest of us blow away in the wind.
This downturn just keeps chugging along. It seems like forever now that the economy has been deteriorating. It used to be that rumors of Fed action would keep the market from collapsing, then it was actual Fed action (dramatic interest rate cuts), then it was panicked Fed action (Bear Stearns, accepting garbage collateral).
Aren't we now to the point where the Fed will no longer come to the rescue? They've lowered interest rates about as far as they can (without much impact). Perhaps they've successfully staved off financial collapse by guaranteeing stuff and accepting stuff as collateral. But methinks there's not much more that they will do. Next time the market tumbles, no Fed rescue?
The chart on capacity utilization does look very nasty. In fact it is the nastiest chart that I seen, except for one:
That is the value of the dollar as expressed in anything else, take DXY or commodity index as a proxy.
I am saying that we are in a statistics-free depression, and we are in 1930 and headed down from here.
The thirties depression lasted 10 years, this one will last a generation. I would say the end will come around 2030. A whole generation has to suffer and get reset before this cruft is cleared out.
By the way, I am one that does not believe that the government can help. It waa government interference in the 30s that kept it going so long. Face it the folks in government benefited by stretching out the depression. I do not see anything sinister or conspiratorial, think of the government a an agency that always grows through ineptitude. Bad managers can always point to needing more resources since they can never keep up with their load; good managers dispose of their load.
Capacity utilization receded sharply to 79.7% in April, a sign of easing inflationary pressure.
Is this really true? We had anemic capacity utilization in the 1970's, but still had high inflation. Inflation of imported goods continues to move higher, not lower, which affects most consumer goods. Deflation in assets along with inflation in goods consumed is a toxic mixture in my view....
We've gone from importing deflation to importing inflation from China in the past couple of years for example.
Did some more work on my numbers. Formulas are fairly complex. Here are the redone numbers in percent GDP YOY
deflator taken out, DXY used as deflator:
It is still a very long recession. I would call it a depression. There was only one year of GDP growth. I am guessing it was due to the housing bubble.
Maybe it is time for folks to think for themselves rather than wait for some government organization to label this a recession or a pullback or a downturn or whatever.
So now are all our lady friends satisfied that the recession is here?
(Unlike last December)
Dryfly says that maunfacturing is cranking. Perhaps not?
Cars are a problem, of course. Take out vehicle production and IP is up a big 1.1% y/y in April. WooHoo! Take out cars and tech, and IP is exactly flat from a year ago. Point being, hte slowdown in IP is very widespread outside of tech.
k, harris,
So, industrial production ex-autos is positive? Sounds bullish to me!
You'd expect production of items for export to increase due to the falling dollar, and you'd expect production of durable goods for domestic consumption to fall due to our recession.
It's hard to export services except in terms of their end outputs (DVDs, cutting edge technology devices, etc).
with the way the data is being manipulated it's pretty obvious that the "recession" just started and will be over before November 6th.
Add in complicit comments from the banking world that it's problems are "already 75% over" and you arrive at what date.
Watch the same trick played with gas as in August 2006 (coincidentally the ONLY time over the last 10 years that oil has gone down for any meaningful period of time) look at a chart...
Sad we are now going from socialism (bank bailouts) to communism (this IS the real news and that's that)
Ciao
MS
That is pretty much what I see happening in my part of the universe... it is intensely bad in automotive & anything housing related (building supplies, furniture, appliances).
It is quite bullish in commodities & commodity related capital goods & infrastructure. But those latter categories will NOT cover for the fall in auto & housing related however... ain't gonna happen.
The other thing (as we discussed in the last thread some)... I sense companies here and abroad are increasingly unwilling to suffer huge losses in the effort to protect market share - with the run up in material costs they can't afford it. Nor can foreign central banks continue to subsidize their currencies to protect exports to the US.
I think the re-balancing is gonna accelerate with increased lay offs being one of the most noticeable results. It will be especially ugly in white collar - that is where most of the bodies are, even for mfg firms.
JMHO.
"Dryfly says that maunfacturing is cranking. Perhaps not?"
I believe him. I believe that it's cranking because of the weak dollar; there's foreign demand, and also manufacturing moving back here from foreign suppliers.
But all that means little if demand drops off a cliff. Even foreign demand is contingent on their economies staying healthy, which is contingent on our economies staying healthy. I'll believe in decoupling when I see it.
"I think the re-balancing is gonna accelerate with increased lay offs being one of the most noticeable results. It will be especially ugly in white collar - that is where most of the bodies are, even for mfg firms."
And they vote, too.
Consider GDP thus
1 Q 08 +.6
2 Q -1.2
3 Q +.4
4 Q -2.3
1 Q 09 +.7
2 Q -1.9
No recession but a 6 quarter cumulative loss of 3.7%
Now adjust for real inflation and you get the classic defination of a depression.
Cherry thought
Ross
I posted in last thread but I'll post it again here. These fundamentals of which you speak not matter in bizarro world.
Why can't we all just be happy and buy up everything we can so prices not fall down. Stock market will rally on deflation because Fed will cut, and stock market will rally on inflation because investors will move out of bonds and into stocks.
Elvis writes:
Dryfly says that maunfacturing is cranking. Perhaps not?
Elvis | 05.15.08 - 12:17 pm | #
Ironically - I was just asked to join a possible mfg start up... just this morning. If they get their ducks in a row I might do it. But I doubt they will... eyes bigger than stomach facing a very big plate.
Not surprising they want to feed off the screw ups and misfortune of other companies in their sector that have been pretty much taken over by accountants and deal makers... and no longer run by industry people.
Especially vulnerable are those owned by PE firms where the deals were designed to flip by now - they haven't. And liquidity is running out but leverage isn't going away. Even in a shrinking/recessionary market some of these folks make fat targets right now.
Whether they pull it off or others do - I see more opportunity for some one in this sector... biggest opportunity since the last big mess (early-mid 80s). Its shit storms like this that make the fields fertile.
I know his biz real well - told him I got a marketing plan on the shelf ready to roll - call me, do lunch, yadda yadda. We'll see. Probably nothing come of it but still ironic that I got the call today with these numbers out.
This is a little off-topic, but does anyone know if there is data showing how many borrowers getting loan "work-outs" wind up back in delinquency again?
I am wondering just how aggressive the work-outs that lenders have been making are in truly reducing the burden so that borrowers can successfully stay current. Sometimes I get the impression that many "work-outs" and just short-gap measures that just play around with payment schedules rather than actually reducing principal or interest rates.
dryfly - would you counsel your children against going into engineering now? Just curious - pretty much at that stage.
Also - what are the chances US engineering could make desalination workable (& saleable) economically (sorry to get back to that - just seems like a future to me)
dryfly, good luck, I hope it works out, esp. since the plan involves not PE extractionists but actual industry people more interested in making something than flipping. God knows we need more of that in this country.
dryfly,
I can certainly see that one result of this mess will be the engineers and techies taking companies back over to make them work now that the financiers have screwed things up. I really hope that can happen for some of these companies, at least.
We lost so much when the marketeers and financial "experts" took things over....
Outsider writes:
dryfly - would you counsel your children against going into engineering now? Just curious - pretty much at that stage.
Yes I do - but they need to know it is NOT a dead end unless they dead end themselves.
I have pressured my kids like crazy to study engineering even if they don't plan to be engineers (in which case study something else too - synergy!!).
So far one has done it all the way (finished with a degree in biomed engineering planning on going to professional school - PT or orthopedics)... Another is still in school but studying IT - probably do retail mgmt with it (already works retail)... The third is in HS and wants to do math & physics (I've pressured him to consider a double in Aero Eng besides - synergy!!).
The idea is that the world is so technical the only way to understand the connections is to have SOME technical training somewhere. The trouble with engineering is too many folks think you can only be an engineer after you study engineering (but somehow you can be anything if you study liberal arts?). I tell folks engineering is the liberal arts of science - it prepares you for anything technical related IF you let your mind be open & wander. Mostly eyes glaze over when I give them that speech.
Since the stock market is so much gambling rather than investing, I'll draw a parallel to poker:
I think banned by Rinholtz hit on something....I think that the Depression many expect will come in the form of a slow grinding underperformance...
As communications and information exchange is so instant and widespread these days it's very difficult for anyone to get ahold of information unavailable to others, so the volitility that comes from information dislocations are smoothed over.
This means gyrations in the stock market and other markets are less severe...thus the profit due to large swings is diminished.
Money is as liquid as information, so with a click of the mouse people can move money wher its needed. With this and the government's ability to create money, provide unemployment benefits, and backstop financial dislocatons...those expecting breadlines and 1929 crashes may be disappointed. It doesn't mean that it will be less damaging....just the damage will be done over time to everyone. Large gyrations are not only where the money is lost, but where it's gained. Losses will be socialized.
Now to my poker example. Pros depend upon amatures to make big money over time. Once the level of expertise at a given table is essentially level among all players then nobody gets the opportunity to win the big pots from the un or misinformed. They simply all pass money back and forth slowly, invisibly, and equally lose money to the rake/house.
That's where we are now....Dow 13000 flat for a decade would be much more devastation to everyone involved...
Those moving to cash underperfom inflation so might as well overpay for stocks for the next decade on the hopes of a non-existant upside. And then you'll arrive at retirement to find that you simply funded the salaries of those in the stock trading industry (like paying the salary of the poker dealer) and lost money to the opportunity costs of getting that 3-4% return in cash.
Also - what are the chances US engineering could make desalination workable (& saleable) economically (sorry to get back to that - just seems like a future to me)
Outsider | 05.15.08 - 12:45 pm | #
The thermodynamics are ugly - it is energy & capital intensive even if made as efficient as possible. The only way this goes commercial is to produce small amounts of potable water in areas that are so arid there really are no other options and even then it is VERY expensive.
You won't see desalination used for agriculture, watering lawns & golf courses or inexpensive bulk process industry. You might see it for human potable water sources once people understand potable water will eventually cost 10 to 100 times more than it does now. Paradigm shift has to happen first.
If your kids are interested in this - study a mix of Chemical Engineering (actual separations & thermodynamics) & Civil Engineering (industrial infrastructure & scale up).
It isn't gonna be easy but its a lot like Dawg's rants against 'Peak Oil' - cheap water is gone but water isn't gone - the supply demand price points shift. We'll see a lot less water wasted in the future.
If you look at CR's chart you'll see that even there the volitility is smoothed out over time. The recessions are less frequent and the swings are less volitile.
I think this anectodal evidence applies to much of the world today.
NAHB: The NAHB/Wells Fargo Housing Market Index Components (Historical Data)
New low on present conditions - 17
Overall very ugly report.
Dryfly,
I only jest. I believe what you are saying, but I also have a sense that industrial production is a dying industry in the US. Niches will always exist, but I think the decline is ongoing and irreversible.
BTW, be careful of those start-ups. 90% fail. So many things to overlook and potential problems that aren't considered, especially in a faltering economy.
Sniglet - see page 14 of Fannie's Investor Summary
for one sample.
Cure rates over time are strongly related to equity in the home, so in some areas it is not a promising outlook.
Cure ratios over 2 years vary with the economic environment. If the economy is bad, you expect your cure percentages to decline.
Cure ratios for different types of portfolios would vary quite a bit, but Fannie is a large sample. In 2006 a lot of their repurchases were coming from the midwest, and those have done pretty well.
The zanier the original total mortgage package, the worse the performance.
That's where we are now....Dow 13000 flat for a decade would be much more devastation to everyone involved...
An absolute disaster given the returns currently assumed by pension funds.
does anyone know if there is data showing how many borrowers getting loan "work-outs" wind up back in delinquency again?
try this:
http://www.freddiemac.com/news/pdf/interventions_in_mortgage_default.pdf
BTW, be careful of those start-ups. 90% fail
in the end were....
ohhhfuggeddaboutit
what's important is that were able that you can start it up , show positive #'s for one quarter after a 3 year start up phase, borrow against that to the tune of 15x sales, showing HUGE growth potential, ramp up , have a family, make tons of debt dollars, and then fold afterr three generations, never having produced any real equity.
now, lets not think of GM(legacy) or AMZN(shiny new)
OT observations- Visited a couple clients in Silicon Valley-Auto dealers both domestic and import- sales down-staffing down-(at bmw store Gen Mgr was desking deals and that's a rarity) outlook down - special finance deals-up - Service revenue- down - Drove up the peninsula and seems to me that commercial property market is looking similar to Dot bomb bust of 02. Lots of 4 lease signs. Stopped at former software company near oracle - Attrition doubled last qtr.
Ohh and all of a sudden skf dropped thru the roof...
4shzl so true...you should see my pension fund calculator, financial fantasy land doesn't even begin to cover it.
Saw my first short sale/make an offer sign today (Dutchess Co., New York.)
The hardest part about going start up in tough times is getting financing. If you can do withoiut and be crafty and the business plan works, you can make a killing when things turn around.
The company I'm involved with just won our first contract with a city in Ohio and we have two other cities letting us write the bid sheets. The cities are desperate for revenue and we can potentially fill that gap. Advertising is the 1st thing to get cut back, but our pricing is still attractive and ridership should be increasing.
"you can make a killing when things turn around."
That is the problem, though. When will things turn around? Getting in too early can be easily fatal.
Is the S&P 500 a shorting opportunity, now?
The NBER Business Cycle Dating Committee (BCDC) tracks four metrics to date the start and end of a recession. Each of these four metrics has turned south: one beginning in November (real manufacturing and trade sales), one beginning in December (industrial production), one beginning in January (payroll employment), and the final one beginning in March (real disposable personal income).
Today, the S&P 500 P/E stands at 22.1. In the nine recessions since 1950, at the beginning of the recession, the S&P 500 P/E ratio stood at an average of 13.4/median of 12.2.
Unless things are really, really different this time, when the NBER BCDC makes its announcement of 'The recession is on' (my bet is that they announce in July), we could then see the panicked reaction and stock market tumble that some of us have been awaiting.
What do you think?
Average Joe,
"its very difficult for anyone to get ahold of information unavailable to others..."
Good post, but can't agree with this assumption. What about hedge funds and other proprietary traders, venture capitalists, foreign markets, etc? In fact there is probably more unavailable information now than ever before.
Jg,
The ? is how long can you hold out when your betting against the powers to be..I know my trading acct has a smaller number which based off the economy I know should be higher..
Just looking at CR's graph, in recent, previous recessions industrial production has turned south as much as a year before the recession officially began. Here, production turned south in the beginning of the year, and has only slightly declined.
Not that I think the other metrics are coming up roses. I think we're heading into a recession, but production isn't the most compelling data.... yet. If we check back in a quarter, I think we'll see further cliff-diving.
cd, I hear you.
As long as I do not get a margin call and forced sale, I am happy to wait. So, I forego 2% interest income on my Treasury money market account, given that I have sold short; no big deal for me.
The market clearly moved down on concerns in February, August, and October, and January. Big selling volume swamped the PPT.
There are a number of holdout money managers and individuals, who think all is well; the bullish percentage is still nicely positive, and the put/call ratio is below 1.0. I think that the holdouts may wake up in July after Feldstein and team say, 'The recession is here, folks, and has been underway since Nov./Dec./Jan./Mar.'
Just my hunch on the psychology of the holdout money managers and individuals.
I could be wrong, and have been wrong so far in this downturn; I thought holdouts would have panicked by now. But, I'm guessing that the NBER declaration will have some effect.
Jg, i hope your right. Although the board is red again for me..? for ya, what do you think of this low volume short SDD small cap 600
cd, I just know the broad S&P 500. I am short SSO (2x the S&P 500). I have no basis for an opinion on any other index.
Good luck, sir!
jg said: "...In the nine recessions since 1950, at the beginning of the recession, the S&P 500 P/E ratio stood at an average of 13.4/median of 12.2...."
At the beginning of 5 of the last 6 recessions the simple yield-curve was inverted. At the beginning of 1 of the 6 recessions (1990) it was about 80 bp positive.
Right now, the simple yield-curve is over 200 bp positive and still rising. That's what it looks like coming out of a recession!
Even if the NBER ultimately announces that there was a recession from Q4 2007 to Q1 2008/Q2 2008, it's far more likely that we're exiting it now. The best "play" for shorting the SP500 is already behind us.
Sebastia
That's why everybody is either lowering forecasts or not providing guidance.
The credit crunch has now swept into the productive sectors of the economy, leaving commodity related and (to a lesser extent) tech industries to keep the economy above water. Retail is contracting in real terms, the ISM outlook survey is prediction contraction in real terms and 4 week rolling initial unemployment claims are up 14% YoY.
The worst is over for big financials(save Citi), the pain is about to begin for the regional banks who are getting buried in CRE, C/D and condo construction, which will be much worse for the overall economy.
Sebastian has established that something is "far more likely" than something else because, while lots of indicators say otherwise, the one he has chosen, and which he himself admits is imperfect, suggests the outcome he favors. I never realized that figuring the odds was that easy.
What is freaky is that capacity utilization has been essentially at or below 80% since 2001. By traditional measure, that level would signify the depths of recession.
My read: We have been in an extended recession since 2001, that is not manifest in the statistics being published. To whit, unemployment does not reflect taking a lesser or part time job, does not reflect those who are out of unemployment, does not reflect those going independent contractor who barely make ends meet.
Similarly, the drop in the dollar properly reflects inflation, not the GDP deflator, nor core inflation, nor PPI. If you depreciate the GDP with the dollar, you have an extended decline in the US economy. Couple that with the long term drop in capacity utilization, and frankly I would not call the post 2001 period a depression.
My own visual of the area shows building after building unoccupied, that formerly held employees. Where did they all go? Are they all hanging out at Starbucks? Or do they now work there?
The housing bubble was the last. Now the rest of us blow away in the wind.
(-:
This downturn just keeps chugging along. It seems like forever now that the economy has been deteriorating. It used to be that rumors of Fed action would keep the market from collapsing, then it was actual Fed action (dramatic interest rate cuts), then it was panicked Fed action (Bear Stearns, accepting garbage collateral).
Aren't we now to the point where the Fed will no longer come to the rescue? They've lowered interest rates about as far as they can (without much impact). Perhaps they've successfully staved off financial collapse by guaranteeing stuff and accepting stuff as collateral. But methinks there's not much more that they will do. Next time the market tumbles, no Fed rescue?
So print faster, you're saying th e2001 recession will be a triple dipper? not W shaped but VW
Alec
I like your VW.
The chart on capacity utilization does look very nasty. In fact it is the nastiest chart that I seen, except for one:
That is the value of the dollar as expressed in anything else, take DXY or commodity index as a proxy.
I am saying that we are in a statistics-free depression, and we are in 1930 and headed down from here.
The thirties depression lasted 10 years, this one will last a generation. I would say the end will come around 2030. A whole generation has to suffer and get reset before this cruft is cleared out.
By the way, I am one that does not believe that the government can help. It waa government interference in the 30s that kept it going so long. Face it the folks in government benefited by stretching out the depression. I do not see anything sinister or conspiratorial, think of the government a an agency that always grows through ineptitude. Bad managers can always point to needing more resources since they can never keep up with their load; good managers dispose of their load.
I agree with you, P-F-, in all respects.
I calculated that we come out of this in 2024.
Capacity utilization receded sharply to 79.7% in April, a sign of easing inflationary pressure.
Is this really true? We had anemic capacity utilization in the 1970's, but still had high inflation. Inflation of imported goods continues to move higher, not lower, which affects most consumer goods. Deflation in assets along with inflation in goods consumed is a toxic mixture in my view....
We've gone from importing deflation to importing inflation from China in the past couple of years for example.
Oct-06\t97.2\t-1.4%
Nov-06\t97.3\t-1.3%
Dec-06\t97.3\t-1.2%
Jan-07\t97.2\t-0.9%
Feb-07\t97.2\t-0.9%
Mar-07\t97.4\t-0.5%
Apr-07\t97.4\t-0.3%
May-07\t97.7\t0.1%
Jun-07\t98.1\t0.7%
Jul-07\t98.5\t1.0%
Aug-07\t98.9\t1.3%
Sep-07\t99\t1.6%
Oct-07\t99.3\t2.2%
Nov-07\t99.5\t2.3%
Dec-07\t99.6\t2.4%
Jan-08\t100.5\t3.4%
Feb-08\t100.6\t3.5%
Mar-08\t101.2\t3.9%
Apr-07\t101.4\t4.1%
Time to correct a typo in my first note. This:
I would not call the post 2001 period a depression.
Should be:
I would call the post 2001 period a depression.
The DXY over the years since Y2K creates the following adjustment and YoY GDP:
2002 -15.45102774
2003 -18.38122021
2004 -12.90536079
2005 1.600706519
2006 -19.67012139
2007 -22.3143404
Folks, by any definition this is
a depression. This is not a recession. We are kidding ourselves that this is normal.
The emperor has no clothes. He has a bad rash, pimples, sunburn, boils, and leprosy.
Did some more work on my numbers. Formulas are fairly complex. Here are the redone numbers in percent GDP YOY
deflator taken out, DXY used as deflator:
2002 -13.65438385
2003 -11.53713392
2004 -0.391585567
2005 14.56829737
2006 -2.860635731
2007 -3.229491653
Total decrease 2002-2007 -10.41370419
It is still a very long recession. I would call it a depression. There was only one year of GDP growth. I am guessing it was due to the housing bubble.
Yikes.