Backstage at a Bank Funeral:
Feds Swoop In on an Unsuspecting Town
(A WSJ reporter went along with the FDIC's closing team to the Minn bank closing and didn't get much information.) See photo slideshow. This is a lot of what I did at FDIC in the 1980s and I know several of these people in the photos. There will be more 'visits' from the FDIC and more FDIC hiring & contractors. Our age discrimination class action suit is still pending with Judge Urbina in DC.
I apologize for being way off topic, but the signal to noise ratio on this blog has deteriorated, especially over the last six months. Is there any chance we can get some limitations on political pontification, cross-links to other articles (can't tips be sent by e-mail?), "this blog is my blog" tendencies, and general spam?
On topic, retail is continuing to hold up. I do not see this as a positive, I see this as a very serious negative, an indication that consumer debt, rather than slowing down spending, is a ticking time bomb waiting to blow up.
I'm guessing that most of the people who post to this blog didn't get stimulus checks. But maybe we could do an informal poll of those who did to see how they spent theirs. So what was it Sebastian?
What's the point of looking at 'here and now' data when it all gets revised 6 months to a year from now? Someone yesterday posted how the BED survey showed the economy lost 200k+ jobs in Q307 instead of gaining 200k+. A major topic people commenting here care about is where house prices are going, and that's down the f%#@ing drain. And in my view, global equities are following, although not in magnitude.
"I'm guessing that most of the people who post to this blog didn't get stimulus checks. But maybe we could do an informal poll of those who did to see how they spent theirs."
I didn't get one but I helped my neighbor who has been on disability for ten years move his new TV in his house, when he went down to buy it he blew a tire on his 10 year old hoopy and ended up replacing all 4. His old TV was 17 years old so I guess it may have been time for a new one if that is all you have to do all day. I threw my TV out in the street and hung some garlic on it about 7 years ago, Don't have one and don't want one.
Oh, I don't know, I'd bet that a bunch of us DID get stimulus checks. But many of us who did are not going to have their behavior changed by an extra $600 added to our savings accounts.
JS asked: "I'm guessing that most of the people who post to this blog didn't get stimulus checks. But maybe we could do an informal poll of those who did to see how they spent theirs. So what was it Sebastian?"
Why wouldn't most people here have gotten checks? It was a broad-based distribution.
I haven't even spent mine yet, just like I didn't spend all (any) of the equity in my house. There's plenty of additional money out there to be spent, which will keep the economy rolling along.
I guess we need a continuous flow of stimuli...
What are people afraid of?
The economy is in very rough shape. So what?
Recession? Who cares?
We've been through it all before and bounced back.
We have gotten so soft as a country its sad.
The stock market is going nowhere and we have years of deleveraging to go through.
The fear of recession talk is pathetic. More than 50% of the country says they are worse off now than a year ago - I guess thats fine so long as we dont have 2 Qs of negative growth....
By the way, when the dust settles thats exactly what we will have in 2008. But who really cares?
I'd prefer we get through this period of deleveraging quickly otherwise we'll be in for a period of long malaise.
By the way, just got back from a tour of China - what a mess. Overbuilt, dirty, massive inflation, crowded, limited usable land, etc. Yikes.
Dont see China as a long term solution to the worlds growth problems - they have too many issues of their own.
The only way they'll be able to maintain their projected pace of growth is if they take over some land and resources - Australia would be a pretty good fit...
I think we are witnessing a classic case of switching to inferior goods. The faux wealthy of the early 2000's (those whose spending was fueled by increasing debt from home equity and credit cards) have realized that they can no longer afford to shop for groceries at Whole Foods, no longer afford to shop for clothes at up-market brand name stores in the local mall, and no longer afford to buy home furnishings from places like pottery barn and crate-n-barrel.
Voila, up go the sales of Costco and Wal-Mart.
The question now becomes, is this a good thing or a bad thing for the economy?
I am in the camp who believes more in the latter. Why? Because I don't think the distress is a temporary phenomenon. I believe that folks overspent so greatly creating the illusion of wealth that pretty soon they're going to realize that they can no longer afford even Costco and Wal-Mart. In addition, things will cascade down. There is currently a fair amount of distress among those who usually shop at Wal-Mart. Then on top of that throw in whatever your estimates are for the increase in unemployment during this cycle (i.e., those who will have difficulty shopping anywhere).
All these things do not bode well for the future prospects of the economy and suggest more pain down the pike.
The consumer is in good shape for everyday expenses as the housing crunch as not impacted their ability to spend on staples.
Those who bought with an option arm are still paying the minimum so their monthly mortgage is still artificially low.
Those who were responsible feel better off and still spend freely.
Those who overpaid for a house are either living for free in it as they have stopped paying the mortgage but haven't been kicked out.
Those who left their house they overpaid for and have abandoned their house, are now paying rent which is presumably less than their old mortgage.
Housing's real impact will be on the long term ability to borrow and spend. The next five years will be absent of any major refi's and equity drains. All those major purchases like expensive cars, new pools, new decks, jacuzzi's, etc. will dwindle to relatively nothing.
Look at car sales for proof.
The impact into these industries are clearly evident but haven't spilled over into the main economy.
Don't look for a sudden drop...but a slow slow slow bleed.
However, one caveat, the coming wave of local govt cutbacks, or absence of growth, may speed things up this coming fiscal year.
Anonymouse said: "What's the point of looking at 'here and now' data when it all gets revised 6 months to a year from now? Someone yesterday posted how the BED survey showed the economy lost 200k+ jobs in Q307 instead of gaining 200k+..."
Well, for starters, plus or minus 200k in jobs in a quarter is a rounding error and insignificant to the overall picture.
Second, there's other data available that doesn't get revised as much or as often as employment data.
Third, if you're concerned that one set of data might get revised, you can always compare it against another set for confirmation/non-confirmation.
Good information and the solid conclusions that can be drawn from it are out there, but it takes a little work.
There are billions being lost in this housing crunch...but very little by the average joe.
Those who lost their house, didn't lose money, only credit (no down payment).
The ONLY ones taking loses right now are the banks and institutions (they are laying off left and right), and they haven't been required to actually take these losses in full yet.
The money that should have been sucked out of the system to square debt, has now been shifted to speculation in commodities.
Deflation cannot occur if the losses are not taken.
The broad economy will not be shocked until banks begin failing and govt's begin cutting back.
Any luck at all and you will get to spend your by giving it back to the gubment who had to borrowed it from the Chinese and pay back just a little bit of the interest that is growing on the same.
Well, for starters, plus or minus 200k in jobs in a quarter is a rounding error and insignificant to the overall picture.
Actually, going from 200k+ jobs gain to a 200k+ jobs loss is more like a half million jobs, but what do you care? You're so delusional you think Charlotte or wherever you're from is immune to house price declines, and that equity prices are cheap. If you had to mark-to-market your portfolio (house + stocks + other) I'm certain it would be worth far less than a year ago.
Many restaurants that used to be quite full are emptier. On the other hand people who used to work for title companies and mtg brokers seem able to find other jobs. In Miami-Dade County. In space coast Brevard, I don't see much of a difference.
There are billions being lost in this housing crunch...but very little by the average joe.
Those who lost their house, didn't lose money, only credit (no down payment).
Which would be great if the average Joe hadn't been out there spending that paper wealth for the past 3-4 years ... just as he did with his paper wealth from tech stocks in the late '90s. When those stocks crashed, it was easy to argue (and many pundits did) that it was just "paper wealth" vanishing and that the impact on the consumer would be negligible, but they were, of course, wrong. The "actual, real" economy fell into recession soon enough.
If your bathtub drain has a bad seal, you won't notice at all as long as the spigot is on. And you might not even notice for a few minutes after you shut it off. But given enough time and no new water coming in, it's all gonna drain out eventually.
Anonymouse said: "You're so delusional you think Charlotte or wherever you're from is immune to house price declines, and that equity prices are cheap..."
But not so delusional as to believe in a non-existent recession.
Seb's the kind of doctor that so long as there is a pulse wanders away to play golf because clearly the patient is still alive. Not the kind of doctor you want in the ER doing triage, but that's ok, because he's stated he's not delusional.
FTR, I still haven't received my stimulus deposit but it's going to savings. $600 is probably more significant on my income than most here, but it's still no comfort to an ever deteriorating jobs market.
Why wouldn't most people here have gotten checks? It was a broad-based distribution.
Why? Well, if we're to belive the posters on here about their stock gains, the fact that they've learned their economic acumen though high-level jobs, and their gains on other investments, I'd say none of them could have received a check. I surely didn't, so it isn't broad enough to cover people like me.
But the strange fact is that I could afford to spend it and give the economy a tweak. I'm not so sure about most that got one. I'm sure it's just making up for the increase in the cost at the pump since the beginning of the year, and the increase in heating/cooling bills.
You know people, you have to give Sebastian credit. Look at today's numbers. You can hem and haw all you like, but there has been nothing tragic in the employment numbers yet, and nothing tragic (yet) in inflation. You may even argue (as I believe) that oil will fall in time for the election, making the pain from all of the temporary and not lasting.
So far, if there is a recession, it is looking like the shallow but long one that I believed it would be, and that our host called too.
And as far as perception being reality, my income has actually gone UP over the last year and I'm spending less. So are most people I know. It's a time of pulling in the horns even if you don't have to. Natural part of the business cycle, and totally based on perception and not reality.
I got a stimulus check, and since I have kids it was fairly substantial. I just spent on a spiffy new iMac, and Apple was kind enough to toss in a free iPod along with it. And why not? I have no debt, I've got some savings, I've got a secure government job, and I spend all day every day working at my crummy old laptop. Sometimes I wonder if you guys have lost track of what the purpose of making and saving money is...
ipodius said: "Why? Well, if we're to believe the posters on here about their stock gains, the fact that they've learned their economic acumen though high-level jobs, and their gains on other investments, I'd say none of them could have received a check."
Imagine. Married filing jointly a couple could make up to $150,000/year and still get the maximum amount of a stimulus check. I'm still middle-class enough to think that an income of $150k a year is good money.
Sometimes I wonder if you guys have lost track of what the purpose of making and saving money is...
Making and saving money is as making and saving money does. Our population still believes that buying houses is the road to wealth, a substitute piggy bank, and an entitlement all in one. They still have no idea what they're in for.
My Costco stock is up nicely today. I was banking on the idea that it would do well in an economic downturn. Perhaps people won't buy as much furniture and jewelry, but they'll appreciate the mega-packages of toilet paper and frozen ground beef!
Avg. Joe- great comments on spending. I think they make a lot of sense. Another factor to look at will be consumer credit. People have been using cards for staples and not necessarily paying them off. If Capital One and others have to keep pulling back credit lines, that will start to seriously impact spending.
Anything to the fact that the universe of retailers surveyed since March is in the 35-37 ragne, vs 45+ in Q4? I still see the same chains in wire service results tables, but that isn't what ICSC is working from.
But the way, there is a continued shift from department stores to big discounters and wholesale clubs. Wal-Mart noted particularly that it beat estimates because of people looking for cheap groceries and because of rebate checks going to big household. Wal-Mart reported a y/y gain in sales of household items (think durable goods) for the first time in 2 years.
The question now becomes, is this a good thing or a bad thing for the economy?
I am in the camp who believes more in the latter. Why? Because I don't think the distress is a temporary phenomenon. I believe that folks overspent so greatly creating the illusion of wealth that pretty soon they're going to realize that they can no longer afford even Costco and Wal-Mart."
Obviously there are a lot of people right at the bottom that have always shopped at Walmart and now are really struggling. I have an immense amount of sympathy for them.
However, the "faux wealth" was spread VERY widely. It's amazing to drive through some of the crappy neighborhoods and see how many BMWs and big SUVs are parked outside. It's a similar story with boats, RVs, big TVs, and vacations to places you can't pronounce.
So if people can no longer afford boats, who cares? If they can no longer afford to buy an expensive (made in China) TV, who cares? It seems to me that most of this faux wealth money actually left the country anyway, and was spent on big ticket items. Perhaps if we go back to spending what we earn (horror!) then we'll find that we really don't have much less than we did before.
We're not going to starve, but we might have a Chevy Malibu instead of a BMW 5 series. Instead of the $2000 50 inch LCD, we'll have the $1000 40 inch LCD. Boo freaking hoo!
Luxury goods are just that - luxury - and you spend a disproportionate amount of money for that good. That's why it's a luxury good. Perhaps given half the spending money we'll still find that we can get 90% of the "stuff" we had before, but it just won't be as shiny and big.
ipodius said: "So far, if there is a recession, it is looking like the shallow but long one that I believed it would be, and that our host called too."
Just for the record, I'm not backing-off even an inch on my position: No recession, not even a little one.
Seb, I wouldn't want any doctor in the ER that announced what reality is based on as little data as I see you doing. Let me assure you I'm ignoring your bearish counterparts only they're apparently less annoying.
These numbers don't surprise me at all. Our dining out spending has been cut by over 50%, which dictates that our spending on groceries goes up. Combine this increase in demand with the high food inflation and the numbers that Walmart and Costco don't look so hot.
"And as far as perception being reality, my income has actually gone UP over the last year and I'm spending less. So are most people I know. It's a time of pulling in the horns even if you don't have to. Natural part of the business cycle, and totally based on perception and not reality."
I don't want to boast here as that's not my intent. However, I received a 4% raise at the beginning of the year and a promotion with an associated 8% raise just a month ago. Most other people in technology are doing well right now too. I also cashed in a lot of stock options last year. As a household, we brought in a lot more money than the stimulus check cut-off.
What's my point? Well, I'm ALSO cutting back on my spending even though I have plenty of money and income. My job seems reasonably safe, but still I'm more cautious. The tech sector could start to show big signs of weakness and I could then get laid off. That wouldn't be a disaster, but I'm more concerned with my ability to retire early than I am my ability to pay the mortgage.
I won't be buying a new car this year, or probably next year. No big vacations. I'll delay putting a new roof on the house.
I think it's just natural for everyone to go back to basics during times such as these, even if some are not yet affected and will likely never be.
The bears have been proven right every step of the way for several years now, and this shows no sign of coming to an end. Anyone (ipodius) who said that Sebastian has been right just isn't thinking clearly...
I Don't know how your company is positioned personel wise but my company is petrified of the upcoming retirement wave. A guy Iwork with just bought a established auto repair biz. This makes 3 Retirements and 1 resignation in the first 5 months of the year. Out of 21 people. 6 more are 55+ and all have mentioned they are ready to go... I to got a healthy raise and we have already gotten hints that next year could be on the order of 8-10%.
The next few years are gonna be very interesting...
Talk about faux wealth... I went to the big-box pet store to get a sack of litter for the cats last night. Besides the cheap clay litter I buy (which had been marked up), they have something like 200 feet of shelf space for "designer" litter than costs 10-20 a box and is made from wood, newspaper, corn, etc. And 15-20 different kinds of cat box.
The cheap stuff was nearly sold out. The designer litter was fully stocked. I think the faux wealth types have decided their cats can poop on cheap clay after all.
Emma Anne; if we got a stimulus check, it also would have gone straight to savings for that next dentist bill. Sheesh, $600+ for three kids last time. I ought to get a willow switch for when they don't brush their teeth well enough instead of sending them back to try again. Stupid non-violet parenting methods
"The 50lb bags of oil dry at Sams in the auto section work real good and are dirt cheap(it is a type of clay).
Chris"
Yes, that stuff is pretty much the same stuff I buy for the cats, in a different package. I did get a good price by buying 1 40-pound bag instead of the 2 20s I usually get for convenience.
So Seb, you're really all fired up about retail sales? The consumer gets $100 billion dollars and retail sales barely budge and you think thats good news? Where would be be without the stimulus.
Jobless claims continue to be awful and the four year moving average is now the highest in over 4 years.
You'll see....
I've seen your claims that there will be no recession in 2008, 2009 or 2010.
Are you holding firm there or wioll the weakening data lad you to hedge that call?
If you still hold firm, I'd be willing to make you a substantial wager that you are wrong.
Cobradriver: With stuff that is for "industrial" purposes and that is not designed for anybody's extended exposure, I would be concerned about purity and irritants. Of course I don't know how much that applies to cheap pet supplies.
If Wal-Mart is making more money it's because their prices went up. The box of crackers I buy there is now 77 cents higher. I stopped buying certain brands of pet food there because they went up by 25%. Yesterday I actually bought my food at a Dollar General instead; I understand this is a new trend. As for everyone getting a stimulus check, that's not true. A friend on food stamps officially was told she isn't rich enough to deserve a check.
Darn guvmint took money out of my checking account.
I'm wondering how much longer the luxury items retailers can hold out. They must be under significant pressure at this point. It's strange that there seems to be more distress among privately held retailers than the publicly held ones.
Bob,
Most of those designer clays do not work well. The paper holds odors, for example. The Crystal type stuff works ok, but is an environmental nightmare in China. The Clay is strip mined, BTW.
PS: The pet industry is counter-recessionary. Put simply, in bad times, people stay at home more, get lonely, get a pet.
Yes, that would be nice to get the reverse transfer of wealth. But of course, politicians don't mention that helping the borrower is also helping the lender. But at the same time, the government is responsible for the FDIC banks.
Stimulus check went to airline tickets to Michigan for my in-laws 40th anniversary and a new comforter set for the bed. An opportunity buy: we really liked it back in December, but held off. It has since been discontinued and she found it for 50% off.
Air Tran and Great Indoors. Sears and an airline. Probably better uses available for it, sure, but both put a big smile on my wife, so I'm alright with that.
Remember, although we're only on the borderline of recession by current definitions, the definition of "recession" was revised under Clinton and W by revising the GDP deflators to yield lower numbers. By traditional (pre-Clinton) recession definitions, we would certainly be in one.
You can hem and haw all you like, but there has been nothing tragic in the employment numbers yet, and nothing tragic (yet) in inflation.
ipodius
If the BED survey is anything to go by the economy has been shedding jobs since last July. A WAG is that a million jobs have gone since July 07, if that ain't tragic I don't know what is.
Look at the price increases in the ISM surveys and say there's no inflation. Puh-leaze
And what was that you wrote about the ECB cutting rates?
I opened a online retail store last year that only carries environmentally friendly goods. May was a good month and June has already equaled March sales. I would have to say that something is helping retailers out. My guess is that yes it is the stimulus package.
I'd like to get me some of that weed you're smoking. It must all look good through the haze.
Recession or no recession, there is no denying that the standard of living for americans across the board is declining at a rapid rate and will continue to decline for the forseeable future. Salaries are stagnant or shrinking and have been for a decade, prices for basics (housing, food and transporation) have all increased by multiples in that time period and savings have been negative recently. That means all growth in the economy has been funded by debt and the access to that debt has just been turned off. Therefore, any illusion of prosperity or wealth for the majority of middle class americans has just evaporated. If you don't believe me, try to fly to a vacation spot or drive in the next 6-12 months. You'll feel poorer than at anytime in your life.
I guess, fattyk, I don't understand what standard you mean. Houses that are too big? Cars that are too big? Jeans that are too expensive? Paying twice as much to shop at Whole Foods? Seemed I lived fine for my childhood and most of my adult life without these things.
I think most people have a warped idea what what the standard actually is. It's certainly not what you see on TV.
Due to population increase about 125,000 jobs must be created each month to provide employment to those entering theworkforce. A job growth of 136,000 in 9 months leaves a shortfall of over a million jobs just to break even.
The BED survey data is way more accurate, this is undisputed. July August & September were 243k job losses, not the 200k job gain the establishment survey claimed at the time(and the numbers I used as a reference source)
So your +136k claim already is at 307k job losses. But since both the accuracy of the establishment survey and B/D model has degraded as the economy has gone south. So one has to extrapolate as one can until the next BED survey can be released for confirmation
The BED survey will next be issued for Q407 in mid august, so much like last time we covered this ground, by the time a more accurate picture appears you'll come up with a new line of bullshit to cherry pick.
Regarding the stimulus checks, one thing I don't understand, is that a hard cut-off at $150,000 per couple? That is if you made $149,999 you get the full rebate, but if you made $150,000 you get nothing?
I tend to agree with Maxed out Mama: so far the predictions of armageddon have not come to fruition. However, things are on a down-ward slide. This really isn't that strong of a report. Some discounters did well (BJ's, WalMart, Costco). Everyone else got creamed (including Target). However, keep in mind how far the debate has moved in 6 months. Late last year, most reputable commentators considered the prospect of a recession laughable. Now, most are arguing about it's depth and length.
Another factor regarding whether the price of gasoline is damping down the stimulus may need to be considered. Recently I retired. The thing I noticed is I drive a whole lot less -- since I don't commute to work any more. So, even though gas has gone up a lot, I'm spending less for gas. It's one of the only areas that I am spending less on after retirement.
I know one person's experience doesn't apply to everyone, but there are going to be lots of people retiring over the next few years. This could cause a big decline in demand for gas. Hence, increases in oil prices aren't going to be that big of a drag on the economy.
The decline in the dollar which is helping the surge in oil is caused in part by the ever increasing debt the federal government is taking on. So while you may spend less on gas, the federal goverment will be spending more on you (and the other retirees) in the form of social security. This will increase the fed debt burden putting further strain on the dollar and negatively impacting oil prices. Do you see how this isn't a vacuum? High oil is here to stay and the knock on effects will continue regardless of a small decrease in consumption within the US.
"So while you may spend less on gas, the federal goverment will be spending more on you (and the other retirees) in the form of social security."
I tend to doubt that. The gov't already has a mechanism to means test social security through the medicare premium. Over my retirement social security could be effectively eliminated.
So we've progressed from saying "Are we there yet? Are we there yet?" about house price declines and now were'e saying it about negative growth? I'm with MoM, it's going to take awhile. Have patience and be prepared. It won't be the end of the world, but many people may discover that the CAN live within their means when the they no longer have access to the credit needed to do otherwise. They won't be happy but they'll live.
Backstage at a Bank Funeral:
Feds Swoop In on an Unsuspecting Town
(A WSJ reporter went along with the FDIC's closing team to the Minn bank closing and didn't get much information.) See photo slideshow. This is a lot of what I did at FDIC in the 1980s and I know several of these people in the photos. There will be more 'visits' from the FDIC and more FDIC hiring & contractors. Our age discrimination class action suit is still pending with Judge Urbina in DC.
Backstage at a Bank Funeral: Feds Swoop In on an Unsuspecting Town - WSJ.com
I apologize for being way off topic, but the signal to noise ratio on this blog has deteriorated, especially over the last six months. Is there any chance we can get some limitations on political pontification, cross-links to other articles (can't tips be sent by e-mail?), "this blog is my blog" tendencies, and general spam?
Sounds like the stimulus achieved its primary goal, which is pumping up Q2 numbers to positive growth, so the recession won't be declared until 2009.
On topic, retail is continuing to hold up. I do not see this as a positive, I see this as a very serious negative, an indication that consumer debt, rather than slowing down spending, is a ticking time bomb waiting to blow up.
I'm guessing that most of the people who post to this blog didn't get stimulus checks. But maybe we could do an informal poll of those who did to see how they spent theirs. So what was it Sebastian?
No limits please. The occasional annoying post is more than offset by the convenience and immediacy of posting...
My stimulus check is in savings...
CR said: "Overall retailers reported fairly strong sales in May. It looks like $4 gasoline didn't use up the entire stimulus."
This is why beating the recession drum is so reckless. People will think "This is a recession? It's not really so bad, after all."
Sebastia
beating the recession drum is so reckless. People will think "This is a recession? It's not really so bad, after all." [Sebasstian]
??? So then what? People will think maybe it's okay to slow down and experience a recession?
What's the point of looking at 'here and now' data when it all gets revised 6 months to a year from now? Someone yesterday posted how the BED survey showed the economy lost 200k+ jobs in Q307 instead of gaining 200k+. A major topic people commenting here care about is where house prices are going, and that's down the f%#@ing drain. And in my view, global equities are following, although not in magnitude.
"I'm guessing that most of the people who post to this blog didn't get stimulus checks. But maybe we could do an informal poll of those who did to see how they spent theirs."
I didn't get one but I helped my neighbor who has been on disability for ten years move his new TV in his house, when he went down to buy it he blew a tire on his 10 year old hoopy and ended up replacing all 4. His old TV was 17 years old so I guess it may have been time for a new one if that is all you have to do all day. I threw my TV out in the street and hung some garlic on it about 7 years ago, Don't have one and don't want one.
Oh, I don't know, I'd bet that a bunch of us DID get stimulus checks. But many of us who did are not going to have their behavior changed by an extra $600 added to our savings accounts.
JS asked: "I'm guessing that most of the people who post to this blog didn't get stimulus checks. But maybe we could do an informal poll of those who did to see how they spent theirs. So what was it Sebastian?"
Why wouldn't most people here have gotten checks? It was a broad-based distribution.
I haven't even spent mine yet, just like I didn't spend all (any) of the equity in my house. There's plenty of additional money out there to be spent, which will keep the economy rolling along.
Sebastia
My stimulus check is going to either my savings or student loans.
I guess we need a continuous flow of stimuli...
What are people afraid of?
The economy is in very rough shape. So what?
Recession? Who cares?
We've been through it all before and bounced back.
We have gotten so soft as a country its sad.
The stock market is going nowhere and we have years of deleveraging to go through.
The fear of recession talk is pathetic. More than 50% of the country says they are worse off now than a year ago - I guess thats fine so long as we dont have 2 Qs of negative growth....
By the way, when the dust settles thats exactly what we will have in 2008. But who really cares?
I'd prefer we get through this period of deleveraging quickly otherwise we'll be in for a period of long malaise.
By the way, just got back from a tour of China - what a mess. Overbuilt, dirty, massive inflation, crowded, limited usable land, etc. Yikes.
Dont see China as a long term solution to the worlds growth problems - they have too many issues of their own.
The only way they'll be able to maintain their projected pace of growth is if they take over some land and resources - Australia would be a pretty good fit...
I think we are witnessing a classic case of switching to inferior goods. The faux wealthy of the early 2000's (those whose spending was fueled by increasing debt from home equity and credit cards) have realized that they can no longer afford to shop for groceries at Whole Foods, no longer afford to shop for clothes at up-market brand name stores in the local mall, and no longer afford to buy home furnishings from places like pottery barn and crate-n-barrel.
Voila, up go the sales of Costco and Wal-Mart.
The question now becomes, is this a good thing or a bad thing for the economy?
I am in the camp who believes more in the latter. Why? Because I don't think the distress is a temporary phenomenon. I believe that folks overspent so greatly creating the illusion of wealth that pretty soon they're going to realize that they can no longer afford even Costco and Wal-Mart. In addition, things will cascade down. There is currently a fair amount of distress among those who usually shop at Wal-Mart. Then on top of that throw in whatever your estimates are for the increase in unemployment during this cycle (i.e., those who will have difficulty shopping anywhere).
All these things do not bode well for the future prospects of the economy and suggest more pain down the pike.
Why is the USD tanking again.. Trichet just said inflation is a problem and they may raise rates next time they meet.
And what did Ben say? Inflation isn't as bad as the 70's. Right. But will it be?
As I mentioned before.....
The consumer is in good shape for everyday expenses as the housing crunch as not impacted their ability to spend on staples.
Those who bought with an option arm are still paying the minimum so their monthly mortgage is still artificially low.
Those who were responsible feel better off and still spend freely.
Those who overpaid for a house are either living for free in it as they have stopped paying the mortgage but haven't been kicked out.
Those who left their house they overpaid for and have abandoned their house, are now paying rent which is presumably less than their old mortgage.
Housing's real impact will be on the long term ability to borrow and spend. The next five years will be absent of any major refi's and equity drains. All those major purchases like expensive cars, new pools, new decks, jacuzzi's, etc. will dwindle to relatively nothing.
Look at car sales for proof.
The impact into these industries are clearly evident but haven't spilled over into the main economy.
Don't look for a sudden drop...but a slow slow slow bleed.
However, one caveat, the coming wave of local govt cutbacks, or absence of growth, may speed things up this coming fiscal year.
Anonymouse said: "What's the point of looking at 'here and now' data when it all gets revised 6 months to a year from now? Someone yesterday posted how the BED survey showed the economy lost 200k+ jobs in Q307 instead of gaining 200k+..."
Well, for starters, plus or minus 200k in jobs in a quarter is a rounding error and insignificant to the overall picture.
Second, there's other data available that doesn't get revised as much or as often as employment data.
Third, if you're concerned that one set of data might get revised, you can always compare it against another set for confirmation/non-confirmation.
Good information and the solid conclusions that can be drawn from it are out there, but it takes a little work.
Sebastia
There are billions being lost in this housing crunch...but very little by the average joe.
Those who lost their house, didn't lose money, only credit (no down payment).
The ONLY ones taking loses right now are the banks and institutions (they are laying off left and right), and they haven't been required to actually take these losses in full yet.
The money that should have been sucked out of the system to square debt, has now been shifted to speculation in commodities.
Deflation cannot occur if the losses are not taken.
The broad economy will not be shocked until banks begin failing and govt's begin cutting back.
Sebastian
Any luck at all and you will get to spend your by giving it back to the gubment who had to borrowed it from the Chinese and pay back just a little bit of the interest that is growing on the same.
I fully agree with Average Joe.
When will Financials be ALLOWED to fail?
Without which no true recovery can take place and instead another bubble may emerge instead.
Well, for starters, plus or minus 200k in jobs in a quarter is a rounding error and insignificant to the overall picture.
Actually, going from 200k+ jobs gain to a 200k+ jobs loss is more like a half million jobs, but what do you care? You're so delusional you think Charlotte or wherever you're from is immune to house price declines, and that equity prices are cheap. If you had to mark-to-market your portfolio (house + stocks + other) I'm certain it would be worth far less than a year ago.
Many restaurants that used to be quite full are emptier. On the other hand people who used to work for title companies and mtg brokers seem able to find other jobs. In Miami-Dade County. In space coast Brevard, I don't see much of a difference.
There are billions being lost in this housing crunch...but very little by the average joe.
Those who lost their house, didn't lose money, only credit (no down payment).
Which would be great if the average Joe hadn't been out there spending that paper wealth for the past 3-4 years ... just as he did with his paper wealth from tech stocks in the late '90s. When those stocks crashed, it was easy to argue (and many pundits did) that it was just "paper wealth" vanishing and that the impact on the consumer would be negligible, but they were, of course, wrong. The "actual, real" economy fell into recession soon enough.
If your bathtub drain has a bad seal, you won't notice at all as long as the spigot is on. And you might not even notice for a few minutes after you shut it off. But given enough time and no new water coming in, it's all gonna drain out eventually.
Anonymouse said: "You're so delusional you think Charlotte or wherever you're from is immune to house price declines, and that equity prices are cheap..."
But not so delusional as to believe in a non-existent recession.
S.
But not so delusional as to believe in a non-existent recession.
You're like a global warming denier: once the proof of catastrophe is here it'll be too late to do anything about it.
Seb's the kind of doctor that so long as there is a pulse wanders away to play golf because clearly the patient is still alive. Not the kind of doctor you want in the ER doing triage, but that's ok, because he's stated he's not delusional.
scav said: "Not the kind of doctor you want in the ER doing triage, but that's ok, because he's stated he's not delusional."
You also don't want an ER doctor telling patients "If you're here that means you're done, an orderly will be along shortly to take you to the morgue."
Which is kind of the way the bearish blogosphere is responding to the economic numbers, as if imminent recession was a foregone conclusion.
S.
Stimulus check -> regular savings. We are entering the braces years at our house.
FTR, I still haven't received my stimulus deposit but it's going to savings. $600 is probably more significant on my income than most here, but it's still no comfort to an ever deteriorating jobs market.
Why wouldn't most people here have gotten checks? It was a broad-based distribution.
Why? Well, if we're to belive the posters on here about their stock gains, the fact that they've learned their economic acumen though high-level jobs, and their gains on other investments, I'd say none of them could have received a check. I surely didn't, so it isn't broad enough to cover people like me.
But the strange fact is that I could afford to spend it and give the economy a tweak. I'm not so sure about most that got one. I'm sure it's just making up for the increase in the cost at the pump since the beginning of the year, and the increase in heating/cooling bills.
You know people, you have to give Sebastian credit. Look at today's numbers. You can hem and haw all you like, but there has been nothing tragic in the employment numbers yet, and nothing tragic (yet) in inflation. You may even argue (as I believe) that oil will fall in time for the election, making the pain from all of the temporary and not lasting.
So far, if there is a recession, it is looking like the shallow but long one that I believed it would be, and that our host called too.
And as far as perception being reality, my income has actually gone UP over the last year and I'm spending less. So are most people I know. It's a time of pulling in the horns even if you don't have to. Natural part of the business cycle, and totally based on perception and not reality.
I got a stimulus check, and since I have kids it was fairly substantial. I just spent on a spiffy new iMac, and Apple was kind enough to toss in a free iPod along with it. And why not? I have no debt, I've got some savings, I've got a secure government job, and I spend all day every day working at my crummy old laptop. Sometimes I wonder if you guys have lost track of what the purpose of making and saving money is...
ipodius said: "Why? Well, if we're to believe the posters on here about their stock gains, the fact that they've learned their economic acumen though high-level jobs, and their gains on other investments, I'd say none of them could have received a check."
Imagine. Married filing jointly a couple could make up to $150,000/year and still get the maximum amount of a stimulus check. I'm still middle-class enough to think that an income of $150k a year is good money.
Sebastia
Sometimes I wonder if you guys have lost track of what the purpose of making and saving money is...
Making and saving money is as making and saving money does. Our population still believes that buying houses is the road to wealth, a substitute piggy bank, and an entitlement all in one. They still have no idea what they're in for.
My Costco stock is up nicely today. I was banking on the idea that it would do well in an economic downturn. Perhaps people won't buy as much furniture and jewelry, but they'll appreciate the mega-packages of toilet paper and frozen ground beef!
Avg. Joe- great comments on spending. I think they make a lot of sense. Another factor to look at will be consumer credit. People have been using cards for staples and not necessarily paying them off. If Capital One and others have to keep pulling back credit lines, that will start to seriously impact spending.
I don't know about retail sales being that strong. The increases are in the discount operators, and the mid-to-upscale places are really hurting.
Walmart said sales of clothing fell. Target didn't even manage a gain.
I wouldn't call this "fairly strong". But the economy isn't falling off a cliff. It really isn't. It's a glide down, not a nose-in-ground impact.
I'm waiting for Q1 from Rockefeller. I think it's going to be ugly.
Anything to the fact that the universe of retailers surveyed since March is in the 35-37 ragne, vs 45+ in Q4? I still see the same chains in wire service results tables, but that isn't what ICSC is working from.
But the way, there is a continued shift from department stores to big discounters and wholesale clubs. Wal-Mart noted particularly that it beat estimates because of people looking for cheap groceries and because of rebate checks going to big household. Wal-Mart reported a y/y gain in sales of household items (think durable goods) for the first time in 2 years.
"Voila, up go the sales of Costco and Wal-Mart.
The question now becomes, is this a good thing or a bad thing for the economy?
I am in the camp who believes more in the latter. Why? Because I don't think the distress is a temporary phenomenon. I believe that folks overspent so greatly creating the illusion of wealth that pretty soon they're going to realize that they can no longer afford even Costco and Wal-Mart."
Obviously there are a lot of people right at the bottom that have always shopped at Walmart and now are really struggling. I have an immense amount of sympathy for them.
However, the "faux wealth" was spread VERY widely. It's amazing to drive through some of the crappy neighborhoods and see how many BMWs and big SUVs are parked outside. It's a similar story with boats, RVs, big TVs, and vacations to places you can't pronounce.
So if people can no longer afford boats, who cares? If they can no longer afford to buy an expensive (made in China) TV, who cares? It seems to me that most of this faux wealth money actually left the country anyway, and was spent on big ticket items. Perhaps if we go back to spending what we earn (horror!) then we'll find that we really don't have much less than we did before.
We're not going to starve, but we might have a Chevy Malibu instead of a BMW 5 series. Instead of the $2000 50 inch LCD, we'll have the $1000 40 inch LCD. Boo freaking hoo!
Luxury goods are just that - luxury - and you spend a disproportionate amount of money for that good. That's why it's a luxury good. Perhaps given half the spending money we'll still find that we can get 90% of the "stuff" we had before, but it just won't be as shiny and big.
ipodius said: "So far, if there is a recession, it is looking like the shallow but long one that I believed it would be, and that our host called too."
Just for the record, I'm not backing-off even an inch on my position: No recession, not even a little one.
S.
Seb, I wouldn't want any doctor in the ER that announced what reality is based on as little data as I see you doing. Let me assure you I'm ignoring your bearish counterparts only they're apparently less annoying.
These numbers don't surprise me at all. Our dining out spending has been cut by over 50%, which dictates that our spending on groceries goes up. Combine this increase in demand with the high food inflation and the numbers that Walmart and Costco don't look so hot.
"And as far as perception being reality, my income has actually gone UP over the last year and I'm spending less. So are most people I know. It's a time of pulling in the horns even if you don't have to. Natural part of the business cycle, and totally based on perception and not reality."
I don't want to boast here as that's not my intent. However, I received a 4% raise at the beginning of the year and a promotion with an associated 8% raise just a month ago. Most other people in technology are doing well right now too. I also cashed in a lot of stock options last year. As a household, we brought in a lot more money than the stimulus check cut-off.
What's my point? Well, I'm ALSO cutting back on my spending even though I have plenty of money and income. My job seems reasonably safe, but still I'm more cautious. The tech sector could start to show big signs of weakness and I could then get laid off. That wouldn't be a disaster, but I'm more concerned with my ability to retire early than I am my ability to pay the mortgage.
I won't be buying a new car this year, or probably next year. No big vacations. I'll delay putting a new roof on the house.
I think it's just natural for everyone to go back to basics during times such as these, even if some are not yet affected and will likely never be.
My stimulus check was direct deposited into my bank one month ago, and I haven't given it a second thought since I got it.
I can't resist throwing my 2 cents in.
The bears have been proven right every step of the way for several years now, and this shows no sign of coming to an end. Anyone (ipodius) who said that Sebastian has been right just isn't thinking clearly...
Matthew | 06.05.08 - 11:24 am |
I Don't know how your company is positioned personel wise but my company is petrified of the upcoming retirement wave. A guy Iwork with just bought a established auto repair biz. This makes 3 Retirements and 1 resignation in the first 5 months of the year. Out of 21 people. 6 more are 55+ and all have mentioned they are ready to go... I to got a healthy raise and we have already gotten hints that next year could be on the order of 8-10%.
The next few years are gonna be very interesting...
Chris
Stim check is in the bank.
But I have been in survival mode for some time now.
No shiny toys since December, no debt.
Talk about faux wealth... I went to the big-box pet store to get a sack of litter for the cats last night. Besides the cheap clay litter I buy (which had been marked up), they have something like 200 feet of shelf space for "designer" litter than costs 10-20 a box and is made from wood, newspaper, corn, etc. And 15-20 different kinds of cat box.
The cheap stuff was nearly sold out. The designer litter was fully stocked. I think the faux wealth types have decided their cats can poop on cheap clay after all.
Bob Dobbs | Homepage | 06.05.08 - 11:45 am |
Bob,
The 50lb bags of oil dry at Sams in the auto section work real good and are dirt cheap(it is a type of clay).
Chris
Emma Anne; if we got a stimulus check, it also would have gone straight to savings for that next dentist bill. Sheesh, $600+ for three kids last time. I ought to get a willow switch for when they don't brush their teeth well enough instead of sending them back to try again. Stupid non-violet parenting methods
"The 50lb bags of oil dry at Sams in the auto section work real good and are dirt cheap(it is a type of clay).
Chris"
Yes, that stuff is pretty much the same stuff I buy for the cats, in a different package. I did get a good price by buying 1 40-pound bag instead of the 2 20s I usually get for convenience.
So Seb, you're really all fired up about retail sales? The consumer gets $100 billion dollars and retail sales barely budge and you think thats good news? Where would be be without the stimulus.
Jobless claims continue to be awful and the four year moving average is now the highest in over 4 years.
You'll see....
I've seen your claims that there will be no recession in 2008, 2009 or 2010.
Are you holding firm there or wioll the weakening data lad you to hedge that call?
If you still hold firm, I'd be willing to make you a substantial wager that you are wrong.
They are using their credit cards.
Cobradriver: With stuff that is for "industrial" purposes and that is not designed for anybody's extended exposure, I would be concerned about purity and irritants. Of course I don't know how much that applies to cheap pet supplies.
If Wal-Mart is making more money it's because their prices went up. The box of crackers I buy there is now 77 cents higher. I stopped buying certain brands of pet food there because they went up by 25%. Yesterday I actually bought my food at a Dollar General instead; I understand this is a new trend. As for everyone getting a stimulus check, that's not true. A friend on food stamps officially was told she isn't rich enough to deserve a check.
Darn guvmint took money out of my checking account.
I'm wondering how much longer the luxury items retailers can hold out. They must be under significant pressure at this point. It's strange that there seems to be more distress among privately held retailers than the publicly held ones.
@anony-1797:
Willow switch?
I think somebody needs a time-out.
Bob,
Most of those designer clays do not work well. The paper holds odors, for example. The Crystal type stuff works ok, but is an environmental nightmare in China. The Clay is strip mined, BTW.
PS: The pet industry is counter-recessionary. Put simply, in bad times, people stay at home more, get lonely, get a pet.
"When will Financials be ALLOWED to fail?"
Yes, that would be nice to get the reverse transfer of wealth. But of course, politicians don't mention that helping the borrower is also helping the lender. But at the same time, the government is responsible for the FDIC banks.
I only will get 300$ or so they say.
Only ones that make out like bandits is the pop kids for checks welfare crowd.
Stimulus check went to airline tickets to Michigan for my in-laws 40th anniversary and a new comforter set for the bed. An opportunity buy: we really liked it back in December, but held off. It has since been discontinued and she found it for 50% off.
Air Tran and Great Indoors. Sears and an airline. Probably better uses available for it, sure, but both put a big smile on my wife, so I'm alright with that.
Seb -
You have any interest in putting your money where your mouth is?
I'm definately game for a large wager.
I spent my $600 check at IKEA
Remember, although we're only on the borderline of recession by current definitions, the definition of "recession" was revised under Clinton and W by revising the GDP deflators to yield lower numbers. By traditional (pre-Clinton) recession definitions, we would certainly be in one.
You can hem and haw all you like, but there has been nothing tragic in the employment numbers yet, and nothing tragic (yet) in inflation.
ipodius
If the BED survey is anything to go by the economy has been shedding jobs since last July. A WAG is that a million jobs have gone since July 07, if that ain't tragic I don't know what is.
Look at the price increases in the ISM surveys and say there's no inflation. Puh-leaze
And what was that you wrote about the ECB cutting rates?
I opened a online retail store last year that only carries environmentally friendly goods. May was a good month and June has already equaled March sales. I would have to say that something is helping retailers out. My guess is that yes it is the stimulus package.
Alec said: "...A WAG is that a million jobs have gone since July 07, if that ain't tragic I don't know what is."
I couldn't figure out for the life of me how intelligent people could be looking at the same data and come up with such different points of view.
Non-farm payrolls show that there have been +136,000 net new jobs created from July 2007 to April 2008.
Bureau of Labor Statistics
So now I know. They aren't looking, they're guessing.
Sebastian
Sebastian,
I'd like to get me some of that weed you're smoking. It must all look good through the haze.
Recession or no recession, there is no denying that the standard of living for americans across the board is declining at a rapid rate and will continue to decline for the forseeable future. Salaries are stagnant or shrinking and have been for a decade, prices for basics (housing, food and transporation) have all increased by multiples in that time period and savings have been negative recently. That means all growth in the economy has been funded by debt and the access to that debt has just been turned off. Therefore, any illusion of prosperity or wealth for the majority of middle class americans has just evaporated. If you don't believe me, try to fly to a vacation spot or drive in the next 6-12 months. You'll feel poorer than at anytime in your life.
I guess, fattyk, I don't understand what standard you mean. Houses that are too big? Cars that are too big? Jeans that are too expensive? Paying twice as much to shop at Whole Foods? Seemed I lived fine for my childhood and most of my adult life without these things.
I think most people have a warped idea what what the standard actually is. It's certainly not what you see on TV.
Seb-
Due to population increase about 125,000 jobs must be created each month to provide employment to those entering theworkforce. A job growth of 136,000 in 9 months leaves a shortfall of over a million jobs just to break even.
People who want to work aren't.
Seb,
The BED survey data is way more accurate, this is undisputed. July August & September were 243k job losses, not the 200k job gain the establishment survey claimed at the time(and the numbers I used as a reference source)
So your +136k claim already is at 307k job losses. But since both the accuracy of the establishment survey and B/D model has degraded as the economy has gone south. So one has to extrapolate as one can until the next BED survey can be released for confirmation
The BED survey will next be issued for Q407 in mid august, so much like last time we covered this ground, by the time a more accurate picture appears you'll come up with a new line of bullshit to cherry pick.
Regarding the stimulus checks, one thing I don't understand, is that a hard cut-off at $150,000 per couple? That is if you made $149,999 you get the full rebate, but if you made $150,000 you get nothing?
Just as I suspected, China will be the primary beneficiary of the Economic Stimulus Act of 2008.
I tend to agree with Maxed out Mama: so far the predictions of armageddon have not come to fruition. However, things are on a down-ward slide. This really isn't that strong of a report. Some discounters did well (BJ's, WalMart, Costco). Everyone else got creamed (including Target). However, keep in mind how far the debate has moved in 6 months. Late last year, most reputable commentators considered the prospect of a recession laughable. Now, most are arguing about it's depth and length.
Another factor regarding whether the price of gasoline is damping down the stimulus may need to be considered. Recently I retired. The thing I noticed is I drive a whole lot less -- since I don't commute to work any more. So, even though gas has gone up a lot, I'm spending less for gas. It's one of the only areas that I am spending less on after retirement.
I know one person's experience doesn't apply to everyone, but there are going to be lots of people retiring over the next few years. This could cause a big decline in demand for gas. Hence, increases in oil prices aren't going to be that big of a drag on the economy.
EngineerJim,
The decline in the dollar which is helping the surge in oil is caused in part by the ever increasing debt the federal government is taking on. So while you may spend less on gas, the federal goverment will be spending more on you (and the other retirees) in the form of social security. This will increase the fed debt burden putting further strain on the dollar and negatively impacting oil prices. Do you see how this isn't a vacuum? High oil is here to stay and the knock on effects will continue regardless of a small decrease in consumption within the US.
"So while you may spend less on gas, the federal goverment will be spending more on you (and the other retirees) in the form of social security."
I tend to doubt that. The gov't already has a mechanism to means test social security through the medicare premium. Over my retirement social security could be effectively eliminated.
So we've progressed from saying "Are we there yet? Are we there yet?" about house price declines and now were'e saying it about negative growth? I'm with MoM, it's going to take awhile. Have patience and be prepared. It won't be the end of the world, but many people may discover that the CAN live within their means when the they no longer have access to the credit needed to do otherwise. They won't be happy but they'll live.