Maybe December will be especially weak, or maybe October and November will be revised downwards, but the two month estimate suggests real PCE will decline in Q3 by about 2.9% (annual rate).
CR, I think you meant Q4. It's a shame to have such good analysis spoiled by a typo.
it would be nice to see analysts getting ahead of the curve finally. although sometimes it's a nefarious attempt to overshoot on the negative so that the real number seems like an "upside surprise". we'll see.
or perhaps PCE will later be revised lower. Hmmm? What say you? I mean every other statistic and their mother these days is revised downward, and often significantly upon the next data release. No reason to think this wont be as well.
Off to buy a few things before flying up to see mom.
Dow is up a whole 5 points: buy, buy buy.
Msn money sez even some bulls were turning bearish. Didn't bother to look and see who this might be.
NPR had a talking head who said real estate would go down for another year, level out another year, and then start to go up. Hah.
If we are really really lucky, it will go down for another year and a half, level out for a year and a half and then start drifting up.
If it does what I think it will, it will be 2 years 2 years and then up a little bit. Which makes 5 years, which is the conclusion I came to a year ago.
CR, as I'm headed out for Christmas, thank you for the fine job that you've done all year. I now mostly visit CR before WSJ, Bloomberg, or NYT to learn what's going on. I feel my grasp of the economy has increased immeasurably thanks to your site and the comments on this site.
If it does what I think it will, it will be 2 years 2 years and then up a little bit. Which makes 5 years, which is the conclusion I came to a year ago. lawyerliz | 12.24.08 - 10:12 am | #
Heh.... I'll take the over.
I'd have to assume that many many many "realtors" are now out of the business.
I remember when I took the Series 7 exam back in 1996...... the place was absolutely jam-packed. Everyone wanted to be a stock broker. I overheard some doofus say he was sitting for the sixth time, trying to pass.
How'd you like to have money tied up with him?
How'd you like to be graduating Harvard Business School this Spring?
Cox told The Washington Post the biggest mistake of his tenure was agreeing in September to an extraordinary three-week ban on short selling of financial company stocks.
Cox told the newspaper he had been under intense pressure from Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to take this action and did so reluctantly.
They "were of the view that if we did not act and act at that instant, these financial institutions could fail as a result and there would be nothing left to save," Cox said.
UGA Dawg(Unrated) writes: To call this a blog and CR a host is like callin gthe Taj Mahal a house....
The Taj Mahal (pronounced /tɑdʒ mə'hɑl/ ---- Hindi: ताज महल; Persian/Urdu: تاج محل) is a mausoleum located in Agra, India, built by Mughal Emperor Shah Jahan in memory of his favorite wife, Mumtaz Mahal.
The staff of the Securities and Exchange Commission is urging the agency to investigate whether the managers of the Reserve Fund, whose money market funds have been blocked for more than three months, violated federal securities laws. According to a statement released by the fund on Tuesday night, the targets of the proposed investigation include Bruce R. Bent, the president of the Reserve Management Company; his two sons, Bruce Bent II and Arthur Bent III, who are senior executives at the company; and the management company itself.
Maybe december will be weak? Maybe we'll have downward revisions?
CR, sadly, we will kill off the "cautious" in your cautious pessimism before this is done.
Maybe December will be especially weak, or maybe October and November will be revised downwards, but the two month estimate suggests real PCE will decline in Q4 by about 2.9% (annual rate).
So, does the implosion of Madoff's fund put $50b into circulation looking for productive investments where it is needed most with an attendant massive stimulus effect? Upon which side of the PCE does it fall?
lawyerliz, even you are too optimistic. Google up a graph of Japanese real estate prices post-bubble. It took more than 10 years for prices even to bottom,
Our experience is almost certain to be even worse. Note that the topic of departure for this thread was personal consumption expenditures (PCE), which recently had reached over 70% of GDP at the same time the savings rate had declined to less than zero. As the savings rate will need to -- and will -- increase back to 10% or more, PCE will drop to about 60& of GDP -- a drop of about 14% in PCE itself.
The job losses associated with the wholesale economic reorganization a 14$ PCE decline implies will be severe, and will result in many more foreclosures than the bubble burst alone.
Over the last few decades, the US home ownership rate mostly oscillated between 63% in busts to 65% in booms. But the bubble took it up to a peak above 69%. As it reverts to the mean and then overershoots below it as job loss approaches depression levels, ownership is going to decline to well under 64.
With each percentage point equating to about a million homes, an ownership rate decline from 69% to, say, 60% (even that a downside overshoot smaller than the bubble overshoot), we can expect about nine million homes to be lost to foreclosure.
Nothing like this has happened in the US since the Great Depression, and it is going to impact national psychology just as that depression did. It'll be decades before anyone starts bidding real estate up again.
How do you figure real PCE will drop 2.9 in Q4? If Q3 chained PCE was 8260, and Oct-Nov avg is 8215.2, that's a 0.55% quarterly drop based on two months data, or 2.2% at an annual rate. Your -2.9% suggests Dec real PCE will be 7,632. that's a 7.4% from November. I don't see it.
If you follow Japanese real estate (my father owns a little bit of prime real estate so I have some interest in the prices , only few pockets went up the past 2 or 3 years: the top was at 1991 so some hit bottom after 14+ years while most places have yet to hit bottom. If the economy in Japan continues to go down (which is what I'm guessing: GD2 is a global phenom), the bottom for Japanese real estate may be few more decades away (much like Nikkei index or Nasdaq index)....
So, does the implosion of Madoff's fund put $50b into circulation looking for productive investments where it is needed most with an attendant massive stimulus effect? Upon which side of the PCE does it fall?
The $50B has been neatly packed into duffel bags and sits in a room in Madoff's apartment.
It will not be circulating anywhere until he flees to South America.
Lefty(Unrated) writes: The $50B has been neatly packed into duffel bags and sits in a room in Madoff's apartment.
He blew it all on likker and hoors.
He imploded when he couldn't handle 7bn in redemptions. It was all donated or squandered. Wait til the charities that were his darlings start getting sued for clawbacks.
Ille_vir, saw that you're headed to Monterey (if you're around), bob dobbs is across the bay in Santa Cruz. I grew up there and still have family on the Peninsula.
If you haven't been, and plan to visit the aquarium, may I tender advice? (one) the Star Trek movie where they rescue the whales was shot there, with some early CG. Don't expect it to look like that. (Two) go EARLY. As in, queue up before it opens. Pardon the mixed metaphor but it's a zoo during the holidays. (Three) the best tidepools are in Pacific Grove, not Carmel. (Four) if you golf, PG Muni was designed by same guy as who did Pebble Beach, but costs about 1/5th the price for green fees. Just don't try to hit out of iceplant.
this is OT - but hey, Counterpointer, we know you can speak Mandarin... so could I relatively well until Jack Welch in a private conversation convinced me in '86 that China "was a shell game".
the hard part about Chinese is the ideograms, Vietnamese is a much tougher language to speak.
I've had a great 1/2 year with this blog thanks to being stranded a while on a lost island in the South Chinese Sea and discovering it... the locals there call it the Eastern Sea.
I agree, CR. I was very startled and puzzled to read the estimates of a 5% (annualized) decline for the quarter. A lot of people living on moderate incomes really needed things like shoes, coats, etc. I think more of this money is going to be spent on the less frivolous items and big ticket items, but it will be spent. The extra money gas prices have put into people's pockets will be spent by the moderate income cohort, which will produce some better numbers. I also have noticed that the lower diesel prices are beginning to bring down some food prices. Also, close attention to some of the economic reports show that lower producer prices are having some effect.
It's almost as if having forgotten economic principles during the boom, the same analysts are now failing to apply them in the bust. Nice to have you around; maybe someday people will remember what economics is all about.
in an earlier thread somebody was calling for Vietnam index as a great buy when it hits 150 in 10 months... oddly, can't find anyone over here in major trading position who'll buy into that
Story in this morning's Oregonian - a Bend OR 1031 (Starker) exchange firm, Summit 1031 Exchange, took its clients' funds and invested them in bad land deals made by another firm, Inland Capital, that was owned by the same folks who own Summit. Surprise surprise Inland's bets went bad, and now Summit is 14 plus million in the hole to its clients, who thought Summit was just holding their money safely until they could complete their RE exchanges (which is what a 1031 principal is supposed to do).
jm writes: Google up a graph of Japanese real estate prices post-bubble. It took more than 10 years for prices even to bottom,. . . .
I don't see the connection. The USA is not Japan and never will be (for numerous reasons).
The key to RRE bottoming is reaching a realistic price/rent ratio. That will happen in the next two years, perhaps even in 18 months, given the number of foreclosures likely to occur.
The key to CRE bottoming is use (consumption) of the structures already built. That may take a little longer, but will happen as population increases and as firms move to better quarters for no increase in lease payments. Some older buildings will be demolished in the process.
The only question in my mind about the timetable is whether the incoming administration will allow price discovery to occur or will continue to mask the problem with handouts.
MaxedOutMama writes:
...A lot of people living on moderate incomes really needed things like shoes, coats, etc. I think more of this money is going to be spent on the less frivolous items and big ticket items, but it will be spent. The extra money gas prices have put into people's pockets will be spent by the moderate income cohort, which will produce some better numbers.
So why hasn't the price of the Sony Playstation3 come down at all??
I was waiting until today to buy one hoping the price would drop, but apparently sales are good enough at $399 so no drop is needed.
As a person with cash, I am very disappointed with the lack of opportunities in this recession so far.
Re: scammer Toussie. The pardon doesn't cover civil suits. His victims should want him out of jail earning seizable assets. Pardon pricing, inflated for scam wealth or volume discounts?
Thanks for the pointers Exit, Been there a few times. Just going to walk around Point Lobos and hike around some other places this time. Wonder if Jack's Peak is worth the time. Last time, we walked from Pacific Grove to Monterey and saw seals and sea otters on the way.
Instead of "negative PCE growth," shouldn't we start calling it what it is, like PCE shrinkage, or something like that? "Clawback," "cramdown" both good words.
I was on an island, a few hours by ferry, off the coast of thailand a few years ago. $10 a night for room. A week later I moved up to the high end rooms for $40 a night. Great food on the beach for $10 or so a night. the locals dranks whiskey for breakfast which made me look like a light drinker. The yachts docked and visited because the island was unbelievably gorgeous. I had some thoughts about starting a life of crime in the US and just moving their with the spoils. I was only deterred by the fact that I could live there for the rest of my days with the money i have already. Have you made this choice? If so, how is it going?
they had better cell service and bandwidth in the middle of the ocean than I have in upstate NY.
Made a mistake on previous comment. I still think two month data suggests 2.2% drop instead of 2.9% drop, but I should have said Dec would need to be 8,170 (not the 7,632 I wrongly arrive at) for a -2.9%, vs. 8,215 to stay as a 2.2% drop.
did anyone notice the Times' numbers? ad sales off 20%... I worked for them back in the 80s (church & state) when they made money but now... they have this B stock which are like supershares and I think they'd need to get close to 70% of Sulzbergers/Goldens on board for a buyout? wasn't the Journal structured in a like way... any thoughts?
True that the 1990 crash took over five years to bottom, at least in my area, but I expect that the velocity of this downturn will be greater at all points on the chart.
I don't see a "V" recovery at all, but I do see us getting to the bottom quicker. How long we spend going sideways is still an open question in my mind.
Old Timer(Unrated) writes: So why hasn't the price of the Sony Playstation3 come down at all??
You know the part in the Lord of the Rings where Theoden goes mad from staring into the palantir and prepares to have himself burnt alive on his funeral pyre?
Interest rate problem,too. The odds are very good that the '82 bull market in bonds is over. Rising rates will kill house prices for the next 20 years .
Prices aren't accelerating down because of better efficiency, they're falling because demographics
I would be very surprised if I, at 50, ever buy a house again. No reason.
Households have lost over $7 trillion in terms of net worth in the year ending 3Q, and it looks like this wealth destruction will top $10 trillion when the 4Q Fed flow of-funds data come out (that already exceeds the entire $4 trillion loss during the tech wreck). For a great synopsis, see A Deflation Maelstrom In the Making on page 11 of BusinessWeek. Fridays WSJ (page B1 - Retailers Drop Prices to Avert a Flop) was filled with stories of how merchants are discounting more now than they were on Black Friday. On The Road To Deflation | Daily Markets
Haven't been out to jack's in a long time. If you are inclined to, head out Carmel Valley toward Greenfield. Past the Village. Beautiful. Also, about 15 minutes north on Hwy 1 is Castroville, home of deepfried artichokes. Mmmmm - salty fried goodness in a bite size lump. Also consider Asilomar for a stroll.
In a new interview with the Washington Post, embattled Securities and Exchange Commission Chairman Christopher Cox stridently defend[ed] his restrained approach to the financial crisis. He refused to accept any blame for the Wall Street crisis or the Madoff Ponzi scheme, saying that regulating Wall Street and protecting investors wasnt the SECs job
Saving from current income may be near zero
or negative when outlays are financed by borrowing (including borrowing financed through credit cards
or home equity loans), by selling investments or other assets, or by using savings from previous periods.
For more information, see the FAQs on Personal Saving on BEAs Web site. For a comparison of
personal saving in BEAs national income and product accounts with personal saving in the Federal
Reserve Boards flow of funds accounts and data on changes in net worth (which help finance
consumption), go to BEA : Page Not Found.
sportsfan wrote, The key to RRE bottoming is reaching a realistic price/rent ratio. That will happen in the next two years, perhaps even in 18 months, given the number of foreclosures likely to occur.
But rental rates are going to drop, too. At the end of 2004 when I first thought of selling my home and renting, only seven homes were listed for rent on my suburban Chicago MLS. And none were anything I'd have wanted to move to. Now the listings number 160+, with 110+ in the neighboring town. And the listings just sit and sit.
We have an unprecedented glut of housing, with ownership rates among the younger age cohorts well above historical averages. The bubble pulled forward a huge amount of demand, sucking into home "owership" young people who in the past would have been renters, saving up downpayments to buy at more appropriate ages. Bled dry by the homes they thought were surefire investments, the many who will lose their homes in this depression won't be able to buy again for a very long time. And their younger relatives and friends will see home-buying as a very unwise act.
This combination of supply glut and demand dearth is going to reset home prices to their early-90s levels.
Say I'm in South Florida and the house is presently worth 320k, down from 460k at peak. How much of a further decline can I expect to see? The home was originally purchased in 2001 at 240k.
You're both right that rental rates are dropping and will continue to drop for so long as we are in a deflation cycle.
The cure for RRE will start when employment numbers and household formation each turn positive again.
I think that will happen before prices reach the level of the early 90s.
I've been a doom-and-gloomer for several years. Things today are at least as bad as I imagined then. I'm just trying to see through to the other side now.
I'm not optimistic by any stretch, but I think we'll avoid Mad Max World and thus that this cycle will end eventually.
Meanwhile, it's 9 a.m. PST, so I think I'll be going out and trying to accomplish something today. We all have to remain productive one way or another. Have a great day, folks.
Say I'm in South Florida and the house is presently worth 320k, down from 460k at peak. How much of a further decline can I expect to see? The home was originally purchased in 2001 at 240k.
Consider yourself lucky, you bought early enough before the bubble.
You should be ok, values won't fall below the 240k that you paid for the house.
Anon's point is pretty important. When CR made his original estimate of falling PCE's in August he took the figure adjusted for inflation.
But in this estimate he's taken the figure not adjusted for inflation.
That seems odd.
Not least as its likely inflation will fall just as fast in December as November, and the same thing will likely happen again.
In other words PCE adjusted for inflation will increase in Q4.
Good work Bill.
OT - Estimating a bounce in oil? Bought some USO @ 28.90 - will buy more on another dip below 28.69. Stop loss 2% lower.
Maybe December will be especially weak, or maybe October and November will be revised downwards, but the two month estimate suggests real PCE will decline in Q3 by about 2.9% (annual rate).
CR, I think you meant Q4. It's a shame to have such good analysis spoiled by a typo.
"OT - Estimating a bounce in oil? Bought some USO @ 28.90 - will buy more on another dip below 28.69."
--Persecuted Comrade Anonymouse
Are you calling a bottom or looking for a quick trade?
A nice counter-trend bounce.
sportsfan, Q4. Yes - thanks!
best to all.
it would be nice to see analysts getting ahead of the curve finally. although sometimes it's a nefarious attempt to overshoot on the negative so that the real number seems like an "upside surprise". we'll see.
Factor in the decline in gas prices and consumer spending is not as bad as feared, it seems.
Oh, and Ho Ho Ho to all.
Those were mine at 28.9 PCA. Harvesting losses, moving to broader energy and commodity indexed etf's.
albnyc:
agreed. the gas price relief will have a hugely positive impact. it would have been a total horror show if fuel was still $4 a gallon.
or perhaps PCE will later be revised lower. Hmmm? What say you? I mean every other statistic and their mother these days is revised downward, and often significantly upon the next data release. No reason to think this wont be as well.
Nantucket: I'm long Santa today.
Off to buy a few things before flying up to see mom.
Dow is up a whole 5 points: buy, buy buy.
Msn money sez even some bulls were turning bearish. Didn't bother to look and see who this might be.
NPR had a talking head who said real estate would go down for another year, level out another year, and then start to go up. Hah.
If we are really really lucky, it will go down for another year and a half, level out for a year and a half and then start drifting up.
If it does what I think it will, it will be 2 years 2 years and then up a little bit. Which makes 5 years, which is the conclusion I came to a year ago.
Everybody has abandoned 2nd half of 2009, I see.
CR, as I'm headed out for Christmas, thank you for the fine job that you've done all year. I now mostly visit CR before WSJ, Bloomberg, or NYT to learn what's going on. I feel my grasp of the economy has increased immeasurably thanks to your site and the comments on this site.
BankUnited, the bank I love to hate, is down to .19 a share, after hanging out in the high 20s for a while.
Now, Bye!
If it does what I think it will, it will be 2 years 2 years and then up a little bit. Which makes 5 years, which is the conclusion I came to a year ago.
lawyerliz | 12.24.08 - 10:12 am | #
Heh.... I'll take the over.
I'd have to assume that many many many "realtors" are now out of the business.
I remember when I took the Series 7 exam back in 1996...... the place was absolutely jam-packed. Everyone wanted to be a stock broker. I overheard some doofus say he was sitting for the sixth time, trying to pass.
How'd you like to have money tied up with him?
How'd you like to be graduating Harvard Business School this Spring?
OK I'm out of USO. Got PKOL, USL, DBC, GAZ,...
Are food stamps included in PCE? Read that there's a bull market in food stamps - UP 25% in much of the country.
Very sad. I am donating today.
Cox told The Washington Post the biggest mistake of his tenure was agreeing in September to an extraordinary three-week ban on short selling of financial company stocks.
Cox told the newspaper he had been under intense pressure from Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke to take this action and did so reluctantly.
They "were of the view that if we did not act and act at that instant, these financial institutions could fail as a result and there would be nothing left to save," Cox said.
SEC chief defends response to economic turmoil
| Reuters
Appointed officials, conspiracy, market manipulation, Banana Republic. What a country. They were wrong though, there isn't anything left to save.
Harvard B School would do well to offer a couple of electives which they strongly urge on grads-to-be:
CR, Jas, Mock Turtle, Rob Dawg, LL, Maxed out momma, anonymouse, all the comrades, MS, mp, FFDIC, currently smoking canabis, allen, etc.
Have enjoyed the analysis, discourse chart porn, ubernerd postings, cartoons, all the disagreements, and prognosticating.
I am better because of this blog which is more than a blog... it's a vast pool of knowledge and respectable opinions with limited trolling...
To call this a blog and CR a host is like callin gthe Taj Mahal a house....
Merry Christmas and happy holidays to all... left and right...
Lance
Can the bottom-callers of oil please stop? Full stop.
Ruh roh....
"CME is having issues, trading halted for Interest Rates, Livestock, Dairy, and Forestry futures "
UGA Dawg(Unrated) writes:
To call this a blog and CR a host is like callin gthe Taj Mahal a house....
The Taj Mahal (pronounced /tɑdʒ mə'hɑl/ ---- Hindi: ताज महल; Persian/Urdu: تاج محل) is a mausoleum located in Agra, India, built by Mughal Emperor Shah Jahan in memory of his favorite wife, Mumtaz Mahal.
Eric(Irritating) writes:
Ruh roh....
"CME is having issues
Like technical issues or market action issues?
Can the bottom-callers of oil please stop? Full stop.
Comrade Peronista | 12.24.08 - 10:31 am | #
When everyone gets sick of people calling the bottom, that will be the bottom.
God Jul kära vänner!
Good. No bailout for retailers.
Bush is getting the ball rolling, pardoning a real shitbag of a local housing swindler:
The Washington Monthly
Heck of a job, Bushie!
Adds new meaning to "Get Bent!"
The staff of the Securities and Exchange Commission is urging the agency to investigate whether the managers of the Reserve Fund, whose money market funds have been blocked for more than three months, violated federal securities laws. According to a statement released by the fund on Tuesday night, the targets of the proposed investigation include Bruce R. Bent, the president of the Reserve Management Company; his two sons, Bruce Bent II and Arthur Bent III, who are senior executives at the company; and the management company itself.
Like technical issues or market action issues?
Comrade Byzantine_Ruins | Homepage | 12.24.08 - 10:33 am | #
I assume tech..... just got that news blip from my datafeed.
Happy holidays to all.
Maybe december will be weak? Maybe we'll have downward revisions?
CR, sadly, we will kill off the "cautious" in your cautious pessimism before this is done.
Maybe December will be especially weak, or maybe October and November will be revised downwards, but the two month estimate suggests real PCE will decline in Q4 by about 2.9% (annual rate).
Eric(Irritating) writes:
I assume tech..... just got that news blip from my datafeed.
Thanks man! Figured likewise but worth asking. =)
So, does the implosion of Madoff's fund put $50b into circulation looking for productive investments where it is needed most with an attendant massive stimulus effect? Upon which side of the PCE does it fall?
lawyerliz, even you are too optimistic. Google up a graph of Japanese real estate prices post-bubble. It took more than 10 years for prices even to bottom,
Our experience is almost certain to be even worse. Note that the topic of departure for this thread was personal consumption expenditures (PCE), which recently had reached over 70% of GDP at the same time the savings rate had declined to less than zero. As the savings rate will need to -- and will -- increase back to 10% or more, PCE will drop to about 60& of GDP -- a drop of about 14% in PCE itself.
The job losses associated with the wholesale economic reorganization a 14$ PCE decline implies will be severe, and will result in many more foreclosures than the bubble burst alone.
Over the last few decades, the US home ownership rate mostly oscillated between 63% in busts to 65% in booms. But the bubble took it up to a peak above 69%. As it reverts to the mean and then overershoots below it as job loss approaches depression levels, ownership is going to decline to well under 64.
With each percentage point equating to about a million homes, an ownership rate decline from 69% to, say, 60% (even that a downside overshoot smaller than the bubble overshoot), we can expect about nine million homes to be lost to foreclosure.
Nothing like this has happened in the US since the Great Depression, and it is going to impact national psychology just as that depression did. It'll be decades before anyone starts bidding real estate up again.
Eric(Irritating) writes:
Comrade Byzantine_Ruins | Homepage | 12.24.08 - 10:42 am | #
I weep for my rating.
How do you figure real PCE will drop 2.9 in Q4? If Q3 chained PCE was 8260, and Oct-Nov avg is 8215.2, that's a 0.55% quarterly drop based on two months data, or 2.2% at an annual rate. Your -2.9% suggests Dec real PCE will be 7,632. that's a 7.4% from November. I don't see it.
Jim in Portland...Or maybe they can apply for disability, which happened in my county when all the jobs left.
It appears most are receiving it.
Just an idea.
"Eric(Irritating) writes:"- Comrade Byzantine_Ruins
"I weep for my rating." - Eric
I'd take an "irritating" on CR over an "excellent" on any of the echo chamber blogs any day.
But then again, I'm special or should I say' Supercalfragalisticexpealodousious.
Arrrgh -- 14% PCE decline [above], not "14$".
Eric(Irritating) writes:
I weep for my rating.
Oh no! Exiled to the land of el-Cliffo by a stray click.
Let me fetch you back from the underworld.
jm: here's one:
charles hugh smith-What We Can Learn from Japan's 15-Year Decline in Real Estate
If you follow Japanese real estate (my father owns a little bit of prime real estate so I have some interest in the prices
, only few pockets went up the past 2 or 3 years: the top was at 1991 so some hit bottom after 14+ years while most places have yet to hit bottom. If the economy in Japan continues to go down (which is what I'm guessing: GD2 is a global phenom), the bottom for Japanese real estate may be few more decades away (much like Nikkei index or Nasdaq index)....
Credit cards were a secondary income for two generations.
With the US and the consumer both in black hole's of debt.....No one has an answer.
Rob Dawg writes:
So, does the implosion of Madoff's fund put $50b into circulation looking for productive investments where it is needed most with an attendant massive stimulus effect? Upon which side of the PCE does it fall?
The $50B has been neatly packed into duffel bags and sits in a room in Madoff's apartment.
It will not be circulating anywhere until he flees to South America.
Lefty(Unrated) writes:
The $50B has been neatly packed into duffel bags and sits in a room in Madoff's apartment.
He blew it all on likker and hoors.
He imploded when he couldn't handle 7bn in redemptions. It was all donated or squandered. Wait til the charities that were his darlings start getting sued for clawbacks.
CR - thanks and merry happy chriskwaanzahanukah.
Ille_vir, saw that you're headed to Monterey (if you're around), bob dobbs is across the bay in Santa Cruz. I grew up there and still have family on the Peninsula.
If you haven't been, and plan to visit the aquarium, may I tender advice? (one) the Star Trek movie where they rescue the whales was shot there, with some early CG. Don't expect it to look like that. (Two) go EARLY. As in, queue up before it opens. Pardon the mixed metaphor but it's a zoo during the holidays. (Three) the best tidepools are in Pacific Grove, not Carmel. (Four) if you golf, PG Muni was designed by same guy as who did Pebble Beach, but costs about 1/5th the price for green fees. Just don't try to hit out of iceplant.
There is something viscerally satisfying about the word 'clawback'.
this is OT - but hey, Counterpointer, we know you can speak Mandarin... so could I relatively well until Jack Welch in a private conversation convinced me in '86 that China "was a shell game".
the hard part about Chinese is the ideograms, Vietnamese is a much tougher language to speak.
I've had a great 1/2 year with this blog thanks to being stranded a while on a lost island in the South Chinese Sea and discovering it... the locals there call it the Eastern Sea.
I agree, CR. I was very startled and puzzled to read the estimates of a 5% (annualized) decline for the quarter. A lot of people living on moderate incomes really needed things like shoes, coats, etc. I think more of this money is going to be spent on the less frivolous items and big ticket items, but it will be spent. The extra money gas prices have put into people's pockets will be spent by the moderate income cohort, which will produce some better numbers. I also have noticed that the lower diesel prices are beginning to bring down some food prices. Also, close attention to some of the economic reports show that lower producer prices are having some effect.
It's almost as if having forgotten economic principles during the boom, the same analysts are now failing to apply them in the bust. Nice to have you around; maybe someday people will remember what economics is all about.
in an earlier thread somebody was calling for Vietnam index as a great buy when it hits 150 in 10 months... oddly, can't find anyone over here in major trading position who'll buy into that
Story in this morning's Oregonian - a Bend OR 1031 (Starker) exchange firm, Summit 1031 Exchange, took its clients' funds and invested them in bad land deals made by another firm, Inland Capital, that was owned by the same folks who own Summit. Surprise surprise Inland's bets went bad, and now Summit is 14 plus million in the hole to its clients, who thought Summit was just holding their money safely until they could complete their RE exchanges (which is what a 1031 principal is supposed to do).
I've never had the oppty to do a 1031. This is frightening. Apparently Summit was highly regarded, and has clients in eight Western states.
Bend's Summit 1031 Exchange goes bust - OregonLive.com
jm writes:
Google up a graph of Japanese real estate prices post-bubble. It took more than 10 years for prices even to bottom,. . . .
I don't see the connection. The USA is not Japan and never will be (for numerous reasons).
The key to RRE bottoming is reaching a realistic price/rent ratio. That will happen in the next two years, perhaps even in 18 months, given the number of foreclosures likely to occur.
The key to CRE bottoming is use (consumption) of the structures already built. That may take a little longer, but will happen as population increases and as firms move to better quarters for no increase in lease payments. Some older buildings will be demolished in the process.
The only question in my mind about the timetable is whether the incoming administration will allow price discovery to occur or will continue to mask the problem with handouts.
MaxedOutMama writes:
...A lot of people living on moderate incomes really needed things like shoes, coats, etc. I think more of this money is going to be spent on the less frivolous items and big ticket items, but it will be spent. The extra money gas prices have put into people's pockets will be spent by the moderate income cohort, which will produce some better numbers.
So why hasn't the price of the Sony Playstation3 come down at all??
I was waiting until today to buy one hoping the price would drop, but apparently sales are good enough at $399 so no drop is needed.
As a person with cash, I am very disappointed with the lack of opportunities in this recession so far.
Re: scammer Toussie. The pardon doesn't cover civil suits. His victims should want him out of jail earning seizable assets.
Pardon pricing, inflated for scam wealth or volume discounts?
Thanks for the pointers Exit,
Been there a few times. Just going to walk around Point Lobos and hike around some other places this time. Wonder if Jack's Peak is worth the time. Last time, we walked from Pacific Grove to Monterey and saw seals and sea otters on the way.
Instead of "negative PCE growth," shouldn't we start calling it what it is, like PCE shrinkage, or something like that? "Clawback," "cramdown" both good words.
Just realized old haloscan spell checker caught all my typos. Companion cooper?
Duke of Con Dao
I was on an island, a few hours by ferry, off the coast of thailand a few years ago. $10 a night for room. A week later I moved up to the high end rooms for $40 a night. Great food on the beach for $10 or so a night. the locals dranks whiskey for breakfast which made me look like a light drinker. The yachts docked and visited because the island was unbelievably gorgeous. I had some thoughts about starting a life of crime in the US and just moving their with the spoils. I was only deterred by the fact that I could live there for the rest of my days with the money i have already. Have you made this choice? If so, how is it going?
they had better cell service and bandwidth in the middle of the ocean than I have in upstate NY.
Made a mistake on previous comment. I still think two month data suggests 2.2% drop instead of 2.9% drop, but I should have said Dec would need to be 8,170 (not the 7,632 I wrongly arrive at) for a -2.9%, vs. 8,215 to stay as a 2.2% drop.
I weep for my rating.
Eric | 12.24.08 - 10:47 am | #
Now that's comedy!
As a person with cash, I am very disappointed with the lack of opportunities in this recession so far.
Old Timer | 12.24.08 - 11:12 am | #
Craigslist, my friend, Craigslist. Buy used and get all their games and accessories thrown in as well.
I don't see the connection. The USA is not Japan and never will be (for numerous reasons)
1990 Nikkei roughly equal to 2001 Nasdaq. Demographics are offset by about ten years.
That will happen in the next two years, perhaps even in 18 months
Unlikely. The 1990 crash took over five years to bottom and this was a bigger bubble, not to mention the demographic issues.
We'll be lucky if there's a real bottom by 2012. i expect a long, slow bleedoff just like Japan, although for a shorter period.
"No, You Can't Have a Pony" CR commenter theme picture, featuring a crying little girl and a pony photo inset that says "Not Yours."
did anyone notice the Times' numbers? ad sales off 20%... I worked for them back in the 80s (church & state) when they made money but now... they have this B stock which are like supershares and I think they'd need to get close to 70% of Sulzbergers/Goldens on board for a buyout? wasn't the Journal structured in a like way... any thoughts?
Duke of Con Dao writes:
Q: did anyone notice the Times' numbers?
A: Poor Gretchen. 'Nuff said.
Broward Horne | Homepage | 12.24.08 - 11:21 am |
True that the 1990 crash took over five years to bottom, at least in my area, but I expect that the velocity of this downturn will be greater at all points on the chart.
I don't see a "V" recovery at all, but I do see us getting to the bottom quicker. How long we spend going sideways is still an open question in my mind.
How'd you like to be graduating Harvard Business School this Spring?
Eric | 12.24.08 - 10:16 am | #
Go PhD?
Just realized old haloscan spell checker caught all my typos.
1 currency soon [yogi] | 12.24.08 - 11:14 am | #
Right click in the editor, and say 'check spelling'. It will then work for the rest of that post. I'm still working on enabling it by default.
Craigslist, my friend, Craigslist. Buy used and get all their games and accessories thrown in as well.
Gary | 12.24.08 - 11:21 am | #
Looking for a camcorder on Craigslist. Those craiglist posts must be from home sellers chasing down the market.
craigslist | Page Not Found
Brand new SR12 sells for $830.
Old Timer(Unrated) writes:
So why hasn't the price of the Sony Playstation3 come down at all??
You know the part in the Lord of the Rings where Theoden goes mad from staring into the palantir and prepares to have himself burnt alive on his funeral pyre?
So, anyway, Sony...
Interest rate problem,too. The odds are very good that the '82 bull market in bonds is over. Rising rates will kill house prices for the next 20 years .
Prices aren't accelerating down because of better efficiency, they're falling because demographics
I would be very surprised if I, at 50, ever buy a house again. No reason.
CR, and all you guys out there,
I whish you all ~~~ Merry Christmas ~~~
And CR, thanks (from Germany) for the blog!
"so could I relatively well until Jack Welch in a private conversation convinced me in '86 that China "was a shell game".
Their shell game and ours made for perfect trading partners.
Happy Holidays to all. Off to buy a couple of things for the Mrs. for Christmas.
When I think about PCE, I think asphalt:
"The pricing index in the asphalt and oil industries is still high, even though gas and oil prices have come down," said Mike O'Barto, board chairman. "We want to get the best prices possible."
Unity supervisors will wait to buy road materials - Pittsburgh Tribune-Review
REbear,
Craigslist is like shorting during a bear market rally..Patience will pay off...
I have a friend that has been buying RV's cheap, cleaning them up and reselling...He has cash and can hold..
He says when you see same ad and poster drops price a couple times...Swoop in with low ball offer...desperation tends to outweigh pride...
Duke, that was me on Vietnam. What are your sources saying?
Deflation risks are intact
Households have lost over $7 trillion in terms of net worth in the year ending 3Q, and it looks like this wealth destruction will top $10 trillion when the 4Q Fed flow of-funds data come out (that already exceeds the entire $4 trillion loss during the tech wreck). For a great synopsis, see A Deflation Maelstrom In the Making on page 11 of BusinessWeek. Fridays WSJ (page B1 - Retailers Drop Prices to Avert a Flop) was filled with stories of how merchants are discounting more now than they were on Black Friday.
On The Road To Deflation | Daily Markets
Ille_vir
Haven't been out to jack's in a long time. If you are inclined to, head out Carmel Valley toward Greenfield. Past the Village. Beautiful. Also, about 15 minutes north on Hwy 1 is Castroville, home of deepfried artichokes. Mmmmm - salty fried goodness in a bite size lump. Also consider Asilomar for a stroll.
Think its time to visit Mom again....
NY CRE in trouble...
Curbed NY: CurbedWire: More Lien Times at Sheffield 57, Trader John's?
In a new interview with the Washington Post, embattled Securities and Exchange Commission Chairman Christopher Cox stridently defend[ed] his restrained approach to the financial crisis. He refused to accept any blame for the Wall Street crisis or the Madoff Ponzi scheme, saying that regulating Wall Street and protecting investors wasnt the SECs job
Think Progress » SEC Chair Asked If He Deserves Blame For Wall Street Crisis: ‘Absolutely Not,’ It ‘Wasn’t The SEC’s Job’
The incompetence and denial of Bush admin 'official assclowns' is off the charts !
Hey, crispy, why you stealing my thunder?
You've got your market crash in CA, let me tout my own.
NYC. CRE.
Threat music
YouTube -
Saving from current income may be near zero
or negative when outlays are financed by borrowing (including borrowing financed through credit cards
or home equity loans), by selling investments or other assets, or by using savings from previous periods.
For more information, see the FAQs on Personal Saving on BEAs Web site. For a comparison of
personal saving in BEAs national income and product accounts with personal saving in the Federal
Reserve Boards flow of funds accounts and data on changes in net worth (which help finance
consumption), go to BEA : Page Not Found.
sportsfan-
It may be a race to the bottom re: buy vs rent
I just got a 10% rent reduction in a prime Los Angeles local. Anyone who asks will get one.
I'm guessing that this may have happened in Japan too.
Threat music... - 12th Percentile
THREAT music? Wow, you NYCers sure are territorial.
sportsfan wrote, The key to RRE bottoming is reaching a realistic price/rent ratio. That will happen in the next two years, perhaps even in 18 months, given the number of foreclosures likely to occur.
But rental rates are going to drop, too. At the end of 2004 when I first thought of selling my home and renting, only seven homes were listed for rent on my suburban Chicago MLS. And none were anything I'd have wanted to move to. Now the listings number 160+, with 110+ in the neighboring town. And the listings just sit and sit.
We have an unprecedented glut of housing, with ownership rates among the younger age cohorts well above historical averages. The bubble pulled forward a huge amount of demand, sucking into home "owership" young people who in the past would have been renters, saving up downpayments to buy at more appropriate ages. Bled dry by the homes they thought were surefire investments, the many who will lose their homes in this depression won't be able to buy again for a very long time. And their younger relatives and friends will see home-buying as a very unwise act.
This combination of supply glut and demand dearth is going to reset home prices to their early-90s levels.
See Also:
http://www.sifma.org/research/pdf/RsrchRprtVol7-7.pdf
Re: PCE,FFA,NIPA,DPI and negative savings, which SIFMA refers to as dissaving.
How does MEW (mortgage equity withdraw) fit in with DIP in this PCE?
Say I'm in South Florida and the house is presently worth 320k, down from 460k at peak. How much of a further decline can I expect to see? The home was originally purchased in 2001 at 240k.
jane and jm,
You're both right that rental rates are dropping and will continue to drop for so long as we are in a deflation cycle.
The cure for RRE will start when employment numbers and household formation each turn positive again.
I think that will happen before prices reach the level of the early 90s.
I've been a doom-and-gloomer for several years. Things today are at least as bad as I imagined then. I'm just trying to see through to the other side now.
I'm not optimistic by any stretch, but I think we'll avoid Mad Max World and thus that this cycle will end eventually.
Meanwhile, it's 9 a.m. PST, so I think I'll be going out and trying to accomplish something today. We all have to remain productive one way or another. Have a great day, folks.
Comrade Byzantine_Ruins writes:
Oh no! Exiled to the land of el-Cliffo by a stray click.
Not only are you a fuzzy-thinking communist, you're a coward, too.
I can haz bailouts writes:
Say I'm in South Florida and the house is presently worth 320k, down from 460k at peak. How much of a further decline can I expect to see? The home was originally purchased in 2001 at 240k.
Consider yourself lucky, you bought early enough before the bubble.
You should be ok, values won't fall below the 240k that you paid for the house.
"Consider yourself lucky, you bought early enough before the bubble.
You should be ok, values won't fall below the 240k that you paid for the house.
Kyle | 12.24.08 - 12:20 pm | # "
I think you "won't" in by accident instead of "may not" in the above sentence.
Although PCE did decline by .6% in nominal terms, in real terms its actually up .6% (positive)
I think PCE will decrease dramatically next year when the depth of the recession really becomes apparent.
Can haz--I'd say 200-240,000.
And saying that anything in South Florida is worth anything is meaningless unless you have a buyer who has cash or financing.
Duke of Con Dao - guess I had about 1000 or more back in the 90s. Mostly AWOL now.
C
sorry anon, when revised down, it will be negative.
Anon's point is pretty important. When CR made his original estimate of falling PCE's in August he took the figure adjusted for inflation.
But in this estimate he's taken the figure not adjusted for inflation.
That seems odd.
Not least as its likely inflation will fall just as fast in December as November, and the same thing will likely happen again.
In other words PCE adjusted for inflation will increase in Q4.