I THINK THE MARKETS HAVE BOTTOMED!!!

Inflation is coming....I don't see how we can stop it.



<a href="http://www.nytimes.com/2009/05/04/business/economy/04debt.html?ref=patrick.net">Worries Rise on the Size of U.S. Debt </a>



"While the real long-term interest rate will not rise immediately, the committee concluded, ?such a fiscal path could force real rates notably higher at some point in the future.?
 
[quote author="morekaos" date=1241585188]Inflation is coming....I don't see how we can stop it.



<a href="http://www.nytimes.com/2009/05/04/business/economy/04debt.html?ref=patrick.net">Worries Rise on the Size of U.S. Debt </a>



"While the real long-term interest rate will not rise immediately, the committee concluded, ?such a fiscal path could force real rates notably higher at some point in the future.?</blockquote>


we had a 30% bounce in the markets...but did we really?
 
They say DJIA is always 9 months ahead of the economy. If we start super-inflating, could the rally be "correct", because in 9 mos the dollar will have inflated enough to keep us at that mark?



My financial advisor told me before the crash that they thought the dow should be at 9000 to 10000. Of course, they didn't tell me to get out of the market at that time, which in retrospect... what the hell?
 
Uhhhhh....3.4 trillion? I think that may be a bit inflationary. The treasury market sure thinks so.



<a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/05/07/AR2009050702001_pf.html">Obama Releases $3.4 Trillion Budget Plan</a>
 
<a href="http://www.gold-eagle.com/editorials_01/seymour062001pv.html">http://www.gold-eagle.com/editorials_01/seymour062001pv.html</a>



My favorite quote:



"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S."

- President F.D. Roosevelt, 1933
 
[quote author="BlackVault CM" date=1229566366][quote author="morekaos" date=1229565917]Call me crazy but I am thinking of going short the gov bonds. PST and TBT.</blockquote>


You're crazy.</blockquote>


Not so crazy after all.



<a href="http://www.cnbc.com/id/30968861">rates spike</a>
 
[quote author="morekaos" date=1243498848][quote author="BlackVault CM" date=1229566366][quote author="morekaos" date=1229565917]Call me crazy but I am thinking of going short the gov bonds. PST and TBT.</blockquote>


You're crazy.</blockquote>


Not so crazy after all.



<a href="http://www.cnbc.com/id/30968861">rates spike</a></blockquote>
I kick myself in the pants for no picking up TBT calls when it was trading at ~$49/share last week.
 
[quote author="usctrojanman29" date=1243505565][quote author="morekaos" date=1243498848][quote author="BlackVault CM" date=1229566366][quote author="morekaos" date=1229565917]Call me crazy but I am thinking of going short the gov bonds. PST and TBT.</blockquote>


You're crazy.</blockquote>


Not so crazy after all.



<a href="http://www.cnbc.com/id/30968861">rates spike</a></blockquote>
I kick myself in the pants for no picking up TBT calls when it was trading at ~$49/share last week.</blockquote>


When I put that trade on December 17th TBT stood at $36.70, now 56.12. 52% in 5 months, I'll take that
 
[quote author="IrvineRenter" date=1243558049]<a href="http://www.msnbc.msn.com/id/30979615/">Evidence mounts that recession may be ending</a></blockquote>
I'll agree that the depression risk is off the table at this point, but to say that the recession is over when weekly unemployment claims are over 600k, total claims are at record highs, finding a job is very difficult (and for many that are still employment they have had pay cuts or pay increase freezes), and housing sales being up is a complete joke. I wonder how the economy will be doing when the speculators drive up oil back up to $100/barrel and the 10-year bond rate is over 5%, not to mention home prices taking another step down and commercial real estate falling apart.
 
[quote author="usctrojanman29" date=1243559455][quote author="IrvineRenter" date=1243558049]<a href="http://www.msnbc.msn.com/id/30979615/">Evidence mounts that recession may be ending</a></blockquote>
I'll agree that the depression risk is off the table at this point, but to say that the recession is over when weekly unemployment claims are over 600k, total claims are at record highs, finding a job is very difficult (and for many that are still employment they have had pay cuts or pay increase freezes), and housing sales being up is a complete joke. I wonder how the economy will be doing when the speculators drive up oil back up to $100/barrel and the 10-year bond rate is over 5%, not to mention home prices taking another step down and commercial real estate falling apart.</blockquote>


Housing sales are up but most the volume coming from REO, Foreclosure and short sales, which kills the comps. And what you prefer, a two decades long recession like Japan or a 2 yr depression if govt aint involved as much.
 
<blockquote>More than 90 percent of economists surveyed by the National Association for Business Economics are predicting that the current recession, now the longest since World War II, will end either in the third quarter or by the fourth quarter of this year.</blockquote>


A consensus sign of a recovery or a contrarian indicator?
 
[quote author="BondTrader" date=1243559726][quote author="usctrojanman29" date=1243559455][quote author="IrvineRenter" date=1243558049]<a href="http://www.msnbc.msn.com/id/30979615/">Evidence mounts that recession may be ending</a></blockquote>
I'll agree that the depression risk is off the table at this point, but to say that the recession is over when weekly unemployment claims are over 600k, total claims are at record highs, finding a job is very difficult (and for many that are still employment they have had pay cuts or pay increase freezes), and housing sales being up is a complete joke. I wonder how the economy will be doing when the speculators drive up oil back up to $100/barrel and the 10-year bond rate is over 5%, not to mention home prices taking another step down and commercial real estate falling apart.</blockquote>


Housing sales are up but most the volume coming from REO, Foreclosure and short sales, which kills the comps. And what you prefer, a two decades long recession like Japan or a 2 yr depression if govt aint involved as much.</blockquote>
I'll take a 2 year depression to get rid of the excesses any day of the week. The gov't sticking their thumbs in too many things will cause the Japan Lost Decade 2.0 here in the US. As BVCM2 stated, the crap will hit the fan with the banks again when we get above that 10.2% worst case scenario unemployment rate. I just find it funny how so many people are expecting a "V" shaped recovery. haha
 
Disclaimer: since I'm just a Homeless Newbie, you should take whatever I say with a grain of salt.



Personally, I still see a Great Depression II coming. I'd be curious to know if anyone else shares this view (which at this point in time either takes courage or stupidity since the media are clearly announcing the end of the recession).



I get that many economic indicators have stopped dropping as much and a number of economic indicators now appear to have a bottom. A picture is being painted to suggest the economy will not recover quickly, but the worst is over.



I do not agree that the worst is over, although I'll spare you the rant. I am eager to see what happens when some of these indicators move beyond the established bottoms.



For example, how will the stock market fare as the number of unemployed reaches 7 million (should be next week at the current rate), then 8 million, then 9 million?
 
[quote author="WaitingToBuyByAndBy" date=1243608287]Disclaimer: since I'm just a Homeless Newbie, you should take whatever I say with a grain of salt.



Personally, I still see a Great Depression II coming. I'd be curious to know if anyone else shares this view (which at this point in time either takes courage or stupidity since the media are clearly announcing the end of the recession).



I get that many economic indicators have stopped dropping as much and a number of economic indicators now appear to have a bottom. A picture is being painted to suggest the economy will not recover quickly, but the worst is over.



I do not agree that the worst is over, although I'll spare you the rant. I am eager to see what happens when some of these indicators move beyond the established bottoms.



For example, how will the stock market fare as the number of unemployed reaches 7 million (should be next week at the current rate), then 8 million, then 9 million?</blockquote>
I don't think a depression is out of the question, just seems less probable to me at this point. I think we'll have a similar situation like Japan did back in the 90s (aka Lost Decade).



Besides the unemployment picture worsening, what are your impressions that we will go into a Great Depression again?
 
I'm glad you asked. It can't be good for our economy to be so dependent upon consumer spending, but the truth is, I had never before really looked at the historical numbers to see what the "normal" percentage is. So I just now went off to the Bureau of Economic Analysis and downloaded <a href="http://www.bea.gov/national/nipaweb/TableView.asp?SelectedTable=5&ViewSeries=NO&Java=no&Request3Place=N&3Place=N&FromView=YES&Freq=Year&FirstYear=1929&LastYear=2008&3Place=N&Update=Update&JavaBox=no#Mid">annual GDP data</a> from 1929-2008 into Excel, then created a separate series that calculated each broad category as a percentage of total GDP.



So for example, if I did this right, I see the Personal Consumption category (consumer spending) for 2002-2008 is 70% of GDP. However, running backward all the way to 1951 this category is slightly above 60%. In 1981, Personal Consumption is 62% of GDP and this more or less steadily climbs up to the present 70%. Sorry for the lack of chart porn. I'm no Calculated Risk.



So in one sense, I'm no longer scared by the fact that over 2/3 of the gross national product comes from us buying stuff. But I'm still scared that recent spending is not sustainable. Households are scaling back, businesses are scaling back, and municipalities are scaling back. This could start to feed on itself.



On the BEA site I found stats for personal income that included personal outlays and personal savings. Thhe average personal savings rate in 2007 was 0.006 (0.6%). Considering this is in the heyday of the home ATM and with the prevalence of credit cards, I think it fair to suggest Americans have been spending 110% more than they make. That's not sustainable.



I see it all pulling back. But then I also expected a return to a bear market this week and that didn't happen. Maybe I'll read this post in a year and wonder why I was such a chicken little.



Btw, while trying to find some data on historical spending, I found this link to a <a href="http://www.nytimes.com/interactive/2008/09/04/business/20080907-metrics-graphic.html?th&emc=th">NY Times article</a> that has a nice flash presentation of per-capita spending from 2008. It compares per-capita spending between the US and major countries in the world.
 
The comedy continues for the keystone cops in charge in Sacramento. Striking isn?t it how history repeats itself over and over and over? Things ended well last time, and they will again. These articles are soooo similar it is easy to get their dates confused yet they are 17 years apart.



http://www.reuters.com/article/topNews/idUSTRE55O07Q20090625?sp=true







<span style="font-size: 13px;"><strong>California set to issue IOUs as fiscal crisis weighs</strong></span>

<strong><span style="color: red;"><span style="font-size: 13px;">Wed Jun 24, 2009 10:00pm EDT</span></span></strong>





LOS ANGELES/NEW YORK (Reuters) - California's controller said on Wednesday that he would have to issue IOUs in a week if lawmakers can't quickly solve a $24 billion budget deficit, and the state's treasurer plans to tap a reserve fund to meet debt service costs.



The measures came as a budget crisis deepened in the most populous U.S. state and the gridlocked legislature failed to pass a proposed $11 billion in cuts.







And then this?



http://www.nytimes.com/1992/07/02/us/california-forced-to-turn-to-iou-s.html?n=Top/Reference/Times







<strong><span style="font-size: 13px;">CALIFORNIA FORCED TO TURN TO I.O.U.'S</span></strong>

By ROBERT REINHOLD,

<span style="font-size: 13px;"><strong><span style="color: red;">Thursday, July 2, 1992</span></strong></span>





Its economy racked by recession and its political leadership paralyzed by stalemate, the State of California ran out of cash today and began to pay its bills with I.O.U.'s for the first time since the Great Depression.



State Controller Gray Davis sent out the first 12,000 of the I.O.U.'s after the Democratic-controlled Assembly failed to reach agreement with the Republican Governor, Pete Wilson, on how to erase a $10.7 billion shortfall in the new state budget before the fiscal year began at 12:01 this morning.







C?mon?it?s kindda funny!!
 
[quote author="morekaos" date=1245970632]The comedy continues for the keystone cops in charge in Sacramento. Striking isn?t it how history repeats itself over and over and over? Things ended well last time, and they will again. These articles are soooo similar it is easy to get their dates confused yet they are 17 years apart.



http://www.reuters.com/article/topNews/idUSTRE55O07Q20090625?sp=true







<span style="font-size: 13px;"><strong>California set to issue IOUs as fiscal crisis weighs</strong></span>

<strong><span style="color: red;"><span style="font-size: 13px;">Wed Jun 24, 2009 10:00pm EDT</span></span></strong>





LOS ANGELES/NEW YORK (Reuters) - California's controller said on Wednesday that he would have to issue IOUs in a week if lawmakers can't quickly solve a $24 billion budget deficit, and the state's treasurer plans to tap a reserve fund to meet debt service costs.



The measures came as a budget crisis deepened in the most populous U.S. state and the gridlocked legislature failed to pass a proposed $11 billion in cuts.







And then this?



http://www.nytimes.com/1992/07/02/us/california-forced-to-turn-to-iou-s.html?n=Top/Reference/Times







<strong><span style="font-size: 13px;">CALIFORNIA FORCED TO TURN TO I.O.U.'S</span></strong>

By ROBERT REINHOLD,

<span style="font-size: 13px;"><strong><span style="color: red;">Thursday, July 2, 1992</span></strong></span>





Its economy racked by recession and its political leadership paralyzed by stalemate, the State of California ran out of cash today and began to pay its bills with I.O.U.'s for the first time since the Great Depression.



State Controller Gray Davis sent out the first 12,000 of the I.O.U.'s after the Democratic-controlled Assembly failed to reach agreement with the Republican Governor, Pete Wilson, on how to erase a $10.7 billion shortfall in the new state budget before the fiscal year began at 12:01 this morning.







C?mon?it?s kindda funny!!</blockquote>
Not sure how well things are going to end this time around though. They stepped into a bigger pile of crap this time. California is going to be the first State with a junk bond rating before the end of the summer.
 
May not be as bad as you might think. Look at those two articles and the amount quoted as a deficit. In 1992 the state was running an $11 billion dollar shortfall. In 2009 it is $24 billion. I would guess in 2009 dollars, that 1991 $11 billion is actually quit a bit worse, but then again, I am an optimist as the title of this thread suggests.
 
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