This page has been archived and commenting is disabled.
Have we entered into a double-dip recession? I’ll answer my own question here, No!
Buoyant stock prices are defying the physics of fundamentals.
Equities are also floating on mist despite the gravity of the
macroeconomic outlook as we believe the equity market falls prey to
over-exuberance and excessive optimism. I query, have we entered into a
double-dip recession? I’ll answer my own question here, No! The reason
is because I do not feel we have organically left the previous
recession. The positive GDP prints and “green shoots” were the direct
result of government bubble (re)blowing through fiscal and monetary
stimulus, culminating in QE v1.5. As the effects wear off, we start to
see were the economy really stands. Let’s just grab the first four
headlines today from CNBC.com a day after a 2%+ rally in the S&P:
- Pending Home Sales Plunge as Housing Market Weakens: Contracts
for pending sales of previously owned U.S. homes fell to a record
low in June as buyers sat on the sidelines, a survey from the National
Association of Realtors showed on Tuesday. Of course, we at the
BoomBust made it very clear this was a foregone conclusion, see As I Made Very Clear In March, US Housing Has a Way to Fall. - US Factory Orders Drop for Second Straight Month: As was expected.
- Consumer Spending, Incomes Flat in June; Saving Up: No surprises here.
- US Unemployment Could Rise Before It Drops: Geithner: Of course, I guess Geither just read my piece from the “Green Shoots” era, “Are the Effects of Unemployment About To Shoot Through the Roof?”
Despite the flurry of the truth finally emerging from among rampant disinformation negative economic news, the markets is only off 2 points today after rallying 24 points for nothing
yesterday. Bubble, Bubble, toil and trouble. Needless to say, this
happy slappy effervescence cannot (and will not) go on forever. A
typical example of said over exuberance is the highly economy and
consumer sensitive US hospitality sector where the entire pack of hotel
stocks have witnessed a substantial rebound from their lows in March
2009 owing to the recovery seen in the occupancy levels, while the
markets ignore the weak prices that are offsetting most of the revenue
gains and are undermining a healthy recovery in the sector. The sector
is still struggling with the demand–supply gap that developed over the
last two years when demand was pummeled by the economic downturn in
combination with new supply that continued to add to the vacant rooms.
Rooms are being booked at rates below the 2009 levels (post economic
bust!) to boost occupancy with group bookings rates showing significant
weakness. The subject of the accompanying forensic analysis’s business
model is particularly vulnerable as the company derives nearly 78% of
the revenues from group bookings and the prices are being slashed at all of its hotels.
Price cuts have been more severe at its hotels in Washington and
Orlando because of relatively higher supply-demand gap in these areas.
Further, price cuts at a time when costs are increasing due to input inflation
are likely to hit the margins at the same time that said inflation
outstrips wages, income and asset appreciation, creating a profit
sapping stagflationary environment. See Continuing the Deflation/Inflation/Stagflation/Depression/Recession Rant… for more on this topic.
In addition to the pricing pressures outlined above, the subject of
our forensic analysis is burdened with the huge leverage and capital
expenditure costs. They report relatively soon, so paying
BoomBustBloggers should take notice. Subscribers (click here to subscribe), please reference:
Lodging Co. Forensic Analysis – Retail- advertisements -
people keep wondering if we are gonna get a next bubble, etc
folks, we are in it NOW. wake up. reggie is trying to help you see it
Didn't Obama say something about draining the swamp ... or was that Pelosi? Whatever, it makes no difference who said it because it applies to the economy just as well as CONgress. As all the stimulus disappears we get to see all the stumps, sunken boats, and dead bodies. If only I were a cartoonist. <sigh>
The 20% real unemployed most likely would disagree with Reggie. Its the old story about a recession depends on your employment status. GDP measures government spending of both taxed AND borrowed money which creates a false GDP which as presently caculated is worthless to all but government. Factor in debt against real productivity and all we are left with is a disaster. We've been replacing productivity with credit and that game is soon to come to an end. We can't keep paying credit cards with credit cards forever, yet that is what we continue to do, only now we are eagerly shifting private debt to the government sector under the notion that government can borrow indefinitely. Good luck on that idea.
Speaking of the residential real estate market Reggie, what's the deal with this Obamacare real estate sales tax kicking in in 2013?
That's less than 2 1/2 years away. Who wants to buy a home now knowing that you're starting out almost 4% underwater before other expenses and with property taxes going nowhere but up?
bap bap bap bap, you can't make an unacredited statement like that. whats that based on? what page of the bill? no dropping hints, spell it out. there's already enough cryptic info out there. help clear it up.
Something I just heard about today actually and I was asking for clarification from someone likely to know more about the matter than myself. You'll notice that there's all kinds of confusion resulting from a 2000 page bill larded with crap and crammed down our throats. That ain't my fault. Something to think about in November though.
Since none of you guys will actually do the work for me I poked around a little and this tax rumor seems to be about half true and not as severe as what I had heard. Basically it looks like some sort of add-on cap-gains tax for sellers with AGIs over $200k - to help fund Medicare.
So, not a flat out sales tax, just another of the endless nickle and dime cuts the government has carved out for itself in the name of wealth "redistribution." It's still not a stimulus for home prices.
More here: http://www.cato-at-liberty.org/2010/07/17/it-depends-on-what-the-meaning...
The Elliott Wave style cataclysm - well the anticipation of such - has got to be THE worst thing one can do for one's investments.
Gotta look at companies at a micro level and forget about this Elliott thing. End Of The World prognostications have a long and "illustrious" history - seems to be a great attention getting tool - has been - going back centuries. No real wealth has been accumulted by people so afraid of their own shadows that they hide under a mattress - or by people expecting an imminent catastrophe of biblical proportions. Cant think of any!
What was the economic outlook in early 2009? Abysmal - no hope. What did stocks do?
All stocks care about is loose monetary policy. And earnings have been good - because most large multinational companies get 50% or less of their revenues from the US. Moreover - while the US consumer is definitely sluggish ( not dead) - corporations appear to be gearing up for a CAPX spree. Imports were surprisingly strong in the GDP report - imports of capital equipment for businesses - hmmm - interesting.
Europe is looking better than it was a couple of months ago. Asia still looking OK - sure property bubbles all over the place - but no signs of a serious crash or anything remotely like that.
Corporate CAPX spree = death wish
Well, other than defense (& other politically connected) contractors, that is.
I agree as well. One can see the effects of the latest bubble being blown if you just look at the Case-Shiller chart for housing. It peaked in November, and then started falling again. With another blip in April, due to the tax credits. And the latest numbers for May show that the price increase is starting to wear off at best, in the areas that have done better than the rest of the Country. I can't wait to see the revisions for the latest GDP numbers.
The only thing I'd add to the article would be to mention the Baltic Dry Index, and its slide.
BDI isn't a great indicator - it's influenced not only by commodity prices but capacity of ships as well, plus it's very seasonal (but the index does not correct for that seasonality). Use raw commodity prices as one indicator of econ activity/strength.
As long as Skynet keeps making money off of volatility, the market will hold up against all deteriorating economic conditions. When the algos rob every last penny from retail investors, they will then cannibalize each other. The markets will crash!
Nice one Reggie! Getting the 'Uh?' factor at saying we are NOT entering a double dip recession, and then qualifying it by saying we never left the last one. Loved it!
DavidC
I totally agree. GDP tracks spending, not productivity, so of course GDP rises when the government spends! Check out http://consumermetricsinstitute.com/ for some good GDP info in real time.
After lurking here for many months , I finally got the nerve to post.I am a 62 year old who has traded direvitives for 43 years. I make between 5000 and 10000 trades a year.
Though we approch the markets from a totally different direction, I am a great fan of Taleb. Where he seeks fat tails in the mathimatical bell curve, my constant is the lack of fat tails in human behavior
I like to say, Mathamatical randomness is more random than human randomness.
A short comment on Reggies post. Barnes Index at 40 year low and my proprietary sentiment indicators are at a record low. My current postions are long stock index futures.short 30 year bonds, short gold and silver and long wheat and short corn with ever deep out of the money calls and puts on all the above.
A specail thanks to George Washington for his MS post. I have SPMS and am legally blind...........It's very difficult for me to type so I probably won,t respond to any repies to my posts.........TY for creating such a wonderful site
thnx for sharing your current positions. short gold?
,,,,,Where he seeks fat tails in the mathimatical bell curve, my constant is the lack of fat tails in human behavior,,,,,, love it. hope to hear from you again and, until then, lurk on!
Im glad you are here, and happy you posted up! good luck to you with your trades, and humans are way more predictable than curves.
mate, that is a very good source of info. Thanks a lot.
Perhaps the most important point is IRS tax collections fell by a third each of the last two years, despite adding 17,000 agents under 0Care and stepping up enforcement and collections actions.
Thanks for the info ... I've never seen this before.
And in Illinois, a sales tax holiday, per the official web site notice: spend it if you got it!
For Immediate Release Contact: Susan Hofer
August 3, 2010 312.814.8197
Back-to-School Sales Tax Holiday Starts Friday
List of Eligible Items Available to Help with Shopping List
SPRINGFIELD – With the first statewide back-to-school sales tax holiday starting this Friday, August 6 and running through Sunday, August 15, the Illinois Department of Revenue is reminding families to plan on shopping for the new clothes and school supplies their children need to get a good start at school this year. A list of items qualifying for the five percent sales tax break is available at www.tax.illinois.gov.
adding to your post, add this http://www.businessinsider.com/wells-fargo-gallup-small-business-index-2010-8