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Paul Farrell Expects No Recovery Until The End Of Obama's Second Term... IF He Gets Reelected
Paul Farrell's take on Jeremy Grantham's recent essay Seven Lean Years (previously posted on Zero Hedge) is amusing in that his conclusion is that should Obama get reelected, his entire tenure will have been occupied by fixing the problems of a 30 year credit bubble, and if anything end up with the worst rating of all time, as the citizens' anger is focused on him as the one source of all evil. "Add seven years to the handoff from Bush to Obama in early 2009 and you get no recovery till 2016. Get it? No recovery till the end of Obama's second term, assuming he's reelected -- a big if." Also, Farrell pisses all over the recent catastrophic Geithner NYT oped essay, which praised the imminent recovery which merely turned out to be the grand entrance into the double dip: "In his recent newsletter, "Seven Lean Years Revisited," Grantham tells
us why expecting a summer of recovery was unrealistic, why America must
prepare for a long recovery. Grantham details 10 reasons: "The negatives
that are likely to hamper the global developed economy." Sorry, but
this recovery will take till 2016."
For those who have not had a chance to read the original Grantham writings, here is Farrell's attempt to convince you that Grantham is spot on:
But should you believe Grantham? Yes. First: Like Joseph, Grantham's earlier forecasts were dead on. About two years before Wall Street's 2008 meltdown Grantham saw: "The First Truly Global Bubble: From Indian antiquities to modern Chinese art; from land in Panama to Mayfair; from forestry, infrastructure, and the junkiest bonds to mundane blue chips; it's bubble time. ... The bursting of the bubble will be across all countries and all assets ... no similar global event has occurred before."
Second: The Motley Fools' Matt Argersinger went back to the dot-com crash of 2000: Grantham "looked out 10 years and predicted the S&P 500 would underperform cash." Bull's-eye: The S&P 500 peaked at 11,722; it's now around 10,000. Factor in inflation: Wall Street's lost 20% of your retirement since 2000. Yes, Wall Street's a big loser.
Third: What's ahead for the seven lean years? Wall Street will keep losing. Argersinger: "Grantham predicts below-average economic growth, anemic corporate-profit margins, and other severe obstacles for the stock market. Over the next seven years ... U.S. stocks as a group will deliver annualized real returns between 1.1% and 2.9%. That's less than you might get putting your money in a CD."
Also, for those who believe they stand to win something in the Wall Street casino, think again:
Warning: You'd be a fool to trust your money with Wall Street during the seven lean years till 2016. Another 20% will vanish.
Fourth: Why will Wall Street kill the recovery, keep driving us deeper into a ditch till 2016? Last year Grantham asked: "Why is it that several dozen people saw this crisis coming for years? It seemed so inevitable and so merciless, and yet the bosses of Merrill Lynch and Citi, even Treasury Secretary [Henry] Paulson and Fed Chairman [Ben] Bernanke, none of them seemed to see it coming." The Pharaoh listened to Joseph. Our leaders are deaf.
Yet for all those still too busy to read the collected thoughts of Jeremy, here is the Cliff notes version, courtesy of Farrell:
Here's my Reader's Digest version of Grantham's 10 handicaps that will "hamper the global developed economy, drag it out for seven lean years," forcing Americans into a painfully long, game-changing period of austerity and civil unrest. You can read his original at GMO.com:
1. Too much consumer debt; increased savings, spending drops
"We've stopped adding consumer debt, but the improvement is minimal. It would take at least seven years of steady reduction to reach a more normal level. Anything more rapid than that would make it nearly impossible for the economy to grow. More stimulus adds government debt, already a problem. But debt reduction in a fragile economy runs the risk of causing a severe economic decline. This dilemma may prove to be the central economic policy choice of our time. Not an easy choice. And no way that this process will be pleasant or quick."
2. Banks off-loaded trillions of toxic debt, increasing federal debt
"The most frightening aspect of the seven-lean-year scenario is that dangerously excessive financial system debt was moved across, with additions, to become dangerously excessive government debt, with levels of debt-to-GDP not seen outside wartime. The cure seems more like a stay of execution."
3. Stimulus failing, housing crashed, no appreciation, confidence lost
"The artificial lift to consumers' confidence from steadily rising house prices is long gone, unlikely to return soon, reducing our confidence in the nest eggs we thought we could count on for retirement. Further house-prices declines are more than a 50/50 bet. No more shot in the arm from construction. Stock prices are stagnant. These changed attitudes will last for years."
4. Banks undercapitalized, overleveraged; more trouble ahead
"Wall Street may have passed its point of maximum stress, but very bad things may lie ahead in Europe. Leverage and the chances of further write-downs leave banks undercapitalized, reluctant to lend. Unhealthy growth in America's GDP caused by previous rapid increases in the size of the financial sector has also disappeared, hopefully will stay gone."
5. State/local governments squeezed, tax revenues down 30%
"Runaway costs: average salaries and pensions went far above private sector in 15 years, now run into the brick wall of reduced taxes. Real estate taxes are down over 30%, unlikely to bounce back soon. The legal need to stay balanced means painful cost-cutting, putting pressure on an economy with few stimulus options left. A double dip would make it worse."
6. High unemployment; few tricks left to stimulate jobs
"Unemployment is high, suffering from the loss of kickers related to asset bubbles. The economy appears to have an oddly hard time producing enough jobs to get ahead of the natural yearly increases in the work force. Consumer confidence and corporate investing suffer."
7. America's trade imbalances are killing the dollar, our economy
"America must stop running large trade imbalances, they destabilize the economy. In a world growing nervous about the quality of sovereign debt, these debt levels have exploded. Adding new foreign debts adds risk and doubts to the system, threatening the dollar. Just as adding surpluses threatens the Chinese. The trick, though, is to reduce these imbalances so that the process does not reduce global growth. Rebalancing will not be quick, easy, or painless."
8. European governments crashing; incompetent management
"Europe suffers from incompetent management. Spain, Greece, Portugal, Ireland, and Italy allowed local competitiveness of manufactured goods to become 20% or more uncompetitive with Germany. The banking crisis was not the problem, so it'll never be easy to solve with a fixed currency. Unfortunately, Europe's problems are now part of America's seven lean years, guaranteeing slower than normal GDP growth and a long workout period."
9. Global loss of confidence in all currencies, including the dollar
"Rising levels of sovereign debt and problems facing the euro bloc and Japan are creating a loss of confidence in faith-based currencies. The world economy is a fragile system that will increasingly limit governments' choices in dealing with low growth and excessive credit."
10. Aging populations; rising Medicare, Social Security costs
"Possibly most important of all, widespread overcommitments to pensions and health benefits is a long-term problem overlapping with the seven-year workout, making the 'seven lean years' even tougher. Developed nations are aging, need more medical attention. Treatment costs are increasing, and are hard to limit or ration. No choice, hunker down, wait for a crisis."
Bottom line: America's facing seven lean years, a long, game-changing, painful recovery till 2016. But let's end on that positive note the Motley Fool's Argersinger promises: In spite of the dark forecast, there's a "silver lining, the saving grace Grantham calls it. The stock market might turn out to be a loser, but that won't be the case for 'high-quality' U.S. stocks. Grantham thinks elite stocks are poised to return as much as 10% a year or better."
Argersinger put it this way: "Grantham doesn't detail what he means, but I think it's safe to assume he's talking about large companies that have strong balance sheets, sustainable competitive advantages, stable or growing profit margins, and opportunities for growth," even in "seven lean years."
He picks seven stocks "that might make Grantham's cut." All are based on "the following criteria: Large-cap stock, at least $20 billion in market size; high profitability, an average operating margin of 15% or higher over the past five years; strong balance sheet, a debt-to-equity ratio of less than 50%; a dividend, not necessarily for yield but as a measure of financial strength." Solid picking criteria.
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'Hundreds of years' talk is retarded, these people are 99.9% COMPLETE in their global planned collapse to usher in 1 world govt, 1 world currency Nightmare Earth, do they think they will let it slip away with some dumb phony ELECTION? Dream on idiots! And theyre working very FAST, not a 3 century timeline.
The middle class in Argentina went from bad to "hell-in-a-handbasket" inside of 2 weeks if my memory serves me correctly.
Argentina has 40,000,000 people, it is one third the area of the United states, and it is mostly homogenous.
No comparison at all to the United States. The Middle class is even smaller, per capita than the U.S. (admittedly, falling each year).
The seven are: Carnival (CCL), Johnson & Johnson (JNJ), Microsoft (MSFT), Southern Copper (SCCO), Thomson Reuters (TRI), Travelers (TRV) and Walt Disney (DIS).
lol @ anyone thinking there is a difference if obama or some republican idiot gets elected. and no, ron paul is not gonna be president.
Exactly Bowtie, people are forgetting the overall point here- its a PLANNED world implosion their goal is 1 world govt, 1 world currency...and they act like theres some hopium to stop it? Do they think Neo is training in some hovercraft in the sewer system? LMFAO! Theyre ALL in on it, demican or republicrat, and they mean to accomplish it FAST!
Precisement!
--Hercule Poirot
Until the Fed is abolished, nuked or whatever, the resident in the WH will be a puppet, always sporting a shit-eating grin and funding the least productive level of society to retain power. I'm sure the current WH resident will be re-elected because I'm sure we are close to a majority of the population/electorate who receive gov't checks every month and never have to worry about April 15.
You need not have me tell you that you are right about all that you write.
Ceres, Pallas, Vesta, Hygiea, one of these will have to collide with Earth for theBamster to not get re-elected.
The republicans and democrats are a monstrous waste of taxpayers hard earned efforts to survive and hopefully, prosper.
The puppeteers on Wall Street own the government. And they are mostly jewish. The day that the majority of jews vote for a republican for POTUS will be the day that the majority of blacks, welfare cases, and women do as well.
Good luck with that, McConnell.
That's not to say that the democrats give a shit about anything but their election donations that they aren't just as corrupt, inept, amoral, and unethical as any republican.
Some thoughts on 2012...
In a straight-up vote, Obama is toast - no chance whatsoever. But 2012 will NOT be a straight-up (two party) race... there will be at least a third and possibly fourth candidate on the ballot. And I expect at least one candidate to withdraw very close to election day and throw their support behind one of the remaining, more viable candidates.
Thus, discussing the 2012 election in a purely Red vs. Blue, two-party context is a waste of time, imo.
Palin will not get the GOP nomination - she is almost certainly a third-party candidate. I believe Palin will attempt to hijack the tea party momentum and run as the "Tea Party" candidate. Look at her and her husband's history & 'beliefs'... below-average intelligence, evangelical christian theme, radical tendencies. The rage/comedy factor here is off the charts.
I think the GOP will run Gingrich or Paul Ryan or someone of this ilk - an establishment candidate, period. McConnell et al. have already made their strategy clear - try to contain the TP movement and help it self-destruct... pick-up the pieces later.
The real wild card, imo, is whether a true alternative steps into the spotlight. I believe the true alternative is a constitutionalist candidate with the bona fides to run a national campaign. Ron Paul is the obvious candidate here, but RP would need to walk away from the republican party and then directly challenge them. He has shown the will to do this in the past, but he has shown absolutely zero evidence that he is willing to do this in 2012. I suppose there is some small chance that RP wins the GOP nomination, but my instincts tell me that McConnell et al. would literally kill RP before they allowed 'their' party to go libertarian. It is hard to get a true read the strength/grip the corporatist/fascists have on the GOP right now... they seem weak, but they are still running the machine, which is a very powerful position in any case.
So hypothetically it could be a 3 or 4-way race in 2012...
Obama - Democrat
Gingrich/Ryan/Romney/? - GOP establishment
Palin - neocon talk radio christians
Paul/? - constitutionalist/libertarian
Obama has a damn good chance of re-election in 2012 if the GOP remains as fractured as it is right now. One of the "conservative" movements would need to surge and overwhelm the others between now and 2011...
Willie Nelson / Jesse Ventura 2012
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Obama has his head up his ass. I just read the headline "Oval Office Redecorated While Obama on Vacation".... speaks thousands of words....
No more fundies in the White House please.
Sheep dog one
A big chunk of history is the hill people swooping down on the flatlanders.
I'm sure you're a real good hand with your rifle.
You won't last long with that attitude though.
The first thing the hill people do when they get to the flatlands after some good killing is figure our its healthier to assimilate and not kill the goose that lays the golden egg.
My latifundium may need a good overseer.
At any rate, you kid yourself if you think you will get far alone.
And gangs are militia fodder.
The hysteria in this thread is comical to read.
First off, each President redecorates the Oval Office and puts their own touch on it. Bush did it during a recession as well. This is a non-story even if "taxpayer funds"(which is complete and utter bullshit) were used. In this case they weren't, so this isn't even a non-story.
http://mediamatters.org/blog/201008290019
There is no depression. When you see food lines and 25% unemployment, then I'll listen to this. We have a sluggish economy dealing with the private debt overhang. The stimulus stopped the slide but more is needed, this is just obvious to everyone who doesn't have the sovereign govt = normal individual when it comes to financing paradigm in their head. Until you learn how the modern monetary system that the US operates under works, your opinion on measures to improve the economy are just bullshit.
Obama being toast sounds just like what Dems thought about Bush in 2003 as the war got worse. Then guess what? The political machine that is the Bush Clan got to working, went up against an incompetent opponent and won. What about Reagan in 1982 when unemployment and inflation were worse? Absolute landslide in 1984.
Now you got the most skilled politician ever going up for re-election with no one even remotely on the radar as a serious contender. Obama has been written off so many times yet continues to bounce back. Betting against him in 2012 is a stupid bet. Especially if as many think, Biden steps down and he names Hillary as VP, setting her up to be President in 2016. No one is beating a Obama-Clinton ticket in 2012, I dont care if you can't even go to get your mail without having a gun and a vest on. This is a popularity contest and the dude is still a rock star. I'll take the other side of those bets, thank you very much.
"This is a popularity contest and the dude is still a rock star."
exactly...see above
So many scenarios, so little time.
First, ACORN in its new carnation is a community organizing vote-getting machine that roves the big cities in the big states, which is why they will be true blue and possibly numerous enough in electoral votes to lock the next election for our Maximum Leader.
Assuming there is a next election. Maybe the Republican power elite are not rushing forward to kick off their campaigns because they know something us mere mortals don't about 2012.
Hmm.
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