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David Rosenberg: "Despair Begets Hope"
Presenting the best weekly self-contrarian segment from everyone's favorite Gluskin Sheff-based skeptic - David Rosenberg:
DESPAIR BEGETS HOPE
... Over half of the 2012 price advance has been reversed in barely over a month as the broad market drifts down to its lowest level since February 2nd. The Financial Times makes the point that the 10-day relative strength index at 29.2 is deeply into oversold territory. The Canadian TSX index is officially in bear market terrain, having declined 21% from its cycle high (posted in April last year) and is back to levels prevailing on October 2011.
Fading risk appetite is also underscored in the credit markets where BB-rated corporate spreads have widened to 450 basis points from the recent low of 420bps. Until we see some resolution to the latest round of euro area angst, one can reasonably expect spreads to widen further, but we would look at this as a nice buying opportunity as the link between the problems there and corporate default rates here is extremely loose. The fact that gold and other commodities are slipping while core government bond markets — gilts, bunds and Treasuries — are rallying strongly suggests that deflation risks are getting repriced into various asset classes. Greek bonds are trading at pennies right now and implicit probabilities in peripheral bond markets are highly discounting exits from the monetary union by year-end. Spanish bond yields have blown through 6% (Italy getting closer too) and 10-year spreads off Germany have hit a new record high of 485bps.
This is where the LTRO has proven to have actually been a dismal failure. Domestic banks used the program as a carry trade to play the yield curve and are now choking on losses on the sovereign government bonds they were enticed to buy. So thanks a lot, Mr. Draghi — ECB policies are at least partly responsible for why it is that euro area bank shares have sunk all the way back to March 2009 lows. Non-domestic investors have been dumping the peripheral government bonds just as the Italian and Spanish banks have been loading up — these foreign entities, we see in the FT, have been net sellers of Italian government bonds to the tune of 200 billion euros in the past nine months and 80 billion of Spanish debt over the same time frame. And guess what? They can unleash even more supply damage because they still own roughly 800 billion euros worth of combined bonds of both basket-case countries.
The most bizarre quote we have seen in quite a while came from a strategist in the FT. Get this:
We can take comfort from the fact that while the Greek electorate are against austerity, the support for staying within the eurozone is even stronger".
I can replace that with this real-life comment:
We can take comfort from the fact that while my three sons are against doing their homework, the support for getting a passing grade is even stronger".
How utterly lame.
If the Greeks want to stay in the eurozone, it's probably because they know they can continue to suck at the teat of the Troika. More bailouts please and on easy terms since "austerity" is the new dirty nine-letter word globally.
The best lines actually came from the FT Lex column:
"All balled-out eurozone countries will ultimately have to decide whether they can make the fiscal adjustments and achieve economic growth more quickly in, or outside, the euro. That is where Greece now finds itself."
Now that is a thoughtful comment.
There was another really good zinger in the Markets and Investing section. To wit:
"it's naïve in the extreme to think you can limit the knock-on effect. As soon as Greece leaves or defaults, contagion will pass like a cannon going off in Spain".
That was from an executive at a U.K. bank.
Arvind Subramanian penned a truly brilliant piece in the FT as well, titled Why Greece's Exit Could Become the Eurozone's Envy. In a nutshell, Greece's challenge is that it is woefully uncompetitive and as such needs wages and prices to adjust sharply lower. You either do that organically or you devalue the currency — which then sharply boosts exports and fosters import substitution. Of course, the initial impact is recessionary and deflationary, but only for one to two years, if history is a guide, followed by a boom. This is exactly what happened to Asia a decade ago. As Arvind concludes, "the ongoing Greek tragedy could yet turn out not too badly for the Greeks. But tragedy it might well be for the eurozone and perhaps the European project".
Indeed, the cost estimates I have seen published for the euro area would be in the neighbourhood of 400 billion euros — in terms of immediate direct financial losses. Second round impacts are far more difficult to assess, but would be enormous. While there are a myriad of legal complexities surrounding a Greek departure, it is not an impossible task. The bigger issue would be how the ECB would manage to ring-fence the banks in Portugal and Spain and prevent a contagion.
But let's talk about what we do know with some certainty.
The Greeks voted against the status quo. It isn't working for them. An election is likely around mid-June, and the party in the lead is dead-set against the initial bailout terms. The government, meanwhile, runs out of cash by early August when a bond payment comes due and that could well be the trigger for default and exit. It is tough to see this process being orderly — confusion, turmoil and volatility all come to mind. But if we do get a cathartic event, we will be able to buy assets for our client base at excellent prices. There always is a silver lining. You just have to find it.
We also know that Angela Merkel this far is not being swayed by her party's recent electoral setbacks — at least that is the indication we are getting from her latest rhetoric.
So how does all this play out?
- The Troika work out new less onerous terms for Greece and in return there is no exit. The problem, though, is that Greece's fundamental economic woes do not go away. And other bailout countries will look for similar treatment. This sets a bad precedent.
- The Germans finally acquiesce on the Eurobond issue — a common fiscal policy backed by the country's balance sheet. The risk here is that Germany no longer receives AAA status. But the whole crisis comes to a head.
- The ECB engages in multi-trillion debt monetization and acts as the buyer of government bonds directly. This will undoubtedly have unintended consequences, but would also stop the crisis in its tracks.
- Greece defaults and leaves the union. This prospect is increasingly getting priced in, including the contagion risks.
All the while, the Eurozone recessionary pressure continues unabated — highlighted by the 0.3% sequential decline in March industrial production, dragging the YoY trend to -2.2%. This was the worst performance since December 2009.
It is against this backdrop that austerity is falling by the wayside across Europe. The FT is filled with headlines like these:
- Swedish Opposition Takes Lead in Polls
- Dutch Austerity Consensus Starts to Unravel
- German Poll Victor Succeeds in Catching the Wind of Change
- Hollande Faces Tough Test on Budget Shortfall
Even Canadians are getting in on the act, with the Globe and Mail running with a lead front page story that says Quebec Student Revolt Boils Over (And these students pay just about the lowest tuition fees in the world! But hey — this is my entitlement!).
I have to admit that when I see this land in the WSJ —Brown Warns Californians: Taxes or Cuts — I sense that America is moving out of denial and much more quickly into acceptance than the Europeans are on the road to fiscal reforms. Jerry Brown is talking about a doubling in his planned spending cuts (remember, he is a Democrat) and an increase in top marginal income tax rates and sales taxes too. He needs to close a budget gap projection that has widened to $15.7 billion from $9.2 billion in January with draconian measures. Guess what? Despite the unpopularity of these belt-tightening proposals, the polls show that 54% of the Golden State residents are willing to accept them with a stiff upper lip. Hopefully, this will resonate at the federal level before long.
Look, we are talking about Governor Brown proposing cuts to welfare, health care for the elderly and social services. At the same time, he is imposing extra taxes on the "wealthy". Everyone is going to feel the austerity to varying degrees. And listen to what he said to his detractors:
The fact is, California has been living beyond its means. The United States of America and its federal government has been living beyond its means. This is a day of reckoning and we have to take the medicine.
This, from a true blue Democrat. It would seem safe to say that the U.S.A., and California for that matter, is not Greece, Spain, Portugal or Italy. Denial is no longer an option and austerity is not some dirty nine-letter word.
But make no mistake, as any Canadian who endured the fiscal squeeze of the 1990s — it's no fun to go on a debt diet but you sure feel healthier once it's over. In the interim, very weak economic growth Will be in store for an extended period of time.
Adding to all this fragility is the latest softening in the Chinese data flow. Electricity consumption in April was basically flat from a year ago — it was +7.2% in March and +11.7% in April 2011, so talk about a sudden slowdown. Yikes. The growth in rail cargo volumes has been sliced in half compared to a year ago and residential construction has fallen 4.2% from year-earlier levels. Import growth has vanished —just +0.3% YoY in April versus consensus estimates of +11%.
Again, however, a silver lining — with Chinese growth clearly tailing off, oil prices have come down and with that ... gasoline. Nobody's talking about four or five dollars at the pumps any more.
As I said, Americans are out of denial even as the Europeans begin to shun the painful road towards fiscal probity. An overwhelming 71% of U.S. citizens polled rated economic conditions as being "poor" in a just-published USA Today/Gallup poll. But a 58% plurality are bullish on the future. And so am I. Change occurs at the margin and generally begins at the political level.
The grass roots at the state and local government realm are leading the charge. Whether or not you agree with or even like Jerry Brown is immaterial. When you unveil a tough fiscal plan that displeases everyone — well, that's called leadership. Whoever the next president is — interestingly, the poll shows Romney's favourable-unfavourable rating at 50-41% which is in line with Obama's 52-46% comparable reading — he should take a feather out of Jerry Brown's hat. Spending cuts, means-testing entitlements, tax increases (a sales tax makes great economic sense), raising retirement ages for Social Security, and closing the myriad of tax breaks — all are in order.
Note that after being tied in February, the GOP are now up six points (50% to 44%) in terms of Congressional support. Interestingly, 55% also said the economy would get better in the next four years if Romney got elected (27% said worse) while 46% said the same about President Obama (37% said worse). So if the election does turn out to be more about the economy than a debate about what sort of bully Mr. Romney was when he was a kid, then perhaps there is a legitimate shot that we will see a one-party-take-all come November which may well be what it takes to get things done and done quickly in Washington. The days of gridlock being good are long gone. Go back to the Canadian experience with one party rule in the 1990s — it was time for decisive action, not checks and balances.
I've said it once and I'll say it again. And believe me, this is no intent to wrap myself up in stars and stripes. But there is a strong possibility that I see a flicker of light come November. The U.S. has great demographics with over 80 million millennials that will power the next bull market in housing, likely three years from now. After an unprecedented two straight years of a decline in the stock of vehicles on the road, we do have pent-up demand for autos. I coined the term "manufacturing renaissance" back when I toiled for Mother Merrill and this is happening on the back of sharply improved cost competitiveness. Oil production and mining services are booming. Cheap natural gas is a boon to many industries. A boom in Chinese travel to the U.S. has triggered a secular growth phase in the tourism and leisure industry. The trend towards frugality has opened up doors for do-it-yourselfers, private labels and discounting stores.
As tough as the near-term outlook may be, start to think that it is 1979 again — dark days with inflation excess (today it's deflation), heavy regulation (in industry then, banking today), unionization (today it's a fragile labour backdrop), geopolitical uncertainties (Iran then ... and Iran now), global debt crises (Latin America then, Europe now), high unemployment (then and now), and depressed investor sentiment ('Death of Equities' found its way to the BusinessWeek cover that year...and while the ultimate low was in the Fall of 1982, scaling in was not really a bad idea at all for long-term investors, considering what happened for the next 18 years. I mention that because of the lead editorial in yesterday's New York Times which was titled End of the Affair? Burned and Mistrustful, Americans are Falling Out of Love With Stocks).
To be sure, sentiment is not yet at such a depressed low, neither are valuations (nor dividend yields as high). Be that as it may, it was a huge mistake to have superimposed the awful 1966-1982 period of economic sclerosis and secular bear market (when Japan. who "borrowed" — more like "stole" — U.S. technology and hence garnered global export market share as a result ... sort of sounds like China for much of the past decade) into the ensuing 16 year period because let's face it, the 1980s and 1990s ended up belonging to America.
Few folks saw it at the time. But it's worth remembering, especially now as we face this latest round of economic weakness and market turbulence. It is exactly in periods of distress that the best buying opportunities are borne...and believe it or not, when new disruptive technologies are formed to power the next sustainable bull market and economic expansion. Something tells me that we are just one recession and one last leg down in the market away from crossing over the other side of the mountain. And believe me, nobody is in a bigger hurry to get there, than yours truly. At the risk of perhaps getting too far ahead of myself, but you may end up calling me a perma-bull (at that stage, I must warn you, folks like Jim Paulsen will have thrown in the towel).
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Eh?
Despair begets hope ... how about
Rock, Paper, Scissors, Spock, Lizard.
We are what you get when you helically wrap a plane around a cylinder.
I respect Rosie but I suspect that someone may have slipped something into his drink. It will pass.
Damn rufies. I hope he goes to see the doctor after this.
His logic reminds me of how my old girlfriend Rosie Palms tackled hard problems.
This is exactly what happened to Asia a decade ago.
No it most certainly is not.
Go with an overcapacity in the world's state of the art manufacturing meets bubble US economy.
No different largely than 20yrs ago.
Rosenberg is drunk on his own liquid blood.
He is not trustworthy.
Blow him away.
Ok, I am going to throw some veggies in the stone soup on this one. Pardon if I rant ...
I am desperate to not get fucked on the big reset that seems baked into the current system. I am almost 40. Call me full of shit, but I took a 25% pay cut to move from TX to AK as a short term strategy (~5 year). I live in a very small town, lots of hydro power, and given a man that can hunt/fish, a freezer stocked full of meat. Rice by the 10lb is cheap in bulk.
I volunteered at 18 because I hated manual labor. I worked my way through an engineering degree (army reserve). I am a worker bee. I produce value. This is serious shit for me. I read a lot. I think a lot. I do not want to go under the bus. I do not buy this "Rosie" outcome ... this bitch is going to collapse.
Let's be honest; the demographics are completely fucked. Seriously, the US is going to be a "bull" when the young population is chocking on student loan debt (i.e. instead of a "house" they are paying for an "education"). At 30 something, do y'all seriously believe yougin's can bat for a HOUSE and an EDUCATION and a FAMILY?
In this economy? C'mon Rosie, chat up my post. Tell my why this red neck is wrong. I'm a scrub. A worthless piece of shit. Give me some math, some numbers, give me some (logical) faith.
The boomer demographic is heading into the sunset (my parents included). The math is pretty basic, 1945 + 65 = 2010. The boomers stopped popping out of vaginas around 1950, so its over at 2015. And, in ten years, along with wiping their own asses, they are going to mow lawns, pay property taxes, and generally live like bad ass John(a) Waynes of the age of 70-75? Fuck no, they are going to cash out, go to assisted living, and fade into the sunset.
Yet more homes going onto the market. Oh, right, encumbered young'ns are going to feed on that inventory ...
As an aside, my crotchety old man calls this "the centennial ride". He carries on, "Son, I am on the back side, coming down the mountain. The wheels are starting to come off, it ain't pretty. The VA a'int shy about cutting me off. I got almost 30 to go!".
I don't think he wants to see 100, but, he is a stubborn cuss.
I have a problem with Rosie on this one, its the "big kahuna" I try to grapple with; demographics. If anyone can pipe in and share some insights, I am most assuredly listening. I don't see how this works. The US is fucked like Japan, based on demographics. I mean, we are just talking phases.
Folks, in the big scheme, the free energy of cheap oil (orgy) is over. Life going forward is "closer to the roots". A'int so much room for free love, peace, and kumbaya. If you are my age (<40) then buckle up, life at 65+ is going to be rough.
All that aside, I think Simon Black is an idiot. I am researching places to move (demographics and common law being the goals), so I would also love ot hear constructive feedback in that arena. I got a few places picked out, and he never hits on any of them. But, he has the right idea.
Regards,
Cooter
You're right. Demographics along with over indebted-ness, along with no jobs - NO JOBS! -
I am not sure who he was writing this for.
Don't worry, things will only get worse and it looks like you're already prepared for it.
I love the part bout Jerry Brown and the Democrats in CA finally ready for shared sacrifice. What a joke. The unionized govt workers will only get 110% of their last paycheck plus time and a half versus 120% of their last paychek for their pension. So insetad of $250,000 a year they will get $249,999. F Jerry Brown and the libtards in Mexi-Porn-ia.
Rosie doesn't read this board ... he is merely quoted here. Does he really think a bunch of youngsters are going to step up and buy houses? Sure, because that is the paradigm in which he was raised. Assuming the youth dig their way out of debt to a point where they could buy a house, will there be houses to buy? Hard to say. There is plenty of inventory, but it is growing dilapidated daily. Should you be glad the military gave you other skills other than how to push paper? I am.
Simon only chats up the places that might actually take him. There are very few places in the world where gringos or round eyes will actually be welcome when TSHTF.
Even economists as realistic as D.R. Seem to not grasp the fact that societies do fail. The dumbest reason I can literally think of for a pro-growth argument is because "there is so much negative sentiment." There are other options to growth/no-growth. It is totally plausible that the US could just collapse. All societies do eventually.
Plausable, but not likely in the near future.
not plausible-when the US sucks up the vast majority of natural resources with a fraction of the pop.-how long will that continue-how much oil do we use across the US during rush hour on a Mon. morning alone? and the Chinese are putting thousands more new cars on the road daily.
Lemme get this straight. Rosie actually believes Jerry Brown means what he says? HAHAHAHAHAHAHAHAHAHA!!!!!!!!!!!.
And sure as shootin' it's gona get a heck of a lot worse before it gets better.
. .
0
I bet Rosie revamps his prognostication when TSHTF. Then he'll be called 'brilliant'.
Despair begets more despair. For some AH's - they live on Hopium.
""We are what you get when you helically wrap a plane around a cylinder.""
We are what you get when you helically wrap a plane around a narrow cone.
There... fixed it for you
The biggest bear, Rosie, seeing hope. OMG. Sell EVERYTHING.
Ya know, he probably has been offered a position as Chief Economist with the next administration.
Definitely the symptoms of using Preparation H as jerk off lube. Soaring strains of martial law band music, wind blown slo mo flags waving, Jet fighters down on the deck doing a fly over, Cheer leaders showing off their fake tits and nose jobs, Fireworks, apple pie, and a great big fucking turkey. Yeah, okay, I get it - everything is beautiful. In it's own way. Four dollar gas, two fucking dollars for a shitty head of lettuce, polluted chemical hormone beef sky high per pound, unemployment running at least twenty percent for real, the country is held hostage by the Fed, banks, Wall Street, and Europe is burning. Peachy keen, if you're smoking crack 24 / 7 / 365.
Rosie has been abducted by a body snatcher as Tyler has.
The end of the world is near ...The ten plagues of Pharaoh “have been brought upon” the USA
http://eamb-ydrohoos.blogspot.com/2010/02/ten-plagues-of-pharaoh.html
..
The Euro, as it is explained further down, does not “signal” any European return to the global economic status. It signals the return of the Jews to Europe. There is no currency conflict. There can’t be such a conflict because both currencies are controlled by the exact same people. These are the people who control the dollar through the FED and are the same who control the Euro through the Central European Bank. Greenspan, Bernanke, Trichet and Akerman are not only like-minded, colleagues and banqueters; they are also Jewish cognates and foster brothers.
Authored by PANAGIOTIS TRAIANOU
One of the ten plagues is your stupid ass copying and pasting the same fucking tripe to every comment thread.
Why don't you go do something worthwhile, like setting yourself on fire in Syntagma Square?
So... does this mean the EOTWAWKI is off?
It was never on, all of this is just change. As in horrible change management practices, but it is Change. It's all happened in horrible collapses in the past, today is no different, the future won't be different either.
Just make sure you have silver and gold before the printing shit show starts, when it all get insane and more types of currency start floating around that will switch favor with the breeze. Who knows. Just make sure you get your ass to a lapidary artist to change the coin/bar format into "art". Lose all the registration paper work because all those one''s and zero's won't be around much longer with the worlds primary IT provider getting reamed by energy problems.
Don't worry, Silver is going to run low in industry within a few years...
Hopefully we be mining stars and asteroids by then.
Unwind the debt and derivatives and then we'll talk...
Rosie has no clue.
But... but... but... increasing Chinese tourism in America. There is hope...
Chinese tourists my ass. More like vacationing foreign-born U.S. residents who own half our town.
Good, more tax revenues are needed.
Spies, every last one of 'em
They copy good. Mistakes, so solly.
I'm sure he knows that without financial trickery to sponge off society, he'd be glue.
The coming "changes" (or fill in your own word for what is ahead) are causing people to get that things aren't going to be the same any more. The newbies still don't see disaster as an option. Other people have been camping.
"The U.S. has great demographics with over 80 million millennials that will power the next bull market in housing, likely three years from now."
3 years from now those self-same people who are supposed to be powering a bull market in housing will on average owe $5,000 on a car, $5,000 on their credit cards and more than $25,000 in student loans. This is called the Mortgage Without The House. 18-24 unemployment is at the highest rate in about 80 years. The "official rate" has been 17percent for the past 38 months. The official rate is HORSESHIT. It is easily half again or even twice that. Generation X, Y and Millenial ought to be combined and called Generation U: Generation Unemployed/Underemployed.
Did you see the talk about "money on the sidelines" from the IPO of Facebook amongst other things? There isn't any money on the sidelines. The young person has no fucking money period, more like 35 grand or more of debt! Without even a job! 35 grand in debt, no job, no relevant skills, most competitive job market in decades, they are screwed. Bull market in housing my broke 25 year old ass. It is a bull market of Renting With 5 Other People and a bull market of Sleeping On Mom's Couch.
Right. The secret is in the secular change in goals and economic behavior of millenials. Their aspirations are different than the boomers. Way different. Just like the boomers had a major headbanger with their parents who were frugal post-Depression survivors. We won't see yuppie clones wearing '80s coke dealer suits.
Christ, every time I go to the bar all I hear is "Man, I had a rough week!" and it is all financial woes.The only thing the Millenials are going to do is buy rail drinks with me at the bar. "So, how many shares (Facebook) did you buy?" was last night's big joke.
Anybody under 30 who hasn't been stockpiling silver, gold, ammo and MREs is fucked in the butt.
"Hopium is a hell of a drug."
-Rosie James
The majority of millenials or young people voted for Hope and Change. F em.
But... but... but. You can get a job as a waiter for the Chinese tourists. Come on People. Let's get Happy Feet !
Morrotzo, hang in there. Your rant tells me you have a bright future if you stay with it. Don't quit, don't give up. Kick ASS and lead the way.
In his defense, Rosenberg is talking about hope AFTER a significant downturn, meaning he is expecting this downturn to be capitulation, which may be true. He also inferred hope in the electoral cycle, and if you read his newsletter, he expects a Romney win to mean capitulation in 2013. That could be a really, really low number on the S&P 500. If we were to get to a P/E of say 10 alongside a negative earnings forecast that overshoots, then maybe we would be at the start of a new bull-market, albeit things at the bottom would look much worse than they do now.
What doesn't jibe is his preference for BB corporates. Shilling's strategy to go long duration treasuries has dramatically outperformed Rosenberg. Shilling is not even talking about a bull market.
Keep smoking that good dope, my friend.
Keep smoking on.
A distorted perception haze like that isn't from just smoking dope. He must be burning some Jimsonweed as well.
There can't be long term growth if the rate oil comes out of the ground is insufficient, and obviously it is.
This is just silly.
Spot on. About the only growth were going to see is an uptick in the suicide rate.
Mr Rosenberg badly needs an editor. The whole thing reads to me like a rough first draft.
For example, he's offering this as one of his hopeful signs:
The trend towards frugality has opened up doors for do-it-yourselfers, private labels and discounting stores.
Staggeringly obvious point follows. The "trend towards frugality", if there is one, will lead to a net reduction in aggregate demand as people stop buying consumer junk they don't need. Improved prospects for "private labels and discounting stores" will be outweighed by bankruptices and job losses in other areas. He's arguing against his own premise.
(I'm all for frugality, by the way. Practised it all my adult life. You don't need much.)
When people are paying more for the SAME quantity of oil and food each week, all it means is that less is spent on "frugal" shopping binges.
People spend their entire paychecks every pay-period. If they get fewer gallons of milk and fewer gallons of gas for the same paycheck, this is FRUGALITY?
Riiiiiight.
Consumption of the same amount of dollars on fewer goods is not economic growth.
Yeah, yeah, now.. Rosie. Everything's gonna be alright. I got the same feeling. Don't bet against the good OL USA. Aswhat we always tell 'em. Right Rosebud? Look out there, Rosie. See dat " Mountain"? It's Mt. Friggin' Everest and we are wearing flip- flops and Haiwanian shirts. Here's your lithium pill.
Man, that sounded a lot like what Hugh Hendry was saying recently.
LOL Your hangover is going to SUCK!!!
I'm really getting sick of this binary shit. Risk On or Risk Off. In Fall 2008 we really did avoid financial Armageddon, all of the world's ATMs showing all zeroes. If you don't believe it, read the accounts: Hank Paulson was on his cellphone every five minutes to everybody: BOC, Mervyn King, Bill Gates, Warren Buffett. Everyone. They held the thing together by the slimmest of margins.
So here we are today, and it's friggin binary again. Either we're going to rinse and repeat, and I'll be glad I've got some canned food and ammo. Or, like Rosie says, this is just a temporary downturn with rays of hope ahead.
How are you supposed to trade these friggin "markets". It's like the movie Jason and the Argonauts. He runs around on Earth, battling, fighting...but the Gods on Mt. Olympus reach down from time to time and either remove chess pieces from the board or else send him a breeze to blow his ship past the monsters.
Drivel. The future holds nothing but maggots and zombies.
"Again, however, a silver lining — with Chinese growth clearly tailing off, oil prices have come down and with that ... gasoline. Nobody's talking about four or five dollars at the pumps any more."
So very many don't understand what this means.
It means if China achieved growth, or more importantly, if the US (a bigger economy) achieved growth, oil's price CAN'T stay down.
If you demand more oil, and you CAN'T ramp up supply, the price will rise sharply and choke off whatever growth you thought you could have.
This is forever.
And lower oil prices in a slowdown means production goes offline. Which, increases the cost per barrel to producers and also creates incentives for production to be taken offline, for maintenance on infrastructure to decline, etc.
Then when money-printing and artificial boom follow, you have even higher prices.
And with all that money-printing, $5 a gallon isn't a "lot" anymore. Prices will be much higher, from printing alone, and add to that the short-term supply problem and the long-term supply problem, and we'll be hitting the skids.
But since the gov't can confiscate all resources, I'm sure each will receive according to his need for gasoline. sarc/
Wait, Americna Exceptionalism, yeah waiting for the NIKE sale , scratching their asses at the malls. Now that is what I call MAericna Excepnalism.
80 million millennials rushing to buy homes, HAHAHAHAHAHHAHAHAHAHAHA!!!
The ones that aren't in school are all living in mom and dads basement. Maybe there will be a boom after mom & dad croak and the millennials will inherit the house. Wait, duh mom and dad took out third and fourth mortgages to buy cool toys and finance the kids college. Doh! inheriting a massive liability won't do anything for housing. The kids can;t even afford the property tax, even if the house is paid off.
There are many suburbs where the monthly property bill is more than the mortgage on the house.
The only millennials that are in the clear are those with enough dumb luck to create some stupid social app that generates no revenue, and never will, that gets bought out by Facebook or Google for hundreds of millions.
Dude, I like made this app that like lets you share shit. I didn't think it actually worked but some guy on some blog shit, like totally wrote this story that my app was the shit. Facebook paid me $500 million for it, score. I'm fucking buying a Lambo man. Mom and dad are going to freak when I come home.
I own my place free and clear and the monthly nut for taxes and fees is over $800.00.
The second half of your sentence just puched the first half of your sentence right in the face, showing it to be false..........
Sounds about right for a middle class house in a decent New Jersey neighborhood.
More like a shack in Jersey.
Could the person who voted this post down rationalize "free" and "over $800 [a month]" for us? Like GlobalCtzn, I don't see how anything can be both.
Someone is under the illusion (a common mistake) that "ownership" of private property is possible in this country.
Just wait till property taxes are "means tested", with "special allowances for those in need". Social engineering of home-ownership will be complete.
Holy crap! How big of a house? I live in a very decent area and my montly tax liability is under $300. Folks in the $500K range or lake front (same thing, really) are paying that kind of coin to the taxman. I've got better things to do.
No you own a condo obviously. You own everything from the paint in. That's all. If you under the age of 65, why the hell would you own a condo.
Or if you are paying 9600 a year on a single detached home. You better be getting a handjob from a hot mayor weekly for that cost.
200 or somewhat less per year...
The revenuer is good to us.
When parents croak, we fucking sell the place off to avoid 7K in annual taxes backed by god knows how much utilities and OIL a year.
Sorry mom and dad, your place is a money pit. Kaching!
He is right - but he is overlooking the cathartic event that we need to set the stage for such growth. We need to rip off all the bandaids. We need to cut $1 trillion out of government spending and halt the growth of government debt in its tracks. We need to kill about HALF of government regulations and departments. We need interest rates to rise to a level that promotes investment and saving - not speculation. And we need the stock market to sell off to a level where everyone has cut and run and no one wants to own stocks.
he is right? really? about what? that incredible growth will bring on auto sales, but somehow oil prices wont react? that our zombie banks will open up a floodgate of lending (which they cant do even if they want to, as the fed has mandated that the parked reserves cannot be used) to the "new generation" who dont have a pot to piss in? 1979 again, are you fc-kn kidding me? the 70's was the first "cough" that came from being pulled off of the gold standard......now that cough has worsened to total lung failure...........
that cathartic event you refer to will need to wipe all the federal 16 trillion dollar debt overhang, that 1 trillion dollar student loan bubble, the massive state debt burden that still exists, etc, etc, etc,....and all of this gone and back to growth in 2-3 years. is rosie eager to become the new "contrarian" just for the sake of being different since the doomer viewpoint grows by the day?...
this article is pure crap. something being handed out in obama re-election flyers perhaps?
"Tonight we're gonna party like it's 1979 [scraaaatch!]"
huh? Didn't 1979 like ... suck?
The 70s sucked, but then again, I was a kid, so they seemed really great to me. The US was a humbler nation coming off of Vietnam and a lot more folksy, it seems.
It sure did. I managed to break a thigh bone in a motorcycle accident that year.
We did have Joy Division, though. Until Ian Curtis checked out the following year:
http://www.youtube.com/watch?v=QVc29bYIvCM
The difference between me and the doomers on here is that I fundamentally believe in human progess amd technological achievement. The worlds best days are ahead of it, but we have some tough medicine to swallow.
Cut millitary spending 50%. Cut welfare spending >50%. Cut 20% of federal employees and cut the salaries of the remaining 80% by 20%. Cut their benefits 50%. Cut half of federal agencies and half of regulations. Outlaw govetnment borrowing and start paying down the debt by at least $100bbn a year. Fundamental tax reform, but no net tax cuts till we'vr paid off half the debt. make the 50% of people that pay no tax - pay their fair share. Raise fed funds rates to 5%.
No question its going to hurt. No question we will have higher umemployment and personal bankrupcies and banks failing. But 5 years later....
Well Ive gotta hope we can get back to the good old USA.
Somebody must have slipped RoadKill some scopolamine:
Better idea: Torch Vichy DC and bulldoze whatever is left into the Potomac, torch the Hamptons, and hang the fuckers on Wall Street. Then, for any states which choose to remain in any sort of union, re-establish a weak central government under something like the articles of confederation.
If that's what you really want, I recommend watching 20 hours of television daily. That's where "the good old USA" you yearn for has always existed.
Hey... share that doobee with the rest of us. The parasites aren't giving up the freebies without one fuck of a fight.
Rip it alllll off.
That high pitched voice breaking squeal of pain...
Gonna be good.
Those creeps that met at Camp David this weekend weren't discussing anything other than their personal financial stability plans like how do I maximize my returns for the remaining time I have in office. Shits going down this time. The length of time for the QEs keeps getting shorter. And, the market ramps with my mother's social security prescription medication money gets both shorter and smaller.
How you supposed to trade these markets? Oh I look at IBD to see when a market top is confirmed and then go short. On the upside I wait until the 50 day moving average crosses the 80 day and put in stops at 10% on the downside in the beginning and gradully move them up to 8%. The Bernank will let you know also so it is good to listen to him to find out if the FED is going to move the markets up or down. I also have a few prayers and a Martingale time based pattern or two running. I have an advantage over Dimon there in that I am certain never to get larger than the house.
Right now I'm short mostly. But for a couple bucks in a minute I can be all cash so what's the problem? Corzine that's one problem. You can never be sure unless you hold physical assets somewhere hidden.
Rosie....so, the 80's and 90's belonged to America eh? Funny, but I thought that all that "prosperity" was due to the massive expansion in debt, unfunded government liabilities and bankers gone wild. Silly me.
Nope, it was due to the arrival of oil from the Alaska North Slope and the European North Sea.
And now it's on the decline, and so is mankind.
Shit. Must be Sunday again. BTFD
I'd like to smoke some of what he's smoking.
But Rosie you’re all right,
You wear my ring,
When you hold me tight,
Rosie that’s my thing,
When you turn out the light,
I’ve got to hand it to me,
Looks like it’s me and you again tonight, Rosie
It's a whole lotta bullshit,
A whole lotta bullshit,
A whole lotta Rosie.
Rosie sees what I see: America the Great. A great country with great leaders and an awesome miltary that can kick butt. You either love her or you leave her. She is the best country in the world - which is why Rosie and I live in Canada.
“”The grass roots at the state and local government realm are leading the charge. Whether or not you agree with or even like Jerry Brown is immaterial. When you unveil a tough fiscal plan that displeases everyone — well, that's called leadership.””
Stalin and Castro had leadership and were very successful, uh yes, and your Jerry Brown.
As far a things going better in November, just listen to NBC, CBS, ABC, NPR, NY Times, Wash Post, Boston Globe, Obama, and the Democrat Party and I am SURE you will hear things are Better. You can go the bank with it, BofA, Chase, MS, etc etc. Change is here
the question is, do we need more
The greatest contrarian indicator is when people who were supposedly on your side cave.
Get the gold now, while you can. This is where the hope lies. Not in myths about a new Renaissance in this corrupt, bloated nation which is in terminal decline.
Whatever Rosenberg is on i want none of it
I think he's on Namenda, the poor chap has joined the SoDC (Society of Demented Cronies).
Do you really think the U.S. can reverse it's dependance on globalization and become an island unto it's self without ramifications? Please do not forget that the dollar is global reserve currency and is supported globally. Without global support the dollar and U.S. consumption goes backward to 1970's levels.
Without 1970's level of 9 million barrels per day of oil production but todays less than 5 million barrels per day production. Todays U.S. consumption is somewhere around 18-20 million barrels per day.
http://www.youtube.com/watch?v=5kmLmjz_cFs
Shot down in flames may be more appropriate than whole lotta rosiehttp://www.youtube.com/watch?v=iCVWVWRaReg&feature=related
Sheeit, trucks got 4 miles to gallon in 70 and STILL get 6 pe4r gallon now, maybe 8 or `10 when the plains wind is pushing them eastbound and down.
Read the thread. Rosie has lost his mind.
Demographics are horrible. You cannot achieve any level of growth without a few items such as...the 30 million jobs we lost, a fucking debt tsunami the size of which the world has never seen, and the most inept bunch of cocksuckers and cowards that ever took a breath in DC. The no budget for years variety.
In three years Rosie!!! Dude, you got your hands on some first rate chiva. I am betting on the Japanese forever stagflation model. Ya know the one they got up and running since 1989 in an identical scenario with identical demographics?
I think he's dying to call a bull market and be positive. Everyone wants to be that guy. He has a shot of being right if this leans toward a "nasty" recession rather than mild. I guess the difference maker would be a financial crisis emmanating from Europe.
I'm assuming this is a comedy piece. While I don't think the end of the world is coming - the idea we can just print trillions (most of which was used so bankers wouldn't have to take losses they will end up taking anyway) and go on our merry way is beyond laughable.
This isn't about McMansions and iPads anymore - this is about food, shelter and health care. Reality can be ignored but it won't be denied.
...let's face it, the 1980s and 1990s ended up belonging to America.
Don't stop there Rosie, the 2000's we owned too!! Fact we own or at least the FED owns this decade so far. All bubbles Rosie!
80 million "new millenials" driving the next housing boom? seriously? with what? re-hypothecating there student loan debt? What jobs will they have, Rosie?
It seems whenever I talk with a Canadian they seem to think the U.S. is going to toss a hail mary at the end and win the game and save Canada too! They have this insistant depenance on the U.S. like a parasite. If it were not for the damn near worthless currency for 25+ years they would not have had 10% of the manufacturing base they have now. Although John Deere, Siemens and Electrolux have already pulled the plug on their factories in Canada. It seems productivity is just too low and there is no longer a weak Canadian currency to hide it.
They have this insistant depenance on the U.S. like a parasite.
**************
I think that could be said both ways-if you talk about dependence-it seems Canada is the US's largest export market-
http://www.census.gov/foreign-trade/top/dst/current/balance.html
Don't bet on the CAD staying strong-there's a housing bubble to pop yet-
I think that could be said both ways-if you talk about dependence-it seems Canada is the US's largest export market
Interesting point you have made. A nation of 300+ million's biggest export market is a nation of 30+ million? ...... and we are going to lead the world again? in what? more debt?
Don't bet on the CAD staying strong-there's a housing bubble to pop yet-
and that cement's my case. Why is Canada, who had no housing bubble with the rest of the world in the 2000's, now has a housing bubble? Look at Canadian interest rates and the fact that their central banker Carney will jawbone the alarming Canadian debt levels but WILL NOT RAISE RATES to stop it!! He can't raise rates without it strengthening the CAD. And a strong CAD = loss of exports to U.S. -beggar they neighbor.
and what will happen to the CAD when the bubble pops and Canada begins printing money hand over fist?
Canada cannot survive without a weak currency to bolster exports.
Rosenberg was a decade too early on the bear, he's likely a decade too early on the bull.
I hear DR but this is not 1982 when we were at the early stages of ERISA, CAPM and had a huge ability to take on debt. Now we know CAPM was a hoax and there is no debt to take on. Since WWII we have had about one quarter of organic economic growth where debt wasn't growing in excess of growth. The markets will surely move up and down but it will be a great many years before we have another secular bull market like 1982 - 1999. In the end DR also has his biases as he needs for people to believe you can earn money in the stock market or his job is gone..
Another Manic Monday ... Europe is doomed [in the morning] . BTFD in the afternoon.
Lather, rinse, repeat.
as long as the largest employer in the usa pays substandard wages the usa is not going anywhere fast. that trend is getting worse not better. wages have to rise substantially to sustain any recovery and that is not going to happen gor years especially because 80 million millenials are trying to find work that pays enough to move out of mom and dad's house. in fact, living with mom and dad to help each other out may be the new normal.
wages have to rise substantially to sustain any recovery and that is not going to happen
**************
Actually-i think to get to a recovery that wages will have to fall-i think that to compete for industry against Chindia etc. that we have to move in their direction for wage competitiveness--this could be a fairly painless process provided governments stayed out of the market with their subsidies and giving banks taxpayer money to speculate in the futures market where they drive up prices-instead of allowing prices to fall to affordability which would free up more consumer money that could be spent somewhere else in the economy-
Just keep on thinking that capital is what runs the world fool... exactly what central bankers and technocrats want you to think.
The world is powered by energy fool...
Just keep on thinking that capital is what runs the world fool... exactly what central bankers and technocrats want you to think.
The world is powered by energy fool.
**************
Do you see a current energy shortage?
Did an energy shortage cause industry to move to lower wage countries over the last 20 years?
Only a clueless asshole would come up with something like you just said that isn't and hasn't been a factor in how we arrived where we are today-or what needs to happen next--
I suspect that you only just discovered that the world was run by energy-
Capital is what is currently overvalued not labor or energy. Clearly a clueless asshole can see that...
Capital is what is currently overvalued not labor or energy. Clearly a clueless asshole can see that...
**************
Capital is constrained-where in fuck have you been?
It's "collateral" that overvalued and wtf does any of your shit drivel have to do with the post i replied to?
Fuck off idiot-
The idiot is you ... capital is being steadily produced by cb's and governments. Capital is lent into existence in a debt based economic model fool...
The idiot is you ... capital is being steadily produced by cb's and governments.
***********
You really don't get it-
CB's are lending "reserves" to banks who are not lending it "into existence"
http://research.stlouisfed.org/fred2/series/WRESBAL
Show me the lending--
Banks are not reserve constrained-they are capital constrained although i don't expect that you understand that-
Yea substandard.
Half the world lives on the equivalent of $240/mo
and for some odd reason they largely possess a lot of the same skills.
There are so many structural imbalances, mal-investments, crony relationships between inefficient industry, unions and Government, and Government sanctioned financial fraud, all supported by a mountain of debt that will DOUBLE on "the next leg down". How do you see any light at the end of this tunnel? There is no politically viable solution. It will, it must burn and with it your naive dream.
you can choose austerity or austerity will choose you. either way it's coming and it ain't goin' to be pretty
Despair begets hope
with the 10yr where it is Davey nailed it
tip - Dave stick to your knitting as you lost so much cred with your world beating pitiful equity calls
and as for Jerry and Calif, his only problem is he doesn't have a printer and he doesn't want his legacy to be that of a two time loser
finally Davey says
I can only imagine that with his spotted track record he has just joined the FB generation.
Finally again - I think Dave went bullish just before the last equity swan dive lthis time last year http://pragcap.com/david-rosenberg-turns-bullish
Dave Despair begets hope, hopefully you have a solid contract with Ira and aren't renting in one of the hottest real estate markets on the planet that has been in crash mode for at least since 2005 according to many meanwhile prices have doubled and tripled since then
http://news.yahoo.com/blogs/ticket/afghanistan-karzai-thanks-obama-taxpa...
What planet is this guy living on. So much is wrong.
He talks about the service/health care cuts. So we continue to prop up the big three looters of health care dollars, Big Pharma, corporate healthcare and Insurance, and instead make cuts in what we provide to the sheeple. Instead of really figuring out how to get through this mess in the least painful way possible, through single payer health care, we continue to prop up the crony capitalistic structure that strips us of basic needs.
Then the optimistic take on millenials creating the next housing boom in three years. Is he not aware of the crippling cost of higher education and the low paying jobs graduates are forced to take? They are a long, long way from down payments. What's this guy been smoking?
Is he some neocon hack?
C'mon, Mr. Rosenberg...
Bullshit is what got us here.
The only reason why Jerry Brown is biting the bullet, is because California (as a State) is prohibited from borrowing more money. Big difference from the Federal level, where there is effectively no debt limit. No limit, denial continues.
The talking heads are are starting to get bored and are just writing anything, the fact is nothing has changed and there is no cataylst on the horizon, so they are just starting to make shit up.
We're on the verge of a Farcebook-led recovery. Blue shoots, people.
I think zero hedge should repost this article in 10-12 years. I think it will be much more true then
Not blue shoots... Propaganda shoots... Www.justicecoin.com
Did Rosie mysteriously succumb to Invasion of the Body Snatchers !?
Millenials and Housing Boom? WTF? Every single under-30 person I know is working at a job that makes $15 and hour or less. They have enormous student loan balances. How exactly are they going to make a mortgage payment??
You got to understand, David, is suffering from too much debt and not enough money...PRESSURE!!
Classic read
Where's Rosy and what have you done with him?
Rosy stop smoking the Hopium.....this is about way too much debt.
In the longer term I do think you maybe correct, but strech the rubber band out another 5-7 years...
It aint gonna strectch. When it snaps anyone holding it is gonna get a mark.
what the economy can tell us about the election
http://www.cnhedge.com/thread-4831-1-1.html
Is the Euro area Credibly on Target?
http://www.cnhedge.com/thread-4838-1-1.html
Yahoo had an interesting title to its banner headline this weekend, touting "Oversold Market".
So since when did "Panic", "Correction" and "Recession" change to "Oversold"?
I believe Rosenberg has seen the future, and it just plain scared him.