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Date Posted: 09:33:26 09/01/09 Tue
Author: Paul Davis
Subject: Well, I don't agree
In reply to: Shirley 's message, "More good news this morning" on 07:10:51 08/31/09 Mon

For a long list of reasons, some of which I posted here earlier.

For one, the stock market is drastically, insanely, and stupidly oversold. Even the senior analyst at S&P is goggling at the crazy stock prices. There is a huge intervention to prop up the stock market ongoing, but I simply cannot believe stock prices will stay up solely through people standing in a circle and saying "we believe". P/E ratios are just crazy, and the reporting of them as anything below hundreds is untrue and not based on GAAP. The GAAP numbers for the S&P 500 are kept here:

http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.XLS

And I think we all know any drop in the market will cause consumer confidence to crater. The real analysts (as opposed to the TV rah rah boys who are NOT allowed to give bad news unless it's obvious and past, because of fears of accusation of market manipulation), aren't arguing over whether or now we will have a correction, they are arguing over whether it will be 10, 20 or 30 percent.

The stimulus package is starting to hit, and of course spending half a trillion this year is going to show some economic boost. I will point out just two things about this, and I'm sure they'll get me yelled at, first, this is just a continuation of the real (not the advertised, the real) Reaganomics that caused the mess in the first place, and more of the same is not the answer, secondly, stimulus doesn't equal economic growth in a real sense, unless it's building infrastructure - and a LOT of this stimulus package isn't doing that. It was done too hastily because the Dems knew the Repubs would try to sabotage it, so it's full of poor planning.

Were it possible for the parties to cooperate, something sensible might have been done, but that just wasn't in the cards.

Yes, the housing market is "up" in a sense, but why?

http://www.generationaldynamics.com/ww2010/g090823c.gif

Which tells all. Huge numbers of foreclosures are not good news, not to anyone but home buyers looking for really cheap bargains. Right now, houses are very cheap in many parts of the country, and that means builders are eating dirt. Real estate agents are seeing a small increase in their business from a year ago, but a HUGE DROP from three years ago. Same goes for just about everything.

I'm told China will lead the world out of recession. Indeed:
http://ftalphaville.ft.com/blog/2009/07/28/64131/asias-forever-blowing-bubbles/

http://blogs.wsj.com/chinajournal/2009/06/29/shanghai-building-collapses-nearly-intact/

China's poorly planned stimulus makes ours look like a model program.

Ok, China's not leading the world out of recession, they're just spending money. How about Japan?

If you check the news, you'll find that Japan just turned the country over to the opposition party totally.

*******
Prior to the election, the ruling Liberal Democratic Party (LDP) held 303 seats, while the Democratic Party of Japan (DPJ) held 112 seats. But according to exit polls from Sunday's elections, the DPJ will now hold about 315 seats, and the LDP will hold about 100 seats
*******

That's total changeover and capitulation. Why?

http://search.japantimes.co.jp/cgi-bin/nb20090829a1.html

For TWENTY YEARS Japan has been in the economic doldrums. And now it's getting worse again, since they've been recycling money and pushing exports. No exports, no jobs.

So that brings us straight back to the USA, and apparently the US believes "something good" will happen. I really don't think we'll pray our way out of this mess.

Before things actually get straightened out, I do believe the stock market has to capitulate and get back in touch with reality. That would mean about a 60% drop in the DOW and much the same for the S&P. This would cause consumer confidence to actually collapse, and we'd finally get back to a normal savings rate and a less insane percentage of consumer spending as a %age of GDP. Prior to 2008, consumer spending was at a record high, about 70% of GDP. Everyone is feeling the pinch now, so its dropped? Wrong, it's now 72%, it's gone up because it didn't drop as fast as the GDP did. It has to drop back to 60% or less, the previous historic high end, to signal true recovery to me - and it hasn't. OOPS, did I just say the GDP is going to drop by 12% in addition to the drop it's already had - probably more since the jobs supplying and retailing all that stuff will be gone? I don't think we're supposed to say that out loud.

I'm seeing short term and transient blips of "good times" showing up as a result of frantic attempts to reinflate the bubbles. We don't need bubbles, we need actual growth.

(Yah, if anyone wants my full lecture on the real package of Reaganomics as put into law and practice as opposed to the imaginary package people think they got, just ask. Damn few like the reality tho.)



>The NY Times is reporting a $4 billion profit for the
>government from banks that have repaid their bailout
>loans. >href="http://www.nytimes.com/2009/08/31/business/econom
>y/31taxpayer.html?_r=1&th&emc=th">http://www.nytimes.co
>m/2009/08/31/business/economy/31taxpayer.html?_r=1&th&e
>mc=th
>
>As for the worst recession since the Great Depression,
>I'm inclined to think it possibly was. Certainly it's
>been worse than the one in the 80s in that banks
>weren't threatened then as they were in this one but a
>commonality is that in both recessions, the housing
>market were devastated and home foreclosures and
>personal bankruptcies were way up. People are losing
>homes as fast through inability to pay taxes as
>through bankruptcies. Economists now agree this one
>started in 2007.
>
>There's no doubt there are still some hard times yet
>ahead and it's going to be slow going for awhile

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