FHA insures mortgages where the mortgagor has only put down 3%. It really doesn't take a great deal of mathematical talent to see the most probable outcome.
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Commercial Loans to Small Business are going down like a rock in a pond. The companies in the S & P 500 are masking the disaster under the covers. But you can only cut expenses for just so long... after that they are going to need some top line growth, and the only customer is the &^%$! government.
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Unexpected? By WHOM?
The U.S. does not have the household formation to support the anemic building we have going on in the market - the last thing we need to do is artificially increase demand.
The lunatics are running the &^^%$#!! asylum.
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I may seem like a frustrated "Perma-Bear" - but I think not. I think that we, the World led by the U.S., will be in a monetary-deflation-environment for at least a year or 2. Yes, I am frustrated to have missed the equity rally (not that I would have bought financials or retailers under any circumstance, and they led the rally) but I am as suspicious of the market as I have ever been.
More soon,
Libertariananimal (at) gmail (d0t) com
12 comments:
Re; 'we, the World led by the U.S., will be in a monetary-deflation-environment for at least a year or 2.'
What about the world led by China? A friend in Australia says China is driving strong solid growth based on basic resources and infrastructure, in the Asia Pacific and African markets. Australia seems to be becoming the Western Connection.
Any thoughts?
China, in the immortal words of Gary Shilling is "great at building capacity" - and the world does not need any more capacity.
China is as vulnerable as any western nation.
Nice tidbits Greg.
I've started rereading some Jose Ortega y Gasset, his book "Man and Crisis."
One of his main points is that man lives in a world that he constructs. The phenomena we experience are mysterious, frightening and unexplainable until we have a world model with which to explain and interpret. Most of us are just given a world by others, in school, TV, etc. Some actively modify their worlds based on thought, evidence, etc.
Greg is pointing out that one of the "givens" of our current world - plentiful energy in the form of easily used, concentrated liquid fuels (oil, gas), is not going to be a permanent feature of our world.
Our world is changing - right now, quantitatively. Soon it will change qualitatively.
I would hypothesize, Greg, that these changes will mean that almost all economic models and attempts to increase or preserve wealth will fail, and that radical new strategies will be required by those who actually want to succeed to creating a human, humane, and good life for themselves and their families and communities.
Those who don't pre-adapt their models of the world will be devastated. Governments will tremble, as for the first time (other than world war), they will face a phenomena that cannot be swayed by the force at their disposal.
China is toast: it is all production, and no consumption. When world demand falters even more, they will implode. The tighter the leash, the greater the violence. During the Cultural Revolution, there was a huge outbreak of cannibalism: people killed and actually ate "enemies of the revolution." I think there is a ferocity underneath the seeming passivity of that populace.
China could EASILY switch to being consumers. We did. Just takes a change of mind. And spending is a LOT more fun than saving. They are buying more cars there than we buy here.
The Chinese citizen has almost no social safety net. They don't have many children to care for them in old age. They have little protection from corrupt officials. Saving is their only safety net.
Furthermore, much of the nation is still living a feudal existence as peasants farming and barely making enough to survive. The goal is/was to force these peasants to the city to work in the factories: but that ain't gonna happen. It's reversing.
Past history has shown that the spenders here in the U.S. (the baby boomers), and in Europe, didn't much care about our "social safety net" when they bought their plasma TVs and granite countertops, putting themselves into hock moreso than ever before. So you are saying we spent because we have a "safety net?" We spent because we wanted to live like kings, even tho workers wages have flatlined for the last 30 years. Luckily, credit was made available to the lowest of the low, and a-spendin-we-went. People don't seem to really care about the future very much, past evidence shows. People save in Asia cause there is little to buy! :) That will change.
I think its time to move my 401k money to short term debt and cash. I was expecting DJIA to hit 12K, but the possibility of stocks taking a 10% hit in a day is just getting too great. I'd love to focus them on gold silver and energy, but the choices you get all move together with the S&P500. I'm scared of bonds because long term rates may not stay low if the dollar really tanks. Not much of a choice.
Regards,
Coal Guy
Bur,
They have shopping malls in Asia. There is everything to buy there that is available here. They save because most of them, or their parents, have lived in poverty without help of any kind. They save so that if worse comes to worse, there is something to fall back on. We are told don't worry, be happy! It's all under control. For 50 years, the trend has been that tomorrow will be better than today. Different experiences, different behavior. They're right, were wrong.
Regards,
Coal Guy
B,
I would say we spent because the safety net was there as insurance, to a degree. Low interest loans helped! However, our nets are straining badly. China savings ( net ) will strain quicker. And when its gone its gone.
I could not agree more about savings in nations without "safety nets."
The Chinese are in a REALLY bad position - safety net AND no children. The 20% of the population that are parents to a son WHO WILL NEVER MARRY BECAUSE THERE ARE NO WOMEN are going to starve or commit suicide.
China is not the engine, not by a long shot.
Short term? How would I know....
Coal Guy:
"They are right, We're wrong".
Spot on.
They do not have shopping malls in the rural countrysides of China. :) Hundreds of millions of Chinese could possibly be saving cause there isn't anywhere to really spend it. Only 1 in 5 Americans will enter a nursing home for any length of time. Not everyone has to save for some 100% debilitating health problem. Plenty of old Chinese people get by just fine.
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