Posts
October 19, 2007
Rafael Pacheco vs. Ash
The Spanish Government yesterday played down fears of a crash. Rafael Pacheco, the Housing Director, said the figures showed that Spain was experiencing a “gradual and gentle landing for house prices. You cannot speak of a crisis,” he said.
That was then. This is now.
April 24, 2009
Unemployment in Spain Hits 17.4%
“These figures are bad and worse than expected,” the finance minister, Elena Salgado, said. The sharp quarterly increase was a sign of “how severe and how deep the crisis is,” she said.
Nobody expects the...
I'm sorry. That joke never gets old to me.
Here's an update. I found another gem from the past. That which must not be thought!
September 18, 2007
David Taguas vs. Vizzini
``To talk about severe adjustments or a meltdown in prices is ridiculous,'' Taguas said in response to reports pointing to an end of the Spanish real estate boom. ``That sort of crisis is unthinkable.''
Here's yet another gem.
Septebmer 19, 2007
The Sarcasm Report v.10
Spanish officials have furiously denied reports that the country’s property market is heading for a crash or that a clutch of banks may be in the same boat as Northern Rock.
That which must be furiously denied!
"The Financial Stability Implications of Digital Assets"
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An interesting paper from researchers at the NY Fed: The Financial
Stability Implications of Digital Assets Here is the overview:
• This article considers...
5 hours ago
16 comments:
Stag,
There's that "that" word again.
As in "that" which must not only be furiously, furiously denied, it must never, ever be discussed:
With "that" in mind, let me come at the "that" issue in another way.
We have too much _______! Tens of trillions of said ______ can't be repaid. Printing money won't eliminate the excessive ______ problem, despite what Bernanke and other eCONomists think. Why? Because in our system, _____ is money. Additional money, like the kind Bernanke is printing to buy $1.55 trillion in GSE and Treasuries paper, still requires that someone assume $1.55 trillion in _____ AND future interest payments. Adding more ______ further burdens the system with _____ without increasing output. Want proof? Just look at how much new ______ it now takes to generate an additional dollar of GDP. We're below the zero bound barrier despite conjuring trillions of new ______ into existence.
From a distance, it seems odd that so many are still clinging to hope and listening to shills. The likes of Kudlow and Cramer would have us believe that prosperity comes during the bubble bursting phase (or the debt repayment phase). Good grief. "That" should be a red flag for even the biggest fools.
Seriously, if the majority couldn't increase their wealth during the credit bubble expansion, exactly how are they supposed to increase their wealth during the credit bust? I'm quite certain that the Dutch would have demanded Tulip Bubbles 2 through 50 if the bust truly delivered prosperity.
As far as I'm concerned, it's still a good time to be a skeptic.
mab,
What phrase goes in the blank in your MABLIB?
1. "debt"
2. "made in China"
3. "con game(s)"
Debt works best, but the other two work pretty good too. No wonder it is best not to name it. "Conchinadebtgamein" would instill fear.
Stag,
Speaking of CON games. I keep thinking about the Fed's quantitative (dis)easing. What a sham. They fire up the printing presses to bailout the fraud, incompetence and banksters, but I guarantee once those banks are helicoptered back to health the printing press will be permanently off limits. Bailing out greed should be at the bottom of the reasons to print list.
Will we print if there are social security and medicare shortfalls? Sorry, the money is gone, you'll have to work longer & accept smaller benefits.
Health care, education? No dice. Times are tough.
And just wait until you see how mobile capital becomes if they ever try and raise taxes. Safe haven will be replaced by tax haven.
The whole process wouldn't bug me so much if I thought it was being administered fairly. To me it's a big CONfidence scam. It's all about the bonus.
Here's the reason for the above rant. I think we've been deprived of the benfits of inflation. That seems to be changing.
I rarely shop, but I went to Walmart today. And when I do shop, I buy only what I need and leave - no browsing. The prices blew me away. Huge flat screen TVs for ~ $500 - $1000. Desk top computers w/ monitors for ~ $300. Ipods for $49. Polo type shirts on sale for $7. 64 oz sodas for $1.00. Twelve disposable razor blades for $2.27. Ten pairs of socks for $4.00. I bought an entire barber kit for < $10 - it just caught my eye. I'd never even considered a barber kit before. I've had a buzz cut for years and it takes the barber about 5 minutes to cut my hair. Yet the barber charges me full price. I'm seriously thing about buzzing my own hair. If nothing else, my boys are in for a rude awakening this summer. ;)
Anyway, I started thinking that we could have really been enjoying deflation for years. The housing bubble was so unnecessary. And MEGA bonuses for financiers and CEOs serve no purpose in my mind either.
I think inflating from here is going to take a bigger helicopter.
I think we've been deprived of the benfits of inflation.That should read: deprived of the benefits of deflation.
mab,
My first trip to Wal-Mart really blew me away as well.
I bought a ton of "Gold Toe" socks at Wal-Mart over the years. They are fairly high end and I love them because I have size 12 feet. Most socks fit up to size 12 but they feel tight. Gold Toe socks go to 13. Wal-Mart no longer sells them, which seriously reinforces my hoarding ways. I've got 90 pairs in reserve and not once regretted it, lol. Those exact same socks would cost a small fortune at the local malls, which is where I'd have to buy them now. Even Target no longer carries them. The new low-end economy now sees them as a luxury it seems, which I would too if my feet weren't big.
I've yet to regret any hoarding purchase. If something is a good value, I'll continue to buy as much of it as is practical. Maybe even aluminum foil might be considered a luxury item someday. To the Chinese factory worker, I'm sure it already is (just like Gold Toe socks). I'm all about locking in a current standard of living. I'm not a huge believer that the economic future looks all that fantastic for the typical American. For example, we're now laying off teachers and increasing tuition dramatically in Washington State. Sigh.
Stag,
Just a friendly reminder - sell in May and go away. Unless of course you believe that the banksters can put the ponzi back in our eCONomy.
mab,
"Just a friendly reminder - sell in May and go away. Unless of course you believe that the banksters can put the ponzi back in our eCONomy."
I'm more of a sell and stay away kind of guy. I'm done. I'm trying to imagine what would entice me to buy stocks again now that I don't have a job. A 50% off sale didn't do it (DJIA 14,000 to 7,000).
What would happen if future retirees start thinking like me. How do I think?
Let's just say that with each passing year...
1. I become less motivated to work.
2. I can feel my job skills deteriorating.
3. I watch unemployment rise.
4. I'm getting older and employers generally prefer younger workers.
5. I'm more willing to lock in a current standard of living.
6. I'm becoming more risk averse. The risk takers are using eggs for batting practice these days, but I'd prefer my eggs kept in the nest.
In summary, rational paranoia increases the longer I am retired. Why rational? I use only hindsight to determine it. Paranoia was a great defense for the 2000-2009 era.
I may not fully grasp how this will all play out, but I'm willing to bet my entire life savings on the idea that borrowing our way back to prosperity has a snowball's chance in hell of working. That was my bet in 2004. It's now 2009 and we're not so much doing it again, but merely continuing it using much larger numbers. It might appear to work for a while, but there will be unintended consequences, again.
Free lunch figures are on the rise.
http://www.orangenews.com/ocn/news/local/article/free_lunch_figures_are_on_the_rise/39483/
Stag,
What would happen if future retirees start thinking like me.On one hand, I think over priced stock and real estate values would drastically decline. Moreover, commodity prices would also drastically decline towards the actual cost of production. Hmmm, it appears your clan is growing.
One the flip side of the same one hand, I think the supply of future retirees has been drastically reduced. :(
I have serious doubts if Bernanke can kick start demand and stop deflation. Real estate is just too overbuilt.
If we ignore the housing rate of sales numbers (house traders distort that market) and look only at supply and demand, the outlook for residential real estate is really grim.
Currently we have 130 million housing units and only 111 million are occupied. That leaves 19 million unnocupied units, 15%! In 1970, 9% of housing units were unoccupied. In 1980, 9% of housing units were unnoccupied. I think the credit bubble that started with Reagan was supported by housing. That support has collapsed. Demand for new homes and all that goes with it is gone imo.
Over a five or ten year horizon, I don't think it is realistic for stocks to return more than the core inflation rate, plus the dividend rate, plus a portion (say 50%) of the real growth rate. Core = 2.5%, Current Dividend = 2.6%, 50% of real growth = 1%. Stocks for the long run look like 6% to me. The inflation and low valuations of the 1970s & early 1980s coupled with the extreme overvaluation of the 1990s/2000s have severely distorted the long term returns of equities imo.
If you study the historical data, prior to our policy of inflation, stock returns over time mirrored dividend returns. That explains why dividends were generally much higher prior to inflation.
If Bernanke can't stop deflation, the inflation gathering/shuffling industry (wall street) is going to get crushed.
Just personal observations and opinions. I could very well be wrong.
Stag,
Here's a joke that is making the rounds on the financial blogs:
One afternoon an investment banker was riding in his limousine when he saw two men along the roadside eating grass. Disturbed, he ordered his driver to stop and he got out to investigate.
He asked one man, "Why are you eating grass?"
"We don't have any money for food," the poor man replied. "We have to eat grass."
"Well, then, you can come with me to my house and I'll feed you," the banker said.
"But sir, I have a wife and two children with me. They are over there, under that tree."
"Bring them along," the banker replied.
Turning to the other poor man he stated, "You come with us, also."
The second man, in a pitiful voice, then said, "But sir, I also have a wife and SIX children with me!
"Bring them all, as well," the banker answered.
They all entered the car, which was no easy task, even for a car as large as the limousine was.
Once underway, one of the poor fellows turned to the banker and said, "Sir, you are too kind."
"Thank you for taking all of us with you."
The banker replied, "Glad to do it.
"You'll really love my place.
The grass is almost a foot high."
mab,
Very amusing joke! LOL!
As for your 6% stock market outlook, how would you alter your estimate if...
1. Interest rates actually began to rise again at some point?
2. The rest of the world did what we did when it comes to oil. In other words, could no longer produce enough oil to fuel themselves?
3. The US population trend follows Japan's? Or worse, follows Mad Max?
In 2004, I debated someone on the Capital One message board about near record low unemployment. They were bullish because so many people had jobs. I was bearish because I figured that at some point that trend would reverse and I wouldn't want to be in the stock market when it did.
In 2009, investors are bullish because interest rates are at a near record low. I am bearish because I figure that at some point that trend will reverse and I won't want to be in the stock market when it does.
If you are young and a Republican you are thought to be emotionaly cold and heartless. If you are old and a Democrat you are thought to be financially naive. I finally figured out what I am.
This middle aged stagflationist is a Democratic Banana Republcan. Sigh. I empathize with the poor and less fortunate, but for the life of me I can't figure out how we can afford what we've got now, much less the grand visions of the current administration.
In other news, I was at Costco last night. The sales tax was 9.5%, up from 9.0% on my previous visit. Raise taxes during a recession? Genius! Why not just raise it to 50%? Oh yeah, I remember. Everyone would move to another state. By raising it just 0.5% only some would move. They are certainly tempting me. Michigan might even pay me to move there, based on their desperation level TV advertisements attempting to lure businesses to move there.
Peak turnip blood?
Stag,
As for your 6% stock market outlook, how would you alter your estimate if... .
I was just saying that I think the common wisdom of 10% long term returns is too high. Especially when dividend yields are historically low at around 2.5%.
Typically dividneds make up ~ 45% of long term reterns. The rest is inflation and real growth.
I don't see much inflation and I certainly don't see much real growth.
mab,
I didn't mean to imply that your 6% outlook was locked in stone, any more than my three questions are.
I'm in "what if" mode, and most of my ifs these days seem pointed to the downside. I'm hoping I'm biased, and there are other unknown ifs that are pointed to the upside. Just wish I could see them.
I was informed today that as of December 8, 2008 my TIPS bond fund was renamed. I guess they no longer like the "Lehman" word in there, lol.
"I don't see much inflation and I certainly don't see much real growth."
I was also given the iShares performance results of their bond funds as well. My TIP fund was the worst, thanks to that missing inflation you speak of. I'm not complaining, but the inflation insurance policy certainly wasn't needed last year.
It could have been a LOT worse. I could have been one of Buffett's investment candidates.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aQaCIYfNsqZo&refer=home
"May 2 (Bloomberg) -- Billionaire Warren Buffett said all of the candidates to replace him as chief investment officer of Berkshire Hathaway Inc. failed to beat the 38 percent decline of the Standard & Poor’s 500 Index last year."
...
"He said two years ago that he would audition managers who are “genetically programmed” to avoid large risks."
Apparently there have been some gene mutations.
"...there are four candidates to succeed him..."
Buffett's Ex-Men?
Bottomcrawler
Pigerene
Perfect Storm
Icecold
Stag,
Genius! Why not just raise it to 50%? Oh yeah, I remember. Everyone would move to another state. By raising it just 0.5% only some would move .
I'm not so sure everyone would move. Why? For one, I don't think they could sell their houses.
States and local governments are facing serious budget problems. And they don't have access to a printing press either. Property taxes, sales taxes and junk fees are the next best thing. Especially with a "captive" audience.
Home "owers" are sitting ducks. Somebody has to pay for the bankers' mischief. No free lunch.
Stag,
I've been thinking about your query into interest rates moving up.
Anything is possible, but lately I've been leaning towards a long period of low rates. Mainly due to our huge debt load.
In 1929, long term Gov't rates were ~ 3.5%. Surpisingly, said rates held steady through 1932. Then rates declined to just below 2% in 1941. Nine years. Rates did not see 3.5% again until 1956, 25 years after the stock market crash began.
I think your original premise is spot on. The days of making money from money are over. Including getting something for nothing from secure treasuries which have outperformed stocks for decades. And I do mean decades.
mab,
"I'm not so sure everyone would move. Why? For one, I don't think they could sell their houses."
I watched a movie the other night called "Between Heaven and Hell".
http://movies.msn.com/movies/movie/between-heaven-and-hell.2/
"Robert Wagner stars as insensitive Southern landowner who gets a much-overdue dose of humility and democracy when he's drafted into the army."
We're all sharecroppers now!
mab,
"Anything is possible, but lately I've been leaning towards a long period of low rates. Mainly due to our huge debt load."
I've been warming back up to Mish in recent months. It wasn't easy after his salt water powered car article though.
Stupidity Squared
http://globaleconomicanalysis.blogspot.com/2009/05/stupidity-squared.html
It is John Mauldin that sums up my thoughts best, and Mish quoted him.
"Next year, we will be entering what will certainly be the most dangerous era in my lifetime for the US economy. It is not clear what will happen. There are a lot of paths that can be taken, though some are more likely than others. For those who are convinced that high inflation and a falling dollar are absolutely, unequivocally in the future I have just one word: Japan.
Yes, there are differences, but there are a lot of similarities. While I think the most likely outcome is a long Muddle Through recovery, the likelihood of a lost decade of deflation a la Japan is a very real potential outcome. And the possibility of stagflation and a seriously impaired dollar is also quite real."
I think that we're okay as savers as long as we can't figure out if deflation or stagflation is the long-term trend. As long as the fed can walk that line, muddling seems hopeful. Using that criteria, as it applies to me, I've been muddling since 2004, lol. I'm never quite sure if I should be protecting myself from inflation OR deflation. Thank goodness TIPS and I-Bonds offer at least some defense against both.
The best news of all, from a hyperinflation standpoint, is that oil crashed and crashed hard. That will put some fear into traders if oil rises again and I'm guessing the Fed can capitalize on that fear, maybe.
Here's what does concern me though. In order to control inflation in the early 1980s, holders of government debt were bribed to save instead of buying natural resources. That saved money has been earning interest and compounding for decades. That tells me the bribes are going to have to be bigger in the future, or there will be an inflation problem. However, offering investors MORE money not to spend money doesn't solve an inflation problem, it merely postpones it and makes it worse when it finally does arrive.
http://illusionofprosperity.blogspot.com/2007/09/chinas-restraint-vs-federal-reserves.html
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