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July 15, 2008
Spain's Crisis
You cannot speak of a crisis. - Rafael Pacheco, Housing Director, Spanish Government, October, 2007
January 6, 2009
Spain Dec service activity second worst on record
Spain's unemployment rate was the highest in the European Union in October and some analysts expected it to rise to close to 20 percent by 2010 as the economy sinks into recession.
How could things possibly get any worse? Surely this must mean the bottom is in. Let's embrace risk again! Woohoo! And when I say we should embrace risk again, I mean 30-1 leverage, baby! That way, if the stock markets of the world rise 1% as the global economy continues to implode, we'll be making 30%. In fact, we'll NEED to make 30%. How else can we make up for the pension losses?
"Any slight optimism seems largely based on wishful thinking, while it seems clear that conditions will continue to worsen in the first quarter of 2009 at least," Harker said.
Don't you know it! I'm basing it 100% on wishful thinking! Everywhere the sun is shining. All around the world it's shining. How can there possibly be a global Great Depression with so much sunlight? I've seen footage of the Great Depression. That was all black and white. It was also quite grainy. Now we have a glut of High Definition color. This is SO not the Great Depression. It is so much prettier than that!
That being said, why do cold winds blow across my mind? Confusion? That would be a terrible shame. Confusion? Look, there's a slight risk I don't know what I'm sayin'. Who knows!
Friday: Employment Report, ISM Mfg, Construction Spending, Vehicle Sales
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[image: Mortgage Rates] Note: Mortgage rates are from MortgageNewsDaily.com
and are for top tier scenarios.
Friday:
• At 8:30 AM ET, *Employment Report* fo...
16 minutes ago
6 comments:
Stag,
As usual, the MSM has grossly misreported the size of the underfunding.
http://www2.standardandpoors.com/spf/pdf/index/051908_SP500_PENSION-Report.pdf?vregion=us&vlang=en
As of y/e 2007, other post employment benefits (OPEB) were underfunded by $269 billion. The situation is much more dire after the market crash of 2008. Note too, that the future return assumptions for S%P 500 pensions are a smidge over 8%. Good luck with that.
At this point I think it would take and entire year of profits (say $500 billion) to set the S&P 500 benefit plans in order. More if they lowered return expectations to an achievable number like 5%.
All of Obama's advisers are ex wall streeters. I have no doubt they are more concerned with nominal growth rather than real growth. However, domestic labor has no pricing power due to globalization. Inflation today could be much more painful to main street than in the 1970s. I don't see how inflation will lead to prosperity. Maybe a Japan like outcome is the best we can hope for.
I don't know why the fed allowed household debt to get so out of wack with wages. Perhaps they were happy that the exponential credit growth system was getting its fix.
Hold on to your kidneys, tough times ahead.
MAB,
I don't know why the fed allowed household debt to get so out of wack with wages.
From the report...
The concern is that neither the public nor the private sector has shown a tolerance for the pain associated with the type of forward action needed to address the problem.
I would argue that we have a high tolerance for pain. Behold the power of denial. The arrows first hit the ARMs. No big deal. Nothing needs to be done at all. A few arrows hit the heart of the banking system. No big deal. We'll slap a $700 billion bandage on it. A few arrows hit us in the legs and we were laid off from work. No big deal. Bed rest is relaxing. Then an arrow hit is right in the kidney. Okay, somebody else is gonna have to pay for that! That requires a trip to the hospital and we're uninsured!
Hold on to your kidneys, tough times ahead.
From the report...
In the end, however, individuals, either as taxpayers or consumers, will need to pay the bill, as well as live with the reduction in benefits and their lifestyle.
The beginning and middle sure were a hoot though!
But my favorite quote, by far, was...
The longer the situation goes on however, the worse it will become.
That's what I was thinking in 2004.
I had no idea at the time that the economy could hold together for four years. I was patient though. It eventually fell apart.
I had no idea we'd actually reelect Bush. I was patient though. His popularity eventually went into the toilet.
I was way too early on gold and silver as well. I was patient though. 2006 was the big year for me.
Speaking of gold, Monex is now running a TV advertisement telling us how to use 5-1 leverage betting on precious metals. You know, if that was a housing commercial talking of 5-1 leverage we'd ALL be heckling the hell out of it. So on that note...
Let's see. Gold has closed higher every year for the past eight years and is nearly four times more expensive than it was at the bottom. Yeah, now is the perfect time to embrace leverage. First, the entire world is deleveraging. Second, you can't lose! You can never pay too much for gold! Heck, borrow insane amounts of money and leverage up! Inflation will protect you. Just ask any real estate speculator.
That being said, I wouldn't dream of shorting gold these days. The same could be said of our dollar. You can never bury too much of it, especially as it drops from helicopters.
Investing never gets easier. It's the same minefield it always is. One wrong move and kablooie. Nothing is a sure thing though, gold included.
Stag,
I had no idea kidneys were THIS valuable. No doubt, we'll be seeing more & more of this:
http://www.nypost.com/seven/01082009/news/regionalnews/ex_is_an_organ_moaner_149236.htm
Now my mind is racing. Think of the possibilities. We've got lots of supply (kidneys). If only we could jump start demand.
Anyway, this guy is as dumb as a bag of hammers. At a minimum he should of done a lease purchase with a call option.
MAB,
They are asking for the $1.5 million as part of the distribution of assets based on a medical expert's estimated value of the kidney.
Lock in that price while you can. Made in China kidneys will be available in the bulk bin if the global economy continues to fold, and maybe even if it doesn't.
Anyway, this guy is as dumb as a bag of hammers.
I was looking for a segue, thanks!
So there I am watching CNBC this morning. They were discussing the odds of the markets ending in the green today. The DJIA was down about 70 points at the time.
Meanwhile, there's Rick Santelli nodding his head sideways in the lower corner of the screen. By the time they ask his opinion he's got a dollar bill out and he's displaying it for the camera. He says, and I paraphrase, I'll bet a George Washington that the markets don't end in the green today. My hero!
I bet your wondering what this has to do with dumb as bricks? Well...
Even though the market was already down 70 points or so and would therefore make ending down the most likely outcome (all things being equal), Dennis Kneale still wanted to take the bet. At the very least, he should have at least negotiated some favorable odds.
I can imagine the pollyanna's gears turning. What's 7.2% unemployment? That just means 92.8% are still doing well!
It's the same mentality that led to underestimating the subprime problem. Most aren't subprime so why should we care? Well, to quote Calculated Risk, we're all subprime now.
Let's hope the catch phrase for 2009 doesn't end up being...
We're all unemployed now.
Stag,
Let's hope the catch phrase for 2009 doesn't end up being...
We're all unemployed now.
Agreed. And Dennis Kneale is the most annoying TV personality ever. His pollyanna, dismissive comments bug me to no end. Same thing with all these dingbat eCONomists recommending theft via inflation.
In rough number, here's the primary source of my bearishness:
Household Debt: $14.5 trillion
Disposable Personal Income: $10.5 T
HHDebt/DPI = 138%
A record high as far as I can tell. The ratio is just about the same for HHDebt to GDP.
How do you grow a CONsumer economy from those debt levels especially against a headwind of stagnant incomes? And to think, that ridiculous debt level was based on the absurd notion that record high housing prices would CONTINUE to rise. Absolute idiocy.
I was uncomfortable with household debt levels ten years ago. The housing bubble blew my mind.
Dennis Kneale and his financial entertainment network focus on earnings, deals, CEOs, forecasts etc. - all noise when our economy is founded on mud.
We're at an inflection point. Drastic steps have and will continue to be taken. I'm quite certain the consequences will be drastic too.
I don't see inflation as a solution. Lowering the aggregate interest rate on unpayable debts is probably the best path. Investors and lenders had their bailout. Now it's time for them to accept lower future returns.
Let's see Pimpco collect 3% loads and 1% yearly fees in a 1% growth economy.
mab,
How do you grow a CONsumer economy from those debt levels especially against a headwind of stagnant incomes?
This question stumped me. I therefore climbed a remote himalayan mountain overlooking the Tibetan Plateau. I presented the man sitting there with the required basket of rare precious goods (several rolls of toilet paper).
In his delight, he told me he would offer the answer to any question I could possibly imagine or may lightning strike him down.
Needless to say, I asked your question from behind a shield of rubberized canvas.
Several minutes went by without a response, so I asked again, and again, and again. I found myself having to ask VERY loudly due to the constant stream of thunder.
Then I heard him speak. It was faint. I could barely make it out. He offered me back my precious goods and the goods of those before me if I promised to never return to that mountain.
Free toilet paper? In this environment? You bet!
Unfortunately, I still have no answer to your question though. ;)
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