May 31, 2009

94% of you disagree with me. Interesting. But maybe, just maybe, I'm right. And Hope is here.


Three months into one of the greatest stock market rallies ever and you STILL don't see green shoots? You STILL think 0% interest rates, trillions in government spending and a tax cut don't matter?

Things are improving folks. The free-fall is over. Millions more will lose their jobs, GM will finally go bankrupt, California will need a bail-out, home prices will keep falling, and we've got one hell of a bill to pay (or inflate away).

But now, the numbers will get 'less ugly'. And then one day, they'll actually level off, and then they'll improve.

So it's time to come out of the shelter.

It was brilliant that you built the shelter, stocked it with supplies, and stayed there for the past two years. Congrats. You survived (I hope).

But really, come out. Take a peek. Everyone else is in the shelter. Takes a brave man to come out and take a peek. Be one of the first. Again.

Of course, get ready to head back down there one day again. Maybe at a moment's notice. There'll still be many (bad) surprises to come, it may be a WWWWW kind of chaotic recovery, there'll be fits and starts. But we've kicked the can down the road.

So really, come on out. Take a peek.

And remember - this blog is "Soot and Ashes - The World After the Crash". It's not "The End of the World is Here and Things Will Never Ever Get Better". Business runs in cycles. This one was a doozy.

But Hope is here. And so is the recovery.

It hath been foretold.




How you feelin?

132 comments:

MelodyofLove said...

I have followed you for years. I must say I disagree. How can you call it before all the fuzzy loans go through our process? How can you call it before the unemployment starts picking up? How can you call it when the banks keep failing? I'm confused Keith. What data is making you believe it's better; that much better to where you think we ending our recession/depression into positive numbers? If unemployment continues to grow, businesses will continue on the decline.

I JUST DON'T GET IT... ESPECIALLY FROM YOU.

Anonymous said...

I think Keith was turned by MI-5.

swannster river said...

Massive deflation or massive inflation. Still can't get a sound idear of which it will be, but neither is good.

Deflation seems the better to me though.

keith said...

Inflation.

You didn't think we were seriously ever thinking of paying all that money back (in real terms), did you?

Not that we ever could have anyway.

Tyrone said...

Keith,
Get to John Williams at about the 60 minute mark. Enjoy!
.
Hyperinflation, here we come!.

Anonymous said...

near short-term, you are right, yes, we are on a temporary plane, with a bounce in the markets for the next few months at least. A year out, I think we will start to know the real results of the job losses, and shrinking economy. Everyday, I see a new for rent sign in the area of NorCal I live in, both for commercial and residential properties, both in the non-tourist and tourism-dependent parts of town. And, that, on the scale I'm seeing, I have never witnessed before.

So, those things aren't going to turn around so easily. All I can hope for is my equities go back to close to where they were, and maybe move the bulk into a basket of foreign currencies/bonds. Or, keep it in the market, it may be better than any currency, even if it loses value.

But, also, what happens when we find out that all that bailout money is just the beginning, and that the car companies and financials will need to be continually supplied with fresh capital. And on top of that, the massive social support programs that will have to be enacted for the jobless. There is a limit to how much the government can print, before the whole ball of wax comes unglued. And, at this point in time, it looks as if we are going to find out, just what that limit is...

Anonymous said...

Well if 94% are against you

Maybe your wrong

Anonymous said...

all the debtor nations of the last depression/ww2 got blown to bits, and perhaps so the creditor nations could sell them the stuff to rebuild?

Saul said...

Keith,

You may be right, or - you may be wrong. I'll say it straight - I think you are wrong (or at least, VERY early), and we'll see soon enough that this is the case. There is still major systemic risk, and there is evidence that they have lost control of the situation. The bond market is breaking, the stock market has massive intervention, capitalism is a shadow of it's former self with "too big to fail" moral hazard and bailout unintended consequences everywhere. Add to that geopolitical tensions which could easily snap, triggering massive spikes in energy costs. There are many other potential black swans too - like swine flu, Hurricanes etc etc. You say yourself everything is still going negative, but in the same breath, that it is now all OK too? Help me out with this logic, because there seems to be a big gap in the middle there.

The trillions spent should be turning the number positive NOW, and at most, we are getting some mild second-order improvements (things getting bad less quickly, but still getting bad). Nothing they have tried yet has worked in any meaningful and lasting way. Next week will be the GM bomb finally exploding. Will this be a happy rainbow event? How much of US employment and GDP is linked to this company alone?

My suspicion is that this is the most manufactured recovery in the history of mankind. There are no fundamentals supporting it, and the weight of it and the broken systems that are on top, will soon enough bring it down. I've been looking, hard, for signs of real recovery. The bad signs far far outweigh the good, and the good seem fake.

Sorry Keith, I'm going back into the bunker now....and my feeling is that I might have to wait until 2013 or later for the bottom of which you speak. This bear market is going to take people down with this first head fake. I think if you come out now to dance you are going to get vaporized by the second financial A-bomb that is currenly in the air falling.

evildoc said...

I think, too, some had(th) fortold this during the first big bear-market rally of the Great Depression, which was- iirc- an even bigger rally than the one we now see. And, we sure do know how that one turned out ;)

Correlation and parallels of course are not predictive. Still...

I see two effects of the current stimulated verdant shoots that have been claimed. Either... hyperinflation with failure for salaries to keep pace (figure low grade Zimbabwe or Argentina... well I hope low grade) thus rendering quality of life improvement nonexistent. Or... transient benefit to this marxifying of our society, giving- well- a bear market rally ;) A bear market rally before the next leg down, as with the GD in 1930.

Hope? Well, I guess I'm part of the health care bubble some here cite, a beneficiary of " big pharma" or the latest "big" something that annoys the crowd. I live waaay below my means. Saving heftily. Scratching head figuring how to diversify for safety.

And... awaiting the next leg down.

Cheers

-evil

Mike Hunt said...

Keith,

I think what's happening as a result of the global ZIRP is that other economies are recovering faster than the US. The US dollar gets weaker and US companies with earnings in the US and outside make more money.

That may be the reason for the stock market recovery, the higher price of oil, and foreign markets going crazy.

And is this continues Schiff will be right- decoupling will happen.

Need to keep watching for signs to back this up or come up with a new position.

The trouble is most of your readership is US based and doesn't see what's happening in other parts of the world directly. I'm seeing a pretty solid recovery for electronics and storage media (Hard disk drives), the current industry I work in.

-Mike

Lost Cause said...

The GM BK will be forgotten once CA defaults.

And somehow you see green shoots? What kind of little green leaves are you smoking?

Pay Lay Ale said...

One question keith, "How will we expand our productive capacity to sell goods and services that the world wants?"

That's how you get REAL economic growth, that benefits everyone. Reinflating the housing/credit bubble will cause even more malinvestment.

Do we really need more houses filled with granite countertops plasmas, and Margaritavilles? Or should we spend the money on stuff like alt. energy, nuke energy, increasing mpg, and improving infrastructure?

Oh, and if you haven't seen the South Park Episdode called "Margaritaville," it's comedy gold.

Pay Lay Ale said...

Oh, and another thing, Keith.

Inflation doesn't increase wealth, it decreases it and redistributes it.

Instead of people spending their time and effort on productive endeavors, they waste some of their time and effort on "beating" inflation. That hurts the real economy. Not to mention the mal-investment it causes.

Singular said...

Nope, don't buy it.

"Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall,
All the King's horses and all the King's men,
Couldn't put Humpty together again."

The American economy is Humpty; it is irrevocably broken - nothing is going to put it together again.

Sure, it's part of a cycle, but the next burgeoning economic empire will not happen in the United States.

Andrew from Russia said...

It's Hope within a longer-term Fear/Desperation, i.e. a mini-cycle within a cycle. Much like the housing PANIC in 2007, set against the overall atmosphere of Anxiety.
Absent some fundamental changes in the Despondency/Depression stage there could be no real Hope.

Duarte said...

The other factor you are not considering is that of the "punctuated equillibrium". It's always a factor and yet always ignored, but left brains don't like seeing sharp changes in what should be normal distribution curves.

It is like the asteroid that dooms the dinosaurs, or the invention of gun powder or the microchip. If H G Wells had created an all powerful world altering technology like the IC chip in one of his stories, the publishers would have laughed him out of their offices...and yet that is exactly what awaited mankind in the twentieth century.

The world economy is too fragile for peace to reign. No balanced equillibrium in our time. It is always punctuated. It won't even take a 911 this time. And the move to socialism will be anything but peaceful. I for one will not go quietly into that bad night.

Anonymous said...

Keith I think you are right about things are getting better, but for how long? I like to give stories from the outside world. Just got back from a friends house in the outer banks NC. It is not high season and the water is still chilly so I was thinking it would be few people out. Wrong, things were happening, people eating out, shopping and houses rented. My friend has her house rented for nine weeks during high season, enough to pay for it the rest of the year. In California my three family members who were not working (all construction) are finding jobs and putting in bids on upcoming projects. My problem is how long is going to last? I have this funny feeling that we will be heading back down in a year or so.

Supernintendo Chalmers said...

not sure what planet, let alone country, you're referring to. but it sounds like a magical place... does everyone ride unicorns there?

Singular said...

We are in the eye of storm where things are unnaturally calm (and where you can be lulled into having a false sense of security), and then suddenly all hell breaks loose.

Anonymous said...

There's hope in the fact that the US possesses the most intellectual property.

Anonymous said...

Yeah Keith, I have to agree with most on here. There is a small feeling of optimism, especially the pick up in Real Estate traffic lately. But it is all tied to first time home buyers and the $8,000 bribe as you perfectly called it. But last week at the first sign of trouble when interest rates rose .5% people started to panic and back down fast. This whole small amount of optimism in the housing sector is very manufactured and will not last past Nov 09'. Way too many people upside down on their homes right now and need to get out from under them. Unless the banks modify every upside down, unaffordable mortgage (which they won't) We have still got quite a ways to go before we are climbing out of the depths of hell.

She ain't even humming yet said...

Try and convince the local Chili's that things are getting better...Saturday evening @ 6:30 the lot is empty & there were more employees inside than patrons ordering food.
When it opened in 05 you had to wait to get in if you did not arrive by 4:00(Remember the little pagers they use to break out? I have not been given one in over 2 years, ANYWHERE)...Recovery?
Chili's would beg to differ...You will see more Grocery & Restaurants fold due to the fact most US families bit off to much debt and have no free cash.
BTW: I live in one of Forbes Top 10 places to relocate in the USA...If this is Good I can only imagine what it's like in Jersey or Detroit.

Anonymous said...

Dead cat bounce. Summer will be brutal. Buying back in towards the end of the year or early 2010

long beach, ca said...

the only hope i see is in the stock market/wall street. but in main street it's still depression/despondency with a dash of capitulation.

yoski said...

Things are getting better for a while. You can throw a hell of a party with a couple of trillion dollars.
IF we would have gotten rid of the overcapacity in the banking and auto sectors and invested the money into future technology, infrastructure, energy, education etc. then I would be hopeful that there would be a permanent recovery.
If ifs and buts were candy and nuts then every day would be X-mas.
None of that has happend. We took the money to support the most appalling failures our economic system has to offer. Chances are this is the last shot in the arm this addict can afford. At a deficit of 10+% of GDP we will soon face the very real possibility of the federal government no longer being able to finance its deficit at the capital markets. This means they will have to print the difference or simply default.
In the meantime China & India are exanding their economy, hoarding & securing access to commodities, investing in technology and infrastructure. Over the next 20 years the size of the cake (ie. world output of energy & commodities) will roughly stay the same, only our slice will get significantly smaller. This translates directly into declining living standards across the board. Yes, there will be a certain amount of decoupling. Contrary to popular opinion, the rest of the world does NOT depend on our consumption and our toxic debt in the long run. This is not a process that happens overnight but will play out over the next 2 decades or so. Rome wasn't build in a day, neither did it fall in one day. The wise prepare for a decline of our economy while they have the chance, the foolish will party on like there's no tomorrow.

Randy said...

Keith,

Be more specific, I’m not sure I understand what you’re saying.

What is the strategy for the next 5-10 years?

Invest in stocks? (what companies?)
Bonds?
Real estate?
TIPS?
Commodities?

The other day you had another one of these moments and predicted oil at over $150 a barrel coming shortly.

IMHO oil at that price range spells instant disaster to the economy.

And with you saying ‘Inflation’ and supporting Peter Schiffs view,

How can it be anything other then build a bunker and stock up in canned food.

Do you think that Salaries and profits will not only keep up with your predicted inflation but will be stronger?

My main issue is Housing;
In my area 90% of the homes for sale can only be afforded by about 5-10% of the local area residents, again, House prices went up approx. 200% or more between 2001 and 2006, and prices have not really dropped yet, a price reduction from $369k to $329k seems like a lot, but the real value is still less then $100k.

So me thinks all that stimuli to maintain inflated house prices is not a reason for Hope.

In a way its similar with car prices, one would think GM and Chrysler cars would be on fire sale now and there would be bargains galore, but in reality not at all they’re still way way over priced and these morons are providing idiotic incentives like “employee pricing or $1,500, cash back stupidity”, in a healthy business environment (without intervention) Car companies would give away the deadbeats as quick as they can at a loss and quickly begin filling inventory with profitable vehicles.

Anyway; what’s the plan, what moves today would pay off in the future?

Anonymous said...

We kicked the can down the road all right, but not as far as you think. And we paid a horrendous price to do so. All we accomplished was to lessen the pace at which things are getting worse. The next leg downward will start in 6 months or a year or two at the outside, and it won't be possible to fix it by throwing money at it.

We are now starting the long, slow downward grind. Forget the idea of business cycles or bell curves. The recovery won't come until we have all given up waiting for it.

Miss Goldbug said...

"Things are improving folks. The free-fall is over. Millions more will lose their jobs, GM will finally go bankrupt, California will need a bail-out, home prices will keep falling, and we've got one hell of a bill to pay (or inflate away)."

Keith, I'm sorry but this is similar to what the President, bankers and economists were saying in 1930.

At least during the Great Depression, we had a gold standard and a manufacturing base from which to manipulate. Today we have a promise, a prayer, Ben and a printing press....nothing.

Look, even China doesnt want to buy our paper, the Federal Reserve had to buy it.

The citizens of the US and the world keeps hoping Obama will save the world. The identical thing happend with new President Roosevelt, everyone thought his actions and ideas would turn around the great depression.

IMHO, we are far away from any hope. I see fear in some, denial and desperation in others. Eight more years before we see any "hope".

The "Stock market crash part 2" coming this October. Dow to 6000. Home prices will follow the crash in December 09' losing another 100k in equity.

All the while, our President, Treasury Secretary, and our absentee Federal Reserve Chairman will all say the economy will start to recover by mid-2010, then revise it to end on 2010, etc.

Havent we seen this story unfold before?

Anonymous said...

your spin is just too cute. we are just getting started.

dud, i think iam going to quit reading. how much of your eadership has dropped off?

Anonymous said...

Tax receipts tell the real story. We're in a depression, but Obama's money bomb is starting to filter into cash registers and this is creating a false dawn. The next leg of the downturn will be more serious because it will cause large institutions to fail

Anonymous said...

Swannster River: "Massive deflation or massive inflation. Still can't get a sound idear of which it will be, but neither is good.

Deflation seems the better to me though."



I agree on inflation. I see it happening on gasoline, healthcare costs, and taxes.

Everything else like home prices, furniture, gadgets, electronics, job salaries, internet, even on some food - are all going down.

keith said...

Lots of echo chamber blogs out there for those of you who only read things you agree with. Please leave.

This blog is an ongoing debate. That's why I like it.

And remember, if I end up being right on this one, as I was about the downfall to come in 2005, then I bet you'll be glad you come by here.

You should always have some doubt. Perma bulls and perma bears get slaughtered. Always question the conventional wisdom. And beware of groupthink. It'll kill you every time.

Miss Goldbug said...

Singular said:"We are in the eye of storm where things are unnaturally calm (and where you can be lulled into having a false sense of security), and then suddenly all hell breaks loose."


I agree with you 100%. The sh*t will hit the fan soon.

JaneZ said...

You should always have some doubt. Perma bulls and perma bears get slaughtered. Always question the conventional wisdom. And beware of groupthink. It'll kill you every time.
-----------------------

So because everyone is pessimistic you take the contrarian position of optimism? To avoid the groupthink?

I will stick with data, and the data says this is far far from over, and that it will NEVER go back to what it was.

You have said this before I think:

After the magnitude of what they have done......

The dollar and the bond market are up next for the spanking. Take cover.

John S said...

Keith, just because the freefall has slowed doesn't mean things are better. There will be no recovery. We've lost 6 million jobs. We'll lose 10 million more in the next 15 months. We've got a currency crises about 4 months away. And then there's energy. By next month, the price of gas will be double what it was last fall. And Congress is about to pass a Cap and Trade tax bill (without reading it). That will amount to a 20% VAT on EVERYTHING. I don't see any chance for a meaningful recovery until 300 Congressmen lose their jobs.

wallstreetvet said...

I sort of agree:

1. Inflation in things you buy
2. Deflation in things you own
3. Leveling of the economy
4. Slow growth

Thus:

1. Commodities higher
2. U.S. lost decade
3. Deflation in the $USD
4. Stock market moderate upside

All this stockpile food type nonsense comments get us nowhere. Its all about asset protection and some moderate gains. The fact that everyone on a blog is bearish makes me wonder if we have blinded ourselves. The open mind tells me the next bubble could be forming in commodities.

swannster river said...

>It's one thing for a business such as a bank to fail; its another thing for the public to lose confidence in banking, or their own currency, or the credibility of all the people who work in banking, or the authority of those charged to regulate these activities, or the courts and their officers who are supposed to adjudicate misconduct in them. When faith in all these things starts to go, all bets are off for even larger social constructs like democracy, justice, and the destiny of a federal republic.

http://tinyurl.com/n6fyv8

Joe said...

Nothing has been solved. You cannot fix a debt problem with more debt.

We have not even got to capitulation yet, but it is coming over Summer/Fall then the USD goes down and the US goes third world. Watch it happen and you can book that!

Joe M.

investorinpa said...

Keith, its not just 94% of us who disagree with you...this is the only opinion I think you should comment on...PimPco's Bill Gross, aka the Bond King:

http://www.marketwatch.com/story/pimcos-gross-boom-times-are-over

i've had it said...

Fellow Sashers,

the reason Keith continues to believe the worst is over is because of his faith in one thing and one thing only:

Barack Hussein Obama.

He has invested so much of himself in this man that he simply can't make a logical conclusion anymore given the facts out there. No matter what the data is saying -- all of which is horrific -- he will, at the end of the day, circle back to the Socialist Savior and put his faith in him.

BO has become a religious prophet to Keith; essentially, a cult figure that now has such a tight hold on his psyche he can't break out of it...not even with the many friends here on S&A who try to talk some sense into him.

It is no use debating/discussing where we are in this cycle with him; or where we are headed. Obama will take care of all of it; he is the leader with vast powers; he is a "deus ex machina", the god-like figure who will save the day and everyone in the story will live happily ever after.

This, my fellow Sashers, is what can happen to even very smart people like Keith; they can get sucked in by personality, charisma, and the oratory skills of certain leaders. This is an old story that the world has seen repeatedly throughout history ...and it never ends well. And it won't this time either.

Keith, you have lost your way on this issue. You have failed to see the concerted effort to bubble-up the market by the power players in the economy and govt. You have been conned. And that's what it is all about: confidence. They want people to be confident because without it then we are doomed. In early Feb BO said we were in Depression; a couple of weeks later he said things were good. Then the well-orchestrated series of statements from biz and political leaders followed -- IT WAS ALL ORCHESTRATED...and the market responed in kind. However, everything that was said were lies. The banks did not have profits: they are bankrupt. The stress tests were rigged. There is no wealth being produced. Housing is cratering and will continue. The commercial real estate shoe is about to drop big time. Unemployment is raging: 700k+ people lost jobs in April, not the 520k the govt. says that did (you have to take out the 219K jobs the govt. said were created based on their birth/death model). Food prices are sky-rocketing. Oil is sky-rocketing. Wages are being decimated. 10 and 30 year interest rates are increasing. Car companies will be liquidating. The GDP fell 6% for both of the last two quarters...6%! And the market goes up?! Rigged and fixed. The dollar will be toast soon due to printed money and global efforts to deep six it. People are re-setting their values and along with them their spending patterns to a much lower level.

Time for you to disengage from the Cult of Obama. Stop listening to him. Stop looking at his picture. And stop believing him: he doesn't know anything. He's an empty suit. He has never produced anything in his life or done anything of real value. He is totally controlled by the radicals he has hired. And, like Bush before him, Wall Street owns him.

Sorry man, the long-term prospects for the country do not look good despite this pumping up of the market by the grifters and banksters.

You make a good and astute point about always challenging what you believe is true; I agree with that. But no matter how much I challenge the data, I still come up with one thing: "craps". I believe you would too if you were able to detox yourself from the Cult of Obama.

Anonymous said...

Keith you are overlooking a few things.
1. Those "Good Reports" that you hear being reported for places like Bank of America are based on transferred paper wealth in credit from other higher interest rate credit companies. By offering 1.99% until some time in 2010, you can place the "new" business on the positive side of your books! There has been a massive campaign on behalf of Bank of America to raise this debt.
2. The Governmnet has closed off any opportunity to make conservative interest gains for the average saver. U.S. Savings Bonds, Bank accounts, etc. are all in frozen states and in the case of "I" bonds, the government is pretending that there is no inflation out there. I know there is every time I go to the store or buy gas.
3. Any spending out there is still being done with credit cards. I watch as people will use their cards to purchase a coffee and danish at quick mart type stores. They buy their groceries with credit and certainly play balance games week to week. We are in deep trouble here and this will contribute to the mess being readied for later.
4. The USA thinks that they can manipulate the world in relation to debt and speculation on the dollar. They are extremely confident that they will be in time to deal with the potential fall value crisis that will come after the summer. We are in for a rude awakening here. I think it may be a terrible winter in 2010.
5. Our European brother, the U.K. is in serious trouble. No one else outside of Israel is so connected to the USA.

will shill for coin said...

Anon 2:48 PM I understand your frustration. Keith seems maddeningly hard headed and heavily entrenched in far left ideology at times. I've wrestled with the want to punch out of this place also.

But basically he's right. When the conversation gets good around here there's lots to be learned, and that isn't an easy thing to find. So just ignore the left wing stuff and get comfortable with exercising your right to civil disobedience.

keith said...

Bill Gross, "King of Bonds" knows his gravy days are over and for the rest of his life, bonds will be in total sell-off mode.

Get ready for 20% interest rates.

Anonymous said...

>Get ready for 20% interest rates.

That'll make housing drop by another 75% overnight.

keith said...

You don't understand.

When interest rates are 20%, the price of a 1-bedroom condo will be $500,000. A gallon of gas $10.

The purchasing power of the US dollar will be destroyed. And the debt will be monetized.

keith said...

Will Shill - so that nuclear anti-union post below this one, or the pro-Ron Paul foreign policy post below that one - that's far left wing stuff, eh?

If you think that's left, I'd hate to see how far you are right

You know you're an independent when the left thinks your right and the right thinks you're left, and you think they're both idiots.

Mike Hunt said...

Groupthink is good if you come in early and ride the swelling wave. Groupthink is what makes bubbles possible. Remember when you called the housing bubble you were years too early.

The trillion (or with Obama on deck quadrillion) dollar question is will this rally last or is it going to turn to vapors? It already seems like a nice enough rise off the bottom. Another 40% rise will see S&P to 1400. If so I would have missed out. I guess I'm willing to take that risk now.

I'm actually going to try to short some financials next week if there is another rally. SKF close to $40 again. But playing with leveraged shorts is like firing an old gun- not sure if it will blank out, fire or explode in your hand!

Very dangerous stuff!

-Mike

keith said...

MSM now reporting on Obama's best-stock-picker-in-the-world bottom call:

SAN FRANCISCO (MarketWatch) -- In the thick of a stock-market panic in early March, President Barack Obama suggested that equities looked attractive for long-term investors.

Good call. An investor who followed the advice the president gave on March 3 and plowed money into U.S. stocks that day would be sitting pretty now. After slumping for a few more days, the Standard & Poor's 500 Index /quotes/comstock/10u!spx.x (SPX 919.14, +12.31, +1.36%) began a ferocious rebound.

The benchmark index is up 32% since March 3. That beats more than 1,000 actively managed diversified U.S. stock mutual funds during the same period, according to investment researcher Morningstar Inc.

http://www.marketwatch.com/story/obamas-market-call-pays-off-for-stock-investors

will shill for coin said...

Yes, I know you have some conservative positions here and there, but on balance you're left, in my judgment.

Btw, I'm not that far right. David Brooks is my favorite columnist and Rush Limbaugh hates repubs like me.

And I want my fucking nuclear power plants.

Devestment said...

false bottom.

Dead cat bounce.

Terrible consumer sentiment.
(read the blog comments)

Impossible new lending standards.

Huge debit service.

Gold bubble. "LAST RALLY!"
(Millions buy in to loose their shirts)

Interest rate backlash on the horizon.

I'm still buying ugly dollars...

When ugly dollars make 20% on a 30 year T-bill they won't be so ugly any more. Consumer debit, labor, and housing, now that will be ugly.

My future looks like a downward staircase of false bottoms that ends in a place where no news is good news and the discussion is over.

Been there, done that!

will shill for coin said...

Mike, you don't have to worry about it blanking out.

pennymac IPO coming said...

good news folks.Angello needs more of your money to buy up all the shitty mortgages he made.His new company called pennymac is going to help homeowners stay in thier homes.What a nice man.Do you want to support him and buy some stock in the upcoming IPO?Keeep working for wall street bitches.

Anonymous said...

"Saul said...this is the most manufactured recovery in the history of mankind. There are no fundamentals supporting it..."

"...yoski said...IF we would have...invested the money...We took the money to support *the most appalling failures our economic system has to offer...this is the last shot in the arm this addict can afford....they will have to print the difference...

...Anonymous said...Tax receipts tell the real story...
The signal-to-noise has grown atrocious , but there are still quite a few good posters to learn from if you're willing to scroll vigorously.

I've learned from experience who the handful are who have nothing meaningful; are blowhards and a complete waste of time to try and wade through their puffery.

The above posters are among the ones I pay attention to, because I've seen they have good insight.

*It's all pretend. ;^D

Anonymous said...

hey, gas could be $20 a gallon if interest rates go up that much! Loaves of bread that much too...
: (

Anonymous said...

time to roll up your sleeves folks.

Anonymous said...

Keith, sorry to say that after all the truths you have posted, you are not looking at the facts or realities. These half million jobs we are losing every month are NEVER coming back. The car Cos are NEVER Coming back. 2004-06 mindsets are dead forever. You know the stock market will crash between 4-6000 points this fall. Interest rates must go up. The housing market will probably heal up starting about 2020 and American wages have no chance of going up this decade. Where is the money and production and manufacturing going to come from? It almost sounds like you have been bought off by the system.

Former HPer said...

"And so is the recovery."

After reading the comments here, a debate in a sense, I am convinced you are wrong Keith. Some very good posts I don't see you responding to:

"However, everything that was said were lies. The banks did not have profits: they are bankrupt. The stress tests were rigged. There is no wealth being produced. Housing is cratering and will continue. The commercial real estate shoe is about to drop big time. Unemployment is raging: 700k+ people lost jobs in April, not the 520k the govt. says that did (you have to take out the 219K jobs the govt. said were created based on their birth/death model). Food prices are sky-rocketing. Oil is sky-rocketing. Wages are being decimated. 10 and 30 year interest rates are increasing. Car companies will be liquidating. The GDP fell 6% for both of the last two quarters...6%! And the market goes up?! Rigged and fixed. The dollar will be toast soon due to printed money and global efforts to deep six it."

Keith you base some of your "feeling" that the recovery is here on a big stock rally? Do you know when the biggest stock rallies of all happen?

Idiocy.

yoski said...

" The open mind tells me the next bubble could be forming in commodities."
Yes, commodities are probably the next "thing". It's going to be a mix of peak everything and wild speculation. There's no way we can extract enough copper, oil, gas, etc. out of this planet to bring everybody up to the standard of living the US has been enjoying over the last decade. There will be wild price swings and shortages, real and imagined.
The dollar dominance will come to an end and our trade balance will even out. That means for everything we import we will have to manufacture something in return. No more paying for stuff with IOUs. Our collective credit card will get revoked by the rest of the world just like any deadbeat gets cut off from credit by their bank.
Things in England, Ireland and Spain look even worse. No resources + no technology + no manufacturing = no future. Selling each other houses on credit and government subsidizing failing industries & investment scams will not work.

observer said...

Keefer,

Here is my prediction and am 100% sure of it as well.

Not that this ->
http://tinyurl.com/l946ko
Isn’t good news –
it is, actually great news for a change..

But I do predict
1)There will NOT be an emergency UN Security Council meeting assuring the continuation of the murdering of innocent heroic Jewish people.

2)We will not hear the automatic unconditional support for murder and terror from the rotten and evil Europeans, in the form of “ Urging the victims to act with restraint”.

Anonymous said...

It's the fundamentals, Keith.

The fundamentals.

-Gonzo

SeattleMoose said...

I'm one of the 94%...nuf said.

Anonymous said...

.


Time to roll up our sleeves...

and drop our pants!



.

Anonymous said...

.



How's that Hope and Change workin out for ya?



.

Anonymous said...

Are we looking at the same chart?

les said...

The conventional wisdom right now is that we will have a recovery. 74% of economist predict a recovery by 4Q 2009. Consumer confidence has also made huge increases.

Therefore, 94% of the readers of this site are going against the conventional wisdom.


In California, things look bleak. The $24 billion deficit amounts to $100,000 per California state employee. No amount of job cuts or wage reduction can fix the problem. California will likely default or receive a bailout from Obama.

The rest of the country might have a small recovery, but California will not. At least, not without a huge bailout.

70chip said...

Keith is right. Too many people on here are way too bearish. Misery loves company and they can't wait for the sun to explode. 2008's plunge cut the fat and flushed out the weak hands. People with education and marketable skills have jobs. Sure, a bunch of low performing proletariat pikers lost their jobs and will see their family raised in public housing.. Thats capitalism. Survival of the fittest. In my metro area, rush hour traffic is as bad as it always been, the malls are packed, cars are selling, SF homes are receiving multiple offers, and hotels are booked. What more do you want to see? If you've been left behind, then YOU are the problem.. maybe its time for YOU to look in the mirror and finally decide that if you can't beat em... JOIN EM. Get out there and stake your claim or all of the ground floor opportunities will pass you by.

Miss Goldbug said...

"When interest rates are 20%, the price of a 1-bedroom condo will be $500,000. A gallon of gas $10."

Keith, are you taking the stance to be the opposite of common sense? House prices will drop like a rock with 20% interest rates.

-As someone else said, it will push house prices down 75% overnight. Remember in the late 1970's Volkner raised rates to kill the over heated housing market and to tame inflation?

With that thought, why did house prices go through the roof for the last 8 years?

Low interest rates combined with easy credit.

We're not going to see 2005 again.

The only way I see gas hitting $10 a gallon is if an oil country's transportation/production is distroyed or sabotaged.

Anonymous said...

Just a couple of observations:
1)Wishin' don't make it so. The wingnuts want the nation to fail because they lost the election. Lefties want our economy to fail because they hate Wall Street. Get over yourselves.
2)Be careful what you wish for.
3)I'm in the 6%.LOLOLOLOL
4)I'm in the midst of looking for some publically traded community banks. There were 15000 US banks in 1990. The S&L crisis dropped it to 8500. This current crisis will cull about 2000 more and the masses are going to freak out. The truth is we need(debatable) no more than 2000 banks. Study the call reports on the FDIC site( it's down until Monday)

Keep the faith folks.
It was only 10 years ago that Clinton had us on a path to totally erase our national deficit. We can do it again. We'll be okay. Yes, I think our standard of living will decrease a tad...but BFD. Life is good.

Anton Chiguhr

Miss Goldbug said...
This comment has been removed by the author.
Anonymous said...

Shitty 1BR condos are still 400k here in Los Angeles Keith. Good ones are 500k+.

Have you forgotten about the Option ARMs here?

Did you know that they were issuing $2.7 million option ARMs with teaser rates?

Anonymous said...

A lot of those Option ARMs and ARM resets have already defaulted or have refinanced at locked in low rates

never_forget_y2k said...

Terrible consumer sentiment.
(read the blog comments)
Had to laugh out loud there! If consumer confidence were calculated from a sample of S&A commenters, it would be zero every month.

In the 6% myself. Enjoying the rebound in commodities and energy and hoping it continues!

Anonymous said...

"...2008's plunge cut the fat and flushed out the weak hands..."Thank goodness all that bad debt has been written down, and we can trust the books and marketplace again.

{snicker}

Anonymous said...

Everyone needs a little HOPE in time of crisis, it helps in weathering the storm.

It is only now, you are seeing the real effect of excess global liquidity.

Remember in the Eighties allot of the excess global liquidity came from Petrodollar. Didn't allot of those liquidity fund the Saving & Loan crisis.

With the run up of crude oil prices during the middle of the twentieth century what did those Petrodollar fund.

Did Petrodollar help funded subprime, option arm, Alt-A loans, and other crazy loans.

http://www.allheadlinenews.com
/articles/7015334582

The global economic crisis is impacting at a micro level, on Saudi family businesses that have taken excessive risks.

Afterthought said...

The effect of the stimulus is to move us up the chart to the left, not the right.

(I accidentally posted this in the GM topic)

Lot's of good discussion here by the way.

patrat said...

Based on the people I know and talk to around me, I just see the gap between the very few rich and the many poor accelerating now and over the next few years. I don't see how that can lead to economic expansion or even stability any time soon.

Miss Goldbug said...

SAN FRANCISCO (MarketWatch) -- In the thick of a stock-market panic in early March, President Barack Obama suggested that equities looked attractive for long-term investors.


Anyone willing to believe our President?

Banks and the marketmakers are licking their chops right about now.

Anonymous said...

Ohhhhhhhhhhh....So THAT's where all of the green shoots went..

KEITH smoked em' all up!!

Sorry buddy---All of this govt. manipulation is nothing more than a shot of caffiene for our economy. You know full well we havent even BEGUN to see the consequences of all these smoke and mirrors....

70chip said...

"Thank goodness all that bad debt has been written down, and we can trust the books and marketplace again."

LOL.. The fed has their back.. Banks will be saved at any cost. it's evident the US Govt will preserve the ruling class no matter what. You want to fight that? Sitting in your bunker giddy about imminent collapse is childish. To be successful you have to adapt to change, and the reality that is in front of you, not the one you want. We are going higher, and recovery albeit choppy is here. Its time to drop all of your armegedden prayers, and move on.. And if not, I have some gold to sell you.

Anonymous said...

KEITH??!!!


KEITH?!!!!!


Has Lawrence Yun got you wrapped in duct tape with a gun to your head????

We are calling the police now to get you FREED.

Anonymous said...

It seems just as things get better, some else drag the housing market down.

First - Subprime
Second - Prime loan (Layoff)
Third - ? (Option Arm or Alt-A)

http://www.mortgagebankers.org
/NewsandMedia/PressCenter
/69031.htm

“In looking at these numbers, it is important to focus on what has changed as well what continue to be the key drivers of foreclosures.

What has changed is the shifting of the problem somewhat away from the subprime and option ARM/Alt-A loans to the prime fixed-rate loans.

The foreclosure rate on prime fixed-rate loans has doubled in the last year, and, for the first time since the rapid growth of subprime lending, prime fixed-rate loans now represent the largest share of new foreclosures.

In addition, almost half of the overall increase in foreclosure starts we saw in the first quarter was due to the increase in prime fixed-rate loans.

More than anything else, this points to the impact of the recession and drops in employment on mortgage defaults.

edgar said...

U iz uber-funny keefer! The biznizz cycle? BWAHAHAHA!! Yeah, if you get a bailout you'll be fined, everyone is is screw-hoo-hooed. Nazi Germany had a brighter future than we're facing.

MrGogol said...

maybe this blog should now be called...Hope is here.

as long as Walmart, McDonalds, Facebook and American Idol are available to every poor sod... smile, be happy, all is well.

Iceland, Argentina and Russia survived a collapse, just that Americans won't care.

Anonymous said...

Hope is all you got when all else fails.

http://finance.yahoo.com
/news/FDIC-Fund-Running-zacks-
15360529.html

FDIC Fund Running Dry

As the FDIC has had to step in to take over more and more insolvent banks, the fund has dwindled to dangerously low levels.

At the same time, the number of problem banks continues to grow at a rapid pace

Paul E. Math said...

Great comments. Looks like you're outnumbered on your own blog, Keith.

I'm in the 94%. The 'recovery' is occurring exclusively in the stock market. And the stock market is not the real world.

In fact, there is considerable evidence to suggest that the stock market is being heavily manipulated..

Wind Farmer said...

Keith,
As the proprietor of this establishment, I can't believe you're serving up dessert! Why, we've just started the main course.
Tasty, maybe...but you're timing is all wrong. Serve it up later, please.

Lost Cause said...

In all seriousness, people might be wise to look at the stock market, which is a leading indicator. But it is also foolish to think that the stock market crash caused the Great Depression. I do not think that the stock market is any longer a leading indicator. The market is fixed, and at any rate the investment banking business in this country has been destroyed for good reason, just as GM is being destroyed now. Look beyond our shores for leadership -- and you will see an even bigger disaster already in progress. No such lucky, bucko -- you are 94% wrong on this one.

Anonymous said...

In order for a recovery to begin you need something big or something new to take this economy to the next level.

The next question will be will it work.

https://lasers.llnl.gov/programs/nif/

Scientists have been working to achieve self-sustaining nuclear fusion and energy gain in the laboratory for more than half a century.

When the National Ignition Facility (NIF) begins ignition experiments at Lawrence Livermore National Laboratory (LLNL) in 2010, that long-sought goal will be much closer to realization.

STU said...

Keith you are simplw way, way too early on this call. We are still mainly in the fear stage. You know fear of losing things like your hour home, your job, your availability to credit, your small business.

With CRE still left to fall off of the cliff this year into next and job losses still setting records each and every week, we have so much further to fall still.

Slowly entering into the desperation stage and for many they are already there. I sense we move as a majority into this stage within the next few months. I sense 6-10 million are already there now.

Looooong way to go Keith before any leveling off is established...

edgar said...

[game over man]

Singular said...

Some good insights by "I've heard it said" re Obama, but I think there is something else. Keith has made some investments in stocks recently is my guess, and he is 'talking up' the investment climate to make himself feel more secure about the risks he has just taken. He wants this to be an echo chamber for his optimism and that's why lately he's changed his bearish outlook to a bullish one. Keith is a gambler - most investors in the stock market are - and there is always one last bet to lay ... ever a glimmer of hope no matter what.

Am I right, Keith, about my guess re your making recent investments?

(The investments may turn out to be OK but that has really nothing to do with the overall downward trend of the American economy. There are shares that behave anomalously no matter whether it be a bull or bear market, and there are always stocks that are recession-proof.)

I'm not engaging in groupthink. I've been saying on the internet that the American economy was going to collapse under the weight of its debts and lack of producing since 2005. At that time I was the only person on forums saying that. These were forums that had nothing to do with finance or economics, BTW. I had a lot of people arguing with me, even abusing me, but I did not budge.

I have no formal training in economics nor have I made any investments. I based my conclusion on my efforts to understand the 'economy' - get through all the confusing mishmash of terminology that media pundits and economists like to use. I made America a business enterprise and on this model, I calculated its debts and its profits, cutting through a lot of noise that is thrown at you to confound you. It boiled down to a simple equation or calculation. And from that, I based my predictions that America as a business entity was not viable. Nothing has happened in the meantime to change my view. If this blog was full of optimists, I would not become an optimist. I am not wired that way. I think a lot of atheists like me are not groupthinkers.

Singular said...

Ooops, scratch that last comment about atheists. Many liberals are atheists and also engage in groupthink.

Ross said...

Short term neutral. Medium term bullish. Long term bearish.

Market flat to stagnant or slightly down until years end, another bull run ahead and then hopefully a crash in 2012 in time to get this lunatic out of the White House.

JAWS said...

Well, there goes another dream. 20% interest rates have visions of monthly income running through my head. But, not if a $500K condo skyrockets.

I always thought... the higher the interest rate, the lower the price. Oh well. Our federal government is making a mess of all the rules.

Singular said...

Obama like all presidents is thinking short term. As short as four years. It's because the presidency lasts only four years unless there is a reelection. So he does what he can to make his four years look successful. The operative term here is "look".

What he is actually doing is damaging America further. He is robbing the future to pay for the lipstick to paint on the pig (the present).

It would be better if the president did not do that and if he tackled the problems as they needed to be - not money thrown at moribund companies and failures. That money would have been better spent on emergency procedures to deal with what's coming ahead. For example, the US's reserves of agricultural produce (milk, cheese, wheat) is dangerously low. The money could have been spent on stockpiling. Lots of other ways - help the future armies of unemployed - build low-cost mass accommodation - even tent cities.

But why would a CEO who knows he will be gone after four years think further than the four years. He wouldn't. Human nature. You get rewarded for short term thinking, you will only do short term thinking. Anything else is too much hassle and his four years might look bad for him (though it might make the future better) if he approached it any other way. (I am speaking about 'he' though the president could be a 'she'.) The people want the painkillers. They don't want the cure. Even if you offer them the cure, they do not want it. The vast majority want relief from their affliction NOW, even if the painkiller is masking their symptoms and delaying their getting the proper treatment and therefore making the situation worse in the long run. And the president is just responding to that.

The president is a reflection of the people. If the people are short term thinkers, they are going to be content with a system that operates on a short term philosophy. And that is what has been happening in America up 'til now.

Nimesh said...

Keith, for the love of God, how can you call the bottom when we have so many problems ahead and we can see those problems before our very own eyes: 1. 12% of mortgage holders are not paying their monthly mortgage note (millions of Nick's out there). 2. Baby boomers don't have squat to retire on and thus they will have to stay in the job market till they drop dead. 3. The Alt-A and Option ARM loans have not matured. 4. The banks have a huge shadow inventory of homes they have not listed yet. 5. A record amount of debt by our federal government, state's, local municipalities, and corporations. All of that debt that is defaulted on doesn't just disappear Keith. Once people get burned once, they don't hand more free money out.

Keith, I would appreciate it if you were to post charts, graphs, and FACTS on why you think "this time is different" and we are out of the woods already. Also, by the end of this year, if things are worse are you going to admit you were wrong? Will you ever admit you were wrong about supporting Obama?

Givuzajob said...

I think your way too early Kieth never mind those green shoots ( except to play them) what about the rotten cancer working its way up from the roots ! The Unemployment infection.

Employment is the key, both as a driving force down and to fuel any recovery up.

The problem is it keeps going down even with the massive rigging of how the date is collected and presented. By some analysis the true figure is nearer 17% and its getting worse.

That is a no mans land in terms of knowing what the final scale of economic destruction will be.

If the number employed continues to fall it would not be unreasonable to predict that unemployed individuals would continue to decrease their spending - access any cash they can (by begging borrowing or stealing) and would no longer be thinking of any type of major purchase such as a new car or house.

Credit card defaults would increase, everyone would stop buying new cars and house prices would continue to decline. A bit like the situation right now.

Again I don't think its unreasonable to further suggest that this will continue into the future if the number of unemployed continues to rise.

I'm loving these green shoots of commodities and energy but like the rest of the 6% on the board I suspect my true affection is colored somewhat by my personal investment position.

I'm glad I have a couple of "fishing rods" out in the real world but the bulk of my bait is staying right next to me in the cosy bunker and that's where it will remain, until I see the employment figures change for the better.

Anonymous said...

Blogger keith said...

Lots of echo chamber blogs out there for those of you who only read things you agree with. Please leave.

This blog is an ongoing debate. That's why I like it.

And remember, if I end up being right on this one, as I was about the downfall to come in 2005, then I bet you'll be glad you come by here.

You should always have some doubt. Perma bulls and perma bears get slaughtered. Always question the conventional wisdom. And beware of groupthink. It'll kill you every time.

May 31, 2009 2:58 PM


Are you going to admit that you were wrong about supporting Obama? By the end of this year if the economy falls apart (October 2009 to December 2009) will you admit you were wrong? Or will you stick to your guns anyways?

I don't mind if you brag about the times "it was foretold" and you were right. But what about times when you were wrong? Will you ever admit you were wrong?

Miss Goldbug said...

Obama takes Michelle to NYC for a date night dinner including a play on taxpayers money.

He had two months before moving into the white house to a take her (on his dime) to a night on the town in NYC. This just isnt right. I guess dinners and plays there in DC just are'nt good enough for the Obamas now.

http://www.nypost.com/seven/05312009/news/nationalnews/obama_keeps_his_big_apple_pledge_171810.htm

Anonymous said...

yoski said...
Things are getting better for a while. You can throw a hell of a party with a couple of trillion dollars.

...
At a deficit of 10+% of GDP we will soon face the very real possibility of the federal government no longer being able to finance its deficit at the capital markets. This means they will have to print the difference or simply default.

In the meantime China & India are exanding their economy, hoarding & securing access to commodities, investing in technology and infrastructure. Over the next 20 years the size of the cake (ie. world output of energy & commodities) will roughly stay the same, only our slice will get significantly smaller.

*************

This translates directly into declining living standards across the board.
***************

Yes, there will be a certain amount of decoupling. Contrary to popular opinion, the rest of the world does NOT depend on our consumption and our toxic debt in the long run. This is not a process that happens overnight but will play out over the next 2 decades or so. Rome wasn't build in a day, neither did it fall in one day. The wise prepare for a decline of our economy while they have the chance, the foolish will party on like there's no tomorrow.

end

hopefully we will be lucky and it will take 2 decades or so, happen in an ordely manner instead of a crash and revolution.

tw

patrat said...

Sentiment is a contrary indicator re: the stock market, historically. Is it different this time?

Angry Leprechuan said...

"A lot of those Option ARMs and ARM resets have already defaulted or have refinanced at locked in low rates"

Who cares! The NINJAs are about to rock the country again and a large portion of the refies you discuss are going back into foreclosure. But you are correct alot of them have been refinanced but the majority of them were take and now sit empty with huge amounts of inventory.

Anonymous said...

I know you've wholeheartedly embraced Obamanomics now Keith so this info probably won't sway you (because it's based in reality not feelings) but here's some analysis from Mish which doesn't point to any kind of real recovery in the near future:

Mortgage Meltdown - More Pain to Come.

-Gonzo

Anonymous said...

Definitely hope is here. The stock market moves up nearly everyday on bad news. The news is just not as bad as expected, or has some kind of silver lining etc etc. Bottom line.....things can not improve losing 600K job per month, and housing inventory rising. The government has spent all its (our) money on saving the banks and the autos. Now the rest of us has to fight through the pain. Anybody can have hope. Its a defense mechanism when things get bad. Banking, autos, insurance will all be fine but the rest of us will have to hope. In this case hope does not equal reality.

Anonymous said...

"...the US Govt will preserve the ruling class no matter what. You want to fight that? Sitting in your bunker giddy about imminent collapse...I have some gold to sell you..."Heh. That was pretty funny. I don't disagree with you, but am neither giddy nor agreeing that we can print our way out of this.

"...House prices will drop like a rock with 20% interest rates...house prices down 75% overnight..."Ask yourself which is preferable: sky-high taxes on an astronomical debt/price + little room for appreciation...

or the opposite.

Anonymous said...

How can you call it before the unemployment starts picking up?Unemployment is lagging.

Everyone is waiting for the housing bottom. Everyone is scared. Everyone thinks it's crazy to buy a house now.

Isn't it the right time to negotiate a good price, have plenty of time to find a perfect house and buy it? Isn't it?

I got mine. Great price, great interest rate. Stay in your shelter forever. I'm out. :)

Anonymous said...

Massive deflation or massive inflation. Still can't get a sound idear of which it will be, but neither is good.Inflation!!!
There is no other way to get out of our debt. Only inflation.
Maybe nor right now but later.
I've seen this happening in Russia. I feel it's coming here.

Anonymous said...

Well if 94% are against you

Maybe your wrong
Perfect time!
Most people (94%) are shitting their pants. It's time to get out and do some action.

You guys were saying for months: Buy when there is blood on streets. Didn't you?
Here it is. Most people are in their shelters afraid to do anything. Why aren't you buying? Because you have no guts!

Of course, it's way easier to say later: Ohhh, I should have bought earlier. :(

Anonymous said...

The American economy is Humpty; it is irrevocably broken - nothing is going to put it together again. So, pick up your crap and get out of the United States!!!
Go to a country with better economy! Go to Mexico, Australia or go to Europe.
Nope, you will not go. You'll stay here. You know why? Because it's better here. :)

Anonymous said...

"..current events form future trends.."

Listen to the man to gain an understanding on why what the gov. is doing is only leading us to the greatest depression of all time...

http://www.youtube.com/watch?v=BzQabWBVTg0

I once had hope, but now only have fear. The massive bailouts have sealed our fate! Thank you Mr. Obama for being stupid. Thank you for trying to save us by listening to the morons who got us in this mess to fix things. For someone who has no experience in anything, he sure does try to give people the perception to wisdom. He will be remembered as the worst president of all time. President Bush, you've been saved.

But, you're right Kieth, the recession is over!!! Whohaaa… Now for the shortest recovery in known history, we're talking months here folks, maybe a year.

Complete economic meltdown, on a global scale, is now coming. The mother of all bubbles; the one that will end it all.

Anonymous said...

I just bought a house.
Am I stupid? Is it too early?

We'll see. I think a few ears later I'll take some change out of my pocket and pay off my mortgage.

Yep, I'm talking about inflation.

Instead of having 100K in US dollars I prefer to have a house.

Mike Hunt said...

Keith,

With interest rates at 20% housing will drop like a rock, and the dollar will shoot up. Look to Iceland for evidence of this.

The bigger problem is with the huge debt we have, high interest rates will crush the US financial system. There won't be any way to pay back this debt.

Obama screwed us all with his multi-trillion bailouts. We could have taken the pain, the shared sacrifice, and moved on. But no- instead there was talk of sacrifice and we kicked the can a few years. Then it's going to blow up on us.

Sad thing is there was enough people behind Obama that we could have endured this hardship and become stronger. Instead we just got let down Big Time.

20% interest rates will kill the country but at that time the dollar will be extremely attractive.

And housing won't sell for $500K at that time- you will have a completely illiquid market or people just walking away or not paying, like an amplification of what we have today.

-Mike

Anonymous said...

>Get ready for 20% interest rates.

That'll make housing drop by another 75% overnight.
If you buy a $300000 house with 20% downpayment at 5% mortgage rate now, you'll have same monthly payments as you buy a $97000 house with 20% downpayment at 20% mortgage rate.

http://www.mlcalc.com/

Will it go from $300K to $97K? I really doubt.
Will mortgage rates will go from 5% to 20%? Yep, it's likely. I've seen it happening before (not in the US).

Anonymous said...

In my metro area, rush hour traffic is as bad as it always been, the malls are packed, cars are selling, SF homes are receiving multiple offers, and hotels are booked.Same in Seattle.
Traffic is very heavy, malls are packed. Houses are selling.
If you go to windermere site, you'll see more pending than active. Of course, some newer crap for $499000 stays there for 365 days and more but good houses for reasonable price are going fast.
By the way, rent is going up too.

Anonymous said...

It's not "The End of the World is Here and Things Will Never Ever Get Better"

Okay. But every man, woman, and child in this country owes somebody around $200k in today's dollars.

When those people are not paid, and surely they cannot possibly be, how will that play out over the next 10-20 years?

Maybe they'll accept some (more bad)checks. Then we'll blame them for trying to cash them immediately.

Like Continental did with their pilots recently."...the pilots — seven men and two women — were afraid of losing major chunks of their pensions because of the financial difficulties the airline industry experienced in 2005.

Around that time, Delta Air Lines, United Airlines and US Airways filed for bankruptcy protection, reneged on their pension promises and handed over the plans to a federal administrator to make good on a portion of the pension obligations.

The Pension Benefit Guaranty Corp.’s maximum guarantee is paid in periodic annuity payments instead of lump sums and is far less than a typical airline pilot pension. This year, for a 65-year-old person, the maximum is $54,000.

“If you look at it from the pilots’ perspective, it’s understandable why they might have pursued this plan..."..."

keith said...

The 94% and negative comments really aren't surprising - not at all. Most of you came here because you saw the downfall about to happen, or you came here after the downfall happened. Nobody came here for rah-rah stuff.

But 94% of you are unwilling or unable to pivot. Either today - which is DEFINITELY early, or maybe even a year or five years from now.

And that's dangerous. When things were going gangbusters, you needed to pivot and realize they were going to go to sh*t. And when things were going to sh*t, you need (eventually) to pivot and realize that business cycles recover.

It's impossible to pivot at the tippy topa and then hit it again at the very bottom. Impossible. But as long as you come close either way, you'll do fine.

Look at that graph again. The point of maximum investment return potential at the bottom is during panic and depression. So if you think my Hope call is early (hint - it is), and you think we're in panic and depression, then GREAT, you've identified we're in panic and depression.

And then you should know what to do.

Just look at the chart. And if you invest - houses, stocks, oil, corn, whatever, be ready to take some pain, as you'll be early too.

But two years from now, you'll look back, and it will all be clear.

Anonymous said...

"A lot of those Option ARMs and ARM resets have already defaulted or have refinanced at locked in low ratesNo they haven't.

And just for kickers, remember that the banks are still booking a fully amortized payment.

Anonymous said...

Why after 117 posts are you saying your "hope call" is early??

Thats not what you said in the beginning of the thread.

keith said...

As in it's early in terms of adoption. It sounds like crazy talk. Hell, it even seems crazy to me.

But it's right.

It'll just take a year or so to prove it.

Meanwhile, GM goes bankrupt today, tens of thousands more lose their jobs. And we're in Hope?

Man, that's crazy.

Devestment said...

Got Balls and Money?

Invest now!

Buy gold! It's so great and cheap, its going to be $5000 an ounce soon!

Buy Real Estate! It only goes up. People who own it never work plus property taxes are fun! Weeeee....

Buy Dollars! Dollars are paper and backed by the full faith of the United States Government.

Buy Stocks! Wow! They are paper also and manipulated by the full faith of business people and corporate America!

And while you do that, don't work or produce anything. Just talk shit, push a pencil, and pick up a paycheck.

Anonymous said...

"-As someone else said, it will push house prices down 75% overnight. Remember in the late 1970's Volkner raised rates to kill the over heated housing market and to tame inflation?

With that thought, why did house prices go through the roof for the last 8 years?

Low interest rates combined with easy credit.

We're not going to see 2005 again."

Let's remember what Japan did. The authors of quantitative easing. Real estate still went below average.

My guess is everything will go up in price greatly, house prices will continue to fall but will stabilize at some point during this period.

les said...

The money isn't getting in to the hands of the neediest. There is no turnover of dollars.

The M1 multiplier is at 0.93. Institutions and people are hoarding the stimulus money or its replacing money that was lost. This 1.8 Trillion stimulus will have the same impact as Bush $600 million tax rebate (m1 multiplier 3.2).

We would've been better off giving everyone $3000 than shoring up these bankrupt corporations.

Anonymous said...

The way I see it - the USA is not exceptional and is now on the downward slide to serfdom. The Asian tigers will come to dominate the global economy. They already are.

The US is fundamentally broken. Yes, Bernanke and Obama may be able to paper over the wound for a short period of time. How long that may be is anybody's guess. We're already seeing the dollar begin to slide and a dislocation in the bond market.

The US simply has nothing left to bring prosperity. The populace is dumbed down to the point of knuckle dragging and drooling. The productive capacity of the US has been effectively dismantled.

I honestly don't know what you are trying to predict here Keith. Are you trying to say we are in recovery right now? In what way? A recovery of jobs? A recovery of standard of living? Or simply a recovery of stock value? But what about the value of that stock in relation to the value of the dollar?

Your prediction lacks definition my friend.

-Gonzo

Saul said...

Keith,

For a counter-view on the rainbows and lollypops, have a good read of this... (funny and informative)

http://mandelman.ml-implode.com/2009/05/stop-blowing-sunshine-up-my-skirt-recovery-my-aunt-petunia/

Anonymous said...

For a counter-view on the rainbows and lollypops, have a good read of this... (funny and informative).


That's a good read and it's dire implications are that Keith himself has slid back into Denial.

-Gonzo

Anonymous said...

Sorry Keith... but a little news from the ground here. St. Louis used to be a big deal in autos. All of the Big Three had plants here. Vans from GM, Explorers from Ford, Minivans and Rams from Dodge/Chrysler... all three have bitten the dust (or are in the process of biting the dust) in the past two years. Ford plant demolished. Chrysler, bankrupt and soon to close Fenton, MO location. GM bankrupt today - who knows what will become of Wentzville plant. The jobs related to those industries feed multiple employment scenarios. Because of a motorcycle injury, I am limited to what I can do at the moment so on a lark, I decided to go do a little house shopping. Talked with a FSBO seller trying to unload his place to take a job out of state. In the conversation he makes the thinly veiled threat of a higher price if not sold soon "because will list with a realtor who will fetch a higher price". My Smug Bastard brain is saying "yeah right buddy... I guess you've not heard about the recession going on right now and are unaware of the multiple properties like your own that have been up for sale in the same community for over two years now and the price cuts that have taken place during those two years..." The attitude of some sellers is still in for an adjustment. Price cuts are of the nearly inconsequential type and are coming in dribs and drabs. I've seen properties in the past three years in the aforementioned idiot's hometown go through FSBO at high price, no activity, for sale via realtor at slightly lower price, no activity, back to FSBO with price cut one and then again with price cut two. We are still looking at more creative financing arrangements going bust for the next two years. We are at "false hope" not real hope.

Smug Bastard

i've had it said...

Keith,

exactly, GM goes bankrupt today and the market goes up!

Why, because one economic indicator was not as bad as the expectation, and another one was better than expected.

You must understand that there is an orchestration -- both covert and overt -- of pumping the markets. The big players (governments and banking institutions) are in it together.

You will notice that every time there is bad news, the market goes up. The excuse they use is that "it's not as bad as we thought". Here are some examples:

1) GDP declies 6%...market goes up because not as bad as expected.

2) 550k people lose jobs in April (really 770k)...market goes up because not as bad as expected.

3) GM announces it is bankrupt...market goes up because some economic indicator released on the same day as the announcement is not as bad as expected.


Rigged. Totally rigged. What do you think the global govt meetings and the constant meetings between the U.S. govt. and the bankers is all about? They are about pumping the market, especially on the days when the bad news comes out. By pumping the market on those days, it tells the sheeple that things really are OK. There's nothing to worry about. Be confident! It is all designed to instill confidence. Confidence. That's what it's all about. If people are confident they will spend and invest, which will get the economy back on track.

But this is a false confidence...manufactured confidence (about the only thing we're good at anymore!).

If you look at the future for America and its ability to produce wealth, I'd say that it's not so bright; certainly not bright enough to warrant equities to be where they are today.

The bankers are going to fleece people one more time; maybe two more times, with mini-equity bubbles like we are seeing now. They did it after the dotcom crash by not letting the Dow go below 8500; and they are doing the same today, trying to set a floor of 8500 again.

The last time this happened they were successful in creating another bubble based on housing. They can't do that this time around however unless they find a new vehicle in which to create one. But perhaps they will.

Anyway, my observation is that the market is massively rigged right now and is heading for a fall this fall, and perhaps even this summer.

My "spidey sense" is tingling. I'm at the verge of shorting the Dow at this point but may wait a bit longer to see if the grifters can pump it over 9000.

Anonymous said...

oh really, Keith? what ever happened to "things are not ever returning the normal after the magnitude of what they have done"?...quietly dropped it? we are in the eye of the hurricane...there is the other shoe still to drop...

gutless and lazy said...

OF COURSE when you throw a trillion dollar party, there will be short term money made in markets.

But any profits made in the next year or two, due to the trillion dollar bomb, it will eat away quickly by inflation.

And the nominal profits you make, once adjusted in real dollars (inflation adjusted), will be near nil. So it's all fake.

So what's Keith celebrating here?
A money bomb rally, at the cost of devased currency and big time inflation?

Behold the next bubble! The Fed stimulus bubble, built upon massive public debt. Bush did the same thing. Only his was privatized corporate debt (now made public debt).

Start moving your assets out of USD.

Anonymous said...

Now Keith is saying "wait two years". LOL. Keith, you don't think logically. You don't use hard analysis. Rather you use your "feelings" and "gut instincts".

If you are going to say we are out of the woods, then post charts, graphs, facts, etc.... But please don't give us your feelings.

Anonymous said...

I dont know about you but I'm getting a bit sick of seeing "It hath been foretold."

Dont ya have another catch phrase?