One more time - HousingPANIC was about the shitstorm to come. And then it came. We crashed.
Soot & Ashes is about the world AFTER the crash.
March 2009 was the pivot.
We were pessimistic when the masses were optimistic. Now (some of us, especially those who read Manias, Panics and Crashes a few times) are optimistic, when the clueless masses are pessimistic.
Pivot.
Get out of your bunker.
Turn off Sarah Palin, Glenn Beck, Rush Limbaugh, Sean Hannity and Fox News.
We've got problems, but problems that can be solved. It was a hell of a storm, but storms pass. And if we're smart, we'll have learned some lessons, and we'll adjust.
Bottom line - I like America's chances.
Party time.
2011 - 2020.
But this one will be more tea and cookies, instead of hookers and cocaine.
And that's a good thing.
The Comeback Country
So what will our new economy look like once the smoke finally clears? There will likely be fewer McMansions with four-car garages and more well-insulated homes, fewer Hummers and more Chevy Volts, less proprietary trading and more productivity-enhancing software, less debt and more capital, more exported goods and less imported energy. Most significant, there will be new commercial infrastructures and industrial ecosystems that incubate and propel growth—much as the Internet did in the 1990s.
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54 comments:
Summer Boom
Both the mini-crash and the naysayers were nearly forgotten when the market surged ahead during the summer of 1929. From June through August, stock market prices reached their highest levels to date. To many, the continual increase of stocks seemed inevitable. When economist Irving Fisher stated, "Stock prices have reached what looks like a permanently high plateau," he was stating what many speculators wanted to believe.
On September 3, 1929, the stock market reached its peak with the Dow Jones Industrial Average closing at 381.17. Two days later, the market started dropping. At first, there was no massive drop. Stock prices fluctuated throughout September and into October until the massive drop on Black Thursday.
Does any of this sound at all familiar?
One more time - HousingPANIC was about the shitstorm to come. And then it came. We crashed.
Soot & Ashes is about the world AFTER the crash.
March 2009 was the pivot.
Keith you do know that you'll be known as the 21st century Irving Fisher when all this turns to shit once again.
right, cauz Newsweek called the housing thing so well back in the day, too ;)
Remember Time Mag with the nice house on the cover wrapped in the bow? 2005?
Sheesh
Sarah Palin is tea and cookies, so why do you (and others like you) keep trying to turn her into a hooker?
This sounds like pre-November-election, bought-and-paid-for, mainstream media hype and propaganda to me. Sorry. Not buying it.
Newsweek? Get real. They're having a Great Depression of their own.
Our turnaround is remarkable. We piled on more debt with the Uncle Sam Platinum card. Look how easy that was. It's shocking no empire before us figured this out. Certainly, people living today are just so much smarter than anyone who ever came before us.
You have made some incredible calls and I agree we are in the rebound. But I do not see a different America with fewer McMansions, better insulation, etc. etc. The attitudes of American excess will not change. Our society has not suddenly become enlightened on how to live smarter. American Idol is still on, most people are not capable of critical thinking and will continue the consumer binge as best they can. The only lesson learned here is one that will quickly be forgotten and those same mistakes repeated in no time at all.
If America is to get out of this long-term hole, here are the keys I'm waiting for:
* Raise retirement age to 70
* Cut back medicare/medicaid
* Withdraw troops, cut defense systems
* Fuel tax and national sales tax (tax consumption, not investment or income)
* Sell and privatize government assets
* Lower corporate tax rate to 10%
Presto. No deficits. And one hell of a sustainable boom.
The systemic problem with America is that Americans like entitlements but they don't want to pay for them. It's time to be adults.
You've lost your mind.
* Raise retirement age to 70
Almost zero effect
* Cut back medicare/medicaid
Not gonna happen
* Withdraw troops, cut defense systems
Yes, eventually and 2) not gonna happen
* Fuel tax and national sales tax (tax consumption, not investment or income)
Ridiculous libertarian nonsense. Only benefits the already rich.
* Sell and privatize government assets
More ridiculous libertarian nonsense. Why the hell would you even consider that?
* Lower corporate tax rate to 10%
Only benefits the already rich.
You say 2011 boom, I say June 2011 Great Depression 2
You really need to be worried when Newsweek and Time come out with articles like this as it portends the exact opposite.
The USD COT structure shows the big US banks as having a huge short position in place on the USD.
If you want to know what happens next, follow the biggest money in the world.
Joe M.
.
NO JOBS
HIGHER TAXES
WEAKENING OUR NATION (MILITARILY)
MUTT AND JEFF AT THE HELM
INCENTIVE TO INVEST 0
LOW INTEREST RATES (GOOD AND BAD)
YUP
THINGS LOOK PRETTY BLEAK
.
Because "growth" (that stupid GDP thing) seems to be the word of the day, I believe a GrowthPANIC will be coming sooner rather than later.
more people than ever will work for the government.
What do you think will happen to the price of Gold?
Keith:
The only reason we have had this so-called "turn around" is because we just spend 12 trillion or more to bail the system out. That debt has now been added on to our already colossal debt. We are insolvent. If the dollar was not the main denomination for trading in oil etc across the world - we would already be going into a Greek type of situation.
By the way. Social security and medicare are not entitlements. I paid my damn money all my life for those so-called entitlements. We would have plenty for everyone to retire at 65 - if we just cut our military budget of over a TRILLION dollars a year - which we use to enrich Halliburton, XE and all the other war clowns. The military budget takes up 60% of spending. As much as the rest of the world combined. That is outrageous - but you hardly hear anyone talking about slashing that.
The Pentagon and CIA took over our so-called government years ago - and I am sick to giving them half of my taxes for killing and murdering people who never did anything to us 10,000 miles away.
Just saying
Keefer,
your 6 keys to get America out of the hole, are totally in line with Glen Beck and the Tea partyers.
In here lies the contradiction most of the readers here question.
Its as if you're blinded by 'i'm right with my support for Obamah'
no matter what.
Sell and privatize national assets? what ever you say Keith. You mean like drilling and logging rights in national parks? You mean like selling off roadways to Australian entities so they are toll roads?
And hey btw, so if America is 'back', what to make of the option arms and other toxic waste still coming to roost through 2016?
If you're keeping score at home, in March 2009 I was at Hope. In November of 2009 I was at Relief.
Today I'm at Optimism.
As always, ahead of the sheep, which is a problem. But I'm calling it as always like I see it.
It's all in that chart. Everything you needed to know. On the way down, and now on the way up. Rinse and repeat. Rinse and repeat.
Now I hope a lot of you get rich.
"By the way. Social security and medicare are not entitlements. I paid my damn money all my life for those so-called entitlements".
Well spoken, thank you. Just the thought of the bastards raising the retirement age would infuriate me to no end. I get to work 5 more years so the banks can get bailed out and Wall St execs can spend more time on the golf course, right?
That's the plan for a better America?
I guess I bought at the bottom then :) (Purchased home 11/19/09)
Queeferino, you share Glenn Beck's view on Social Security. Entitlement. He was characterizing it as Insurance yesterday. WRONG and let me echo Aloha19's outstanding points. I paid in for years. 12.4% of my pay is not "insurance", it's theft.
On the hope, optimism part, it does look like we are going to spend until the end, so we may get a 'false recovery'. This just makes the inevitable crash worse. No way this ends well. You know that too I suspect.
Does this mean that Realestate will never be affordable again?
Those who didnt take the money while it was easy will miss out forever?
:-(
Please dont start with House prices have dropped ~%.
Even if they dropped a whopping $50- 80k which in most cases they did not, majority of houses are up at a minimum 100% since 2001/2 for no reason at all.
We were hoping for a real correction
Keith - I just don't get it. You used to laugh about how articles in Time and Newsweek were alarm bells for the smart money to get out. Remember the infamous Home Sweet Home cover in Time?
To me, Newsweek saying everything is back on track tells me to get the hell out of the markets.
Keith why don't you put your bullishness out on display for the world to see by proudly hanging a "Mission Accomplished" banner on top of your blog and leave it there. A big giant banner that say "Mission Accomplished" across the front that replaces the current soot banner. Let's see it.
Keith - how can you say you are ahead of the sheep when Newsweek has your message on the front cover?
Keefer said:
"As always, ahead of the sheep, which is a problem. But I'm calling it as always like I see it."
This time around your timing has coincided with the MSM not exactly ahead of anything.
The Street and MarketWatch called the bottom when you did too.
Doug Kass called the bottom on Kudlow then too.
We read this blog to have better insight on things to come, but ever since you bought in to this whole 'international community woves Obamah'
your vision has blurred a bit.
The problem is that we should never make decisions on whether the 'world likes us' or not.
just like for an individual if you do everything so others 'like you' you'll be spending the rest of your life trying to figure out how to conform to others.
same is with a country, we only need to focus on doing the right thing and all will fall into place.
Bush did not do all things right, but i was very proud to be hated as an American by the lowest scum of the earth.
There is something very wrong now that the most rotten of societies, human oppressors and tyrants, love our president.
Also, there is something very wrong with fixing our economic problems with the same methods that created it in the first place.
If easy money caused people to spend more then they earn with little to no consequence and the good times are back, dont ya think this annoying little thing called debt, will bite us sooner then 2020?.
I guess we're asking for logic, not just happy talk cause you like Obamah.
Perhaps your'e right, I will change my mind if you make your case.
you really do not expect readers here to just blindly follow, right?
Keith, you should know that magazine covers (newsweek, business week especially) are historically great indicators for contrarian investors. Basically whatever the cover says - the opposite will happen soon.
http://seekingalpha.com/article/172731-why-magazine-covers-are-historically-great-contrarian-indicators
The problem here is Time just called a downturn in the market.
Where's the recovery going to come from, Keith?
Housing? - Massively overbuilt, no recovery for at least a decade. Housing always has lead us out of every major recession in the post war period. Not going to happen this time.
Retail? - Massively overbuilt, reliant on debt strapped consumers to spend more money. Not going to happen now that the Home Equity ATM is closed. Besides, how many more Best Buys do we need?
Financials? - Don't know how much toxic waste are they still carry on their books (and off balance sheet)? Still haven't written off their bad debts. Been zombified by government support (a la Japan)
Manufacturing? - Ha, Ha, Ha! Not going to happen unless oil goes to $150/barrel and it's finally cheaper to make it hear rather than China. Plus, any new manufacturing is going to be highly automated and will not be a big employer.
Technology? - In my opinion, insanely overvalued (especially the big names like Apple and Google). Not a big driver for jobs.
Healthcare - Bloated, inefficient and insanely complex. There may be growth here, but I'd actually consider it a tax on the productive populace (because of ever increasing costs).
Energy? - This is one area of the economy where I see chronic underinvestment and increasing demand. This could be our ticket out when combined with alternative energy, but it will be difficult. Especially with peak oil in play.
In the meantime we've got a goverment deficit spending 10% of our GDP. As long as interest rates remain low, this is okay, but when will the bond market impose discipline and raise rates on Treasuries?
On the flipside, state and city goverments are broke or bankrupt and there will be massive layoffs and cutbacks for highly paid civil servants. Another big drag on employment and the economy going forward.
Finally, there have been no arrests or investigations into the wrongdoing done by banks and Wall Street. Where's the frog marches you were calling for? The fraudsters and shisters are operating with impunity now that they know the gov't will bail them out because they're TBTF! What happens when the next thing blows up (commerical RE, sovereign debt, Option ARM resets, or any other Black Swan)?
Please enlighten me, Keith.
Jymkata
The perma-bears and Glenn Beck parrots will never be able to admit that things are getting better. It flies in the face of their preferred narrative, that America is doomed because it elected a scary black man! Ooo!
Long-term, there are still big problems to solve, yes. We've kinda had that discussion here on the boards, Keith, and I'm pleased to see that you've features a couple of items I've suggested. But like you, I'm more optimistic than I was in the past, because we have a president who actually believes in addressing some of the problems, rather than pretending they don't exist (climate change) or actively making them worse (deregulation of just about every industry that wants to screw over the American public).
The nihilists will insist that everything is going to implode - Just You Wait - much like the bitter & wizened old Church Ladies that prefer to sit in corners, muttering to themselves while everyone else actually lives life and does things.
America was not built by such people.
America was built by people who had dreams of greatness and who dared to try to make them a reality. It will be rebuilt by the same.
The doom-sayers and Depression Junkies never built anything. Moreover, they never will (other than a bunker that more & more smells like old gym socks, full of overpriced gold and MREs that are going sour).
DENIAL.
If an enemy surge breaks
a defensive front a some point,
then the entire line is vulnerable
if that breach is not closed off.
It can take too long for reserves.
Sometimes the best choice is for
the runners to risk turning to attack the
flanks of the enemy before it can turn
to break up the front.
The runners risk losses; but it can save the
battle, or allow maneuver for another day.
But the runners had to confront fear itself.
.
From the article:
"The tale of the economy's remarkable turnaround is largely the story of swift reaction, a willingness to write off bad debts and restructure, and an embrace of efficiency—disciplines largely invented in the U.S. and at which it still excels. America still leads the world at processing failure..."
How many billions in bad debt are still being held in off the books in level 3 assets at banks at par?
EPIC FAIL!
Any ideas on how all of those bubble debt payments are going to be made?
Failing that, any appreciation of the consequences when they are not?
"...Look how easy that was. It's shocking no empire before us figured this out..."
I think he's being sarcastic there, Keith. ;^D
Likely all of us have paid into social security - us and our employers who contribute their match.
The problem?
The benefits promised are greater than the contributions put in.
Ponzi Scheme.
So yes, you 'deserve' some social security. But not what you thought.
You deserve to retire, but not at the age you thought.
Plan accordingly, greedy boomers. Plan accordingly, deceived Gen X'ers. Plan accordingly, truly screwed Millenials. Plan accordingly, children being born today.
This is what the end of a Ponzi scheme always looks like.
"We didn't see it coming!"
"I want my money back!"
"It sounded fool-proof!"
"We trusted them!"
America though will be better off once the truth comes out. Get it out there. Let people plan accordingly.
Relying on the government is a fool's game. And thinking you'll get your SS, Medicare and Medicaid as promised is stupid.
Get to work.
Don't take Keith too seriously - he's just trying to drive people away from the site so he can shut it down without all of you complaining.
Has Suzanne researched this?
Sorry but with more than 6 million households delinquent on their mortgages and about to strategically default, I'd say we're in capitulation mode.
On top of that, they're saying WTF, I've been screwed, I'll never retire anyway, so I'll enjoy some luxuries while I still can using the money saved from not paying the mortgage.
I think you're early. Government worldwide are going austerity style. They're going to cut spending thinking the green shoot roots are strong enough. The economy will crater and the market will tank again. Then the people will truly throw in the towel and we will hit the long awaited trough.
Trough are not hit until there is true desperation. Too many people are still hopeful for a true trough.
Newsweek?
You're citing Newsweek?
You are too far gone.
Shit, conned by your BS stirring of the pot again.
I think you're right about party time, but it'll be a coke and hooker party. Without finacial reform the coke and hooker merchants will be hosting again.
The SS @ 70 yrs and Medicare cuts will never happen, old people vote, e.g. the Rx drug benefit.
I'm with you on the fuel tax, we should tax the bejeezus out of fuel. It would cause a huge row because of our sprawl-based society, but it is the right course to take if we'd like to have a future.
Everything else sounds like another Neoliberal-assisted corporate gang rape of the middle class --The Clinton Era: Part Two.
I'd love to see multi-million dollar income (including investment income) and bonuses taxed at post-WWII levels. If the fat cats can't line and re-line their pockets with the money maybe they'll find something else to do with it. It worked before.
The way I see it, all we need to do is convert all the boomers into diesel. We will solve the housing problem, SSN problems, medicare and medicaid problems, and enviromental problems.
It's win-win and besides, those locust bastards have had more than their fill.
Jymkata said...
Please enlighten me, Keith.
-------------------------------
Damn excellent post. Lined em up and shot em down. Perfect.
But you are spitting in the wind.
It is all about opinions here.
JaneZ
Link contains chart. (Eyes glazing over)
http://blog.atimes.net/?p=1430
JaneZ
How can we call this a recovery when all they did was create money out of thin air and increase debt?
this is no recvoery.this is a propoganda blitz.
"* Raise retirement age to 70"
Good luck with that one. It won't fundamentally change the ponzi structure of social security very much. Not to mention the political hell to pay that this would cause.
"* Cut back medicare/medicaid"
But, but, Soetoro and Keith said that health care is a RIGHT? Cutting medicare and medicaid means more death panels and less people getting care. It means people dying in the gutter.
Do you have split personality disorder, Keith?
"Withdraw troops, cut defense systems"
We won't withdraw troops or cut defense spending until we default on our debt obligations.
"* Fuel tax and national sales tax (tax consumption, not investment or income)"
Only if there's an associated cut or elimination of income taxes. A national sales tax and UK-style fuel tax on top of the existing tax structure and infrastructure would obliterate the economy.
"Sell and privatize government assets"
Like what? B2 bombers? Nukes? Worthless wasteland in Nevada?
"Lower corporate tax rate to 10%"
Are you arguing this based on the Laffer curve or to maintain or international competitiveness?
In an interview with Charlie Gibson, Soetoro accepted the Laffer Curve's premise, but rejects it in the name of "fairness."
"GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.
So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness."
The benefits promised are greater than the contributions put in.
Nonsense Doucherino. Take the contributions you have made over several decades of work, invest them conservatively. At age 62, you are very well off, and not stuck eating cat food in your "golden years". Pure theft, by evil politicians in both parties.
Housing speculators (aka flippers) are rushing in with cash to buy undervalued properties while they can. Retail "investors" are coming out of their bunkers to put their sideline cash to work, before they miss out on any more of the the new bull market in equities.
According to Keith, this isn't the kind of behavior we would normally associate with a pump-n-dump scheme, oh no, this time it's a ten-year runaway train to wealth city!
Sorry Keith, I'll hang onto my hard-earned cash and wait in the bunker. You see, I still remember the Spring of '01, the Summer and Fall of '08, and how often the words "surge" and "unexpectedly" were used in news stories about the financial sector. Outside of the huge new pile of debt, it's not different this time. Fools still rush in, and I laugh as they trade their cash for magic beans. When this sucker deflates later in the year and the debts are written down or defaulted, cold, hard,in-your-hands cash is the only asset that will hold any value.
Let's just allow the Pentagon to control the collection and spending of Social Security funding.
Let's call it the National Security Administration.
Let's call our payroll deductions for SS a 'terror remediation tax'.
Let's make the Commander in Chief an employee of the Military Industrial Complex.
Let's cook the federal books and align the federal statistics to reflect a continuation of constitutional mandates.
Presto! Problem solved!
We are so screwed...
Keith, now it's officially your word against Soros. Although I respect your past track record, I don't think your credibility holds a candle to Soros.
George Soros Warns Of Biggest Market Crash To Come, As "We Are Facing A Yet Larger Bubble" Than During Credit Crisis
Submitted by Tyler Durden on 04/15/2010 12:05 -0500
CRE Credit Conditions Credit Crisis George Soros International Monetary Fund Market Crash National Debt Reserve Currency Reuters Sovereign Debt The Economist
George Soros, speaking at a meeting organized by The Economist, warns all those who are throwing their money into the equity pit, that "the financial world is on the wrong track and that we may be hurtling towards an even bigger boom and bust than in the credit crisis." Advice from Soros or from CNBC. You decide. Reuters reports that Soros said "the same strategy of borrowing and spending that had got us out of the Asian crisis could shunt us towards another crisis unless tough lessons are learned." We hope all those who are buying stocks have very tight stop loss triggers.
Unfortunately, Pretty in Pink, the tyrants and despots LOVED Bush. He was the best friend they ever had. He supported the criminal regimes in Saudi Arabia & Pakistan that routinely torture & assassinate political opponents (or did you forget what happened to Benazir Bhutto?). North Korea got the nuke. Iran was free to develop their nuke program because the US was bogged down in a pointless war in Iraq (which had no nuke program, and wasn't working on one - unlike Iran). Putin was allowed to crush the fledgling pro-democracy movements, assassinating pro-democracy journalists.
But more than that - the US was loathed by actual decent democratic countries. Countries that had been our staunch allies - countries like Chile, Colombia, Costa Rica, Germany, Italy, Spain, Netherlands, etc. etc. Places I visited during the Bush regime. Places where I was unable to close deals because the hatred of the US was such that they preferred to pay higher prices to other vendors, rather than give money to someone from America.
This situation has thankfully changed in the last year. I no longer have to spend the first 15 minutes of any conversation hearing a tirade about what a ignorant redneck I am, just because I'm from America. And that's from (formerly) friendly business contacts.
This translates directly into fewer sales for US companies (like mine) and fewer jobs here in the US.
And, of course, the Chinese made out like bandits under Bush. Not such a democratic regime there, either.
The systemic problem with America is that Americans like entitlements but they don't want to pay for them. It's time to be adults.
When American do pay for them, at gunpoint mind you, the money is STOLEN by elected officials, who think they will be long gone when the SHTF. Joe Stack, where are you?
VS, I may tend to agree with Soros. I think we're in store for one hell of a rally. Already been a great one since March 2009, just as Helicopter Ben told us in his 2001 speech it would be.
The only way out of this mess is for the US to have substantial growth in GDP, incomes and cap gains. And that's exactly what we'll have.
Now, the $64,000 question is - will it be sustainable? And how long will the boom last.
I suggest we're in store for a 2011 - 2019 boom. That's what I can see.
And I think it'll be sustainable if we make dramatic cuts in entitlements and military spending, while at the same time encouraging investment and jobs creation our tax policies, and bringing in a wave of educated, legal, tax-paying immigrants.
I think this thinking is contrarian. I think the masses are pessimistic, represented by many of you on this board.
I like being a contrarian. Served me well so far.
Boom.
2011 - 2020.
A BIG one.
Time will tell.
http://www.ritholtz.com/blog/2010/04/yahoo-tech-ticker-americas-back/
Keith, thanks for clearing that up. Now I understand what you're getting at so let's put our minds together and see what ideas we can come up with for all of us to get in on the action this time around, even if has to be real estate. If you can't beat them, join them right?
Do you think this time the bubble will be more on the stock and real estate side, or rather newer technologies such as bio, fuel, internet?
We're still waiting on that boom Keith. Financials and military is doing excellent. The common man on the street is still being beaten down. Real estate is still crashing with no end in sight. Banks continue to reel in loans to the common man so they can lend to the Treasury instead.
anyone following this blog still. I check back every now and then. Keith please bring this blog again.
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