How bad is it going to get?

[Smokin Joe]

After reading this thread Recession over... (http://www.professionalsoldiers.com/forums/showthread.php?t=24502) and reading all of the info my brain is a little fuzzy and I'm having difficultly envisioning how bad it is going to get.

TS and everyone who is much smarter than I is predicting that the worst has yet to come. So I need to ask, how bad is it going to get?


Do I need start a cache of fuel, ammo, rations, water, cash, etc.?
Should I start shifting everything into survival mode?
Are we talking total economic collapse or what?


I'm just trying to wrap my mind around this on my individual family level. Yes, I'm concerned about the country but I'm more concerned about making sure my kid grows up and lives a healthy life.

Would you guys be so kind as to give your no-shit assessment.

TIA

[TDude90]

http://professionalsoldiers.com/forums/showthread.php?t=24502

:D

[Kyobanim]

Problem is, major companies got a kick, in different ways, from the gvt to stay solvent.

The way I see it, that is a temporary fix, not even a good MacGiver fix. When that economic boost runs out it will happen all over again. The problem now is the unemployment roles are growing and will continue to grow because companies are not going to start employing people until they see an increase in consumer spending/confidence. Consumer spending won't go up until the consumer see an increase in hiring or consumer confidence about the economy.

Catch 22, ain't no one going to do anything cause everyone is waiting to see what the other is going to do.

This train wreck is going to make the US a third world country. I hope I'm wrong but if someone doesn't make a move we're screwed.

My pantry is full, ammo stocked, and a security plan is in place with several friends in the area.

Someone please make a liar out of me. I'm not kidding. I am not looking forward to the next 2 years.

[nmap]

Your question is one a ponder often.


All of the following are MOO, YMMV, don't do it if it doesn't feel right>

At the least, reduce debt to zero - and that means the mortgage and car payment, too. We seem to be in a deflationary environment - the price of things is trending down. I recognize that such deflation is not immediately apparent in the supermarket - but take a hard look at house prices. Houses are important assets, and the price has gone down quite a lot. Right now, the FHA - in coordination with the Fed and the Treasury - are trying to get house prices to start going up. It is the key to resolving the banking crisis. Make no mistake, the banks are in crisis, because the value of their loans, especially for commercial real estate, is lower than the price on the books. In addition, take a hard look at the reserves held by the FDIC - and the trend down. Further, consider the value of pension funds (both public and private), and the drain they represent on future revenues of both public and private entities.

Today, unemployment was reported. It is 9.7%. Or is it? Take a look at Table A-12 on page 19 of the Bureau of Labor Statistics news release today (09-04-2009). LINK To PDF (http://www.bls.gov/news.release/pdf/empsit.pdf). There, you will see several unemployment measures, including U-6 - which tells us that there is a 16.8% unemployment rate under the most inclusive measure.

Rumor control suggests that the newly elected government in Japan wants to reduce its vulnerability to dollar decline - and they may demand the use of so-called Samurai bonds. Such bonds are denominated in Yen, not dollars. A dollar decline would make the debt burden heavier for the U.S. In addition, China is, supposedly, moving some of its dollar assets to tangibles - including gold and oil. It is interesting to note that gold has gone up sharply in the last few days.

We, as a nation, have a total debt of nearly $12 trillion dollars. The administration suggests that we will see another $9 trillion over the next decade.

LINK to the $9 trillion (http://online.wsj.com/article/SB125119686015756517.html)

LINK to the $11.7 trillion (http://www.brillig.com/debt_clock/)

How is the housing market surviving? After all, to save the banks, we must save housing. Answer: through FHA loans. And how is the FHA doing? Not well at all.

FHA LINK (http://online.wsj.com/article/SB125202440174685297.html)

Rhetorical Question: How can housing recover with high unemployment? (My opinion: It cannot.)

So, after a hefty dose of gloom and doom - back to ideas for what you can do.

After eliminating debt, accumulate cash equivalent savings. Deposits in banks and credit unions are insured. The FDIC covers up to $250,000 per person. Don't tie the money up in CDs. Keep it where you can access it.

Emphasize holding on to jobs and employment. The problems may take years to clear up. They make take decades. Japan still hasn't cleared up their problem after 20 years.


Live beneath your means.

All of the above are low-risk choices, IMO.

Beyond that....FEMA suggests having an emergency kit for at least 3 days. LINK (http://www.fema.gov/areyouready/). Personally, I prefer 14 days.

In my opinion, having some cash, all in $10 and $20 bills is nice.

Having a few friends who live elsewhere is really nice.

Having a few neighbors you can trust is not easy - but good to have.

Beyond this...the Preparedness thread is a valuable resource. LINK (http://professionalsoldiers.com/forums/showthread.php?t=10819)

If I may suggest a different lens you might wish to look through - the problem is partly the degree of change, but also the rate of change. I think the changes will be slow - over years and even decades. There will be time to adapt, to change, to correct course. The key, I think, is to maintain flexibility while we let the situation develop.

Hope that helps.

[Team Sergeant]

The housing market is not an indicator. Right now those with money are purchasing properties that are "on sale", pennies on the dollar. These individuals can sit on those purchases for a few years without any ill effect.

We are going to go above 10% (and above) unemployment, probably by the end of the year. That's a lot of people out of work. As been said before no one's hiring, not even the government.

Soon we will be pulling out of Iraq and A-Stan, throw another 100,000-200,000 into the unemployment lines. These lads that will be returning (contractors) will find there are no more jobs. Security companies will go bankrupt.

The recent boon in car sales is only because of the government spending more of the American "Taxpayers" money to "give" new cars to the poor. That spike is over. Car sales will again tank.

Right now I'm waiting to see if commercial real estate companies start to go bankrupt. Commercial real estate can hold out a bit longer, (a few years) more capital to deal with unlike personal real estate purchases. The curve in individual bankruptcies is very sharp, I am waiting to see if commercial real estate will start that climb.

No one knows how bad it will get. I'm betting it ain't going to be pretty for the next two years.

[Peregrino]

I just bought one of these: http://www.pressurecooker-outlet.com/921.htm and a whole bunch of jars to go with it. I'll be getting one of these: http://www.pleasanthillgrain.com/index.aspx#CLM as soon as I'm finished paying for scopes on several rifles. I'm within E&E distance of enough SF buddies that I'm not particularly worried about "support network". Most everything else is already in place. In other words - yes, I'm worried. I would also recommend a VERY low-profile approach to any extraordinary preparations. A number of really smart people have been keeping me informed about trends, many of them right here. Nobody is mentioning inflation (inevitable) or it's consequences yet. Food for thought, YMMV.

[nmap]

Housing prices may be a bit problematic - because of the loans that still plague the system. Back some months ago, all eyes were focused on CMOs - securities that relied on home mortgages to perform according to predictions. Those expectations have proven false.

In addition, banks and other lending institutions have loaned money on residential real estate. Those loans are not performing, which means that their market value is lower than the amount of the debt. So - what is a bank to do? If they "mark to market" - in other words, reduce the value on their books to the market value - then they must reduce their capital by a like amount. So loan write-offs, even partial write-offs, impair capital.

Mortgage delinquencies are increasing. LINK (http://realestateconsumernews.com/financing/mortgage-delinquency-rates-rise/).

But notice that the cure rate has collapsed. LINK (http://business.theatlantic.com/2009/08/how_to_understand_the_next_mortgage_crisis.php). Cure rate for prime loans used to be 45%. Now its 6.6%. Which means the mortgage will go to foreclosure. Those foreclosures have a good chance of being "under water", with values less than the mortgage. That's a side-effect of the properties picked up for pennies on the dollar.

How bad is the banking crisis as a consequence of housing? LINK (http://ml-implode.com/). How about 358 lending operations since 2006?

So, what is a banker to do? Simply this. Pay low rates. Charge high rates. Lend carefully to the best quality borrowers. This pattern must continue until the banks are either shut down by the regulators, and the losses written off, or until the shortages in capital have been corrected by earnings. Japan chose the latter path - 20 years later, they still have a problem. Such an environment does not lend itself to business growth. (pun shamelessly intended).

One need look no further than credit cards to see the shape of things. Interest rates up. Credit limits down. Since consumers make up 70% of the economy, restrictions on credit cards must impede any recovery.

I must (respectfully) contend that a broad housing recovery would help the banks and hence the economy. I think there is a better chance of me winning the lottery without buying a ticket than of housing recovering.

When and where will the troubles start? When might be as early as the end of September, when unemployment benefits run out for the first cohort of the previously working - although Congress may further extend benefits. Where? I suspect California. Their budget is a disaster, and they have not yet allowed for the cuts that will be necessary. When large numbers of people suddenly hit the wall, things may get interesting.

As for myself...San Antonio is a neat place in many ways. But it's close to the border. And I'm not sure it's the best place to be for the long haul. I'm not sure any big city is.

[akv]

Smokin Joe,

On any sort of survival topic the QP’s know best.

If I can be of any assistance, one I would recommend “When Markets Collide” by El Erian the CEO of PIMCO. He explains the trends in debt, credit, and globalization which have got us to this point and gives it to you straight on what he thinks the future holds. In a nutshell, his opinion (one I share) is the recession is not over, and we are actually going through secular change and globalization. The “new normal” is a world where the US annual GDP may only grow at just under 2% instead of 3%, and India and China emerge. This is not to say America will not be an economic power going forward, she will, but there will be other players emerge on the scene.

As for the recession, the government has taken steps to show it will intervene to prevent capitulation of the financial system, so the doomsday financial meltdown scenario folks were worried about is likely off the table, this was vital and necessary, however this does not mean the economy will not get worse before it heals.

It is unclear what the net impact of all this government stimulus will be, other than a lot of debt someone will have to pay for. I’m a conservative so I bash this stuff and feel Obama’s rehashing of Socialist policies are silly they never worked in the past. It was forced saving and WW2 that got us out of the great Depression not the New Deal. Others folks cite counter arguments, but the only thing that seems certain is the government is throwing a lot of stuff at the wall in hopes something sticks.

So, government shenanigans aside, as always it falls on the US consumer. First, I highly advise not watching hype networks like CNBC, or at least watch it with no volume if you must. They are in the drama/fear business and not accountable for anything. For example if I told you a lung patient who was losing 10% of his lung capacity per year in 2008, is now only losing 5 % a year, this is relatively better, but is this good news? This is the take recession is over folks have on both unemployment and corporate earnings. A company can meet earnings by either making money (sales) or cutting costs. It is true companies are meeting their earnings expectations relative to this time last year, but one the bar is so low, and two they are doing it by cutting expenses, not increasing profits, you can’t cut past the bone. If you believe the numbers the US unemployment rate as of today is 9.7% the highest since 1983. Economists will tell you unemployment is a lagging indicator this is true, but at some point it becomes more relevant to the future. If one in ten Americans is unemployed, perhaps you still have your job, but you know two guys on your street who aren’t working. Are they just slackers, or do you think it could happen to you too? Now if concerned how will this impact your spending habits, are you going to go buy the cars, TV’s and computers that Ford, Best Buy and Apple need you to buy to make earnings? No, well then they have to lay people off to make numbers. The credit crunch doesn’t help either, in the past you could get a loan to tide you over, but part of the problem was credit got too easy, and now you see the opposite before it corrects.

So, I think we have a ways to go, the things I am worried about going forward are the inevitable inflation we will see, and Obama’s looming healthcare debacle. In the long run, if I had kids in school and they had a foreign language option I would pick Mandarin for the business world going forward.
-AKV

[nmap]

By the way, when I speak of the banks having a problem, perhaps some numbers are in order.

Here's a list of bank failures that the FDIC covered. LINK (http://portalseven.com/servlets/Finance?action=finFailedBanks&selectedTimePeriod=6)

Scroll down to #81, Guaranty Bank. You will notice it had $12 billion in deposits, and that the cost to the Deposit Insurance Fund (DIF) was $3 billion.

Why the difference? It's the actual value of the loan portfolio - which is so much less than the liabilities (the deposits), that the taxpayer got hit for $3 billion. Rhetorical question: How many other banks have similar profiles, and how much must be made up? I don't know. Bernanke and Geitner may know.

For more about the FDIC, here is a LINK (http://globaleconomicanalysis.blogspot.com/2009/08/as-of-friday-august-14-2009-fdic-is.html)

[Smokin Joe]

I'm good for survival stuff I should have mentioned that.

I was speaking more on an economic level, and or what we might see in the future, such as a 3rd world economy that Kyo talked about or an across the board socialization or out right Communism "for the good of the nation"

Lets talk doomsday scenario is it feasible that our economy may totally collapse and that we will be buying bread with wheel barrows full of cash? Like Germany post WW2...

TS, I had lunch with a friend who is a commercial Real Estate agent and he said basically the same thing you are saying. That it is going to get much worse before it gets better.. Especially in the Commercial RE world because banks have Commercial buyers and business by the short hairs. For instance unlike residential RE, if a commercial lender has to foreclose on a building they will either discount the note and or sue everyone for the difference. So all securities and personal assets can be consumed and taken to repay the note... Which would just push everyone who is associated with the loan into bankruptcy.

[incarcerated]

My $.02:

Problem is, major companies got a kick, in different ways, from the gvt to stay solvent.
The way I see it, that is a temporary fix, not even a good MacGiver fix.

Concur. Stimulus is just a band-aid. Put another way, stimulus only seeks to ameliorate ($2 word for "improve") the general economic situation by increasing the overall amount of economic activity: it does not address the fundamental structural problem that produced the downturn.
(Compound this by "using the crisis" to stimulate Dem political constituencies like the United Auto Workers union, rather than doing anything to stimulate the economy.)

The sub-prime loan market flourished as housing priced itself out of reach after four decades of runaway inflation. In 1994, the housing affordability index in So. Cal was a shockingly low 17%. To keep that number, housing inflation and the real estate industry propped up, sub-prime lending was expanded.

Housing as an investment functions identically to a Ponzi scheme. In other words, it is a pyramid. Without an endless supply of home buyers entering the system at the bottom level of the pyramid (in constantly increasing numbers), demand will not continue to drive prices up to yield a double digit return on investment for those already in the system. To keep the entry level participants coming into the system with the price of admission ranging from $400K to $800K+ (here in Southern California) (which, BTW, is over-rated), clever new lending arrangements were devised. Only, not half clever enough.

The word I get is that Germany went through a smaller housing bubble in the 1980s. After their painful lesson, German banks now require 20% down on a home loan, and prefer ten years of prior banking with the lending institution.
BTW, the German economy has a heavy manufacturing and export base.

There is a lot of real estate money out there that wants a return to the good old days, when you could pay $4 million for a small apartment complex and flip it in 30 months for $6 million after very minor improvements. That old speculator money will lobby vigorously for a return to that old investment climate. Restarting housing inflation will lead us back to the place where we now stand.

Right now, the big sub-prime borrower is the Obama Administration, casting the next generation into debt in order to expand and solidify its voter base.

[Team Sergeant]

The individuals that own the commerical real estate are big investors, hedge funds, retirement funds, large religions, etc etc etc When the commerucal real estate market tanks it's depression time. We could not print enough money fast enough to make up for the losses. See below,

"Hundreds more banks are expected to fail in the next few years largely because of bad loans for commercial real estate."

They are holding out because they can, for a few more years and then it will hit the fan....... big time. Hundreds of banks failing at the same time will cause a run on the banks, then it's game over. Black Tuesday, time for history to repeat itself.


List of US banks closed by feds jumps to 89
By STEPHEN BERNARD (AP) – 8 hours ago

NEW YORK — The crippled economy and increasing loan defaults have forced financial regulators to close even more banks, including the only branch of the First Bank of Kansas City, which is reopening under a new name after its deposits are assumed.

The number of banks that have failed this year stands at 89 after regulators on Friday shut down banks in Missouri, Illinois, Iowa and Arizona.

The Federal Deposit Insurance Corp., an independent agency whose goal is to maintain stability and public confidence in the financial system, took over First Bank of Kansas City, which was based in Kansas City, Mo., and had $16 million in assets and $15 million in deposits. It shut down Sioux City, Iowa-based Vantus Bank, with $458 million in assets and $368 million in deposits.

First Bank of Kansas City's deposits will be assumed by Great American Bank, based in De Soto, Kan., the FDIC said. It was to reopen Saturday as a branch of Great American Bank.

The FDIC seized two banks in Illinois: Oak Forest-based InBank, with $212 million in assets and $199 million in deposits, and Platinum Community Bank in Rolling Meadows, which had $346 million in assets and $305 million in deposits.

First State Bank in Flagstaff, Ariz., also was shuttered. It had $105 million in assets and deposits totaling $95 million.

Vantus Bank's deposits will be assumed by Great Southern Bank in Springfield, Mo. All 15 of Vantus Bank's branches will reopen Saturday as branches of Great Southern Bank.

The FDIC agreed to share with Great Southern Bank losses on about $338 million of Vantus Bank's assets.

Nearly all of InBank's deposits will be assumed by MB Financial Bank in Chicago. Some brokered deposits won't be assumed by MB Financial Bank. InBank's three branches were to reopen Saturday as MB Financial Bank branches.

The FDIC didn't find another bank to take over Platinum Community Bank's branches or deposits. Instead, it will pay out insured deposits at Platinum Community Bank. Government direct deposits, such as Social Security and veterans' payments, will be handled by MB Financial Bank's Palatine, Ill., branch.

The FDIC insures accounts up to $250,000. Depositors with accounts larger than $250,000 will be able to receive details about whether their accounts are fully covered beginning Tuesday by checking the FDIC's Web site.

First State Bank's deposits will be acquired by Sunwest Bank in Tustin, Calif. First State Bank's six branches will reopen Tuesday as branches of Sunwest Bank.

The failure of First Bank of Kansas City is expected to cost the FDIC's deposit insurance fund an estimated $6 million. InBank's failure will cost the insurance fund $66 million, while Vantus Bank's failure will cost the fund $168 million. Platinum Community Bank's failure will cost the fund about $114 million. First State Bank's collapse will cost the FDIC's insurance fund $47 million.

Hundreds more banks are expected to fail in the next few years largely because of bad loans for commercial real estate. The number of banks on the FDIC's confidential problem list jumped to 416 at the end of June from 305 in the first quarter. That's the highest number since June 1994, during the savings-and-loan crisis.
The insurance fund has been so depleted by the epidemic of collapsing financial institutions that some analysts have warned it could sink into the red by the end of this year. The fund fell 20 percent to $10.4 billion at the end of June, the FDIC reported Thursday. That's its lowest point since 1992, at the height of the S&L crisis.

The agency estimates bank failures will cost the fund around $70 billion through 2013.

U.S. banks overall lost $3.7 billion in the second quarter, compared with a profit of $7.6 billion in the January-March quarter, the FDIC said. Surging levels of soured loans at banks dragged down profits in the April-June period.

FDIC Chairman Sheila Bair has said there were no immediate plans to borrow money from the government to replenish the insurance fund by tapping the agency's $500 billion credit line with the Department of the Treasury. The FDIC may, however, impose an additional fee on U.S. banks this year to bolster the fund, atop the estimated $5.6 billion from a new emergency premium that took effect June 30.

http://www.google.com/hostednews/ap/article/ALeqM5gg9RS-ZvzlfzrcnujKaEDMXrYyYgD9AH1D880

[Richard]

MOO - it's like watching CNN.

And so it goes...;)

Richard's $.02 :munchin

[Team Sergeant]

MOO - it's like watching CNN.

And so it goes...;)

Richard's $.02 :munchin

You may think so, I don't watch yellow cowards on CNN, nor do I drink from their kool-aid pitcher.

This coming crisis is already looming large and has a few trillion as "empirical evidence". The failing banks & failing FDIC don't trouble you?

As a public educator I would think you'd be glued to the news as tax payer funded "public education" is taking a big financial hit and I'm betting it will get worse.

You don't have to believe me, just keep watching CNN.

And BTW has anyone here mentioned anything in the photo you've depicted ??? You actually think anything in that photo bothers me? Unlike the liberals the only motive I have to to keep up with the changing times, yes I beiieve change is coming and it ain't going to be pretty. I'm not alone, there's about 30 million individuals in the United States that are not very happy picking up their unemployment checks, and those numbers are swelling eveyday.

I don't take the current situation as lightly.

[nmap]

Stimulus is just a band-aid. Put another way, stimulus only seeks to ameliorate ($2 word for "improve") the general economic situation by increasing the overall amount of economic activity: it does not address the fundamental structural problem that produced the downturn.


I wonder, Incarcerated. Is it possible that it is more malignant than that?

Let's suppose I have a shiny new credit card burning a hole in my pocket. Let's also say it has a nice, high credit limit. (Who cares about the interest rate? We won't worry about that!)

So I go out, spend up to the limit, and buy all manner of things.

I have, incrementally, stimulated the economy. Stores have more sales because of the spending than they would otherwise have.

Unfortunately, the payments come due on the credit card. So every month, my consumption is reduced by the amount of the payment.

I have shifted consumption from the future to the present. The store has shifted retail sales from the future to the present in like manner.

Now here's where we start getting into trouble. When the debt load is high, and we've shifted lots of future consumption (and economic activity) from the future into the present, then we can't afford to make any more payments on that credit card. We have robbed the future. We cannot consume, because we have consumed all of our tomorrows. Likewise, we do not generate sales revenue.

Borrowing by both individuals and governments has shifted economic activity to the present (and past) from the future. In essence, we have behaved just like the fellow with the credit card in the example. The cash for clunkers deal shifted car sales from the future to the present. Notice that the rebates given out by the car companies in past years did precisely the same thing - and that did not end well for them. Likewise, the $8,000 credit for home purchases seeks to transfer future economic activity to the present.

We face choices. We can simply default upon the debt. This will make future borrowing difficult and expensive. Or, we can pay it off - but that means decades of reduced economic activity (which the public and the politicians will hate!). We can, some way, some how, rapidly increase our national income so we can support the debt (I don't know how. I doubt anyone else does either). Finally, we can seek to use inflation to cheat our creditors - folks like China and Japan. It works until they smarten up to the trick. Unfortunately, they stayed up late studying - they seem to recognize the problem.

For the moment, we have about 70% utilization of global manufacturing capacity. This puts downward pressure on the price of goods, a deflationary tendency. So one can get good deals on various things. But here's the problem - to get economic activity going, to get companies to use that excess capacity and hence hire more people, we have to stimulate demand.

Paradox: Maybe we used up that economic activity with past stimulus. Maybe we robbed the future until its pockets contain nothing but lint and old receipts.

As for chicken little...no, this does not mean the sky is falling. That's the peak oil thread. :D

What its likely to mean is that people will be poorer - and will keep getting poorer - which brings us to the character issue. One must discern how people will react to all this. Personally, I expect more crime. I expect people to be angrier. This has both personal and political implications.

These changes do present challenges. They also present opportunities.

[BMT (RIP)]

It's BAD now!!

Today I found a penny in a parking lot. The first penny I've found in a long time.

Last year it wasn't unusual to find quarter's, dime's and nickel's.

BMT

[Richard]

You may think so, I don't watch yellow cowards on CNN, nor do I drink from their kool-aid pitcher.

1. I have refused to watch CNN since the Tailwind reporting fiasco. :mad:

2. The issues are real.

3. The cartoon is satire.

4. The potential danger of any group [such as CNN or even the WWW] broadcasting 'everything' in a 24/7 'sky is falling' format may have a detrimentally numbing effect on the audience in a Peter and the Wolf or Chicken Little kind of way and adversely affect our objective reasoning abilities.

5. The issues are still real and the cartoon is still satire.

Richard's $.02 :munchin

[incarcerated]

Well, nmap, I was bent out of shape by Brush Oakie's thread on the cracking Ruger Mk IIIs, until I read your remarks above.
I wonder, Incarcerated. Is it possible that it is more malignant than that?.

At first, I thought it may merely be the limit at which large bureaucracies can perform. As with reform of the Japanese banking system and Social Security here in America, real solutions are often politically impossible.
The bulk of Japanese stimulus gimmicks with which I am familiar did not entail borrowing. Their sole successful stimulus came unintentionally, from military spending to send troops to Iraq for the occupation. (Notice that BHO isn't using military spending as a tool with which to fix this problem.)

You make an excellent point. When the stimulus is BORROWED, as in our case, we have mortgaged our future. The only way out of that is to pay off the debt with inflated dollars, i.e. dollars with less buying power due to inflation.

The truly frightening thing is that this stimulus debt load may make it impossible for a Republican president to repair this thing after Geitner, Emmanuel and BHO are finished with it. The trillions that we are spending/printing now will be unavailable to anyone coming later who is really interested in fixing the problem. This may destroy the Obama presidency, but any Republican taking office after him will be castigated by the media for his or her inability to repair the economy, whether he or she is making progress or not. (How do you like all this jobless Recovery' talk?) If a Dem president follows the Republican, the Dems can seal the deal.

I would expect increased crime to be organized, more often than not, accompanied by public corruption. Political chaos is also a possibility here. We're not used to that.



These changes do present challenges. They also present opportunities.

This is the place to focus.

[nmap]

The potential danger of any group [such as CNN or even the WWW] broadcasting 'everything' in a 24/7 'sky is falling' format may have a detrimentally numbing effect on the audience in a Peter and the Wolf or Chicken Little kind of way and adversely affect our objective reasoning abilities.

It's amazing how perceptions can differ.

Although I haven't turned on CNN lately, I've been struck by what I see as a wildly optimistic media. They speak of "green shoots", of new housing starts, and how this or that crisis has passed. I, quite cynically (and, perhaps unfairly), sneer at the TV and comment acidly about how they are pumping stocks up so their employers can sell to the unknowing public.

Some time ago, I started a thread about panic - Colonel Moroney kindly added his insights. This is what he said:

From my limited experience with this subject, panic usually evolves when the normal rules of expected behavior, for whatever reason, no longer apply. In the case of the market, I imagine just about every model used to predict expected behavior has been turned on its ear. Folks are trying to predict the future from past behavior not really taking the time to draw any parallels between the conditions and factors that existed in the past to those that exist today. I am sure that there are some distinct differences because nothing remains static. Those that can control panic are the ones that have gained respect from their experience and expertise and have gained a level of respect from those that look to them for resolution, but usually the fact that they have met folks expectations in the past is usually insufficient unless they can also show, or have a clearly defined vision, of the way forward. It is critical for those that find themselves in this situation have not only the confidence of those that look to them for guidance but that the game plan for controlling the situation and moving forward is understood and within the abilities of those that find themselves flailing around in a panic mode. Those that are in a panic mode already see themselves as stakeholders in the outcome of the event, the trick is how to harness those stakeholders so that they no longer run around in circles at ever increasing speeds with the threat of running up their own 4th POC put providing a clear azimuth to an objective that they can all see and obtain. In the most dangerous of panic situations, the resolution can require unorthodox actions often at great personal risk.


If we could, somehow, discern when the mass of people are ready to "run up their own 4th POC", then we can call the bottom of the markets. We can buy stocks/bonds/metals/real estate at bargain prices. Thus, chicken little may be our friend.

Finding that panic point, that point where chicken little rules supreme, is the challenge, perhaps. But is it wrong to cheer him on? :D

[Team Sergeant]

1. I have refused to watch CNN since the Tailwind reporting fiasco. :mad:

2. The issues are real.

3. The cartoon is satire.

4. The potential danger of any group [such as CNN or even the WWW] broadcasting 'everything' in a 24/7 'sky is falling' format may have a detrimentally numbing effect on the audience in a Peter and the Wolf or Chicken Little kind of way and adversely affect our objective reasoning abilities.

5. The issues are still real and the cartoon is still satire.

Richard's $.02 :munchin


"The cartoon is satire."

It's been a long day.
I missed your point.
I stand corrected.

TS

[Night Walker]

I think we can all agree the precursor to this recession was lending institutions taking advantage of the low interest rates and lending more money than they could cover. That was just the begining, we can all thank ourselves (including the US Goverment) for the continuation and the steady decline of our present circumstances. While jobs are being lost, banks going out of business, and the value of our dollar decreasing, American spending continues. This is on all levels, public and Gov't. Instead of the American people saving a few dollars, possibly investing it, we are buying new cars, houses, and running up credit card debt. Our Gov't (and i can say this because i have seen it first hand) is squandering large fortunes of money in the GWOT. Being a soldier on his second deployment I have seen Iraq and Afghanistan. I have seen civilian contractors getting paid nausiating amounts of money to do almost nothing. 80k to work in the MWR, 100k to drive the chow bus, 90k to work in the laundry (not doing the laundry just making sure the soldier has filled out his receipt). Not to mention all the 3rd country nationals we have working on our FOBs, COBs, and COPs. These are US Gov't contracts being paid by our tax dollars. I will not get into CERF funds and other money being given to Company Commanders to give to the LNs for OPSEC reasons. But I have seen mountains of cash just given away for nothing. I am not protesting this campaign, i believe in it and i love my job, but we are being foolish with our money and until the American people and the US Gov't realize this, nothing will change.

Night Walker - You need to read and comply with the Forum rules before posting again. That includes filling out the rest of your profile. Failure to follow simple instructions is a label that sticks "for a while"). Peregrino

[6.8SPC_DUMP]

I'm just trying to wrap my mind around this on my individual family level. Yes, I'm concerned about the country but I'm more concerned about making sure my kid grows up and lives a healthy life.

I have some family members who are dependant on medication - so I've secured other sources for that medication abroad if needed. Aside from taking advantage of the wealth of survival info here - all we can do is work hard to excel at our jobs, cut costs and invest for both security and growth right?
If I was hunting for work I heard that trying to build a reputation on a skill you have, that is not easy to replace, is a must. (But that goes w/o saying I'm sure.)

It's irresponsible to give financial advice w/o knowing the person's holdings vs liabilities / income vs overhead and willing changes to location/lifestyle.

But broadly:

Is your money in a financial derivative of a real asset? Would you rather own the real thing or have a stake in a good company that profits from that good?

Do you realize that when you own a foreign stock (indexed in another countries stock exchange) that you are not only investing in that companies future, but the currency of it's country? Do you know you can generally broker the deal directly w/ the company through their web site.

Do you trust the valuation of the stock markets and the soundness of the currency they are held in?

3. Are we talking total economic collapse or what?

I have no idea and anyone who really does lives in a much nicer neighborhood. An American Hero and PS.com member wrote this in a thread here - and if turns out he talked to the right people it could have saved me a lot of work this year.

I have had recent conversations with some optimistic billionares who are convincing themselves that the Dow is fixin to rally to 10,000ish and then free-fall indefinitely. The logic behind this is clear to me. They are hoping to recover a portion of their recent, substantial losses(as if what they currently have is not enough); and they are expecting the worst, long term. I laughed in their faces, but inside was wondering if what they say is true. Time will reveal this positive push in the market, but I think 10,000 is becoming a rally cry for the big boys.

What I do know is that the real growth is in G20 countries and they are moving away from the dollar as a reserve currency. They are tired of recycling the money that they make from us as consumers, into funding our debt of operations, while we are not protecting the dollar value. Everyone says they won't be able to replace the USD anytime soon - it would cause war and economic hardship for many countries - but whenever 97% of investors are sure about something it's a good time to be skeptical IMHO.

The reason we can get away with printing new money now is b/c we are the ones paying for it through debt monitisation. The reason we haven't seen more inflation is because that new money is not in circulation of the consumer/spender; so it's the equivalent of a country having 100 dollars but only handing out 50. Here is the most complete info the Fed gives on the dollars in "circulation". Take a look at the increases over the last decade. Link (http://www.economagic.com/em-cgi/data.exe/fedstl/rsbkcrns+1)

The money has been given to US bank holding companies (all major financial firms are now) and federal savings and loan associations (many Fed regulated banks needed to become to get Tarp money). Looking at a model of the 2008 sell-off is not a good idea when preparing for a 2009 sell-off; b/c 60%+ of stock market volume is now done by High Frequency Trading (HFT), which is a complex tool that has been utilized by the companies that are putting your tax dollars to hard work. Because of the speed involved with HFT a sell off will come more fast and furious in 2009.

When our currency power ends over the fuels that run countries and the food that feeds them - the gig is up. Has this happened already? - who knows, but, the first major step has been taken.

The intermediate reserve currency option to the USD being used is the IMF Special Drawing Rights (SDR) (http://www.imf.org/external/np/exr/cs/news/2009/cso79.htm)

September 9, 2009 will be a historic day in the world of currency as the IMF's the Fourth Amendment (http://www.imf.org/external/np/sec/pr/1997/pr9745.htm) will go into effect for the first time in a half a century. This is a debt based World Currency and a special one-time allocation of $250 Billion worth of SDRs will be spread out amongst the IMF's member nations to provide liquidly to the world banking system - or the IMF's own version of "quantitative easing". None of the experts I saw gave this as the reason gold shot up so much last week and it's a no brainer because it gives other countries a place to trade in our Treasuries - for which the world has pledged 1.1 Trillion. Link (http://www.nytimes.com/2009/04/03/world/europe/03summit.html?_r=)

"Members’ holdings of newly allocated SDRs, will count, as of the date of each of the general and special allocations, toward their reserve assets. Some members may choose to sell part or all of their allocations to other members in exchange for hard currency—for example, to meet balance of payments needs—while other members may choose to buy more SDRs as a means of reallocating their reserves.

"In time, SDRs are likely evolve into a parking place for the foreign holdings of central banks, led by the People's Bank of China. Beijing's moves this week to offer $95bn in Yuan currency swaps to developing economies show how fast China aims to break dollar dependence".

China is to become the 1st purchaser of the SDR's ($50 Billion worth)Link (http://online.wsj.com/article/SB125194047261781873.html), but other countries such as Britain, France and now Japan want to also, it's not just the B.R.I.C that are looking to move away from US Treasuries Link (http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5096524/The-G20-moves-the-world-a-step-closer-to-a-global-currency.html)

The Federal Reserve has flip-flopped on wanting a Global Currency - but they do want in on this cash cow because private corporation's loyalty lies with their share holders - even if politicians hand over control of the countries' monetary policy. Link (http://www.politico.com/blogs/bensmith/0309/Geithner_open_to_China_proposal.html?showall)

Might be a coincidence but Iraq started valuating there oil in Euro's not USD in 2000. Iran started this in 2007. When Art Cashin warns of "[Fascism], currency wars, trade wars and esoteric forces" we have the privilege of listening to one of the most respected persons walking the NYSE floor - not a UBS propaganda salesman - despite what CNBC largely is.

Just my .0000000002

[dennisw]

The other day an article in the Wall Street Journal caught my attention. To date most foreclosures were related to Sub prime loans. The article went on to say that this trend has now changed and that 80% of foreclosures were now related to prime loans. Subprime loans being loans to folks with subpar credit. Prime loans being loans made to people with good credit.

If this is true, it paints a very ugly picture. I get the impression a fair amount of these folks have hung on as long as they could, using savings etc. One wonders about the effect on the economy and specifically banks when folks with good credit and credit history start losing their homes in record numbers. Doesn't look good at all.

Most folks predicted that 2009 would be the year of record commercial property foreclosures. I don't know if that has happened as of yet. I do see a lot of commercial properties being auctioned off or adds in the WSJ for auctioned commerical properties.

I spoke with a broker I met in the field while dove hunting this past weekend. He said he has 20% of his portfolio in gold index investments. He was going to provide me with additional information, but I think he got pissed when I got my limit faster than he did.:D Sounds like I need to do some research.

[Team Sergeant]

The other day an article in the Wall Street Journal caught my attention. To date most foreclosures were related to Sub prime loans. The article went on to say that this trend has now changed and that 80% of foreclosures were now related to prime loans. Subprime loans being loans to folks with subpar credit. Prime loans being loans made to people with good credit.

If this is true, it paints a very ugly picture. I get the impression a fair amount of these folks have hung on as long as they could, using savings etc. One wonders about the effect on the economy and specifically banks when folks with good credit and credit history start losing their homes in record numbers. Doesn't look good at all.

Most folks predicted that 2009 would be the year of record commercial property foreclosures. I don't know if that has happened as of yet. I do see a lot of commercial properties being auctioned off or adds in the WSJ for auctioned commerical properties.

I spoke with a broker I met in the field while dove hunting this past weekend. He said he has 20% of his portfolio in gold index investments. He was going to provide me with additional information, but I think he got pissed when I got my limit faster than he did.:D Sounds like I need to do some research.




IMO the sub prime individuals did not keep a "nest egg" set aside for troubled times, hence the reason they took the predatory lending offers in the first place.

Individuals (or corporations) that purchased commerical property are holding out longer because they do have more wealth and wealth, in this case, equals staying power. Right now many are attempting to wait out the storm.

That storm is not over and is getting worse. 2010 many more banks are going to fail because of commerical real estate loans foreclosing. Yeah, they may "own" that commerical property, but no one is buying and won't be for a few more years.

IMO This train wreck is still in motion.

[nmap]

Apropos of the current discussion, this LINK (http://market-ticker.org/archives/1418-The-Governments-Effort-Has-Failed.html) may be of interest.