A bit short on time but I had a post in mind, so away we go.
Before The Regularly Scheduled Programming
Before tonight's missive I wanted to offer my own 2 cents about the markets in general and specifically ideas about "perma bulls" or "perma bears".
What I would like to say is that I am bearish on many things. Of course I can see a government influenced pop as much as the next person, but that does not change my macro fundamental view. It perhaps changes the timing, but not the end result.
My own words for the "perma bull" types and those that are screaming "look at what the market is telling you bears" or "admit you are just plain out wrong" is the following public service message:
-You need to go over the last year again as I think time and distance had warped your mind. Fundamentals finally trumped collective delusion and things went south in a hurry, and no doubt you were "dollar cost averaging" in the whole way down. No you would have the nerve to try and run a victory lap and taunt those of a different view because of the single greatest financial experiment in the history of the USA? Shame is not an issue for you.
Try and remember something as the S&P 500 rockets higher (as the dollar is dropped in tandem) and know that your only claim to fame is that the government saved you. The FED took your hand when you were lost and crying in the fetal position and the Treasury powdered you backside after your bout with incontinence in the face of the credit crunch. You now rely on their committed support to help you learn to walk again and play the only game you know how to: every asset going up all at once makes investing easy.
Of course if you would like to remove your diapers and make an effort to stand on your own "the fundamentals are improving" two feet I would welcome you in joining me is a call for the immediate end to any and all government support/easy money practices and then we can see where the chips fall.
Oh, you need to go to the bathroom again? Well by all means go ahead, your coddling parents will be here when you get back.
Back to the regular show.
The Running Man; A Reality Show?
A more light hearted post to get a few laughs and maybe inspire some thinking.
I am sure that most readers are familiar with the Arnold Schwarzenegger film "The Running Man". What you may not know is the film was based on a Stephen King short story of the same name which was an excellent piece of writing. Now you know.
Taking great liberties, and having some fun with the dialogue, I will present the show "The Running Man" with an whole new set of players and circumstances.
INTRO
Damon Killian: Hello all the folks at home! Tonight we have a special show for you, one you do not want to miss. But first, who loves you and who do you love?!:
Raucous crowd: YOUOOUIO!!!! (roar)
Killian: YES!!!!:
Killian: As you know we have bad debts, they are bad elements, they hurt us all. Now forget how they happened, it does not matter, what matters is we are going to help those bad debts. Indeed, if these sick players can survive our game for the allotted time frame, they will simply be forgiven! Their debt to society paid in full! What a deal!
Here are your guest runners:
-Housing Market Assistance across all fronts (you know the players)
New item today:
FHA moves to boost condo market
I am sure government backing for buying up Miami condos is rooted in sound policy making.
-Commercial Real Estate Support
New item today:
New Rules and More Lies Hide Cancerous Commercial Real Estate Loans
Extend and Pretend in perhaps it's finest iteration. Unreal.
Back to our host:
Killian: Now these bad debts can either be lost over time to a recovering market, or inflated away by the central bank. But first they will have to survive their time in the game zone, and you know who is hunting them, right?
Raucous crowd: YEESSSSESS! (roar)
Killian: Who?!
Raucous Crowd: The Stalkers!!
Killian: YES!!!:
Killian: Tell em about our stalkers!
Announcer: Leading the league in kills last year is Fireball whose main weapon is his "mark to market" flamethrower which torches accounting tricks, wait, I have just been informed that Fireball's flamethrower has been rendered inactive and thus he cannot participate in the hunt. Never fear, we have a deep stable of stalkers!
Announcer: Next up is "Buzzsaw" whose currency devaluation chainsaw tears away at the dollars value across the world:
Announcer: And finally, we have Professor "Sub Zero" who can chill any countries plans for unlimited funding by freezing a bond sale:
Killian: The rules are simple, all the runners have to do is run out the clock on the stalkers and all will be well. So are you ready? Are you ready?!
Raucous Crowd: YESSSS!!!
Killian: To Extend!!:
And Pretend!!!:
YES!!!!!!!!!!!!!:
Guest Runner Bad Debt: Killian, I'll be back!
Killian: Only in a sovereign default punk! GO!!!!!!!
End Sarcasm.
The entire plan has always been to buy time so that someday, someway these debt will be at par either through some miracle of a real estate mania rebound, or devaluation of the currency in a controlled manner. If you are of the mind that this kind of gamesmanship is both good and needed then you sit across the divide from me.
Have a good night.
I don't believe in macro economics. There is no such thing. All economics is micro.
ReplyDeleteIt's a willing buyer and a willing seller agreeing on a price, with full disclosure. That's it. There really is nothing to it more than that at whatever level, no matter what product, service or commidity you're dealing with.
The problem begins when you don't have full disclosure. Questionable financing, property defects, what have you. If both the buyer and the seller are not completely honest and up front with each other, the deal falls apart. Or one or the other, or both, gets ripped off.
That's not economics. But it's close enough for academia or government work.
Gawains,
ReplyDeleteThat was the fastest comment ever!!
I did write "macro fundamental view" but perhpas that is a difference without a distinction.
Maybe we disagree here, but I am a firm believer in the "big picture", though you are right about full disclosure being the needed component for anything related to commerce.
Good to see you.
I don't think we disagree as much as we agree, it's really just a question of definition of terms.
ReplyDeleteMacro, micro, what's the difference?
Ultimately, it all comes down to money changing hands. In real estate, that would be at closing and funding. Until such time, I don't consider any deal done. I've seen too many fall apart at the last minute for any number of reasons.
When I get paid, the house is marked sold. And not before.
I suppose it's the same in all other transactions. When funding occurs, the deal is done. Then there's no looking back. It's all over but the crying.
As the stock market rises, the US dollar falls. Therefore, no one is getting "richer." There is abysmal volume in this market, so the runup is nothing more than (suprisingly small) bits of money being used to ramp the futures and the market makers do the rest. It can't last. Permabulls also tend to forget how deeply in debt the government is, and that the Fed can't monetize much longer. It's not 1970, 1980, or 2003. It's 2009 and we are running out of "extend and pretend" time at an exponential rate.
ReplyDeleteI read or heard (can't remember) a couple of days ago that the average person today is in three times as much debt as was the norm in the early 80's and they only have half of the savings as back then, that can't be good going forward.
ReplyDeleteI've also read elsewhere that the runup we've seen lately has been on low volume so Lisa's comment struck a chord in me when I read it.
Lisa,
ReplyDeletegreat point, that is another fact that the permabulls want to ignore.
Watchtower,
I would have to look it up, but the numbers you cite sound in the ballpark. I remember a radio host saying that never before did the "middle class" live paycheck to paycheck before, but that is the deal for the last 10 years. Ugly indeed.
I did not know the movie was based on a Stephen King short story.
ReplyDeleteI was quite stunned this afternoon when I heard a mortgage ad on the radio announcing a new FNM program which offered a 105% loan to value refinance mortgage, REGARDLESS of whether or not there was 2nd mortgage on the property.
The U.S. taxpayer is now funding the attempted reinflation of the housing bubble.
"What I would like to say is that I am bearish on many things. Of course I can see a government influenced pop as much as the next person, but that does not change my macro fundamental view. It perhaps changes the timing, but not the end result."
ReplyDeleteWell thats the central issue isnt it? Timing?
Daniel Hastings, the firebrand depression era senator was convinced, I repeat CONVINCED, the agriculture support system introduced in 1934 would cause the economy to collapse "within 20 years".
Treasury Secretary Carter Glass - a student of the "Long Depression" (1873-1879) railed heavily against the massive massive debt the US govt took on during the new deal, and the "market distortions" of the day (especially the minimum wage and dairy price supports). He warned, again and again about the systemic collapse of the US economy which was sure to happen in very short order.
Look at the massive amount of debt the US incurred to pay for the Civil War, and the rampant inflation that followed as the govt printed with reckless abandon. The outrage as we went away from the bimetal standard and (in the words of William Jennings Bryan "crucified mankind upon a cross of gold").
These guys were all convinced govt meddling and manipulations would lead to the collapse of the US economy. They knew prior generations warned of the same thing, but they were convinced, their crisis was the "big one" which would result in the collapse of the economy.
They are all dead now.
Long term, they are in my opinion, right. I have no doubt THE US ECONOMY WILL COLLAPSE, AND POSSIBLY THE US REPUBLIC ITSELF. Will it happen in my lifetime? I have no idea.
This is where you and I differ. I recognize there may be 5-10-20 year mini cycles of growth - as well as cycles upon cycles before the eventual collapse be it tomorrow or 1,000 years from now. As such, I refuse to remain bearish as it becomes increasingly evident, this cycle is over, and there is no sign the "big one" will happen during my lifetime.
Ten most troubled states in the U.S.
ReplyDelete"The 10 most troubled states are: Arizona, California, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin."
"Other states -- including Colorado, Georgia, Kentucky, New York and Hawaii -- were not far behind."
"In a separate study released Wednesday, the Center on Budget and Policy Priorities found that states will likely have to make steep cuts in their fiscal 2011 budgets, which start next July 1 in most states. That's because the critical federal stimulus dollars will run out by the end of 2010."
"These cuts could take nearly a percentage point off the national gross domestic product and cost the nation 900,000 jobs, the study found."
"More stimulus needed"
http://tinyurl.com/yd9p3t4
More stimulus needed? Who'd a thunk it?
"Have one, have twenty more "one mores" and oh it does not relent.
The good times are killing me." - Modest Mouse
Anon @8:51 AM - nice, thought provoking, post.
ReplyDeleteI submit part of our problem is our relative youth. I suspect the vast majority of us are under 40 meaning we have never seen a "real" recession in our lifetimes.
I have a tendency to be as bearish as hell, yet my father scoffs and says this isnt as bad as the 73 recession (I was just a kid then and really couldnt remember). (He said his father scoffed at the 73 recession saying it was nothing compared to the great depression)
Which gets me to thinking a sense of perspective is in order. Even our gracious host would probably agree, his assertion that this is the biggest financial experiment in the history of the USA" is a bit of hyperbole. I think what we are doing now pales in comparison to Andrew Jacksons attempt to destroy the central bank, resulting in the stats printing their own (very unstable, hyperinflationary money) was a far bigger experiment.
So yes, a sense of perspective is important. To me, it seems like this is going to end very very badly - but what do I know?
It seems like the 1800s were littered with the Panic of _____, the Boom of _____, the depression of _______, etc, etc. All that must have been horrific for those who lived through those events - to them our concern must seem like childs play.
Anon and neil,
ReplyDeleteI do not have the time to go over history with a fine tooth comb, but I would only add that it is easy for soemone today to say "those calls about printing money during the civil war destroying the country were crazy" beacuse it did not. It did however relegate the southern (former south) US to a long era of low level existence as the north took what was need to pay for all that spending. Collapse is a moving target, it depends on your exact criteria.
Neil wonders if I mean it when I sau this is the biggest fianncial experiment in US history, and I do mean it. It is by any measure used.
I would agree whole hearted that the tough old souls of the late 1800' and the Depression era folks would laugh or better LOL at our cries of despair, but this makes my point for me.
I have always argued that this credit crisis would and could pass with minimal interference and America would be better off in the aftermath. I believe in America, and Americans. Where we perhaps differ is that it is my firm belief that the government is trying to maintain a broken system by playing a dangerous game of huge numbers. This exact course of action could, repeat COULD, rsult is a serious dislocation that will be very serious and you will really know what a crisis is at that point.
And I could be wrong. My time table for another credit/debt event is not "in the next 50 years" but in the next 1-3 years if the games do not stop. I would hope all my readers will be alive then!
Another point, history is not a science experiment (I WISH it was). If there were a parallel universe out there (there is indeed if you are a string theory proponent) then in 1931 we could set it up to see if another handling of the great depression would have had different effects. Maybe wothout the malinvestment of the New Deal and other programs around the world, a quick bottom would have been found and a rebound would have occurred as business theory shows us it may have. Maybe with another 15 years of real innovation we would have floating cars now and cures for cancer. Maybe. Or maybe we would be in a new stone age. Nobody knows and I have never said "I KNOW that X WILL happen", well maybe I did say that TARP would pass, but whatever. My point is I do my best to give my ideas and the thinking behind them.
Thanks for the interaction, I enjoyed the points you both made.
"My time table for another credit/debt event is not "in the next 50 years" but in the next 1-3 years if the games do not stop."
ReplyDeleteHere is an interesting exercise for yourself, right here, right now, set a date certain for "the big one" as you define it. Say the 3 year mark in your 1-3 years quote - such that your "kaboom" event will either happen by Nov 12, 2012, or it simply wont happen at all.
The reason I say this is because as time goes by, its too easy to pick a new reason in the future as to why kaboom will happen "but its been delayed" such that you keep pusing out the date, one more year, then another year, then another year/ Next thing you know its 2017 - all of us have moved on with our lives and your still here saying "the BIG ONE IS HAPPENING SOON"!!!
This I submit would be a sad state of existence similar to that of the people I noted above. They went to their graves convinced it was "just around the corner" and yet there was nothing there.
Dont be that guy. If the kaboom doesnt happen by 11/12/12, just say "fuck it" ditch the doom prophecies and go live your life. Good luck...
ANON-
ReplyDeletePeople ARE going on with their lives. That statement is a bit condescending to all of us who are fighting the corruption in our government. The BIG one isn't going to happen, as LITTLE KABOOM's are happening on a near-daily basis. These little ones are what many of us are fighting at THE CORE, so no such thing as a big kaboom happens. Would you rather we all ignore it and move on with our lives, while our very way of life is being destroyed? You really ticked me off, but maybe I read your comment in the wrong mood. Maybe you didn't really mean to convey what you did. Tell me I'm wrong. And use a damn name for Pete's sake.
Anon,
ReplyDeleteI am with Lisa here. I am not sure what is with the personal attack.
"ditch the doom prophecies and go live your life"
What do you think I stay up all night crying about this stuff?
Here I offer my observations and lines of thought and I encourage all kinds of debate. I would like to keep that debate on the facts and not personal things, unless cars or football are involved!
Lisa is correct that it sure would be easy to just swallow the massaged news and roll up a few green shoots and inhale deeply, but then is that not what those in government always prefer you to do anyway?
I could go on, but I will leave it at that.
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