http://finance.yahoo.com/news/US-economy...67029.html

But, it's good news

Quote:However, declining inventories is a positive development as it suggests the inventory correction cycle might be over.

Yeah, nice spin.

I blogged about this today. Yesterday, consumer confidence was at its highest point since November. Now this. Just shows how clueless most of us are about the actual economic situation.

The tanking economy means that if you have good credit and an 80% LTV, you can refinance at 4.65% for 30YR Fix this morning. That is INSANE.

(04-29-2009 10:04 AM)BGSUalum1987 Wrote:  Yeah, nice spin.

I blogged about this today. Yesterday, consumer confidence was at its highest point since November. Now this. Just shows how clueless most of us are about the actual economic situation.

Oh, but John McCain told us the fundamentals of the economy are sound.

And the Obama administration has been echoing that lately, don't you know?

I think there is a major disconnect between those in Washington/Wall Street and those on Main Street. I don't know where this leads, but I have a really hard time finding an outcome that appeals.

(04-29-2009 10:24 AM)Owl 69/70/75 Wrote:  

(04-29-2009 10:04 AM)BGSUalum1987 Wrote:  Yeah, nice spin.

I blogged about this today. Yesterday, consumer confidence was at its highest point since November. Now this. Just shows how clueless most of us are about the actual economic situation.

Oh, but John McCain told us the fundamentals of the economy are sound.

And the Obama administration has been echoing that lately, don't you know?

I think there is a major disconnect between those in Washington/Wall Street and those on Main Street. I don't know where this leads, but I have a really hard time finding an outcome that appeals.

I get the feeling that the DC crowd and their university supporters have just closed their eyes tight and are hoping this all passes quickly. Throw money in the system, hope people buy stuff and keep jobs, and it will all be over...w/o a calamity on their legacy.

Meanwhile, I see businesses making somber decisions in order to make it for the long haul. I think it's going to get ugly.

I do confess I don't understand current stock prices and consumer confidence. It seems like a calm before the storm...but I don't understand the reasons.

(04-29-2009 10:36 AM)DrTorch Wrote:  I get the feeling that the DC crowd and their university supporters have just closed their eyes tight and are hoping this all passes quickly. Throw money in the system, hope people buy stuff and keep jobs, and it will all be over...w/o a calamity on their legacy.
Meanwhile, I see businesses making somber decisions in order to make it for the long haul. I think it's going to get ugly.
I do confess I don't understand current stock prices and consumer confidence. It seems like a calm before the storm...but I don't understand the reasons.

I think I understand it and I think it's euphoria. We're all basking in the media glow that surrounds the Messiah, and that has people optimistic. Meanwhile, the smart businesses are girding their loins to ride this out. When reality hits fantasy, it's not going to be pretty.

I've pretty much been predicting this. My own prediction is that it lasts until late summer. That's not based on anything solid, more intuitive than anything. I expect the Dow to wobble back and forth and eventually climb above 9000 in August or so (I realize the Dow is hardly the best economic measure, but it's one that people understand, and I expect others to move in concert, so it's an acceptable indicator). That's about when it will start to manifest itself that the stimulus isn't really stimulating very much, at about the same time that the impacts of the additional debt burden will start to make themselves felt in the capital markets. I'm expecting that to be Katy-bar-the-door time. I expect the Dow will be back under 6000 by year-end, on its way to about 4000 (a friend of mine predicts 3800, but I'm not going to let my precision exceed my accuracy). It will ride there for a couple of years. The rest of the world will start to come back, but we'll be stuck behind. That's going to be very difficult for Americans to accept, and I don't know what happens then. Depending on what does happen then, my over-and-under on getting back on track is 2020.

The real turning point in the global economy will be when Israel strikes Iran. It will be a quick downhill slide after that.

(04-29-2009 10:53 AM)GrayBeard Wrote:  The real turning point in the global economy will be when Israel strikes Iran. It will be a quick downhill slide after that.

That could be another late summer event. It won't be good when it happens. I do think you'll find some fairly strange bedfellows when it does occur. The big unspoken problem is that Iran's retaliation will most likely be against Saudi oil production and transportation facilities.

There is another scenario that concerns me, but I think this is a bit further out in the future. China is building up its navy, and the ships it is adding appear to be well-suited to support an invasion of Taiwan. What happens if China makes a feint towards Taiwan, we send in the Seventh Fleet, and China responds by dumping our debt for a dime on the dollar? Yeah, they lose money, but in a communist society they just look upon that as cheaper than building an army to confront us directly. I think it's further in the future because (1) that navy won't be done building until about 2013, and (2) they will hold enough of our debt to ensure their ability to crater the whole US economy by then.

(04-29-2009 10:20 AM)Lord Stanley Wrote:  The tanking economy means that if you have good credit and an 80% LTV, you can refinance at 4.65% for 30YR Fix this morning. That is INSANE.

add to that the falling home prices., now you can get a nice house for not too much per month compared to a year ago.

Quote:Taiwan, we send in the Seventh Fleet, and China responds by dumping our debt for a dime on the dollar?

only China would lose, the US would still be obligated to the original terms of the Bond contracts when they come due, just to the new owners who would have gotten a steal.

(04-29-2009 11:12 AM)Owl 69/70/75 Wrote:  There is another scenario that concerns me, but I think this is a bit further out in the future. China is building up its navy, and the ships it is adding appear to be well-suited to support an invasion of Taiwan. What happens if China makes a feint towards Taiwan, we send in the Seventh Fleet, and China responds by dumping our debt for a dime on the dollar? Yeah, they lose money, but in a communist society they just look upon that as cheaper than building an army to confront us directly. I think it's further in the future because (1) that navy won't be done building until about 2013, and (2) they will hold enough of our debt to ensure their ability to crater the whole US economy by then.

It would cause the country to start living within its means, that is for sure. They couldn't raise the money they need for all of this extra crap that has been going on since the 80's.

I can't see China wanting to mess with the USA. I also don't think they could do more than damage the USA for 10 years max. After that the US economy will come back, as it is still easily the largest and most wealthy. They would also lose their biggest importer, causing them to lose a lot of money to fund their continuing expansion.

If the US balances the budget now then we kill the biggest risk to the country immediately...

(04-29-2009 11:20 AM)GGniner Wrote:  only China would lose, the US would still be obligated to the original terms of the Bond contracts when they come due, just to the new owners who would have gotten a steal.

The issue would be for the US to raise new funds through bond sales... the US would pretty much have to live only on tax revenues at that point.

(04-29-2009 11:20 AM)GGniner Wrote:  only China would lose, the US would still be obligated to the original terms of the Bond contracts when they come due, just to the new owners who would have gotten a steal.

You're view is too narrow. That move would tank the dollar on world markets. Once China holds enough debt to be beyond the developed countries' ability to prop up the dollar, they can crater us. Besides, they'd probably sell it to somebody like Cuba or Iran or North Korea (who could afford a bunch of it at the discount price). Wouldn't it be lovely to have them owning us?

The new owners would not get a steal becuse if their $10,000 debt is paid off in dollars that are now worth a dime, they end up with something worth the $1,000 they paid for it.

China represents only a small portion of our Bond holders, about the same amount as Japan.

when foreign investors of all stripes stop investing in the US, that is when we will go down hill, if it ever comes to that.

(04-29-2009 11:22 AM)mlb Wrote:  I can't see China wanting to mess with the USA. I also don't think they could do more than damage the USA for 10 years max. After that the US economy will come back, as it is still easily the largest and most wealthy. They would also lose their biggest importer, causing them to lose a lot of money to fund their continuing expansion.

I can assure you that China does want to mess with the US. The Chinese man-in-the-street in Beijing or Shanghai or Hong Kong will tell you that. I know, they've told me, and they've told friends of mine. Often and repeatedly. It's surprising and a bit disconcerting just how open they are about it. There's a lot of nationalism going on there.

Ten years might be a bit optimistic. We would have to do some pretty serious restructuring. I think we'd be better off for it. But our status as a superpower would pretty much be toast. That might not be bad, all things considered. At my age, this is not something I want to live through.

(04-29-2009 11:22 AM)mlb Wrote:  I can't see China wanting to mess with the USA. I also don't think they could do more than damage the USA for 10 years max. After that the US economy will come back, as it is still easily the largest and most wealthy. They would also lose their biggest importer, causing them to lose a lot of money to fund their continuing expansion.

yep, they'd lose their #1 Customer if they do anything too stupid. They have alot of internal pressures as it is to keep that going.

Quote:If the US balances the budget now then we kill the biggest risk to the country immediately...

the Assets to Liabilities ratio is a bigger concern than a balanced budget, which at the moment its going in a bad direction.

that said, under Thomas Jefferson Foreign Countries owned a much higher portion of US Debt than they do today. over 50% I beleive.

(04-29-2009 11:27 AM)GGniner Wrote:  China represents only a small portion of our Bond holders, about the same amount as Japan.

when foreign investors of all stripes stop investing in the US, that is when we will go down hill, if it ever comes to that.

Ummm, China will probably be a much bigger bondholder by 2013. And if and when they dump our bonds, one likely consequence will be that investors of all stripes will stop investing in the US.

for a politically historical perspective, in the late 80's and early 90's the same argument was made about Japan 'owning us' and how they would takeover. Didn't happen.

today they own about as much of our T-Bills as China does, yet you don't hear a thing in the political debate about Japan "Owning us" or 'dumping our debt'. the Japan canard is played out, is why.

as long as the US GDP is the #1 in the world, only Insanely stupid and suicidal investors will actually leave the US, and with nowhere to go at the moment.

(04-29-2009 11:34 AM)GGniner Wrote:  for a politically historical perspective, in the late 80's and early 90's the same argument was made about Japan 'owning us' and how they would takeover. Didn't happen.

today they own about as much of our T-Bills as China does, yet you don't hear a thing in the political debate about Japan "Owning us" or 'dumping our debt'. the Japan canard is played out, is why.

Japan does not have the same strategic objectives as China. That could change in the future, but it has not been the case for the time frames you reference.

Japan's economy has been stuck in neutral since the early 1990s. Why? They tried a very similar "stimulus package" to deal with the 1989-90 downturn, and they've been mired in a slump ever since. They've poured money down the rathole and gotten nothing back but further in debt. The lesson of Japan in 1990 and the US in 1933 may well be that if you want to make a depression last longer, try "stimulus." One consequence of this is that it is very likely that China will be buying more of our debt in the futre than Japan will.

U.S. Economy = Frightened turtle?