Financial News

[jasonxctf]

when you (or others) say that we had a lost decade, what does that really mean?

[NorthSideSox72]

when you (or others) say that we had a lost decade, what does that really mean?

From 1999 to 2009, give or take, the equity markets were essentially unchanged. I believe that is the only 10 year period if its kind since the Depression. That is what he means by the Lost Decade.

 

Historically, over longish periods of time, like 10+ years, you could rely on the broader markets to make you about 7 to 10% on equity year over year, with some variance if you played with the 10 years you picked. But zero gain, the complete loss of the equity premium, for 10 years, is unique.

 

[bmags]

From 1999 to 2009, give or take, the equity markets were essentially unchanged. I believe that is the only 10 year period if its kind since the Depression. That is what he means by the Lost Decade.

 

Historically, over longish periods of time, like 10+ years, you could rely on the broader markets to make you about 7 to 10% on equity year over year, with some variance if you played with the 10 years you picked. But zero gain, the complete loss of the equity premium, for 10 years, is unique.

 

it's not unique if it's happened before.

[jasonxctf]

From 1999 to 2009, give or take, the equity markets were essentially unchanged. I believe that is the only 10 year period if its kind since the Depression. That is what he means by the Lost Decade.

 

Historically, over longish periods of time, like 10+ years, you could rely on the broader markets to make you about 7 to 10% on equity year over year, with some variance if you played with the 10 years you picked. But zero gain, the complete loss of the equity premium, for 10 years, is unique.

 

well then here's what i dont understand....

 

1) how can the stock market be a gauge of a "lost decade" but then be meaningless, economically when its gone up 35% in the past 6 months? All I hear all day, is how the stock markets gains dont mean anything economically to the country.

 

2) isnt the whole notion of a "lost decade" very subjective? Ok, from 1/1/00 to 1/1/10 the market had 0% growth (or negative growth). However once you factor in yields, you would be positive. Also when the market tanked in April 2009, can we go out to April 2019 and say what an awesome decade's worth of growth. Can't you just pick the start date of your decade analysis to show either outstanding or horrible growth levels?

[NorthSideSox72]

well then here's what i dont understand....

 

1) how can the stock market be a gauge of a "lost decade" but then be meaningless, economically when its gone up 35% in the past 6 months? All I hear all day, is how the stock markets gains dont mean anything economically to the country.

 

2) isnt the whole notion of a "lost decade" very subjective? Ok, from 1/1/00 to 1/1/10 the market had 0% growth (or negative growth). However once you factor in yields, you would be positive. Also when the market tanked in April 2009, can we go out to April 2019 and say what an awesome decade's worth of growth. Can't you just pick the start date of your decade analysis to show either outstanding or horrible growth levels?

1) You are playing one side's bias against the other. Neither one says they other makes sense. It is what it is - a lost decade in the US equity markets. How much effect that has economically is a subject of much study and controversy.

 

2) Yields in the broader equity market, in the modern era, are small. Less than 1% per anum, if you average it out, I believe. Fewer and fewer stocks (common stocks) pay dividends nowadays, and they pay less and less. Some folks see a huge danger in that too, but that's a whole different discussion. The S&P 500 was at 1089 at yesterday's close, and it was at 1400-something 10 years ago - so its lost something like 30%. The dividend yields do not make up much of that, even when compounded. So, its been a net negative decade.

 

[mr_genius]

From 1999 to 2009, give or take, the equity markets were essentially unchanged. I believe that is the only 10 year period if its kind since the Depression. That is what he means by the Lost Decade.

 

Historically, over longish periods of time, like 10+ years, you could rely on the broader markets to make you about 7 to 10% on equity year over year, with some variance if you played with the 10 years you picked. But zero gain, the complete loss of the equity premium, for 10 years, is unique.

 

also a net loss of jobs for a decade. no growth at all.

[NorthSideSox72]

also a net loss of jobs for a decade. no growth at all.

Yup. We got far too service-industry oriented (among other failiings). We have lost the edge we had in the 90's, and need to get back in front on some things. Sadly, we aren't going quickly enough in that direction.

 

[NorthSideSox72]

National Association of Business Economists is actually more bullish than I am - saying they see the beginning of jobs recovery in Q1 2010, and a 3.5% bump in real GDP this quarter. They do caution though, that they see it taking until 2012 to fully recover the jobs lost so far, and that they feel consumer spending will be disappointing going forward due to consumer thrift.

 

I personally think we won't see real drops in any of the UE numbers until latter half 2010, and I think the recent bump we saw in consumer spending will stick, so I guess I don't see it the same way. But I found it surprising to see that much bullishness from that crowd.

 

[jasonxctf]

WASHINGTON (Reuters) – Sales of previously owned U.S. homes rose in October at a faster-than-expected pace to the highest in more than 2-1/2 years as buyers rushed to take advantage of a popular tax credit, a survey showed on Monday.

 

The National Association of Realtors said sales surged a record 10.1 percent month-over-month to an annual rate of 6.10 million units, the highest since February 2007, from a downwardly revised 5.54 million-unit pace in September.

 

Analysts polled by Reuters had expected October sales to jump to a 5.70 million-unit pace from the previously reported 5.57 million units in September. Compared to October last year, home sales were up by a record 23.5 percent.

[jasonxctf]

The Standard & Poor's/Case-Shiller home price index of 20 major cities rose 0.3 percent to 144.96 in September, the fourth monthly increase in a row. The seasonally adjusted index is now up more than 3 percent from its bottom in May, but still 30 percent below its peak in April 2006.

[southsider2k5]

The Standard & Poor's/Case-Shiller home price index of 20 major cities rose 0.3 percent to 144.96 in September, the fourth monthly increase in a row. The seasonally adjusted index is now up more than 3 percent from its bottom in May, but still 30 percent below its peak in April 2006.

 

No mention of the 0.7% downward reduction of Q3 GDP?

[NorthSideSox72]

No mention of the 0.7% downward reduction of Q3 GDP?

Widely expected, once the trade deficit and other numbers were added. Didn't go down as much as some thought, but its been revised to 2.8%, which is about what the concensus had been.

 

[Cknolls]

No mention of the 0.7% downward reduction of Q3 GDP?

 

 

Or the .5% revision to Personal consumption.

[Cknolls]

The Standard & Poor's/Case-Shiller home price index of 20 major cities rose 0.3 percent to 144.96 in September, the fourth monthly increase in a row. The seasonally adjusted index is now up more than 3 percent from its bottom in May, but still 30 percent below its peak in April 2006.

 

 

But Y/Y Sept Case Shiller came in at -9.36% vs. -9.10 consensus. So potato putahtoh.

[Cknolls]

Nov consumer confidence 49.5 vs. 47.3

 

 

Nov Richmond Fed index 1 vs. 8, October reading was a 7.

[NorthSideSox72]

Or the .5% revision to Personal consumption.

This brings up an oddity that I have noted lately, that is good for discussion here.

 

One number the markets are sensitive to is consumer confidence. The assumption is that, when consumers are more confident, they spend more. More granular numbers are available too, like % of people who plan to spend $X in some period of time. Those numbers haven't recovered at all.

 

And yet, the actual spending seen as reported by real sales numbers for retailers have risen, slightly, in recent months.

 

My posit, which I think I've stated before, is that the lowering of spending by consumers shot lower than was really sustainable by the American market. Basically, Americans are so used to spending so much, that they couldn't hunker down THAT much, for THAT long.

 

But a further point here is that, I think, the recession causes people to think, and say, they will cut down spending my X amount. But that doesn't mean they actually do it. Certainly, for those who are losing jobs or income, their cut backs will be real. But remember, even a huge jump in UE like we have seen in this recession, going from 6%-ish to 10%-ish (or 10%-ish to 17%-ish, depending on which number you want to use), is still only having that profound effect on 4 to 7% of the population. For most others, changes that effect them directly are smaller. They will continue to spend.

 

Anyone else have a competing theory, as to why these numbers have diverged?

 

[southsider2k5]

This brings up an oddity that I have noted lately, that is good for discussion here.

 

One number the markets are sensitive to is consumer confidence. The assumption is that, when consumers are more confident, they spend more. More granular numbers are available too, like % of people who plan to spend $X in some period of time. Those numbers haven't recovered at all.

 

And yet, the actual spending seen as reported by real sales numbers for retailers have risen, slightly, in recent months.

 

My posit, which I think I've stated before, is that the lowering of spending by consumers shot lower than was really sustainable by the American market. Basically, Americans are so used to spending so much, that they couldn't hunker down THAT much, for THAT long.

 

But a further point here is that, I think, the recession causes people to think, and say, they will cut down spending my X amount. But that doesn't mean they actually do it. Certainly, for those who are losing jobs or income, their cut backs will be real. But remember, even a huge jump in UE like we have seen in this recession, going from 6%-ish to 10%-ish (or 10%-ish to 17%-ish, depending on which number you want to use), is still only having that profound effect on 4 to 7% of the population. For most others, changes that effect them directly are smaller. They will continue to spend.

 

Anyone else have a competing theory, as to why these numbers have diverged?

 

The consumer spending is being artificially effected by short term stimulus money that people know isn't going to be around. I am still getting unemployment and spending money. I don't have any prospects for work, so what confidence would I have right now? Even getting past that the growth areas are all artificial. Housing prices are up, only because of a short term stimulus item. Odds are that prices drop by at least the figure of the tax credit when they are done.

[NorthSideSox72]

The consumer spending is being artificially effected by short term stimulus money that people know isn't going to be around. I am still getting unemployment and spending money. I don't have any prospects for work, so what confidence would I have right now? Even getting past that the growth areas are all artificial. Housing prices are up, only because of a short term stimulus item. Odds are that prices drop by at least the figure of the tax credit when they are done.

What stimulus money? The only real cash anyone is getting is unemployment, which is only higher than normal in length because it was extended. You think that few % of people who have extended benefits are making that difference?

 

Also, that doesn't really answer the question. My question is not why is it not crashing further - because its not doing that anyway. My question is, why is it going UP? People who go to unemployment don't suddenly start spending more, in fact they probably spend a lot less. So that makes this bump even stranger.

 

I am not talking about housing here, BTW, I am referring to repeated months of stronger than expected retail sales (and I am looking at the numbers that leave out autos, because that was way artificially high, then way artificially low, thanks to Cash for Clunkers).

 

 

[Balta1701]

What stimulus money? The only real cash anyone is getting is unemployment, which is only higher than normal in length because it was extended. You think that few % of people who have extended benefits are making that difference?

There was a big temporary tax break as well.

[Cknolls]

http://www.thehill.com/homenews/house/6929...-150b-stock-tax

 

 

Why don't we just call it the "Latest Transfer of Wealth Act.

[southsider2k5]

What stimulus money? The only real cash anyone is getting is unemployment, which is only higher than normal in length because it was extended. You think that few % of people who have extended benefits are making that difference?

 

Also, that doesn't really answer the question. My question is not why is it not crashing further - because its not doing that anyway. My question is, why is it going UP? People who go to unemployment don't suddenly start spending more, in fact they probably spend a lot less. So that makes this bump even stranger.

 

I am not talking about housing here, BTW, I am referring to repeated months of stronger than expected retail sales (and I am looking at the numbers that leave out autos, because that was way artificially high, then way artificially low, thanks to Cash for Clunkers).

 

Higher than expected are still much lower than what those numbers have been in the past. It is the game of low expectations at play for lots of this data.

[NorthSideSox72]

Higher than expected are still much lower than what those numbers have been in the past. It is the game of low expectations at play for lots of this data.

I think you are still missing what I am saying here. Why have the numbers increased, over time, over the last few months, even when seasonally adjusted? What has changed?

 

[NorthSideSox72]

There was a big temporary tax break as well.

You mean the housing credit? I am talking about retail spending here.

 

[southsider2k5]

I think you are still missing what I am saying here. Why have the numbers increased, over time, over the last few months, even when seasonally adjusted? What has changed?

 

No, I am not. Improving still doesn't mean good, or even respectful. It just means they have come off of how far they have fallen. It still doesn't make them good.

[NorthSideSox72]

No, I am not. Improving still doesn't mean good, or even respectful. It just means they have come off of how far they have fallen. It still doesn't make them good.

Who said it was good?

 

Nevermind.