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QUOTE (Y2HH @ Aug 28, 2009 -> 12:51 PM)
Yes, and us Kappies do not like being forced to agree with NorthSideSox72, but you've left me no choice...

 

I think a little part of me just died.

 

Thanks a lot. :/

You must think NSS is a liberal or something...?

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QUOTE (kapkomet @ Aug 28, 2009 -> 12:47 PM)
This "stimulus" was and is not designed for a job recovery. It's simply to boost GDP to make it look artificially like they are doing something. See 3rd Qtr GDP (most bounce will occur from cash for clunkers). Media: Yea, STIMULUS IS WORKING!.

 

What a lot of you people don't understand: these companies are not going to hire people back. Not nearly as much as they have cut. The management realizes that they can do the same with less, drive people like slave labor (read: middle management works 60-70 hours a week to take up the slack of "cuts" but at least you people have a job!!). This will not change for a long time. Aka, jobless recovery - which then means you don't have a long term recovery - you can't without private sector jobs. And again, that was never the intent of the "stimulus".

Who in this thread is saying the stimulus was designed to add jobs? But meh, people were already complaining in May when the stimulus wasn't "working" yet. That's just part of the game.

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QUOTE (southsider2k5 @ Aug 28, 2009 -> 07:45 AM)
I don't buy the modern bias anymore. It wasn't too long ago that people believed that the market has gotten so effecient at pricing in information, that a negative PE could be interpreted as a good thing. 10 years later over 90% of the dotcoms are busts or buyouts. I still believe in history and understanding what the numbers are telling you, and why they are saying what they are.

 

The housing market has all of the signs of a deadcat bounce. Unemployment is still rising, as is the hidden unemployment of people who either have been taken off of the official roles because they have exhausted their benefits, or have taken much less paying/part time work out of desparation. The other big factor in homebuying is ease of credit, and that hasn't really changed that much in the last 10 months or so either. Also remember that employment lags confidence in the system by 6-12 months, and foreclosures also lag unemployment by about the same margin. There is still a large chunk of supply that hasn't come onto the housing market, not to mention, much like the hidden auto demand, there is also the hidden housing supply of people who want to sell their houses, but feel that they can't for one reason or another (worried about losing job, upside down on loan, houses not selling in area so not trying, etc). Even if hiring really did take off today, it would be a year to two years before you could really point to a true housing recovery.

 

More numbers I have seen bantered around as proof are the durable goods and GDP revisions... This is pretty simple stuff to explain away as well. The two biggest components in durable goods are airplanes and autos. Autos numbers being reported are in the midst of the cash for clunkers bounce. Once you remove auto numbers from durable goods, that number becomes near zero growth. That same growth is also responsible for a good chunk of GDP growth. Remember, no one seemed to be able to forecast how successful this program would be, which means it wasn't factored in as "expected" in any of the growth figures for Q3. Now moving on to Q4 you have removed pretty much all automotive demand from this system, both pent up demand and the future demand from people who realized that this was the best deal they were going to ever see, so they moved and took delivery sooner than they probably would have. As for other durables, people who are employed and able to buy are also still scared of losing their jobs, as unemployment is still increasing. If you are scared of losing your job, you aren't going to run out and spend savings money to buy a new fridge or TV unless you have to do so. The proof here is that savings rates in the US are still at levels we haven't seen in decades, and again, even the slight dip in the number can be explained by the artificial demand of cash for clunkers spending.

 

I also saw your point about articles of people investing in the stock market, but I am still reading articles about people who are afraid to invest in the same market, in other, less market biased media outlets. The Sunday Tribune just had one.

 

Finally I really believe that we have to see unemployment take a real turn before I will believe actual growth is coming. The fundementals of the markets have to change, and not just by artificial government means. For all of those auto sales, does anyone think any jobs are going to be saved? That is the question we should be asking. Until jobs come back for real (not just accounting tricks brought on by people who can't file for benefits anymore, or are working part time/at a fraction of former salaries.) we aren't going to sustain anything. History bears this out, not just me.

Mike I like the above. Very good and informative post. I think you should blog on the economy!!!

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QUOTE (NorthSideSox72 @ Aug 28, 2009 -> 07:55 AM)
1. "other less biased media outlets"? Than WSJ and Crain's? WTF?

 

2. The housing market has all the signs of a dead cat, because it has all the signs of hitting a floor. That's why everything we're seeing now is positive. There will probably be one more dip, or a leveling, into early next year, as the tax incentives wear off, but that's expected and not a bad thing at all. The only two things that are really worriesome for the next year or two in housing are increased unemployment (which we'll probably see at least a little bit of), and the looming inflation issue's effects on mortgage rates. And those are definitely big. But I think the overall strength is building - and we'd likely see a slow, choppy rise over the next few years. Downticks as rates go up and employment goes down, upticks when employment goes up again.

 

3. As for history bearing you out about unemployment, that is only partially true. Its always the laggard. Economic growth needs people to have jobs, but typically the growth starts around when unemployment tops, not after. Then they move in concert. That's why the market has priced in some spiky growth next 2 quarters, but sustained, more predictable growth next year.

 

Inflation is the scary monster next year, IMO. That is the biggest X factor in how quickly we recover, or if we dip deeply again, in 2010.

In terms of the housing market, I think the biggest reason we are seeing numbers increase a bit is a, because it was down for such an extended period of time, but also B because the supply is actually very very low (shockingly low).

 

Now I'm basing the above on my market and as we all know, real estate differs across the country pretty significantly, but no one got hit much harder than SoCal during the housing and mortgage bubble (we not only had inflated housing prices crash and a large % of the new wave of financing, but we were also home to the corporate headquarters of most of those lenders) and right now prices have went up a bit the past few months (during summer which is the typical peak season for real estate).

 

The problem is, when you look out there you'll see that the only things on the market (and I'm talking about 80% and higher are short sales and REO's). There are about 20% equity sellers (and I actually think I'm exaggerating as there are far less than that). Short sales are pretty much non-existent as they are very very difficult to get closed so really the only available homes are REO's and the ocassional equity seller and because of this people sitting out there looking to buy a home (ie, the young and new families trying to take advantage of the first semi-affordable market in our young adult lives).

 

So Bottom line, Mike is completely on par in saying that this housing rebound is anything other than a minor blip. Is stuff going to dive bomb, absolutely not, but there is enough out there that will prevent any true recovery for a lot longer (I do think it is pretty safe to buy, if not a great time to buy if you can, but that time window should be around for another couple years, at least in my area).

 

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QUOTE (lostfan @ Aug 28, 2009 -> 12:06 PM)
Who in this thread is saying the stimulus was designed to add jobs? But meh, people were already complaining in May when the stimulus wasn't "working" yet. That's just part of the game.

Well, our very own Messiah President was screaming that we had to pass this NOW because they were going to "save or create" whatever the hell number they had out there # of jobs. It was a lie, and continues to be a lie, and as such, the "stimulus" is not working, well, yea, it's "working" but not like they said and told us it would. Just more lies from our Savior.

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QUOTE (NorthSideSox72 @ Aug 28, 2009 -> 11:48 AM)
"out of the question" is something no one should ever say when projecting a market. Its asking for trouble, and makes me question this source.

 

 

 

 

 

 

 

Your predictions tend to be dire on this board, usually well outside what most others predict, and this is no exception. Dow 5000? Deflation? I find these to be incredibly unliklely scenarios based on all the economic data out there, as well as market history.

 

Well I did say the mkt would go to 660 SPX and it only went to 666, so I guess i was wrong, sorry.

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QUOTE (kapkomet @ Aug 28, 2009 -> 12:23 PM)
Well, our very own Messiah President was screaming that we had to pass this NOW because they were going to "save or create" whatever the hell number they had out there # of jobs. It was a lie, and continues to be a lie, and as such, the "stimulus" is not working, well, yea, it's "working" but not like they said and told us it would. Just more lies from our Savior.

Do you even know what the definition of lie is?

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QUOTE (jasonxctf @ Aug 28, 2009 -> 10:51 AM)
U.S. double-dip recession "out of the question": ECRI

On Friday August 28, 2009, 10:30 am EDT

 

NEW YORK (Reuters) - A weekly measure of future U.S. economic growth slipped in the latest week, though its yearly growth rate surged to a 38-year high that suggests chances of a double-dip recession are slim.

 

The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index for the week to August 21 fell to 124.4 from a downwardly revised 124.9 the prior week, which was originally reported at 125.0.

 

But the index's annualized growth rate soared to a 38-year high of 19.6 percent from a downwardly revised 17.4 percent the prior week, a number which was originally 17.5 percent.

 

It was the WLI's highest yearly growth rate reading since the week to May 28, 1971, when it stood at 20.5 percent.

 

"With WLI growth continuing to surge through late summer, a double dip back into recession in the fourth quarter is simply out of the question," said ECRI Managing Director Lakshman Achuthan, reinstating the group's recent warning to ignore negative analyst projections.

 

He added that the index was pulled down this week due to higher interest rates.

 

Achuthan has recently projected that the recovery is moving at a stronger pace than any the United States has seen since the early 1980s.

 

I took some time and read up on this guy and his foundation. It is interesting, but I not convinced. My whole argument has been about the fundamentals versus the statistics. His whole system is econometrics essentially, which still does not take into account all of the outside intervention, and the tenuous nature of that. I didn't see any accounting for the artificialness of said statistics.

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QUOTE (Chisoxfn @ Aug 28, 2009 -> 12:10 PM)
Mike I like the above. Very good and informative post. I think you should blog on the economy!!!

 

Thanks Jas, I appreciate it. It sounds silly, but I find this stuff incredibly interesting. There is a reason I passed up sportscasting and broadcasting to stay with econ. based things.

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QUOTE (kapkomet @ Aug 28, 2009 -> 01:23 PM)
Well, our very own Messiah President was screaming that we had to pass this NOW because they were going to "save or create" whatever the hell number they had out there # of jobs. It was a lie, and continues to be a lie, and as such, the "stimulus" is not working, well, yea, it's "working" but not like they said and told us it would. Just more lies from our Savior.

Meh that was PR bulls*** to get the bill passed and should be seen for what it is. That's a pretty minor thing and the least of complaints I had with the stimulus.

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QUOTE (lostfan @ Aug 28, 2009 -> 12:27 PM)
Meh that was PR bulls*** to get the bill passed and should be seen for what it is. That's a pretty minor thing and the least of complaints I had with the stimulus.

But lost, and some others, seriously, that PR bulls*** is part of the huge problem. So what PR bulls*** is Obama spinning now to get health care passed? Cap and Trade? Where does it stop? So it's ok to "PR bulls***" to get stuff rammed down our throats? Wait, we "needed stimulus" but it is all the wrong kind, and no jobs are resulting - which is the most important part, because you can't have a solid and stable recovery without them.

 

You just made my point about Barack Obama to a "T" almost without meaning to.

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QUOTE (southsider2k5 @ Aug 28, 2009 -> 10:26 AM)
Thanks Jas, I appreciate it. It sounds silly, but I find this stuff incredibly interesting. There is a reason I passed up sportscasting and broadcasting to stay with econ. based things.

I think you and Matt do an outstanding job going back and forth too. Its very educational and a great read. I bet a blog or even podcast would be very cool for you guys. Of course I have no clue what kind of market there is for stuff like that.

 

But you guys teach me more than the people on CNBC and stuff do. I think they have some great stuff in the morning but the more perspective the better as I'm continually trying to learn more and more how markets work.

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QUOTE (kapkomet @ Aug 28, 2009 -> 01:30 PM)
But lost, and some others, seriously, that PR bulls*** is part of the huge problem. So what PR bulls*** is Obama spinning now to get health care passed? Cap and Trade? Where does it stop? So it's ok to "PR bulls***" to get stuff rammed down our throats? Wait, we "needed stimulus" but it is all the wrong kind, and no jobs are resulting - which is the most important part, because you can't have a solid and stable recovery without them.

 

You just made my point about Barack Obama to a "T" almost without meaning to.

That's the way of Washington, it always has been, and it's never going to change. It honestly doesn't even bother me anymore, I don't have the time or energy to be worried about that kind of s***. It registers in my mind the same way a neighbor's loud ass barking dog does, or the planes approaching BWI that fly over my house. I hear it, but I don't really notice it. As long as it doesn't reach the level of outright lying (which he didn't do - say what you want about what you think about how effective it will be, but just because you don't believe the same theories he does doesn't mean he's lying) then I don't really care. It's all a game, no matter how good your intentions may be you're up against big money and entrenched interests. I won't delude myself into thinking it's something other than what it is.

Edited by lostfan
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QUOTE (Chisoxfn @ Aug 28, 2009 -> 12:17 PM)
In terms of the housing market, I think the biggest reason we are seeing numbers increase a bit is a, because it was down for such an extended period of time, but also B because the supply is actually very very low (shockingly low).

 

Now I'm basing the above on my market and as we all know, real estate differs across the country pretty significantly, but no one got hit much harder than SoCal during the housing and mortgage bubble (we not only had inflated housing prices crash and a large % of the new wave of financing, but we were also home to the corporate headquarters of most of those lenders) and right now prices have went up a bit the past few months (during summer which is the typical peak season for real estate).

 

The problem is, when you look out there you'll see that the only things on the market (and I'm talking about 80% and higher are short sales and REO's). There are about 20% equity sellers (and I actually think I'm exaggerating as there are far less than that). Short sales are pretty much non-existent as they are very very difficult to get closed so really the only available homes are REO's and the ocassional equity seller and because of this people sitting out there looking to buy a home (ie, the young and new families trying to take advantage of the first semi-affordable market in our young adult lives).

 

So Bottom line, Mike is completely on par in saying that this housing rebound is anything other than a minor blip. Is stuff going to dive bomb, absolutely not, but there is enough out there that will prevent any true recovery for a lot longer (I do think it is pretty safe to buy, if not a great time to buy if you can, but that time window should be around for another couple years, at least in my area).

The low supply you are referring to is a fundamental support in the market. The fact that is has gotten a lot lower is good, not bad. Its not an indication of anything temporary, its quite the opposite. If sales and prices suddenly jumped while supply was not going down significantly, then THAT would tell me this this will go back down again, and that it was purely tax-deal and foreclosure-inspired blips. But as supply keeps getting lower in going with the prices, and more people snatch up the foreclosure properties, the market is correcting in a fundamental way.

 

 

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QUOTE (Chisoxfn @ Aug 28, 2009 -> 12:38 PM)
I think you and Matt do an outstanding job going back and forth too. Its very educational and a great read. I bet a blog or even podcast would be very cool for you guys. Of course I have no clue what kind of market there is for stuff like that.

 

But you guys teach me more than the people on CNBC and stuff do. I think they have some great stuff in the morning but the more perspective the better as I'm continually trying to learn more and more how markets work.

That's an interesting thought (and thanks, BTW). Lots of people do this in the media, not sure if there are little fish in the pond too. My firm actually has a media arm that has commentary out there, so, I probably would not be allowed to go do something like that formally.

 

And housing is sort of weak territory for me anyway, knowledge-wise. I'm far more knowledgeable in financials, derivatives particularly.

 

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QUOTE (NorthSideSox72 @ Aug 28, 2009 -> 01:12 PM)
The low supply you are referring to is a fundamental support in the market. The fact that is has gotten a lot lower is good, not bad. Its not an indication of anything temporary, its quite the opposite. If sales and prices suddenly jumped while supply was not going down significantly, then THAT would tell me this this will go back down again, and that it was purely tax-deal and foreclosure-inspired blips. But as supply keeps getting lower in going with the prices, and more people snatch up the foreclosure properties, the market is correcting in a fundamental way.

 

Except I really don't believe that supply is nearly as low as it seems. There are a ton of people who want to see but can't, because of either job, credit, credit market, or upside down issues right now. The resistance for a recovery in the housing market is huge right now. I can think of no better example than the auto market fundamentals we just saw, except this is much bigger because of the huge price losses in many markets.

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QUOTE (southsider2k5 @ Aug 28, 2009 -> 01:14 PM)
Except I really don't believe that supply is nearly as low as it seems. There are a ton of people who want to see but can't, because of either job, credit, credit market, or upside down issues right now. The resistance for a recovery in the housing market is huge right now. I can think of no better example than the auto market fundamentals we just saw, except this is much bigger because of the huge price losses in many markets.

Supply is low? No way. Demand is trickling back up because of some of the incentives out there, but in no way is there a large demand - as you said, jobs, credit, etc. are still damn hard to come by. Inventories are pretty large at this point as well.

 

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QUOTE (southsider2k5 @ Aug 28, 2009 -> 01:14 PM)
Except I really don't believe that supply is nearly as low as it seems. There are a ton of people who want to see but can't, because of either job, credit, credit market, or upside down issues right now. The resistance for a recovery in the housing market is huge right now. I can think of no better example than the auto market fundamentals we just saw, except this is much bigger because of the huge price losses in many markets.

What you are referring to, the people already in homes that they bought relatively recently and can't sell now (not enough equity, etc.), is a downslope, definitely. But there is a crossing curve you need to address (well, a few, actually). The big one is new capacity slowing down DRAMATICALLY. The new housing starts fell like a rock during the past six months, as developers focused on selling what they had and not building new. This had a deliterious effect on the economy, but it stopped the out of control home building machine that was still plowing along late last year. By taking new stuff out of the market, you focus buyers onto those existing homes, which will inevitably prop up their value.

 

Further, you also have a lot of new buyer types out there who are seeing tax breaks and cheap prices, and jumping in. Now, some of that is a spike, this year. But some will continue, as lenders have been easing lending a bit lately, so more new buyers can leap into it. That is a self-sustaining growth right there, that will also help the market.

 

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QUOTE (NorthSideSox72 @ Aug 28, 2009 -> 01:18 PM)
What you are referring to, the people already in homes that they bought relatively recently and can't sell now (not enough equity, etc.), is a downslope, definitely. But there is a crossing curve you need to address (well, a few, actually). The big one is new capacity slowing down DRAMATICALLY. The new housing starts fell like a rock during the past six months, as developers focused on selling what they had and not building new. This had a deliterious effect on the economy, but it stopped the out of control home building machine that was still plowing along late last year. By taking new stuff out of the market, you focus buyers onto those existing homes, which will inevitably prop up their value.

 

Further, you also have a lot of new buyer types out there who are seeing tax breaks and cheap prices, and jumping in. Now, some of that is a spike, this year. But some will continue, as lenders have been easing lending a bit lately, so more new buyers can leap into it. That is a self-sustaining growth right there, that will also help the market.

I am not hearing of lenders easing up - in fact, I'm hearing it's tougher and they don't really want to work with people. You either have that 750 score, or you don't.

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