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Interesting from Wall Street Economist

Discussion in 'Political Discussion' started by PatriotsReign, Aug 11, 2008.

  1. PatriotsReign

    PatriotsReign On the Roster

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    For those who stubbornly refuse to stray from the "2 consecutive quarters..." definition, wake up before it's too late.

    Sunday, August 10, 2008

    "David, Rosenberg, Merrill Lynch's chief North American economist, says the US Remains Firmly In Recession.

    The US economy is in recession. Period. And it has been in a recession since January. This is the mantra of David Rosenberg, the first Wall Street economist to predict America's current economic woes, back in January, and perhaps one of the most bearish in the economic fraternity.

    "The path to financial ruin is littered with calls of a bottom, and I don't think you want to confuse intermediate bottoms with fundamental bottoms; I think that is quite a dangerous game to play," he warns. "I think what separates my call, say from the consensus, is that I don't necessarily think this is going to be a mild flash in the pan. I think this is going to be a long recession."

    "This is an epic event; we're talking about the end of a 20-year secular credit expansion that went absolutely parabolic from 2001-2007."


    http://globaleconomicanalysis.blogspot.com/
    Last edited: Aug 11, 2008
  2. MrBigglesWorth

    MrBigglesWorth Rookie

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    sounds like you want a recession PatriotReign.
  3. maverick4

    maverick4 Banned

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    The US is going down, anyone knowledgeable about the markets has been saying this since 2003. I hope you've moved your securities out already, because it's too late if you haven't.
  4. MrBigglesWorth

    MrBigglesWorth Rookie

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    I've read the dollar has recently strengthened and China is slowing down.

    This is merely a reset causing people to save more. Once they save and start to feel comfortable they will starting spending again.
  5. BelichickFan

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    #24 Jersey

    Why do people insist on finding one person, or a few people, who agree with them to "prove" their point ? It's ridiculous. This guy may be right but he's in the minority right now and there's a bullish feel to the markets right now. And whether PatriotsReign agrees or not, the markets are a leading indicator for the economy.
  6. Real World

    Real World Moderator Staff Member

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    The guy might be 100% on spot, but I can find 100 "experts" that will say the opposite. We'll see what happens moving forward.
  7. PatriotsReign

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    No, what I want is what the economy NEEDS. so if it is a recession, then let it happen and stop trying to stop it. Who TF would wants a recession? We live in a free-market capitalist nation. That means we trust the basic tenets of the system. Part of that system is "Booms & Recessions".

    I post a fact about a well respected economist and you reply by saying I want a recession? That makes no sense. Especially since we ARE in one!

    If you support capitalism, then you take all of it. I happen to support capitalism.

    Can you explain how or why we should not expect a recession after being in a boom for 10 years AND after we purposefully avoided a recession in 2000 by artificially inflating the housing market? We are in the awful state we are today because of that false bubble...you do realize that, don't you Biggles? So if Government fixes result in messing up our economy even more, why support them.

    Also, I know for a fact that recessions "restore" the economy to a base that allows for future prosperity. I'm sure you know prosperity can't be permanent in a capitalist society.
  8. PatriotsReign

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    It doesn't matter what you or I believe, the FACT is, the economy drives the markets, not the other way around. Only long-term market trends are an economic indicator. Not short term trends.

    What baffles me is how many people think the economy can straighten itself out in 6 months. Look at the housing market as an example. It needs a huge correction and that is going to take years to correct.

    Time will show us who is right on this. So we shall see.
  9. PatriotsReign

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    Economics is extremely complicated cause & effect model. simple things like the dollar strengthening isn't nearly enough to change the direction of the economy. The money supply must find balance and the current supply won't sustain a strengthing dollar. It needs to contract for a long period before that happens.
  10. BelichickFan

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    #24 Jersey

    I'm not giving you my opinion, I am telling you that I am right. There's plenty of evidence here :

    http://www.google.com/search?q=stoc...s=org.mozilla:en-US:official&client=firefox-a

    If you do the same search replacing leading with lagging you'll find an opinion or two but nowhere near the same quality or quantity.
  11. PatriotsReign

    PatriotsReign On the Roster

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    BF, it looks like you misinterpreted my statement. I didn't say the stock market isn't an economic indicator, I said it does not change (drive) the economy and that is absolutely true. No indicator drives the economy since the economy is the macro in this case. Inflation, unemployment, the money supply and the stock market are all "small" parts of the whole economic model.

    So if these components in total make up a poor environment for economic growth, then none of them alone can change the direction of the economic trend.

    Don't you agree that the markets don't drive the economy, but rather, it's the other way around (as my statement proposes). I realize you're a market guy, but I am an economist for my company...so both of are qualified to state our opinions. If the markets did drive the economy, then the economy would have to be a part of the markets and that is reversed.

    You're right that the markets are an indicator, but not in the short-term. I guarantee you that the current upswing in the markets is not an indicator the economy has "bottomed out". But if you want to predict that, then we have an issue that will show one of is right...so time will tell. I say most of the current market uptrend is due to falling oil prices. Since oil isn't a major cause of our economic down-turn (remember, this started well before oil increased), we know it's not enough to turn the economy around.

    Let me propose something to you and I'd love to get your feedback. Here it is;

    Our recent boom (2000-2007) was driven by record levels of consumer spending. It represented over 60% of all economic activity. The majority of this spending was sourced from borrowed money as household after household re-financed and used their credit cards at levels never seen before. And now we're experiencing the biggest contraction of the money supply in US history. Why? Because much of this spending was based upon the presumption that real estate would always increase.

    This was part of Greenspan's plan....FUEL CONSUMER SPENDING by creating a housing bubble. Now that this bubble has bursts, consumers are in a position that they have to pay down debt. This is going to take years. Financial institutions have made it more difficult than ever to get loans...both private and business.

    The net/net is that the market is not in a a position for economic growth. In fact, it is in debt payback mode. We will never again see consumer spending based upon borrowed money the way we did over the past 7 years. This all means that consumers will be frugal and save. When consumers save, they spend/consume less.

    So if over 60% of economic activity was driven by consumer spending, where are consumers going to get the money to drive the economy now that this money supply is no longer available?

    Further, we became negative savers as a nation for the first time in US history during the 2000-2007 period and that was very bad. We don't want to ever go back to that behavior.

    So as the money supply continues to contract over the next 12-24 months, please tell me in your opinion where consumers and businesses are going to get the money to spend/invest that is mandatory for an upswing in the economy?

    I'm looking forward to your response BF. We may not agree, but I do have a lot of respect for the insights you've given this board. I know I'm not rigtht either. I'm just guessing like everyone else.
    Last edited: Aug 12, 2008
  12. BelichickFan

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    #24 Jersey

    I agree with most of what you said. All I am trying to say is that the known bubbles which are bursting have already been factored into the stock market - not that the stock market is the be all and end all but it is important to a lot of people.

    When people post threads about Alt A mortgages going the way of Subprime - the market knows that - mrmortgage isn't the only one. The market was caught with it's pants down on subprime but part of the 20% drop we had was the factoring in of the unknown of Alt A and Prime mortgages along with everything else (car loans, credit cards, etc). That's why we had such precipitous drops, the fear of the unknown.

    Maybe maverick4 is correct and this is just the beginning - more likely, though, all your negative concepts have been priced in at this point.

    Regarding your specific questions about where the money will come from to spend, I'm not a micro economist so I can't say for sure but the United States is still the world leader in technology and I am extremely confident that will continue to fuel the engine whether it's companies like Apple or totally new technology on alternative energy, etc.
  13. PatriotsReign

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    I will admit that you know more about the stock market than I do. But I can't help but think that those who priced in all the anticipated factors probably will miss on more than one of these factors. So, if they priced in an estimated contraction of the money supply or unemployment, in all likelihood, they won't be any more accurate than any other major economist.

    Let's admit, wall street economists aren't any more reliable than any others. So we'll agree to disagree and time will tell. I am fascinated by economic modelling and forecasting, so I find this all extremely interesting. Which ever way it falls is ok by me. Booms & busts are both facts of life to me.

    If you go by those who say we are not in a recession, how can anyone say we've bottomed out?
  14. PatriotsReign

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    I should have added this yesterday BF...I have another question for you. You have said more than once "The market knows that" and "The market has factored all those things in" which assumes "The market" somehow knows all. That there is never a chance they missed something or failed to see factor x causing result y. I can't buy that BF.

    The reality is, the market must factor in a range of potential "what if's" that range from various world economies (China & Japan), to financial markets, inflation & unemployment. In the end (and this is where I don't know the answer), I'm guessing market experts factor in a projected "worst case" market bottom.

    Let's just look at China as one example. Their economy has been vital to financing US debt. Imagine that, China is quickly moving to become the #1 lender to this country. How can they do that? Because their economy is 90% dependent upon US consumer demand. What if China's economy begins to crumble (which it has begun to)?

    http://en.wikipedia.org/wiki/United_States_public_debt

    My question is very simple, what if their worst case scenario is far off the mark? Why do you put so much trust in the market's ability to "factor in" or "price in" these factors as if it is truth?
    Last edited: Aug 13, 2008
  15. BelichickFan

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    #24 Jersey

    I just meant that most of the time it's factored and priced in to a good probability of what will happen. Sometimes, like Subprime, they miss it and we saw what happens. But when mrmortgage talks about the Alt A upcoming crisis, a reasonable worst case has been priced in as we/they know about the mortgage mess. Has the worst case been priced in ? No. But the most likely case has - with a lean towards the worst given the disaster we just went through. It's a leading INDICATOR not a leading absolute certainty.
  16. PatriotsReign

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    Ok, that's very reasonalble and very interesting. I wish we knew more about this process and the models they use. I'm sure it would blow me away.

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