Fed sees recovery next year

Dave Siciliano

Dave Siciliano

Final Approach
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Dave Siciliano
Fed minutes released today say little chance of economic recover until next year according to this news release.

Best,

Dave

WASHINGTON (AFP) – The Federal Reserve has lowered its outlook on the recession-mired US economy, seeing no glint of recovery until next year, according to minutes of a central bank meeting released Wednesday.

Despite massive interventions by the Fed and other government bodies to jump-start the moribund economy and unblock tight credit, policymakers at a March meeting viewed grimmer projections than those made two months earlier.

http://tinyurl.com/d4jhos
 
Unemployment will continue to rise to over 12% in the next 18 months triggering a cascading effect that will only lead to less consumer spending, and further decline in our economy. We haven't even bottomed out and the fedfools are talking about recovery? Saddled with the crushing government debt now being wasted, I'm not seeing any significant recovery for the next 5-8 years, and I'm being optimistic. It is entirely possible, if fact probable we may never recover.

The last 12 years of exuberant and irrational economic growth was fuel by consumer spending due to easy credit which (in most cases) was undeserved. Fueled by the skyrocketing real estate market (caused by a flood of foreign money into US real estate backed securities, which caused cheap credit) homeowners foolishly used their homes as ATM's with no real hope of repayment. Refinancing and pulling out cash for a new boat, motorcycle, car, whatever, ect. This is what fueled the economy and now the bills are due, and a larger percentage of people cannot possibly repay. More foreclosures, more bankruptcies, more business write-offs, leading to more layoffs, forclosures, and BKs.

I wonder how many of the jobs the 25 million illegals aliens have Americans would like to have now?.... or in 1,2,3,4,5 years.

What can stop this cycle? Stay tuned! :ihih: I don 't want to burden you any more tonight.:no:

Have a nice evening! :cornut:
 
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Is that the same bunch that couldn't figure out mark to market impact?
Dave Siciliano said:
Fed minutes released today say little chance of economic recover until next year according to this news release.

Best,

Dave

WASHINGTON (AFP) – The Federal Reserve has lowered its outlook on the recession-mired US economy, seeing no glint of recovery until next year, according to minutes of a central bank meeting released Wednesday.

Despite massive interventions by the Fed and other government bodies to jump-start the moribund economy and unblock tight credit, policymakers at a March meeting viewed grimmer projections than those made two months earlier.

http://tinyurl.com/d4jhos
Click to expand...
 
Does this mean the next hammer to fall will be skyrocketing inflation?
(should we buy gold/euros or?!)
 
Let'sgoflying! said:
Does this mean the next hammer to fall will be skyrocketing inflation?
(should we buy gold/euros or?!)
Click to expand...

Sorry, same dynamic affects the Euro market, I'm afraid.
 
Dave Siciliano said:
Fed minutes released today say little chance of economic recover until next year according to this news release.

Best,

Dave

WASHINGTON (AFP) – The Federal Reserve has lowered its outlook on the recession-mired US economy, seeing no glint of recovery until next year, according to minutes of a central bank meeting released Wednesday.

Despite massive interventions by the Fed and other government bodies to jump-start the moribund economy and unblock tight credit, policymakers at a March meeting viewed grimmer projections than those made two months earlier.

http://tinyurl.com/d4jhos
Click to expand...

Dave,

I'm assuming this was released after hours? There's a lot of green on my stock report for today - In fact, it's all green except the total. :rofl: I guess it'll all be red tomorrow.
 
The mark-to-market nonsense is a canard.

DaveT, that kind of inflation is what I am worried about. Not now, but with the wheelbarrow-fulls of money being pumped out, it's gotta come later.
 
rpadula said:
DaveT, that kind of inflation is what I am worried about. Not now, but with the wheelbarrow-fulls of money being pumped out, it's gotta come later.
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I can't believe the media (which I partake of at least) is not talking about it more. Does anyone else think it a reasonable probability? Is the gov. not printing money wildly to fund all these crazy things??

I am a believer in "If you don't learn from past mistakes, you are bound to repeat them". Think it applies?

http://en.wikipedia.org/wiki/Inflation
http://en.wikipedia.org/wiki/The_great_depression
 
Let'sgoflying! said:
Does this mean the next hammer to fall will be skyrocketing inflation?
(should we buy gold/euros or?!)
Click to expand...

There is a theory that hyper inflation might not be all that probable. What we lost in the stockmarket was in a sence being replaced by the government with it's (wastefull porkbarrel) spending. There will be inflation, but not like we saw in the 80's.

But real estate that can pay for itself. People must live somewhere and with all the foreclosures rentals are in demand again, depending on where you live. Someone else is paying off the mortgage, it should only go up in value from here, you can depreciate it, and if inflation hits it will be worth more. Do not refinance it and oull cash out 15 years from now. :wink2:

JMHO
 
Kent: Futures look strong this morning. A lot of analysts are talking about early indicators of recovery. The stock market tries to look pretty far forward. One thing I've learned is not to fight it.

We'll see if this rally holds. Lots of issues that have to be worked out before there is a positive turn. I think GDP will be pretty flat next year. Maybe a technical recovery; that is positive, but not the kind of strong economy we want.

Hard for me to be optimistic until banks have better balance sheets and are lending again; home inventories are down and jobs are more stable and jobless numbers get better. If you follow dry goods shipments, they are dismal; no need to ship if no one is buying. Some leading indicators seem to be stabilizing--or at least not getting worse.

As to inflation, you bet, it's coming. We've got to monetize all this debt. Just a matter of when and how bad, but not until the above things happen. With almost zero cost of funds, banks have huge margins borrowing at short rates and lending for longer periods. Balance sheets will improve; just a matter of how long it takes. Those with huge portfolios of toxic assets will have more to work through. Great time to start a bank or purchase a clean one.

Best,

Dave
 
Wells Fargo who recently acquired Wachovia announced it is projecting a record $3 Billion profit for Q1.

http://finance.yahoo.com/news/Wells-Fargo-projects-record-3-apf-14890409.html


Maybe they should pay some or all of the TARP money back.

As long as Obama is stopped from raising taxes including the Global Warming Tax (Cap & Trade) he wants to enact, we may just get out of this one sooner than expected.
 
Dave Siciliano said:
Kent: Futures look strong this morning...
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...on a big, positive surprise (earnings!) out of Wells Fargo. But you're right Dave, we're gonna need a lot more evidence that it's a turn vs. a one-off event. Of course, when you have the evidence, it would be "too late" to buy. :ihih:

Dave Siciliano said:
Hard for me to be optimistic until banks have better balance sheets and are lending again; home inventories are down and jobs are more stable and jobless numbers get better. If you follow dry goods shipments, they are dismal; no need to ship if no one is buying. Some leading indicators seem to be stabilizing--or at least not getting worse.
Click to expand...

Seen a report recently saying things still are getting worse, albeit much more slowly.
 
Dave Siciliano said:
As to inflation, you bet, it's coming. We've got to monetize all this debt. Just a matter of when and how bad, but not until the above things happen. With almost zero cost of funds, banks have huge margins borrowing at short rates and lending for longer periods. Balance sheets will improve; just a matter of how long it takes. Those with huge portfolios of toxic assets will have more to work through. Great time to start a bank or purchase a clean one.

Best,

Dave
Click to expand...

Can't say I can disagree with your assessment. I have not really studied the "no inflation theory". It makes sense in that the debt replaced the losses, but it will have to be paid back saddling us with higher taxes that cannot be lowered due to it being foreign debt. It must be repaid. Higher interest rates are a given as the Feds and us fight for the same dollar. Interesting to watch anyway.

Toxic assests, IMHO is one of the keys to "leveling off the economic decline" the toxic assets and the current administration does not seem to understand that, and they have wasted a trillion $ trying to bailout their buddies. They need to be removed from the balance sheets ASAP into Fed "holding trusts" and sold to private investors ASAP.

Another and bigger "key" is the return of trust and confidence in our system. Right now we have none. The Feds do not seem to understand the public is shell shocked from the bailouts, bonuses, and scandels by public officials. There is a growing sentiment in this country that the government will take care of everything and that scares the hell out of me. The SEC auditied Madoff several times and did not find it was a ponzzi scheme. What other items have they missed? Fanny & Freddie lead us into this mess and they just gave they "top" employees performance bonuses? :incazzato:
 
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If you look back to the Great Depression; it was not a lack of supply, but a lack of demand during the lows. Right now, that's what I'm seeing. Little lending, job loss and loss of confidence reduces demand as does increasing savings.

When we borrowed so much, we consumed into the future. Now, we are paying that back and restricting consumption. Until there is increased consumption, it will be very difficult to raise prices; thus, have inflation.

I do agree with you, it will come, but we will have to greatly increase demand. Wages will not increase until employment is much higher. If one studies what happened in Japan in the 90s, they will find that a decade was spent reducing and paying off the high levels of debt that were incurred in the late 80s. Of the companies that were making money from operations, much of that went to pay down debt rather than for new, productive things. GDP was flat for years.

This isn't the first time we've monetized debt. Unfortunately, now that it's an accepted practice, we are using it more and more and just accept the fact that it's the manner in which things will be fixed. So, I'm completely on board as far as future inflation; we just have to get demand and employment back up until that will happen.

Look to natural resources: copper, steel, etc. Those prices have come way down. There now seems to be evidence they have bottomed and are stabilizing or beginning to climb again, but demand its way below the levels it will take to cause substantial price increases that lead to inflationary pressures.

BTW, still some substantial job losses to come.

Best,

Dave
 
I did not sleep at a Holiday Inn last night, nor do I profess to have a crystal ball, but my job gives me a lot of insight into which companies are tottering on the precipice of bankruptcy, public and non-public, as well as early indicators of profitability (or lack there of). I see no signs of a recovery except in the minds of those buying stocks and the governments' propaganda.

P.S. There are a lot of banks trying to repay TARP funds but the government won't let them. It doesn't want to give up control!
 
Barry: you don't have to be an MBA to observe what's actually going on in the market; actually, it may be a handicap. My biggest criticism of the Wall Street gurus, is they are completely out of touch with what's actually going on in the field. I watched one after the other call the bottom time after time in the housing stocks as my field observations saw nothing to indicate a bottom. Traffic was down, cancellations were up and promotions were increasing the entire time they were calling a bottom. You should look at a graph of D.R. Horton and when analysts said to buy and sell the stock. You would have made much more money doing the opposite of what they said than by following their advise. Very few of them are good in a down market: all they seem to think about (with a few exceptions) are what's going up.

Couple other shoes to drop: commercial RE and credit card debt. I've attached a CRE article. There is a huge amount of debt coming due that needs to be refinanced. Much of this had been securitized in the past; that market no longer exists. Pension funds and insurance companies also financed a lot of that in the past; anyone want to believe they will do a lot of that in the near future? So where will these folks go? Office properties are losing tenants and dropping rents when they need to re-finance--not good. Retailers are seeing a flight to lower cost providers; tenants are renegotiating rents if still in business. Some credit tenants have filed in bankruptcy court. Simon Properties, for instance has $19 billion in debt. They may get things worked out, but it's not going to be a fun time.

http://futronomics.blogspot.com/2009/04/cre-will-lead-next-round-of-panic.html

I just moved a subdivision loan that was less than 50% loan-to-value; class A location; three original builders but slower lot sales. I had to go to 31 banks to finally place the loan. Had to put up a third of the amount I was borrowing to make everyone happy.

Best,

Dave
 
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Dave, excellent thread, and excellent posts. Nice to see "No Spin" discussion about facts rather than play the "blame game". There is enough blame to go around, and that won't get us anywhere.
 
Dave Siciliano said:
Couple other shoes to drop: commercial RE and credit card debt. I've attached a CRE article. There is a huge amount of debt coming due that needs to be refinanced. Much of this had been securitized in the past; that market no longer exists. Pension funds and insurance companies also financed a lot of that in the past; anyone want to believe they will do a lot of that in the near future? So where will these folks go? Office properties are losing tenants and dropping rents when they need to re-finance--not good. Retailers are seeing a flight to lower cost providers; tenants are renegotiating rents if still in business. Some credit tenants have filed in bankruptcy court. Simon Properties, for instance has $19 billion in debt. They may get things worked out, but it's not going to be a fun time.
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Sounds like what happened to GGP.

Dave, are you familiar with Calculated Risk blog? One of my faves. They've been all over the CRE shoe-drop coming.

They often link to Jim the Realtor, who was just named "The Hunter S. Thompson" of real estate by the LA Times. His videos are hilarious!:rofl:
 
Thanks Rich. I enjoy the info you provide. I read so much, it's difficult to add more, but I will try to look at this one.

Best,

Dave
 
rpadula said:
The mark-to-market nonsense is a canard.
...
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You mean banks not being able to say they "assets" they own that nobody wants to buy are worth $billions is not the problem? If they can't keep making stuff up, ya know, they might actually not have reserves and stuff!
 
Dave Siciliano said:
Kent: Futures look strong this morning. A lot of analysts are talking about early indicators of recovery.
Click to expand...

Yup, lotsa green today too. Amazing - it seems the market generally has an instant, negative reaction to any tiny bit of bad news.
 
mikea said:
You mean banks not being able to say they "assets" they own that nobody wants to buy are worth $billions is not the problem? If they can't keep making stuff up, ya know, they might actually not have reserves and stuff!
Click to expand...

No, I mean in the sense that changing the m-t-m rules was supposed to give the banks "relief," whatever that means, and give their common stock a chance to go up. It doesn't change the fact that investors have to look at their cash flows also, and not just this junk.

David Merkel says it better than I can. (and again here on what investors might do if assets are not marked as impaired).
 
Another reason I am pessimistic about our recovery prospects is shown in a recent Rasmussen telephone poll. Only 53% of adult Americans believes capitalism is better than socialism. 20% said socialism is better than capitalism and 27% had no clue. Capitalism brought us to where we are were just a few years ago, socialism has and will continue to mire us in mediocrity and European Union style economic malaise as we become slaves to our debt and dependency on government for every day life. Without capitalism there is little incentive to succeed, it will be taken from you either by high taxes, or a oppressive burgeoning governmental bureaucracy (local, state & federal) created to regulate all aspects of our lives.

As more and more employees join the "state" as workers more and more socialistic policies are put into place to govern even more, so the socialists hold onto power by controlling the workforce and industies. "Vote for me and I won't cut your jobs, SS benifits, or cut your wages where you work."

http://www.nydailynews.com/news/pol...socialism_to_capitalism_a_new_poll_finds.html

Cut & paste from the above article. The poll was taken this Tuesday.
"According to the poll, adults over 40 strongly favor capitalism, while adults under 30 are essentially evenly divided."

I am afraid the best years of this experiment we called USA are behind us.
 
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Geico266 said:
Capitalism brought us to where we are were just a few years ago...
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Uhhh...it's pretty much brought us to the here and now, where the profits were privatized, but the losses are being socialized! So, I'm not too awfully surprised at the poll results, an iffy polling source notwithstanding.

...socialism has and will continue to mire us in mediocrity and European Union style economic malaise as we become slaves to our debt and dependency on government for every day life. Without capitalism there is little incentive to succeed, it will be taken from you either by high taxes, or a oppressive burgeoning governmental bureaucracy (local, state & federal) created to regulate all aspects of our lives.
Click to expand...

I might be a teensy bit concerned, if there were any evidence at all of this happening.

As more and more employees join the "state" as workers more and more socialistic policies are put into place to govern even more, so the socialists hold onto power by controlling the workforce and industies. "Vote for me and I won't cut your jobs, SS benifits, or cut your wages where you work."
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Printed on toilet paper, this statment would have some value...as it is, not so much.


Trapper John
 
I think I voiced my opinion of the changes in M-T-M in another post: like redoing the basement with new paint and carpet, but not fixing the plumbing leak that made the change necessary.

Best,

Dave
 
As in all things simplistic extremes rarely represent reality or function as good ideas. Sorry Geico. When unbridled capitolism ruled there was economic turmoil that was very bad for a lot of people, as it created frequent bubbles and crashes. What brought us to the pinnacle or our success was tightly regulated capitolism, which in wise hands has worked marvelously. The problem is the hands became less wise (under the mantra of "less regulation is always better") and screwed the pooch pretty fiercely.
 
Sigh... It's really a shame that folks would tear down conversations like this one, simply because they lack the requisite rhetorical and intellectual tools to handle discussions in the SZ. :frown2:
 
I've deleted my messages in this thread. After consideration, I've come to believe that the complaints from one side of the discussion about belonging in the SZ would have borne fruit. Of course, their own messages are pure as the driven snow and would never be dragged to the SZ, oh no.

Bah.
 
steingar said:
As in all things simplistic extremes rarely represent reality or function as good ideas.
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+1

jmaynard said:
I've deleted my messages in this thread. After consideration, I've come to believe that the complaints from one side of the discussion about belonging in the SZ would have borne fruit. Of course, their own messages are pure as the driven snow and would never be dragged to the SZ, oh no.
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Oh, I guess that's why I couldn't quote your post in order to respond to it. I was going to say that what we need is more nuance and less ideology.
 
ReverendSlappy said:
Sigh... It's really a shame that folks would tear down conversations like this one, simply because they lack the requisite rhetorical and intellectual tools to handle discussions in the SZ. :frown2:
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Well, the fart smell will eventually dissipate, so...

From the blog that Dave liked to:

CRE has always been the domain of the little fish. For this reason, total bank failures in the 80's/early 90's was far higher than even now. See chart below:



As these CRE delinquencies rise, we can expect to see the failure of many more small banks and thrifts. Whether the number of these failures will surpass those of the last bout of failures, I do not know. But I will go out on a limb to say that the overall size of the institutions and thus damage to the FDIC will be far greater.

I can't help but wonder if we're about to set ourselves up for another problem, with the exposure smaller banks have to CRE loans. What's the potential FDIC exposure for these smaller banks, and what's our plan to backstop FDIC insurance if we get another wave of failures similar to the S&L fiasco?


Trapper John
 
jmaynard said:
I've deleted my messages in this thread. After consideration, I've come to believe that the complaints from one side of the discussion about belonging in the SZ would have borne fruit. Of course, their own messages are pure as the driven snow and would never be dragged to the SZ, oh no.

Bah.
Click to expand...

:rolleyes:
 
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