The recession hasn't been delayed by a year or months. If people have cried wolf, then that's their ignorance. A recession in 2004 or even now would have been premature given the nature of the business cycle. The fact that we got a soft patch was testimony as to how weak the current "recovery" is.
But by the end of this year, a recession or sharp slowdown is a possibility, especially if one looks at what is occurring in other "Anglo" countries. The length of the average 20th century expansion was approximately 4 years (the 90's was an outlier). Also remember, the market discounts the future so if the thesis is correct, we should be at or near the top given this expansion started in 2002.
Technically the market doesn't look too good as the post-election rally was built on shaky ground according to widely followed technical indicators. Add in the continuing breakdown of the cyclicals (I'd add semiconductors to that as well) and you will see that something is definitely going on. Plus the yield curve continues to flatten and the long-end near 52 highs.
Regarding your cost/benefit analysis of a hybrid, I can't agree more. That's precisely why oil can go a lot higher because demand patterns won't change until much higher price points. The most important things in this country are:
1) Your Car
2) a nice TV
3) Computer (for some)
4) Whether you own or rent
If you heard something back in 1979, that's great. And people once heard the world was flat, who cares? The fact is that as a non-renewable energy source, oil supply will eventually run out. When that happens is anybody's guess, but currently demand growth is far outstripping supply growth and that's a fact. It takes years and years for exploration to come to fruition. It takes years and years for alternative energies to become competitive. Both have been underinvested in because nobody believed the oil rally was for real. In 1979, in India and China, the power was out 1/2 the day. You now have 2 billion people who won't tolerate that and want the same things you and me take for granted.
<<Debt service is still within historical levels unless interest rates rise sharply from these levels>>
I don't believe it for a second. Maybe you're using some median or average statistics that are not representative of the bifurcation that has occurred in the U.S. The fact is that a much larger proportion of society is "at risk" than ever before. Geez, anybody who steps outside or has 2 friends can see it. Furthermore, you yourself admit that a rise in interest rates would be painful which implies that many people are currently doing some type of balancing act in their personal finances. But what does it matter, the bulls will tell you that all the debt is at fixed rates so interest rates are irrelavant. But what neither side understands is that the actual interest rate is meaningless because higher interest rates would imply higher inflation - that would be fantastic for debtors. Rather, it is the availability of credit that matters; the correlation between inflation and credit availability is not strong, but the correlation between deflation and credit conditions certainly is. Deflation is a manifestation of high absolute debt levels - not debt-service.
Regarding guns and ammo, I agree (to a point). As far as I am concerned, gold is silly "investment" unless one believes inflation or armageddon is imminent, the latter of which too many are willing to predict! |
