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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: AC Flyer who wrote (14618)	2/8/2002 10:48:51 AM
From: Mike M2	Read Replies (2) \| Respond to of 74559

AC, the Austrians would say the inflation is in the financial markets. mike

To: AC Flyer who wrote (14618)	2/8/2002 11:12:16 AM
From: Jim Willie CB	Respond to of 74559

I am not superbear, just supersuspicious, check this... from John Mauldin (below) of Millennium Wave, he quotes Morgan Stanley Witter's Roach my comments: the gas tank might be close to empty when this so-called recovery is on track, as you say what is the fuel for such a recovery, with debt worsening? I believe an aberrant inflation burst is inevitable, even while the economy struggles for traction inflation is nowhere to be seen, right? maybe the gold spurt owes itself entirely to currency instability (e.g. Asia) maybe it signals something more to blithely expect that recovery is on track is folly in my view far far too many warning signals to the contrary consumers will not continue to spend without being joined by businesses consumers are spent out, debt to their ears take away Govt Security spending in Q4, take away Detroit zero-rate car sales in Q4, and we had a wretched negative GDP figure it will be negative after two revisions really not a superbear this recession in no way resembles any since WW2 so why would recovery be timed according to past recoveries? / jim from Mauldin: Consumer spending grew at an annualized 5.4% last quarter. 94% of that gain was in “consumer durables” with 70% of that being in cars. Stephen Roach of Morgan Stanley tells us why to keep the party hats in the closet. “Never before have consumers spent with such a vengeance in the depths of recession. In the 28 quarters of the past six recessions, real consumption growth averaged a scant +0.5%. In only two of those quarters did consumption growth come in at 3.5% or greater -- 2Q60 (+5.1%) and 3Q70 (+3.5%). And those spending bursts borrowed from the immediate future; they were both followed by declines in the subsequent quarter that averaged -1.4%. The lesson is clear: With jobs and income under pressure, paybacks are the norm in the aftermath of mid-recession consumption spurts.” He and other articles noted a few other reasons. Government response to terrorism increased spending by 9.2%. State and local construction grew at an annual rate of 35%. Both are temporary growth spurts. Roach states the case for a double-dip recession as well as anyone: “The double-dip call, however, is not premised solely on a statistical analysis of the national income accounts. There is, in fact, a much deeper meaning to all this. This recession -- especially if it’s now over, as most suspect -- has done next to nothing to purge America of the excesses that built up in the Roaring 1990s. The American consumer remains overly indebted and saving-short; the personal saving rate fell back to 0.5% in 4Q01, and there is good reason to believe it was even lower than that at the end of the quarter. Corporate America continues to be plagued by bloated costs -- from both capacity and workers; the capital spending share of GDP has now fallen from a cycle high of 13.2% in 4Q00 to 11.6% in 4Q01, completing only about half the adjustment that has occurred in past secular downturns in business fixed investment. And America’s current-account deficit remains at about 4% of GDP -- a near-record shortfall and in sharp contrast to the near balance that typically occurs in recession. “Such profound and persistent excesses are simply not conducive to sustained economic recovery, in my view. They leave the US economy bucking powerful headwinds in the aftermath of any inventory-related pop to activity that may be occurring in the current period. In short, I have a hard time believing that a sustained cyclical lift-off can occur with a zero saving rate, a 4% current-account deficit, and a lingering overhang of excess capacity. Given the likelihood of a demand relapse, these lingering structural excesses provide a seemingly classic set-up for a double dip.”