Hello mishedlo, <<MOAB>>
Message 17825533
August 2nd, 2002
"... I am mentally prepared for a 'bottoming process' lasting not just simply a moment, as in jiffy days, but an agonizingly long age of quarters making up years (until 2004 mid-year, at least, if we are lucky), with plenty more of 400-500 point up days on Mondays, and 50-200 down days the rest of the week. This is how irrational euphoria is typically ground down into unfounded fear.
Folks used to say the stock market is a great predictor of the economy, 6-12 months ahead. Well, the stock market is seeing the horror that waits in our future, not the terror that we have already left behind.
The bankrupt companies and laid-off individuals will now join Argentina, Brazil, Euroland credit crunch, and WAT-WOT-whatnot to work on and grind away at the banking system. The resultant rise in interest rate, and the weak salaries market (jobs paying less generous compensation) will burst the housing bubble, and scare the daylight out of still courageous consumers, changing them into savers, finally, hopefully fast, else we run into the demographic wall that ACF Mike talked about (7 years is not a long time away).
Once we have bottomed, the process of ‘reality conditioning’ and ‘savings re-education’ will commence, when stocks do not do better than bonds, and savings account outperform the market.
Folks also used to say the US economy is like a great big aircraft carrier or oil tanker, difficult to change the momentum (speed, direction). This bit of folksy wisdom may turn out to be spot-on as well, especially given that the US economy is a locomotive for the ROW economies, and when it weakens, so goes the rest, eventually cycling back to the US economy again, in a feedback process that appears to be working.
Places like Thailand and Argentina, places of lesser momentum, go down quickly and recover 'fast', because the economies are small, the stock markets are tiny, and the counter-balancing world is huge. Places like Thailand and Argentina bottom in about a year, reacting quickly to withdraw of international capital, and then stay down for about 3 years, before showing signs of any vitality."
If the US is indeed like a super tanker, then it is difficult to steer in tight quarters, at the shallows, and while difficult to sink, is also difficult to get off the sand bar unless the tide is coming in, which it is not.
Argentina will recover before the US will.
Here are my early chitchats on recovery:0)
Message 16213753
August 15th, 2001
"Hi Ron, this post is in response to your post here ...
>>the US will feel the pain less than our competitors who have relied upon US markets for so long to subsidize their economy. Thus, we'll be the first to recover<<
We should also consider the possibility that it is the US competitors who have been subsidizing the US economy and that given the relative height of valuations of both assets and currency, the fall may be less bearable in the USD denominated space.
We should also consider the possibility of sudden shock of concurrent asset value depreciation and currency devaluation, and the resultant fear-induced pullout of credit by the offshore investors (inclusive of the US seeded and Japan funded hedge funds), causing a severe contraction of liquidity, thus simultaneously but impossibly requiring the FED to lower rate and increase rate at the same time."
The last mentioned impossibilty is a natural consequence of a scheme of monitoring and control in an economy where one can have increasing unemployment with increase in jobs, increasing productivity and decrease in profit, no way to fund retirement and yes way in buying another SUV.
Chugs, Jay |
