The U.S. economy is in the midst of the worst part of the recession, according to economists polled in the latest Wall Street Journal survey. WSJ’s Kelsey Hubbard sits down with colleague Phil Izzo to discuss the outlook.
via WSJ
"My formula for success is rise early, work late and strike oil." —John Paul Getty
Consumer Credit outstanding fell $14.8b in Sept seasonally adjusted, almost $5b more than expected and marks the 11th month in the past 12 of declines. At $2.456T outstanding, it is 4.9% below the record high in July '08. After a flat reading in Aug, (didn't fall b/c of the CARS program), non revolving debt outstanding fell by $4.9B. Revolving (mostly credit cards) balances outstanding fell by $9.9B. To fully put into perspective today's data, look at the current level of consumer credit (doesn't include mortgages, the biggest chunk of consumer credit) relative to GDP. As of Q3, it totaled 17.2%...
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November 13th, 2008 at 5:37 pm
Well, we know what polls of economists are worth
This type of poll is probably part of the reason for the big rally. It’ll take em a few months to figure out they’re wrong.
November 13th, 2008 at 5:49 pm
Wife: Honey, why was the stock market up so much today? Was the news good?
Husband: Well, here take a look.
Jobless Rolls in U.S. Rise to 25-Year High, Exports Plunge on Global Slump
Foreclosure rates up 25 percent year-over-year Thu Nov 13, 8:12 AM ET
OECD says developed world already in recession Thu Nov 13, 1:13 PM ET
US Steel lays off 677 workers in US, Canada 43 minutes ago
PITTSBURGH – United States Steel Corp. said Thursday it is laying off 677 workers in the United States and Canada because of lower demand for steel amid the economic downturn.
Jobless claims surge while trade deficit narrows Thu Nov 13, 2:06 PM ET
WASHINGTON – Applications for unemployment benefits soared to the highest level since just after the Sept. 11, 2001, terrorist attacks while the trade deficit shrank more than expected as demand for imports plunged, further evidence of the struggling U.S. economy.
Bad economy puts post office $2.8 billion in red Thu Nov 13, 11:59 AM ET
WASHINGTON – The ailing economy caused a big drop in mail, leaving the post office $2.8 billion in the red.
Bush: Intervention not “cure-all” for crisis Thu Nov 13, 11:57 AM ET
Las Vegas Sands to fire up to 11,000 Macau workers Thu Nov 13, 8:49 AM ET
Wife: So that’s why the stock market went up 6%?
Husband: Sure. That’s the way it works; you gotta be a contrarian. When things are the worst that’s when you gotta buy. So I think we should buy stocks again right away. This must be the bottom.
Wife: But how do we know this is the worst? Didn’t Soros say just today that a deep recession was inevitable? Inevitable means it’s still coming, not that it’s already here; doesn’t it? And didn’t he say a depression was possible?
Husband: What does he know; he’s too old now and probably has dementia.
We got to get in now while stocks are cheap! If we wait we will be priced out of the market in no time! Just like when we tried to buy the house in 2005 and got outbid. You gotta act fast in these markets to make money!
Wife: I don’t know. It looked like a buying panic today to me. And that means it was driven by greed. I don’t think it will be the real bottom until all the greed has turned into despair and utter revulsion of the stock market. Then I will be ready to buy again.
Husband: Oh that’s so 20th Century! Things happen faster now! I’m tellin ya, this is it. If we don’t get in now were gonna miss the big money!
November 13th, 2008 at 5:53 pm
If these guys had no clue that we were entering into or were already in a recession just a few months ago, what is the point in asking them how far along in their misguided delusions they are?
November 13th, 2008 at 6:21 pm
Here’s something to consider. I think everyone on this blog either trades or invests long short or otherwise. So, if everyone here has this extra money how bad is it really?
How bad is it really when the poor who shop at Wal-mart and the discounters have same store sales going up?
It’s not that bad.
Consider then every fund on TV that says they are in cash have now totally screwed themselves against any inflation.
Consider the PIMCO bond fund which is 82% in cash. Pardon my French but who the fuck taught this dumbass how to run divsersified money? Anyone now in that fund will totally lock themselves out of ANY rebound. Unless of course the end of the world is coming in which case the $s in cash ain’t worth jack shit either.
http://finance.yahoo.com/q/hl?s=PTTAX
November 13th, 2008 at 6:25 pm
“How bad is it really when the poor who shop at Wal-mart and the discounters have same store sales going up?
It’s not that bad.”
Yet.
And that’s why this is probably not the bottom, IMO.
November 13th, 2008 at 6:38 pm
Whoever ain’t broke now when trillions of $’s came out of the market most likely will not be broke.
Yes banks will continue to have problems and so will any other industry with major competition broke auto companies . But if the US can withstand a terrorist attack and still moves forward without going into depression it shows how difficult it is to get that kind of event.
If the market continues have problems the gov’ts all over the world will continue interviening to jack the shorts. How fun was it for Ackman the day he woke up and found out it was illegal to short banks.
Austrailia had a bill to prevent naking shorting in their entire market. I don’t know whether it was passed or not. I don’t believe it’s good to bet against the government. They are way to powerful and can change the game on you at any time and if you are betting against the market and the majority of the public you are going to get creamed eventually.
November 13th, 2008 at 6:53 pm
Yeah, they have already creamed me – several times. And it pisses me off to no end that I saw this coming since early 2007 and still lost my ass this year on the short side. It was the volatility, and fear due to not being able to contact by broker when volume spiked that caused me to put in market orders and get fleeced big time. I had no idea the volatility could be so bad.
I thought this recession would be my ticket to riches like Joe Kennedy in the GD, but it was too tough for me. I am just trying to recoup some losses at this point, and I am fully aware that is not going to be easy. I just keep thinking the government will ultimately fail. Even FDR needed WW2 to really get the economy going again, so why should we think it will be any different this time?
I feel confident we have not seen the bottom in the economy nor the stock market, but whether or not I will be able to make a net profit on it still is in doubt.
Good luck to all, long and short.
November 13th, 2008 at 6:56 pm
It’s not that bad? With Circuit City bankrupt, Bets Buy still warned for the holiday season…IT IS UNBELIEVABLY BAD.
November 13th, 2008 at 7:02 pm
KJ the only time I’ve ever lost money is being short. I had the same trouble as you. What I learned to do is sit and wait until it looks terrible. Then start buying and stick with it. Eventually some tid bit of news causes shorts to panic and off we go. I shorted Phelps Dodge and dumbass FCX bought it at a 30% premium overnight. That sucked. Luckily I only had $1k position in PD and only lost $300. That was a powerful lesson. When I did short I only shorted what I could afford to triple. If you can’t afford it to triple you don’t have enough capital to short.
I’ve found the best way to be short is selling covered calls. Whenever you sell a covered call NEVER buy it back for a higher price, no matter what. Eventually, this will make you a crap load of money. Yes, you can sell an option and then the share price tanks and you’ve lost more than you had to begin with and you sell the option again and all of a sudden the option holder makes out with a huge gain but those are rare. If you get exercised against you get exercised against. Keep the volatility in mind of what is likely rebound in panic and what is not.
I haven’t shorted in 6 months now and the only time I’ve done better is 2006 (before I started shorting). I did make some money in EEV but I quickly realized with the volatility it would lose money over time. The other problem with being short is you can’t tell where the friggin bottom is going to be.
November 13th, 2008 at 7:10 pm
Steve Barry, Best Buys major problem is that CC went bankrupt and will be liquidating at lower prices. I believe thats a Best Buy problem, not a market problem. I’ll be sure to be out again this weekend at my mall and see what people are buying. I’ll also check my Best Buy and see what’s happening.
November 13th, 2008 at 7:22 pm
JB (Dennis Kneale?) I’ve had a couple but gimme a break. Best Buy never had a problem with CC. It’s only saving grace is that gas has come down.
Easy money is GONE! Tell me, what replaces it?? Without a replacement,..BB eats shit just like CC.
November 13th, 2008 at 7:36 pm
What is Nordstrom’s problem? Cut 4Q guidance to .35-.45 vs. street consensus of .70! That is so troubling…the high end consumer won’t even be spending.
November 13th, 2008 at 7:39 pm
Best Buy’s problem is that everything they sell I can buy cheaper online if I don’t mind waiting a day or two.
When times are good you don’t mind paying a few extra bucks for having it NOW. When times are not so good, if you buy at all you’re much more prepared to shop around online for a deep discount.
Will be very interesting to see numbers for Amazon compared to retail over the holiday period. Not saying it won’t still be down, but I suspect it will be down less than your local mall.
November 13th, 2008 at 11:14 pm
Steve Barry:
Some of the high ends like Nieman Marcus had sales drops of 25% already.
KJ Foehr:
Even though this has been a great opportunity to be short, you have to accept that markets don’t go smoothly up and definitely don’t go smoothly down. I keep harping on it, but find a chart of the DJ from Sept. 1929 on for several years. Lots of spikes up an even a genuine 50% bear market rally starting in late 1929. Unless you are like Steve with almost an obsession for sitting on QID, you will risk getting whipsawed. I’ve experienced it.
November 14th, 2008 at 5:23 am
Mike nailed it…this market can move 1000 points in a day…go with your long-term view and stick with it.
I can boil my view down to one chart which shows Total Credit as % of GDP is so wacked that we would be lucky if the worst that happened was a severe recession. If we have the deflationary debt crash I expect, stay short now…when NOBODY even cares about the market anymore (one sign would be Cramer getting canned) buy gold miners for the re-flation.
http://www.comstockfunds.com/files/NLPP00000/292.pdf