Global Economies Plummet
Wow, some amazing numbers out of America’s biggest trading partners: Mexico fell 21.5%, Japan reported its economy contracted 15.2% (annualized) in Q1, while Germany’s Q1 fell at an annualized 14.4%. Most of this data is the worst since 1970.
And, its not too hard to guess why, according tot he front page of the WSJ:
“All three countries depend on exports to the U.S. But they have nose-dived as U.S. consumers cut back purchases of autos, electronics and other goods mass produced abroad. For the first three months of 2009, U.S. merchandise imports declined about 30% to $352.5 billion compared with the same period a year earlier. Mexico’s ties to the U.S. are particularly strong because of the North American Free Trade Agreement, and Mexican auto production in the first quarter fell 41% from the year before.”
Not quite green shoots . . .
>
Source:
World Economies Plummet
BOB DAVIS
WSJ, May 21, 2009
http://online.wsj.com/article/SB124286297167741263.html
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May 21st, 2009 at 7:11 am
Read the article:
Who’d like to bet that the less Bailed Out economies will be the first to exhibit a strong recovery?
That the more manipulated economies will be the longest healing?
May 21st, 2009 at 7:39 am
but Costco has been packed…….
May 21st, 2009 at 7:45 am
Couple more ideas on volume:
1: NYSE up volume was up above 80% at one point yesterday but closed at just 48.3% which suggests the near term rise may be tired.
2: Total volume contracted on Monday and Tuesday but it expanded into the close yesterday which could spell some selling pressure.
I think some shorts had to have gotten squeezed out of the market the last few days but I still believe a pullback is underway here. It could be that the countertrend rally that started on 3/6 is over, but I still think that is unlikely right now and we still move higher eventually. unless we break yesterday’s high, which I’m seeing as 924.6 I think the SPX pulls back to 873 or further to 841. So my view on SP and DOW remains the same, we are pulling back. What is odd is I don’t get the NAS. In my early attempts at reading waves, it looks like a 5 wave up pattern from the May 13 low on the Nas. AT am I way off here? I think it then points to wave 5 going to 1780-1786
Perhaps this would be the return of the divergence we were seeing earlier in the year when the NAS was outperforming the DOW and SP on a consistent basis. It’s odd though as the tech cycle is coming to an end.
if gold doesn’t correct it should peak around 968 on any st move up
May 21st, 2009 at 7:45 am
I guess, in addition to our dollars and our debt, our other major export has been our unemployment rate. The “new, new normal” is going to be wrenching for all.
May 21st, 2009 at 7:47 am
“but Costco has been packed…….”
should be Bronzed..
BnT,
I will.
May 21st, 2009 at 7:49 am
[...] Jump to Comments -21.5%, -14.4% and -15.2%: On Wednesday, Mexico became the latest country to report a plunge in output. The country’s [...]
May 21st, 2009 at 7:56 am
Ben22, Costco is ‘packed’ because the places where customers shopped previously are empty. In Economics, it’s called ‘substitution’. Others call it downsizing. I suspect most are buying groceries.
About global economies plummeting: True, but I suspect we will all see a disconnect between commodity markets and the use of commodities for a long time. Oil is in a near permanent glut but prices are rising. Copper is rising on a fabled demand in far off China that is supposed to appear later. Nat gas is in glut, but still spends a lot of time above $4 and could jump above it again on a moment’s notice. Old timers who read about commodity markets still believe that the natural conflict between buyers and sellers promotes the best possible price, just as the textbooks say. For some reason, asset inflation doesn’t exist here among those true believers.
The world has an ocean of cash available for investment. Commodities aren’t immune to asset bubbles, providing regulators allow too much cash to chase too few commodities. If this cash were channeled towards real investment and asset bubbles were discouraged via commodities regulation, everyone would be better off.
May 21st, 2009 at 8:02 am
http://www.marketwatch.com/story/us-stock-futures-down-as-sp-cuts-uk-outlook
U.S. stock futures lower as S&P lowers U.K. outlook
“LONDON (MarketWatch) — U.S. stock futures slipped Thursday, as Standard & Poor’s move to lower the credit-rating outlook on Britain raised fears that a downgrade of the U.S. government’s debt rating could be coming soon as well. ”
…Love the Costco snark, Ben22…
May 21st, 2009 at 8:03 am
Hobo,
That was a joke buddy. Aimed at our boy Franklin.
Sorry I didn’t make that more clear.
May 21st, 2009 at 8:05 am
I am sure Ben was meaning that tongue and cheek
May 21st, 2009 at 8:07 am
BAC says they would like to pay back TARP by year end, which was 45b.
How is this possible when the real stress test showed they needed 55b
I seem to recall some other statements like this from them last year:
1. Our dividend is safe, we will not cut it
2. Our capital ratio’s are strong we do not need new capital
3. We are buying Merrill for the crown jewel brokerage unit, we have done our due diligence and the company is a good value.
4. Insert any idiot remarks about CFC
and on and on.
meanwhile Joe Kernan shows us how many pieces of meat and cheese you can stack on a cracker.
May 21st, 2009 at 8:11 am
ben22,
Mucho apologies. Sometimes subtlety just bounces off. As you said, some here believe everything they are told when it’s green shoots oriented and they say things just like that.
May 21st, 2009 at 8:15 am
How is this possible when the real stress test showed they needed 55b
————————–
Because there are other funds available with no strings attached.
May 21st, 2009 at 8:16 am
no problem. it’s early.
May 21st, 2009 at 8:16 am
They’re and their
Than and then
Shoots and chutes.
May 21st, 2009 at 8:17 am
danm,
isn’t that the conclusion. paying back the tarp is all about the compensation issues that came along with it. fees baby fees goes from the worst broker in the trading unit all the way up to the ceo.
now give us your deposits.
May 21st, 2009 at 8:31 am
this globe just can’t get’s it shit together- hmmmm- what other planets look promising-
maybe Macke knows
May 21st, 2009 at 8:41 am
you got it ahab, Macke was channeling the universe – all those high frequency “radio” waves were “shorting” his brain
May 21st, 2009 at 8:44 am
I saw Macke, and I thought he was telling everyone, “This is still worse than you think, dim bulbs….” in his own Mackevellian way…
May 21st, 2009 at 8:50 am
Bruce-
I actually agree with you- he appeared incredibly frustrated- and I actually like the guy- doesn’t mean though that I can’t get a laugh out of it
May 21st, 2009 at 8:58 am
I am not sure of the implications, but it seems that maybe part of our economic decline doesn’t show up in our domestic numbers because so much of “our” production is overseas. The same way that so much of the job creation and then job destruction in construction didn’t show up in the numbers because it was all new immigrants (and many illegal).
It also seems to me that the loss of jobs is moving faster than the decline in GNP. If so, perhaps this is because companies have been waiting for an opportunity to shed jobs in the US. In other words, that what looks like a cyclical change is actually a secular change.
If that is the case, we might remain in a permanent state of high unemployment even after the economy recovers.
Hopefully, I am wrong.
May 21st, 2009 at 9:04 am
Sounds like the Mexicans have experienced a little bit of NAFTA “blowback”
May 21st, 2009 at 9:06 am
I doubt the case of high permanent U-3, but maybe permanently elevated U-6.
May 21st, 2009 at 9:08 am
What was amazing is that there was so little reaction to it here (part of the bottoming process) and oil still went up. Certainly shows “the genius of the marketplace” in action.
Bruce: I suppose you got to learn your trade in the trenches. You can probably remove a bullet quicker than any of your friends :)
Know Jorge Martinzez? I’ve lost track of him since the storm.
May 21st, 2009 at 9:09 am
Don’t worry about Mexico. They have other cash crops they can substitute to boost exports.
Cocaine: the other white meat. Just ask Macke.
May 21st, 2009 at 9:12 am
“… In other words, that what looks like a cyclical change is actually a secular change.
If that is the case, we might remain in a permanent state of high unemployment even after the economy recovers…”–jessica, above.
While I hope that’s incorrect, as well, it’s, actually, a very clear-eyed view of the current scene.
~~
tagyoureit,
care to expound upon your Thesis/ How do you see that occurring?
May 21st, 2009 at 9:13 am
Of course it’s green shoots!
Just remember that disaster is still an upgrade from Armageddon!
HCF
May 21st, 2009 at 9:13 am
I think that the overall picture is still one of weakness. Retail sales down again, unemployment still has a very high velocity, and I think this may be that some companies that were trying to keep people on as part-time, these companies are now deciding they won’t need these folks. Oil is much higher than 3 months ago. Even devoted followers of Keynes realize now where these massive Obama deficits are leading us. It is my opinion that when all is said and done, the national government will have to have a sanity moment as California is now having, and realize that government must shrink. That government the size and scope of present day is just too big for success.
…and my wife still thinks this is a depression…hmmm…..
May 21st, 2009 at 9:16 am
ben22
Good news. No need to worry. Birinyi says it’s nothing but straight up from here!
http://www.bloomberg.com/apps/news?pid=20601087&sid=arkZfe8.A15o&refer=home
Shameless hucksters
May 21st, 2009 at 9:18 am
CNN BREAKING NEWS: The number of people filing first-time unemployment claims fell 12,000 last week to 631,000, according to a new report.
6k higher than expected. Last week was revised from 637k to 643k. *sigh*
May 21st, 2009 at 9:22 am
Bruce in Tn Says:
“It is my opinion that when all is said and done, the national government will have to have a sanity moment as California is now having, and realize that government must shrink. ”
whew- keep dreamin’ Bruce- I’m on your side- but that is not going to happen anytime soon- California cannot create $$$ out of thin air- and once you use that drug- well- you’ll keep going back
May 21st, 2009 at 9:23 am
Transor Z
But claims fell! What’s not to like? The trend is very positive. Buy those banks!
/snark/
May 21st, 2009 at 9:28 am
@jessica http://www.ritholtz.com/blog/2009/05/global-economies-plummet/comment-page-1/#comment-174187
Well put. This is the reality that America’s going to start waking up to. The illusion (delusion) we’ve been living under is being ripped away. Standard of living might have to go back to those awful days of the ’50s /snark/ and we can maybe bring back some of our manufacturing jobs and stop frittering away our money on crap.
Unfortunately we’ll never reform our government programs and the like until the thing actually crashes and burns. We’ll borrow money until there’s no more to be borrowed. Like the proverbial irresponsible brother-in-law.
May 21st, 2009 at 9:29 am
@Jessica:
I’m not sure the unemployment statistics bear out your thesis. Take note of the YoY changes:
http://www.bls.gov/web/cpseea31.pdf
Take a look at Mining, quarrying, and oil and gas extraction, Construction.
Generally, there’s an across-the-board doubling (or higher) in U.
May 21st, 2009 at 9:31 am
QE = Substance D
you are either on it or you never tried it-
May 21st, 2009 at 9:34 am
The first quarter 09 was horrible.
Wow…what passes for news these days!
May 21st, 2009 at 9:37 am
@franklin411: The second won’t be much better, but, hey, at least the banks are all saved so they can pay themselves big bonuses for the year. All is well in banker world, so we all shouldn’t worry. What’s good for Wall Street is good for America, right?
May 21st, 2009 at 9:41 am
@Mannwich
The US and China were the only two major nations to pass a stimulus package early this year. The Europeans were too busy arguing among themselves to address the crisis…They worried that inflation was the real demon, not growth. Germany was at the forefront of that movement.
Well, the time has come for Europe to reap the whirlwind it sowed by listening to German inflation hawks.
May 21st, 2009 at 9:51 am
I have to admit I’m perplexed by Mexico’s contracting GDP…I mean, it’s not like there’s a war on down there or something…
May 21st, 2009 at 9:52 am
You could look at falling real estate prices as part of an inevitable relieving of pressure on the working family. Housing will bottom when it is possible for single-earning families to own a home in a nice neighborhood. We’ll also have a permanently higher U-6 as second-income individuals leave the workplace permanently. Things will cost more, but we’ll be better off for it.
May 21st, 2009 at 9:53 am
Wall Street economists expect factory shutdowns by Chrysler and General Motors Corp. to inflate the initial claims numbers through June. (AP wire story)
http://news.yahoo.com/s/ap/20090521/ap_on_bi_go_ec_fi/us_economy
That’s outrageous spin. I guess if we just back out the auto layoffs and financial layoffs we’ll get closer to the “real” unemployment rate. Are you shitting me?
May 21st, 2009 at 9:55 am
@franklin:
So where’s the war in Japan and Germany? Is this 1941 or something?
HCF
May 21st, 2009 at 9:58 am
@F411
Europe won’t have to worry about ‘bickering’ in the future…
Read my lips…If the Euro collapses below 116…It’s TOAST! It will break apart…
Everyone will go their own way…Not only will the EU break up, but “countries” are likely to break up…I lived in Italy for 12 years…The constant murmur there was that Italy itself would break into two countries to save itself from “prosperous” regions having to fund “unprosperous” ones…
It could easily happen…
May 21st, 2009 at 9:59 am
Franklin..you snarked yourself! wonderful! I like it.
I think I like you because you are young. I don’t think the folks in the room necessarily need you to agree with them, I think we were just worried because it just seemed you couldn’t see both sides of the debate.
May 21st, 2009 at 10:00 am
@HCF
“Did we panic when the Germans bombed Pearl Harbor?”
ANIMAL HOUSE
May 21st, 2009 at 10:02 am
@HCF
The German war is against inflation, and the way to fight that is to gimp the money supply. They’ve decided that they like high unemployment and collapsing GDP as long as the price of sauerkraut doesn’t go up too much.
May 21st, 2009 at 10:06 am
@F411
Franklin, are you actually pretending to know something about Europe and the EU?
Please son, spill out all your revelations here and now…I need to start the day with a good laugh…
May 21st, 2009 at 10:06 am
@cvienne:
Thanks for putting a smile on my face!
“Christ. Seven years of college down the drain. Might as well join the f***ing Peace Corps. ”
-Bluto in “Animal House”
Incidentally, I agree with your long-term thesis about the Euro. I’ve always thought of the Euro as Germany and France’s way of taking over the rest of Europe without firing a single shot. When Italy, Spain, Greece, etc. figure this out, that’s when the currency unity with break apart.
HCF
May 21st, 2009 at 10:07 am
Otto, you need to adjust your moustache. Misogyny and anti-German sentiment is so 50 years ago.
May 21st, 2009 at 10:11 am
Mike in NO:
Don’t know him, and haven’t had to remove bullets in years…
Sorry, to when I don’t seem to be following the thread, I have to take large gulps as people come in the salt mine, until I can catch up….
May 21st, 2009 at 10:13 am
run this chart on a monthy, 10 year time frame if you want to see the radical big picture, $usd:$wtic
May 21st, 2009 at 10:14 am
Onlooker from Troy
I don’t trust any man who’s voice is higher than my 3 year old daughters
May 21st, 2009 at 10:15 am
@f411
“The first quarter 09 was horrible.
Wow…what passes for news these days!”
From Calculated Risk:
The economic projections are near the end. Although the Fed lowered their economic outlook (compared to January), they are still fairly optimistic.
I’m not looking back at 1Q09, I’m looking at 2Q09 and 2H09. The estimates are already starting to fall. What are your thoughts on that? Also, do you think this is the last downward revision (be care, I have a good memory)?
May 21st, 2009 at 10:19 am
franklin,
Let me make your confusion about Mexico simple.
Credit Deflation has gone global.
You heard it here first.
May 21st, 2009 at 10:19 am
@HCF
Only happy to oblige…
Re: Euro
Trust me on this, NOBODY there really really even wants the Euro anymore…It was a convenient ‘share the wealth’ idea to bring the Eastern Europe countries online economically…Now that THAT has faltered, everyone would rather go back to their soverign currencies and fight it out on their own…
Germany & France (mostly Germany) hate it, but don’t mind as long as they can play rough and be the boss…Italy (which is a hanger on), would MUCH rather go back to the Lira…They played the game FOR YEARS of just devaluing the Lira everytime an economic crisis hit…
A weak Lira is great for EVERYONE…It’s cheap for everyone to visit Italy (and buy their stuff), and everyone wants to go there anyway…As for the Italians, they prosper, and are happy staying home…
May 21st, 2009 at 10:21 am
@Onlooker,
He’s saying that in that Bloom article because he’s just another idiot that thinks the goal is the beat the S&P, or some other benchmark. This type of thinking is so backwards it’s not funny.
Plus, he already called one bottom before another huge drop. Had you invested when he told you to where are you now?
May 21st, 2009 at 10:49 am
ben22
No doubt (re: Birinyi). I found it to be absurdly funny in light of the reality. Someday credibility will matter (I hope). Probably naive’, I know. But really, before this is all over the investing public will become so cynical due to this kind of shameless self promotion and lack of any kind of fiduciary attitude in the financial advisor and investment management world. But you know that, based on previous comments, I think.
Maybe the sign of the end of the secular bear will be that CNBC goes out of business. We can only hope. I’ll keep that in mind.
May 21st, 2009 at 10:51 am
I think this shows the danger of running trade surpluses is equal to the danger of running trade deficits.
May 21st, 2009 at 10:57 am
So in a perverse sort of way, it still shows that it is still better to invest your money in the US. We may be down but we are not down at a double digit rate.
May 21st, 2009 at 10:59 am
@Karen: Thank you for the tip.
It’s taking me a while but I’m finally getting around to reading blog buzz from fall 2007. I’m a bandwagon market-watcher.
Clearly the plate tectonics were already in motion, with top banks recognizing their MBS’s and CDO’s were in deep doo-doo and China and others beginning an exodus out of the USD. China was already starting to diversify its reserve holdings . . . already talk of a Federal bailout $100 bil fund to buy up toxic assets from the big banks.
*Lightbulb*
Now I understand a little better why everyone here is so contemptuous of the whocoodanode meme.
May 21st, 2009 at 11:40 am
@ franklin411 9:41 am Says:
“The US and China were the only two major nations to pass a stimulus package early this year. The Europeans were too busy arguing among themselves to address the crisis…They worried that inflation was the real demon, not growth. Germany was at the forefront of that movement.”
Really?
How about germany passing two stimulus packages, (i) €31 billion in November 2008 and (ii) €50 billion on Jan 27th 2009. Thereby saving the germany automobile industry by generating incentives worth 2,500 € for new car purchases.
May 21st, 2009 at 2:24 pm
@f411:
I have to admit I’m perplexed by Mexico’s contracting GDP…I mean, it’s not like there’s a war on down there or something…
—————————
I read the US buys something like 80% of Mexico’s exports. Each 1% drop in US GDP hits Mexico for 1.4%. Makes you wonder about China’s GDP claims.
Barnes & Noble reported 1Q loss of $2.7M. I guess they had counted on Barry’s original publisher coming through. Bailout Nation will put them back in the black for Q2, right?
May 21st, 2009 at 4:09 pm
“All three countries depend on exports to the U.S.”
Not too worry. Bennie, Timmie and the rest of the gang in Washington are scrambling to save not only our economy but those of our major trading partners too. Good luck…