Here Comes The Double Dip Pt. 3

[Quinny]

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[Daniel_Plainview]

So what do you do?

Netflix is the obvious answer. I don't watch TV either, but I'm hooked on Netflix: great value and great product.

[Armageddon]

Is the derivative time bomb beginning to unfold starting with JPM ?

[Daniel_Plainview]

Fitch downgrades Japan to A+, outlook negative

FRANKFURT (MarketWatch) -- Fitch Ratings on Tuesday downgraded Japan to A+ and issued a negative outlook on the country's credit rating, citing rising public debt levels. Japan's long-term foreign rating had stood at AA and its local currency issuer default rating was previously at AA-.



"The downgrades and negative outlooks reflect growing risks for Japan's sovereign credit profile as a result of high and rising public debt ratios," said Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch, in a news release "The country's fiscal consolidation plan looks leisurely relative even to other fiscally-challenged high-income countries, and implementation is subject to political risk," he said.

[OilFinder2]

Existing Home Sales Rose 3.4 Percent in April

U.S. home resales rose in April to their highest annual rate in nearly two years and a falloff in foreclosures pushed prices higher, hopeful signs about the pace of recovery in the still-struggling housing sector.

The National Association of Realtors said on Tuesday that existing home sales increased 3.4 percent to an annual rate of 4.62 million units last month, the highest since May 2010.

Nationwide, the median price for a home resale jumped to $177,400 in April, up 10.1 percent from a year earlier. That was the biggest year-over-year increase since January 2006.

Distressed sales accounted for 28 percent of resales, down from 29 percent in March. NAR economist Lawrence Yun said a drop in foreclosures fueled the decline in distressed sales, which in turn drove the increase in the median sales prices.

[...]

[Armageddon]

Existing home sales do very little for the economy. They create very few jobs. New home sales are what drives the economy. Millions upon millions of jobs are directly and indirectly related to new home building. Think of these fields when a new home is built:

Framers
drywallers
electricians
plumbers
tapers
painters
flooring
trim carpenters
concrete workers
landscapers
window treatments (mini blinds, etc)
brick layers
roofers
siding installers
deck and patio builders

Then think of the manufacturers that make all stuff

Then think of all the suppliers that supply the materials

Then think of the salesman


The list goes on and on....

New home sales have collapsed and will never recovery. This is what a depression looks like. The gov't has tried to cover it up by printing trillions of dollars, but it hasn't really made a difference. It may have bought them more time, but the outcome will still be the same. Take away food stamps, and the soup kitchens would like just the first depression. We are witnessing the collapse of the industrial civilization due to peak oil. An economy can't grow with a dwindling energy source and our entire banking system is based on growth. It's time to wake up and face reality.

[pstarr]

New home sales have collapsed and will never recovery. This is what a depression looks like. The gov't has tried to cover it up by printing trillions of dollars, but it hasn't really made a difference. It may have bought them more time, but the outcome will still be the same. Take away food stamps, and the soup kitchens would like just the first depression. We are witnessing the collapse of the industrial civilization due to peak oil. An economy can't grow with a dwindling energy source and our entire banking system is based on growth. It's time to wake up and face reality.

Home building was supported by;

--mortgage deductions,
--cheap oil,
--endless forests of giant trees,
--natural farm land abandoned for chemical plant machines,
--the re-imaging of the WWI battle tank as a bulldozers.

This one-time bonanza propelled the build-out of modern American suburbia, called "the greatest misallocation of resources the world has ever known." (J. Kunstler).

That is all over. We will live within our means now.

[seenmostofit]

This is what a depression looks like.

Not according to my grandmother. Or the 90%+ of Americans still out there working.

The idea that we are in a depression is interesting, but first don't we have to get to the double dip recession? Which hasn't happened yet? One step at a time...

[OilFinder2]

Economic Confidence in U.S. Hits New High

The Gallup Economic Confidence Index broke through a barrier last week, surpassing -17 for the first time in the four-plus years of Gallup Daily tracking in the United States. The index now stands at -16 for the week ending May 20, up from -18 in each of the prior two weeks in May, and from -21 in late April.



The Gallup Economic Confidence Index is an average of two components of consumers' psychology: Americans' ratings of current economic conditions and their perceptions of whether the economy is getting better or getting worse. The index has a theoretical maximum of +100, obtained if all Americans say the economy is excellent or good and improving. The index could go as low as -100 if all Americans perceive the economy as poor and getting worse.

All of last week's gains occurred because of a slight improvement in Americans' outlook for the economy. Forty-three percent now say the economy is getting better and 52% say it is getting worse, for a -9 net economic outlook score. This is up from -13 the week prior. Americans' net perceptions of current economic conditions are unchanged from the previous week, with 15% describing conditions as "excellent" or "good" and 38% as "poor," for a net economic conditions rating of -23.

[...]

[Armageddon]

This is what a depression looks like.

Not according to my grandmother. Or the 90%+ of Americans still out there working.

The idea that we are in a depression is interesting, but first don't we have to get to the double dip recession? Which hasn't happened yet? One step at a time...

The 50 million people on food stamps and the 20% real unemployed say otherwise.

[Armageddon]

New home sales have collapsed and will never recovery. This is what a depression looks like. The gov't has tried to cover it up by printing trillions of dollars, but it hasn't really made a difference. It may have bought them more time, but the outcome will still be the same. Take away food stamps, and the soup kitchens would like just the first depression. We are witnessing the collapse of the industrial civilization due to peak oil. An economy can't grow with a dwindling energy source and our entire banking system is based on growth. It's time to wake up and face reality.

Home building was supported by;

--mortgage deductions,
--cheap oil,
--endless forests of giant trees,
--natural farm land abandoned for chemical plant machines,
--the re-imaging of the WWI battle tank as a bulldozers.

This one-time bonanza propelled the build-out of modern American suburbia, called "the greatest misallocation of resources the world has ever known." (J. Kunstler).

That is all over. We will live within our means now.

Agree

[Fishman]

Wow, pstarr advocating for reduced government, "That is all over. We will live within our means now".

Oilfinder, the confidence is up because the media is hyping it as hard as they can. Any bump is great. But, employment generation numbers are terrible, Europe is sliding into recession again and China is now backing out of coal, steel delivery orders. Double dip by December. Remeber it takes two quarters of negative growth to be an official recession

[pstarr]

Wow, pstarr advocating for reduced government, "That is all over. We will live within our means now".

As a hippie and green I have always been a proponent of small government, and against large wars. Unfortunately the same can not be said of profligate Americans of all stripes. Conservative used to mean something, living small, taking care of the unfortunate and future generations, not wasting precious resources.

Oilfinder, the confidence is up because the media is hyping it as hard as they can. Any bump is great. But, employment generation numbers are terrible, Europe is sliding into recession again and China is now backing out of coal, steel delivery orders. Double dip by December. Remeber it takes two quarters of negative growth to be an official recession

wow we agree. Does that make me a Republican idiot?

[seenmostofit]

This is what a depression looks like.

Not according to my grandmother. Or the 90%+ of Americans still out there working.

The idea that we are in a depression is interesting, but first don't we have to get to the double dip recession? Which hasn't happened yet? One step at a time...

The 50 million people on food stamps and the 20% real unemployed say otherwise.

There have been millions on food stamps since the day after the program was fired up, and "real" unemployed is a nefarious term including people who also weren't working during better economic times because they didn't have to, didn't want to, or were mooches in general.

It is not fair to say that just because the numbers are higher for these categories now, compared to then, that this constitutes a "depression". 1% unemployment in Williston, ND. I recommend those who really NEED to work would move, currently retail positions are paying $15/hour, just heard it from the major himself.

[Plantagenet]

It is not fair to say that just because the numbers are higher for these categories now, compared to then, that this constitutes a "depression".

Numerica data is the sole basis for categorizing recessions, depressions, recoveries etc. "Fairness" has nothing to do with it----the numbers are the key thing.

Based on the GDP numbers, the recession ended way back in mid-2009. What we've been in for the last three years is a weak "jobless recovery."

1% unemployment in Williston, ND. I recommend those who really NEED to work would move, currently retail positions are paying $15/hour, just heard it from the major himself.

Yes, thats excellent advice. All those unemployed college grads in California and New York who live in their parents basements and owe the government $40,000 on their college loans should definitely move and get one of the McDonald's jobs at $15/hr in North Dakota.

[seenmostofit]

Based on the GDP numbers, the recession ended way back in mid-2009. What we've been in for the last three years is a weak "jobless recovery."

I agree with you completely. Thereby validating my original point. First we must get back to an actual recession, prior to claims of depression.

1% unemployment in Williston, ND. I recommend those who really NEED to work would move, currently retail positions are paying $15/hour, just heard it from the major himself.

Yes, thats excellent advice. All those unemployed college grads in California and New York who live in their parents basements and owe the government $40,000 on their college loans should definitely move and get one of the McDonald's jobs at $15/hr in North Dakota.

Only if their skills run towards burger flipping. The average wage for everyone else is $80K/year. Of course, this will involve actual WORK, something college grads from the two left leaning states mentioned may have no experience with, in their desire to specialize in esoteric activities to avoid it.

[Daniel_Plainview]

Japan's fiscal death is a warning to the West
Fitch Ratings has downgraded Japan two notches to A+, citing a surge in public debt since the Lehman crisis and the lack of any plan to restore fiscal probity.

Key indicators are deteriorating on almost every front, raising concerns that the world's third largest economy is running aground after two "Lost Decades". Japan's debt has jumped by 61 percentage points of GDP since 2008, compared to eight points for the AAA bloc. Public debt is expected to reach 239pc of GDP this year, uncharted levels for a major economy in peace-time. `Net debt' – subtracting Japan's vast holdings of foreign bonds – is nearer 137pc but this is rising at an even steeper trajectory.

"Japan's addiction to public sector spending is way beyond the boundaries or remedial `austerity'," said Dylan Grice from Societe Generale. "Political pressure on the Bank of Japan to crank the printing presses into top gear will become irresistible. We see no alternative."

Japan has been even more nonchalant than the US in efforts to rein in spending. The budget deficit will remain above 7pc of GDP late into the decade. Fitch said the pace of fiscal consolidation is "leisurely" and prone to "political risk". Plans to raise VAT from 5pc to 10pc face a battle in the Diet.

Japan still enjoys "exceptional financing flexibility" but is vulnerable to shocks. Even a small rise in borrowing costs would play havoc.

The IMF said Japan is the only advanced country to let its "cyclically adjusted deficit" rise further this year. Gross financing needs are 59pc of GDP in 2012, compared to 14.8pc in the UK and 8.9pc in Germany.

The central bank has stepped up stimulus but is fighting to defend its independence, so traumatically lost in the 1930s. It is wary of uncorking inflation, fearing a catastrophic stampede out of government debt. Bettter the devil it knows of chronic deflation.

Mr Grice said it would take a fiscal squeeze of 13pc of GDP to stabilise debt, a tall order for a country with the world's oldest population. The workforce has been contracting since 1995. Nominal GDP has been falling at 0.5pc a year. Tokyo expects the population to fall from 128m in 2010 to 87m by 2060.

Previous downgrades a decade ago were shrugged off by the markets. Yields on 10-year bonds kept falling as the economy slid deeper into deflation. They are now 0.85pc, the world's lowest. There was no flicker of change after Fitch's announcement. There is a graveyard full of `Japan bears' who warned of a debt debacle too early.

It may prove different this time. Japan has exhausted its buffers. The savings rate has collapsed to 2pc of GDP from 16pc when the bubble burst in 1990. This has vastly reduced the pool of captive savings that can be tapped by the state.

Taxes cover half total spending. The rest is borrowed. Japanese banks and life insurers are still buying the bonds, but Jonathan Tepper from Variant Securities doubts that they can do so much beyond 2014. The Government Investment Pension Fund – the biggest holder of debt – became a net seller last year to cover redemption claims.

The historic current account surplus of 3pc of GDP has evaporated. Last year's Fukushima disaster was the coup de grace. Japan will switch off its last nuclear reactor in May, leaving the country dependent on oil and gas imports to power its industry.

David Rea from Capital Economics said Japan will run a trade deficit this year. It may also tip back into contraction soon after bumper growth in the first quarter driven by the one-off effects of eco-car subsidies and post-Fukushima reconstruction. Retail sales fell 1.2pc in March. Core machinery orders fell 2.8pc. Export orders have withered, reflecting the sharp slowdown in China.

Monetarists say that Japan's 20-year battle with stagnation is a warning to the West. The country failed to purge its banks swiftly and relied on Keynesian fiscal projects to prime pump the economy each time growth stalled. The result was a string of false dawns, with public debt ratcheting ever upwards. The Bank of Japan dabbled with quantitative easing, but too little and too late. The bonds were purchased from a moribund banking system, a recipe for failure since this has little effect on the M3 money supply. "Japan was never early enough or ambitious enough in its use of monetary stimulus," said Jamie Dannhauser from Lombard Street Research.

It let asset prices slide, and let nominal GDP contract. The result has been rising debt on a shrinking economic base. "Once this starts it is very hard to stop. That is the danger for Ireland and Spain," he said.

For Japan, the lost decades are tunning into a lost century.

Japan's once mighty economic engine is sputtering, and its debt burden is so onerous that a mere 1 or 2 extra percentage points in interest rates will implode the house-of-cards. As Japan's credit rating becomes progressively worse, while its desperate efforts at QE have become increasingly ineffective, it becomes clear that debt will destroy a country in the long-term, and the West is not far behind Japan.

Japan is VERY close to hitting the wall ... all it takes is a slight uptick of interest rates ... and KABOOM!

[Lore]

Global economic meltdown anyone?

[seenmostofit]

Global economic meltdown anyone?

Hopefully. I made a mint off the last one. Could use another 75% portfolio increase. Unfortunate that everyone couldn't have done the same, but staying liquid enough to take advantage of a market downturn requires some planning, and too many people just don't understand change or market cycles.

[Daniel_Plainview]

Global economic meltdown anyone?

Hmmm, David Rosenberg would agree:

Anti-austerity demonstrations in Frankurt. Massive emigration out of Spain. Student bombings in Italy. Suicides in Greece, along with a run on the banks. Camp David discord with Germany. Unusual nuclear war talk out of Russia. Euro area fiscal and banking crisis.

Italy, Spain, Portugal, Greece, the Netherlands and Brazil are now facing economic contraction. France is stagnating. China is slowing down rapidly. ... Beyond Greece, two areas of concern are clearly Spain's woefully undercapitalized banking system where bad debt ratios have hit all-time highs (the banks received a Moody's downgrade late last week too), and China's property market which continues to deflate — average prices in 70 major cities fell in April for the second month in a row (-1.2% YoY versus -0.7% in March ... maybe this is one of those events that we're supposed to assume will somehow stay contained). ...

It's not just the economies, either, but also stock markets. The likes of Greece, Spain, Italy, Russia, Brazil and even Canada have seen corrections of 20% or more from the cycle highs. The U.K. FTSE has corrected more than 10%. As the Financial Times reports, euro area banking stocks are actually lower now than they were at the panic troughs after Lehman collapsed nearly four years ago. The S&P 500 has given up two-thirds of its 2012 gains and is now below its level of a year ago. The VIX index is at a new high for the year and copper touched a four-month low to finish off last week. The FX market is consistent with this downbeat global growth assessment, underscored by the Aussie slipping to its lowest level since November and the NZ kiwi sliding to its lowest level since December. The winners have generally been the more defensive units — like the U.S. dollar, the yen, and sterling as well.