C’mon Nouriel, your looking at 3% GDP growth for Q3 and stocks at all-time new highs.

 Read Ben Bernanke’s Lips,”Inflation is absolutely not any problem”.  Home heating bills on the rise http://money.cnn.com/2007/10/09/news/economy/heating/index.htm?postversion=2007100912 Price of oil heat this winter forecast to jump 22 percent, or $319. Natural gas users can expect to pay 10 percent more – report.  NEW YORK (CNNMoney.com) — No matter how you heat your house, this year will cost you more than last, according to a government report Tuesday.  Americans will spend $977 to heat their homes this year, averaging for all fuels across all sections of the country, according to the Energy Information Administration.   Those heating with oil can expect to pay $319 more this year compared to last, according to a government report Tuesday.   That’s nearly 10 percent higher than the $889 spent last year and the highest amount ever, not adjusted for inflation. The previous record was $948 in 2005-2006, according to EIA.  Americans who use oil heat will be hit the hardest. Due mostly to higher crude prices, nationwide-average oil heating bills this winter are expected to be 22 percent higher than they were a year ago, EIA said. 

“google now the biggest market cap US stock???”  bigger market cap than walmart, hardly the largest mkt cap, believe that is Exxon, I dont think Google is in the top 10  We are far from the 2000 goofiness, but the multiples are getting pretty heady and some tech companies are just stupid in their valuations, it is what it is though. Personally earnings estimates are garbage also, all of these companies sandbag their earnings now and whataya know, they beat “expectations”.

Nouriel is No-Real  Be real nouriel.. Give it up. You are losing credibility fast. Recession is not happening anytime soon. You’ve been talking recession for more than 14 months now. You have never explained why your predictions are not working. Everytime there is a market correction, you shout louder with your pessimistic views. I have a feeling that you are out there to prove a point, not analyze facts objectively.    We are looking at 2.5-3% growth here. We WILL have recession SOMEDAY but not this Quarter or this year.   Sorry, but you have caused plenty of readers to lose money. Its good that you are not running a fund. 

Now a rallying dollar, because the Fed is not going to ease in Oct, is good for stocks. Stocks are the Fed/Govt way of clouding reality. It is a tool for them to manipulate to support their vision (lies) in order to maintain the status quo…

This can get very wild until it gets bad. Insanity has to become insane before things start to gloomy.

 http://www.financialsense.com/fsu/editorials/jain/2006/0904.html  One consequence of the rise in Consumption Debt over an extended period, mostly pushed on the middle class, is rising inequality. This is one consequence that takes a very long time to correct. If you listen to people like Greenspan and Bernanke, who act as if they are “very concerned” about the problem of rising inequality, which they have contributed the most to!, you will hear lame excuses like education gap. What a crock. Is the education gap in the US much higher today than in 1973? Most importantly, the rich are NOT the most educated; it so happens that the most educated serve the richest, who happen to be lot less educated then them! BTW, Bush administration’s solution to narrowing the inequality is, you guessed it, “No Child Should be Left Behind” program! I heard an administration official claim that, just a few days ago.  You will find direct correlation between the increase in debt on the middle class, as percent of income, and the rise in inequality. And this correlation is a result of causation. This time, the banking Crooks have taken the problem to such a scale that the middle class in America will be decimated. America will become a nation full of bankrupt households most of whom were formerly middle class. It does not bode well for the stability of the whole political system. The current Peak Debt may well foreshadow the collapse of the American political system, as the world has known it since 1776. And that would be a long life for a political system. Circa 2020s: It was a good system for most of the time it lived. May it rest in peace. 

Doesn’t matter what reality is. Even though we may feel it, the orwellian masters of statistics will never let us see it. They thrive in the opaque abyss behind the curtain of truth. Lies, damned lies and statistics. There is too much power and money on the line to let dominance of the reserve currency fade into history. Official reports are what matter and they will always be spun to be positive. Bad news is good news and official perception equals reality, If it means deceit, so be it. Throw in a subservient media machine to push it on the uncaring, ignorant masses more concerned about Britney Spears and Paris Hilton. As you sense, complete and utter disgust resides here with our whole corrupt system.

 “S&P estimated that, on a purchasing-power parity basis, the United States would contribute only 9 percent of world growth in 2007, compared with China’s 33 percent and India’s 12 percent.”  9% of world growth would be awesome in the current environment, but the US dollar has to recover its losses for the year just to get back to “purchasing power parity”. US GDP is negative for the year in Euros.  

 As Henry Liu writes, The circular recycling of dollar-denominated debt was made operative by the dollar, a fiat currency that only the US can print at will, continuing as the world’s prime reserve currency for international trade and finance, backed by US geopolitical military power. Dollars are accepted universally because oil is denominated in dollars and everyone needs oil and thus needs dollar to buy oil. Any nation that seeks to denominate key commodities, such as oil, in currencies other than the dollar will soon find itself invaded by the sole superpower. Thus the war on Iraq is not about oil, as former Federal Reserve Chairman Alan Greenspan suggests recently. It is about keeping oil denominated in dollars to protect dollar hegemony. The difference is subtle but of essential importance.    Since 1993, central banks of all trading nations around the world, with the exception of the US Federal Reserve, have been forced to hold more dollar reserves than they otherwise need to ward off the potential of sudden speculative attacks on their currencies in unregulated global financial markets. Thus “dollar hegemony” prevents the exporting nations, such as the Asian Tigers, from spending domestically the dollars they earn from the US trade deficit and forces them to fund the US capital account surplus, shipping real manufactured product wealth to the US in exchange for the privilege of financing further growth of the US debt bubble economy.  

Well if the economy is going to turn down it sure is taking a long long time to do so. Inflation the last I checked was under 2%/yr and the Dow and SP500 just made new highs today. How long can one fight the facts or the tape? The is an economy that can’t be sunk. Here and there a bit of damage, a few nicks and scratches, but overall just sailing right along.

Written by Guest on 2007-10-09 16:53:23  >>Inflation the last I checked was under 2%/yr …

If you are a person who believes that the economy is doing well, then you are a person whose beliefs will never be shaped by accurate data. Instead, you should act on what your dreams are telling you. If Frank Knight told you to buy Google, liquidate everything you have and buy, buy, buy.

Dave Chiang;  Based on your thoughts, what do you feel is going to happen? Inflation, hyperinflation, deflation? Do you see a short cycle of one and then a long cycle of another? How does China’s decision making change the plan towards inflation or deflation? Do you see the dollar reach bottom and turn around? How about Gold? good during inflation but during deflation? 

The professor looks at only very few parameters of the economy system and draws conclusions. I have to admit that initially I was trilled by his extreme views, but months later, I realized that he was just an average economist with very narrow view. If the professor is a fund manager, he will be a failed one.   I disagree. He is looking at the key and main parameters, consumer spending. It is slowing, job growth has slowed in 2007 because of it. The market is a irrational retard. It is so lost, much like in 29, the collapse will be even more impressive than any in post-WWII era. I feel bad for them.   JGU, except the slowdown, it has arrived(really since January it has been here). Now we wait for recession.   If the Prof had waited until the housing bust had really gotten going, he wouldn’t be a year off on predictions, but nobody is perfect.

Anyway, back to markets and views, I think we are all going to see a dip in either the 4Q07 or 1Q08.   Higher prices are bound to eat up and restain the consumers who roughly made up 60-70% of the US economy. Couple that with lower interest rates on your returns, im not talking about the priviledged few who have the means to invest, and gloomy job prospects it doesn’t look that good to me.  A sustained weak USD will bring the US general population and consumers to their knees. Stocks as an excellent indicator of the economic health? Well, crashes, panic and doom started at or near the peaks of the stock markets right?

It’s not enough to predict a recession (or hard landing). You have to predict when, or it’s of no value. Of course a recession will come , eventually. It’s like predicting a stock market correction. The professor will eventually be right that we will have that correction, but what if the market is us 30% before we have a 10-20% correction?  I suspect that a lot of people posting here are not so much predicting a correction as hoping for one because they are not investors.

NR is completely wrong. no recession. but i see inflation. how can there be recession when oil is going higher. how can inflation not going high, when you have Fed ready to cut rate. and look commodity and gold to zigzag up.  http://stockcharts.com/charts/candleglance.php?$TNX,$UST,$USD,$GOLD,$WTIC,$GTX|D|B14

What a bunch of nonsense. How could someone hide the fact that we are in a recession? Don’t you people live on this planet? Companies are at record profits, malls and restaurants are full. Lay-offs are scarce. Everyone I know is getting a raise and probably a bonus this year. Get a life! The Prof’s prediction is a product of his negative personality, nothing more.

just keep your hard landing calls…  I will not be sick of you!

I have a sneaky feeling that if an asteriod was going to obliberate the planet next week, some Wall Street analyst and the Fed would proclaim the outlook for stocks the next 6 months looks just “peachy keen”

nothing short of an asteroid is going to derail this market

Guest on 2007-10-09 21:13:51: “Lay-offs are scarce. Everyone I know is getting a raise and probably a bonus this year. Get a life!”  Guest, congratulations on your nice life, but not everyone lives as high on the economic food chain as you apparently do. For example, some rural counties in the South that were dependent on manufacturing have lost 60 percent of their manufacturing jobs since 2000. Or take a look at Michigan. This is a growing problem outside the coastal centers of finance.  Since 70 percent of GDP is consumption, and since even the low-on-the-food-chain people who you don’t know must buy food and fuel, this recession will largely come from the bottom up. Economic elites don’t pay much attention to the trickle-down people in flyover country, but those Wal-Mart shoppers and their wellbeing matter greatly to GDP.   For example, look at this poll that came out today (the quote is from an Associated Press story):  ”WASHINGTON – A growing number of people say the economy is the nation’s top problem, with the less educated among the most worried, an Associated Press-Ipsos poll showed Tuesday.”  There are reasons for that. Many people in this country are hurting.  In time, the distress is going to trickle up to people who deserve it a great deal more than those wage earners in flyover country. 

Guest wrote: “just keep your hard landing calls…   I will not be sick of you!   Guest also wrote: “NR is completely wrong. no recession. but i see inflation. how can there be recession when oil is going higher. how can inflation not going high, when you have Fed ready to cut rate. and look commodity and gold to zigzag up.”   Guest is setting himself up to eat some doggedy-doo-dah-doody and a can of crow with his personal name written on the label.   It must feel real good to sit back in your King Tut high chair, sheilded from the scrutiny and rebuke that someone of your character is deserving of.   You must feel so superior in your ability to forecast market-movements; it must make your ego all bubbly and warm-feeling that Nouriel’s forecast has not yet verified.   Well, sit back on your high-horse, King-Tut and enjoy the momentous ride downward as you suffer the punative damages incurred by the frictional forces of sudden market-descent.   Do us all a favor, don’t be rude and stubborn in the midst of your fall, give us all a nice wave on your way down, maybe we will catch you on the next bull-market-that is if there is a next time…only time will tell.   Economic time and the time to read the seasons are here in full force and the bears have lost-touch with the exotic, euphoria of the bull-market, ponzi-scheme, talking-heads, “lets spin straw into gold” cabal.”   The guests and denizens of this lost-world and candy-land-game of jeapordy will eventually succumb to the weight of the manipulations they have imbibed from the evironmental-toxins that so patently seem to run skin-deep among this very confused and bedazzled species of sheep.   Well, if Nouriel is wrong (and I highly doubt he will be) he has atleast been write with regard to His predictions of those factors that would cause the recession: A slowdown in consumer spending, capex-spending; A slowdown in job-growth (110 phony-thousand is still below population-growth trend and much lower than would be expected in an expanding economy); Slowdown in durable-goods orders, non-durable goods orders….etc and on and on and on goes the list, yet some guests just don’t seem to remember the data reports much pastr the day of release.   The one question I have for the mockers-of-ill-content, is how can they expect the losses not to continue with those companies holding non-market modeled dept that continues to lose value per indexes such as the ABX.HE.   These CDO’s and MBS’s will contunue to erode as long as the housing downturn continues and it has been shown that to even bring the home-price to rent ratios back to historical levels, prices would have to drop by atleast 50%.   This bull-market wull soon dissipate and fall very short(or hard) of the delusionary-expectations that have been the hallmark of its illusionary, reason-to-rise.   This quote I think is very applicable to Nouriel Roubini who has been the victom of underserved cynicism: “It is NOT the critic who counts, not the one who points out how the strong man stumbled or how the doer of deeds might have done them better. The credit belongs to the man who is actually in the arena who’s face is marred with sweat, dust and blood; who strives valiantly who errs and comes short again and again; who knows the great enthusiasm, the great devotion and spends himself in a worthy cause; who if he wins, knows the triumph of achievement and when if he fails at least fails while daring greatly, so that his place shall never be with those cold and timid souls who are afraid to risk victory nor defeat….”  - The GREAT Theodore Roosevelt 26th President of the US, 1st American to win the Nobel Peace Prize, author of 34 Books, Naturalist that discovered 39 species of fauna & plant, Warrior, Awarded Congressional Medal of Honor , Environmentalist, Conservationist, Founder of 30 National Parks and the National Park System 

Quiet educating to read this blog through the narrow tropism of Dr Roubini’s detractors. His comments are not addressing the equities markets but the macro components of economies please focus! Equities junkies no one prevents you from buying, as no one prevented you from purchasing CLO CMO CDO.  

The US is in a recession. Put everything (Indices) in perspective to the Euro or the Pound Sterling. Either the dollar strengthens and stocks go down or the dollar plummets and stocks go up. Monetary inflation with credit is exploding. The monetary base might be ok but credit growth is still firing on all cylinders.   So what will happen? Well my guess is that the next cpi and ppi numbers are going to be somewhat bad. Don´t forget core cpi/ppi was up .2% and cpi/ppi was down because of oil prices lower now with oil back up and the dollar down that will fire inflationary prices up. We are experiencing a growth in prices here in Europe and the Euro is strong (relatively of course). So if we experience higher prices, then prices in the dollar zone with a plummeting dollar can´t be falling or somebody has just reinvented the theory of relativity.  With the US consumer dying not only with too much debt and tapped out in equity he is going to get killed by inflationary pressures which have been built up over the past years (deficits).  The birth/death model managed to hide the truth on the labor market but I can tell you, people here in Europe are starting to question the US data and it´s integrity.   Oil and Stocks are high because of loose credit conditions. The FED has lost control of credit (if it ever had it) and prices are roaring. That is what is going to kill the bond market and who ever has simple understanding of economics knows that in a credit monetary system the bond market is everything. Yields will have to soar to make stocks come down. That process can take some time, it seems.  Can the world decouple? One of the key elements is the pricing of Oil and Commodities in a currency. In the past it was the dollar. That meant that if the US did not drive a deficit, the ability of emerging markets to by commodities went down because of a scarce dollar. Since it seems that this is changing we might be facing a new environment now. The Euro and Yen (and Won) are becoming new commodity currencies. This changes everything. Does that mean the world will decouple. Well at least we could conclude that a US recession will not be as bad as in the past. That would also mean that the US would not necessarily see a falling oil price if the US went into a recession. My problem though are the imbalances. That is a problem. Chinas economy is out of balance as much as the US economy is out of balance. If there ever will be a decoupling then with economies which are half way well balanced. That might be the reason why the Euro is performing well, relative to other currencies. I would expect Japan, Switzerland, Singapore, India and a couple of others to do well.

Here is a very interesting tidbit about how the credit default swap market is driving the plunge in underlying asset prices:  In a letter to clients last week, John Devaney, chief executive of United Capital Markets, a troubled broker-dealer and hedge fund manager in the asset-backed securities market, said: “Liquidity is horrible and prices are in the range of five to 50 points apart sometimes just hours or days apart.”   Mr Devaney added that the existence of the nascent derivatives market for such securities, in the form of the ABX index, had exacerbated the sell-off and uncertainty over true valuations.  “The CDS market and its size has contributed greatly to the volatility. As prices dropped, there were – and still are – those forced to sell, taking off leverage.”   http://www.ft.com/cms/s/0/cb1e9288-769c-11dc-ad83 0000779fd2ac.html  Could we see the CDS market create a plunge in the stock market (just like happened in the MBS market)?  Bernard 

Prof Roubini’s analysis is sound and clear. Someone with a little understanding of economics should be able to see that. However, if someone is looking at this analysis as a tool to predict market movements- long or short, doesnt matter- that person is in the wrong place. Sound economic analysis is not sufficient to predict the market anymore, when there are too many external factors. It has become a chaotic environment -as in chaos theory- for now.   I have been reading Professor’s analysis for a while now and think that a severe recession is very probable in the mid-term at this point. However, I am still long in the market, as I know this ride will continue for a while. Proffesor’s analysis urged me to create a flexible investment strategy. I would urge every investor to stop trying to make sense of the market and make the most of it, at the same time to keep in his/her mind that a recession is not far off. 

Guest: “Companies are at record profits”  Based on what? Analyst estimates? Sanbagged corporate forecasts? Do the extrapolation on the numbers and see what you find. Lets take Costco for example, The report earnings today of .83/shr vs .75/shr last year same q. Things aren’t what they appear to be. Per share numbers are a joke, they are meaningless because when these numbers are forecast I can pretty much guarantee that they dont factor in 5% buyback. Yes there is increased value, but not in the way that most would perceive. So yes they meet “expectattions”, but not without some trickery.  last year same q 355.6m .75/shr = 474133333m shares os current quarter 372.4m .83/shr = 448674698m shares os

AFFG: “The birth/death model managed to hide the truth on the labor market but I can tell you, people here in Europe are starting to question the US data and it´s integrity. “  So are a lot of Americans. The data coming out of Washington are becoming a disgrace to our country. For an alternative view of US economic data see John Williams’ site at this link:  http://www.shadowstats.com/cgi-bin/sgs?  For example, this site shows CPI running at 5.5%, and not 2%. Some people feel that numbers on this site are too pessimistic, but I tend to feel the real data are probably a lot closer to John Williams’ estimates than the Gov’t figures.  Pete, CA

Those who point out that GDP has been up YOY, need to renormalize. By my reckoning, the GDP normalized by the dollar index (DX on ino.com, USD on stockcharts) indicates that the USA has been in recession since December 2005, with a negative GDP YOY.  Nouriel has been closest to the truth in identifying the grinding recession that we are in. We are being fooled by assuming that everything valued in dollars or renormalized by fake inflation figures is showing growth. The growth is in terms of dollars. The dollars are falling faster than the fake growth.  This is normally called stagflation. We have a stagflationary recession with the crush grinding toward a stagflationary depression.  PrintFaster 

A glimps into the national future… *The Florida Legislature is expected to vote this Friday (Oct. 12) on a deal to dig itself out of a $1 billion hole through cuts in education, health care and courts.   *Michigan was pushed to the brinks of a statewide government shutdown because it first had to erase an $800 million deficit for its current fiscal year before it could pass a new budget for an Oct. 1 deadline. The new package relies on hikes in the personal income and sales tax and new taxes on an array of services.   *Maryland needs to bridge a looming $1.7 billion deficit. Gov. Martin O’Malley (D) has pitched bumping up personal income, sales and tobacco taxes and relying on slot-machine gambling to gin up $550 million for the state.   *Both Arizona and Virginia are looking at more than $600 million shortfalls in their current two-year budgets. Layoffs, hiring freezes and tapping rainy day funds are among ideas under consideration.  

Deficits are coming home to roost at a municipal, state and Federal level. Consumers will sell their children to slavery in order to keep themselves able to shop.

Well I think I am officially a bull now. They have beaten me into submission. I am only a bull because my personal trading account which was not very large is all gone now from loosing on shorts. Now all I have left are even smaller retirement accounts which can only be invested long.  My silly belief that markets operate somewhat efficiently and free is also completely gone. Now I see that the Fed will just continue to add money so that there is now place other than stocks to put it. No matter how bad the economy is they will go up. Thinking about the “Greenspan Put”, it is absurd. All it means is that any bad news can be perceived as goods news to stocks. There is absolutely no reason or news that drags stock down significantly. Let’s face it stocks are now government insured risk free assets.

Guys listen up, Please !!!  DOW is down 140….might go down 60 points more today….  establish shorts.   wrong time to be a bull.

Dr. R, et al The issue of the timing of the recession, which is long overdue, as the stock crash of 2000-01 was a mini blip due to Greenspans slash and print action, is again being postponed as long as possible. The current “credit crisis” is not an issue of interest rates for cost of funds, but solvency issues being swept under the rug to be hidden as long as possible.   The Japanese experience with their credit bubble bust had stocks and real estate down over several years about 75%. The PTB now running the PPT for the equities markets will do anything, and i mean anything to prevent the equities going down as long as possible.   An article out today on real estate forclosures in D.C. area quoted a realtor saying that auction vs listing price was down 72%. The time lag for foreclosures in the San Diego area is well documented in this piece with a great graph. Last line about its about to get ugly may be an understatement.    Time rate of change accelerating UP very well. Last line is spot on. Ugly coming soon.  http://calculatedrisk.blogspot.com/2007/10/reo-auction-in-san-diego.html  Stick to your reality guns.  Ursel Doran

another miraculous trunaround in stocks this afternoon…

Well, those who don’t believe in the PPT, you have had a front row seat today to their incredible control over the futures markets and thus the indexes. Stocks need to be removed from the official Leading Economic Indicator (LEI) because of this manipulation.

From Minyanville today, nicely written:   http://www.minyanville.com/articles/index.php?a=14418

Nice article from minyanville, interesting comments on the Canadian government taking steps to protect themselves from foreign ownership. This is a trend that is only increasing and proberbly only going to increase. We now have the rise of these asian and middle eastern soverign wealth funds armed to the teeth with exports surplus and petro dollars. large cap resource companies are becoming one of the targets of the chinese, there is talk that they are buying up large holdings in BHP and Rio Tinto and why not it certainly makes sense for them. Can we really call this fair when these same countries have such free access to western markets whilst at the same time they heavily protect their own companies? Can you imagine if the US, German or British government started buying up shares in companies of China, do you think this would be allowed ?

Evidence is starting to pile up that the consumer may be toast! Consumer spending is 2/3 rds of GDP.

yes, there must not be any problems out there… stocks are near highs… it is so ironic that all of the efforts of nearly the entire financial community to analyze stocks based on fundamentals are completely frivolous and irrelevant. analysts, managers, media all strung along by the planners like little well-paid puppets  government policy / planners intentions are the only relevant indicators. last summer legislation was passed to facilitate automatic enrollment in 401K plans when people were hired, now Hillary having government money funneled into market in matching proposal, of course Ben and Hank outright buying futures to support the “market”, President calling White House Economic Forum’s when equities are down a few % points, constant murmur of social security running out spreading fear to juice 401K contributions, …  what a complete and utter farce of a “market” so, in advance of the potential super rally that still MAY have legs, it will be due to “multiple expansion” got it ? time for me to go play with my pet unicorn

Consumer weakness can be seen in the M2-M1 – which indicates savings are increasing (YoY).  Which conversely shows spending is down.  You can watch these figures with only a ten day lag time.

Nouriel is right four weeks in a year. Nouriel is No-Real when it comes to markets.  He is an economist who tried to go for the glory but fell flat. He is consistently making outrageous predictions to attract attention, but all he does is to gather some fool following. He is the Tom Friedman of economics.  Nouriel is never right.

You all should get a copy of N.N. Taleb’s enlightening book “The Black Swan” paying particular attention to the section on predictions.   As James Garner said in a segment of “The Rockford Files” many years back….  ”You can fool all of the people some of the time, and some of the people all of the time, and those are pretty good odds.

Quote by Realitycheck:”Nouriel is right four weeks in a year. Nouriel is No-Real when it comes to markets.  He is an economist who tried to go for the glory but fell flat. He is consistently making outrageous predictions to attract attention, but all he does is to gather some fool following. He is the Tom Friedman of economics.  Nouriel is never right.”   Stupid and unbacked assertion that makes me want to either vomit at the mere consideration of even reflecting upon such a baseless statement for more than a few seconds, or cry in utter angst and disarray as a purging mechanism to free my nerves from the shock and awe of the realization that people like you are a force that runs counter to all know laws of reason and common-sense.  Give an example of where and when Nouriel Roubini has been wrong.  His recession timing is of no great import in the context of the greater macro-economic variables which he has adeptly deconstructed with near surgical precision.  The economy is doing great if you believe that the stock-market is not disconnected rationaly and realistically from the world of hard-core macro-data. 

Some of these comments remind me of a hen house of roosters. The brains are also very small. We finally have someone of intelligence sharing their insight with the public and the web sight gets slammed with stupidity. I undestand now why the intelligent few isolate themselves form the general public. Some of these quest comments are so ignorant its astounding they can take themselves seriously!!And some of them actually think the stock market is an indicator of the state of economy. What does a trader call a trade. A play!! Was the tech stock boom any hint?? Not only is this country headed for recession its already in a recession. Wake up!! Try reading something other than your local newspaper. And if you think CNBC will enlighten you than you are naive. Ignorance is blissfull when mixed with testosterone. We need more war so we can once again hear ourselves think above the rattling of plastic swords. PG,patience gone!!

Indeed, Indeed. Thier grotesque hyperbole will be their ultimate downfall.  MaunderMin you are a scholar of the highest caliber, a student of the oft fabeled Austrian Economics vein of though you must surely be.

Professor Roubini is right. The recession has already started. Nobody knows how far it will go. Remember the Asian crisis of 1997-1998. When it started, nobody knew it would be so terrible: governments fell, capital was destroyed, the population suffered.  Economic crisis in capitalism is inevitable.

You are doing great jobs. Without you, how can the bulls celebrate?

Very pleased to know that here is a piece of land for the hard landing callers.

Do you hard landing callers really understand the meaning of recession?  Just cry for recession is not making sense!

The best thing for Americans would be to take as much as possible of their money out of the bank accounts.  Don’t expect to see long queues in front of the banks in the U.S., however, as the national savings rate was already low. Even if the situation deteriorated many people would have nothing to take out. 

The economy is doing great. The data speaks for itself as well as the commentary from people who are in the know: CEO Bill Zollars. (emphasis added) Taken from calculated risk:  Fortune: How is the holiday season shaping up?   Zollars: We’ve got a window now of about ten weeks or so where we should really see a big increase in shipment volumes as we get ready for Christmas. We have not seen that, and that’s a concern. Last year’s inventory buildup for Christmas was lower than historical standards, and the season ended up okay – not terrible. This year you have some easy comparisons, so you would expect to see more of a preholiday inventory buildup, but we have not seen that. Maybe it’s coming later. Maybe it’s not coming.  … Fortune: Getting back to the economy, could things get worse before they get better?   Zollars: We have not felt the bottom yet. I’m still a bit nervous. Right now, if things continue to deteriorate, I’m worried we may head into a recession. [I feel that] there is a one-in-three chance of a recession. We are prepared for the worst and hoping for the best. More Housing woes and blatent signs that nouriel’s call for continued deteriation in the housing market is undeniable. How many more revisions will NAR make? Here’s the latest data from NAR that underscores nouriel’s prescient call on the housing downtrend: The comedians at the National Association of Realtors (NAR) revised down their forecast today for existing home sales in 2007 again. Their current forecast is for sales to be 5.78 million in 2007, down for 5.92 million last month.  Compare this to their original forecast from Dec ’06 of 6.4 million units in 2007. (My forecast was for existing home sales to be between 5.6 and 5.8 million units).   The NAR forecast is still too high, even after eight straight months of negative revisions. Luckily for the NAR, they still have two more downward revisions to go.  More bad-news-bears: Alcoa, the first member of the Dow average to report results, reported that their sales had declined by 3.2%. Chevron intimated that third-quarter net income was “significantly below” last quarter’s record period. Boeing has announced the delay of their 787 Dreamliner deliveries from May 2008 to the end of 2008. Goldman sacks confessional: Goldman reveals effect of credit squeeze By Ben White in New York Published: October 11 2007 00:51 | Last updated: October 11 2007 00:51 Morgan Stanley disclosed that its quantitative strategies traders lost $390m (£195m) in a single day in August because of what the bank on Wednesday said was widespread selling by investors.  The disclosure helped explain the $480m quarterly loss in quantitative trading that Morgan Stanley reported last month and highlighted how volatile the markets were in the third quarter as the credit squeeze spread and unnerved investors around the world.  Morgan Stanley reported an overall 7 per cent fall in third-quarter profits. The disclosure came as Goldman Sachs said it lost more than $100m on six trading days during the quarter but earned more than $100m on 23 days. The information came from the banks’ quarterly filings with the Securities and Exchange Commission. Also: Strip-Mall Vacancies Hit 7.4%  More confessionals from Goldman: Goldman CDO, CLO Holdings Fall 53 Percent in Quarter  And Nouriel’s excellent commentary: “110K jobs were created in September and the July and August figures were revised upward. So is it all rosy for the job market? Not really for several reasons  First, the August revision (+93k) was almost only goverment job which went from -28K to +57K (a +85K revision).  

the figures by the government are fake, and do not have anything to do with reality. Costs here in arizona have gone up alot. of course the gov’t figures dont include costs of buying a house even though 70% of the people live in houses, 30% in apartments or rent. they do what the house would rent for, and rents are much higher in phoenix than a few years ago. i pay $850/ month for a studio with cable, internet, electric. i used to pay about $650 and i had a 1 bedroom and nicer place, just a year or year and 1/2 ago. This is a basic place not in a bad area. gas of course is much more and i just read food is up 15% in arizona this year. I spend everything i earn now just to get buy, i never in my life have ever been in this position. i’m moving out of phoenix and may just go overseas since i have sizable savings. so, it is not a surprize to me that people are having a hard time making ends meet. stocks will rally a little longer, they did in 2001. plus, i have heard there is lots of cash sitting around so i shorted a little during the meltdown, but got out before the fed cut as i knew the market could move against me. still looking to short, but i’m waiting for more highs first to draw in the greedy longs! longs will get slaughtered just like in 2002!

AG wrote:”Inflationary conditions and recession can hand in hand. America is heading for a recession.”  Exactly, as the U.S dollar loses its purchasing power there will be a transfer of wealth to those countries that experience currency appreciation; so in effect demand will shift to said countries as U.S demand “falls off the roof.”  This increase in purchasing power will allow those nations with positive savings rates to expand their capital stock and as a result labour and output will also increase.  Imports will become extremely expensive for the strapped, tapped, and on the edge American consumer as He suffers the brutal consequences of true inflationary pressures, coupled with output that is reflective of a severe contractionary phase of the business cycle.  Let the purging of the excesses begin.  

If you are making love with “hard landing calling”, just do it. I just make fun with making money.  Yes, USD may becime a piece of shit. I have not been care since such experts told me such a great finding a few year before.  

I have been lurking for a while but I think its time I made a comment. The symptoms the US economy is showing is not unique. Over the course of economic history, there has never been a case where a final deflation of an asset bubble did not result in a recession or worse a depression. In the US, the case is particularly acute since this housing bubble appeared post the stock bubble of the late 90s/early 2000s. In essence, it is the cumulative effect of multiple bubbles. Without savings and with the kind of leverage the ordinary American has at the moment, there is very little to prevent a severe recession, even with massive rate cuts from the Fed. We have seen similar in Asia before in the the 90s and throughout economic history. The idea is to make the recession as short as possible. This would require pain and loss. In other words, bite the bullet. From a clean base, the economy will emerge stronger and better for future growth. You have had your party. Now its time to pay the price of the excesses.  Japan did not do that, and to this day, they are still paying the price of the mistake of not taking the pain in 1990. That is 17years of economic malaise.   Stock markets are emotional creatures. It takes a while for reality to bite. But when it does, it will be dramatic and it will be painful. It has happened many times before in history. And if human beings are anything, they are very very predictable. History ALWAYS repeats itself.  Good luck, Americans.. I’ll be worrying over here about the asset bubbles we have in Asia.

@Ralph on 2007-10-11 02:54:46,  it would accelerate the decline substantially. A war against Iran would mean more money drained from the bond market at a time when Oil and Gold prices skyrocket and inflation fears pop up out of nowhere and people start selling bonds and make yields go up. That then will kill the economy.

http://www.dailyreckoning.com/Writers/Mogambo/DREssays/MG101007.html  It´s often worth reading articles from the Mogambo Guru. He makes depressing news fairly funny:  ”Being naturally paranoid and distrustful, I vote for corruption every time, because the history of the world is clear; the amount of corruption at the end of long booms is always at unbelievable levels. And then Jeremy Grant at the Financial Times hears us talking about corruption and volunteers that, “The number of cases involving manipulation and false price reporting in commodity and commodity futures markets caught by U.S. regulators has reached record levels in the past 12 months. The Commodity Futures Trading Commission, which oversees such markets, yesterday revealed it had collected a record $540m in civil penalties, restitution and disgorgement (the return of ill-gotten gains made as a result of a fraud) from cases involving fraud, manipulation and other misconduct. It said this was a record.” Hahaha! A record! It’s just history repeating itself, as corruption is at the maximum!  The good news is that when the regulators get around to looking at the staggering manipulation in the gold and silver markets, they could probably balance the federal budget for years to come if they forced the manipulators to “disgorge” their “ill-gotten gains” as a result of the price-manipulating frauds they committed for the last few decades!  [...]  So I decide to celebrate Ron Paul winning the Presidency, and the fact that this shows real intelligence in Americans, with a good old-fashioned, “Lost Weekend”, booze-guzzling party. But just as I knocked a few drinks back in one long pull on the bottle, just when I think people are getting smarter, here comes Frederic Mishkin, who is one of the new guys at the Federal Reserve who apparently have to say stupid things as part of the secret Federal Reserve initiation process (probably getting their brains knocked out by spanking, and then chanting “Thank you sir! May I have another?” a la Animal House).  For example, unbelievably, Mr. Mishkin is reported to have remarked that, “Gold is not a particularly reliable indicator of inflation,” which he thinks somehow handily dispenses with that particular piece of evidence, especially since gold is roaring along at over 30% a year and thus has been acting like price inflation is roaring at over 10% a year (just like John Williams at ShadowStats.com calculates), which I am sure is probably true because the M3 money supply (monetary inflation) has been growing at about 15% a year, and price inflation is caused by monetary inflation, and in roughly the same degree. It’s that simple!  So even as I am feeling the initial effects of greedily chugging down some powerful alcoholic beverages start to kick in, Mr. Mishkin is rendered comically beyond laughable when he says that not only has inflation in prices come DOWN, but that, “Inflation has come down in the old-fashioned way. Tighter monetary policy and a commitment to price stability by central banks throughout the world have led to lower inflation and an anchoring of inflation expectations.” Hahahaha!  [...]  If you look at my face, you will notice that I am having a hard time not breaking into a big, loud belly laugh of Maximum Mogambo Mirth (MMM) as I say, “And I am supposed to believe that the Fed will NOT create the money and credit to allow the government to borrow all of this $900 billion more, and then even more when that runs out in about two years (extrapolating the long-term trend)? Hahahaha!”  And did he say “tighter monetary policy”? Hahahaha! Required Reserves in American banks are, in total, still only a lousy, insignificant, almost nothing, squat-like, stinking $40.2 billion, which is about the same low, low, low amount that it has been since 2000, while deposits and loans grew like a cancer to trillions of dollars, and now Required Reserves as percentage of anything new in the banks is certainly the lowest in the history of banking, because there is nothing less than zero! Hahahaha!  So, for how much assets and debt is this piddly $40.2 billion counted as its “reserves”? Doug Noland, in his Credit Bubble Bulletin at PrudentBear.com, reports that bank credit alone is $8.923 trillion. And how fast is bank credit growing? “Bank Credit,” says Mr. Noland, “is now up $280bn over the past ten weeks, with a $627bn, or 10.1% annualized, y-t-d gain”, while “Loans & Leases surged $25.9bn to a record $6.574 TN (10-wk gain of $249bn).”  So it looks like about $15.4 trillion in bank assets and liabilities is being backed up by a minuscule $40.2 billion! That’s a microscopic 0.0026%. A quarter of 1%! Hahahaha! Fractional reserve banking at its finest! Hahahaha!  And all of this is Mr. Mishkin’s “tighter monetary policy”? Hahahaha! I’m laughing my Stupid Mogambo Butt (SMB) off here! Hahahaha!

@Anonymous on 2007-10-09 17:08:35 said “No one talks about the inevitable tax increases coming”  I am really surprised that you haven’t seen the tax increases already – guess they were really stealthy. The rapidly rising home values prop up great property tax collections to fund our protection from our mortal enemies. Property tax is a ‘win-win’ tax – Taxes are collected and consumers see a wealth effect (unlike rising income taxes that did Bush Sr. in). That’s why Greenspan promoted ARMs as a channel for monetory policy. That’s why the foreclosures (and consequent flight to Fixed mortgages) must stop. The Matrix must be funded by keeping people in their homes and their wealth-effect regulated through ARMs.  If the foreclosures don’t stop, then Ben would need to engineer wage inflation (investments can no longer drive wages since world is overinvested now – Keynes gave the investment->income->savings causation) and really have to end up killing the dollar. Rising wages with higher income taxes would again be ‘win-win’ taxes to fund the war(s) against enemies who will stop at nothing to destroy our free way of life earned over 300 years. To hell with the dollar, we need to live first.  As a few financial historians note: Politics drives Economics NOT the other way around. Wake up. Given this global bubble, there WILL be a depression (Great). We should NOT ask to have our noses cut off by asking for a recession, for, it’s NOT a recession but a depression that we are really asking for.   The US and Ben will have none of it.   As for the politics, the deficits REALLY don’t matter. The ‘dollar by the wheeler-barrow’ will still be backed by a political power that has enough resources to destroy the planet nine times over.   Like Ben’s mere threat to board the helicopter (hence the SURPRISE 50 bps cut – is it that ‘surprising’???), the US’s mere threat to use that awesome firepower is enough to restore faith that the US and her dollar will be around for a long and NOT DEFAULT (Here’s a hint: stay long). Like Mohammed Ali, a ‘crazy man’ cannot be trusted to know fear and be threatened with defeat (or default). Just ask the USSR.  Deficits matter for weaklings; Argentina was proved one during Falklands – that’s why UK’s bonds are called Perpetuals – they NEVER will pay principle – rollover is GUARANTEED  Invest knowing that Politics drives Economics and you will be a very rich man (and then seek power) – as Hank Paulsen has.   Print First – Ask Questions Later. or is it Shoot First – Ask Questions Later?  

OK, I’m getting annoyed. Anyone notice the title of this blog? ‘Roubini’s Global Economics Blog’ its not ‘Roubini’s Domestic Day Traders Blog’. This is about macroeconomics, not some get rich quick day trading scheme. Looking here for day trading investment advice is not appropriate. Roubini is a very insightful macroeconomics commentator. If you can apply that information to your trading, bully. Complaining here that you have lost money based on a macroeconomics blog just makes you look like an idiot.  By the way, didn’t anyone tell you that the S&P 500 stock market index has lost 60% of its value in real terms since 2000? Now thats where macroeconomics comes in. Dollar in debasement.

The most spectacular outcome of these few years of monetary prolixity has not been only the USD debasement but the inefficiency of the Banks system as an intermediary for channelling money supply, the inefficiency of the Central Banks to notice the perverse effect of their miseandavours , the lack of control of the financial system through the national and supranational bodies.  When hearing Mr Greenspan and seeing the aftermath of his contribution , the conclusion is the USA is not the country of the second chance only but the country of the hundredth chance. 

With the consumer tapped out, the pricing power of companies is going to be very low, but everything hanging behind the supply chain is going up. Margins are going to get squeezed. That will be bad for profits and stock market.  If the fed cuts it will all get worse.

Asset backed commercial paper drops another $6.8 bill-credit problems far from over as the libor/treas spread is still telling you…

Dr. R., et al In our debt based fiat currency system, with a negative saving rate for several years, we now have to have about $5-6 dollars of new debt to get one dollar of GDP, (whatever that is and however it is measured).   Why has the consumer not stopped buying junk for the McMansions and ministorage bins which he is addicted to? Availability of more debt.   Where does the debt come from and what is it used for to keep the consumer, 70% of the economy, alive and moving?? With MEW now almost completely gone there is only one source, high cost credit cards. Heres the stats.  http://www.reuters.com/article/newsOne/idUSL0936312820071009?sp=true

Looking at the market yesterday, it was great to see the old “two o’clock save” still in action. It must be nice for those guys. I mean, they take a 2-hour lunch, have a couple of martini’s, and still have time to step back into the market and inject some serious cash into the index. I tell ya’, what will these guys do if they ever have to get a real job ???  ——————– Separate Topic: Moral Hazard NOT !!!  Here’s a cute little true anecdote about debt and Moral Hazard. Our family has an acquaintance – a woman in her 50′s. She went into one of the major US banks last week (a big bank … one of the household names) and asked for a loan for just under $200,000. NOW … this particular lady does not have a job and has no means of support. Naturally she expected to be turned down by the bank (and actually for financial reasons it would have helped her if she had been rejected). But imagine her surprise when the loan officer from the bank called her and told her that the loan was APPROVED. And in fact – the bank even offered to bump up the loan to $250,000 !  So, we’ve got a person with no job, no visible means of support .. and a major bank is willing to kick over $250,000 no sweat.  It doesn’t look like Moral Hazard has had much effect on the banking system … at least not where I see things down on the street.   We’re not out of this great Credit Bubble yet, and somewhere out there a major blowout is still coming.  Pete, CA

@Pete, CA,  WOW … what did she want to do with the money if I may ask? Buy a house?   In Germany that woman wouldn´t have made it to the door!  AFFG

I will be happy to have a comment from somebody on this forum on the SSEC index. It seems to me that this can be “the mother of all bubbles”.  You can take a look of SSEC index at: http://www.bloomberg.com/apps/cbuilder?ticker1=SHCOMP:IND  Thanks in advance for your comments.  Danilo Italy

how about 374,256.68  is it recessionary

Walmart posts 1.4% sales growth. Target posts 1.2% sales growth.  In real terms, this unmistakably shows consumer spending is falling as we speak. These are RECESSIONARY numbers.  All the government statistics about employment, inflation and GDP growth are lies. The business reports for revenue growth cannot be manipulated the same way.  I think foreign investors are finally realizing the charade that the government (our Ministry of Truth) is perpetrating with our economic statistics. 

“Lawmakers are pushing a variety of bills that would punish China for what they see as unfair trade practices such as manipulating its currency to keep its value low against the dollar as a way of boosting Chinese imports and making it harder for American companies to sell their products in China.”  hey kettle, you are black  Here is another classic outtake  ”The improvement reflected a 0.4 percent rise in exports…The boom in U.S. exports”

*KROSZNER SAYS FED MONITORING INFLATION `CLOSELY’  nobody believes the Fed anymore, it seems that everyone convinced that reflation is the theme. and it indeed looks like that. Growth and prosperity must be protected even if it comes at the price of inflation and a devaluation of dollar savings vis a vis the rest of the world. The US is in effect borrowing from the future, hoping that the borrowed credit will earn a high enough rate of return to make up for the initial dollar deval. This is a risky strategy for two reasons: devals are addictive if they become part of mainstream econ.policy. More importantly though if the dollar starts to slide big time, it will be harder to reflate the economy to a growth rate that compensates for the deval. The deval risks sending the economy down on a slippery slope..  From the tandem  1. Gold as safe haven, Commodities that are priced in dollar, mainly oil  2. Dollar (fiat money)  3. Equities (nominal growth)  It will be nominal growth that will be reflated, dollar devalued and as a result the dollar value of commodities will rise and gold enjoy its status as an alternative store of value.  I think this pretty much sums up ‘The Game’ at the moment.  While this seems all very logical, I believe that the $ should not be allowed to collapse, given the USD’s status as a reserve currency. There are large concentrated holdings of dollars, central banks who will have no choice but to offload their dollar holdings. Maybe they are already doing that. This will push bond yields to the sky in the US, and will ultimately hurt the US economy more than what can be achieved with a short term deval of the currency. The Fed isnt truly an independent institution anymore, it feels highly politicized, therefore for them to act in the sound long term interests of the US doesnt seem to be on the agenda.  Short term the dollar seems oversold anyay, and I wouldnt be surprised if we saw some dollar supporting rhetoric from policymakers. The Fed is scared to be seen not rescuing the markets, but if the dollar blows up the blame will also fall on them, so they will try to walk a tightrope between not letting the dollar collapse brutally and keeping the stock market bubble from bursting violently  Jeremiah ”You will go to them, but for their part, they will not listen to you” 

The SPX and SSEC going higher is not really what matters. What matters is that you are measuring things with shrinking yardsticks. It is the USD and the RMB that are losing value!  For the USD, that’s very clear: WTI back above 83. Gold above 750. Copper at 3.70. Grains just below their recent highs. The Euro back above 1.42. USDCAD at 0.97. For the RMB, inflation figures in China don’t leave room for discussion.  The point is that, unless the Fed changes course, the USD will lose value against real things, no matter what central banks of countries with Current-Account surpluses do with their exchange rates:  - if they stop intervening and let their currencies appreciate against the USD (as Claudio Haddad recently recommended for Brazil on this site), prices will keep stable in those currencies, but will rise in USD;  - if they keep buying dollars and printing huge amounts of their currencies (as China, Argentina et al are currently doing), they will keep the exchange rates stable but will have high inflation, so prices of real things in USD will rise just the same.  Players all over the world are starting to assume that the USD will just keep losing purchasing power in real things. The US is risking a massive run away from the USD and the loss of its role as reserve currency. As Krugman said in his latest paper, the USD could have a “Wily E. Coyote moment”. And as he also said, the US in 2007 isn’t Argentina in 2001. Only that, contrary to what he meant, the US could be in a much direr situation now. Because even when Argentina’s imports dropped from 20 billion USD in 2001 to 9 billion in 2002, she was an oil and natural gas exporter. What if oil and ng exporters now decide (realize?) that they have way more than enough USDs and USD-denominated debt in their reserves and stop selling their precious finite, absolutely-exhaustible resources to the US until they have exchanged at least half their stacks of printed paper for real things? Given that the US imports 59 % of the crude oil and petroleum products they consume, the impact on US life would be truly shocking.  The one thing the Fed can do to stop this collision course is to send a very strong signal that they care about the USD’s role as international reserve currency and about it keeping its purchasing power in internationally traded goods. That signal would be a surprise rate HIKE of 50 bp before Oct 31.  After all, the last rate cut was based on wrong data input (Aug NFP -4K when it turned out to be +89K). A decent retail sales data tomorrow would round up the needed support for reversing that cut. But it would be even better if the Fed reversed the cut in the face of a bad retail sales data. Because that would send this message to the world: “We acknowledge the important role the USD plays in global trade and we assure all countries that our monetary policy will be geared first and foremost to preserve the purchasing power of the USD for international transactions, so that countries can confidently hold it (or debt denominated in it) as a store of value.”  Conversely, this was Sep. 18′s message: “Look, the only thing we care about when setting our monetary policy is the level of our internal economic activity. And by that we mean mainly the production of goods and services that you can’t buy from us. We don’t care much about our currency holding its purchasing power internally, let alone when measured in internationally traded goods. So, if you use our currency to trade between yourselves, it’s your problem. And if you are so stupid as to use it (or debt denominated in it) for holding your savings, you do need professional help.” 

“1) Dollar could rebound substantially due to sentiment extreme, and world-wide speculation in China. Do you realize that China reserve has been soaring lately much mroe than the trade surplus? The current theory is that too many chinese firms borrowed US dollars and turn around and throw it back into china — why not? Even a brain-dead know Chinese Yuan is going to appreciate, coupled with the hot Real Estate and Stock Bubble!”  sure, dollar rebound when Fed continues to knife $. stupid or smart call, you decide.

The main point is that the FED should have never cut the FFR.  @RealThink,  you are completely right. But I NOW am not so curtain they will not cut.   The main point to be made is that the economy as such might appear to be strong, but it is growing on a unsustainable path and has severe structural problems. Too much consumption, too little exportable goods and services. That means that people have to stop consuming and start saving, while banks divert savings from consumption to investments. That can only be achieved when interest rates go up. And I don´t mean the fed funds rate but the rate of free capital for savings. In order to do that the FED has to throttle the credit spigot and make savings scarcer. I don´t believe that it can be achieved with the FFR. I am inclined to believe that an increase in the Reserve Requirements Ration (RRR) might be the better way.   I am slowly disbelieving that banks (especially US banks) actually know how to find proper real investments.

On a personal note, my Father is a retired fireman and after serving the community in this role, he was served notice by the government he served that his insurance was being scaled back. This is truly great stuff. Thanks Ben, “W”, Hank ! I hope the transfer of wealth to the top serves you all so very well and you sleep better than ever as your policies punish retired public servants, all fixed income retirees and literally starve the world’s poor in not only 3rd world countries, but soon developed countries with intitials USA now and in the near future. Good luck with the crime fighting ! By the way, how will anyone who is not a trust fund baby yet is young and getting married in the USA ever buy a home again at these prices ?  How Hank’s 500 visits to China have not included a transfer of “market management expertise” to the Chinese I do not understand. How does a Communist government allow such a bubble to form in the Shanghai ? Just sell the damn futures morons and the herd has to follow ! I had dinner with a friend who lived in China for a few years. According to her, the building inequalities in China have currently led to unrest and possibly may even result in Civil War at some point. What are the silly Chinese with their super Shanghai Bubble going to do with all of the losers when reality sets in ? How are on Earth have they allowed this to happen ? Dave Chiang, any thoughts ? 

AFFG thanks for your comment  i dont live in the US, hence only get an impression of things through what I read, mostly on the net. it seems to me that the public’s perception of inflation is at a much higher level than what the Fed tell us inflation is (not the Fed technically, but you get the point). so… if you indeed get high inflation prints, i would not be surprised to see a public uproar.. which could force officials into reasserting a strong dollar policy.  the Fed talk of well-anchored inflation expectations is also questionable to me. the Conference Board’s index for inflation expectations 12month forward is rising steadily on a multi-year basis. if things go on their current path, the expectation could rise to the 5.50-6.50 range (its now at 5.0%). its been oscillating between 4.00 and 5.50 for the period i could check (1987-2007).   well anchored inflation expectations.. ???    Jeremiah  ”You will go to them, but for their part, they will not listen to you”

http://finance.yahoo.com/q/it?s=CFC  Angelo Mozilo doesn´t seem to be confident that CFC stocks will get any higher.;-)  @JMa,  my father is retiring too and he got something similar. The only difference, his pension is denominated is Swiss Frank. He came back from China and was shocked to see the time frame in which Chinese companies expect their investment to amortize. The expect a full scale multi billion industrial investment to be amortized in … hold you hats on … 2 YEARS!  He said they categorically refuse to understand that they will eventually loose their low wage competitive advantage and that they will have to extend their investment horizon now. But they just ignore it. He was also shocked to see that the plants built in China are 70s Japanese technology which are not built in the West anymore because they are by far and large too small and not competitive. He said he had visited the Japanese original in the 70s and was shocked to recognize the exact copy of the plant in China. By the way they bought the technology. Bottom line: They do not spend one cent in process engineering and he doubts they actually are able to do so. I was stunned to hear that. If this is what the Chinese economy is made of, they are going to get a bad surprise when they reevaluate their currency. It doesn´t suprise me that their economy is running at 10% / a.  I believe that inflation and the induced inequality is Chinas main concern and what ever happens, it will be certainly not very nice. When the currency reevaluates, prices will go down, but so will some investments, leading to a shock on the stock market and in the full economy as people loose nominal asset values and companies get beaten up by foreign companies.  Currency manipulations never pay off.

We have an interesting tide developing in the equity markets today, at this very moment, momentum may be being reversed by some very big players…. Stay tuned, this is going to be interesting…

http://www.bloomberg.com/apps/news?pid=20601087&sid=aWKV52Fxn7Gc&refer=home  Oct. 11 (Bloomberg) — European Central Bank governing council member Axel Weber said the bank may need to raise interest rates to a level that restricts economic growth to keep inflation under control.  “If risks to price stability are threatening to materialize, monetary policy can’t lose sight of its primary mandate — even if that means no longer supporting the robust economy or becoming restrictive,” Weber, who also heads Germany’s Bundesbank, said in the text of a speech in Munich today. There may be an “additional need” to raise interest rates, given the “expected acceleration in euro-region inflation over the coming months.”  While Weber acknowledged “increased uncertainty,” he said the ECB needs to remain focused on fighting inflation. “Price increases are taking place on a broad front and are no longer limited to energy and volatile food prices,” he said.”  I want to see that. The ECB hikes and the FED cuts … wow … MAN … What´s happening … nobody can tell me that the stock market is plunging because JP decided that some kind of overblown Chinese new economy stock was not worth the bubble price it was being traded at. Nasdaq down 1,10 % and falling … Dow down sharp … oups …

It looks like a free fall … if you ask me …

Don’t call it a free fall yet.  

AFFG — If China gets into trouble, that will signal a dark future for the US. The public+private debt of the US is 48 trillion dollars (with social security and medicare liabilities it is 98 trillion). Still, the economy is going forward, because this debt is financed by a huge borrowing from the future (people, companies and the government pushes an ever increasing debt problem into the future). It goes like this: a person borrows money, the debt is securitized by the bank and sold, someone buys it in the hope of selling it for more money, the person in the begining of the chain may invest in some funds which invest in these securities, thus this person makes profit on its own debt. Debt becomes wealth. The price is an ever increasing amount of debt pushed into the future. This game could not work without cheap import, which prevents inflation (because this game creates money out of nothing), and without the ability of the US to pay for its import in its own currency. China supports the US by 200 billion dollar a year, which is not that much. But it allows the 48 trillion credit-game going. Once this support is gone, the credit game is over, and you end up with a 48 trillion dollar problem.

WOW, a 200 point down reversal for the Doe, ease Ben, ease!! Hurry before it gets worse!

Look at the bid to try and hold 14K. Man, this is criminal.

The U.S. government lies. Their inflation numbers are a lie. Anyone working to make ends meet in the U.S. knows that inflation isn’t “manageable”, but I guess if they say everything is okay on the news then we are all supposed to feel better.   I have seen many comments to the effect of “those darn American consumers, buying things they don’t need with money they don’t have”. It’s much too sweeping of a generalization.   The Fed says that 43% of Americans are spending more than they make. A related fact, 1 in 5 Americans are scraping by on insufficient funds – low wages and/or paltry aid. The number one cause for U.S. consumer bankruptcy? Medical debt. What were those selfish SOBs thinking getting sick without being wealthy? BTW, many (if not most) of those filing due to medical debt are insured. You must have been living in a cave to miss the increases in housing, energy, and college costs.  The short version? It’s insolvency – not liquidity.

WASHINGTON (Reuters) – Treasury Secretary Henry Paulson said on Thursday he backs a strong dollar, reaffirming long-standing policy and addressing concerns in Europe that a soaring euro may undermine economies there.  

http://money.cnn.com/news/newsfeeds/articles/djf500/200710112049DOWJONESDJONLINE001100_FORTUNE5.htm   Shaken, not stirred, please…

Dave Chiang  Good Post as always   It will take some getting used to the idea that $ are being held for other than the best intentions.  My personal conviction is that I should punt. The punt is a good choice when on third down and the clock is with me. When faced with armageddon I may choose to run the ball, ie all out offense. What, I don’t know — kill or something. What the hell would Ben Bernanke do ?

print faster  better definition of recession would be based on decline in both rate and mass of productive economy profit. this allows for, contains, the possibility of simultaneous recession and asset price inflation. problem is, profit as calculated on an opportunity cost basis or by the BEA is a mismeasure.

ZSE was on fire again this week, too  http://www.zse.co.zw/ 

My god, I thought the consumer had retrenched, US retail sales for september +0.6%. Stop selectively quoting data to support your nonsensical arguments.

 ”The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for September, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $380.2 billion, an increase of 0.6 percent (±0.5%) from the previous month and 5.0 percent (±0.8%) above September 2006″ according to http://www.census.gov/svsd/www/retail.html There are large errors in the estimates (+-0.5%). I can’t understand how the large imprecision i econonomical data is ignored. The figures indicate anything from low growth to very high growth.  

@CleveR,  I would advise you to do the same thing:  ”As for retail sales, excluding motor vehicles and parts, retail sales rose 0.4 percent last month, slightly ahead of analysts’ expectations for a 0.3 percent increase. Gas stations’ sales were up 2 percent in a month that saw oil prices spike.”  Retail went up because prices for Oil related products went through the roof not because they went to buy more stuff!  ”U.S. producer prices advanced by a larger-than-expected 1.1 percent in September on rebounding energy prices, Labor Department data on Friday showed, but a key measure of core inflation at the producer level rose by a slight 0.1 percent.”  Just as I said, the inflation game is coming to haunt us again. 1,1% … that´s a monthly number! Prices increased more than 13%/a … WOW! The core inflation is low … but don´t forget, the core always lag´s to the wholesale number. If companies can´t pass the prices to consumers, then either there is a fair chance that profits will get under pressure or if they can … then the CPI will go through the roof and will make further rate cuts by the FED look fairly stupid.  @Guest on 2007-10-12 07:56:08,  Your ESTIMATE for GDP growth might be at 3% in dollars. My CERTITUDE is that inflation numbers as a whole are up 13%/a! 

ehm, we from the History Repeats Itself department would like to present something on the lighter side  A part of the movie “TRUE STORIES” from 1986: http://www.youtube.com/watch?v=K2TyF1CbsDs  In this movie the Talking Heads song about the commercialization of America mentions Gulf+Western in the line “With your Gulf and Western and your Mastercard, got what you wanted and lost what you had”  Sort of sounds like today albeit a bit differently

Re: retail sales  Excluding gasoline and food sales were up 0.3% Excluding autos, gasoline and food sales were up 0.06%  General merchandise stores, the second largest sector after autos, sales were DOWN 0.1%.  Restaurants and bars (#4 in size)…0%  It looks to me that, except for autos which swing depending on how sales are booked, almost all the “discretionary” spending is being curtailed.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aDFa.ech7cUs&refer=home  This is what I mean:  ” “The stronger-than-expected PPI report should add some upside risks to next week’s headline CPI number,” said Zach Pandl, economist at Lehman Brothers Holdings Inc. The Labor Department next week reports on the consumer price index.  [...]  Raising Prices  Faced with rising commodity costs, some companies are raising prices to maintain their profit margins.  Kimberly-Clark Corp., the maker of Huggies diapers, said Oct 9 it’s raising prices in the U.S. 4 percent to 7 percent on Feb. 3 to counter higher raw material and energy costs. The increases will affect products in the company’s consumer tissue and baby and childcare businesses, the Dallas-based company said in a statement.  “The increases are necessary to offset significant inflationary pressure from higher raw material and energy costs,” the company said.  Some companies aren’t passing on all their cost increases to consumers.  “We pass on a lower rate of price increases to consumers than we are feeling in our input costs,” said Stephen Sanger, chairman of food processor General Mills Inc. yesterday at the annual Business Council meeting in Williamsburg, Virginia. “  

I remember the same thing happening back in the mid-70′s. Retail sales were up dollar rise because of rising energy prices due to the OPEC embargo.   RE: I have to agree with anon, guest, your figures are to high. You made the same mistake last quarter and got burned on the downside as I remember. I don’t believe Personal Consumption came in at 2.98% and needs to be revised downwards but that is for a later date. But other factors such as increasing losses in residential investment and flat capital spending will be a drag on growth.

people love to live in a lie. waking up from a dream or truth is too painful. real inflation, medicare and social security crisis are all too painful. please plug me back to matrix again