Your Take on the Recovery?

Here’s a perplexing new twist in the story of America’s supposed recovery from The Great Recession. While auto manufacturers can barely keep up with demand, sales at Wal-Mart, Macy’s and some other big retailers have gone flat. What’s going on here?  The easy explanation is that auto showrooms attract a different class of shopper, one with more discretionary income. Our take, however, is  that more than a few Wal-Mart shoppers who have cut back on non-essential purchases are in fact driving shiny new SUVs.

While this might seem paradoxical, there’s a simple explanation – namely, that even households that don’t have two nickels to rub together at the end of the month can easily qualify for a $40,000, five-year car loan. With interest rates as low as they are, especially for big-ticket items purchased on credit, the buy-now- pay-later engine of the U.S. economy is able to thrive even with real incomes stagnant and new employment coming mainly from minimum-wage jobs.

The Question of the Week is:  What’s your take on the recovery? Is it about to come to a screeching halt?  Did it ever really begin?  Will the economy ever return to “normal,” whatever that means? Are college grads doomed to live with their parents until they are 35 or older, like they do in Spain?  Anecdotes drawn from personal experience and the lives of friends and neighbors are welcome.

  • Luke August 29, 2013, 4:32 am

    Totally fictitious recovery since 2009, and a stock market which since that year has been soaring so steeply that according to Gann Global (they keep the largest database of 200 year market stats in North America) is now already in the ultra-elite group of 4-5 largest and fastest stock bull markets in 3 centuries … and appears to be closing in on the No. 1 spot next year. They (and others) forecast the bull trend continuing up till we see S&P 3600 and a DOW north of 20,000 – 25,000. These are the bull markets that fool all rational observers – once in a generation bull runs that had no rational basis to exist. The Gann system is powerful. And there are others who forecast it as much as five years ago also. David Bensimon of Polar Pacific out in Singapore was one. Like the Gann group, he spent a decade meticulously reconstructing global markets spanning three centuries. I read around, subscribe to absolutely no group or school, and look for market observers who employ large databases of market history, or who work on discerning the really big macro trends. Cannot absolutely abide day trading, scalping, or any kind of trading. Give me an analyst who has a great track record of making only a few major calls on the indexes say once every two to five years. They call the big direction – up, down or sideways for a good long stretch. Those are the people I get interested in. And the point is, you look for two or three of the best of these, to see **what they agree on** – then you’ve found a high probability macro trend. What I was reading from the likes of Gann Global and David Bensimon five years ago called for a major, multi year, massive inflationary bull run. It’s understood the economic recovery is fictitious, and that our standard of living is crumbling badly. But the actionable insight was, that in an all-fiat currency world, you will never see hyperinflation – nor will you see real deflation – you will see a curious economic disintegration in the Western economies, along with burgeoning growth in the industrializing world, and the STOCK MARKETS and COMMODITY MARKETS, act as the pressure relief valve to adjust asset valuations upwards as the currencies engage in ever steepening competitive devaluations. This process has been led, since 2009, by the USD equities zone. In a 20 year process of fiat currency paradigm disintegration, it is the peripheral currencies which will be thrown under the bus first. The senior currency does not go under the bus until last. So the Peter Schiff’s of our world (who lost his clients a bundle of money in 2008), keep encouraging them to play the wrong cards – convinced the emerging currencies are to soar, and the USD collapse. Instead the past five years have taught them a harsh lesson as the USD rains remarkably firm (and IMO will get a lot firmer yet – up to 90 on the USD index), and while they watch in pained bemusement, as the US indexes soar and emerging market indexes get torn to shreds. Several of these analysts called this for a major bull run back in 2007-2009. A 5-7 year run that may top the three hundred year records. This is why equating a collapsing substrate of the econy with a collapsing stock market is naive in the context of an all fiat currency world.

  • mava August 24, 2013, 6:43 pm

    BLK,

    What makes you think that the energy is less affordable than before?

    AFAIK, the cost of gasoline, for instance, in US had fallen to historical lows, around 10 cents a gallon, or something like that.

    Unless you are counting in the paper money, of course. But then, how do you count or compare anything when the value of the unit of money (paper money) has been changed so drastically and been manipulated with abandon lately?

    • BKL August 25, 2013, 6:58 am

      You must be talking about the real, inflation adjusted price of gasoline. There have been periods in the past when median income rose faster than the price of gasoline. The 1960s would be the best example of that. Median pay actually outpaced the price of gasoline in the 1970s, too.

      Maybe I am wrong, but I doubt that median pay has even come close to keeping up with the price of gasoline since 2000.

      The postings about frozen quail and abattoirs are interesting and informative. The U.S. sure does have a dynamic and creative consumer economy. Difficult to keep up.

  • mava August 24, 2013, 6:40 pm

    Carol,

    I buy whole frozen raw quail at Asian supermarkets. As Asian people have different taboos then us, they sell different stuff.

    6 (three week old) quails weighting 28 oz total are about $11 around here. These are perfect size for being a cat’s game, so the bones are all proper, not huge like those found in chicken.

    They also have raw innards, which is impossible to find in “normal” stores, such as beef, pork or poultry liver, heart, kidneys, blood, etc. These contain so many nutrients, one would have to eat a shopping bag full of supplements to get that from muscle meat.

    My cat had a urinary tract decease that would have put him on a lifetime of prescription diet, and there was no cure. However, switching to raw natural diet fixed it all in just a few weeks, like magic.

    Sort of like feeding the specified fuel to the car, in place of anything that burns, I guess.

    • Cam Fitzgerald August 24, 2013, 9:08 pm

      Just throw out the livers, Mava. Vitamin A is toxic to cats and livers are loaded with the stuff. I feed my 4 cats raw meat too by the way. I usually pick it up direct from the abatoir though and it really is cheap since the parts are all castoff bits of meat that cannot be processed or sold in stores. Costs me about 10 cents a day total to feed the whole crew and it is fresh as can be.

  • redwilldanaher August 23, 2013, 8:12 pm

    Rick, things are so swell that the big worry from people that pass for economists is that the FRAUD er umm, the FED won’t double down:

    http://www.zerohedge.com/news/2013-08-23/jackson-hole-presenter-warns-bottom-could-fall-out-economy-it-did-great-depression

    I am sure that our resident seals will be front and center explaining that it is the only course as they always do. Give more power to those that most greatly abused it. Nice solution guys. Keep those corporate doggies rollin’! Let me see, a “bang up” job consists of off loading too-big-to-fail-but-incredibly-profitable-risk from the banksters onto taxpayers, mushrooming debt (again on taxpayers) to beyond silly levels at which it can’t be fathomed by joe sixpack, forcing millions onto many more doles, paying them more to stay home and finally spending things silly to make them look better in the short run. The madness will never end but damn, look at those corporate earnings…

  • paul August 23, 2013, 5:05 pm

    I was driving a mini van with 165,000 mile everyday. I had to put some money in it ($1300.00) new coolant, brakes, etc… and then the mechanic informed me I should replace the front calipers for another $400.00.
    So I took my 850 credit rating bought a smart car, 40MPG, 0% interest for 5 years. Now I have a more fuel efficient ride and a bought and paid for back up that runs real good. Though the calipers should be replaced I’m delaying the repair because now I only use the mini van once a week or so.
    Did I want to buy a new car? Not really but I did need reliable transportation and the mini van has some miles.
    Que sera sera
    Whatever will be will be

    • John Jay August 23, 2013, 5:26 pm

      Paul,

      It all depends on your circumstances.
      My 1986 300ZX with 401,000 miles on it gets 22 city/33 highway.
      But I only drive about 900 miles a month, and I dropped collision/comprehensive on the Z 15 years ago, and registration is “only” $100 a year to Moonbeam here in CA.
      (On a 27 year old car, $100, thanks Jerry Brown!)

      My gasoline bill is about $160 a month@$4 a gallon.
      So if I doubled my mileage and cut my gas bill in half, I only save $80 a month.
      And I’d have my registration triple and my insurance double without even allowing for the cost of the new car.
      But I don’t have to commute to work anymore, so if you drive any distance you do what you have to do.
      The math determines what makes sense for us all.

      Oh, yeah, I almost forgot, I’d have to give Moonbeam almost 10% of the cost of a new car as “Sales Tax”!
      Thanks Moonbeam, way to keep me from ever buying a new car in California!

    • BKL August 24, 2013, 4:38 am

      That’s what I wanted to hear. 0 percent financing! I have never heard of that here in Japan. Americans are so lucky!

      Didn’t they try to screw you some other way, like forcing you to buy silver-plated floor mats or something?

    • paul August 24, 2013, 11:17 pm

      my commuting is 56 miles per day minimum. I ballparked my fuel bill based on $4 per gallon and avergaged miles and guesstimated a monthly fuel bill of $250.00. Cutting that bill in half took the edge off the car payment of $226.00 per month.
      Yes they did sell me an extended warranty which I promptly cancelled but not without a big fight. So all beware any extended warranty that exceeds 10% of the selling price.
      Other than that all is fine and so far Im pleased.

  • mava August 23, 2013, 4:05 pm

    I’d like to note that there are some people with somewhat good understanding of economics, who make a mistake and say “neither a borrower or lender be”.

    That, would be possible if we lived in freedom. However, we do not. We live with violently enforced paper money. Paper money is designed to be an instrument of borrowing (this doesn’t mean nor promise any repayment). When the FED prints, they suck up the purchasing power from everyone holding the paper money.

    Therefore, it is not possible to be “nor a borrower not a lender”. Those who believe it is, quickly learn when they are screwed up by their party and “repaid” in legal tender.

    • BKL August 24, 2013, 4:30 am

      Mava,

      The reason the middle class has gone along with this charade, for the last 100 years or so, is that the value of their assets has risen faster than the decline in the value of their cash savings.

      Remember that their most important asset has been their job, followed by their home.

      This arrangement is only sustainable if you have significant economic growth. That growth is predicated on affordable energy.

  • Redwilldanaher August 23, 2013, 2:41 am

    Why it pays not to even try and how 7 of 8 jobs in this “recovery” are part time and that allows that they were actually “created” !

    http://theeconomiccollapseblog.com/archives/if-you-could-make-more-money-by-going-on-welfare-instead-of-working-would-you-do-it

  • BKL August 22, 2013, 4:13 pm

    One last thing before this forum moves on. Aren’t consumer interest rates still highly variable in the U.S.? Don’t car dealerships still try to screw their customers on financing every chance they get?

    When my wife was shopping for a car three years ago, she really had her heart set on a new Prius. This was just before all the Prius recalls really put the brand in the tank for a while. Demand for the Prius was strong.

    The Toyota dealership would only finance the car at 10 or 11 percent, I can’t remember the exact percent. Japanese interest rates are the lowest in human history. Our home mortgage rate is 1.5 percent, and we have absolutely spotless credit; house almost paid off.

    She wound up buying a used Nissan Tiida with 7,000 miles on it. It has quite a lot of luxury features, including a continuous variable speed transmission which lets you drive 60 mph with the engine turning only 1600 rpm; gets about 42 mpg in a good-sized car. Not much different from a Prius and much more comfortable.

    If you factor in the financing, The Tiida cost one third the price of a Prius.

    Don’t U.S. dealerships still pull these kinds of financing tricks?

  • Don August 22, 2013, 3:38 am

    Hey Mario,
    Stay with the Japan auto electronics and 2nd choice Ford. Meeting spec’s does not have much significance on quality. ie. My wife 1998 Lexus GS 300 with 31k miles is near perfect and in 15 years changing the lubricants on occasion and couple of new sets of tires and batteries from age and the benefit of keeping and driving her car far exceeds the price it would bring. It is actually tighter than my 2011 Benz.

    On another note Gary you may be interested in learning the difference in currency and money; and you may not.

    As far as auto sales in US on upswing about 40% are sub-prime financing. Go figure.

    I think John Jay just about nails it all and why Mava doesn’t teach her cat how to hunt is a mystery to me.

    I enjoy all of you.
    Don

    • mava August 23, 2013, 3:45 pm

      Don,

      I second your take on Japanese cars. Whenever I am at the car junk lots, I always look at the odometer of non-crashed junk cars, and the difference is obvious. It it 300 000 miles on average for Jap vehicles, and 100 000 on average for domestic (bigger engines are different).

      Oh and I am a male. I don’t tech my cat hunting because I live in urban setting, and there is nothing to hunt here. But, I suspect that he is hunting anyway (he is un-castrated and un–caged), because some days he wont come home to eat at all.

  • John Jay August 21, 2013, 3:45 pm

    Mario,
    I saw a beautiful Lincoln Mark VIII on a used car lot with a $3990 price tag on the window. I have friends that love to buy old Lincolns and I was going to stop and look at it for them on the weekend. It was gone off the lot in three days!
    There are usually a dozen or so 84-89 Nissan 300ZX cars on autotrader.com within 200 miles of my zip code.
    The last time I checked, there were none at all.
    The great old used cars get snapped up fast even back here in the states.
    Enjoy your new car!

  • mava August 21, 2013, 3:15 pm

    I am not buying new cars on principle. I disagree with pricing. Besides, I think it is more prudent to buy used cars, so, that is what I do. Feels great to know someone else had just paid for most of the shine!

  • John Jay August 21, 2013, 5:56 am

    Mario,
    I am shocked, shocked to learn you are buying a new car!
    Is this the first new one you’ve ever purchased?
    Best wishes for your new car and your family!

    • mario cavolo August 21, 2013, 6:29 am

      Wow JJ, you remember that its been two decades since I bought a new one! 🙂 I have been the king of finding and buying great used cars! Ha!, even the car we now own I bought one year old and got a great deal. I’ve spent the past six months keeping my eye on the used car market here, planning to do exactly that, buy a well-chosen used car – 3-4 years old. Plenty of used car choices but in this market, remember I’m not in the USA, not a particularly attractive situation pricewise. Still some chance I might pickup a 3-4 year old SUV if I find a smokin’ deal, but as I said above, the value/offer of the new ones is quite attractive with that price point/warranty…we’ll see! Cheers, Mario

    • BKL August 21, 2013, 12:15 pm

      Japan actually exports a lot of used cars. The driving is British-side here in Japan, so they mostly export to former British colonies. I drive an old Subaru Vivio with a stick that gets about 60 mpg. Three years ago, my wife bought a real nice five-year-old Nissan with 7,000 miles on it. The only problem with my Vivio is that a couple of the power windows don’t work.

      Japanese cars really are fantastic, but young people in Japan have even less need of a car than American young people do. They face the same employment nightmare as young Americans. New car sales are down about 35 percent from 20 years ago.

  • Troll August 21, 2013, 3:45 am

    Message to Cam: where in Africa are you and why are you there? Perhaps you could share with us your take on what is going on where you are vs what is going on across the Atlantic?

    • Cam Fitzgerald August 24, 2013, 11:06 am

      Sub Sahara Africa, Troll. Wife’s family is here and due to a family illness I had an important reason to come for visit. I just never returned. It is so amazingly peaceful and friendly here and there is no snow which the last few years was making me a bit miserable and arthritic.

      It is very poor here of course. Certainly by North American standards. Life is quite normal though despite incomes of a dollar or two daily. People just get up and go to their jobs like everywhere else in the world and seem to have very ordinary lives even if the vast majority could never afford an automobile of their own.

      They dress well, eat well, get decent educations and still manage to have large families. The middle class is growing in leaps here although you need to define that idea to appreciate it merely refers to people earning above 200 dollars a month. Incredibly, savings levels are very high and typically amount to 20 or 30% of salaries if not more.

      That was a huge shock to me considering incomes are so low. Everything is cash though. That is how the economy functions. You MUST save to acquire goods. There are no credit cards. There is no lending for property or vehicles or holidays or anything else for that matter unless you have solid collateral (fully paid up property) or a solid revenue generating business.

      I know Mario will relate well to this as he sees the same thing in China all the time. People pay all-cash even for big purchases like houses and cars. There is also no social programs here either. No welfare. No pensions of note. No unemployment benefits, no food stamps and no medicare. The concept of unfunded liabilities is completely foreign because the local government simply does not make any promises it cannot keep.

      Family life thrives and it is a supportive environment where they stick close together until the kids marry and save enough to move to their own digs. Typical homes are multi-generational and living alone is not considered normal. I would not call it poor either. Anyone here who is a homeowner and manages to have a family of four children on a single income despite the low salaries is far better off than most people back in America. Most of the middle class can afford a live-in housekeeper for example and it is not considered unusual especially if you have kids.

      It is because the cost of almost everything important is so insanely low that it is possible to live very, very well on incomes that are a tiny fraction of Western standards. Try to imagine a place with no fast food outlets, virtually no processed meals or even supermarkets for that matter and a place where most people still buy their animals live instead of frozen, wrapped and packaged.

      I have observed that when you strip out the lifestyle components that most of think of as normal and substitute traditional ways and values that the so-called poverty we all pity is a myth as people here often live better, healthier lives than their Western counterparts. Obesity and diabetes are rare. Cancer is almost unheard of.

      Could it be as a result that people here eat meals prepared almost exclusively from raw fresh ingredients each day? Almost nobody out of the city has a refrigerator, buys canned foods or diverts much income to all the chemicals that we find as ordinary in our homes and medicine cabinets back home.

      The other day when Rick was inviting comments about our falling living standards I was struck by just how extreme the differences really are. Whereas here living standards are rising quickly as health practices improve, infant mortality declines and so many of these youthful African economies are embarking on an astonishing growth trajectory.

      And they are doing it in the almost complete absence of domestic bank credit and personal debt. Savings alone is powering up the flourishing number of small enterprises that pop up daily. I see it every day. The construction boom is so far off the charts they ran out of paper to plot it.

      I have to agree with Mario on one major point he often makes. It is hard to hurt an economy where all the assets are paid off in full and folks, despite their low incomes, often have more money set aside for a rainy day than half the households in America.

      It beggars the imagination that the poor are sometimes wealthier than the so-called rich. Anyway, this short post is the nut of the idea I started the other day but could not finish because my internet connection was grounded.

      It is a jungle out here though!

    • Cam Fitzgerald August 25, 2013, 6:19 pm

      Kind of surpised you never responded, Troll. What I was questioning in my post is the essence of what wealth really means. I also questioned what is poverty by making some comparisons.

      My conclusion is that accumulations of money do not always convey good information about the quality of life differences between here and there. So what is poverty then if it cannot be measured in mere dollars? Who is really better off?

      Is it the crack sniffing glue-head in some inner-city living off government welfare benefits, food banks and free transit passes while some poor sap half way across the planet who enjoys just a tiny fraction of his monthly income still manages to support a large extended family and enjoy a healthy lifestyle?

      The methods we use to conclude who is rich and who is poor are not well designed. Even purchasing power parity (PPP) is very flawed in making comparisons across cultures and between countries as it attempts to draw broad strokes based on averages and GDP without offering a meaningful analysis of actual lives as they are lived. I know. I looked hard and could not find any good method of comparing the real differences in daily buying power and liing standard comparisons.

      I am trying to say that what I have been observing is that there is a mythology about poverty in the Third World that has not entered the consciousness of the Western mind who only values volumes of money while discounting the relative potency of much smaller cash levels in poorer economies.

      I will also tell you with a straight face that that the 1000 dollars or more per month of benefits that are typical (free cash, free food, rent subsidies, transit passes, medicare, tax benefits etc) for those who are on state supports in the US are more poverty inducing than the fractional incomes of folks I know who earn less than 200 dollars monthly and yet support a whole extended family with a host of kids.

      So who is really poor at the end of the day?

      The middle class working guy in Africa who earns a crappy 5 bucks a day yet still manages to save 5000 dollars cash, owns his own home clear title, has 4 educated children and does it all without his wife ever working (my neighbor is that guy)…….or is it the full time welfare recipient back home who is glued 24/7 to his TV set while living alone in a creepy basement, eating Cheetos and Kraft Dinner with barely enough free cash to buy beer and cigarettes each day and not a speck of love in his sorry life?

      You tell me which is the real poverty. Life is not fair.

      Our system is so completely screwed there are not even words to express it and credit and asset inflation seems to lie at the heart of the problem. There is more to be said about a system that has no social benefits whatsoever yet functions well with family supports versus one that hands out benefits from on-high like candy and leaves it’s citizens destitute.

      But maybe this is a topic nobody wants to hear about.

      The myth of poverty in foreign counties is so ingrained in our culture that we are at a loss trying to understand how the differences in life style can be so extreme.

      Why are so-called poor families producing such large happy families in impoverished countries on a single income when back home we have officially reached the lowest point in domestic birthrates in recorded US history? Why is it Gen X and Y have eshewed children and family in favour of single lives, home ownership and cars? Obviously they cannot afford it all.

      So you tell me……. who is really poor.

  • Rich August 20, 2013, 8:20 pm

    “As the cash equity markets opened in the US this morning, it appears a slew of options-based bearish bets were placed across a variety of stocks(starting with letters H to L). This slammed the Dow down into the red and to the all-important 15,000 Maginot Line. All was ‘normal’ until that critical indicator of ‘wealth’ finally broke 15,000 and almost instantly the exchanges went into “catastrophic error” mode which has resulted in trades from 0930ET to 0947ET on the CBOE being “busted”. The exact time when the selling was under-way (so we can’t have those sells being counted?). However, there is a rumor that what really drove it was Goldman losing millions on options trades (including JPM), and instead of the NYSE forcing the firm to eat its losses as it did with Knight, it decided to unwind 17 minutes of trades. These are the ‘markets’ in which investors are supposed to trade?”

    http://www.zerohedge.com/news/2013-08-20/selling-will-not-stand-man-nyse-bust-17-minutes-option-trades-when-market-dropped

    And meantime, we have a Georgia Elementary School shooting

    • mario cavolo August 21, 2013, 5:18 am

      In the next few months I am going to buy a Chinese brand Zhang Huai S5 mid-sized SUV. Its a beautiful mid-sized SUV. With minor styling differences, my wife and I actually like it’s looks better than the Hyundai IX35.

      Why?

      It is designed as similar styling/design as the Hyundai IX35 SUV

      The quality is the same, same materials, etc., well ok, perhaps 90% the same. I’ve already read the comparison reviews and owner comments online.

      It has always been a fallacy that Chinese manufacture cheap crap. They are fully capable of manufacturing whateve “specs” level of quality the customer orders. With respect to their booming auto industry, about ten major Chinese brands cropped up, obviously they looked at the design of existing cars and built their brand spankin’ new auto manufacturing plants to those assembly and material specs, they just copied the model, as any smart business people do.

      So why should I buy the Hyundai IX35 at $28,000 with a 2 year, 30k warranty, when I can buy the Zhang Huai S5 at $15-18,000 with a 5 year / 100,000k warranty?

      Other brands have similar model comparison situations going on. Ford, as an appealing foreign brand has recently positioned themselves to fight the price war trend for middle class buyers, they just released the Ford EcoSport smaller SUV here, at the lower $16-20,000k base price….smart move on their part.

      Besides their low-priced entry, which I will look at before finally buying, there is zero real benefit by buying a Ford, Buick, Chevy, Hyundai, Mazda, Mitsubishi, Toyota, Honda, Kia….they are all “made in China” just like autos in the U.S. are made in the U.S. The only benefit now is the nouveau comfortable middle class Chinese mostly choosing to buy the foreign brand as a matter of social face. But as the Chinese auto mfg’s are coming up with cars that are just as nice for 30% less, that trend is shifting too. Chinese are known to be frugal, but the new western trend of indiscrimate buying is steadily pervading the culture here. Interesting…

      Cheers, Mario

  • Rich August 20, 2013, 8:03 pm

    Nice call on the reflex rally after the stealth bear distribution Rick.

    Here at Nevada Tahoe we have a bifurcated economy, with Silicon Valley Billionaires moving to Lakeside mansions for no business or income tax, NV RE prices up +50% last 52 weeks, Ritz at 99% occupancy, and lots of people getting a government check or minimum wage to live in “Tahoe Cabins” not up to code with woodstoves and organic markets along the “most scenic highway in America.”

    Stand-Up Paddle boards here bigger than Hawaii with recent cross SUP Tahoe race.

    Just paid cash for Tahoe Blue Ford CMAX Hybrid with many electronic subtleties, great European tested and tuned hybrid car priced like a gasoline car, that did not provide the 47 EPA combined mpg quoted to beat Toyota Prius (39.1 so far). Ford offered free software upgrade to stay in “infinite” mpg electric mode up to 85 mph and a $550 rebate to pay for gasoline difference for combined mileage now EPA claimed as 43 mpg. Seems F did not actually test the CMAX, but filed the Fusion results and that was ok with EPA.

    So fed up with deliberate destruction of the middle class by devious big corporate government, that we have a book and website to win Las Vegas District 1 with a Fresh Start:

    http://amzn.to/14T44Bh

    • Buster August 21, 2013, 10:17 am

      …looks interesting, Rich.
      “A recent Gallup Poll found 33% of Americans have quite a lot of confidence in the military, 29% have a great deal of confidence in Small business, 26% have a great deal of confidence in the police, 23% have quite a lot of confidence in organized religion, 17% have quite a lot of confidence in the presidency, 15% have a great deal of confidence in the medical system, 14% have a great deal of confidence in public schools, 13% have a great deal of confidence in the US Supreme Court, 11% have a great deal of confidence in Television news, 10% have a great deal of confidence in the Banks, 10% have a great deal of confidence in the criminal justice system, 10% have a great deal of confidence in Organized labor, 9% have a great deal of confidence in Newspapers, 9% have a great deal of confidence in Big business, 8% have a great deal of confidence in HMOs, and just 5% have a great deal of confidence in Congress.
      Is this the 60s generation turned cynical 50 years later?
      Have Americans lost their families, homes, jobs, savings and confidence?
      Are 99% of US depressed about the future?
      What can we do about it to recreate the Politics of Prosperity?
      We find a surprising answer with a modern Forward to a Common Sense best-seller written 237 years ago…”
      The numbers about sum it all up!

  • John Jay August 20, 2013, 7:38 pm

    Gary,
    If some banks and insurance companies went under without TARP, it would not be the end of the world.
    The pieces would be picked up by the well run firms and life would go on.
    Asset prices would adjust to fit the ability of consumers to pay, which means house prices would drop, and be more affordable to purchase without NINJA loans.
    A reflated real estate bubble is not at all a good thing.
    The Fed buying worthless MBS paper at par is not at all a good thing.
    That is why housing has recovered Gary, not because the average American is rolling in dough.

    A healthy economy does not need 1000 page TARP legislation written by bank lobbyists and financed by trillions of dollars of money created out of thin air by the Fed.
    All these scams are necessary because we have had decades of off-shoring of manufacturing and jobs, accompanied by Open Borders supplying cheap labor to suppress wages.
    Once again, 80% of Americans are living paycheck to paycheck with no savings.
    Their macro economic future here is very bleak.

    You always have the same micro economic argument to support your position.
    Namely, a sharp trader can make a lot of money in the market, so everything is fine.
    The average American is not a sharp trader, not in the futures market, not in dealing with a bank for a mortgage, not in financing a new car.
    They are easy prey for a financial system that ignores the laws and has them re-written to suit them on a regular basis.

    Every time the Government bails out the speculators it just enables a bigger mess to bail out down the road.
    If they let LTCM investors eat the loss years ago we would not be in the position where AG Holder says, “Oh well, if we prosecute financial fraud the system collapses, so Wall St. can do whatever they want.”

    Municipalities are already imploding, you know the names in the news.
    Labor force participation rates are at decade low levels, part time jobs are at never before seen levels.
    I just don’t buy the argument that because a smart trader using 2% margin can get rich quick, it follows that all Americans are wallowing in prosperity.

    • gary leibowitz August 25, 2013, 7:57 am

      I can’t compete with the repetitious notion that corporations, banks, and the Fed are all preying on the poor innocent consumer. With that mindset it is no wonder that the last 5 years was though of as a means to scalp us as long as possible, while allowing the crooks to get away scot free. Not so fast! The innocent consumer is not just you and me. it is also people that hold office in the government. Does one change over when he/she crosses the line?

      The crooks were the families that had no savings and little income but decided to own a home anyway just because they could get away with it. The crooks were voters that repeatedly voted in people that went against their best interest. The crooks were the people that voted in the “pork” for their local interests. The crooks were flipping homes during the housing rage to capitalize on a good thing. The crooks were happy to buy on credit and lay away because they wanted everything immediately with no concern on how or when they paid the money back.

      As for your argument that letting the brokerage/banks/insurers fail would turn out dandy. Well I do believe they started to do just that by allowing Lehman and AIG to fail. The libor rate went thru the roof. The biggest insurers, banks and brokerage firms would have all went under. On Sept. 18th (Sunday) meeting to discuss the 700 billion bailout play, Bernanke stated “If we don’t do this, we may not have an economy on Monday.” Do you think that was hyperbole?

      Please someone else chirp in on this. How many really think we wouldn’t be as bad off as 29 when the Fed did nothing to prevent the failures. Anyone?

      Rick Ackerman, do YOU think sitting back with no government assurance, like 29, would result in a collapsed system? Total collapse? I do. in fact if I was a bookmaker I would give the odds 1,000 to 1 that it would fail totally.

      John Jay, I take offense with your notion that I think its wonderful since a smart trader can capitalize. Yet here YOU are doing the EXACT thing. Betting? Perhaps you are here just as window dressing? I guess I should be morally outraged that justice wasn’t served. I should be angry and whine that we haven’t had that purging event to wipe out all the evil in this world. What a naïve notion. That the government dare to try to keep the system intact, as if it wasn’t worth saving BEFORE the collapse? No, we whine only AFTER such an event. Me, I was way ahead of everyone here. I complained in the late 80’s. I got tired of complaining since HUMAN nature is such that we must always go thru these events each new generation because emotional happiness usurps all other considerations. I saw this monster develop before this crash. I only knew a couple of years before the crash that housing was the target. I did however know that it would happen decades before that, simply because we discarded cash in favor of credit on all things, and extended that credit higher and further each and every year. I actually complained when we could have done something about it. You whine about what should have been done. Not very constructive is it?

      As long as you are making money outraged over the very system you capitalize over. what a hypocrite.

      Why it is so hard to accept that a crisis like this had only one solution. Bailout. This same bunch would be blogging on their outrage that the world governments stood by and allowed total anarchy, had they sat on their hands. Complain about something that can’t be fixed. Real productive. No discussion on how it should have been done realistically and none on how to survive (change/fix) going forward. All of you are sadists only happy if/when the maximum pain is felt by others. Sorry it’s taking so long. You would rather be right with total suffering than accept a world that goes on in an imperfect and unfair way.

    • Cam Fitzgerald August 25, 2013, 9:12 am

      Umm Gary…..you are blaming the victims I think. Are you really trying to say the crooks are the general public? You readily acknowledge that most investors are not all that sophisticated. We should not be surprised that they get caught up in the nets that have been cast by those who write the rules and create the terms of so many investment products and put the dangerous financial trends into action. Easy lending for housing, zero-downs, liar loans, Ninja’s etcetera are examples of ideas that went sour but should have been recognized as being systemically hazardous from the outset. Many unsuspecting folks have been ruined by a process that was not designed to favour the public but rather only to reward those with the advantage and knowledge in creating instruments that were tilted heavily in favour of generating profits for those who created them. Should the house not lose when their gamble does not pay off ? I am sure not in favour of crashing banks but when some of these guys made bets that backfired on their firms it hardly makes sense that they should be immune to consequences. I think John is just saying the obvious when he suggests that bailing out speculators and the authors of some ideas and products is a dangerous precedent. Failure is the price that some companies should pay for pushing the envelope too far in their quest for profit at the expense of less savvy and mostly unsophisticated consumers of financial services and products. That is one way that balance comes back to a system when it has strayed too far from basics and become little more than a casino. As to whether or not we would have been worse off had the Fed and Government “done nothing” thus leading to a 1929 moment is just speculation. We will never know because we never risked allowing the corrective process to proceed. Needless to say, you already know it is my opinion we will see that correction unfold as it inevitably must one day. The reckoning has merely been forestalled because the changes required were never made to avoid a repeat of the credit hazards created and thus we are on borrowed time awaiting the conclusion.

    • gary leibowitz August 25, 2013, 11:10 pm

      No I don’t see the crooks as average citizens, just as I don’t the government. We are one and the same, elected from a pool of citizens. In Obama’s case the Republicans would take issue. Citizens were as much to blame for ignoring the problems and allowing greed to take hold. Everyone seems to think that in our Democracy it is just a shame, a paper tiger, where the real power is behind closed doors, manipulating the vote. this notion of conspiracy and inability to allow true citizen representation is ludicrous. How so? We elected a black president, almost elected a dumb as a doornail female vice president, and the most liberal veteran Republican. Fix was in? Right before the crash the Republicans were a shoe in with a margin of well over 10 percent. Events certainly changed those odds, not some mystery committee.

      It would be real nice and just to punished the culprits and allowed the largest banks, insurers and brokerage houses to fail. Unfortunately this economy doesn’t work on judicial fairness. The 29′ crash was exactly the course of hands-off government policy. It worked according to most here. We saw great suffering, but it lasted decades and only the World War put an end to that. Some would like to change the history books, but it was only well after the banks failed that policies started coming together. there was no safety net, no social programs, no government agency to oversea the problem. Do you really think we would do better this time around if we let the same thing happen again?

      I am tired of the argument that those elite rich folks that initiated and profited from this mess has to be punished. I would love a system where that takes place. unfortunately the only ones I know that can work are not democratic systems.

      As for the inevitable. yes I personally believe we have a day of reckoning. I do not however think the current policies will not work on any level. I think it will buffer the extreme suffering and most likely extend the problem, but in the end offer new rules and policies that would strengthen us, as it did post 29 crash for 50 years.

  • mario cavolo August 20, 2013, 5:16 am

    To gain an understanding of who exactly can afford what, including a sweet deal new car that Rick talks about today, the following stat page I just found lists every major occupation and hour wage of every single of the 135 million employed in the U.S. It is a long, comprehensive listing.

    http://www.bls.gov/news.release/ocwage.t01.htm

    From a very quick glance at the numbers, it appears that around 50 million of the jobs listed are in the $9 to $16/hr range.

    This fits what many of us have been noticing about the economy, that those bottom 100 million are really struggling.

    Cheers, Mario

    • Andrew Gutterman August 20, 2013, 2:56 pm

      For some perspective on the 10 year Treasury note, and implications for the economy going forward, here is a 25 year chart:

      http://www.booktrakker.com/Economy/TenYearTreasury.jpg

      As you can see we are still in a falling interest rate environment when you take the long term view. We may be very close to a top in the rate, or it might go a little higher and top out at the long term resistance line, at about 3.5%. In any event falling interest rates reflect a declining economy, exactly what you would expect at this time in our demographic cycle.

      If the chart holds true we could be looking at the 10 year note with a yield considerably under 1% before hitting bottom. And if history is any guide the rate will stay low for a very long time.

      I would not expect much of a rise until the mid 2020’s.

      You can draw your own conclusions as to what this means for the economy.

      Andy

    • Cam Fitzgerald August 24, 2013, 9:51 am

      Good observation, Andy. I have looked many times at the long trend rate charts and come to the same conclusions. The process has years to play out and this current rate spike won’t likely be sustained for long. I anticipate housing will bubble and perk for quite a while longer. Longer than most people who are expecting economic Armageddon to arrive are predicting anyway. I would not be surprised to see average home prices peak at their old highs either suggesting a double top before the sh*t really hits the blower.

  • Troll August 20, 2013, 4:23 am

    The “road to recovery” does not mean buying a car you can barely afford.

    But it sure looks good on paper.

  • mario cavolo August 20, 2013, 4:14 am

    “Our take, however, is that more than a few Wal-Mart shoppers who have cut back on non-essential purchases are in fact driving shiny new SUVs.”

    Rick, this makes good sense. The lower income employment group will continue to transform their lifestyles. They are being forced to live the frugal lifestyle which is quite common in emerging/third world countries, of which China is now the most popular example. There are two key factors: 1) the employees themselves learning to give up their independent lifestyle, ie. living with roommates, living at home, living near their work so they don’t need a car if possible, to save money. 2) The employers offering low salary offering more benefits, such as dormitory housing, cheap/free meals, shuttle transportation to and fro work. This is very common in China/Asia.

    I doubt those developments will take hold in America on the employer side though as the situation develops they may start to look at new models of employment compensation and start to shift.

    However, imagine if your employer offered a job where you knew you could bank $800 / month? It would mean living a different lifestyle, but it would be appealing to many Americans who now can’t make ends meet because of their model of the American middle class lifestyle in which there is so much money wasted on so much they don’t actually need. Let’s say you work for Starwood hotels in the U.S., they make it easy for their employees to transfer to other properties pretty much anywhere in the world they are qualified to go, And in the process they would typically offer the salary with local shared housing or dormitory, its a reasonable deal.

    Now, let me note the prospect is highly deflationary! People would truly not be out spending and I think in the end, that’s a point you continue to focus on.

    Cheers, Mario

  • gary leibowitz August 20, 2013, 2:56 am

    I would really like a piece on how each of us would have
    handled the post crash economy. What policies to be put in place, rules to help or hinder, target segment of the economy would you focus one, etc…

    It is so easy to twist every single action this Fed has done into a drum beat of incompetence and favoritism, but much harder to come up with real solutions that keep the economy we have afloat. over 4 years after the debacle, listening on a daily basis proclaiming imminent disaster that never materializes, we still complain its not good enough. I must have stayed home too long because I haven’t seen the mushroom cloud of economic destruction outside my window.

    If you want proof on just how well this fed has done since the crash look back over the years, at the tens of dozens of incidents and situations that you were sure would derail the whole thing, and come up with reasons why it didn’t happen. You need some pretty far fetched explanations, other than they did the right thing, to explain away why this debt debacle didn’t plunge us into another great depression. Lets start with the fact that the debacle was “the” biggest in our history. Worse than anything before us. The amount of paper loss was staggering.

    In response to the question how this recovery has progressed, given the impossible task of reclaiming a credit system, I would say better than most here expected. My proof is in each of your responses over the last 4 plus years. You were absolutely sure they were on the wrong path and that it would collapse of its own weight years ago. To justify the fact that it hasn’t collapsed you revert to convoluted reasons with conspiracies, hidden agendas, and manipulation.

    We can be very much in agreement over the cause of the debacle. We even can agree on the lack of real change to prevent another one from occurring. We can even agree that the debt saturation is most likely too great an obstacle to prevent another depression. What I can’t agree upon is the insistence that the Fed’s only purpose is to make sure the creditors thrive at the expense of the masses. How sinister and uncaring would you have to be to pretend to keep the middle class intact while all along knowing you are dooming them to a debt abyss. To assume they are the puppet masters with the ability to manipulate all strings over 4 years without stumbling is simply a mathematical impossibility. Think about this for one moment. Even using a world orchestrated plan by those elite few, you would have to control the banks, housing, all currencies, all corporate CEO’s, all mutual funds, all financial institutions, not to mention the private sector.

    I give them an A+ for getting us this far, even with the massive excess of accumulated debt. I will most likely give them a passing grade 2 to 3 years out simply for carrying us this far before the dam breaks. I personally don’t see a collapse in the current environment. I believe it would take an acceleration of economic expansion to do that. Low inflation, low expansion of credit shouldn’t derail their recovery plan. Good times could very well be the death knoll that plunges us to another deep depression.

    • John Jay August 20, 2013, 3:38 pm

      Gary,
      “I would really like a piece on how each of us would have
      handled the post crash economy. What policies to be put in place, rules to help or hinder, target segment of the economy would you focus one, etc…”

      That’s easy Gary.
      FDIC insured deposits are covered by the Government.
      Everyone else eats the loss.
      That would end the Fed Put speculation once and for all and put the economy on a sound footing.
      One without 30 year mortgages and 10 year car loans.

      Everything you talk about as evidence of a Recovery is just can kicking.
      All those mortgages and HAMP workouts will default once again.
      30% of the HAMP workouts have already defaulted.
      http://tinyurl.com/kk92vtp
      The housing market was saved by changing the rules so the banks could ignore people living in a house with no mortgage payment for three years or more.
      Do you think that is sustainable?
      The economy has already crashed for hundreds of millions of Americans, I once again will post:

      76% of Americans live paycheck to paycheck
      27% of American have no savings at all
      46% of Americans have less than $800 in savings

      The bottom 80% are living paycheck to paycheck with no savings to fall back on.
      The stock market rising does not make them wealthy.
      I rest my case.

    • gary leibowitz August 20, 2013, 5:40 pm

      If you only support the FDIC insurance and you let the banks and insurance companies go under what happens to credit? The LIBOR market would be crushed. there goes your recovery.

      The stats on how Americans live isn’t a phenomena post crash. We were already there before the crash.

      Regarding the housing market I agree that the situation was dire. I also see the Fed’s reaction on rule changes and low interest for 5 years as a way to bring back the market. Hasn’t the Fed done exactly that over the past 5 years? Wasn’t the policy exclusively to keep as many Americans in their homes as possible? We do have a housing recovery despite your insistence there is none. We do have home prices now above water, where at the time of the crash many were paying mortgages over the assessed value. Isn’t that the number one way to allow home owners a chance to get back on their feet?
      Not only has their real estate value gone back up, but they were allowed to refinance at a much lower rate. And they did just that. You can’t deny this was a positive. How many on this blog took advantage of this?

      Why the insistence that there should be retribution first and disregard the consequence. This isn’t about fairness. It’s about how best to save the economy and allow us to heal. Are you saying individuals are worse off because of the policies?

    • Erin August 20, 2013, 6:37 pm

      Gary says,
      Are you saying individuals are worse off because of the policies?

      That is exactly right…The government/fed has decided to steal wealth from the people in a plethora of ways. Using a credit card to pay bills and putting Americans in debt with QE, Zirp or whatever is not helping anyone except the banks. It is simply a transfer of wealth from the poor and middle class to the banks.

      The welfare state is massive and just keeps growing. Why would the welfare state keep growing in a “Recovery”? Are they hiding the real economy with lies? Of course they are….

      What part of this is so difficult to understand. We are being inundated with debt and absorbing the rising costs for food, housing, energy and everything else with real incomes being crushed year after year!

      You live in your own little bubble. Creating false wealth and paying bills with a credit card is not a recovery. There has never been a recovery!

    • Jason S August 22, 2013, 8:39 pm

      Gary, that is easy. Dont interfere, let the chips fall where they may and let free markets sort it out after the bankruptcies are completed.

      Would a lot of people be wiped out? You bet. Would we suffer a whole bunch of pain very quickly? You bet. But letting people who make bad choices suffer the accountabiliy of their bad choices is effectively financial Darwinism and what made America great.

      The down and outs could be helped by charities, family, etc. Hopefully they get back on their feet somewhat in a decade or so. Lesson learned they will be less financially stupid. We need fewer stupid people!

  • John Jay August 19, 2013, 9:48 pm

    Effective Immediately FHA Waives Foreclosure Waiting Period!
    Link: http://tinyurl.com/l55xo89

    And that is in spite of default levels running at over 30% for loan modification under TARP’s HAMP .
    Link: http://tinyurl.com/kk92vtp

    Anything goes to keep the scam running and avoid the Day of Reckoning.

    &&&&&&

    That is funny. I noted in the photo caption that even unemployed people and prison inmates could get a car loan, but I was being facetious about the inmates. However, you’ve trumped me with the reality that people who have just filed for bankruptcy can get mortgage loans. RA

    • Erin August 20, 2013, 9:32 am

      Seems Funny in a sick sort of way that they call it “Back To Work – Extenuating Circumstances Program”….seeing there never seems to be a reason to go back to work with our new and improved welfare state.

      “The FHA realizes that, sometimes, credit events may be beyond your control, and that credit histories don’t always reflect a person’s true ability or willingness to pay on a mortgage.”

  • Erin August 19, 2013, 6:36 pm

    I have recently relocated to one of the most beautiful college towns left in our country that is sort of “isolated” from the rest of the country because of its location.

    The false wealth from the rising real estate bubble is starting to affect things. Ben needs to come up with some new tricks or ratchet up QE.

    In the spring in our area, home sales were very brisk and prices were rising very nicely (if your a seller), since those rates started to rise from the end of May till now, home prices have completely fallen of a cliff. Inventories our soaring and nothing is moving at all. Very predictable and very easy to see where the consumer money has been coming from again…(the second real estate bubble).

    I put an all cash offer in for a building lot right in the middle of a growing area near the water and the seller refused my offer on the lot because he said the market was moving in his favor. That was on June 5. I am sure he believes like many delusional people that once prices start rising…It will last forever and they will be wealthy if they just wait. This is what Bernanke and AG have created and nothing could be further from the truth. Houses are nothing more than an ATM. There is no such thing as a home anymore…only houses!

    History will not be kind to these disgusting, vile thieves who steal from the people and give to their friends!

  • John Jay August 19, 2013, 5:11 pm

    I forgot to mention that the 1000 SF shack with the brown lawn with $30,000 + cars parked all over it is back to being worth $400,000 again.
    That could work!

  • mava August 19, 2013, 5:10 pm

    The older I get, the more I like to ask about the terminology first. Typically, what is being understood under the term “recovery”, is a reversal of a particularly bad economic condition.

    In our case, the condition was that many people had invested into the housing bubble, and were looking at owning assets worth less than they have paid for them.

    The cure, as it was proposed, was to inflate the nominal price of those assets to produce magic. Specifically, the chairman savant had promised to inflate the price of those assets only, with everything else remaining at the prior price levels.

    Several years into the “recovery”, and the frozen quail that I buy to feed my cat is now twice the price it was when the promise of the recovery was made. It is now so bad, I am considering outsourcing the pet feed purchasing to Asia, as I can’t stand being not prudent.

    So, this should be obvious, that to the extent that the idiot savant had promised us to raise only the asset prices, he had missed his target completely. No magic had happened, strangely.

    We now find ourselves in the situation where after a several years of no profit stagnation and no interest on our capital, the price levels had risen on everything, and not only on assets. This means, that we have saved the worst members of our business class, while sacrificing the best: we had helped the debtors to remain whole, while (since there was no magic) our creditors will now receive returns incomparably low with what the inflated economy must now command.

    On the balance, we are now in the same situation we were in when we saw the real estate collapse happening.

    Yet, the situation is much worse, because we have punished the prudent and honest, while assisting the smug and fraudulent. Our prevalent economic “might” now consist of mostly fraudsters, while we could have it exactly otherwise. Plus, as mentioned above, we had several years of diminishing capital, because the interest rates are way below the real inflation rates.

    Exactly the performance I would expect from an ignorant dumb-ass such as our current leader.

    • Jason S August 20, 2013, 12:53 am

      Two brilliant statements, Mava:

      “This means, that we have saved the worst members of our business class, while sacrificing the best: we had helped the debtors to remain whole, while (since there was no magic) our creditors will now receive returns incomparably low with what the inflated economy must now command.”

      and

      “we have punished the prudent and honest, while assisting the smug and fraudulent. Our prevalent economic “might” now consist of mostly fraudsters, while we could have it exactly otherwise.”

      May I plagiarize?

    • gary leibowitz August 20, 2013, 2:02 am

      Housing prices have done very well thank you over the last 4 years. It is the number one debt burden of anyone that owns a home. Can you name anything that comes close. Isn’t it prudent to focus on that recovery over all else? I think they did a bang up job.
      Did you want them to look elsewhere?

      No interest on your capital is exactly the way you heal an over debt burdened economy. It is a brilliant, absolutely brilliant move. Did you want the pre-crash era to come roaring back? Allow a low inflation environment for as long a possible while allowing housing segment to heal. Number one priority by far. Done a great job. I hear complaints that the stringent requirement are keeping people away and that housing is in another bubble in the same breath. No bubble redeveloping with those requirements. It helps the middle class like nothing else. This was done to prop up the middle class, not the bankers or creditors. In fact the banks refused to lend because of the lack of profit until recently. You can’t claim these actions wasn’t the most logic course. Here we go again, complaining that the Fed helped the housing market to recover. How absurd is this complaint?

      I am at a loss to understand why every move the Fed makes post crash is supposedly helping the elite. The funny part is that even after a huge gain in the housing segment, service industry hitting its stride, and an economy almost ready to take the fed out of the bond market, we still find reasons to cry foul.

      I can understand the angst over the pile high debt. I can understand that after 4 years the rules and regulations have changed little to prevent another calamity. I can understand that wall street, greed, political shenanigans, and lack of urgency can bite us in the ass. I can’t understand the complaints over the policies put in place that clearly has saved the middle class after the crash. The shrinking of the middle class did not start, nor is it caused, by this Fed’s post crash policies.

    • Jason S August 20, 2013, 7:20 am

      Gary,

      Here is how I claim that every move the Fed makes is helping the elite (either knowing or unknowing).

      PhD’s take below BBB rating, chop them up and turn them into MBS’s and ABS’s that magically now have huge AAA traunches. Those bonds go to being worth $.05-$.15 on the dollar during the crash. To save the integrity of the banks, the Fed and Congress come up with TARP to buy those bonds off the balance sheets of the big banks, et al at dollar for dollar value. This purchasing continues with QE1 and QE3.

      Yes, these bonds are now worth maybe $.50 to $.75 on the dollar but still a severe loss since the tax payers are on the hook for all these bonds now held by the Fed at face value.

      So step one, the bankers are bailed out and get to keep their jobs and salaries rather than going BK. Step two, with all of this (tax payer) free money the banks, et al have four choices:
      1. lend the money to people but those that are solvent dont want to borrow to a large extent so the main demand is from poor quality borrowers.
      2. buy treasuries from the Fed or keep excess reserves to get a .25% return to maybe 3% for a 30 year treasury.
      3. give the money to your trading desk and have them buy corporate bonds or equities.
      4. buy blocks of depressed real estate.
      They mostly choose options 3 & 4. This drives up the prices of those assets. Unfortunately, due to the crisis, the majority of those assets that inflate are now owned by the wealthy elite because the middle class either liquidated out of need or fear. The buyers were the wealthly elite.

      Those middle class folks who still have those assets have less ability to leverage to buy more because the inflation in standard of living keeps them concerned, the lack of wage inflation keeps them concerned and the profligate spending and debt doesnt make any common sense which keeps them concerned. (These issues do not impact the wealthy in the same way since their wealth insulates them.)

      So over the last four to five years, the middle class has seen their share of the wealth pie diluted compared to the wealthy. All of this is due to the actions of the Fed. And somewhere down the line all this public debt that is worth less than dollar for dollar has to be paid off. Even if it is kept until maturity, the default ratio is going to be larger than 5% so the public eats it. Thanks Mr. Fed.

    • BKL August 20, 2013, 12:21 pm

      You feed your cats frozen quail!? Talk about white people’s problems. Ha! Nice one, Mava.

    • mava August 21, 2013, 3:02 pm

      You’re welcome to… Sure!

    • mava August 21, 2013, 3:10 pm

      BKL,

      No, sorry for misunderstanding. Not frozen. I that w it out before feeding, of course. I figured this is the cheapest and simplest of ways to get him healthy nutrition, as small raw bird would be exactly his food in nature, and it had a mix of everything in right proportions, except for brain, eyes and guts with content. So, 90% is there, I just need to add some supplements.

      No, I would not give an animal a frozen carcass. Of course. I do that, actually, but only as delayed feed…

    • BKL August 22, 2013, 4:41 am

      Be careful with the bones. They must be similar to chicken bones.

    • Redwilldanaher August 22, 2013, 2:10 pm

      This entry was a real knee-slapper Gary. Your inner propagandist really seized control this time around! I feel really “saved” right now! Can I mail you my tithe to Uncle Ben’s Church of Unholy Salvation? Are you the treasurer? You leave all other collaborators in the dust…

    • Redwilldanaher August 22, 2013, 4:11 pm

      Huxley on Gary-types 50 years ago:

      In a 1961 lecture, Aldous Huxley described this police state as “the final revolution”: a “dictatorship without tears” where people “love their servitude.”

      Yes they’ve done a “bang up” job alright. It profits a man nothing … But for boundless fraud, Gary?

    • gary leibowitz August 23, 2013, 6:32 am

      Jason you point out the unfair Fed policies. I don’t disagree with most of what you stated. Is the policies the best course to prevent the current credit system from freezing up? We faced another great depression. If we learnt anything from that one is not to stand by and punish the offenders at the expense of the system. Had we done what most here suggested we do, we would be in a dozen years of despair, followed by a dozen more crawling our way back to normalcy. The end result would most likely be a quick purging of greed, but at what expense? Why complain the Dam was built incorrectly after the bursting? We must focus on how best to rebuild it.

      BTW, the very long, easily defined yield on the 10 year note suggests lower highs since 1981. That suggests the next high should not break above 3.45 percent. Is that proof of deflationary pressures resulting from debt exceeding credit expansion? Not sure but the trend is a solid.

    • Jason S August 23, 2013, 8:10 am

      Gary, based on your answer to mine the one point that I think you misunderstand is that I do not view letting the financial system shudder under the bankruptcies that should have happened as punishment. I view it as accountability. If I make a bad decision and it goes against me, there is no malice, there is no punishment to reform or inhibit me, there is accountability and responsibility for the consequence of the bad decision.

      You also seem to think that the course that was taken will not result in as dire or more dire a result as letting the free markets reign during the crisis. Please remember that the casualty of debt is loss of freedom. The problem is that the debt has been transferred now to the population at large. At some point we all will suffer some form of indentured servitude for these actions. We tend to think these things happen (or should happen) with a close time proximity to the situation, and if it hasnt happened five years post crisis that it will not happen. That is very myopic and contrary to history and emperical data.

    • mava August 23, 2013, 3:51 pm

      BLK,

      How do you mean? Its raw, so they are not splintering at all. He chews up an entire quail carcass in about 20 minutes (good time, I gather, not too short), leaving nothing but one small bone every time (the knife-like keel bone).

      I think this is the best feed short of crazy super-rich people stuff may-be. I have no idea of any differences with chicken bone. If anything, I would say that the feline natural feed would be quail, no chicken, because of the difference in size, and because quail is a game (well, sort of).

      I must clarify for others, that the frozen quail is cheaper than dirt, and yet, it beats any canned food nutritionally.

    • Carol August 23, 2013, 4:21 pm

      Mava

      I agree wholeheartedly about your feeding your cat. Wild animals eat bones it is rich in minerals especially boron, mag, cal, etc. I was feeding my cat raw chicken bones and all with supplements until he became sensitive to the chicken. I would love to feed him a whole quail where do you buy those?

    • gary leibowitz August 23, 2013, 10:13 pm

      Accountability, fairness, retribution can all be lumped together in my mind. When did we ever have a fair accounting in our short history? What mechanism or society does these things. By its nature any structure that is set up will have untouchables. If the economy relies on large institutions for credit stability how do we extricate the wrongdoers without doing more harm? Perhaps we should have set up a system where there are no dominant entity, but there lies the problem. Do we stifle the drive to compete with these restrictions? Some say yes, while I say no. In a democracy there are no neat answers.

      I don’t know if the final course will be worse. I expect it will not, but instead be a shallower trough but longer. We know what happened in the 30’s when we allowed everything to fail. Why not try another way?

      As for debt it has been going on way before this crisis. it was in fact inevitable that we create a credit bubble. We all let it happen. We all are responsible for our actions and use of debt. To abandon the path set forth over 50 years ago in one fell swoop is not a good idea in my opinion. To place blame (or demand accountability) is also not my idea of fixing the problem. My answer has always been for more oversight, more restrictions to prevent dominance in any segment. I have been shot down by most on this blog for suggesting it. In fact most want less oversight. As for the solution going forward I can only hope we buy enough time to sort out the insolvencies and start on a path of fiscal responsibility. I have stated many times that I don’t think that scenario will play out. I do however prefer we try as opposed to abandoning the current system.

      BTW, housing data on new home sales took a big hit in July. I believe that doesn’t yet reflect the full uptick in rates. Interesting to see how the Fed reacts.

    • Jason S August 25, 2013, 6:21 am

      Gary, in the ’30s we may have let banks fail but I wouldn’t say we tried nothing. Hoover tried austerity and then FDR tried massive government spending and increased govt debt. Neither was sufficient to stem the deleveraging but prolonged the pain. Prior to creation of the Fed and centralized monetary policy we had frequent booms and busts, panics and depressions. Through all of that America grew and progressed. All of this with less regulation and govt. intervention. We have a working blueprint from those days, it was not perfect but far better in my opinion than what we have going on today. The reason it is not put into place again, in my opinion, is that back then the elite were far less able to foist losses and mistakes on to others. Today they have greater ability to do that and their power is greater.

      Last, by definition accountability and retribution are far different. Lumping their meanings together is incorrect and wrong. I would even say short-cuts like that are symptomatic of our problems.

  • gary leibowitz August 19, 2013, 5:07 pm

    Breaking down the numbers we have WMT’s last quarterly sales in the United States down .3 percent from prior quarter. This quarter ended on July 26th.
    Home starts for July was up 5.9 percent compared to s 7.9 percent drop in June. Permits up 2.7 percent compared to drop of 6.8 percent in June. Non farm productivity this last quarter up .9 percent where previous was down 1.7 percent. Unit costs was up 1.4 percent where previously down 4.3 percent.

    Home sector has been one of the best yearly gains with a 44 percent gain using the ETF XHB.

    It is true that the divide between economic classes is widening. It is also true that mortgage costs are going up rather sharply compared to very depressed levels. The sentiment by home builders seems to contradict the assumption that higher yield will destroy this segment.

    The steepness that the 10 year note rises is a major concern. I suspect the move is just to readjust the assumption that the bond purchases will go on forever. Everyone ignored their taper talk till recently. Everyone assumed it was just another bluff by the Fed to pretend the economy is improving. There are major headwinds such as higher loan costs, recent increase in payroll taxes, and concern on costs of Obama Care, not to mention rising costs by businesses.

    I would worry if the 10 year note breaks out over 3 percent in the short term. In fact that to me would be an indication that we have real problems with the credit system.

    I believe I gave enough detail to support my suppositions. I also must confess that I have always expected a bear market by this time, but one where earnings, and not income, become the main focus. I have always focused on the 10 year note for guidance. I will let the yield determine the fate of this current economy.

    As Mario stated this is a mixed bag. I do not see local residence showing any sign of contraction on discretionary spending. In fact the service sector seems to be doing very well. Job market, while pitiful based on prior recoveries, is showing stability and most importantly job losses are slowing considerably.

    Is it really unusual to have the 10 year note rise on assumptions that the bond program will be phased out? Is it indicating something worse? I look at the data that comes out to get a better picture of the trend. So far it is not showing any major trend changes.

    • VegasBob August 19, 2013, 6:42 pm

      As I write on Monday morning the 10-year is at 2.88%. Without serious intervention, it’ll probably be above 3% by the end of the week.

    • gary leibowitz August 23, 2013, 6:10 am

      Recent data points: Leading indicators spiked higher as did regional manufacturing numbers. The Fed is trying to “cap” the potential expansion of growth. The tapering creates three solutions. Allow banks to profit from the spread thereby loosen borrowing restrictions , allow housing prices to cool from its recent fast pace, and places higher costs to industries. This is actually “intended” to slow wall street down. That’s my take on how we can avoid total complacency in the market. The next recession will be based on company profits for the most part. Lets see if companies again revert to high layoffs. That would tip the whole thing into a tail spin.

      A high-wire act. Not sure if the Fed can pull it off.

      Most of the big name hits were not based on badly missed revenue. Profit margins are being squeezed.

      The first indication if the yield spike will derail this up trend would be housing. We have another month to see how the recent spike turned out. Job layoffs will be another immediate sign.

      The Fed should want a bear market after these steep moves, if nothing else than to slow down spikes in certain asset classes. As wild a concept as mine is, there has been signs of a heating economy right BEFORE the Fed announced their plans to taper. I don’t think that was coincidence. A steady slow recovery even if it means a hit on corporate bottom line.

      We should talk this over, and rehash today’s debate in 6 months time. Rick, perhaps you should save some critical discussions since the taper announcement started. Chronicle the assumptions and see where we end up. it would be interesting to view the thought process and see if opinions change.

  • John Jay August 19, 2013, 4:56 pm

    I am not certain if it is true, but I have seen on more than one economic blog the following facts:
    76% of Americans live paycheck to paycheck
    27% of American have no savings at all
    46% of Americans have less than $800 in savings

    That is how the “Recovery” is being done.
    Via Financial Insanity.
    I drive by 60 year old, 1000 SF houses with 4 or 5 $30,000 plus cars parked all over the tiny driveway and onto the tiny front lawn.
    And the local junk yards are full of 10 year old cars that look structurally fine to me, but probably never had an oil or coolant change, plenty of abuse is evident.
    That’s OK, just junk it and…………………….
    “Go see Cal, go see Cal, go see Cal!”

    The Government at all levels will do anything to avoid the financial reality that faces America.
    Because house prices that reflect ability to pay mean the end of the 30 year mortgage scam for the banks, and the end of the $600 a month property taxes scam for the municipalities.
    And the end of the Diploma Mill scam via Federal Student Loans.
    That keeps millions of kids out of the job market, temporally of course.
    There is no there, there.

    Mario,
    I would put the number of Americans who can weather the return to reality that is slowly manifesting itself at right around 20 million, tops.
    I was talking to a realtor who said that all the “Cash” purchasers of real estate here in California usually totally mortgage the paid cash for property as soon as the deal closes.
    Then it’s off to the next “Cash” purchase.
    Crazy.
    I girl I know told me her ex- husband worked his way up to 12 properties in the last boom, and when one tenant stopped paying it all fell apart and he lost all twelve houses.
    She told me that story with great gusto, she still hates his guts for cheating on her with that bimbo.

    So I would say there is a hard core of about 20 million Americans, moving in and out of that group, that are safely “Well Off”.
    The rest will wind up wearing loin clothes in teeming poverty once the money printing/easy credit scam collapses.
    Working on their “job skills” and “resumes” and “networking.”
    Detroit is their future.
    As Agent Smith said:
    “That is the sound of inevitability.”

    • mava August 23, 2013, 3:59 pm

      But what do you want the people to do? They need a car to get to the job site. So, they go and lease luxury. Why not? Yes, sure, they could have bought a used vehicle, (like I do), but that would require an upkeep effort, and that in turn, would mess with their ability to watch the American Idol.

      You are so correct though. The poorest guy I know at the time, just got his second leased vehicle. Even though he owes money all around, and struggles with rent every month.

      It could also be that the people intuitively understand the FEDs game, and so they stay borrowers, because only the borrowers will survive, if the FED is allowed to execute their strategy (the government is a borrower).

    • Cam Fitzgerald August 24, 2013, 9:04 am

      Yeah, I keep reading those same numbers, John and they hardly seem real to me. Last one I came across was that 60% of US citizens had less than 2000 dollars in cash savings. It is preposterous and dangerous if true. Where is the cushion against any downturn, job loss or death in the family? We must surely be living on borrowed time because the easy credit cycle is coming to an end after ramping up almost non stop for the last six decades. There is a huge vulnerability that has developed when more than half the population is not prepared for a day they don’t have a paycheck. It becomes easier to predict the consequences when we appreciate that there is simply no fiscal or monetary medicine available to cure this ailment either. Even government is finally tapped out as the cycle comes to its conclusion so the balance sheet repair that is coming is probably going to be fairly traumatic for everyone once it arrives. Even the savers with their nest eggs tied up in bonds stand to get hurt badly as will those who discover they got bailed-in when the local bank fails. There must have been a few good reasons our grandparents kept their cash in the mattress long after the Great Depresssion had finally ended.

  • crusty August 19, 2013, 1:49 pm

    hmm, ive noticed 2 new cars around town of note, a new Volt and a Tesla, both still sporting dealer tags. i assumed the Volt to be of govt purchase, the Tesla was driven by a little ole lady of 70ish vintage. GM’s sales i’d be thinking are mainly state and local gov’s filling their union payback quotas with the yearly upgrades to the fleet. Ford and others to reflect the actual consumer interest. But what is a recovery made of, not an increase in spending? how does that occur if the purse is stretched by the gasoline budget, healthcare allowance, tax bleed, and increase in every govt caused fee and levy? The veiw from my dining table is the back sides of Tiger wannabees setting their balls upon tees at the 13th fairway; fewer so than last year, so has it been for the last 3. A rush to buy any home for sale came and went, now demand has cooled to wait and see mode it seems.
    I believe a single voter/contributor block holds the key to real economic recovery – the eco/greens . timber, mining, oil, natural resources, food production, you name it, they have caused the over regulation and cessation of most states income source and populus income stream. If the college grads can really think for themselves, let them look unemotionally at the climate / eco political diatribe and they will find their promised pots-o-gold awaiting, and the nation’s financial status renewed.

  • Nitram August 19, 2013, 1:08 pm

    I’m waiting to buy my new used car from a bank, right off the parking lot of the bank. Took my propane barbecue tank to fill up store and was told it’s 12 years old so it’s against the law to fill it up again. Must buy a new one and I was told to pay $4 for disposal of the old tank. Maybe the government should do that with automobiles to spur the economy. 🙂

  • David E August 19, 2013, 11:08 am

    “And so again, its just the lower 100 million who are in true economic hell for a variety of reasons.”

    And starting this fall and going into next year it will be 200 million in economic hell.

    Nice post.

  • mario cavolo August 19, 2013, 10:55 am

    Hi Rick,

    I’ll remain consistent with my previous comments on such regarding the state of the U.S. economy and society. The country is in a societal and economic schism. The lower/middle class 100 million or so have it worse than ever, as you well describe and as many of us here at your forum easily understand. However, the upper 50-100 million of the U.S. population are doing better than ever, they are your folks with plenty of discretionary income. There is a huge gap in between the two groups.

    Many might say I am being too optimistic. Perhaps it is only the upper 20-50 million of the population, I haven’t done the analysis to know more accurately how far down into the society the wealth/stable high income jobs really go. And of course, the entire edifice has many severely splintered legs holding it up. As a few of them may give way, it could spiral into a nightmare.

    But for now, there’s enough American families who are doing well, better than ever in many ways with their two income $40,000/yr jobs or better, living very nice lifestyles, who have learned to cut wasteful spending too.

    I think this well explains why the greatest weakness we see in the economic numbers is now showing up at places like Walmart who service the lower end of the economic spectrum in the U.S., and in the rundown lower level neighborhoods in many American cities such as Detroit where the economy has been crushed. These places don’t necessarily represent the broad stroke of the state of American cities, just, for example, as I’ve reminded folks that stories of China’s ghost towns are a tiny fraction of the real estate/development market here.

    If business was so bad, for example, how can Disney think it ok to now be charging $90/day park fee, I remember when it was $55. Are they reporting terrible attendance #’s or just a bit of a decline? If business across American retail and tourism was doing that bad, wouldn’t they and similar companies be offering discounts?…I’m not seeing such evidence broadly yet in America. I just spent three weeks in Scottsdale and drove all around Phoenix while there. For those in better positions, it seems life and business as usual.

    I can reference some clinical data with the retail establishments I saw doing business with my own eyes and my own entire extended family of millenial generation cousins, etc., who are all doing fine in their lives with gainful employment far above minimum wage. Mind you, they are mostly not even college grads, and they aren’t getting wealthy, but they are definitely not suffering on their last pennies…

    And so again, its just the lower 100 million who are in true economic hell for a variety of reasons.

    Cheers, Mario

    • VegasBob August 19, 2013, 7:04 pm

      Mario,

      I think you’ve hit the nail on the proverbial head. American society is stratifying economically. I think when the process reaches its conclusion, we will find that the top 1% (the super rich and the rich) have done just fine. After all, they must have been “smart” enough to get rich (they came by their wealth “honestly,” right?), and so they will *always* have government protection in the event of any economic distress. The next 19% will be composed of the private sector technocrats who keep the systems running, the toadies and sycophants who serve the rich, and a cohort of government apparatchiks who have successfully remained attached to the government teat.

      The remaining 80% are going to be living in some variant of economic hell. They may have jobs at Walmart or McDonalds or Starbucks, but they won’t be earning what people think of as a living wage. They may be collecting welfare or disability and have food stamps and a government-subsidized apartment, or they may be collecting Social Security, at least until those benefits are cut or eliminated. But government benefits generally don’t provide for very much above a subsistence-level existence. Better-off retirees who think their government pensions are secure are going to be in for a rude awakening when their monthly benefits are substantially reduced as well.

      That will be the fate of the overwhelming majority of Americans – a subsistence-level existence or something worse.

    • Jason S August 20, 2013, 12:27 am

      Mario,
      It is interesting that you bring up the price of going to Disneyland. I spend a little time around late-teens and early-twenty year olds. I am amazed that many of them will spend $400 for Disney annual passes or $100/mo for their cell phone plans or $5 for a cupcake, etc. They live at home and do not save but instead spend all of their money on these types of items and other fun things like travel.

      It seems many of them are happy to spend their money on these luxuries while living at home. Parents are allowing them to have their $5 cupcake and eat it too. So I think that for many kids, staying at home until 35 is appealing to them and they are content to do so as long as they are free to have fun without consequence.

    • mario cavolo August 20, 2013, 3:16 am

      Thanks guys,

      I’m doing additional research on employment ranges, part of my book and I want us to know. Meanwhile, I picked up this In total, the Global 500 companies posted record revenues of US$29.5 trillion, up 13.2 percent over 2010.

      Corporations around the world “continue to be adept at wringing productivity out of their workers,” Fortune said.
      Total employment at the Global 500 increased by 4.9 percent, to 60.7 million, last year, but revenue per worker grew at almost twice that rate, climbing to US$463,212. “Total profits rose 7 percent, to US$1.6 trillion, roughly equal to the gross domestic product of India,” Fortune said.

      We’re seeing that the fundamental evolution of society is simply causing the need for less jobs rather than more jobs, companies are going to start having to look at employment differently, not in a strict traditional model. In China/Asia the model of employment OFTEN includes low salary/low expenses / living with family together. This is going to be the case in the U.S. more and more out of necessity. At an article on China’s real estate I read about a mall that built apts on the roof of the mall. For what purpose? Dormitory housing for the mall employees, makes perfect sense as a model for low level workers. They can’t afford rent, they live in dormitories, they would gladly do it if offered the option, they don’t need a car because they work in the same building. Bingo, save more money. This IS the direction the U.S. is going. Cruise ships offer the same thing, you get a bunk, meals, medical and a decent salary. You need nothing more and you have no expenses and bank 90% of your salary.

      The problem with living at home to save money in the U.S. is that the society broke down the marriage/family structure and harmony, making that not an option for many. The U.S. middle class dream lifestyle is in a shambles…

      Cheers, Mario

    • mario cavolo August 20, 2013, 5:45 am

      Impossible to disagree, teens and twenty somethings with $100/month cell phone bills is lunacy….one of many similar which shows a complete disconnect with the reality of living and spending in a society. Its big time brainwashing by the govt/institutional/industry marketing PR machine…

      Cheers, Mario

    • BKL August 20, 2013, 12:09 pm

      Regarding the dormitories on roof of the mall; or employee dormitories anywhere else for that matter. Imagine the legal risk incurred by employers in the U.S.! More friction. Friction which will be measured as GDP.

    • allen42 August 20, 2013, 2:40 pm

      The “upper population” have DECENT jobs and access to plenty of credit,not plenty of disposable income.When the axe comes down on this economy and it will they to will be TOAST.You dream way too much.

    • mario cavolo August 21, 2013, 4:45 am

      Allen, definitely could be the case, if all goes to hell, layoffs will be high including many jobs paying $50k to $100k / year…

      See the link below, there are somewhere around 50 million people out of the total of 135 million employeed at $60k / year…. assuming many of those are 1.5 income households and if they are single, are rooming with someone, that’s pretty decent, eh? ….especially if they learn to stop pissing away $1000/month on discretionary spending of stuff they truly don’t need…

      Cheers, Mario

    • Cam Fitzgerald August 24, 2013, 8:30 am

      Good point Mario. I am also not really seeing much change in the lives of family and friends. Nothing like what the statistics seem to be telling anyway. They carry on much as before, shop for groceries in the organic shops like always, take the obligatory annual vacation in Mexico and buy houses and new cars as if nothing has changed. I do know some of them are up to their eyebrows in debt though and a few friends are just the proverbial single paycheck away from insolvency. Hardly anyone seems to have much in the way of real savings though which is probably the biggest risk. They have their lives all tied up in the perception of wealth based on real estate and other assets like motorhomes instead of having cash in the bank. Pretty much the whole lot of them are screwed if we do enter a period of deflation and that is despite the appearances of very significant wealth that would prove to be fictional in a period of falling asset prices. For the moment though it all looks placid and stable on the surface and to a last man none of them cares to hear a word about troubles that are brewing beyond their window on the world. Maybe the jokes on me because I refuse to participate in the debt carnival and as a result don’t enjoy the perks or leverage that easy credit offers.

  • David E August 19, 2013, 10:18 am

    My business does work for a contractor of Kohls. This contractor handles all the 1100+ nationwide stores. For many years dating back to the early 90’s I could expect 90 to 110 units of scrap (what I process) after the Christmas season was over. Last year during same period I received 66 units. This year only 35.

    Kohls is not high end store. It caters to the middle class. The middle class is shrinking and of course is getting poorer and poorer and so am I. So us consumers don’t shop as much. We can’t afford to.

    Buying a new car? Why not? What’s the worst that can happen? It goes back to the dealer when you can no longer make the payment? Frankly I think a lot of people formally of the middle class have given up being “respectable” after they had the rug pulled out from under them. Time to get a EBT card and not pay your quarterly estimated taxes because you need that money to make your mortgage payments. Besides “tax resolution services” as broadcast on every radio program can save your a$$ from the I.R.S. Yeah sure.

    We’re going down.

  • PhotoRadarScam August 19, 2013, 8:04 am

    That’s probably a fair assessment. I recently ordered a new car and part of it is that a) prices will probably continue to climb so buy now rather than later and b) the money (financing) is essentially free. Also I think contributing to auto demand is the fact that demand was subdued the last few years so on average, cars were driven longer and are older and it’s just time for those cars to be replaced. One last thing that I can think is increasing demand is that there are some cool tech features now appearing even in entry-level cars that people really want, such as an interface to plug in their phones for music and blue tooth. And features like navigation appear to be getting a bit cheaper.

    • BKL August 19, 2013, 2:29 pm

      I only wish to God that they still made cars with manual, roll-up windows. Cars with manual windows will be highly sought after.