Another Day Another Dollar

Disappointing employment numbers this morning, to say the least:

http://www.calculatedriskblog.com/2010/08/employment-population-ratio-part-time.html

another bank closed today, consumer spending still horid this back-to-school season, Fannie Mae REOs on a drastic rise,

http://www.calculatedriskblog.com/2010/08/fannie-mae-reo-inventory-doubles.html

and all is well - or not. As I have been saying, not much happening to lead us out of our doldrums very fast. Perhaps not a second dip but certainly not a nice solid climb as we have seen in past recessions. Perhaps we will see a steady diet of poor performance for a decade that has become the norm in Japan. Either way, no popping of corks. There is increasing noise about QE2, but even if that happens it simply adds liquidity to banks who have no one to lend to; consumers are cutting back, banks will not lend to small businesses with anything less than stellar credit and big businesses mostly have money but are not yet putting it to use. Accordingly, any stimulus - other than some targeted to create jobs - seems just a bit foolish at the moment.

Unemployment and consumer spending, which are closely tied, remain stubornly in problem territory. So it is another day and there may not be another dollar.

Disclosures: None.

Time to Hunker Down?!

I consider myself an optimistic realist. The glass is always half full but if it is draining out of a hole in the bottom then it is damn well time to do something. So I guess I am a pragmatic optimist. If you read my blog you probably consider me a doom-and-gloomer, a chicken-little. And you would probably be right. That characterization, however, is not about outlook on life, in my opinion, it is about reality. And reality right now, by more and more folks input, seems to be in keeping with where I see it.

I posted on the new reality well over a year ago. The folks at PIMCO are now calling it the new Normal. Whatever you call it, it is the realization of a few facts of life that the government officials are now having to face as they are not going away with the stimulus for financial institutions. I will miss some, but here are the key points to keep in mind:

1. Let's start with the savings rate in the U.S. It has recovered nicely from negative rates a few years ago but still needs to get up several percentage points to resemble historic norms. Moreover, while private debt is slowly being paid off, it still has a long way to go to get back to historic norms in relation to national GDP. While a fair amount of progress has been made in this category the past couple of years, it can probably be mostly attributed to government stimulus, which is fading fast. I would not look for personal debt levels in the U.S. to get back to norms for several years to come, and some of this is due to my next point.
2. Unemployment is persistent and stats out today on it are not promising. I am not focused on week-to-week or even month-to-month stats but overall unemployment has been rather stagnant all year around the same levels. I do not see this changing in either direction significantly though there are folks forecasting it to get better and those, including Geitner, who expect it to get worse in the short term. Obviously, unemployment directly affects point 1 above.
3. The GDP growth in the first quarter fell drastically in the second and there is a good recognition that a lot of the GDP was due to inventory build-up, which is largely done at this point.

There are a lot more than these three points - like commercial real estate at historic lows, carry trade currency issues that are really disturbing:

http://www.nakedcapitalism.com/2010/08/summer-rerun-carry-trade-threatens-a-deflationary-global-collapsse.html

And foreclosure activity mounting in a serious way. Invest in this market at your own risk:

http://www.calculatedriskblog.com/2010/08/fannie-mae-reo-inventory-doubles.html

Disclosures: None.

Listen . . .

Do you hear that? I hear a few different things. First, I hear a rushing sound, like money rushing into the markets. It is a tidal wave and it has been waiting on the side-lines, just waiting, for the moment to rush in. And now the wave seems to be coming ashore big time. Markets were aflush with a rush of money today. A bit of good news on EU banks and the flood gates were opened to the money rushing into the markets. Now, I must admit, there is not a lot of difference in the sound between the money rushing in and it flushing out. One seems to follow the other. We will see.

The other thing I hear is silence. Silence in terms of anything positive happening in housing, foreclosures, commercial real estate, unemployment, inventories, exports, GDP growth, etc., etc. For this stage in a recovery the numbers on all these are still sucking wind and some are clearly signalling a double-dip. This is certainly not a consumer led recovery as they are still lacking confidence, lacking jobs and buried in debt. It is not a housing led recovery as many respected - and generally correct folks - are expecting prices to continue dropping this year with sales to be very poor. So what will lead this economy out of recession? China- well it did for a while and now is having its own problems with its economic indicators the worst in 17 months. EU ain't going there. Thus, I hear only silence in terms of positive news that may lead us out of this recession. If you hear something different, I am all ears.

Don't believe me as I am an attorney and we always lie, or at least most folks believe we do, here are some links supporting the above:

Residential real estate still sucking wind: http://www.calculatedriskblog.com/2010/08/private-construction-spending-declines.html

http://www.nakedcapitalism.com/2010/08/new-push-to-prop-up-housing-market-via-mass-refis.html

Commercial real estate ugly: http://www.nakedcapitalism.com/2010/08/getting-ugly-on-the-commercial-real-estate-front.html

Disclosures: None.