Folks, WE ARE IN A SPIN LOOP AND ARE CRASHING ECONOMICALLY.

[editec]

Are American consumers recovering?

We are told that 70% of the GDP of our economy is driven by domestic consumer spending, are we not?

Okay... so how well is the CONSUMER CLASS doing overall, sportsfans?

The roof of a house may be in excellent condition. It may be gold-plated and shine in the sun, a marvel for all to behold.

But if the foundation upon which that golden roof stands is crumbling?

Editec's number one rule of macroeconomics:

If your neighbors aren't doing well, neither are you. ​

Often expressed politically as​

United we stand divided we fall.​

Also suggested by an obscure Jewish Rabbi named Jesus as:​

Love thy neighbor as thyself.​

Folks, the USA has been living by a philosophical code for at least the last thirty years. One that is bound to destroy any society in the longer run.​

That false philosophy is the midset that includes such catchphrases as:​

Government is the problem, not the solution.​

The wealthy carry the society on their backs, (and the workers are merely tools to be used and discarded as need, i.e. --Alas Shrugged;​

Greed is good;​

A rising tide lifts all boats;​

Whatever the market will bear;​

An invisible-Hand-of-the-Market guides us best.​

We are currently enjoying the BLOWBACK from the above mindsets, all of which inevitably lead to the erosion of the cohesion that is absolutely essential in a modern society.​

Will we suffer a complete collapse, either ecoomically or as a nation?​

I doubt it.​

But until we stop worshipping at the alter of the GOLDEN CALF (which is exactly what we've been doing for the last 30 years or so) we are just going to keep going down AS A NATION.​

If you worship money and THINK you are a Christian? Then, whether you know it or not, you are an apostate of the religion you profess to follow.​

 

[Neubarth]

By my metrics, the SP is trading at 17x normalized earnings, which are sales multiplied by a cyclical average profit margin. I think this is expensive for today's environment, though the oceans of liquidity could take us higher.

I was short in July, but covered soon after and went long. Today, I hedged out all my long stocks and am net flat for the first time since then, though I am still long gold, which has been correlated to stocks the past several months.

So is that a better or more accurate way of valuing stocks, compared to P/E?

It is a normalized PE.

Sales per share of the SP500 = $920.
Normalized profit margin = 7%
Normalized earnings = $920 x 7% = $64.40
SP500 = 1079.6
Normalized PE = 1079.6 / $64.40 = 16.8x, or ~ 17x

Whether or not that is more accurate, I don't know. It is less cyclical though.

It is important to understand this graph that Neubarth posted when making an analogy to the Great Depression

During the time the market fell from the first 50% bounce in 1930 to the bottom in 1932, there were four waves of bank panics, which began in September 1930. Literally, thousands of banks failed. If we were to repeat the conditions of the Depression, we would need to see the equivalent of 4000 banks fail. Thus far, we have had 100. It is also important to understand that we had 1600 fail during the S&L crisis and did not get a repeat of the Depression. The main difference is we have a myriad of government support systems today that we did not have in the 1930s.

Now, maybe Neubarth is correct, I don't know. Maybe we will have another 3900 banks fail. Or perhaps, more ominously, we'll have a failure in the daisy chain of the derivatives markets. However, I think it is more likely that we are probably going to have to have a repeat of the 1970s where we collapsed 50%, had a 65%-75% rebound, then moved sideways for five-six years.

However, nobody has any idea what is going to happen. The amount of stimulus the government has injected is unprecedented. Nobody knows, and there is no historical precedent.

Cart before the horse! You have placed the cart before the horse. The failure of the small town banks did not cause the Depression. The Depression caused the failure of the small town banks. We have the FDIC and other Federal Regulations to keep the bank failures to a minimum now as it is unnerving to the public to see the banks fail and that might add to their lack of spending.

The simple fact of the matter is that the economy is down in this service sector dominant culture because money is not being spent. The major source of that problem now is that people are unemployed and underemployed. To get people spending, you have got to make them feel secure in their financial situation. So far the government has failed miserably in that effort. Obama needs to go to school on economic theory. He does not seem to have a clue about what is tanking our economy.

 

[Neubarth]

By my metrics, the SP is trading at 17x normalized earnings, which are sales multiplied by a cyclical average profit margin. I think this is expensive for today's environment, though the oceans of liquidity could take us higher.

I was short in July, but covered soon after and went long. Today, I hedged out all my long stocks and am net flat for the first time since then, though I am still long gold, which has been correlated to stocks the past several months.

So is that a better or more accurate way of valuing stocks, compared to P/E?

It is a practical way of valueing stocks in an environment that is not unstable. Of course right now we have tremendous instability, with companies reporting earnings from job cutting and the reduction of research and development expenses and so on.

Sure, if you cut expenses you can generate profit, but it is profit that is unsustainable and loaded with complications. If R&D is cut, the company loses its leading edge and the leading edge for many companies is what drives future sales. As you can see, too much instability can lead to further instability and that is exactly what is happening now in the USA. On stocks, I like to crunch the internal numbers. That includes starting with Revenue from sales(Falling or what?) and expenses, and profit from sales. Remove any cost cutting sources of earnings as that leads to future expense if the company actually starts to see an increase in sales. THEN assess the company.

Once you have done that, go put your money into government short term notes.

 

[Paulie]

They also need to stop sucking all the money out of the economy in bonuses and start loosening credit for good risks again.

Come on jill, the economy has lost TRILLIONS.

The bonuses account for mere MILLIONS.

I have a problem with bonuses for a person who helped a company FAIL, but I don't have a problem with someone being compensated for their success.

But to attribute BONUSES to "sucking all the money out of the economy" is pretty damn disingenuous, no?

 

[The Rabbi]

Can anyone say the phrase 'commercial mortgage market tanking'?

The UK has tried to bullshit it's citizens that they are out of recession too.

The commercial mortgage market is reflecting the same facts that the residential market reflected a year ago when Bush signed the TARP.

Maybe the banks need to stop taking absurd risks and capitalizing their profits while socializing their losses. They also need to stop sucking all the money out of the economy in bonuses and start loosening credit for good risks again.

Oooh, more leftwingspeak! What a phrase! Where's the bumper sticker??

Banks are in shell shock from all the write-offs they have had to take. Naturally they are going to be gunshy about lending. The present economic environment is not one to encourage risk and in such a phase there is no "good risk."

We aren't out of the recession but it is getting better. Just natural growth in the economy dictates that will happen. The Obama administration has done about everything to prolong it and they continue to do so. But the economy is bigger than the gov't. I'd watch for surprises on the upside.

 

[editec]

Can anyone say the phrase 'commercial mortgage market tanking'?

The UK has tried to bullshit it's citizens that they are out of recession too.

A shoe that has yet to drop, we are informed, CG.

We had one of these commercial RE paper meltdowns before, remember?

That was bad, but that did not happen ON TOP OF the sort of economic mess that we're in now.

We really idea how bad things are, since none of us are privy to the banks' books.

Thanks you once again Mr. Reagan for covincing the people that the markets could take care of themsevles.

Obviously the invisble-hand-of-the-market is planing on giving us still another DOPE SLAP.

 

[Toro]

Cart before the horse! You have placed the cart before the horse. The failure of the small town banks did not cause the Depression. The Depression caused the failure of the small town banks. We have the FDIC and other Federal Regulations to keep the bank failures to a minimum now as it is unnerving to the public to see the banks fail and that might add to their lack of spending.

That is why we will not have a repeat of the Great Depression. There was no backstop to the banking system in the 1930s. Now there is.

In reality, the Depression was indeed caused by a failure in the financial system. This is the conclusion of Milton Friedman and Ben Bernanke, two of the foremost experts of the Depression.

The Federal Reserve did not supply liquidity to the financial system. Bank reserves fell by a staggering one-third during this time. Without liquidity, banks failed en mass. Compare this to today whereby reserves are sitting at mind-boggling highs and the government has guaranteed pretty much everything.

In September 1930 - one year into the Depression - the ratio of deposits to currency was extremely high. People still had confidence in the financial system. They were keeping their money in the banks. By the end of 1932, that ratio had fallen to all-time lows as banking panics caused people to pull money out of banks.

If the Depression was the cause of bank failures and not the other way around, then one would have expected that weak banks would have failed at a faster rate than strong banks. But that did not happen. In fact, banks that failed generally were as strong if not stronger than banks that did not.

The failure of the financial system caused the Depression but it was a circular loop, a death spiral - failing banks destroyed credit constricting the economy causing more failed banks which destroyed more credit which constricted growth. This negative feedback loop is what lead to the Great Depression. This negative feedback loop is what was occurring in financial markets last fall. It was broken by the government. There will be no repeat of the Great Depression.

 

[The Rabbi]

Can anyone say the phrase 'commercial mortgage market tanking'?

The UK has tried to bullshit it's citizens that they are out of recession too.

A shoe that has yet to drop, we are informed, CG.

We had one of these commercial RE paper meltdowns before, remember?

That was bad, but that did not happen ON TOP OF the sort of economic mess that we're in now.

We really idea how bad things are, since none of us are privy to the banks' books.

Thanks you once again Mr. Reagan for covincing the people that the markets could take care of themsevles.

Obviously the invisble-hand-of-the-market is planing on giving us still another DOPE SLAP.

The only one getting dope slapped is you.
The problem was exactly government regulation, not its lack. With Uncle guaranteeing stuff Fannie and Freddie felt like they had dad's credit card and could do no wrong. Compound that by a few hundred regulations and guarantees and we're in this boat. The only thing worse is that gov't is going to try to solve the problem by making more regs.

 

[Paulie]

The present economic environment is not one to encourage risk and in such a phase there is no "good risk.

MORE buillshit from the guy who knows nothing.

The Fed lowered rates to near 0 to add bank reserves to strengthen balance sheets and allow for lending again. That was supposed to be the plan.

They, by virtue of lowering the rates like that, ENCOURAGED LENDING (risk).

Just the same way they did in '02 when when they lowered the rate to 1%.

That was an environment where you could have said the same thing "Not a time to encourage risk"...since 9/11 just happened, and we just emerged from the tech bubble burst. But they lowered rates, and encouraged risk...DIDN'T THEY?????

Your stupidity knows no bounds!

 

[Neubarth]

The present economic environment is not one to encourage risk and in such a phase there is no "good risk.

MORE buillshit from the guy who knows nothing.

The Fed lowered rates to near 0 to add bank reserves to strengthen balance sheets and allow for lending again. That was supposed to be the plan.

They, by virtue of lowering the rates like that, ENCOURAGED LENDING (risk).

Just the same way they did in '02 when when they lowered the rate to 1%.

That was an environment where you could have said the same thing "Not a time to encourage risk"...since 9/11 just happened, and we just emerged from the tech bubble burst. But they lowered rates, and encouraged risk...DIDN'T THEY?????

Your stupidity knows no bounds!

A good counter argument could be made that there is no risk when you borrow at ZERO or near ZERO percent and lend it at five percent. That is pure profit. Especially as is the case now where once they write the loan, they can turn and sell the loan to the Fed as they are buying any and all paper.

 

[Paulie]

The present economic environment is not one to encourage risk and in such a phase there is no "good risk.

MORE buillshit from the guy who knows nothing.

The Fed lowered rates to near 0 to add bank reserves to strengthen balance sheets and allow for lending again. That was supposed to be the plan.

They, by virtue of lowering the rates like that, ENCOURAGED LENDING (risk).

Just the same way they did in '02 when when they lowered the rate to 1%.

That was an environment where you could have said the same thing "Not a time to encourage risk"...since 9/11 just happened, and we just emerged from the tech bubble burst. But they lowered rates, and encouraged risk...DIDN'T THEY?????

Your stupidity knows no bounds!

A good counter argument could be made that there is no risk when you borrow at ZERO or near ZERO percent and lend it at five percent. That is pure profit. Especially as is the case now where once they write the loan, they can turn and sell the loan to the Fed as they are buying any and all paper.

He was obviously speaking in terms of private banks giving consumer and business loans when you take into account the context of the direction of discussion.

 

[The Rabbi]

The present economic environment is not one to encourage risk and in such a phase there is no "good risk.

MORE buillshit from the guy who knows nothing.

The Fed lowered rates to near 0 to add bank reserves to strengthen balance sheets and allow for lending again. That was supposed to be the plan.

They, by virtue of lowering the rates like that, ENCOURAGED LENDING (risk).

Just the same way they did in '02 when when they lowered the rate to 1%.

That was an environment where you could have said the same thing "Not a time to encourage risk"...since 9/11 just happened, and we just emerged from the tech bubble burst. But they lowered rates, and encouraged risk...DIDN'T THEY?????

Your stupidity knows no bounds!

A good counter argument could be made that there is no risk when you borrow at ZERO or near ZERO percent and lend it at five percent. That is pure profit. Especially as is the case now where once they write the loan, they can turn and sell the loan to the Fed as they are buying any and all paper.

The capital of banks is at an all time high. You are right that borrowing at zero and lending at any percentage rate is a win win situation for them. THey don't need to take risks in lending. Small businesses are being starved of capital because banks won't lend on that anymore.
I can't blame them particularly either.

The Pauli's two functioning brain cells continue to puke out stupdiity, confirming my decision to stick her ass on iggy.

 

[Neubarth]

MORE buillshit from the guy who knows nothing.

The Fed lowered rates to near 0 to add bank reserves to strengthen balance sheets and allow for lending again. That was supposed to be the plan.

They, by virtue of lowering the rates like that, ENCOURAGED LENDING (risk).

Just the same way they did in '02 when when they lowered the rate to 1%.

That was an environment where you could have said the same thing "Not a time to encourage risk"...since 9/11 just happened, and we just emerged from the tech bubble burst. But they lowered rates, and encouraged risk...DIDN'T THEY?????

Your stupidity knows no bounds!

A good counter argument could be made that there is no risk when you borrow at ZERO or near ZERO percent and lend it at five percent. That is pure profit. Especially as is the case now where once they write the loan, they can turn and sell the loan to the Fed as they are buying any and all paper.

The capital of banks is at an all time high. You are right that borrowing at zero and lending at any percentage rate is a win win situation for them. THey don't need to take risks in lending. Small businesses are being starved of capital because banks won't lend on that anymore.
I can't blame them particularly either.

The Pauli's two functioning brain cells continue to puke out stupdiity, confirming my decision to stick her ass on iggy.

The capital of the banks is at an all time low. Remember they do not have to report their real losses until Bernanke tells them the jig is up.

 

[Paulie]

A good counter argument could be made that there is no risk when you borrow at ZERO or near ZERO percent and lend it at five percent. That is pure profit. Especially as is the case now where once they write the loan, they can turn and sell the loan to the Fed as they are buying any and all paper.

The capital of banks is at an all time high. You are right that borrowing at zero and lending at any percentage rate is a win win situation for them. THey don't need to take risks in lending. Small businesses are being starved of capital because banks won't lend on that anymore.
I can't blame them particularly either.

The Pauli's two functioning brain cells continue to puke out stupdiity, confirming my decision to stick her ass on iggy.

The capital of the banks is at an all time low. Remember they do not have to report their real losses until Bernanke tells them the jig is up.

Neubarth, please tell this moron that his so-called "The present economic environment is not one to encourage risk" is completely retarded given the Fed's subsequent response.

The Fed lowered the Fed Funds Rate to .25% to strengthen bank balance sheets so that they could TAKE THE RISK to loan again, and get the economy moving. This is why they bought so many bad assets to clear up room to make loans.

When the Fed lowers the rate, they are ENCOURAGING risk by making lending and borrowing more attractive between member banks and the public. They did the same damn thing after the tech bubble and 9/11, when they lowered the Fed Funds rate to 1% and ENCOURAGED people to use the low rates to their advantage and buy property.

I don't know where this guy comes up with this shit, but he gets dumber by the day. He hasn't seen how stupid I've been making him look for the past week.

Quote this whole post, it may be the only way he'll see what I've said. And let him know how much of a PUSSY he is for ignoring me. Like a fucking little bitch ass teen girl who just got her period and locks herself in her room because she's embarrassed.

What's funny is that I AGREE that it's not an environment to encourage risk, but that's what the Fed does. It's ALL they know how to do to deal with these problems. Create money, buy securities, increase bank reserves, and hope that banks loan more because they're getting loans from the Fed for so cheap.

It's like the PRIMARY reason we anti-fed people are doing what we're doing.

 

[Chris]

The capital of banks is at an all time high. You are right that borrowing at zero and lending at any percentage rate is a win win situation for them. THey don't need to take risks in lending. Small businesses are being starved of capital because banks won't lend on that anymore.
I can't blame them particularly either.

The Pauli's two functioning brain cells continue to puke out stupdiity, confirming my decision to stick her ass on iggy.

The capital of the banks is at an all time low. Remember they do not have to report their real losses until Bernanke tells them the jig is up.

Neubarth, please tell this moron that his so-called "The present economic environment is not one to encourage risk" is completely retarded given the Fed's subsequent response.

The Fed lowered the Fed Funds Rate to .25% to strengthen bank balance sheets so that they could TAKE THE RISK to loan again, and get the economy moving. This is why they bought so many bad assets to clear up room to make loans.

When the Fed lowers the rate, they are ENCOURAGING risk by making lending and borrowing more attractive between member banks and the public. They did the same damn thing after the tech bubble and 9/11, when they lowered the Fed Funds rate to 1% and ENCOURAGED people to use the low rates to their advantage and buy property.

I don't know where this guy comes up with this shit, but he gets dumber by the day. He hasn't seen how stupid I've been making him look for the past week.

Quote this whole post, it may be the only way he'll see what I've said. And let him know how much of a PUSSY he is for ignoring me. Like a fucking little bitch ass teen girl who just got her period and locks herself in her room because she's embarrassed.

What's funny is that I AGREE that it's not an environment to encourage risk, but that's what the Fed does. It's ALL they know how to do to deal with these problems. Create money, buy securities, increase bank reserves, and hope that banks loan more because they're getting loans from the Fed for so cheap.

It's like the PRIMARY reason we anti-fed people are doing what we're doing.

And those of us who are willing to work are making tons of money.

 

[Paulie]

The capital of the banks is at an all time low. Remember they do not have to report their real losses until Bernanke tells them the jig is up.

Neubarth, please tell this moron that his so-called "The present economic environment is not one to encourage risk" is completely retarded given the Fed's subsequent response.

The Fed lowered the Fed Funds Rate to .25% to strengthen bank balance sheets so that they could TAKE THE RISK to loan again, and get the economy moving. This is why they bought so many bad assets to clear up room to make loans.

When the Fed lowers the rate, they are ENCOURAGING risk by making lending and borrowing more attractive between member banks and the public. They did the same damn thing after the tech bubble and 9/11, when they lowered the Fed Funds rate to 1% and ENCOURAGED people to use the low rates to their advantage and buy property.

I don't know where this guy comes up with this shit, but he gets dumber by the day. He hasn't seen how stupid I've been making him look for the past week.

Quote this whole post, it may be the only way he'll see what I've said. And let him know how much of a PUSSY he is for ignoring me. Like a fucking little bitch ass teen girl who just got her period and locks herself in her room because she's embarrassed.

What's funny is that I AGREE that it's not an environment to encourage risk, but that's what the Fed does. It's ALL they know how to do to deal with these problems. Create money, buy securities, increase bank reserves, and hope that banks loan more because they're getting loans from the Fed for so cheap.

It's like the PRIMARY reason we anti-fed people are doing what we're doing.

And those of us who are willing to work are making tons of money.

I don't know about "tons", but yeah, we're doing ok. Nice to see a liberal say such a thing too, not that I have the first fucking clue what it has to do with what I wrote.

At least you quoted it so sock-puppet boy Rabbi could read it, hopefully before he gets banned.

 

[Neubarth]

The capital of banks is at an all time high. You are right that borrowing at zero and lending at any percentage rate is a win win situation for them. THey don't need to take risks in lending. Small businesses are being starved of capital because banks won't lend on that anymore.
I can't blame them particularly either.

The Pauli's two functioning brain cells continue to puke out stupdiity, confirming my decision to stick her ass on iggy.

The capital of the banks is at an all time low. Remember they do not have to report their real losses until Bernanke tells them the jig is up.

Neubarth, please tell this moron that his so-called "The present economic environment is not one to encourage risk" is completely retarded given the Fed's subsequent response.

The Fed lowered the Fed Funds Rate to .25% to strengthen bank balance sheets so that they could TAKE THE RISK to loan again, and get the economy moving. This is why they bought so many bad assets to clear up room to make loans.

When the Fed lowers the rate, they are ENCOURAGING risk by making lending and borrowing more attractive between member banks and the public. They did the same damn thing after the tech bubble and 9/11, when they lowered the Fed Funds rate to 1% and ENCOURAGED people to use the low rates to their advantage and buy property.

I don't know where this guy comes up with this shit, but he gets dumber by the day. He hasn't seen how stupid I've been making him look for the past week.

.

Podner, all I know and can see for certain is that the BIG banks are not really lending like they should be. The Fed effort to encourage lending appears to be failing. I believe that the reason behind it is that we did away with Mark to Market accounting and the banks know that eventually they will be held accountable to balance their accounts. I may be wrong on this, but what else can it be???

 

[The Rabbi]

They're not lending because they got burned all to hell on the loans they made 3 years ago. Mark to market has something to do with all that, but not a lot.
This is the same environment we've seen before: during the Great Depression, and after the South American lending fiascos of the 1980s and after the S&L crisis of the 1990s and after the tech bomb of the early 2000s. Whenever banks experience outsize losses on their loans they pull back and get ultra conservative. I have seen this numerous times in my life already.
This is probably all new for Pauli, who got her first savings account 18months ago and now thinks she knows everything about banking.

 

[Paulie]

They're not lending because they got burned all to hell on the loans they made 3 years ago. Mark to market has something to do with all that, but not a lot.
This is the same environment we've seen before: during the Great Depression, and after the South American lending fiascos of the 1980s and after the S&L crisis of the 1990s and after the tech bomb of the early 2000s. Whenever banks experience outsize losses on their loans they pull back and get ultra conservative. I have seen this numerous times in my life already.
This is probably all new for Pauli, who got her first savings account 18months ago and now thinks she knows everything about banking.

Still doesn't understand that even though the economic environment is not one to encourage risk, what the Fed did was ENCOURAGE banks to take risk and lend.

That's what the fed DOES you fucking moron, what don't you understand about that? That banks aren't lending doesn't change the fact that the Fed's first move was to clear up balance sheets and ENCOURAGE RISK.

GOD DAMN you're a moron!!

Doesn't know econ, and can't even comprehend context. I feel sorry for anyone who wasted their time trying to educate you throughout your life.

 

[Paulie]

The whole point of the original argument between Rabbi and I a few weeks ago was over the need for the Fed in the first place.

If, like he says, the economic environment is not one to encourage risk in, then why does the Fed continually make moves to encourage banks to take risks during these times??

Talk about someone who doesn't know their history... Not to mention their ass from a fucking hole in the ground.