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Greenspan Warns of Likely U.S. Recession

post #1 of 77
Thread Starter 
Batten down the hatches

Another view is here.

For a little historical context we can look here.

Based off the average age of this forum, most people were not of an age where they would have really encountered and felt the last true recession in the United States. (1992 or so depending upon where you happened to be.)

The second article notes the following information.

Consumers also face high energy prices, higher interest rates, stagnant wages, negative savings and high debt levels, he noted.

Some of these factors, for example energy prices, can't be controlled for with regard to personal choice. However some of the other factors, higher interest rates, negative savings and high debt levels can be controlled.

As someone with a few more years under the belt than some on here, I cannot emphasize the effect that lack of liquidity will have on this next recession. Debt has been so readily available and cost so little for so long in this country that it will truly be interesting to see how people deal with less availability of it in a the future. Credit has so distorted the economy that things are no longer valued on what they are worth, but on what they can get in terms of credit. It is so strange to think of people thinking of interest rates being at 6.25 percent for homes loans as being high or even crippling. I still have an 8% mortgage on one of my properties and was thrilled to get it that rate because that was so much lower than the previous rates.

So the point of the thread, if you have experiences of memories of prior recessions, please post them here. If you have any advice or thoughts, add them as well.

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #2 of 77
Quote:
Originally Posted by trumptman View Post

Batten down the hatches

Another view is here.

For a little historical context we can look here.

Based off the average age of this forum, most people were not of an age where they would have really encountered and felt the last true recession in the United States. (1992 or so depending upon where you happened to be.)

The second article notes the following information.

Consumers also face high energy prices, higher interest rates, stagnant wages, negative savings and high debt levels, he noted.

Some of these factors, for example energy prices, can't be controlled for with regard to personal choice. However some of the other factors, higher interest rates, negative savings and high debt levels can be controlled.

As someone with a few more years under the belt than some on here, I cannot emphasize the effect that lack of liquidity will have on this next recession. Debt has been so readily available and cost so little for so long in this country that it will truly be interesting to see how people deal with less availability of it in a the future. Credit has so distorted the economy that things are no longer valued on what they are worth, but on what they can get in terms of credit. It is so strange to think of people thinking of interest rates being at 6.25 percent for homes loans as being high or even crippling. I still have an 8% mortgage on one of my properties and was thrilled to get it that rate because that was so much lower than the previous rates.

So the point of the thread, if you have experiences of memories of prior recessions, please post them here. If you have any advice or thoughts, add them as well.

Nick

Could present some great buying opportunities for stocks and defaulted loans on houses. The longer term question is: What kind of effect will boomer retirements and shrinking workforce have on the US (and world) economies?

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

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Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply
post #3 of 77
Prior recessions...

Riots in LA.

Racial antagonism.

Yeah... you know the drill...
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post #4 of 77
Quote:
"While, yes, it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008 ... with some slowdown," he said.

Greenspan said that while it would be "very precarious" to try to forecast that far into the future, he could not rule out the possibility of a recession late this year.


How one get from the above quote to "Greenspan Warns of Likely U.S. Recession". Is it just bad reporting or did Greenspan say more than what was reported.
post #5 of 77
Quote:
Originally Posted by trumptman View Post

Batten down the hatches

Based off the average age of this forum, most people were not of an age where they would have really encountered and felt the last true recession in the United States. (1992 or so depending upon where you happened to be.)

Nick

I recall the recessions of Nov. 1973-Mar. 1975 and July 1981-Nov. 1982. Though I was only a teenager and twenty-something, I remember the troubles my older brother had keeping his job and paying the bills. \

Source
post #6 of 77
I remember 92. I was in grad school and that was a good place to be. Many a friend who had good jobs out of college lost them in that recession and went back to school.
post #7 of 77
Thread Starter 
Quote:
Originally Posted by mydo View Post

How one get from the above quote to "Greenspan Warns of Likely U.S. Recession". Is it just bad reporting or did Greenspan say more than what was reported.

I think the statement relates to parties having differing views on the timeframe as opposed to recession versus no recession.

Quote:
Originally Posted by @_@ Artman View Post

I recall the recessions of Nov. 1973-Mar. 1975 and July 1981-Nov. 1982. Though I was only a teenager and twenty-something, I remember the troubles my older brother had keeping his job and paying the bills. \

Source

The early 90's recession showed some very interesting values with regard to government to me. It is what makes me such a believer that the U.S. will go through a period of very strong to possibly hyper inflation.

A recession hits, the government which is supposed to protect shows it's own self interest and simply begins ignoring its own rules.

I was attending the CSU system in California. There were state laws instituted that limited tuition increases to 10% a year. They promptly ignored them and began passing 50%+ increases. I was paid by the state (teacher's aide) with a warrants instead of checks during a budget stalemate. Government will absolutely ignore the interests of anything but itself when the shit hits the fan. They'll suspend inflationary increases, they will ignore benefit promises, they will magically ignore caps and rates for fees and taxes, they will simply lie.

Quote:
Originally Posted by SpamSandwich View Post

Could present some great buying opportunities for stocks and defaulted loans on houses. The longer term question is: What kind of effect will boomer retirements and shrinking workforce have on the US (and world) economies?

My first property (which I ended up flipped to the tune of $20k on for several years) was signed over to me for free by the person who wanted to get out from underneath it. People did this often. Debt demands cashflow and in a recession, you might not have any so cars, homes and especially toys (rv's, boats, etc.) become very cheap.

As for the upcoming boomer retirement. That could be several threads unto itself. My belief is that the U.S. government will magically unlink benefits and inflation calculations and run the printing presses. Boomers who have run record national debt levels all while saving nothing will be given the option of moving to someplace like Mexico to get by (they can send us workers, we can send them retirees) or they can enjoy the true silver bullet solution, a literal bullet.

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #8 of 77
Quote:
Originally Posted by trumptman View Post

Boomers who have run record national debt levels all while saving nothing will be given the option of moving to someplace like Mexico to get by (they can send us workers, we can send them retirees) or they can enjoy the true silver bullet solution, a literal bullet.

Nick

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply

Proud AAPL stock owner.

 

GOA

 

Get the lowdown on the coming collapse:  http://www.cbo.gov/publication/45010

Reply
post #9 of 77
Stock selloff deepens

"Dow tumbles 150, Nasdaq slumps as investors eye selloff in China, thwarted attack on Cheney, drop in durable goods orders.

NEW YORK (CNNMoney.com) -- The stock selloff worsened near midday Tuesday as reports of slumping stocks in China and Europe and a steep decline in durable goods orders raised worries that the recent rally may be tapped out.

News that Vice President Dick Cheney was the apparent target in a Taliban suicide bombing attack in Afghanistan added to the morning concerns."



attack on cheney?!!!
post #10 of 77
Ah! Just when SDW thought the economy was doing so well. Kind of soon isn't it? However not inconsistent with a cycle I've previously talked about.
Without the need for difference or a need to always follow the herd breeds complacency, mediocrity, and a lack of imagination
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Without the need for difference or a need to always follow the herd breeds complacency, mediocrity, and a lack of imagination
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post #11 of 77
Thread Starter 
The economy has been and is doing well. The prediction is for late 2007 and 2008.

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #12 of 77
Tell that to the urban dwellers that surround me...
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post #13 of 77
Thread Starter 
Quote:
Originally Posted by @_@ Artman View Post

Stock selloff deepens

"Dow tumbles 150, Nasdaq slumps as investors eye selloff in China, thwarted attack on Cheney, drop in durable goods orders.

NEW YORK (CNNMoney.com) -- The stock selloff worsened near midday Tuesday as reports of slumping stocks in China and Europe and a steep decline in durable goods orders raised worries that the recent rally may be tapped out.

News that Vice President Dick Cheney was the apparent target in a Taliban suicide bombing attack in Afghanistan added to the morning concerns."



attack on cheney?!!!

You must have some serious mojo power artman, the sell off is almost at 400 points now.

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #14 of 77
Quote:
Originally Posted by jimmac View Post

Ah! Just when SDW thought the economy was doing so well. Kind of soon isn't it? However not inconsistent with a cycle I've previously talked about.

Gee...I couldn't have predicted that. You've been licking your chops, just waiting for some less than stellar economic data to come out. Today's drop in the market is like Christmas for you. Of course, it's been five years of waiting for you, so I guess I'll let you have your day. enjoy.
I can only please one person per day.  Today is not your day.  Tomorrow doesn't look good either.  
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post #15 of 77
Quote:
Originally Posted by trumptman View Post

You must have some serious mojo power artman, the sell off is almost at 400 points now.

Nick

500

But recovering...
post #16 of 77
Quote:
Originally Posted by SDW2001 View Post

Gee...I couldn't have predicted that. You've been licking your chops, just waiting for some less than stellar economic data to come out. Today's drop in the market is like Christmas for you. Of course, it's been five years of waiting for you, so I guess I'll let you have your day. enjoy.

We never really recovered SDW!

More like 3 years for most of us!

I'm sorry but while you haven't felt a thing others have.

I've never wanted this sort of thing but I did predict it!

Bush is still in office and we're headed back for the hole again. Good job!

Let's have some more tax breaks!

http://articles.moneycentral.msn.com....aspx?GT1=9114


From that article :

" The decline was the biggest point loss for the Dow since Sept. 20, 2001 when the blue-chip index fell 383 points, or 4.4%, to 8,376. The biggest point loss ever -- nearly 685 points -- occurred three days earlier, when markets reopened after terrorists flew airliners into the twin towers of the World Trade Center and the Pentagon.

The Dow's loss was also the biggest percentage decline since the index fell 3.67% on March 24, 2003 -- just before the United States invaded Iraq. The Nasdaq's point loss was its biggest since it fell 116 points on Sept. 17, 2001, the day the markets reopened. "
Without the need for difference or a need to always follow the herd breeds complacency, mediocrity, and a lack of imagination
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Without the need for difference or a need to always follow the herd breeds complacency, mediocrity, and a lack of imagination
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post #17 of 77
Quote:
Originally Posted by trumptman View Post

I think the statement relates to parties having differing views on the timeframe as opposed to recession versus no recession....

Uhhhhhhhh? Not buying. There's some long bridge between "Greenspan Warns of Likely U.S. Recession" and "cannot rule it out". "cannot rule it out" is not "likely".

Bad journalism. The AP is known to be very lazy.
post #18 of 77
http://onlinejournal.com/artman/publ...cle_1777.shtml

This is an interesting aritcle. Could it be true
It makes sense to me.
The spirit of resistance to government is so valuable on certain occasions that I wish it to be always kept alive. Thomas Jefferson
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The spirit of resistance to government is so valuable on certain occasions that I wish it to be always kept alive. Thomas Jefferson
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post #19 of 77
post #20 of 77
Thread Starter 
I had a post with some links to the nice 250 point "other shoe dropping" market close the other day. I didn't get to finish it and since then I have run across this.

Top investor sees crash

Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it'll be worse because we haven't had this kind of speculative buying in U.S. history," Rogers said.

"When markets turn from bubble to reality, a lot of people get burned."


Those who have bought at the top, or who believe they can continue some huge payment during downturns and bumps might be in for a large surprise.

"This is the end of the liquidity party," said Rogers. "Some emerging markets will go down 80 percent, some will go down 50 percent. Some will most probably collapse."


I'm not hoping anything goes wrong and for a lot of folks, things really won't be especially bad. They'll stay in their homes which were overpriced and now will become reasonable in price.

I cannot emphasize enough that the principle cause of harm in this recession will be lack of liquidity. The credit has been so easily available for so long that lack of it is as foreign to people as lack of electricity.

Put some money in those savings accounts!

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #21 of 77
Nick, as a property owner, are you worried about this at all? I only have one mortgage, a 15-year fixed, so I don't see how it could harm me. But I have a friend who own about 100 properties in my city. He says he's not worried at all, because we're not in a bubble region, but I can't help but wonder.
post #22 of 77
My 2 cents.

I don't think a major real estate decline will occur UNLESS we see a big jump in unemployment. Nobody will sell into a declining market unless they have too, i.e. they loose their job and can't make the monthly payment. The tightening of credit will actually be good,IMO, for real estate values as it will discourage speculative building.
post #23 of 77
Thread Starter 
Quote:
Originally Posted by BRussell View Post

Nick, as a property owner, are you worried about this at all? I only have one mortgage, a 15-year fixed, so I don't see how it could harm me. But I have a friend who own about 100 properties in my city. He says he's not worried at all, because we're not in a bubble region, but I can't help but wonder.

I personally am not worried because the properties I own have small mortgages and are not heavily leveraged at all. I could have both my houses sit empty for example and still make all the mortgage payments.

The property values themselves are not the big concern. The principle issue is cashflow from the properties. It isn't as if people get in trouble because their home is worth $500,000 and they lose their job. They get into trouble because they believe that they do not need to save in case they lose their job because their home is worth $500,000.

This is the prime point I try to put across when I discuss liquidity. I'm talking literally about being able to get cash into your hand. People have been able to just cash advance a credit card, or get a HELOC and so forth. They have also easily been able to manipulate and manage debt, toss the credit cards or car loans on to the house for example. Many folks have not had to go any extended period without employment and often can restructure debt in the event something does happen. That likely will end.

We are going to come to a point where since debt will cost much more to originate, the terms for qualifying for it are going to tighten. If you have studied fiat money, banks and fractional reserves, you know that credit tightening has a multiplier effect in terms of dollars removed from the economy and circulation.

People have had a negative savings rate, own less of their equity-wise than they have in the past, and are used to being able to easily get long term loans for vehicles and be granted large amounts of unsecured debt. That will become much less so and cash will again be king.

So make sure you have some, not that you believe you can borrow some, but literally have savings on hand.

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #24 of 77
Any of you guys willing to set an outside date for all the doom and gloom? Let's say December 2008. No bubble burst by then and we'll all have a good laugh at the dire predictions.
post #25 of 77
Thread Starter 
Well you never can be sure if Bernarke might throw dollars from helicopters, but I'm of the firm view that this recession will be here by Spring 2008.

My mental timeline goes like this, the housing slowdown began this year. Many people have finally gotten the fact that the Spring selling season has arrived and amid record inventory, there is no rebound in prices. (When housing is at a normal level, not a red hot market, your home normally sells for more in Spring than trying to sell in December and the first denial claim was, "well now we are just returning to a regular cycle where you have to wait until Spring for further price appreciation)

The truly deluded will hold onto their homes through the entire spring and through the end of the summer and note that they haven't sold. These are the hottest times of the selling season and so when the fall gets here, and the mix of patience, prep, and prayer haven't worked, you will get panic. By this I mean you will finally start getting real price drops instead of the nominal priced drops we have seen.

Most people have been "dropping" their prices from an already overinflated sense of appreciation. They anticipated 10% appreciation, priced that in, it didn't move so they dropped it back down to the non-appreciation price and think they have done everyone a favor. The fall season is when we will see the first set of price cuts.

This sets off a whole series of economic issues. For example if you are flipped on your home, sure you aren't being tossed in the street as long as you hold on and make the payment, but are you also going to drop big money on Christmas without a HELOC? Are you going to drop big money on Christmas when a reverse wealth affect has you feeling $40-50k dollars poorer or mentally tolerating being flipped $25-30k on your home?

This is why you have seen Wall Street not just kick the hell out of certain subprime mortgage companies, you have started to see them kick the hell out of retailers. Again we already see slow down, but not negative growth. People are currently holding on just fine and hoping some good card turn on the river but the rest of us know the odds.

So Spring 2008, Christmas is officially declared to have sucked, we will have the second year of no buyers returning, people will have clamped those wallets shut and recession will be here.

Laugh away,

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #26 of 77
Thread Starter 
It's ARMageddon.

Quote:
NEW YORK (CNNMoney.com) -- More than two million subprime adjustable rate mortgages (ARMs) are poised to reset at much higher rates in coming months, worsening an already suffering housing market.

Borrowers who took out hybrid ARMs in 2004 and 2005 to secure low "teaser" rates for the first two or three years of the loan may see their monthly mortgage payments climb by 35 percent or more.

Consumer groups and politicians worry that hundreds of thousands of subprime ARM borrowers will be unable to keep up with their mortgage payments and will lose their homes.

"In October alone more than $50 billion in ARMs will reset," according to Mark Zandi, chief economist and co-founder of Moody's Economy.com. That's a record, according to Zandi.

Please, I cannot emphasize the lack of liquidity that will occur this time as we head into recession. I suspect this recession will be worse than 1991-ish but not as bad as the early 80's recession.

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #27 of 77
Quote:
Originally Posted by trumptman View Post

It's ARMageddon.

Please, I cannot emphasize the lack of liquidity that will occur this time as we head into recession. I suspect this recession will be worse than 1991-ish but not as bad as the early 80's recession.

Nick

Mkay...so how much cash are you sitting on and don't have in the market. We were planning on moving but decided that selling our house now would be impossible and are going wait 5 years (or a really good buying opportunity that lets us keep both houses). So I'm sitting on a down payment in cash and dithering about putting it back into the market at this time.

And I'm thinking how much we could have made if that had been in say...Apple shares.

Vinea
post #28 of 77
Quote:
Originally Posted by trumptman View Post


Please, I cannot emphasize the lack of liquidity that will occur this time as we head into recession.

Nick

Why do you say this? What would prevent the Fed from injecting liquidity into the market?
post #29 of 77
Thread Starter 
Quote:
Originally Posted by vinea View Post

Mkay...so how much cash are you sitting on and don't have in the market. We were planning on moving but decided that selling our house now would be impossible and are going wait 5 years (or a really good buying opportunity that lets us keep both houses). So I'm sitting on a down payment in cash and dithering about putting it back into the market at this time.

And I'm thinking how much we could have made if that had been in say...Apple shares.

Vinea

I keep a little over $10k in just pure cash and no consumer debt. Which market do you mean though, stock or housing? You seem to interchange the two. As long as you keep your stops short, you shouldn't feel too concerned about buying stocks, as you noted the housing market is weak right now. People are already declaring a bottom to housing but in my view that is just a dead cat bounce. I keep much more than that in the stock market and could easily sell it to obtain liqudity/cash. I'm not talking about retirement pensions/401ks or items like that. I'm talking savings or your after-tax dollar stock fund. Liquidity to me means money you can easily get your hands on that is not part of your retirement, home equity, etc.

Quote:
Originally Posted by backtomac View Post

Why do you say this? What would prevent the Fed from injecting liquidity into the market?

Injecting liquidity back into the market is possible, but it raises inflation which the fed has claimed to want to fight. Inflation is, depending upon the report either right on or already outside the cusp of acceptable. Many claim that inflation is already quite high and the fed has kept taking things out of the reporting basket of goods (that just happen to show inflation) for so long, it is no longer accurate.

If they do inject liquidity and inflation is fully seen as returning, the cost of borrowing will rise anyway and thus the impact will be reduced as well. This is a real tight rope here and so far the fed has walked it pretty well but as the one article noted, the fed cannot do anything about the ARMageddon coming in terms of resetting home loans. That "wealth" will disappear as will any chance of a decent Christmas this year. Loads of these folks are already in a bad situation and are burning through their remaining liquidity as we type in attempts to wait out the situation. I suspect that when next spring arrives and there were no Christmas bonuses, instead possible new layoffs due to lack of sales/activity, we will finally start to see the shit hit the proverbial fan.

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

Reply

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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post #30 of 77
Quote:
Originally Posted by trumptman View Post

Batten down the hatches

Another view is here.

For a little historical context we can look here.

Based off the average age of this forum, most people were not of an age where they would have really encountered and felt the last true recession in the United States. (1992 or so depending upon where you happened to be.)

The second article notes the following information.

Consumers also face high energy prices, higher interest rates, stagnant wages, negative savings and high debt levels, he noted.

Some of these factors, for example energy prices, can't be controlled for with regard to personal choice. However some of the other factors, higher interest rates, negative savings and high debt levels can be controlled.

As someone with a few more years under the belt than some on here, I cannot emphasize the effect that lack of liquidity will have on this next recession. Debt has been so readily available and cost so little for so long in this country that it will truly be interesting to see how people deal with less availability of it in a the future. Credit has so distorted the economy that things are no longer valued on what they are worth, but on what they can get in terms of credit. It is so strange to think of people thinking of interest rates being at 6.25 percent for homes loans as being high or even crippling. I still have an 8% mortgage on one of my properties and was thrilled to get it that rate because that was so much lower than the previous rates.

So the point of the thread, if you have experiences of memories of prior recessions, please post them here. If you have any advice or thoughts, add them as well.

Nick

I missed your post first time around. IMO, you're way off the mark with your predictions of a 1992 recession repeating itself in 2007. Why? The world economy is much different than it was 1992 (yes I remember 1992 very well). We now have a global economy whose growth is booming in places like China,India, Russia, Brazil and elsewhere. In fact, many US companies like John Deere, Catepillar, Cummins Engines, Foster Wheeler, Fluor, Dell (alas not Apple yet) and many, many others are participating in this infrastructure/agriculture/industrial boom, creating a significant number of new jobs in the US, higher wages and increased liquidity to fuel consumer spending without increasing inflation due to the Fed's over-arching fear of the inflation monster. This situation is much different than 1992 when the global economy was much, much different. Think about the state of China and Russia in 1992. Also Real interest rates compared to 1992 are actually quite low. Finally, I think the Fed will ease in Q4 07 or Q1 08, negating many of the large increases in sub-prime mortgages and allowing recovery of the US housing industry, thereby creating more jobs, increasing consumer spending, etc.
post #31 of 77
Quote:
Originally Posted by trumptman View Post

I keep a little over $10k in just pure cash and no consumer debt. Which market do you mean though, stock or housing? You seem to interchange the two. As long as you keep your stops short, you shouldn't feel too concerned about buying stocks, as you noted the housing market is weak right now. People are already declaring a bottom to housing but in my view that is just a dead cat bounce. I keep much more than that in the stock market and could easily sell it to obtain liqudity/cash. I'm not talking about retirement pensions/401ks or items like that. I'm talking savings or your after-tax dollar stock fund. Liquidity to me means money you can easily get your hands on that is not part of your retirement, home equity, etc.



Injecting liquidity back into the market is possible, but it raises inflation which the fed has claimed to want to fight. Inflation is, depending upon the report either right on or already outside the cusp of acceptable. Many claim that inflation is already quite high and the fed has kept taking things out of the reporting basket of goods (that just happen to show inflation) for so long, it is no longer accurate.

If they do inject liquidity and inflation is fully seen as returning, the cost of borrowing will rise anyway and thus the impact will be reduced as well. This is a real tight rope here and so far the fed has walked it pretty well but as the one article noted, the fed cannot do anything about the ARMageddon coming in terms of resetting home loans. That "wealth" will disappear as will any chance of a decent Christmas this year. Loads of these folks are already in a bad situation and are burning through their remaining liquidity as we type in attempts to wait out the situation. I suspect that when next spring arrives and there were no Christmas bonuses, instead possible new layoffs due to lack of sales/activity, we will finally start to see the shit hit the proverbial fan.

Nick

I totally disagree. You are completely ignoring the global boom which has allowed non-inflationairy expansion of the US job market, wages,etc. See my previous post.
post #32 of 77
Thread Starter 
Quote:
Originally Posted by lfe2211 View Post

I missed your post first time around. IMO, you're way off the mark with your predictions of a 1992 recession repeating itself in 2007. Why? The world economy is much different than it was 1992 (yes I remember 1992 very well). We now have a global economy whose growth is booming in places like China,India, Russia, Brazil and elsewhere. In fact, many US companies like John Deere, Catepillar, Cummins Engines, Foster Wheeler, Fluor, Dell (alas not Apple yet) and many, many others are participating in this infrastructure/agriculture/industrial boom, creating a significant number of new jobs in the US, higher wages and increased liquidity to fuel consumer spending without increasing inflation due to the Fed's over-arching fear of the inflation monster. This situation is much different than 1992 when the global economy was much, much different. Think about the state of China and Russia in 1992. Also Real interest rates compared to 1992 are actually quite low. Finally, I think the Fed will ease in Q4 07 or Q1 08, negating many of the large increases in sub-prime mortgages and allowing recovery of the US housing industry, thereby creating more jobs, increasing consumer spending, etc.

First all those things are indeed true and demonstrate why we have gone since 1992 within a major contraction of any sort. However as with all good things, they must come to an end. China, India Russia and Brazil are going to play Japan in this version of the recession. The insane growth within their own economies are leading to issues with possible hyperinflation already. When the U.S. slows even a bit, their own lack of domestic demand will cause their respective speculative bubbles to burst, force their exporters to cannibalize each other, and finally will lead them in a deflationary recession just as they did Japan.

The United States, as you noted has had no liquidity issues at this point because the excess profits from these exporters, profits which are not being used to create domestic demand, are instead being sent here and trying to earn a return. The trade surplus has continually been held and invested into dollar-based investments. When that paper speculative wealth evaporates within their own countries, those monies will be needed more at home and will not be able to be sent back over here. This means less liquidity here, and higher borrowing costs.

People have been arguing that the fed has essentially been outsourced because they had raised the overnight borrowing rate so many times and had seen no corresponding rise in bond and interest rates for mortgages and other types of lending. Those rates have finally started budging up because inflation is not tamed, and secondly because there is simply less money chasing a return here. The overseas markets are providing insane returns and people will begin pulling their dollars and converting them into their own respective currencies to grab those gains. Those created bubbles will pop and their deflationary cycles will start.

China, India and others do not keep this from being 1992. They will insure it is just like 1992. Trade imbalances and an unbalanced economy driven totally towards exports and not at all towards generating domestic demand cannot be sustained.

Quote:
I totally disagree. You are completely ignoring the global boom which has allowed non-inflationairy expansion of the US job market, wages,etc. See my previous post.

It wasn't non-inflationary. The inflation was merely siphoned off. Trade deficits are basically just knocking part of our GDP off and sending it abroad. That money has kept coming back and looking for a return creating speculative bubbles here in housing. If it had been converted to the currencies of the respective countries, then it would have created speculative inflationary bubbles there. However now we have the perfect storm. We have a deflating housing bubble here, due in part to ridiculous financing schemes with neg-am, crazy ARM loans that should not be made available to the general public, and seeing the slower growth here, countries have already started converting dollars (raising rates here) and creating speculative bubbles within their own economies. What they invest in though are export driven sectors which leads to bubbles within the export based industries.

China Bubble

The bubbles will pop. Growth will revert to the mean. Nothing new is revolving around the sun.

India Bubble

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

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"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

Reply
post #33 of 77
Trumptman,

Japan in the 1990s does not in any way equal BRIC and ROW in 2007.That's an overly simplistic FUD opinion. You've been listening too much to Uncle Al (thank god he 's retired except he won't go away!). If you really believe in your (Greenspan) doom and gloom recession bubble hypotheses, in Q4 07 just short all the companies I mentioned along with Paccar, McDonalds, Yum, US Steel and about 100 others I can give you.

Let's just agree to disagree. I do not wish to get into a protracted economics debate with you on an Apple site.
post #34 of 77
Thread Starter 
No problem. I don't know who you mean with regard to Uncle Al. You are welcome to give me the list of companies. I'll be happy to research and make money off them.

Nick

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

Reply

"During times of universal deceit, telling the truth becomes a revolutionary act." -George Orwell

Reply
post #35 of 77
Nick

I think he's referring to Greenspan(uncle Al).

Anyway while I think your scenario is possible, I don't think it will occur. What appears to be unfolding reminds me a bit of the S&L crisis of the 90s. It will have some impact but the US economy is pretty resilient.
post #36 of 77
I've pulled most of my cash out of the market except for a single mutual fund that happens to have a good bit of Apple stock (the only thing keeping it a float)

I probably have too much cash in multiple money markets right now, however I am not comfortable with the risk of the market. I know I am just keeping up with inflation, but the 5.35% is helping me sleep at night. Not sure when/if I will jump back in.

No consumer debt. Home morgage is "0"

Yes I remember '92
post #37 of 77
Quote:
Originally Posted by trailmaster308 View Post

I've pulled most of my cash out of the market except for a single mutual fund that happens to have a good bit of Apple stock (the only thing keeping it a float)

I probably have too much cash in multiple money markets right now, however I am not comfortable with the risk of the market. I know I am just keeping up with inflation, but the 5.35% is helping me sleep at night. Not sure when/if I will jump back in.

No consumer debt. Home morgage is "0"

Yes I remember '92

You're getting 5.35% in a MMA? I need to move from ING. AmTrust right?

Hmm, can one do a trailing stop on an index fund without micromanagement? I guess I'd have to use an ETF. I don't have time to research individual companies and do the analysis that individual stock picks require.

I dunno...if folks really believe in a large decline around the corner I would expect them to have reverse funds in their portfolios to protect gains/hedge against losses.

Vinea
post #38 of 77
This is really very sad. You guys are missing out on one of the greatest Bull Markets ever (an undisputed fact) because of the nonsensical doom & gloom postings of people like trumptman. China and the global economy are booming. Many US companies are partcipating in that boom. Will the boom end? Perhaps. But not until at least August,2008 when China will host the Beijing Summer Olympics.

http://www.mercurynews.com/breakingnews/ci_6347872

I suggest you take some time and do your own research on what the prospects for a US recession are. And, don't take as gospel the predictions of anyone on a computer forum, whether they be bullish (me) or bearish (T-man). That's what you do in every other aspect of your life so why not do it for your money as well?
post #39 of 77
Quote:
Originally Posted by lfe2211 View Post

This is really very sad. You guys are missing out on one of the greatest Bull Markets ever (an undisputed fact) because of the nonsensical doom & gloom postings of people like trumptman. China and the global economy are booming. Many US companies are partcipating in that boom. Will the boom end? Perhaps. But not until at least August,2008 when China will host the Beijing Summer Olympics.

http://www.mercurynews.com/breakingnews/ci_6347872

I suggest you take some time and do your own research on what the prospects for a US recession are. And, don't take as gospel the predictions of anyone on a computer forum, whether they be bullish (me) or bearish (T-man). That's what you do in every other aspect of your life so why not do it for your money as well?

Who's missing out? Trumptman is sitting on no more than $10K. I have a pile of cash because we expected to have to put a down payment on a house but that isn't all my assets and I'm looking to get back in. trailmaster308 is the only one out of the market.

Also, my reading of the Chinese is that they indictated in June that they are unwilling to allow the bubble to continue to grow until after the Olympics and has allowed their market to adjust and increased the stock trading stamp tax to try to achieve a softer landing. The Shanghai composite looks to have leveled out without becoming a smoking hole. If they can stay comfortably above 3000 through the Olympics they'll have a soft landing and a good basis for future growth. If they hit 5000 they're going to pop and thud. IMHO from very casual analysis.

Vinea
post #40 of 77
Quote:
Originally Posted by vinea View Post

Who's missing out? Trumptman is sitting on no more than $10K. I have a pile of cash because we expected to have to put a down payment on a house but that isn't all my assets and I'm looking to get back in. trailmaster308 is the only one out of the market.

Also, my reading of the Chinese is that they indictated in June that they are unwilling to allow the bubble to continue to grow until after the Olympics and has allowed their market to adjust and increased the stock trading stamp tax to try to achieve a softer landing. The Shanghai composite looks to have leveled out without becoming a smoking hole. If they can stay comfortably above 3000 through the Olympics they'll have a soft landing and a good basis for future growth. If they hit 5000 they're going to pop and thud. IMHO from very casual analysis.

Vinea

There is always money to be made..

I have just made over $1,300 in three trades in and out of COH

Coach handbags are very popular with the ladies and their stock only goes up over the long haul.

Fellows
May the peace of the Lord be with you always

Share your smile, Have respect for others, and be loving to all peoples

Paul in Athens: Acts 17 : 16-34
Reply
May the peace of the Lord be with you always

Share your smile, Have respect for others, and be loving to all peoples

Paul in Athens: Acts 17 : 16-34
Reply
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