Some numbers do have consequences.
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August 6, 2004
Billmon: Out of the Blue
Comments
This is why the October Surprise will become the October Spectacular!
Posted by: Cloned Poster | Aug 6 2004 21:26 utc | 1
Billmon, great anaylse and writing. One addition –
The crucial question is how economic decisionmakers – in the markets, corporate board rooms, on shop floors and in the stores – are going to react to today’s ugliness. If they conclude the shitty employment news is just a blip in an otherwise robust expansion, the economy may still be on a glide path to a relatively soft landing – a temporary slowdown in growth, not a return to recession. But if they freak – if companies jam the brakes on investment and hiring
– this is already happening. Morgen Stanleys Richard Berner -an optimist- writes today:
…Corporate America is swimming in cash. Liquidity is at record highs and cash flow appears to have outstripped investment needs …
Combining these two trends, the so-called financing gap — the difference between cash flow on one hand and the sum of capex and inventory accumulation on the other — has been in negative territory for the first time since 1975, and we estimate that the gap remained below zero for a record five straight quarters.
– companies have cash but do not invest it. They do not see enough possible return on the investments they could do. This says something about their view on the economic future.
Posted by: b | Aug 6 2004 21:34 utc | 2
Now that’s what I call a post.
When this old boy gets his dander up…he out-writes the world.
So the underlying squeeze on middle-class incomes continues…
That plays right into the paws of the main democratic talking point. Bad news is good news. Remember everyone: don’t buy anything expensive between now and November. Go onto pure subsistence mode. Voluntary Poverty is Patriotic.
High unemployment, high energy prices, inflation-driven wage gains that still fail to keep up with inflation. Gee, where have we seen that picture before? Jimmy Carter shakes his head sadly and says, “Don’t ask.”
Now this is rich given that today Kerry announced an enegry independence plan. Trivia question: who was the last president that tried to wean American’s from Arab oil? Maybe the time wasn’t right then. But it sure the hell is over-right now.
Heck, at this rate, they’ll be bringing back disco and the polyester leisure suit.
Ha ha ha…we are about due for the go-around come-around on 70 styles aren’t we? Seriously.
The enormous stimulus of the Fed’s rate cuts and the Bush tax cuts may have bought the long boom a little more time, while worsening the imbalances and internal contradictions that will eventually bring it to an end.
I am afraid this may be quite accurate. Think about the sheer size and duration of the Fed’s rate cuts. For the last three years they’ve been nearly paying people to borrow money. That’s akin to treating cancer with huge doses of laetrile. The creature is sick…the remedy is phony. Something has got to give.
Showing Bush the door is a start on the healing path.
[Aside: On another thread I wrote: “Historians may write that Chinese and the Subcontinent demand for oil doomed Bush’s reelection efforts.” I am still sticking to that line. Without the Chinese demand the US might have gone for Bush despite his manifest incompetence. As we sit typing today: Bush is history and we will begin to see the major media outlets curry Kerry’s favor. They are after all: suck asses first and reporters second.]
[Double aside: Absolutely brillant post Billmon. ]
Posted by: koreyel | Aug 6 2004 22:51 utc | 3
Billmon wrote:
“…if the stock market takes a nasty fall, or if consumers decide that they better cut back on spending and start socking more money away in the bank – then things could get more ugly.”
Since the banks aren’t paying any interest anyway, what if the consumers start banking their money in a sock? I wonder how ‘ugly’ *that* could get.
Posted by: pb | Aug 6 2004 23:01 utc | 4
pb: You know, people emptying their bank accounts and keeping them safely hidden at home is my dream scenario. This would gut the entire economy in a matter of days, because most currency and actual money would be stocked for real. The central banks would be forced to print tons of new $, £, Euros, and massive devaluations would quickly follow.
In fact, what we need is just a massive and apparently serious rumor that HSBC, Citybank or UBS is close to bankruptcy, and that should be enough.
Dang, there, for a minute, I thought we were nearly there. The ultimate and complete downfall of the capitalist system. *sigh*
Posted by: Clueless Joe | Aug 6 2004 23:16 utc | 5
Koreyel:Voluntary Poverty is Patriotic.
And involuntary poverty? 😉 No worries from my house about buying much of anything except groceries, and I’m employed(under-employed) and don’t use credit cards of any kind. I guess it could be patriotic either way, eh? Given the right PR person. [sigh]
But seriously (drum and cymbal hits)… while I’ve never burned up the town making scads of money, this is the worst two-year period of my adult life for holding the nose above water. I hope it’s just a trend, but I fear it isn’t. To me what economic reporting always needs is some examples from real life. I’m betting percentages with decimal points put more than just me into a trance.
Posted by: Kate_Storm | Aug 7 2004 0:28 utc | 6
Just as an information , I can’t start to explain how much harder it is for me and my husband now then it was when we came here in Australia some years ago and even had children to support at that time, which is not the case now (thanks God).. And Howard & Co are constantly “beating” us how AU economy is in a great shape. Yap, I am sure it’s fucking brilliant for 5% of them. And this trade agreement with USA is going to bring USA laws and USA practice here along with USA investment. Happy, happy-joy, joy…Like we already don’t have enough of it…We are literally becoming one of USA states.
Posted by: vbo | Aug 7 2004 2:43 utc | 7
I hear you VBO.
Here in Canada, when the Big Dog’s
book tour rolled into T.O yesterday
many were left reminiscing about
those “golden years”.
Were they really just a few years ago?
Toronto loves him!
Rose colored glasses? Maybe…
Posted by: Ramlad | Aug 7 2004 3:03 utc | 8
Billmons post leaves out one great big point. Those hedge funds he’s talking about are fucking the average Joe. They are sucking all of the 401 K money out as quick as it gets taken fron your check.
I cannot believe people have not taken this shit more serious. The fat cats are fucking middle america and Bushie and company are doing absolutely nothing about it. Hedge funds must be taken to task for the stealing they are doing.
Further, people must wake up and take their money and invest in a local bank. I know, cry about the little return, but investing locally is the only way the US economy will get going.
That is fact.
Posted by: jdp | Aug 7 2004 4:25 utc | 9
@Ramlad
It’s pretty amazing isn’t it….
Tom Ridge on the front pages of all the CanWestAssWipe papers on Monday scaring the crap out everybody, then BillyC fronting the Star and the Globe on Friday of the same week filling everybody with hope.
For all the non-hosers out there the important thing to realize is that this is happening North, not South, of the 49th!
In other words the tentacleular reach of the Rovians and their on-board cross-border MediaMinions are trying to put the fear in Canadians because we’ve got a new Prime Minister who’s looking to see which way the wind is blowing (and, unfortunately, he does need a weatherman to tell him which way to go).
Further example…the editorial page of the Vancouver Sun was admonishing us Thursday that, based on the latest Ruffles have Ridges, Never-Goes-Stale-in-a-Vaccuum-Tube-Potato-Chip- Evidence, we on the Canadian Left Coast must be vigilant because if we’re not AQ could blow-up a kayak or infiltrate a tree-hugger’s ring or some damn thing….
Lord, when will it ever end?
Posted by: RossK | Aug 7 2004 16:34 utc | 10