01/06/10 Baltimore, Maryland – If you read the papers you’re likely to think that the recession is over…we’re in full recovery mode…with rising sales, rising production, and rising prices. This year is going to be a good one for stocks…and the US economy is coming back stronger than expected.
Is it true?
Well, it’s sort of true. The recession is over…the depression continues. As we keep saying, if you’re going to make a royal mess of things, you need taxpayer support. And with the unwitting and unwilling support of millions of American taxpayers, the federal authorities are busily making a bad situation worse.
Don’t believe us? No worries. Since everyone is so sure that the economy is hunky dory, the burden of proof is on us to show that it is not.
First, we point out that the evidence is mixed. Here’s David Rosenberg, on the ‘new normal:’
“…what was previously unthinkable suddenly becomes the ‘new normal’. From March 1983 (when the Reagan-led economic expansion took hold) through to September 2008 (when Lehman collapsed) we never once had a month where US vehicle sales came in as low as 11 million units at an annual rate. That is a span of 25 years.
“In yesterday’s WSJ, page B1, there is a huge article titled ‘Late Surge in Car Sales Raises Hopes for 2009.’ This ‘surge’ seems to have taken sales up to 11 million units in December (data out later today), which would be up from 10.9 million in November. So here we are today, and it is apparently good news that we had virtually no growth in sales towards the end of the year even with dramatic incentives according to the article, GM gave its dealers $7,000 for some of its models and that we had 11 million units when the ‘old normal’ was 16 million units (not to mention that 12 million is the cutoff for replacement demand – autos are still being taken off the highways and driveways of America).”
“Personal Bankruptcy Filings Rising Fast,” says The Wall Street Journal. That’s the way depressions work. It takes time for people to run out of money and out of options. Then, they give up…admit defeat…and get on with their lives.
That’s true for the housing market too. People hold on. They wait. They hope prices will go up. And finally, they give up. That’s when prices really go down. That hasn’t happened yet. The depression is still young! David Rosenberg again:
“One would think that of all the sectors that should be benefiting from all the government largesse it would be housing – but at 355k in November, new home sales were down 11% MoM and the fifth lowest level in 3 decades. It is now taking the builders a record 14 months to locate a buyer upon completion of a unit. And the unsold inventory shot back up to 7.9 months’ supply from 7.2 in October. Sales of completed homes are still down 38% from what were already depressed levels of a year ago.”
“Living on nothing but food stamps,” says a New York Times headline. A record 39 million people are getting food stamps. For some of them, that’s all they have. They’ve used up their unemployment compensations. They’ve spent all their savings. They’ve mooched off of relatives and friends. Now all they’ve got is the kindness of strangers who work for the US federal government.
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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I’m surprised the situation in Iceland isn’t getting more play here at DR.
A population that’s had enough of the shafting told the criminals to go pack it sideways. Even their government listened- Something that hasn’t happened in the US in many decades.
Once again you fail to mention that manufacturing is picking up sharply. Factory orders are picking up sharply. I’m happy the growth is slow and steady, means it’s more sustainable. A sharp jump up would indicate nothing but inventory rebuilds. This is a nice steady economic pickup.
And, BTW, quit quoting Rosenberg, he’s been wrong for months now, just like the rest of the doomers.
The country needs more people like Harry to swallow the garbage statistics the government has been trying to feed us.
Harry hope it feels good going down, because it’s going to burn like hell coming out.
Harry’s right. That great ISM number rose to a reading of 50.1% As you all know, anything over 50.0% indicates an expansion. And everybody knows Rosenberg is lying about his vehicle sales and housing numbers.
Harry’s wisdom has compelled me to sell the farm and send Momma to live with Sis in her trailer over by the highway, and put all the money into the stock market, because stocks are cheap! 14,000 Dow in 2010 – you can’t lose, there is still money to make!
I’m hoping Harry will tell me what 5 stocks I should buy, tho.
Mary Jo:
AAPL
GOOG
QCOM
WDC
MOS, POT (Take your pick)
Your welcome!
Harry those look like some pretty good candidates for a sell not a buy.
“Now all they’ve got is the kindness of strangers who work for the US federal government.”
Harry, why don’t you step up to the plate and help some of these folks that can’t find find work? You’re making a killing on the stock market right now, do the right thing and spread some of your wealth around.
Six suggestions – that’s one more than I asked for! Hot dam!
Momma’s still mad at me for losing her inheritance on DELL and Q after the broker said it was a sure bet. She says any more computer stuff or phone stuff is out.
But I like your POT suggestion – that Roubini guy likes it.
I think it’s about time you told us Harry ; who are you working for ? Treasury department :p ? A Federal Reserve Agency maybe :p ?
I foresee Dow 30000 in 2011 btw. Win it big, bet your money on it.