tag:blogger.com,1999:blog-30643134.post1222164070365483630..comments2023-12-26T01:10:26.319-05:00Comments on Accrued Interest: Ultra-Bears: I take it back!Accrued Interesthttp://www.blogger.com/profile/05096191765979971184noreply@blogger.comBlogger65125tag:blogger.com,1999:blog-30643134.post-60375425161576053152009-07-27T12:38:04.302-05:002009-07-27T12:38:04.302-05:00We are facing undeniable evidence of recovery. Alt...We are facing undeniable evidence of recovery. Although some of my evidence comes from an unlikely source. This spring China provided some early evidence of economic recovery. More recently, China announced that it is on track to see 8 percent growth in 2009. When coupled with positive US housing and manufacturing data, we have reason to be optimistic.<br /><br />Please see The Green Market<br /><br />http://thegreenmarket.blogspot.com/2009/07/recovery-sustainability-employment-and.htmlThe Green Market Oraclehttps://www.blogger.com/profile/12716602107381237080noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-89964864812121113992008-04-23T13:16:00.000-05:002008-04-23T13:16:00.000-05:00Dave, my view of the conversation... :-) I was ori...Dave, my view of the conversation... :-) <BR/><BR/>I was originally responding to your point that American manufacturing is not in bad shape at all (just that there are not many jobs in manufacturing anymore).<BR/><BR/>You then responded by saying "My intent was to say that US manufacturing will not be a top supplier of the consumer products that the next wave of global consumers will need.<BR/>"<BR/><BR/>You supported your point with information on trade deficits (as opposed to absolute trade itself), which implies to you manufacturing will not be 'pulling the American wagon' going forward.<BR/><BR/>I pointed out that deficits are not a very compelling way of looking at the issue (at which point you correctly reminded my of the difference between account deficits and trade deficits) since they are an account of how people spend money, which is related to how much they think they have, which is related to how much they are given (loaned, etc...)<BR/><BR/>To me, everything in economics is linked to everything else-- so one consumer's decision (or a group of consumers like a whole country) cannot have one spending pattern examined in isolation meaningfully since it is always impacted by other spending patterns.<BR/><BR/>But the total value of US exports is tremendous; if I am not mistaken, we are the third largest exporter in the world.Thaihttps://www.blogger.com/profile/00700253024420397221noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-65203467994796257032008-04-23T12:26:00.000-05:002008-04-23T12:26:00.000-05:00thai,I'm sorry, but I'm not quite clear on what yo...thai,<BR/><BR/>I'm sorry, but I'm not quite clear on what you are asserting.<BR/><BR/>I agree that Govt. spending, tax cuts, and willingness to borrow has certainly enabled a lot of consumption in the US. How does that relate to our discussion?<BR/><BR/>I may be reading your post wrong.Dave Wrighthttps://www.blogger.com/profile/12269677359841766356noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-64097884914097916562008-04-23T12:16:00.000-05:002008-04-23T12:16:00.000-05:00Dave M.,I agree that the price of oil imports make...Dave M.,<BR/><BR/>I agree that the price of oil imports makes the aggregate trade deficit number harder to analyze. That's why I highlighted the point in the report that <B>Manufactured imports are responsible for the bulk of the U.S. trade deficit.</B> They separate Manufactured Goods from Commodities, so the statement above does not apply to petroleum.<BR/><BR/>You'll also notice in the report that the country where our trade imbalance is continuing to careen out of control is with China (10.2% growth from 2006 to 2007). Those are consumer product imports, not petroleum.<BR/><BR/>All of this was in support of my argument that I don't believe that the US will be a primary supplier of consumer products to all those new consumers around the globe.Dave Wrighthttps://www.blogger.com/profile/12269677359841766356noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-89421327301592527122008-04-23T11:19:00.000-05:002008-04-23T11:19:00.000-05:00I would be careful about using the trade deficit t...I would be careful about using the trade deficit to analyze anything. It includes oil imports, which I think compromises it's usefulness.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-71949817680122645042008-04-22T20:46:00.000-05:002008-04-22T20:46:00.000-05:00Dave, thanks! Would you help me with my logic whic...Dave, thanks! <BR/><BR/>Would you help me with my logic which has always been as follows...<BR/><BR/>Americans want DVD players and healthare, etc... Only Americans can't afford both so they buy one out of their 'own' pocket and have the governement borrow for the other (comes up as more government debt).<BR/><BR/>But Americans would not buy DVD players if they ALSO had to buy healthcare from their 'own' pocket (no plug on private healthcare intended)-- fortunately American's don't have to 'sacrifice' right no as foreigners have been more than kind enough to lend them the extra money they need (awfully nice of them!) <BR/><BR/>So yes, I understand 'trade deficits' and 'account deficits' are different, AND at the same time they are inseperably interrelated, e.g. the distinction can be a little like Clinton's: "it all depends on what the meaning of 'is' is".<BR/><BR/>Do you think I am looking at the issue wrong?Thaihttps://www.blogger.com/profile/00700253024420397221noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-59972526203501047992008-04-22T17:12:00.000-05:002008-04-22T17:12:00.000-05:00thai,I do not believe that your last assertion is ...thai,<BR/><BR/>I do not believe that your last assertion is correct. But I'm not an economist (I only play one on TV :-) ).<BR/><BR/>The trade deficit (tracked by the Commerce Dept.) tracks the imports and exports of goods and services.<BR/><BR/>The current account deficit tracks the net flows of trade and other investment into and out of the country.<BR/><BR/>Hence foreign investment in the US would be captured in the current account deficit, not the trade deficit.<BR/><BR/>I would also content that the growth in the current account deficit has as much, or more, to do with financing our public debt as foreign investment in US growth.<BR/><BR/>Here's an interesting article on the state of the current account situation...<BR/>http://www.iie.com/publications/<BR/>papers/paper.cfm?ResearchID=705Dave Wrighthttps://www.blogger.com/profile/12269677359841766356noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-16047430701366379832008-04-22T17:01:00.000-05:002008-04-22T17:01:00.000-05:00All my stocks are hedged with S+P futures so I hav...All my stocks are hedged with S+P futures so I have no net exposure.<BR/><BR/>Things that would cause me to go long.<BR/><BR/>(1) S+P closes at all time high.<BR/>(2) S+P closes down 35% from all time high.<BR/>(3) I'll go long no later Jan 1, 2010<BR/>(4) Nominal house(Case Shiller Index) prices fall 25% from peak.<BR/><BR/>I fully expect the credit crisis to spread to ALL parts of the world. Contagion often takes quite a long time to spread...something like 1.5 - 2 yrs. I'm using Aug '07 as the start.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-63294524123233297672008-04-22T14:13:00.000-05:002008-04-22T14:13:00.000-05:00I think I see you logic but it has a flaw in it......I think I see you logic but it has a flaw in it... remember, the trade deficit (of which manufacturing is a part) is a result of American's borrowing from abroad. If we were not borrowing to finance our growth, the deficit would go away.Thaihttps://www.blogger.com/profile/00700253024420397221noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-81507804227329124202008-04-22T14:08:00.000-05:002008-04-22T14:08:00.000-05:00sorry I was trying to post the URL. the end shoul...sorry I was trying to post the URL. the end should be:<BR/><B>indicators_intlpict_20080215</B><BR/><BR/>How do you make a link in this editor?Dave Wrighthttps://www.blogger.com/profile/12269677359841766356noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-89917709355073879682008-04-22T14:05:00.000-05:002008-04-22T14:05:00.000-05:00thai,Thanks for the response. I need to be carefu...thai,<BR/><BR/>Thanks for the response. I need to be careful with my generalizations. <BR/><BR/>My intent was to say that US manufacturing will not be a top supplier of the consumer products that the next wave of global consumers will need.<BR/><BR/>In support look at the Commerce Dept. data from February<BR/><BR/>http://www.epi.org/content.cfm/indicators_intlpict_20080215<BR/><BR/>One excerpt...<BR/><BR/>"The U.S. deficit in manufactured goods improved from $690 billion in 2006 to $679 billion in 2007, a decline of 1.6%. <B>Manufactured imports are responsible for the bulk of the U.S. trade deficit</B>. The manufacturing sector lost 3.3 million jobs between January 2001 and December 2007, including 200,000 jobs lost in 2007 alone. More than 32,000 U.S. manufacturing establishments closed between 1998 and 2005."<BR/><BR/>also before we get too excited that 2007 was slightly better than 2006...<BR/><BR/>"Improvement in the U.S. trade deficit in 2007 was due to the combined effects of appreciation of the Euro and other currencies over the past five years, and the initial effects of a U.S. slowdown."<BR/><BR/>If American consumers are sucking this stuff in from overseas, why would we think we could become suppliers to the rest of the world?Dave Wrighthttps://www.blogger.com/profile/12269677359841766356noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-29321307419078092222008-04-22T13:14:00.000-05:002008-04-22T13:14:00.000-05:00Dave W said... "Outside of highly specialized prod...Dave W said... "Outside of highly specialized products, we cannot compete in the manufacturing sector any longer"<BR/><BR/>I don't want to argue, however this statement is not true. The US is the largest manufacturing center in the world--both in absolute $ and as a % of world GDP. In fact we are VERY close to manufacturing being at an all time historical high). American manufacturing is also by far and away one of the most profitable sectors of the American economy.<BR/><BR/>There are just NO JOBS in manufacturing since productivity improvements in manufacturing have been so robust over the years that workers have been replaced with robots, automation, etc...<BR/><BR/>America's manufactured good are very much in demand in the rest of the world. America has such a large economy, exports are just a relatively small % of our economy compared with countries like Germany, etc...<BR/><BR/>Google the accuracy of this yourself. <BR/><BR/>RegardsThaihttps://www.blogger.com/profile/00700253024420397221noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-67316651642618640012008-04-22T13:00:00.000-05:002008-04-22T13:00:00.000-05:00Dave M.I agree that future consumption growth will...Dave M.<BR/><BR/>I agree that future consumption growth will be fastest in the developing economies as their middle classes grow. However, I'm not sure that I see a case for the US to be a top provider of goods and services to those new consumers.<BR/><BR/>Outside of highly specialized products, we cannot compete in the manufacturing sector any longer. I purchase VERY few items that are made in the good ole US of A.<BR/><BR/>We have definitely been the leading global supplier for financial and IT services. <BR/><BR/>We've already begun the first wave of outsourcing IT services (customer service/support and software development). And the continued call for more H1B visas by the tech CEOs tells me that we are continuing to train a bunch of foreign engineers here in the US. A lot of them will return to their home countries to take advantage of the growth/entrepeneur opportunities. I think the leading edge of tech innovation will remain in the US for the next 20 years at least, but I see a lot more of that sector going overseas. (I worked for Cisco for 10 years as an engineer).<BR/><BR/>I don't have much personal experience with the financial services sector, but I do wonder if the current crisis won't lead to more international suspicion of Wall St. financial engineering. I guess on the other hand we're supposed to have the best oversight (not that that helped a whole lot either). Any comments from you folks who work in this area?<BR/><BR/>I would say we're in a position where we need to be the leaders of the next big wave in order to remain the leading economy in the world. Let's hope the big breakthroughs in genetics, nanotechnology or alternative energy happen here and not in China or a former Soviet state.<BR/><BR/>As a father, I want to think about what careers would support my kids and their families 30 years from now.<BR/><BR/>I said in a previous post that I believe in the business cycle. I also believe that history does tend to repeat itself and that like every other historical great power (Rome, British Empire, etc...) we will reach a point when internal stagnancy and external pressures will relegate us to a modern day Italy or Great Britain.<BR/>At today's pace of change I think the transformation will happen a lot sooner than in the past.Dave Wrighthttps://www.blogger.com/profile/12269677359841766356noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-16263741634850370132008-04-22T12:20:00.000-05:002008-04-22T12:20:00.000-05:00kicker said.."Create new businesses selling what t...kicker said.."Create new businesses selling what to who?"<BR/><BR/>Selling products and services to the global community, especially the newly emergent middle class in the BRIC countries.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-53153492921760256992008-04-21T20:17:00.000-05:002008-04-21T20:17:00.000-05:00I love the blog.I think that we were priced to per...I love the blog.<BR/><BR/>I think that we were priced to perfection, expecting low inflation and sustained high earnings multiples. I think we'll need to see a stronger sell off and lower p/e's. Probably in the 8's or so as in other bottoms. And then also some end in sight for credit.JoshKhttps://www.blogger.com/profile/17028441526311718240noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-17585513905328456852008-04-21T13:55:00.000-05:002008-04-21T13:55:00.000-05:00Our system of capitalism is too dynamic to be a lo...<I>Our system of capitalism is too dynamic to be a long term bear. IMO, sideways is a more likely scenario. Many rich people are type A personalities and cannot sit still and collect a coupon. They will instead create new businesses and new jobs, if govt. regulations are not onerous.</I><BR/><BR/>Create new businesses selling what to who?<BR/><BR/>Demand takes both a <I>desire</I> and the <I>ability to pay</I>.<BR/><BR/>The US middle class still has plenty of <I>desire</I> but they are lacking in the <I>ability to pay</I> department.<BR/><BR/>And there is perception that even the US Government is edging up against it's <I>ability to pay.</I> Push much more and we'd trigger a run on the dollar.<BR/><BR/>Central bank reserves represent plenty of <I>ability to pay</I> and their citizens have plenty of <I>demand</I> but the transmission mechanism is a stronger currency.<BR/><BR/>Which developing countries (other than the US) is willing to see it's manufacturing base decimated to support domestic consumption?<BR/><BR/>The rich have done <I>very well</I> over the last couple of decades and have plenty of <I>ability to pay</I> but there are only so many iPods and Cars that .005% of the world's population can consume.<BR/><BR/>Where are tomorrow's consumers going to come from?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-64919032745129286442008-04-21T13:36:00.000-05:002008-04-21T13:36:00.000-05:00evryone i know bought a house they cant afford. ev...evryone i know bought a house they cant afford. everyone i know has rolled their last car payment into the latest car payment. i know unemployed people that bought houses. i know unemployed people that refi'd and lived off that for years.<BR/><BR/>no one has any savings. most people i have worked with have been downgraded in their job meaning they make 40% less salary today than 7 years ago.<BR/><BR/>most of the people i know cant pay all their bills each month...they are always late on some bills.<BR/><BR/>all my friends or people i work with make/made $100k a year but dont today.<BR/><BR/>the friends from europe that are between the ages of 30-50 must live with their parents in europe. they cant afford a car. they cant afford children.<BR/><BR/>my friens in the usa cant afford their children...their parents oay for the grandchildrens education and medical expenses.<BR/><BR/>no one has health insurance.<BR/><BR/>how will companies in the usa make/grow profits when 70% of their income comes from consumers and the poor is still poor and the middle class is beyond foreclosure..........when someone can explain where the new growth will come from i will switch back to a bull.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-4187845901402592212008-04-21T11:45:00.000-05:002008-04-21T11:45:00.000-05:00I thought it was entirely appropriate for you to b...I thought it was entirely appropriate for you to be dismissive. 99% of the comments are drivel.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-91732881157384220802008-04-21T11:07:00.000-05:002008-04-21T11:07:00.000-05:00Its totally fair to argue that pre-existing condit...Its totally fair to argue that pre-existing conditions have finally caught up with us. Its my view that the burden of proof is on those who try to make that arguement. I wouldn't say its "irrelevant."<BR/><BR/>I think there is a better case, and maybe this is where Dave is going, is that some of the pre-existing conditions will result in a more tepid recovery than some past cycles. I think consumer debt is one of these areas. We'll probably see a longer-term move toward a higher savings rate, which means that as incomes recover there will be less spending than you'd otherwise expect.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-4571743403586912352008-04-21T10:58:00.000-05:002008-04-21T10:58:00.000-05:00I say the US stock market goes sideways for many y...I say the US stock market goes sideways for many years. As a former momentum growth stock trader, I have seen many high flyers start to go sideways (instead of down) on the chart while earnings catch up to the inflated stock price.<BR/><BR/>Our system of capitalism is too dynamic to be a long term bear. IMO, sideways is a more likely scenario. Many rich people are type A personalities and cannot sit still and collect a coupon. They will instead create new businesses and new jobs, if govt. regulations are not onerous. <BR/><BR/>My portfolio consists of safe, municipal G.O. bonds, ( for the sleep well at night part) and equity, covered call, (aka buy-write funds) closed end funds selling at a discount (for the sideways part of my thesis). Some of these funds are global as well, since I think that global growth will be better than the US.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-83182305982965033982008-04-21T10:43:00.000-05:002008-04-21T10:43:00.000-05:00AI,On the issue of longevity of conditions, I thin...AI,<BR/><BR/>On the issue of longevity of conditions, I think it's a matter or interpetation. You are looking at them as "pre-existing" and therefore irrelevant, many (myself included) are looking at them as longterm contributing factors to the current situation that need to be unwound.<BR/><BR/>As for "why now?", you could as easily ask "why did it take so long?". Just a matter of how you look at it.<BR/><BR/>I agree with you that the Fed will likely need to tighten aggresively towards the end of this year and into 2009. I'm very interested to see their release from the April FOMC meeting. I think we'll see language to the effect that they are done lowering, if they go another 25bp down.<BR/><BR/>Even dynamic economies have periods like the 70s. We certainly got through it, but not without some pain.<BR/><BR/>I believe in the business cycle, and that we're entering the down side for a while. Will the economy recover? Most definitely. But when and in what fashion? And more importantly, what do you do during the down cycle?Dave Wrighthttps://www.blogger.com/profile/12269677359841766356noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-39607565373904338562008-04-21T09:26:00.000-05:002008-04-21T09:26:00.000-05:00Also, I was curious what might change bearish mind...Also, I was curious what might change bearish minds. Some of you have posted things that aren't realisitically going to happen, which is the same as saying you won't change your mind. You are going to be bearish period.<BR/><BR/>That's a view I just don't subscribe to. I believe in a dynamic economy, which figures out ways to get through bad times. As I just said, I think there is a pretty good case for a double recession, which would be bad for stocks. But thinking more big picture, about the entire economy, a double recession is something we get through in a couple years and then start moving forward.<BR/><BR/>Also for what its worth, a very small percentage of my personal net worth is in stocks.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-21168359865833469402008-04-21T09:16:00.000-05:002008-04-21T09:16:00.000-05:00I didn't mean to be dismissive of anyone. I'm sorr...I didn't mean to be dismissive of anyone. I'm sorry if it came off that way. I will say I don't find certain arguments very compelling if the problem described has been a problem for many years. For example, say someone said to me that the markets are going to tank because we're off the gold standard. The question is, why is that going to create a problem now, but didn't create a problem 20 years ago?<BR/><BR/>I think the best case for a 2-3 year bearish view is that the Fed is forced to hike rates aggressively to stamp out inflation later in 2008, thus creating a double recession, starting in 2009 or 2010. We get a rally off the "liquidity crisis" bottom, but we don't form a cyclical bull market until after the second recession.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-56645188283863664732008-04-20T20:47:00.000-05:002008-04-20T20:47:00.000-05:00i read some good comments. there was a post by ro...i read some good comments. there was a post by robert freeman that included some very important longer-term trends and issues. i believe he also mentioned real vs. nominal returns. equity markets indices may increase on a nominal basis along with everything else via inflationary pressures, but on a real basis, discounted by ongoing inflationary pressures, equity markets may provide the equity holder with a negative real return.scotthttps://www.blogger.com/profile/17925729431261811483noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-58025262105528901042008-04-20T16:38:00.000-05:002008-04-20T16:38:00.000-05:00eh, have you thought of currency GEMS?eh, have you thought of currency GEMS?Thaihttps://www.blogger.com/profile/00700253024420397221noreply@blogger.com