US - Economy in Recovery or just smoke and mirrors?

I believe the economy is slowly recovering. I believe what is holding everything back is the credit issue. Many Americans are now saving their money rather than go out and buy something on credit.

We have to remember that prior to the recession, our whole life revolved behind the charge it system. You wanted a computer, charge it. Charging it kept the manufacturers, the transporters, the bankers, and retailers busy.

Now people are trying to collect the money to buy a new computer. Depending on the person and their income, this could take several months.

So, I guess the question to ask is what kind of economic growth are we expecting? Are we expecting things comparable to pre-2007?

IMO, our recovery will take time. Many people, like myself, just don't want to find themselves in a future predicament similar to this one just because they wanted to have something now, but willing to pay for it later.

"This is the clearest evidence of consumer deleveraging that we have. Consumers are actively saving more, borrowing less and paying back their credit card balances and other debt," said Zach Pandl, an economist at Nomura Securities International in New York.

"This is a positive thing in the long run, but in the short term it is negative for growth. People spending less means demand will be weaker and employment will be weaker."

While data indicate the economy started growing again in the third quarter after a recession that started in December 2007, consumer spending and a weak labor market remain the missing link to a sustained recovery.

www.reuters.com...

reply to post by jam321


Thanks for the link.

Interesting that many simply choose to over look it.

The article you posted just outlines why everyone should be bullish.

This is akin to a stock having heavy short interest, you would think that would be bearish logically, but it is not, because everyone has to cover.

This is the same thing, people have thier $ in 0% yielding savings and money markets, while Nasdaq is up 64% on the year or something - sooner than later the risk reward does not make sense and naturally, just like the speculator that shorts must cover, so must the guy transfer money into higher yiekding instruments.

When you hear the phrase "Money on the Sidelines" people are referencing the ratio of money in money market accounts to dividends on the SP500.

Originally posted by GreenBicMan
Here is, among many others, one of the most convincing arguments.

Historically the market will gain an "x" percentage every 10 years.

Everytime in history when we have had 10 years (as this occurance now from 1999-2009) that we do not - the next ten years will make up for those losses and also gain you "x" percentage for that 10 years.

I believe it is 20% compounded every 10 years. But it could be something else, I am forgetting right now and do not want to misquote.

Either way as I have been continually saying, and you can check my sig. that this market right now is due for another hisotrical long tenure bull market.

Another way to think of it is, think about all the new tech. that comes out all the time. It comes out exponentially faster than we really can comprehend. 100 somes years years ago till now we went from candles to wireless internet on your iphone.

Think about the next 100 if we stay on this same pace. It is human nature to be bullish and want to outdue the next guy with your unique ideas. Thats why USA is currently still number one, we have the best thinking/artistic people in the world residing here.

Let china make all the bull# plastic dolls and cars they want. Its companies like Intel, Microsoft, and Google that drive the future, not Toyota. Our debt HISTORICALLY drives us FURTHER than any other country. EVERYONE buys OUR DEBT because IT IS BACKED BY THE FULL FAITH AND CREDIT OF THE US GOVERNEMNT.

Thats just one way to put all of this, but there are many others as well.

[edit on 23-10-2009 by GreenBicMan]

This video clears a bit of this up, although I am not sure exactly if he is referencing the same %'s as I was thinking, but its relatively close


Video Link

reply to post by SLAYER69


Truth is that companies are doing better. The underlying reason is their international reach. They are an eco system of their own. However, they are still doing much worse than a few years ago. I think it is fantasy that we will return to those levels anytime soon. Thus I think the markets and the economy are at a temporary top at this point.

In keeping with the optimistic thread I will bring to attention something i found the other day.

www.treas.gov...

As you can see by these numbers our debt to other countries is not as overwhelming as some might think. Overall we owe 3.5 trillion. our economy runs at about 17.5 trillion. This works out to foriegn debt of 20% of GDP. Not great, but definitely not that big an obstacle.

What is interesting is that we all know our government is borrowing way more than these amounts. So where is it coming from? It is coming from domestic sources, basically citizens and investment institutions. This has the net effect of goverment spending not adding any money to the economy. No extra money, then no inflation. Makes sense, right?
Then it would also make sense that we will see little inflation until the government starts paying back their debt and returning the money to the consumers and investors.

Enough with the optimism. With the government sucking up so much cash, that leaves less cash for investment and thus slower economic growth. I think it will be many years until they can actually start paying off debt, thus we should be stuck in this low inflation, low growth scenario for many years yet. With less growth, public companies will demand lower earnings multiples which will make it hard for stocks to rise much further. I think we can use Japan as a good example at how hard it will be to kick start growth from these levels. They followed a similar path and still haven't recovered. Thus those expecting things to get better quickly are deluding themselves.

Sorry this is kinda garbled and incomplete but i don't have time to clean it up or be more comprehensive. I did have a long post typed out the other night on this topic, but when I went to submit it my internet connection went down and it was all lost. Damn NSA!

Midwest Home Resales Post 6 Pct Annual Increase

KANSAS CITY, Mo. (AP) -- Home sales in the Midwest increased in September as a soon-to-expire tax credit for first-time buyers and glimmers of an economic recovery brought more people to the closing table.

The National Association of Realtors said Friday that there were an estimated 110,000 resales in the Midwest, up 5.8 percent from September last year. The median sale price for the region fell 1 percent to $147,600, marking the smallest decline in the country.

Nationally, home resales rose almost 8 percent from a year ago, without adjusting for seasonal factors. The median sale price fell 8.5 percent to $174,900, the Realtors association said.

Originally posted by LadySkadi
reply to post by SLAYER69

 

Hmmm, well there is a mixed holiday sales forecast. It suggests that retail may be flat lined or -1% end of year '09. Compare it to the -5.9% last year and it would seem that spending is actually going up (or it may just account for the dramatic drop in '08). I suppose flat lined is better than still falling...

Amazon Lights Up E-Commerce Holiday Outlook

In a sign the holiday period could be good to online retailers, Amazon.com Inc. posted a 69% increase in third-quarter profit and offered a rosy outlook for the current quarter.

Shares of Amazon.com Inc. leap to record levels after the online retailer reports a 69% jump in third-quarter earnings. The shares have more than doubled since the start of the year. MarketWatch's Dan Gallagher reports in San Francisco.

The results were driven by a 44% rise in sales of electronics and general merchandise, including TVs and office supplies, which now account for 43% of the retailer's sales.

Amazon also reported a 17% spike in sales of media, which had dragged on earnings in the second quarter because of sluggish video-game sales. Results were bolstered by the debut of several popular books, including Dan Brown's "The Lost Symbol."

reply to post by SLAYER69


Thanks for posting this information.
I appreciate the effort.

Economic update as follows

GDP Grows By 3.5%

Growth was driven by consumption, exports, federal government spending, home building and inventories. Consumption contributed 2.4% of the growth, with a particular boost in autos. Thanks to the Cash for Clunkers program, motor vehicle output added 1.66 percentage points to GDP. But even without this particular stimulus program, consumption improved and the economy grew nearly 2%, a swift turnaround from the first quarter of 2009 when the economy was shrinking at a 6.4% rate.

[edit on 29-10-2009 by SLAYER69]

The worst US recession in 70 years has unofficially come to an end after the economy grew in the third quarter.

Smoke & Mirrors, so sayth this forecaster.

I couldn't have said it better myself.

"all you've done is you've taken the private sector debt and you've bunged it into the public sector. That's all you've done. Now that's not a recovering economy, as it were in addictive parlance, but it's simply the fact that you've got a huge amount of money being whacked into economy."

reply to post by behindthescenes

President Barack Obama is hailing new figures showing the economy grew at a 3.5 percent rate in the third quarter. In remarks to a small business group, Obama says he believes the new figures show that the recession is easing. (Oct. 29)

U.S. Economy: Consumers, Government Propel Growth (Update1)

“Consumers will feel that the news is getting better, but not good,” Joel Naroff, president of Naroff Economic Advisors Inc. in Holland, Pennsylvania, and the top economic forecaster last year according to a survey by Bloomberg Markets magazine, said in an interview. Americans “are not going to see businesses out there hiring a whole lot of people and the unemployment rate is likely to continue to rise.”

U.S. consumers not ready to cheer end to recession

The GDP number marks the “first, semi-official recognition” that the recession is over, said Paul Dales, U.S. economist at Capital Economics Ltd.

This first evidence since early 2008 that the economy is growing again may seem like cause for celebration.

But temper the enthusiasm: The main driver of the economy – U.S. consumers – are still in a deep funk, relying heavily on temporary government incentives to get them to spend.

“It's certainly a good milestone,” added Bill Cheney, chief economist at MFC Global Investment Management in Boston. “The end of a recession is as bad as it gets, but given how far down we went, happy days are still a long way off.”

[edit on 29-10-2009 by SLAYER69]

Obama Says U.S. Has ‘Long Way to Go’ to Full Recovery (Update2)

“The benchmark I use to measure the strength of our economy is not just whether our GDP is growing, but whether we’re creating jobs, whether families are having an easier time paying their bills, whether our businesses are hiring and doing well,” Obama told business leaders in a speech on the White House grounds.

Washington policy makers are seeking to sustain the recovery from the worst recession since the 1930s and boost job growth. The unemployment rate reached a 26-year high of 9.8 percent in September. A continuation of high unemployment may effect mid-term congressional elections a little more than a year from now.

reply to post by SLAYER69


Come on baby, let the good times roll.

I really wonder what is going to happen once recovery is fully going.

Will banks still be mandated to make loans to people who can't afford to pay it back?

Will banks be allowed to defraud its customers through interest schemes again?

Will consumers once again start relying on credit and getting themselves back in debt?

Will we face this same situation in the future because of our own unwillingness to change our habits?

reply to post by jam321



Yeah right...

We aint anywhere near the good times.

We took a royal beating this time around. I doubt we will see any real growth for a while. Meaning JOBS. We just finally bottomed out. Now we will have to claw our way back to any kind of normalcy.

This time, the CEO said, the continent appears to be keeping pace with the U.S., where the economy has been improving since June, based on the usage of the Internet's largest search engine and most profitable advertising network.

reply to post by SLAYER69


Based on the usage of a search engine?Largest or not...and ad networks..they would have nothing to gain by putting this out there eh?

I don't think that it's a good sign that Europe is keeping pace at this point,I mean,not for the US(lol),and I think the numbers are being fudged to put us in a better frame of mind for the upcoming holidays.

I like this thread content,though I must admit that I don't follow the market TOO closely..I do get a feel for things and my common sense is telling me that this talk is smoke and mirrors-just as you questioned.

To many unemployed,er jobless men and women,pay cuts,medicaid and medicare cuts,too much scrambling going on to be in recovery.Oh,and would we not be happier about it..like actual people talking about how much better things are going--not simply gov;t officials?Just thinking?

I can only speak of my experience. Last year the company I work for was in dire straits. Management was down to a four day work week with pay cut. Our manufacturing arm had laid off a good portion of workers and was down to a 40 hr week. It had run 24/7. This year I myself received a 16% raise and 10% bonus. We are back to full time and orders are rapidly coming in. We called back the laid off workers and they have received a 6% raise and will be receiving another in Feb. Fingers crossed. Management also received 10% raises as well. Something is happening. I was even able to leave this company for an overseas company in Amsterdam for more pay and better benefits. I leave tomorrow. My background is in finance, 25 yrs licensed CPA. Everything from Payroll manager to CFO. My old company is even hiring. If we could do it, hopefully others can as well. The business of America is business.

this recovery is manipulated, people are still losing jobs, people are still losing their houses, people are still suffering, no NUMBERS will change this fact.

this is just plain manipulation, plain and simple, they play some good news to keep peoples hopes up instead of telling the truth.

this economy is watered down with fake numbers, and massive govt spending.