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me

What BS If this economy is so damn great explain this:

Eighteen months after the Chicago City Council torpedoed a South Side Wal-Mart, 24,500 Chicagoans applied for 325 jobs at a Wal-Mart opening Friday in south suburban Evergreen Park, one block outside the city limits.

The new Wal-Mart at 2500 W. 95th is one block west of Western Avenue, the city boundary.

Of 25,000 job applicants, all but 500 listed Chicago addresses, said John Bisio, regional manager of public affairs for Wal-Mart.

GK

Surely you're smart enough to see the difference between a conveniently selected piece of anecdotal data, and the official data of the economy.

Did you read the BW article? Or are you one of those people who thinks that there is no way ever that the economy could have anything positive about it as long as Bush is President.

jeffolie

I do not hate Bush at all.

HeliBen has no where to go to avoid the deflationary collapse. He must raise rates because the economy is relatively strong with lower unemployment. He must raise rates because commodities are going ever skyward. He must raise rates because the Fed hates rising gold prices. Rates have started to rise because the Japanese have started selling our bonds.

As rates rise, the adjustable mortgages ( I/O & ARMs, plus HELOCs) raise monthly mortgage payments and default and foreclosures go up. As houses held by flippers and investors try to liquidate prices decline. As prices decline the MEWs (Mortgage Equity Withdrawals) disappear. Greenspan stated the MEWs added $700 million to the 2005 economy or 70% of the 2005 growth.

Investors and flippers were 24% of the housing purchases in 2005 nationwide. 50% of mortgages in 2005 were adjustables which will easily be underwater with a 14% decline. The subprime lenders disappear when house owners cannot borrow when they have no equity. No subprime lenders means not MEWs for cars, vacations, educations, etc. As unemployment rises and more houses go into default, the mortgage backed bonds (MBS) default or become impaired. The GSEs (Freddie and Fannie) go from not reporting their earnings to the NYSE. The pools of MBS which become CDOs and become sold outside the Fed's control and regulation as derivatives worldwide in the hundreds of Trillions. Half the volume of the US stock market comes from derivatives. -- end game worldwide.


If HeliBen does not raise or even lower Fed funds rates:

China and Japan sell the US bonds held as currency reserves because the rate of return is horrible. With lower rates the dollar declines and imports cost more causing inflation. Sacrificing the dollar and suffering inflation will raise the long bond as the Fed holds the Fed funds steady or declines. The Fed will monetize the bonds that no one wants to hold. Monetizing causes inflation by putting more money into circulation. The world flooded by all these dollars devalues the dollar to garbage = end game.

GK

I strongly agree that there is a housing bubble in certain markets, like California.

However, at the same time, do recognize the large value of intangibles that are not recorded. This makes the trade deficit and savings rate much better than they initially appeared.

It also means the US must try to get more highly-educated immigrants (who were educated at another country's expense, then come here all set to contribute), rather than block them out from coming here.

jeffolie

"the large value of intangibles that are not recorded"

The US is losing the large value of intangibles that are not recorded to India and China. They steal our intellectual property by stealing our patented knowlege. They reverse engineer our products all the time. You can find our conterfeited products they make for low prices sold worldwide.

We are on the losing end of this exchange.

Link

A bright spot in the economy is jobs. But, how many jobs are low end jobs taken by illegal immigrants that Americans are not allowed to do?
And what of the rule of law in America. Is that important in the economy? Millions of illegal immigrants conspiring with millions of employers to falisfy employment documents, defraud the government, break OSHA laws, etc. Can this be good for our belief in the rule of law?
LomaAlta
http://linknzona.blogspot.com

jeffolie

The internet companies evaluations and market caps are suspect or at the least extremely volitile. The dot.com bust took down the NASDAQ from 5000 to 800 in less than a year. Even with today's Google's, etc., the NASDAQ is still more than 50% down from 5000.

Intangibles like Google, etc are unstable and hard to measure.

jeffolie

The economy has FALSE EARNING AND PROFITS

Reuters reports on Fed officials speech. “Those anxious about the housing market have urged the Fed halt its tightening cycle before it does substantial damage to property prices. But Dallas Federal Reserve President Richard Fisher sounded less worried and said the high number of home owners with fixed rate mortgages provide a buffer.”

“In somewhat hawkish remarks, he also said U.S. growth would remain strong, provided the Fed keeps inflation under control and trade was not obstructed. ‘As long as the Federal Reserve does its job of holding inflation at bay, and as long as our political leaders resist protectionism and other forms of interference with creative destruction, we will remain a productive economic machine,’ he said in his prepared remarks.”

“Those anxious about the housing market have urged the Fed halt its tightening cycle before it does substantial damage to property prices. But Fisher sounded less worried. ‘It is not unreasonable to think the situation is manageable, albeit worth watching closely,’ he said.”

“Robert Schiller, a Yale economist and author of Irrational Exuberance, warns that Ben Bernanke’s focus on the Great Depression has trained him to fight the wrong war. In 1929, house prices and commodities had been falling for several years, even if Wall Street was frothy. This time assets are on fire across the board.”

“‘We are now in the late stages of the biggest real estate boom in US history, driven by frenzied market psychology. In the near future, this could put Bernanke into uncharted territory for economic stress,’ he said.”

And Paul Muolo writes at NMN. “Fourth quarter production volumes were decent, but all lenders (prime and B&C alike) suffered from the profit margin blues. Payment-option ARMs have garnered a ton of negative press because of their risk to consumers but what about lenders? Here’s the concern: when a borrower with a POA chooses the ‘negative am’ option the lender who made the loan gets to book the interest payment as ‘accrued’ even though the institution has not actually received the money from Joe and Mary Six-Pack.”

“The more negative-am POAs a lender has on its books, the greater that receivable. From what I understand, that accrued interest can be booked as income. In other words, the lender gets to count something as income even though it actually hasn’t received the cash yet. Now, maybe there’s nothing wrong with that but it sounds very close to the gain-on-sale debacle that cratered the nonprime industry back in 1998/99.”

“One analyst suggested to me that accrued (but uncollected) interest isn’t so bad as long as the loans are properly underwritten. He also suggested that accrued interest results in a receivable being created that costs next to nothing. But here’s one other issue to consider, if the firm with POAs is a REIT and it’s hooked on paying dividends, what happens when volumes and profit margins hit the wall? We should have our answer by year-end. Then we’ll see who’s left standing.”

Party Like It's 1999

From the "don't worry, be happy" economic hall of fame:

P/E ratios don't matter any more.

GK

P/E ratios certainly do matter. But for the S&P500 index and the Nasdaq, the P/E ratios are lower than historical averages.

Are you saying that Yahoo, eBay, and Google are all going to crash by 80-90%?

Google, maybe, but not the other two.

What do you think the 'fair' valuation of the S&P500 is, anyway?

jeffolie

I am suspect of the real Earnings portion of the P/E . Besides, my expectation of a deflationary depression as in Japan throws out the window historic evaluations.

I am very bearish but will not try to predict the prices of individual stocks. Depressions usually take down stock prices 80% or more.

Blah Blah

STFU! You are an idiot! Die!

GK

Blah blah,

Who are you addressing? And what topic?

triticale

Those 325 jobs at Wal-Mart were hardly the first ever driven out of town by the Chicago City Council; they've been doing it for decades.

Furthermore, that 25,000 number tells us nothing until broken down into numbers of people looking for a better job because they know working for Wal-Mart means a job with a future, people desperate for a job because of a bad economy, and people who need to apply for jobs to keep the benefits flowing. When I was involved in hiring in the Chicago suburbs I had people popping in on a regular basis asking "You aren't hiring, are you?"

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