anyone calling for a V shaped recovery?

AR, this is not at all indicative of the larger student experience, but you know I work in academia and you might find this funny.

When I asked one female student what her post-graduation plans were this past spring, she actually said "get paid to party." When I asked her how she was going to pull that off, she shrugged. Zero fear. I don't think this girl had ever worked a day in her entire life. Then she mumbled something about working abroad if the paid to party thing didn't work out and walked off saying, "I never thought I was going to make much money anyway."

evnyc, i've always said that the key to happiness is limited expectations.

when we went to europe we hired a recent risd grad to apartment and animal sit. she had received exactly one job offer in the US, to be an assistant designing plus-sized swimwear in California. she is going to intern in Europe instead, where she says that people are still getting some jobs. maybe she was uppity not taking the swimwear job, but i had some sympathy when she confessed that was kind of what she expected at the end of her career.

i've seen similar attitudes, i don't know if it's a defense mechanism, or the result of never fending for themselves and not knowing what it really entails.

To connect it back to your point about credit, for a while this girl is going to look like a fantabulous credit risk. She'll have (likely a boatload) student debt, which you can generally pay on a very modest salary or defer for a while. I suspect she will get all the rope she needs to hang herself with credit card debt. I'd love to believe it's defensiveness, but honestly, I don't think she had a clue. I get a lot of defensive students, and naive students, and smart students. The former and possibly the latter will do fine; the naive and the checked out ones will probably be one source of growth, albeit toxic.

AR - its called analysis - you know, not just having a view and looking only at the facts that support it, but rather looking at everything out there and trying to figure out where I might be wrong.

sort of like mh23 should be doing right now around auto sales - he was basing his opinions on made up facts, and now that he has the correct ones, he should come up a new analysis. but like all the bears, i'm sure he'll just come up with different reasons why the facts don't apply in this case, and that we're on non-stop ride to armaggedon no matter what

"When I asked one female student what her post-graduation plans were this past spring, she actually said "get paid to party."

There are plenty of jobs in NYC that fit that description, how about:

1) Hooker
2) One of those pathetic morons that hand out t-shirts at bars if you order the right beer
3) Cokehead
4) Clown

"There are plenty of jobs in NYC that fit that description, how about:

1) Hooker
2) One of those pathetic morons that hand out t-shirts at bars if you order the right beer
3) Cokehead
4) Clown"

What would you classify the Naked Cowboy as? Could be a combination of 1,3 & 4.

Would it surprise you if the naked cowboy is W67thstreet?

JM - those 4 are all the same job at different points of the night...not that there's anythign wrong with that.

> There are plenty of jobs in NYC that fit that description, how about:

How about

5) girlfriend of a rich guy.

so...we can agree about the fear factor.

gotta consider the chicken and the egg. the stock market going up doesn't do much of anything for the bulk of fearful americans. what else is happening to reduce the fear?

note: cover story in time magazine just makes them (time mag) look stupid to the people who see many of their friends, relatives continuing to lose jobs.

p.s. would love to see real stats from the cable companies.

printer, so what was your response to my point that the current contraction is a reversion to mean? have you discussed where the money will come from for sustained growth, the cash for clunkers can only do so much and will likely just push forward those that were planning on buying in the near future anyway? any retort to the fact that we would have had negative GDP even with our stellar economy for most of 2004-08 but for HEW? where's your analysis, other than to say it could surprise to the upside, and it would take very little demand to bring the good times back? hypocrisy.

The New Joblessness. http://www.nytimes.com/2009/07/26/magazine/26FOB-WWLN-t.html?_r=1

waverly, in which order? clown, t-shirt distributor, cokehead, hooker?

Printer: You should also examine how oil prices affect auto sales. The boom in auto sales began as you said in the mid-80s, at the end of the last oil crisis. It began dropping precipitously in 2007.

Not to sound unamerican, but sustained higher oil prices could likely lead us to European levels of car ownership.

nyc10022, 5) is harder to get these days.

> the stock market going up doesn't do much of anything for the bulk of fearful americans.

Sure it does.

Stock market going up has always been by far the biggest factor in getting americans into stocks (to their own detriment, of course).

waverly, in which order? clown, t-shirt distributor, cokehead, hooker?

Hmmm...start the nightr handing out t-shirts for free drinks...friends show up for a few bumps in the bathroom...realize you can make a little more $ by being a hooker...he has a thing for clowns...bingo!

I clearly need a day off.

printer: your confusion between the economy as a whole and the stock market is fascinating to me. I am assuming that you are sincere and not just kidding around. The irony is that to the extent that you are representative of the professional market participants simply confirms that the market is not representative of anything except itself.

Printer. Thanks for the correction. However, your reliance on auto sales seems myopic when you consider that you have failed a very simple question, which I shall now repeat.
Where is the wealth going to come from to get sales back to the number that you say is reasonable? Do you agree with the following set of assertions: unemployment is rising, wages are falling, credit is contracting, housing values are eroding, savings are climbing. If you do, then you are obliged to inform us as to where the "wealth" is going to come from to buy the cars...

Also, I am not a bear, in the sense that I cling to any sort of ideology. However, I also do not ignore facts...Again, if you can explain to me how the trillions of dollars of lost wealth are going to be replicated, I am open to being persuaded. Again, I am bullish on Pharma, MCD, TUP, WMT and other companies and sectors that will do well sue to changing demographics and spending patterns.

"due to"

the money to buy cars will come from the same place it came from for say the 80yrs it came from before this latest binge in HEW. that is savings and wages. we're seeing a dramatic uptick in savings, and 90% of people are employed (or if you want to be more negative, 80% are fully employed). so if 15mm is a normal rate for for 95% employment/90% full employment, 13-14mm is still a more realistic number for the current environment. housing is more difficult to quantify b/c certain areas (like miami, or williamsburg), are crazy overbuilt and there is a decade or more of supply, whereas other areas (say dallas, or the west village) are not so much, so the supply/demand imbalance is impossible to discern at a macro level.

columbia, i'm not following what you are getting at. i am not comparing the economy to stocks directly, but I am saying that changes in the expected economic environment will affect the stock market

And yet...there is a huge percentage of Americans who have no exposure to the stock market. No reliable figures out there, but general estimates are that ONLY about half of American households have any exposure to the stock market.So the stock market arguably doesn't have much effect on households with no or even little exposure.

"The Mutual Fund Industry group - Investment Company Institute - has a lot of data on this subject. Its 2002 study, http://www.ici.org/pdf/rpt_02_equity_owners.pdf showed that 49.5% (or 52.7 million) of US Households owned equities in some way shape or form in 2002. However, only 21 million (less than 20%) owned individual stocks outside an employee sponsored plan."

So, if I understand you, printer, you believe that people will be buying cars with cash that they save as opposed to using auto loans? Because, it is my understanding that most cars are financed, and as I stated before, credit is constrained. In addition, people took out HELOCs to buy additional cars, boats motorcycles, whatever. Finally, and most importantly, will the sentiment be there to buy cars when they can squeeze another year or two from their existing vehicle? I think not.
That being said, I hope you are right.

cars are only one of our declines. retail generally isn't doing so hot, and CRE is wheezing along.

lets agree that we're all hoping you're right.

i'm hoping not to get lung cancer.

I also stopped smoking.

what i'm struggling to see is what we are doing as a society to make this better.

no, i said they will buy cars from savings and income - meaning savings for the down payment, and income to pay back the loan. and right now its not as difficult as its made out to get auto loans - it only seems that way because of the ludicrously easy terms of the past 5 years. for people who have steady jobs, and put a reasonable down payment, loans can be had.
gee AR - thanks for that - i had no idea that retail and commercial real estate aren't doing that hot.

my point is not that all is rosy, nor even that we are likely to see a V. in fact, i don't think that at all. I think we're in for a bump up as we finish the unwind of the shock that the LEH bankruptcy caused, and then a sluggish recovery while we de-lever out of this.

but trading isn't about making a prediction on what will happen and then positioning yourself for it. it is about understanding where the best risk/reward lies, and knowing how to best deploy your capital. and my thus far un-acted upon thesis is that the risk/reward of betting on V-shaped recovery, though high risk, has a return that is inordinately large compared to the risk.

steveF - btw, its a pleasure to have a civil conversation with you

same here Noah...it's all good.

who cares about trading?

and from reuters:

"The net worth of U.S. households dropped $11.2 trillion in 2008, reflecting steep declines in stock and housing markets, a previous Fed report showed."

another few zeros.

Regarding the normal level of cars here is a consideration:

I have read somewhere that in this recession in order to get by, an increasing number of people are resorting to moving back in with their parents, sleeping on a friends couch etc. Consequently the "creation of households" has ceased growing and is perhaps shrinking.

Now why can't that happen with cars? If people start resigning themselves to leading a more austere lifestyle, who says that the 2 car garage is guaranteed to continue? Maybe one car will be fashionable or carpooling may rebound. I'm not denying that things will pick up eventually, but as a whole, our country has collectively lived a lifestyle in the last few years that they clearly could not afford. Cold hard reality may be pretty sobering and the volume of cars demanded at a comfortable level of affordability may be lower than you think.

Lecker, that's impossible in much of the country because of the choices made in housing development since WWII. 2-4 car households are essential, or the householders become prisoners. Maybe when new development occurs, a return to town/city clustering will happen, but that doesn't seem to be in the cards right now. And when the economy rebounds to that point, cars will also be affordable. Maybe more energy-efficient ones, or maybe not.

well, gee, printer, i never knew you just needed an increase in automobile purchases for a recovery. thanks for that!!

i thought this thread was titled anyone calling for a v-shaped recovery, not anyone thinking a butt load of cars might get sold with or without credit.

Fair enough Alanhart - Perhaps this is a stretch.

Still, consider all the teens that have been getting cars as presents from their parents for their 16th birthdays. Not sure how big that group is, but perhaps austerity could dent into that "discretionary" market? I remember sitting home a lot as a kid - kept out of trouble that way . . . :)

Japanese and Korean cars.

I remember sneaking onto the subway for free a lot as a kid - kept out of trouble at home that way . . . :)

this thread fascinates me. during the height of the bubble, the contortions people would go through to justify prices in places was a tremendous indicator of how one-sided the risk was to the downside. it was the famous paradigm shift - similar to how stocks reached their ridiculous levels during the tech bubble.
now you have people like lecker, columbia, about, et. al. justifying some of these economic indicators by saying the same - we are going through a paradigm shift, people are going to move in back with their parents and carpool everywhere - not just the unemployed, who may have no choice, but even the employed, out of some newfound austerity. human nature has changed, or maybe we're going back to the Walden of about's youth.

and from reuters:

"The net worth of U.S. households dropped $11.2 trillion in 2008, reflecting steep declines in stock and housing markets, a previous Fed report showed."

i didn't make this up. what do you think happens after this kind of loss?

i think that smart people take advantage and create new fortunes

"i didn't make this up. what do you think happens after this kind of loss?"

people double down

life is not a movie. take advantage? of what? or is this still all about the stupid stock market?

JM, isn't that what CALPERs is doing? As a general rule i try not to do what they do. Words to live by.

full disclosure - the "moving back in with the parents" (stalling of household creation) is not a hypothesis or rationalization but an OBSERVATION (can't remember where I read it though - maybe Fed beige books?)

Sorry for stretching that OBSERVED austerity into an asset class (autos) that tends to be a large outlay for the common man. What was I thinking?!

I think we are talking about the stock market...Yesterday UD and I talked about FXP, because it seems to be quite likely that the Chinese stock market is poised to have a major correction. When I see IPOs quadruple on the day they are offered I know from history that a bubble is nearing its peak. On the short side I like shorting oil down around 15% minimum and definitely shorting base metals for at least a 20% move.
Printer, I am not a bear...I just think one needs to give a fair appraisal of the economic conditions before putting money to work. I still believe that high quality munis offer great value, as do Build America Bonds, as do certain equities, and I own all of these instruments with an outlook of a few years to beyond. However, I do not believe it is wise to assume that consumption will come roaring back to what it was in 2006 any time soon. Bill Gross has explained why it will not, and I am persuaded by his arguments. If you are thinking long term, then I guess you should buy stocks. However, as a risk/reward trade, to use your terminology, I would say that the move we have seen since March squeezed much of the reward out of the trade, at least in the near term, leaving plenty of downside risk.

here's some of what he said:

"July 1 (Bloomberg) -- Investors should favor bonds and dividend-paying equities as the U.S. heads into a %u201Cnew normal%u201D of higher savings and lower consumption, said Bill Gross, manager of the world%u2019s largest bond fund at Pacific Investment Management Co.

Higher savings, lower consumption and annual economic growth of about 2 percent, as opposed to 3.5 percent, may last a generation or more, meaning investors should %u201Cstress secure income,%u201D Gross, who helps oversee about $756 billion as co- chief investment officer at Newport Beach, California-based Pimco, said today in his July note to clients.

%u201C%u2018Non App�tit,%u2019 not Bon App�tit, will become the apt description for the American consumer, and significant parts of the global economy, including the U.S,%u201D he wrote. %u201CIt promises to persist for a generation at a minimum.%u201D

lecker, a while back I posted a statistic on the number of people who reported that a family member or friend had moved in or stayed for an extended period of time during the past year, i believe. it was a surprisingly high percentage, but i can't recall where i posted it or the source.

just one example, from USA Today in February.

More families move in together during housing crisis
http://www.usatoday.com/money/economy/housing/2009-02-02-housing-crisis-families-living-together_N.htm

lecker/columbia - the point is not that people aren't, right now, taking measures to preserve wealth and increase savings - of course they are - we are, after all, in the worst recession of the past 25, or maybe 75yrs depending on how you choose to measure it. I am not disputing that - it is indisputable.
What I am questioning is your thesis that these measures herald a long-term cultural shift that will last beyond the point when things 'normalize'. I just don't see it. One of us will be wrong.

and mh23 - my point, using autos as an easy to measure example, is that we don't need to go back to 2006 consumption levels to see sharp growth from here - go back to numbers that pre-date the '03-07 equity withdrawal madness and you still see growth - the sharpness of which depends on the time to return to those levels.

bill gross is absolutely a smart guy, but he is also the head of the, or one of the, largest fixed income asset managers - of course he thinks everyone should be buying bonds - i have tremendous respect for his accomplishments, but i've never seen anyone love TV more than him - except maybe el-erian.

i'll try again.

lets use a clear, small case...Bank of America announces that its closing 10% of its branches---call it 650 bank branch managers who will be let go. it is extremely unlikely that they will be able to find employment as bank branch managers as banks in general are looking to cut all costs possible.

Lets assume that these people are getting around $75K and most likely have worked at a bank for quite a while meaning very little other experience. Could they work as store managers in any retail environment? Maybe, but I would guess that running the gap store at the mall pays significantly less than bank manager.

There is nothing on the horizon for these people that will pay them close to what they were used to.

you keep saying...yes, yes but when things normalize. You assume that "things normalize" because they always have but actually always only dates back 60 years or so.

think a little about the big early 80's recession when the fed raised interest rates through the roof to stop inflation. it worked with a lot of pain and then they dropped interest rates which created a significant stimulus.

we can't drop interest rates now and we are so politically screwed up that we cannot sustain intelligent fiscal stimulus.

so...other than its always happened, what is going to get us back to normal?

"There is nothing on the horizon for these people that will pay them close to what they were used to."

They said the same thing when all these DOT.COM and technology companies blew up in 2000-2003. A new sector will emerge to carry the slack. There's always a bubble somewhere.

columbia - you are correct. we've been on a downhill slide ever since expedia replaced travel agents. or was it voicemail replacing operators/receptionists. or maybe it was autos obliviating the need for blacksmiths. no, no, i know - it was when the cotton gin replaced all those farmhands. wait, it was the printing press replace the scriveners...

newsflash - we've had jobs being destroyed and new ones created for quite some time, and yet, we haven't imploded yet. I repeat a quote I heard (don't recall from whom) back in the winter:

"The end of the world only comes once, its a trade you have to time perfectly"

"skin deep" thxs waverly. CC, i hear they are hiring at McD.

"Always a bubble somewhere" Gotta love the honesty. me thinkz it's the equity mkts and PH :) right NOW!

Printer... yes, it's human nature to get hungry every 6 hrs, get horny every now and then and let greed trump austerity/frugality. The problem is when the checks and balances (i.e. no loan w/o steady income, assets, proven history of frugality) are thrown away as in the last 15 years. Some dipshit policy maker got this equation wrong. They thought Homerownership => savings, stable families, nice tax base, pretty flowers, marital bliss/fidelity, loss of Body Odor.... When in fact the equation went the other way....

my 2 yen.

Great thread, everyone. Interesting, vital debate between impassioned, smart people with real opinions. If there was a thread award, this one would win one. "The Threadies".

so...for you it all comes down to "it'll get better because it always has."

"Gotta love the honesty. "

Think of it this way.....your penis can only hold so much blood. When you're done, it will have to go somewhere. Right? Ala! Bubbles...

it's more like 'there are reasons why things move in cycles, and they haven't changed'.
to take one simple example - US Steel announced today that they are re-hiring (taking off furlough - whatever the right term is), because inventories have come down so dramatically that they need to re-stock. so that means more orders down the chain. and the people who get re-hired might not go out and buy a car, but perhaps that new TV they wanted. or maybe they'll just hit Applebee's a couple of times. whatever the case, it'll flow down.
and now the neighbor who is a nurse with a steady job but was being super-cautious b/c she sees what's been happening with her neighbor feels a little better and might go out and buy that car or TV. things go up, things go down.

Its great that folks "feel" like there are more jobs and all that, the problem is, you need folks to actually HAVE them to spend...

http://www.google.com/publicdata?ds=usunemployment&met=unemployment_rate&tdim=true&q=unemployment+rate

Its like the crime rate stats... I remember some idiot chick from ohio or somewhere that had just moved here and was already complaining about Giuliani and him not doing a good job on crime. I pointed out the crime reduction stats and her response.... "but, uh, yeah, well, but people don't FEEL safer".

Apparently she interviewed everybody.

"newsflash - we've had jobs being destroyed and new ones created for quite some time, and yet, we haven't imploded yet."

Of course, that only works if you have the new ones created...

newsflash, we haven't had a 16% U6 and rising for quite some time. so US Steel rehires to increase inventory.

do you think their employees feel certain that they won't be laid off again when the inventory adjustment is completed? many of them are far behind on their bills. a couple of trips to Applebee's doesn't seem to me to be comparable to previous consumption patterns. this is what a number of the economists are talking about for the third quarter, and what is typical in bad recessions, a need to increase production that leads to a one quarter growth in GDP, but is not reflective of the end of the decline.

Exploding penises! Great ericho.

Anybody remember the story about the guy who was laid off and finally got a job and to celebrate went out to applebees and a movie in queens? The son ended up choking to death while eating popcorn, one of the saddest stories I've ever read about.

Oh this was the last recession in the 80's. So yes we will pull back, but how long and how many sad stories later?

"the money to buy cars will come from the same place it came from for say the 80yrs it came from before this latest binge in HEW. that is savings and wages. we're seeing a dramatic uptick in savings,"

Which means a HUGE HUGE drop in consumption...

no about, we haven't had that for quite some time. of course the last time, in the early 80s was followed by what exactly? oh yeah, a huge boom. the economy moves in cycles. this one has been much worse to the downside. you tell me why this is the first time we won't ever recover.

printer, as cc has been trying to pound into your consciousness, there is a HUGE difference between today and the early 80s. the early 80s had a fed-induced recession that occurred when interest rates were raised sky-high to tame inflation. when the threat of inflation abated, interest rates were lowered and voila, growth resumed. what are they going to lower interest rates to next, -5%? when 90% of economists see interest rates RISING in the next couple of years?

enjoy your quarter or two of stability or near stability.

1. $11.3 trillion in wealth has evaporated since this began.
2. in the early 80's interest rates were sky high and were subsequently lowered by the Fed which sparked demand
3. baby boom generation was just getting started in the work force---now we are retiring in boatloads
4. we are mired in two wars that we haven't paid for
5. tax increases cannot be borne by the bulk of the our populace; there is no political will to cut back spending (which of course would just makes things worse in the short run anyway).

and i never said we would NEVER recover, but i'm at a loss to see what our eventual recovery will look like. i'm on record as believing that we have tremendous potential in many areas, including a return to more widespread manufacturing, but it will take a fair amount of time, and a number of right steps, to achieve that potential. and if american companies just find it less expensive to develop new technology and manufacturing overseas, well, then i'm not sure what will happen.

but, as discussed about 100 posts ago, in order to recover we will have to do some things differently which will involve sacrifice (which used to be called investment). as long as we assume that things will somehow magically take care of themselves, nothing can change.

Agreed with ar.

Noone here is saying we won't recover, thats a strawman.

its just about the definition of recovery. in 2001, we just traded one bubble for another.

Recovery generally doesn't mean return to bubble prices...

for those who are interested, the Gross newsletter, which i found on ritholtz's site.

http://www.pimco.com/LeftNav/Featured+Market+Commentary/IO/2009/Investment+Outlook+August+2009+Gross+Investment+Potion.htm

Who's laughing now???

MUHAHAHHAHAAA!!!

still us. Your comments get funnier and funnier each day. Still laughing about the "Target buyers will save us" one...

not to mention, the bulls were trying out their strawmen even then... and are still trying to claim they were true!

> and i never said we would NEVER recover,

and

> Noone here is saying we won't recover, thats a strawman.

whoops.

We'll have a better idea tomorrow morning at 8:30 am et. Stay tuned.

Im goin under 200k

Expecting 250k+.

Somewhereelse lost.

Post something of value please.

well, now its time to rationalize 162K. i'll start.

hey, its better than losing jobs.
gotta start somewhere
hey, its bettter than gaining only 62,000.

erichooooooooooooooo

where are ya?????????

> Somewhereelse lost.
> Post something of value please.

Ericho, post something that isn't NEGATIVE value...

You're almost at the top of the "most wrong" listings...

;-)

Regarding the discussion of the "normal" level of car sales going forward that we had some time back, I saw this update today (directed from Patrick.net)

http://www.time.com/time/business/article/0,8599,1980989,00.html?xid=patrick.net

"A more important observation on auto sales is that with the annual scrappage rate close to 12.5 million, even a 12 million sales rate doesn't cover that. So on a net basis, we continue to reduce the total stock of autos and light trucks on the highways. Bottom line, we're in a whole new and lower range of auto sales than we were before the crisis."

I guess if you are chronicly unemployed, there is no point in getting those new wheels (?) Or maybe this alludes to some "pent up demand" which will represent a future windfall (?)

Still, if we add in approximately 1 M households lost in 2008 (don't know if there is a figure for 2009), the "paradigm is shifting" (I think) takes a negative turn.

1.2M households in 2008 that is:

http://www.msnbc.msn.com/id/36231884/ns/business-eye_on_the_economy/

I wanted to see the status of this thread after I made the comments above, but could not find it in the lists of all threads (I had to search the thread name to find it).

How does a thread "go into hiding" like that?

Well we're seeing inventory led growth cycle this year. 2011 will be very flat. Increased taxes are never a recipe for increased GDP

and...you know this...how?

yep...you made it up.

Saw another story recently regarding the car sales and dug up this thread. More headwinds for car sales:

http://www.nytimes.com/2012/03/23/business/media/to-draw-reluctant-young-buyers-gm-turns-to-mtv.html?pagewanted=1&_r=1&ref=global

highlights from the NYT article:

"... many young consumers today just do not care that much about cars.

That is a major shift from the days when the car stood at the center of youth culture and wheels served as the ultimate gateway to freedom and independence. Young drivers proudly parked Impalas at a drive-in movie theater, lusted over cherry red Camaros as the ultimate sign of rebellion or saved up for a Volkswagen Beetle on which to splash bumper stickers and peace signs. Today Facebook, Twitter and text messaging allow teenagers and 20-somethings to connect without wheels. High gas prices and environmental concerns don’t help matters.

“They think of a car as a giant bummer,” said Mr. Martin. “Think about your dashboard. It’s filled with nothing but bad news.”

There is data to support Mr. Martin’s observations. In 2008, 46.3 percent of potential drivers 19 years old and younger had drivers’ licenses, compared with 64.4 percent in 1998, according to the Federal Highway Administration, and drivers ages 21 to 30 drove 12 percent fewer miles in 2009 than they did in 1995.

Forty-six percent of drivers aged 18 to 24 said they would choose Internet access over owning a car, according to the research firm Gartner.

Cars are still essential to drivers of all ages, and car cultures still endure in swaths of suburban and rural areas. But automobiles have fallen in the public estimation of younger people. In a survey of 3,000 consumers born from 1981 to 2000 — a generation marketers call “millennials”— Scratch asked which of 31 brands they preferred. Not one car brand ranked in the top 10, lagging far behind companies like Google and Nike."