In addition to the economic slowdown, the continued housing crisis, the endless turmoil in Europe and the deceleration in China and India, we are moving closer to the period where the so-called 'fiscal cliff' will become more of a threat to the market.The fiscal cliff refers to the near-simultaneous January 2013 expiration of the Bush tax cuts, the payroll tax cuts, emergency unemployment benefits and the sequester established in last summer's debt limit agreement.Various estimates have indicated that the hit to GDP could be as high as 4%.Many on Wall Street dismiss these concerns on the grounds that Congress and the administration will simply extend everything and, once again, 'kick the can down the road'.That may eventually happen, but it won't be easy.
Various members of the Federal Reserve Board, including the Chairman, have been concerned enough to make their worries publically known.Bernanke, at his last press conference, said that the size of the fiscal cliff was so large that "I think there's absolutely no chance that the Federal Reserve could or would have any ability whatsoever to offset the effect on the economy".[More]
According to extensive research by Reinhart and Rogoff, past credit crises were invariably followed by many years of below average growth, high unemployment, sluggish economic expansions and numerous recessions.In practice their studies were recently reinforced by Japan's two-decade period of sluggish growth and the current tepid recovery in the U.S.In our view, working our way out of the mountain of debt, both private and public, that was incurred during the boom will take many years to come and will keep a solid lid on overall gains in the stock market.
The current economic recovery remains in sharp contrast to any other expansion of the post-war period, and is now showing definitive signs of petering out once more.The recently reported first quarter GDP is a mere 1.3% above the amount reached at the peak of the last cycle in the fourth quarter of 2007.In eight previous post-war expansions, GDP had increased by an average of 13.3% in the 17th quarter following a peak, with the lowest being 10.5%.
Now, even this tepid recovery is slowing down once more.In the last two months the overwhelming weight of the evidence supports this view, as the following indicators have either come in below expectations or suffered an actual downturn: core durable goods orders, the Chicago Fed National Activities Index, new home sales, existing home sales, payroll employment, the NFIB Small Business Index, construction spending, the ISM Non-Manufacturing Index, the Kansas City Fed Index, the Philadelphia Fed Survey, industrial production, the Empire State Manufacturing Index, the NAHB Housing Index, the ADP payrolls, auto sales, real consumer spending and the GDP.Weekly initial unemployment dropped this week after rising for three weeks, although the four-week moving average remains high.The only real outlier appears to be the ISM manufacturing Index, which came in above expectations.[More]
We live in an age of anxiety, and rightly so: Worries about the global economy are most emphatically not just in our imagination. The question is, who's going to bear the blame, come November?
The Age of Anxiety? With all due apologies to the late W.H.[More]
It's time Stephen Sondheim wrote another carnival song, and, more specifically, a sequel to the hauntingly memorable "Send in the Clowns" from his 1973 musical, A Little Night Music, which has proved so eerily prophetic in describing this year's political scene. As a glance at the crowded roster of Republican wannabe candidates for the presidency in next year's election makes clear, the powers that be in the GOP obviously have taken quite literally Sondheim's injunction that served as the title of the song, while the Democrats already have their very own barker and no shortage of mountebanks ensconced in their big tent.[More]
FEET DON'T FAIL ME NOW Dated, but not out of date 12/10/99 The list of negative factors impacting the stock market has now become so numerous that it is highly likely that a severe bear market has already started
Introduction
The list of negative factors affecting the stock market has now become so numerous that it is highly likely that a severe bear market has already started. We begin with the fact that, as measured by earnings and dividends, this is by far the most overvalued market of the past century.[More]
We received a phone call over the weekend from a close friend and someone who reads our comments religiously.He had a question for us.He wanted to know if we were still in the secular bear market camp or have we thrown in the towel since the economic news has gotten much better and virtually every index is either at or close to new 52 week highs or are fairly close to all time highs. He explained that it looked to him that the European risk has moderated, the China "collapse" has evaporated, the jobs and housing problems of the U.S.[More]
Bloomberg Interview - March 10, 2009 The Fed and Treasury Dept. claim that the housing bubble could not be foreseen. Take a look at this video to see how obvious it really was.
Wonderful analysis that I have been reading for many years 9/03/11 I would like your permission to send a copy of your 8/25/11 market commentary to them since I agree that we are in a major credit/debt contraction of hugh scale and a good deal of the asset write-downs are ahead not behind us. irrespective of your answer I want to thank you for wonderful analysis that I have been reading for many years.
Your Message is Loud & Clear 8/25/11 Your weekly commentary plus the weekly postings on John Hussman's site should serve as required reading for anybody trying to follow this market.
Your message (much more concise than Dr Hussman's, I have to say)is loud & clear.
Hi there from Ireland. I've been reading your blog every fri morning GMT and before when it was daily for a long time now and in my opinion it is one of the best things on the Internet. I've emailed you about this before.
I've one comment on your Fri Dec 3 piece when you say "However if you believe, as we do, that the start date of our crisis was 2000 and not 2008, you can see that we postponed the inevitable for 8 years while we had a Fed-sponsored housing and stock market bubble that should have been addressed much earlier."[More]
I simply want to thank you for providing your frequent commentary on our economic outlook. It is always insightful. I simply look to many resources in trying to determine what lies ahead for our future. Your perspective has been very much appreciated these past several years.[More]
First of all, I love your work and the honest commentary you provide.
My question is this: Of the $40 trillion in Individual and corporate debt, I was wondering if any of it is double counted? For example, all home mortgage debt is counted properly to individuals. However, most of that debt is securitized and issued as debt again by a sponsoring institution. The same for some commercial real estate, credit card receivables, auto loans, etc.[More]
