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I feel more like 6000 should be the bottom ...

Worst Is Yet to Come:" Americans' Standard of Living Permanently Changed

Posted Feb 17, 2009 12:53pm EST by Aaron Task

There's no question the American consumer is hurting in the face of a burst housing bubble, financial market meltdown and rising unemployment.

But "the worst is yet to come," according to Howard Davidowitz, chairman of Davidowitz & Associates, who believes American's standard of living is undergoing a "permanent change" - and not for the better as a result of:

* An $8 trillion negative wealth effect from declining home values.

* A $10 trillion negative wealth effect from weakened capital markets.

* A $14 trillion consumer debt load amid "exploding unemployment", leading to "exploding bankruptcies."

"The average American used to be able to borrow to buy a home, send their kids to a good school [and] buy a car," Davidowitz says. "A lot of that is gone."

Going forward, the veteran retail industry consultant foresees higher savings rate and people trading down in both the goods and services they buy - as well as their aspirations.

The end of rampant consumerism is ultimately a good thing, he says, but the unraveling of an economy built on debt-fueled spending will be painful for years to come.

You think that is bad; read and watch this!

http://www.russiatoday.com/guests/detail/2114

http://www.youtube.com/watch?v=9nJ7LM3iyNg

German real estate never recovered from the 1990 reunification bomb, just like Japan.

I have a small position in Yen, held all the way from 11x, and I let go entirely today. Yen is about to start dramatic devaluation soon.

I didn't get into Frank's head, if I did, Frank would have said, long food. After crying wolf for a few years, I think we are very "well" positioned for the next worldwide famine in the near future.

And this
http://www.guardian.co.uk/world/video/2009/feb/11/zimbabwe-gold-panning-starvation-food

has happened many times in developing parts of the world, Zimbabwe is not the first, and won't be the last. Lack of food in this situation, is not a result of weather or water crisis, it is the result of a financial crisis.

http://www.mercurynews.com/localnewsheadlines/ci_11712324?source=rss

"considering going back to work so as to send her kids to private kindergarten..."

It sounds like some Silly Valley parents have gotten the priorities completely backward. WTF can a kid learn at a kindergarten??? Can a kindergarten teacher be as attentive and loving to her kid as herself???

At this moment, I have decided to stay liquid in dollars. At the end of the year, I expect better deals in stocks as well as some corporate high yield bonds.

IMHO, it's way too early to start buying stocks for long term investment.

I have no clue where the exact bottom is. But I am betting the volatility to remain very high. There is no need to bottom fish here. And there is no need to chase any rallies - however long they might be. Even if you think SP500 is a buy at these level, it's a safe bet to say that these levels will be tested again and again.

But if you are a trader, there are ample opportunities as long as you sell into any rallies, take profits and have tight stops. The option premiums are still very high and you can convert an idle position into something that yields monthly income.

This market is not for the faint of the heart. And if your pain threshold is not high, staying out of the market is a very respectable strategy. Just remain on the sidelines and enjoy the show.

What now, you ask? Well, there is Obama's foreclosure plan.

According to reports, there will be 75B for loan modifications of FNM/FRE loans (which presumably are conforming and not Jumbo).

The big question is whether that plan will have any effect in coastal California, land of Jumbo loans.

The big question is whether that plan will have any effect in coastal California, land of Jumbo loans.

Conforming loans are about 700K in california. It could have some marginal impact. Still not sure how they can bring mortgage payments to 31% of income. Remember strawberry picker, Annual Income: $18,000. House Price: $7,00,000. Banks can reduce principle of interest rate to bring payments down. I suppose they would look to bring interest rate down.

I feel more like 6000 should be the bottom …

... if the market continues to get sand-papered down.

But if the market rallies to a double top first, watch out. We may see Dow 1500.

Not investment advice.

At this moment, I have decided to stay liquid in dollars. At the end of the year, I expect better deals in stocks as well as some corporate high yield bonds.

I too think USD will be strong for a while. I am not sure about stocks and corporate debt this year.

I have even cashed out of a muni MM fund.

Greenspan didn't let the bubble die last time, he created the housing bubble instead. So I doubt this will be the bottom unless they create another bubble.

GM is begging for $$ right now, the other automakers will probably do the samething in the next few month, and that will not be a positive sign for the market.

So I doubt this will be the bottom unless they create another bubble.

Or unless prices are stuck at 0. :)

We could pool our money and invest 75 billion to pay other people's mortgages... oh wait we just did. Wonderful.

There won't be another housing bubble. Prices will still fall, even in light of the Irresponsible Homedebtors Bailout Act of 2009.

What sucks is that we're all going to be waiting longer because of it. Japan Redux.

Welcome back, Randy!

What sucks is that we’re all going to be waiting longer because of it. Japan Redux.

Yep. Japan but without the good sushi.

I think prices should get within 10% of the true bottom in about a year, but they may stay there for another few years.

This year should be a great year for traders.

Not investment advice.

Keeping people in failing mortgages will not help them. They are still stuck with bad assets. If they are allowed to foreclosure at least they will have more cash to spend in the economy.

I haven't been trading much lately. I'm busier now than anytime ever in the past 19 years. The worse things get, the more my consulting seems to be in demand. It's a bittersweet reward.

I still don't see a "bottom" in housing until 2011-2012, and then a half decade of slogging along the bottom +/- inflation/deflation.

The worse things get, the more my consulting seems to be in demand. It’s a bittersweet reward.

Why bittersweet? Schadenfreude is bittersweet. Being in demand is super sweet in any day. :)

Screw the world. It asked for its own troubles.

Let's hope our fine Republicans in the state senate are able to hold off those outrageous tax hikes. I rather see complete annihilation than tax hikes!!!

Housing will be in a zombie mode due to strong government intervention.

But overall economy wise, we are not going to be Japan. What will happen is, lots of banks are holding phantom housing inventory with low transaction volume for years, so as to protect their "book value" of asset. But people in the real world still need to eat, drink, poo and pee, and that real world economy cannot possibly drag on for much longer.

Btw, I found Valentine Day weekend to be extraordinarily busy both at shopping mall or restaurants, is it an indication of short-term bottom, or an indication of desperation of our kind to secure good sex?

Btw, I found Valentine Day weekend to be extraordinarily busy both at shopping mall or restaurants, is it an indication of short-term bottom, or an indication of desperation of our kind to secure good sex?

Perhaps they are just trying to rage, rage against the dying of the light. :)

(Though wise men at their end know dark is right)

or was it just the long weekend with valentine day?

The Silly Valley has yet to feel the wrath of the recession.

I think it is coming soon, I can feel it in my bones.

I can feel it in my eyes. Do you guys have ways to relax a strained eye?

Dunno, maybe less computer time helps.

Dunno, maybe less computer time helps.

I wish.

http://www.spiegel.de/international/world/0,1518,607840,00.html

Here is another reason why globalization has gone too far and must be put to a stop.

I need to get a geiger counter for all my appliances and recently acquired stainless steel stuff. Used to think made-in-Germany should be fine, but nowadays you can trust nobody except for the food you grow yourself.

Here is another reason why globalization has gone too far and must be put to a stop.

No, it is not.

Caveat emptor. With globalization or not.

I believe unemployment and underemployment still have far to go and together with continued tightening of credit subsequently will put much more downward pressure on prices.

I'm shorting S&P and financials in general and some specific names. I don't
see a bottom coming in this year unless of course Obama et al come to their senses.

OO says,

lots of banks are holding phantom housing inventory

What exactly do you mean? Are they holding less then they claim? What advantage is it to do so?

What is the best strategy to avoid getting short-squeezed? Do you guys use trailing stops? Or do you just buy gamma? How do you manage your trading psychology?

phantom housing inventory = inventory inaccessible to home buyers ?

I definitely use buy stops and I also look at short interest and days to cover as indicators. For financials in general and S&P, I simply use SKF and SDS with stop limits. Not very sophisticated at all I know, but it has served me well the past few years.

OO,

I would be very concerned about the radio active Cobalt in that steel. That Cobalt is a gamma emitter that is one of the worst radio isotopes you can run into. The problem with Cobalt is the energy of the gamma is low enough to interfere with biologic tissue, but high enough in energy to do lots of damage. The higher energy gammas will actually do less damage because they tend to go right through you.

I actually laughed when I saw people concerned about the granite counter tops. That radiation is harmless if it remains an external source (don't eat the granite).

Not very sophisticated at all I know, but it has served me well the past few years.

Hey, simplicity works. :)

Do you trade every down swing or do you tend to hold on for weeks?

Do you trade every down swing or do you tend to hold on for weeks?

No general rule there... depends on the name and circumstances at the time.

For instance, SKF was a great buy recently at ~120 and is a good buy right now with the [almost] inevitable nationalization of Citi and BofA on the horizon (and don't forget all the smaller banks yet to go under).

S&P500 at 800 is just plain insane and I feel comfortable holding SDS for as long as it takes to realize at least an additional 50% increase from here.

phantom housing inventory are those houses technically in foreclosure but kept off the foreclosure through re-org, interest forgiveness, government buy-out, or simple neglect by the banks. They won't be auctioned off.

It is like the bad corporate loans in Japan. As long as the debtor doesn't fold, even if he is not paying a cent, banks will still classify such as a "performing loan". By the same token, US banks will try their best with the help of government to classify all near default or already-defaulted mortgage as "performing mortgage". That's why all the TPTBs are talking about "KEEPING people in their homes". The verbage is very interesting here, why not encourage, why not facilitate, but keep?

Stainless steel: It should perhaps be pointed out that stainless steel is not inherently radioactive. The background story appears to be that there have been three batches of *contaminated* stainless steel that was manufactured in India, and now has to some extent spread around the globe.

Apologies for not following the original link before posting.

I read the rest of the posting (by OO) as being a complaint about the quality of German Geiger counters. I realize now that was not the intent :-).