patrick.net

@bap33
You write fox news polls don't you!
Do you think:
a) doom and GLOOM!
b) DOOM and gloom!
c) DOOM AND GLOOM!
d) GLOOM AND DOOM!

The first two options are for their liberal watchers are who aren't fully into the doom and gloom, if you didn't figure that out already!

Trying to pawn off "a house buyer opens up another spot, and nothing gets created!" well things do get created. Lots of things. Movers get paid, real estate agents get paid, banks get paid, repair men get paid, new house hold goods are purchased, and the list goes on and on. It's a fairly large wealth generation when someone buys. Those people can possibly afford to hire more people who will rent. Maybe they're moving out of a shared housing currently and nothing changes. The people who were renting are still out there. Many might be sharing more housing right now, but as they become more comfortable with their positions and their jobs, they might assume more risk. Many companies have had all the fat cut from their pay rolls now, and they're show profits this quarter because of it. Maybe not growth, but profits. Which means those companies don't need to change anything. If you're a taco vendor for one of those companies, you might have lost a good number of customers, but now you know exactly how many you've got, because it's a stable environment now. It might not be the same number as before, but you know what you have to deal with.

Trying to come up with all doom and gloom possibilities as the *ONLY* way out is meaningless. The government has already shown that it can hold it's own in slowing things down and making the ride much less spiky than it would have been and much more manageable for most people. If the economy was spiky, there is only one group that will become rich, the rich. Us normal investors would freak when the bottoms came and sell, selling at the bottom, trying to catch the rise again, only to lose on the down swing. Non economic related people don't have the skills to manage money like a hedge fund manager, or any fund manager. We can look at some documents, figure out what looks ok and buy. We can see a value and buy. If all those numbers were changing all the time, we would be SOL.

There *IS* money out there, because investors are coming out of the frame work and buying up anything cheap. The lower it goes, the more investors will come out. There is a fixed bottom, and that is when all investors come out buying up everything they can. We'll never see it, because the government is flattening out the whole process.

The issues you mention are significant, but they are not new, and not getting worse.

Of course they are not new, but you cannot really suggest that we have arrived at some kind of stasis where compensation erosion is concerned. Completely false. Our compensation in America continues to suffer not just from outsourcing, trade imbalances and labor arbitrage, but also from the squeezing of the workforce for the benefit of shareholders, particularly when there's a good pretext, like a meltdown. C level executives who make it priority number # 1 to wring every last drop of blood from the bottom line so that they can see short-term quarterly growth are the only ones who have seen any decided improvements on their returns.

For a double dip these problems would have to get worse than they are now. That is possible. However, we are seeing some improvement on all of these issues.

Honestly, where?

The economy is rising. Consumer spending is rising.

Even a the most hyper-optimistic soul would have to admit that the economic recovery is a cheap and sleazy sham by any sane measure. What fundamentals have been restored or ratified to ensure truly healthy economic growth? As for consumer spending, I've suggested for about the last half year that this is thanks to preemptive defaulters living rent free, and I'm now seeing official stats to support that in the media. When you aren't paying your #1 expense every month, it frees up a lot of cash. That was a boon to the savings rate at the last half of last year, too, which is back down in the toilet. Consumer confidence is also way down there in the toilet, and rightfully so. Nothing has changed.

Corporate profits are rising.

Thanks in large part to layoffs and salary freezes. Alcoa and Caterpillar are just two examples that spring to mind, although I think Caterpillar has its tit in the wringer again.

And a rising tide will soon lift all boats.

That's great if you happen to be lucky enough to have a boat/yacht. Whatabout all the slobs scrambling around in leaky water wings?

Hiring is about to pick up.

Mostly for a fraction of what these people were getting paid before the meltdown.

This will cause the recovery to gain momentum.

The only thing that will provide the momentum is a return to the easy-credit/free money paradigm. Next time, however, count on the credit being much more usurious in nature. Where credit cards left off, payday lenders will take over.

Housing inventory is down, and sales are up.

Speculation is up. Organic sales are not up.

But shadow inventory will keep coming into the market preventing any dramatic price increases. This happens in every recovery.

You know, it would be really nice to read some good news that actually had some fiber in it!

Austinhousingbubble says

Of course they are not new, but you cannot really suggest that we have arrived at some kind of stasis where compensation erosion is concerned

I can
Austinhousingbubble says

For a double dip these problems would have to get worse than they are now. That is possible. However, we are seeing some improvement on all of these issues.
Honestly, where?

Have you followed any of the latest news of the economy?
Austinhousingbubble says

Thanks in large part to layoffs and salary freezes. Alcoa and Caterpillar are just two examples that spring to mind, although I think Caterpillar has its tit in the wringer again.

That's pretty much how it happens at the end of every recession. As the economy improves further, companies are forced to hire and wages increase.
Obviously you aren't convinced the economy is out of the woods yet. Fine, but you realize that at some point it will right? The world is not going to end in 2012 no matter what the Mayans think...

Not to mention that companies are showing profits, look at all the conglomerates, like Ge. They are all showing profits now. It's pretty obvious that if they're making money in all their different little businesses, that things are stable. That things have come back to the norm.

If "normal" people aren't spending, then these businesses are surviving off normal peoples spending habits, and that means we've hit a bottom. Maybe you're just seeing bad news, but the good stuff is all around you. You're just insanely stuck on foreign work forces and how we're going to compete. How there isn't any way. Look around, all of these companies are doing it, and they've been doing it for a long time, making lots of money.

I can

You can what?

Have you followed any of the latest news of the economy?

Yes, perhaps more studiously than yourself.

That’s pretty much how it happens at the end of every recession. As the economy improves further, companies are forced to hire and wages increase.

Nice shade of brown, but it's still horseshit. The order of the day has been layoffs and forced retirement; when these positions are refilled, they are filled by less employees doing more work, and are significantly less compensated. Do a little reading on some of the companies I mentioned -- Caterpillar and Alcoa. If you'd like, I can compile a list.

Obviously you aren’t convinced the economy is out of the woods yet.

I lost nothing during the downturn, and have actually seen my income/net worth improve. However, I know that my unique situation is not one enjoyed by 2/3 of the population. In other words, I don't suffer from an insular point of view.

Fine, but you realize that at some point it will right?

I realize that we can loom more rug to stick more ugly bugs under, yes, and I suppose that's an improvement in some people's mind.

The world is not going to end in 2012 no matter what the Mayans think…

Keep it on the sunny funny side.

With all due respect, it's something of a folly to cite corporate profits as a benchmark of an improved economy where the man-in-the-street is concerned, unless you are a proponent of trickle-down.

But anyway, GE is not doing as swimmingly as you suggest. Witness: GE Profits Drop by a Third As it Eyes Cuts:

http://online.wsj.com/article/BT-CO-20100416-704882.html

@Austin--

OK. Let's talk again in 6 months and see where we are...

tatupu70 says

@Austin–
OK. Let’s talk again in 6 months and see where we are…

This will be intersting. :)

I think the Dow can hit 12000 mark because all the f--kcat companies that brought us into the mess are doing exceptionally well in the market, while everyday people's life is not improved at all, despite of all those Fed money and credit.

OK. Let’s talk again in 6 months and see where we are…

It's a date.

Many foolish people once believed that there would be no bust after the bubble.

There are many equally foolish people who now believe there will be no recovery from the bust.

Both groups are equally wrong. They just don't understand the cycle.

I bear no ill will for either of these groups.

They harm only themselves.

Zephyr says

Many foolish people once believed that there would be no bust after the bubble.
There are many equally foolish people who now believe there will be no recovery from the bust.
Both groups are equally wrong. They just don’t understand the cycle.
I bear no ill will for either of these groups.
They harm only themselves.

Back in 2008, foolish people were those who belived "it's going up" when the bubble is about to pop.

As far as I know of, no one in this site ever said there will be no recovery. I do believe the issue in this thread is b/w "The bottom is over. We're recovring now" groups and "We haven't seen the bottom yet. It's too early to call it recovery" groups.

I think even those "recovering now" groups are not throwing their money like they did in 2008. The other groups of course are doing the same. One groups are being hopeful, and the other groups are being cautious. That's it.

So, where those "many foolish people" idea come from? I understand you're not bearing any ill will, and you're not saying those people who don't agree on this "we're recovering now idea" are foolish. So, care to tell us your no foolish opinion?

They sacrificed the garage for the extra living space and that little tiny slab of concrete in the last picture is what passes for a backyard. The Mexicans in Concord like to garden.
Still, they are coming in at less than $1 per sq.foot. I'll be sure to recognize your rental listing: "Yard ready for garden -- only $200 more than the rest of the market!" Who knows, maybe that premium will be justified. And, uh-oh, looks like home builders are now renting out some of their (returned?) inventory: see 1330 Tapestry Lane, Concord, CA. This 4/2.5 is asking $1,795. Nice, uh, compact lot.

@Austinhousingbubble
Citing large corporations profits is *extremely* important. Forget about "trickle down". They laid off, what 10%? 15%? 20%? some maybe 30%? That leaves between 70-90% of people who are now secure in their earnings. They haven't cut the pay of those people, they have positions which are required, they have pay that they expect.

You might be in a "unique" situation, but 70-90% of those people are secure in theirs now.

Yeah, it sucks to be the person who got laid off right now. I wouldn't want to be them, because it could be awhile before they get work. But that still leaves 7-9 people still working for every 1-3 that got laid off.

Zephyr says

Many foolish people once believed that there would be no bust after the bubble.
There are many equally foolish people who now believe there will be no recovery from the bust.
Both groups are equally wrong. They just don’t understand the cycle.
I bear no ill will for either of these groups.
They harm only themselves.

Many foolish people also believe this is just another cycle.

Debt levels have been building since the 80's, never allowed to deflate. Perhaps we will go another round of debt inflation, but the odds are against it.

Keep your eye on the Fed's Z1.

Citing large corporations profits is *extremely* important.

Small business is what really drives the economy, employing something like half of the private sector workforce and making up almost half of our GDP. Small business is also widely credited as the key to the recovery, yet remains the sector still struggling the most. Corporations - particularly major multinationals like your example GE - are largely proxies for Wall St., besides all of which, GE are reporting losses this quarter and proposing cuts. I wonder how secure their 70-90% of remaining workforce feel right about now?

Forget about “trickle down”.

The point was that large major multinational corporations are notoriously trickle up. A modicum of research will confirm this.

They laid off, what 10%? 15%? 20%? some maybe 30%? That leaves between 70-90% of people who are now secure in their earnings.

Are you just assuming the remaining workers feel secure after witnessing a chunk of their coworkers get the axe, or do you actually somehow know that they are secure? In which case, how do you know? Perhaps your definition of secure is just vastly different from mine, but I think the more typical and appropriate reaction would be feelings of anxiety or vulnerability.

They haven’t cut the pay of those people, they have positions which are required, they have pay that they expect.

This reads as pure conjecture. To whom with what expectations in what positions with which companies do you refer? I need to see real numbers before I can agree or disagree. If you're going to beam this so vociferously, it would help if you had more than just anecdotal information. All I read about and hear about from colleagues alike is pay cuts and/or salary freezes. I don't know where you're getting your information.

You might be in a “unique” situation,

Yeah, and I said as much. I am unique in that I'm doing markedly better than I was a year ago, and feel quite secure in my situation. I am also apparently unique in that I realize I am not in the majority. I am not so insulated or insouciant as to assume that everyone else is pretty much doing as well as I am, and that I will be always be doing as well as I am in the broader view.

but 70-90% of those people are secure in theirs now.

Again, how did you arrive at that percentage window? It sounds like you're pulling this out of thin air or some other nether region. Where did you get your numbers? I'm genuinely asking. Of the volumes of studies and various texts that I have spent time poring over, the vicious cycle is very clear and definite: the rich get richer and the poor get dramatically poorer. Best case scenario: stagflation.

Yeah, it sucks to be the person who got laid off right now. I wouldn’t want to be them, because it could be awhile before they get work. But that still leaves 7-9 people still working for every 1-3 that got laid off.

Yeah. It sucks. And if you think things are suddenly done sucking...well...we shall see what we shall see.

There are many equally foolish people who now believe there will be no recovery from the bust.

There will be a recovery -- my contention is that the recovery will be a variant of the last phantom recovery. Fresh garbage. What has changed at the fundamental level to ensure sustainable and healthy growth? What sound economic policy or restoration of infrastructure has been put into play since '08? Where are all these good paying jobs going to come from? Pent up demand? From what sector?

There is a readily obvious pattern emerging with each boom and bust cycle, where 'new rules' are ushered into place, which, among other things, translates to further income inequality, massive wealth transfers and generally diminishing returns for a huge chunk of an already vulnerable workforce. The unemployed might gradually go back to work, but for a disproportionate amount of the labor force, they will not be picking up where they left off. I think it foolish to assume otherwise.

SF ace says

pkennedy says

@Austinhousingbubble
Citing large corporations profits is *extremely* important. Forget about “trickle down”. They laid off, what 10%? 15%? 20%? some maybe 30%? That leaves between 70-90% of people who are now secure in their earnings. They haven’t cut the pay of those people, they have positions which are required, they have pay that they expect.

You might be in a “unique” situation, but 70-90% of those people are secure in theirs now.

Yeah, it sucks to be the person who got laid off right now. I wouldn’t want to be them, because it could be awhile before they get work. But that still leaves 7-9 people still working for every 1-3 that got laid off.

I totally agree with this key observation. In 2007/2008, we knew cuts were coming across the board, in 2009, the cutbacks were deepened, bonus cancelled and raises frozen, in 2010, we are hiring and expecting modest top line growth. (for me, the turning point was last Dec.) The people who survived this cycle (75-80%) are expecting modest pay raises and bonus and is not worried about their jobs. That is the difference between March 2009 and March 2010 and surefire reason that the worst is over and why consumer spending will come back slowly as that stability is spread.

Really? Where I work wages are still frozen and will be for another year, we suspect. And we're expecting to pay more for health care premiums this year without getting raises yet again. It's going to be another lean year for this worker and his fellow worker bees.

So, who's getting those raises and bonuses?

Austinhousingbubble says

GE are reporting losses this quarter and proposing cuts. I wonder how secure their 70-90% of remaining workforce feel right about now?

For the record, GE is not reporting losses. They made 600MM in this quarter and expect to beat their previous estimates for the full year.

For the record, GE is not reporting losses.

According the WSJ April 16th 2010:

"General Electric Co. said Friday its first-quarter profit dropped by nearly a third, dragged lower by its financial and media arms as it said it may chop costs further.
For the recent period, the conglomerate (GE) said earnings fell 32% to $1.87 billion, or 17 cents a share, as revenue fell 5% to $36.61 billion. ..."

Austinhousingbubble says

According the WSJ April 16th 2010:
“General Electric Co. said Friday its first-quarter profit dropped by nearly a third, dragged lower by its financial and media arms as it said it may chop costs further.
For the recent period, the conglomerate (GE) said earnings fell 32% to $1.87 billion, or 17 cents a share, as revenue fell 5% to $36.61 billion. …”

Yes, a reduction in profit is not the same as a loss. A reduction in profit means you made less money than in a previous quarter or year. In this case they still earned $600MM. A loss means you LOST money. That's a BIG difference.

ZippyDDoodah says

Under this scenario in which demand for US debt is declining, interest rates would have to rise in order to attract investors. This rise in interest rates could occur while we enter into a deflationary period with further drops in housing and other items as interest rates reduce demand.

Interesting point, but what rate are mortgages tied to? LIBOR? I'm not sure that US Treasury yields would necessarily affect mortgage rates...

taputu: Mortgage rates are tied to MBS security rates, particularly 10 year rates. At no time EVER have 10 year MBS's traded less than 10 year US treasuries. So to answer your question, if 10 year treasuries increase in yield, you can rest assured mortgages will too.

Interesting point, but what rate are mortgages tied to? LIBOR? I’m not sure that US Treasury yields would necessarily affect mortgage rates

It's all risk/reward. If US T-Bill interest rates rose to say 9%, banks and other lenders would have to weigh their options whether to buy T-bills or to loan out their money for mortgages. Mortgage rates would have to rise in order to compete for that money, assuming that US treasure notes are equal to or more creditworthy than the risk of a mortgage loan.

Here are some things to remember, like tatup70 said, GE made a profit, it didn't lose money. I'm not sure how many people they cut, I did just pull that number, I based it loosely on underemployment. But when we look at their numbers, we can more or less figure out how many people were laid off, by the numbers they give out vs total numbers. A company making large profits isn't laying off huge numbers. Normally they do about 10%, unless they're heading out the door. They do about 10% to clean up the riff-raff that has managed to make it into the company. It's hard firing someone, but when everyone has to do lay offs, it's a lot easier. A good chunk is everyone going through their rosters and dumping crap. I've heard of stories where people got laid off in the middle of dept that wasn't really effected, like 1 in 40 people. Think about every job you've been in, and how many "incompetents" where around you, often these are the only times to get rid of those people, under the guise of economic problems. Managers don't like firing because a fired employee is a bad mark on their record. They hired them, they needed them, and now they're firing them. They did a bad job. Some have no issues, but lots do!

Threats are great, but how many are followed through on? Not many. Lots of useless managers use threats to get people to work harder. If you see the manager mad and making threats he's not worried. If you see him suddenly trying to do peoples work, and staying 12 hours to finish stuff up, you know he's probably not lying. There is a big difference between being a tyrant and using this economy to push people, and to actually being in a position where bad things will happen.

As far as replacing employees for "cheaper" employees, very few would do that. VERY few. Here are some reasons:
If you're a small company, like most companies in the US are, like you pointed out, which I agree with, then chances are your employees are much more important to you than a few dollars. It's hard hiring good people you get along with -- that is important. The #1 reason for being fired is because people don't get along with you, not because you're incompetent. So firing someone because you can get someone for 20% or 30% cheaper isn't wise. Your new employee will be grateful to have a job, but will quickly be demoralized by the fact that they sold out and took a low paying job. Reason #2 is that it is very expensive to hire and fire someone. You've either got overlap, or you fire and start looking to replace. They need to hire, they need to screen, they need to train. While they do all this, there are often 2 people involved. One competent, and one new guy. You can't expect competent person to run at full speed, so you lose him + the new guy isn't running at full speed. In the bay area, it costs $25,000 to replace an employee. If you hire someone, and the economy recovers in say 1 year, or 2 years, what are the chances you're going to "keep" those savings you're currently getting? Do you think you can hire someone for 50% or less? Most likely 20-30% less. 20-30% less over a year around here might be 25,000. But you've got a new guy, you've got demoralized employees, and you've got employees that will jump ship at the first chance they can for hirer pay. You might HEAR lots about *ONE* company that did this, but the majority know better. They aren't going to do this.

Employees at GE are probably feeling pretty secure -- they are making money. If I was in a money making company, that had just killed the riff-raff, I would feel pretty confident. Killing more employees will now seriously impact productivity, GE isn't going to risk that. I use GE because it just released numbers, most of their losses are in their "credit" division (go figure), while other divisions are doing well and offsetting that division, to make profits over all.

Now small companies do make up most of America, and I agree with that. It's hard to gauge how they're truly doing because many of them don't make massive profits, so when they start dwindling at all, they hurt. Owning a company is pretty stressful as it is, so regardless of where the economy is going, they will be stressed out. My main point is that a good part of the economy is decently secure. While others might be teetering, most aren't. The country has laid off a lot of people, our unemployment numbers are high, but the people working aren't going anywhere. Those companies are "stable" now, they've cut the riff raff for sure, and cut many good employees too (riff raff is just the odd person around the company) most of the lay offs come from specific areas and don't fit into this category, but riff raff can add up to a decent number in the lay offs, and they are just dead weight so cutting them is returning 100% salary back to the company with 0% loss.

Now don't get me wrong, we're not in good shape here. We might take a long time to put those unemployed back to work. But have we hit the bottom? Most likely. Companies are stable, they've got profits coming in, they're doing OK. Not great, they just aren't in a position where they might topple over. They aren't going to do another round of large lay offs, because that has been done. Layoffs need to be done all at once, to keep morale up. Tanking economy + low low morale = SUPER bad situation.

Companies that laid off 10-20% of their employees are in good positions to survive. Anyone laying off 50% should fear for their jobs. 50% is losing just too many people to survive. At 50% you're sinking, and they're just tossing everything overboard now to slow it down, not stop it. When you see 50% cuts, it usually means the company is going under, and they're keeping a few people around to keep 1 or 2 products alive, in hopes a buyer might come along. If you slash everything, you're all dead for sure. If you slash nothing, you're probably dead within 3-6 months. If you slash 50% you're all dead, but maybe you can reduce costs enough to survive 18 months, and find a buyer. LOTS of that in 2001 in the SF area. I've seen it since as well, it's a closing up strategy and leads to a firesale. Investors are just looking to get a bit of their money back.

Outsourcing is no "miracle" cure either. No matter what you think, it's not. I've been in the bay area, where out sourcing cost more than hiring locals in the end because of all the extra costs. They are all contractors, and it's hard to setup shop in India for programmers, so they all come from these outsourcing houses which employee the people and you pay them. So imagine hiring cheap contractors as replacements for employees. They ended up costing about 65K per year for QA people, after EVERYTHING was said and done. We needed managers for them, we needed to fly them over to do some local work, we needed to fly over there, we lost a lot of work due to time differences, etc. The work out put was less than what we got here, they had masses of holidays, having all of our holidays, the Muslim holidays, and the Hindu holidays off in general. Outsourcing DOES work if you get enough people. They flip positions *all* the time, they're mercenaries over there and wages are going "crazy". It used to be a good programmer made about 6K per year, now it's like 20K per year. Add on "contractor" fees, shipping them around, and it ends up costing a lot more than that for us. Their wages are definitely taking off. Lots of competition over there.

There aren't many countries where english is a primary language. We go there, because communication is easy, they all know english (all that went to school). Not so for most other countries. China has a lot of people learning English, but it takes a lot more for them to learn English because they're learning it as a first generation, while the Indians learned it due to english colonization. Their parents teach it to them when they're young, they learn it in school, they know it's important, etc. Chinese are starting from scratch, this is the first generation learning english.

Ok that was more than I meant to write. In the end, we're probably not headed for a fast and quick rebound. Lots of jobs to fill. Companies are showing profits, which means they're finding enough sales to make that happen, which means they aren't likely to cut more people. They might not see growth, but they won't see any more losses either. That I deem the bottom, I don't deem it to be great for those out of work, I don't deem it to mean a fast recovery, or anything else. We're there, we're slowly making recovery efforts, people will be hired, new companies will be born (mostly from unemployed probably, starting something micro and building from there). We need to look at it from an employers perspective as well, how are they *really* feeling, not middle management, but the higher ups.

The best proof of an economic "recovery" in progress is the fact that the US will spend
a record 156 billion dollars on unemplyment benefits this year and probably even more in 2011.
Nothing like an all time low in employment to prove that everything is "up",
in the Bizarro World.

just from what i see:
my company cut 5% wages 2 years ago, we got no raise last year, same this year.
all the new fresh graduates i know(About 4-5 of them), were unable to find a job in the last few month.

Jobs are still shifting to India, unless we find something new which can only be done in the US, I don't see how this can be changed.

And I agree with monkframe, usually war is the answer for a recession throughout history. Heck, without the nuclear weapons everyone's hoarding, we are probably already in war.

@warblah
Because a grad with no experience can't compete with unemployed with experience. We need to flush all unemployed first.

So in essence, nothing is getting worse for you? Housing costs are down, rent is down. Your wages haven't moved. Where are things getting really bad for you? Sounds like a bottom to me. Did they announce 5% wasn't enough, they need 50% wage cuts?

"Jobs shifting to india..." Cost "savings" are negative unless you're doing it en mass, a company outsource 30 jobs isn't going to see savings.

Unemployment benefits will be high for quiet awhile. Are we going to see massive JUMPS? Are we seeing companies announcing massive layoffs like we did in 2008/2009? No. Job numbers aren't great, but they aren't out of control or changing massively from month to month either.

pinnacle says

The best proof of an economic “recovery” in progress is the fact that the US will spend
a record 156 billion dollars on unemplyment benefits this year and probably even more in 2011.
Nothing like an all time low in employment to prove that everything is “up”,
in the Bizarro World.

#1 We're not at an all time low. That is ridiculous. We are nowhere near the 1930s...
#2 As others have mentioned here many times, employment is the last thing to recover. It is a lagging indicator of an economic turnaround--so again, let's look at employment in 6-12 months. But, even now you can see some good signs--in the latest survey, companies responded that they would be hiring this year.

Is it not GE that has always been infamous for "managing its earnings" through the black box subsidiary known as GE Capital ?

What makes anyone think that GE cannot manufacture some fake profits if all the banks can? GE has a big subsidiary which is essentially a bank.

And by the way, the banks are STILL insolvent except they are hiding behind fraudulent accounting rules (FASB) which were enacted got rid of the mark-to-market requirement for assets.

Next!

azrob--
I get what you are saying, but I guess I'd say that if the US T-Bill rates rost because of unsystematic risk--that is the chances of the US defaulting--instead of systematic risk that affects all assets, then I'd say we're in uncharted territory. I see no reason why that would affect the rate that a prime borrower would receive.

Zippy--

And as to the risk/reward--if that were to happen, wouldn't it imply that a prime borrower would be less risky than the government?

People can certainly disagree about the timing of the recovery.
But many seem to ignore the improving data, and suggest that a recovery is not going to happen. Or that the improving news is artificial. Experienced investors have different view, and have collectively bet on the recovery. That is why the stock market is up about 70% from the bottom a year ago. And why investors are buying homes to rent or resell. Looking back at the last 12 months, I am very glad that I did bet on the recovery.

The data suggests that the recession ended last year.
There is a pattern/sequence to economic cycles.
The current recovery fits that pattern.

Here is where we are recently:

GDP is up.
Consumer spending is up.
Profits are up.
Home sales are up.
Hours worked are up.

It will take some time before most people really feel the change, but the cycle has turned.

Are we seeing companies announcing massive layoffs like we did in 2008/2009?
I still think we need to go through a 'right sizing' exercise at the federal, state, and local levels of government before we get through this.
"These layoffs and service cuts I have proposed will be severe and they will be painful," Villaraigosa said in Tuesday's State of the City address... The budget proposal for the 2010-2011 fiscal year calls for "initiating layoffs of more than 800 employees" and reduces the number of full-time employees by some 3,300 when compared to year-ago levels.
As you said: It’s hard firing someone, but when everyone has to do lay offs, it’s a lot easier. Double that for government employees.

Keep your eye on the Fed’s Z1.
I've never looked the Z1 (PDF alert) data before. I'm assuming where we see negative numbers is debt repudiation. We're slowly ridding ourselves of that stifling private debt -- one mortgage and credit card at a time.

@justme

Lots of companies are turning profits.
Intel, Amazon, Apple.. in fact I don't think I've seen anyone reporting a large negative balance in the last while, or in some way not reporting a positive uptick from last years sales. I use GE because it's a big conglomerate.

@ebguy
I can agree to that. In a way the government keeps things from totally sinking during these times, eg stimulus packages, spending and creating larger deficits. While it's scary for us to watch it grow, its economic necessity to keep the country moving. It's always worked in the past, and appears to have worked decently well this time too.

What can I say? Someone sighted that experienced workforce will get opportunities before new grads...
Lets be careful there..
Some industries, think otherwise, they would rather higher a new grad or perhaps two, and rip the benefits.
One hand they are getting 4 hands for the price of one, and more likely someone who is trainable, and can be put through the growth chain. That someone that if they are forced to lay off again, would not cost them as much, or perhaps nothing as they would not have 18mo of work experience. Someone who listens and much easier can get molded into what they need... No organization wants to be top heavy, you need the working - bees, new grads are one among best. You can cherry pick them best on how eager they are, what they have achieved and how they want to continue achieving. They are not hung-up on office politics, and etc. Also they bring a valuable asset - they are Generation Y, who are constantly on online, and great at new era communication, collaboration and ways of doing things differently. They are taught to work in teams, and depend on one another.

Some industries cannot afford to take the risk of taking a new grad, but then they turn to those who have just 3-4 years of experience, someone that is still the working bee, yet does not cost a fortune.
The most challenging time is for those who are 8-10years into their careers - namely last portion of gen X.

Is it going up?
- Here a few I bid or seriously considered bidding on.

Fremont. Priced at 495K. Sold a week ago for 515K.
Fremont. Priced at 499K. One across the street from above, placed 3 days ago.
Fremont. Priced at 500K. Sold at 530K
Fremont. Priced at 409K. Sold for 479K
Fremont. Priced at 430K. Sold for 500K Next to the one above, on the market right after sale of previous one.

It makes sense. If one sold for X, then next will be placed for X+Y
Are there still places where bids come under asking? Or those get thrown out by the Listing Agent?

EBGuy says

I’ve never looked the Z1 (PDF alert) data before. I’m assuming where we see negative numbers is debt repudiation.

Not necessarily. It's also just paying off of debt that was previously created. Debt inflation in the private sector leads to increased aggregate demand, and is almost always associated with economic booms. Debt deflation is just the reverse.

CBETA says

Is it going up?
- Here a few I bid or seriously considered bidding on.

CBETA, that is evidence of sellers pricing to sell, not prices going up.

@cbeta

I agree with what you're saying about grads. But in general someone with a couple of years of experience, or even 6 months or a year, is better than a grad with non, and costs roughly the same.

We're at a high enough unemployment rate now, that the best will be cherry picked for sure, and I'm betting 1-4 years experience is a pretty good area to do that, and will undermine grads abilities to pick up good positions.

Yes, a reduction in profit is not the same as a loss. A reduction in profit means you made less money than in a previous quarter or year. In this case they still earned $600MM. A loss means you LOST money. That’s a BIG difference.

Perhaps the BIGGER more important thing to take note of is that GE was a recipient of big bailout funds, and it's still reporting a loss. Anyway, let's not get overly pedantic about the difference between losses versus drops in profits. The original point was that they anticipate cuts, which doesn't jibe with some of the recovery cheerleaders on here.