Is the Balloon About To Pop?

[conraddobler]

This is from Karl Denninger (and while Karl makes Conrad look like Mary Poppins on the doom and gloom scale, he's made a fairly concise analysis of the GDP report here:
GDP Is..... Better Than Expected? Link


Here is an excerpt:

Oh what a tangled web we weave....

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 3.5 percent in the third quarter of 2009, (that is, from the second quarter to the third quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP decreased 0.7 percent.​

​

​

Looks good, right?

Hmmmm.... or is it?
​

Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after adding 0.19 percentage point to the second-quarter change.
​

....
Real federal government consumption expenditures and gross investment increased 7.9 percent in the third quarter, compared with an increase of 11.4 percent in the second.​

(you can read the rest if you are interested)​

But here is the scary part:​

Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, in contrast to an increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent.​

*******************************************​

Anyway, suffice it to say, the balloon is safe for another day or two. But there are certainly more than a few band-aids it as well. ​

JTS​

​

He's really an amazing guy at doing analysis, although he's a bit over the top on his board.

I haven't been on his board for over a year and a half because he's less than open to other ideas but in terms of simply taking apart numbers I've never seen anyone better.

If you really boil it down he's just documenting how you get the Wall Street and MSM disconnect from on the ground observations.

The PTB know that perception is a big battle, they're IMO lying to us in a host of ways, almost every way they can and that is in effect selling future credibility for current stabilization.

What happens when their credibility is completely gone though?

What happens when the economy does not turn like all their numbers say it should?

Financial systems are nothing more than confidence, what happens when that goes?

Well we're about to find out, now or 10 years from now the truth will come out.

 

[conraddobler]

Jeff, not only does that capture what's really going on, it captures the insanity of short-sighted Wall Street. Wall Street likes companies that downsize in tough economic times. Great. But when EVERYONE downsizes, it downsizes the economy, meaning surpluses collect and production is cut and more companies downsize and the cycle just goes on and on.

It's why raw capitalism is a broke *** ho. When everyone is doing what's in their best interest right now, eventually everyone takes their money and goes home.

What's really scary is corporate raiding in the 80s greatly diminished family- and strong privately-owned companies that would have been stalwarts in this kind of economy. Everyone went public, so everyone is playing by the same rules. At some point someone's going to have to reward a company for finding ways to maintain some profits without minimizing payroll or it's going to accelerate the U.S. economy into a tar pit our dinosaur of an economic system can't crawl out of.

Raw capitalisim never has existed and never will.

Fraud, cheating, lying and stealing has existed since mankind has existed and will always exist, it's how we as a society deal with that and what controls we place on it that determines how out of sync with our goals capitalisim gets.

The bedrock of capitalisim IMO is fairness, ie truthfullness of data and earnings and financial conditions.

We want the raw power of it to align wants and needs based on a free market, nothing works better and I don't think anything will in any of our lifetimes.

What cannot happen though is a pervasive lack of ethics and morals and also a pervasive lack of accountability for lying, stealing and cheating.

The heart of the problems is honesty in all facets of numbers, had that been in place the whole time none of this happens to this extent.

We want you to compete, without lying, stealing or cheating period, fair is fair and beyond that we only need to control monopolies to manage capitalisim.

Let me put it this way.

What difference does the economic system make if lying is tolerated? Cheating? Stealing?

The only difference is who gets the money, because if you allow all that, it will flow to whoever has control of the process.

 

[jefftheshark]

The balloon has more lives than a cat.

But volatility has returned to the market in a big way, which is good for traders, but very disheartening to the buy and holders of the world.

The VIX was up huge last Friday and realistically the bankruptcy of CIT should made it go up again this week. But so far the market has somewhat just shrugged it off (I don't really understand why, as it adds fuel to the deflationary pressures).

I guess we'll see.

But so far the balloon is holding its own, but I'm thinking it's not for long.

JTS

 

[82CardsGrad]

The balloon has more lives than a cat.

But volatility has returned to the market in a big way, which is good for traders, but very disheartening to the buy and holders of the world.

The VIX was up huge last Friday and realistically the bankruptcy of CIT should made it go up again this week. But so far the market has somewhat just shrugged it off (I don't really understand why, as it adds fuel to the deflationary pressures).

I guess we'll see.

But so far the balloon is holding its own, but I'm thinking it's not for long.

JTS

It's strange as it's simply irrational... There is hardly anything out there that is pointing toward sustainable, real-live growth in 2010. More banks and financial institutions are failing each day. Companies are not growing their top-lines. Lending is still very restrictive. CRE will be taking a huge wallop. Residential real estate is still hurting, although the lower end of the market seems to have stabilized...
It just seems that the only correlation to be drawn is between the dollar the equity markets. Dollar goes up, market goes down... and vice versa. Other than that, there is very little to draw upon.

 

[conraddobler]

What companies are alive now are getting stronger, the expected bounceback is priced in.

That's if this thing follows all normal recessions, the market is just playing for the bounce is all.

Also as you just said 82 the dollar means a lot right now, as we've been turned into Japan in funding a carry trade.

We've entered bizzaro world because frankly things are so broken they almost meet up with themselves.

I figure this is bad news more than good news in terms of the actual effects this will eventually have.

 

[AZCB34]

Ultrashorts are impractical to me personally. I'm not a short term trader. I need long term ideas.

Long term, if that is truly your time horizon, is to stay the course. What is happening today or the next 3 years is irrelevant to a long term investor. You can use short ETFs as a hedge but being long ofver time has proven over and over the correct answer.

If you are a lucky person, trying to time the market can be a very profitable enterprise but you know the likelyhood of properly timing the market.

IMO, the economy is developing a base from which to step off from. That does not indicate the problems are completely over but I believe we are starting to see the ship right itself. The market does it's own thing and the best a person can hope for is picking good companies to invest in if you go that route or picking solid mutual funds to onvest in long term.

 

[Russ Smith]

Today seemed like an interesting trend to watch. The last couple of weeks save the one big up day, the market has struggled to hold gains during the day. Today early Dow was up 140, then got all the way back to down around 10, and then finished up over 70. That seems significant, but of course bad data tomorrow or Wed and it'll go down again.

Financials today were crazy, up then down, then up again. I was tempted to buy FAS and play it but the CIT thing scares me.

 

[CaptTurbo]

I bought gold companies to protect myself from inflation. Thats about it otherwise I am long on NYX, DVN, C, VMW and a few others.

 

[jefftheshark]

I bought gold companies to protect myself from inflation. Thats about it otherwise I am long on NYX, DVN, C, VMW and a few others.

Are you still in UYG?

JTS

 

[jefftheshark]

The "real" numbers we announced today and - surprise! they were what Goldman said they would be @2.8% (okay, they were off by 0.1, but if they were exactly right we might wonder if they had some kind of insider information ) This means when you take out the CFC bump and all the other one time events, we were actually negative.

But the market is once again shrugging this off for the most part, as the dollar becomes toilet paper and gold pulls a Buzz Lightyear ("To infinity and beyond!")

JTS

 

[conraddobler]

The "real" numbers we announced today and - surprise! they were what Goldman said they would be @2.8% (okay, they were off by 0.1, but if they were exactly right we might wonder if they had some kind of insider information ) This means when you take out the CFC bump and all the other one time events, we were actually negative.

But the market is once again shrugging this off for the most part, as the dollar becomes toilet paper and gold pulls a Buzz Lightyear ("To infinity and beyond!")

JTS

You can't short a stock market in a crashing currency, well you can but it'll be the last investing you do with that money for a while