Economic reccession to continue into 2010
By Daniel at 14 January, 2010, 2:49 pm
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This year. The SP500 likely will blast through 666.
Many will say “no way,” but who ever believed it would drop from 1576 to 666? - but it did. Back in 2007, they were saying only a 10% pullback (like you hear now!) and it became a 58% plunge.
This next leg down is expected to be extreme as debt by individuals, companies, and government start to go unpaid - much like Dubai “warning shot” indicated was happening. Income in families, companies, and governments are not abe to service the debts they have taken on. People will cash out everything, feeding the sell-off. Very few sold their stocks at 666 - this time they likely will. They should sell NOW.
The next economic perfect storm - should start mid February.
it may crush the existing structure of Fannie and Freddy and drag the economy further down, no matter how many dollars the fed throws at it
here are the events:
each individual event will have no visible effect, but combined will crash the economy:
these are all pending events, many listed on MW as individual events, but no one looks at them all together - but that is how we will feel them in our wallets
financial:
- the next wave of ARMs will start to reset,
- mortgage rates will go up,
- the next wave of foreclosures will hit,
- the default on holiday expenditures will cause more chapter 7 and 13 filings,
- retailers will know how little they made, and many will go chapter 11, or just close
taxes:
- the fed will start seeing how little revenue they got from business because of COBRA extensions and funding, and push for new taxes
- states will start locking in on the lower incomes from wage taxes, and looking to raise taxes,
employment
- employer hiring will slow even more, as the employer tax mandates for health care kick in
- employers will see the new unemployment tax rates which will come due, and lay off or not hire to be able to meet those expenses
- seasonal job losses will be posted as the holiday labor surge ends
- this also be when the numbers are issued for the “new” unemployment extension enrollment and it will “true” the unemployed picture,
health reform effect:
- consumers will see the effect of the new FICA rates and cut spending even more
- the 40% luxury tax on those fine health plans will kick in, and families will see a 20 - 30 % drop in disposable income
- the insurance companies will pass on the taxes they have under the new health bill, and that will cut another 5 - 10% off of each person’s disposable income
- the manufacturers of medical products (tampons, bandages, medical wipes, chairs etc) will pass on the tax they were given, further affecting disposable income
- the Fed will have published the health bill details - and states will see how much they will have to pay, forcing tax increases
- insurance company rates will climb as a result of the new health plan taxes, effective immediately
banking:
- FDIC will collect next 3 years worth of fees to cover the depleted funds from the bank failures
- banks will tighten lending even more, as they scramble to meet the FDIC “tax”,
- 10% of banks will become financially unstable because of the depleted reserves and will be taken over by the newly funded FDIC
and so the next economic collapse happens -just in time for the elections
those that remember history will see that this perfect storm will make the impact of the “luxury” tax and it’s effect on RV’s, Boats and similar look like nothing
- P-T-Barnum-was-right
1. The cost of credit for small, new, start up, and solo businesses is prohibitively high in real terms while availability is severely restricted.
These businesses, which are the engines of job creation, simply lack the financial energy to expand; many cannot even maintain existing operations while bankruptcies are at discouragingly high levels and new business formation is at historically low levels.
2.The typical small business owner is focused on cash
conservation because of fear and pessimism: fear of increased taxes, suffocating regulations and the hostility of WashDc, Wall St and the MSM to true entrepreneurship , genuine innovation, and ethical risk capital; pessimism that the environment for small business will continue to be implacably hostile in 2010
3. The real purchasing power and real net worth of most Middle Class households continues to compress. This, naturally leads to notably reduced discretionary spending and a considerable anxiety about capital preservation
4. Increasingly, ordinary Americans are convinced that The Stimulus is not just a failure for them but has made things worse for ordinary People while enriching the politically favored and the entrenched upper class. They believe that 2010 will bring record residential foreclosures and even higher unemployment and underemployment. The typical consumer has neither the appetite nor the resources to drive growth.
Euphoria on Wall St and in the Upper Class;
stagnation and recession among the Lower Class
and a depression, both material and psychological, among the Middle Class: Three moods, three realities, three Nations.
- someone
1) The stock market is completely disconnected from the economy. It has become simply a manipulated tool serving the government’s propaganda needs while private and institutional investors try to guess which way the wind is blowing in DC today.
2) The volume is the ‘tell’ in market statistics. Low volume, but upwards movement regardless of good news, bad news, no news. This isn’t even irrational exuberance, just HFT and the FED and treasury moving the market with an occasional foray by institutional investors looking for hourly profits.
3)Debt, Debt, Debt. Leverage everywhere you look from individuals, to cities, to towns, corporations, governments, and any and everywhere else. Contrary to popular opinion, eventually you have to pay the piper. To pay the piper you have to first stop spending, then get lean, then lower your financial expectations.
4)Unemployment is still going gangbusters and WILL NOT STOP. The BLS numbers are only missing a ‘U’, an ‘L’, and a ‘HIT.’ I expect the U-3 number to decline though as the Unemployed fall right off the grid after being unemployed for years. The states will not pick up the slack either since they have already been providing extended benefits. We will now have millions unemployed, with no benefits, and no relief available from most states on the verge of collapse themselves.
5) I could go on, but why bother, it’s obvious to almost every person in the country with a modicum of education and wits, that the proverbial shit has hit the fan. Academics, Legislators, Perma-Bulls, and ignorant citizens, although comprising the majority of the US population, still cannot force rose colored glasses onto the noses of realists.
- HunterGVL
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