Oaktree Capital’s Howard Marks begins his latest missive with a few hard truths. Anyone who has read his memos of the last 23 years will see he returns often to a few topics. This is due to the frequency with which themes tend to recur in the investment world. Humans, he notes, often fail to learn. They forget the lessons of history, repeat patterns of behavior and make the same mistakes….
In 2004, I stated the following conclusion: “There are times for aggressiveness. I think this is a time for caution.” Here as 2013 begins, I have only one word to add: ditto.
The greatest of all investment adages states that “what the wise man does in the beginning, the fool does in the end.” The wise man invested aggressively in late 2008 and early 2009. I believe only the fool is doing so now. Today, in place of aggressiveness, the challenging search for return should incorporate goodly doses of risk control, caution, discipline and selectivity.
Biderman’s Daily Edge: Current Stock Market a Reminder of January 2000
Economic Forecaster: The US Has Gone Over The ‘Demographic Cliff’. Market Crash Will Start In Summer – That, Just Like The Last Crash, Lasts About A Year And A Half Or So, Goes Into Late 2014, Early 2015.
Gail Tverberg: U.S. Economy Will Enter A Severe Recession, This Time It May Never Be Possible To Exit From It Completely.
We have been hearing a lot about escaping the fiscal cliff, but our problem isn’t solved. The fixes to date have been partial and temporary. There are many painful decisions ahead. Based on what I can see, the most likely outcome is that the US economy will enter a severe recession by the end of 2013.
My expectation is that credit markets are likely see increased defaults, as workers find their wages squeezed by higher Social Security taxes, and as government programs are cut back. Credit is likely to decrease in availability and become higher-priced. It is quite possible that credit problems will adversely affect the international trade system. Stock markets will tend to perform poorly. The Federal Reserve will try to intervene in credit markets, but if the US government is one of the defaulters (at least temporarily), it may not be able to completely fix the situation.
Less credit will tend to hold down prices of goods and services. Fewer people will be working, though, so even at reduced prices, many people will find discretionary items such as larger homes, new cars, and restaurant meals to be unaffordable. Thus, once the recession is in force, car sales are likely to drop, and prices of resale homes will again decline.
Oil prices may temporarily drop. This price decrease, together with a drop in credit availability, is likely to lead to a reduction in drilling in high-priced locations, such as US oil shale (tight oil) plays.
Other energy sources are also likely to be affected. Demand for electricity is likely to drop. Renewable energy investment is likely to decline because of less electricity demand and less credit availability. By 2014 and 2015, less government funding may also play a role.
This recession is likely be very long term. In fact, based on my view of the reasons for the recession, it may never be possible to exit from it completely….
“After putting $803,436 in Obama’s re-election campaign, a media giant attempted to keep Americans from seeing the video by banning it from their sites,” stated Aaron DeHoog, the financial publisher who is unapologetic for the release of controversial footage that has gained international attention.
The video DeHoog is referring to is a stunning interview with famed economist Robert Wiedemer, author of the New York Times best-selling book Aftershock.
Wiedemer, best known for correctly predicting the collapse of the U.S. housing market, equity markets, and consumer spending that almost sank the United States during the “Great Recession”, provides disturbing evidence in the video interview for 50 percent unemployment, a 90 percent stock market crash, and 100 percent annual inflation . . . starting as soon as 2013.
When the host of the interview expressed disbelief in Wiedemer’s claims, he calmly displayed five indisputable charts to back up his predictions (click here to see those exact charts).
By The Numbers: 20 Facts About The Collapse Of Europe That Everyone Should Know
The economic implosion of Europe is accelerating. Even while the mainstream media continues to proclaim that the financial crisis in Europe has been “averted”, the economic statistics that are coming out of Europe just continue to get worse. Manufacturing activity in Europe has been contracting month after month, the unemployment rate in the eurozone has hit yet another brand new record high, and the official unemployment rates in both Greece and Spain are now much higher than the peak unemployment rate in the United States during the Great Depression of the 1930s. The economic situation in Europe is far worse than it was a year ago, and it is going to continue to get worse as austerity continues to take a huge toll on the economies of the eurozone. It would be hard to understate how bad things have gotten – particularly in southern Europe. The truth is that most of southern Europe is experiencing a full-blown economic depression right now. Sadly, most Americans are paying very little attention to what is going on across the Atlantic. But they should be watching, because this is what happens when nations accumulate too much debt. The United States has the biggest debt burden of all, and eventually what is happening over in Spain, France, Italy, Portugal and Greece is going to happen over here as well.
The following are 20 facts about the collapse of Europe that everyone should know…
#1 10 Months: Manufacturing activity in both France and Germany has contracted for 10 months in a row.
#2 11.8 Percent: The unemployment rate in the eurozone has now risen to 11.8 percent – a brand new all-time high.
#3 17 Months: In November, Italy experienced the sharpest decline in retail sales that it had experienced in 17 months.
#4 20 Months: Manufacturing activity in Spain has contracted for 20 months in a row.
#5 20 Percent: It is estimated that bad loans now make up approximately 20 percent of all domestic loans in the Greek banking system at this point.
#6 22 Percent: A whopping 22 percent of the entire population of Ireland lives in jobless households.
#7 26 Percent: The unemployment rate in Greece is now 26 percent. A year ago it was only 18.9 percent.
#8 26.6 Percent: The unemployment rate in Spain has risen to an astounding 26.6 percent.
#9 27.0 Percent: The unemployment rate for workers under the age of 25 in Cyprus. Back in 2008, this number was well below 10 percent.
#10 28 Percent: Sales of French-made vehicles in November were down 28 percent compared to a year earlier.
#11 36 Percent: Today, the poverty rate in Greece is 36 percent. Back in 2009 it was only about 20 percent.
#12 37.1 Percent: The unemployment rate for workers under the age of 25 in Italy – a brand new all-time high.
#13 44 Percent: An astounding 44 percent of the entire population of Bulgaria is facing “severe material deprivation”.
#14 56.5 Percent: The unemployment rate for workers under the age of 25 in Spain – a brand new all-time high.
#15 57.6 Percent: The unemployment rate for workers under the age of 25 in Greece – a brand new all-time high.
#16 60 Percent: Citigroup is projecting that there is a 60 percent probability that Greece will leave the eurozone within the next 12 to 18 months.
#17 70 Percent: It has been reported that some homes in Spain are being sold at a 70% discount from where they were at during the peak of the housing bubble back in 2006. At this point there are approximately 2 million unsold homes in Spain.
#18 200 Percent: The debt to GDP ratio in Greece is rapidly approaching 200 percent.
#19 1997: According to the Committee of French Automobile Producers, 2012 was the worst year for the French automobile industry since 1997.
#20 2 Million: Back in 2005, the French auto industry produced about 3.5 million vehicles. In 2012, that number dropped to about 2 million vehicles.
One thing that these shocking numbers cannot convey is the tremendous amount of pain that many average Europeans are living through on a daily basis at this point. To get a peek into what life is like in Greece these days, check out this short excerpt from a recent Bloomberg article…
Anastasia Karagaitanaki, 57, is a former model and cafe owner in Thessaloniki, Greece. After losing her business to the financial crisis, she now sleeps on a daybed next to the refrigerator in her mother’s kitchen and depends on charity for food and insulin for her diabetes.
“I feel like my life has slipped through my hands,” said Karagaitanaki, whose brother also shares the one-bedroom apartment. “I feel like I’m dead.”
For thousands of Greeks like Karagaitanaki, the fabric of middle-class life is unraveling. Teachers, salaries slashed by a third, are stealing electricity. Families in once-stable neighborhoods are afraid to leave their homes because of rising street crime.
All over Europe, people that have lost all hope are actually setting themselves on fire in a desperate attempt to draw attention. Millions of formerly middle class Europeans have lost everything and are becoming increasingly desperate. Suicide and crime are skyrocketing all over southern Europe and massive street riots are erupting on a regular basis.
Unfortunately, this is just the beginning. Things are going to get even worse for Europe…..
Matthew Boesler: Thought The Euro Crisis Was Over? These 18 Charts Show The Real Crisis That Lies Ahead
According to new numbers, youth unemployment rates across Europe just hit new highs.
Unfortunately, the young and unemployed are not likely to see their situation improve anytime soon. According to a report by the International Labour Organization, the global youth unemployment rate will continue to edge higher beyond 2014, and will hit 12.9% by 2017, 0.2 percentage points up from 2012.
From the ILO:
“As the euro area crisis continues in its second year, the impacts are spreading further, slowing down economies from East Asia to Latin America. Other regions such as Sub-Saharan Africa that had expected faster improvements in their youth labour markets will now take longer to revert to levels seen prior to the global financial crisis. In developed economies, youth unemployment rates are expected to fall over the coming years, after having suffered from the largest increase among all regions at the beginning of the crisis, but principally because discouraged young people are withdrawing from the labour market and not because of stronger hiring activity among youngsters.”
Headlines (via SAX)
- ROSENBERG: 6 Key Economic Indicators Show That The US Isn’t In Great Shape
- Eurozone unemployment reaches record high; Greece soars to 26 per cent jobless rate
- Milliman analysis: Historic low interest rates widen pension funding deficit by $74 billion in 2012
- Spain 2013 Net Bond Issuance to Reach 59 Billion Euros
- State comptroller: NY government debt tops $63B
- With U.S. fiscal problems unresolved, treasured AAA rating may fall off cliff
- Japan to buy EU bailout bonds to ease eurozone crisis
- U.S. Debt May Rise as D.C. Dysfunction Draws Downgrade, UBS Says
- Muni Cap May Force $150 Billion in Calls, Citigroup Says
- Lexington, Kentucky, mayor says pension costs have ‘spiraled out of control’
- Gold Lures Japan’s Pension Funds as Abe Targets Inflation
- Japan to Buy European Debt With Currency Reserves to Weaken Yen