Sunday, July 5, 2009
Trick question eh ? I guess you could eat your Alfredo to-go in the Hugomongo cab of your Cummins Diesel powered Dodge Ram, but it'd still be an Italian Truck now that Fiat has bought what it wanted of Chrysler. I guess some of my red-neck buddies off-roading out in the Chatanika Valley are gonna be put out cause some Gucci loafered exec in Milan is going to be calling the shots on spare parts in Alaska for their diesel ground pounders.
SO WHAT ? WHO CARES ?
Lets see, 2 of the 3 BIG THREE [ former ] are now bankrupt. BANKRUPT. GONE ! GM will come back as a shadow of its former self. Ask some laid off GM works how strong GM is gonna come back. Their homes are not YET in foreclosure. How long will that last?
A point made is that the first and most recent wave of foreclosures, was those most vulnerable and those whose "margin-calls" bucked them right off that bucking Real Estate bull.
Lets see, and if any of you want to or can do the math, please do: the rest of the homeowners are still in their homes. What% struggles to balance two jobs, two kids, two car payments, and small savings against the current dynamic? Their prices are rising for fuel, groceries and consumables. Their ability to fund this by other than borrowing is limited as is the borrowing window. While we have not touched the "MISERY INDEX" which is calculated by adding the True Inflation Rate, to the TRUE UNemployment Rate, my suggestion is that RIGHT NOWit probably approaches or exceeds that of the nasty period in the 1979-80 period. We remember the Prime Rate in the high teens [ 18% ?], and the unemployment rate in the low teens [ 12% ?].
All govt officials will argue otherwise, but the REAL data would suggest that the Real and True unemployment rate is approaching 15%, not even touching the downshifting of job quality here in North America. At the farmers market Saturday morning, I could find examples of 20% inflation without even resorting to math. The grocery stores are also as indicative of price movement in that bracket.
OK, AGAIN, who CARES ?
No one who has a job cares YET.... Might they care later ??? You can say the jury is out on that one, UNTIL it is discovered that we are in the "1931"comparison, instead of the "1936" comparison to the GREAT DEPRESSION.
That makes the MISERY INDEX "back of the napkin" calculation for 2009 a bit scary, IMO, as I see no real way that we are already in the SECOND WAVE. All the Elliot Wave Counts aside, I cannot point to any other "Peak & Drop" move as prominent as this current one since Nov '08. So far what we see in the Real Estate downside breakout, is only the beginning.
THEREFORE, logically [ your gonna hate this conclusion ], THIS IS ONLY THE BEGINNING. The froth has been swept away as if in the First Storm Surge of a hurricane. My experience with hurricanes suggest TO ME, that we have 2/3 of this storm to go thru. BECAUSE, if Joe and Mary TWO INCOMES have only started to feel the pinch, then I think when the "roll-down", rather than 'trickle-down' effects of this First Storm Surge hit Joe & Mary TWO INCOMES, we will be in new territory in the MISERY INDEX, as Joe & Mary TWO INCOMES have to negotiate with Retired MOM & DAD for assistance to weather the storm, maybe give up a car, suffer a loss of one job, take the kids out of all Xtra-curricular activities, and maybe consolidate realty with MOM & DAD. UNTIL THAT HAPPENS I DONT THING WE WILL SEE 1936 or 1940.
Am I a really mean guy for saying this ? Yes I guess so.... Where I live, things are tranquil and normal. Yes we have had First Wave casualties, the Risk Takers, those on the Outer Margin, the Vulnerable, the First Wave peeled them off and now they are adrift. Yet no one is really alarmed down here, two or three levels down. The successive waves will cut into us and peel more of us away to set us adrift, maybe even me three layers down. When that happens it will be 1936 or 1940, and the world will be awash in DOOM, DOOM, DOOM, with no optimism to be found. At that time, there will be NO SELLERS LEFT. The rest is history.
What I am talking about above, is REAL LIFE, where Armageddon occurs when the price of something you need quadruples before you can get any, or your kids need something you can no longer provide.
NOT what I am talking about is the fair-tale world of the stock and bond markets denominated in currency designations, rather than, the real misery of running out of gas, or losing your job, or trying to find decent housing. These are the items that relate to the MISERY INDEX. The concept of MISERY INDEX also allows you to project what likely could be a rip in the societal fabric if people cannot obtain what they THINK they need. Expectations could play a large part in changes in society under these scenarios.
Next time maybe we will talk about where the money went. That basic article is in the archives of this blog.