Monday, April 12, 2010

Cents And Common Sense

Before we pop the cork on the champagne because the stock market closed above 11,000, perhaps we should listen to what Graham Summers has to say:

While the market cheers on the fantastic job “growth” of March 2010, the more astute of us are concerned with a growing tide of personal bankruptcies. March 2010 saw 158,000 bankruptcy filings. David Rosenberg of Gluskin-Sheff notes that this is an astounding 6,900 filings per day.

This latest filing is up 19% from March 2009’s number which occurred at the absolute nadir of the economic decline, when everyone thought the world was ending. It’s also up 35% from last month’s (February 2010) number.

He then goes on to dissect the median U.S. household income.  It's a great article, and worth reading.


  1. Lewy, thanks for recommending Zero Hedge. It's a wonderful website! I'm hooked. :)

  2. The number of bankruptcy filings is staggering. Up 35% from last month? Wow.

  3. It's just the opposite up here in the land of fat arsed housewives!

  4. lady red - omg, what have I done.

    We are all d00mpr0nerz now.

    Fay - land of fat arsed housewives? Like this one?


  5. Just now from the Zero Hedge chatroom:

    it's a good thing americans own so many SUV's
    they'll need a place to sleep


  6. The only ones recovering in this 'recovery' are those who have no real stake (I hate the phrase 'skin in the game') in the American economy, except to profit from it.

    They could be making just as much profit sitting in Brussels or Tehran, and playing the US stock market.

    The people who are actually tied to the soil of America (and I don't mean only agricultural folks) are still struggling and suffering.

  7. I don't disagree that things are bad, and I like Zero Hedge.

    But where investment and finance are concerned, it pays to analyze the opposite case from whatever you are feeling is correct.

    I see a bit of legerdemain with the analysis - namely that it presumes that the median income household is shopping for the median home on the market. I would conjecture that this is not the case, and has likely never been the case, in good times or bad.

    The median home buyer is, and has likely always been, above the median in terms of income. Given that there are a substantial portion of the population who are renters, and that homeownership is not and cannot be for everyone (that _is_ what we learned form the sub-prime meltdown, right?), I don't see what the problem with this is.

    I agree with RWC - the benefits of this "recovery" are very unevenly distributed.

    But keep in mind that some of the "losers" are also financial investor types, who were so convinced the world was ending that they failed to make any money of the (paper) recovery. And so they make endless prognosis of pending disaster - which they fervently hope for - so that this time they can get in at a good price.

    Remember - a fund manager is always either talking up his book, or talking out his ass.

    Now - again - like RWC says, there aren't a lot of winners among regular folks in this "so called recovery".

    There's going to be an ugly sorting process, and the terrible thing about what's going on is that some of the "good" companies and people - who, to use a phrase attributed to a prominent Democrat in the last century, "worked hard and played by the rules", are going to be left behind. And others - like the big banks, make out OK. Ugh.

    But in any recession, bankruptcies are going to be a lagging indicator. Can they still be increasing as business conditions are getting better? Actually, yes. (Though obviously if they continue unabated, things will dip again).

    I'm not convinced that disaster is around the corner. I'm increasingly suspecting that it is further off than that - far enough off that it's time to get on with life in the meantime.

    One of the things I keep hearing is that "nobody will start a company in these conditions".

    I go to meetings now regularly with people who are starting companies, or are thinking about it. These include friends and acquaintances. So I have some data points which contradict the pessimism.

    Soon I may decide to invest in some of these. This isn't all techie stuff either, but e.g. apparel retailers. (Though truthfully, my focus is tech).

    Insane? Maybe. Open to that. Still thinking.

    But also open to the possibility that things will keep on keeping on long enough to start something interesting and keep it going through (or cash out before) the next crisis.

    The sad thing is that the combination of business process innovation and technology has resulted in a situation where it has never been easier to do more with less people - and that includes industries which make stuff in the USA (and yes, there are still a number of those industries).

    I'm figuring this trend will continue.

    It is this relentless "productivity growth" that Greenspan cited as a reason to keep rates low - which, given the Fed mandate for full employment, was not as stupid a thing to do (without the benefit of hindsight) as some suggest.

    And productivity growth will continue. Companies will make more stuff - and offer more services - with fewer and fewer people.

    The "secular" unemployment trend is therefore very bad. How society deals with this is a very hard problem. I'm afraid that the very low unemployment in the mid 2000's was only achieved with an unsustainable credit bubble.

  8. Oh crap, I did it again, I confused DWT with RWC. Dude, I'm seriously sorry. It's late, even for me.

  9. It should not be that tough, Lewy, he is the young, handsome one.

  10. Lewy14 said: "...they make endless prognosis of pending disaster - which they fervently hope for - so that this time they can get in at a good price. ... Remember - a fund manager is always either talking up his book, or talking out his ass."

    Oh, yes, I am sooo stealing that bit...perfection in prose.

  11. Steal away, Ari!

    Follow up zinger for the book / arse dichotomy:

    That's not an opinion - that's an accounting identity!

  12. OK this will piss everyone off real nice.

  13. It's easy to make a profit when you don't have the pesky burden of covering your own losses.

    No risk = pure profit. Not much of a circus trick, is it?

    The "profits" (can't really call them about "loot?") of the banks, brokers, and fund managers are obscene. Criminal, even.

    Pissed off? Yeah, you might say that.

  14. That's pretty much it, Aridog.
    They are all criminals.
    Few will ever be prosecuted and of that few NONE will go to prison. We save that for the little guys - small business owners, etc.

  15. Lewy14 said: "... this will piss everyone off real nice."


    Hey. Great chart. That wee differential between Non-Financail Industry profit and Financial Industry profit is other wise known as smoke & mirrors. Almost better than printing money.

  16. Myself, I prefer this "chart"....


  17. There's an echo on her backside :O&

    Kind of a funny notion, a tattoo stating that one is "sexy". If one was, would one need to say so? And if one wasn't, would saying so matter?