The coming crash?

[MacGyver]

The crash that comes next is going to make Lehman Brothers look like a Sunday afternoon picnic in the park.  Just saying...

 

 

Note the blue line above with significant dips represented by Black Monday, the dotcom bust and the credit/housing crisis. 

 

We've got the stage all set.  Where's the next cliff?

[Poor_Dog]

JMO, but we got one foot over the edge now and the other is precariously gripping a banana peel with the toes.

 

I have never seen the markets the way they are now, like a foundation built on sand.

[mikegideon]

Isn't it interesting that the biggest dip in Corp profits falls on the GDP growth line. 3 seconds of reality.

Edited April 8, 2013 by mikegideon

[Guest 6.8 AR]

I think it is one big house of cards, also.

 

I just watched that movie with Jeremy Irons, "Margin Call". Not that great of a piece of cinematography

for those looking for the usual garbage, but it did display some real problems with all those mortgage

backed securities, that are still floating around in cyberspace.

 

The profit thing is all contrived, also, with massive cost cutting being the driving force, and the pumping/

printing of dollars.

 

A lot to be concerned over.

[RobertNashville]

I think the real problem is what the graphic doesn't show.

 

It's to be expected that business profits would be up because they are operating at about the same levels they were 10-14 years ago but doing so employing some 3Million less employees.

 

That's not necessarily a bad thing, that's called productivity, but is what is bad is that the economy isn't growing enough even to keep pace with population growth let alone re-employ all those who have lost their jobs since about 2008.

[Guest 6.8 AR]

It's not a bad thing, except for the size of government and it's dependents. That tells some of the rest of

the story.

[monkeylizard]

So how do I get my paycheck to move from the green line to the blue line?   :)

[Guest Lester Weevils]

 

Note the blue line above with significant dips represented by Black Monday, the dotcom bust and the credit/housing crisis. 

 

 

I expect more bad economic times, but am curious about the chart. Is it inflation-adjusted? The y axis label was initially confusing. Worded oddly. First impression being that it is a "first derivative" rate-of-change chart, though I suspect it is just numbers scaled against 1970 "absolute values"?

 

====

 

Interpretation of statistics might be the modern equivalent of prophesy via divination of chicken entrails. Charts that appear "almost periodic" tempt one to guestimate the frequency of periodic swings to predict the future, though any chart that repeatedly goes up and down can give impression of more periodicity than actually exists. Examining the intersection points of Corp-Profit vs GDP, 2002 -> 2009 ~= 7 years, 1992 -> 2002 ~= 10 years, 1982 -> 1992 ~= 10 years, 1972 -> 1982 ~= 10 years. So if it were at all periodic, perhaps the next intersection could be in the ballpark of 2016 or even as far forward as 2019?

 

My crystal ball never gives the right answers but I somehow don't expect the current level of misery to even make it to 2016 before it gets even more worser.

 

====

 

Was earlier thinking about the economy vs stock market. I wrote the following about a month ago. This current "high" stock market appears solely an artifact of inflation, even if we use the government's inflation numbers? The stock market appears to have become entirely de-coupled from the economy.

 

This BLS government site calculates official inflation values--  http://www.bls.gov/d..._calculator.htm

 

This site shows historical Dow Jones Averages--  http://www.1stock1.com/1stock1_139.htm

 

So the current "remarkable high" of $14,000, would be the same as $10,469 in the "high point" year 2000. But the actual Dow Jones average in the year 2000 was 11,367, which is higher then than now, inflation adjusted.

 

Similarly 14,000 would be the same as 12,605 in the "high point" year 2007. However the year 2007 average was 12,864, yet again higher then than now, inflation adjusted. If somebody bought an average mutual fund 15 years ago, they would have had about zero real growth in their money for the whole damn time.

 

An even weirder reality check, in the opposite direction-- The Reagan-BushSenior "high water mark" looks like the year 1989, when the average Dow Jones was about 2461. However, todays inflation-adjusted 14,000 would supposedly be 7539 in 1989!! It is seriously difficult to believe that the value of the stock market actually had a "real gain" of 3X between 1989 and today. That doesn't seem to make a lick of sense. Seems more reasonable to suspect that during the BushSenior-Clinton years the overall valuation of the stock market got pried away from realistic values somehow. From real money to monopoly money or something.

 

That 1989 period is about the same time the government began changing the way they calculate inflation. Which by some opinions drastically underestimated inflation in the last decades. Something is just seriously f'd up about the whole thing.

 

OTOH if we suppose that the big "apparent real gain" in the BushSenior thru Clinton era is merely an artifact of modified methods of inflation calculation, and the "real" level in that period was closer to flat-line, then applying the same adjustment to more recent market averages would show the market going seriously and steadily DOWN in real value over the last 15 years or so?

[Guest flashlight Dave]

I've been concerned with the economy for several years now and the stock market being on a tare really scares the crap out of me. I know its helicopter Ben that's responsible for that! I am afraid of some hyper-inflationary event

[peejman]

I'm also very confused by the y-axis label...   % growth since 1970 and 1972 is at 90%.  So everything grew 90% in 2 years? 

 

Or should that 90 be 0 since all the other labels end with 90 (590, 1090, etc.)?  If so, that means it grew 500% in 23 years (~1993) and another 500% in the following 10 yrs (2003)?  I'm not an economist nor did I sleep at Holiday Inn last night, but I'm not sure I believe that. 

 

That said, I agree with the assessment that the Dow has become decoupled with reality.  Personally, I blame it on the Dow itself and modern communication technology.  Its a vicious cycle that progressed to where publicly held companies have to do their financial reporting quarterly, and that information is available nearly instantly.  A "long term" plan these days is 12 months.  That's madness.  The system has become hypersensitive to the slightest fluctuation...  the butterfly effect. 

Edited April 8, 2013 by peejman

[Krull]

What is going to happen if the over a billion dollars in gold that belongs to Texas stored in NY isnt there along with other states Gold that is "safely" stored away by the US Gov? A recent audit of the NY Bank says its there but most of belongs to foreign govts. what about the gold at fort knox? Why cant anyone see it -- and why has it not been audited in over 60 years? -- This is a manufactured economy i think we are in and hopefully we still have the gold to back a little of the buck.  IF the gold is ever found to be gone thats going to be a problem noone will be able to solve.  Cyprus wont hold a candle to what will happen. 

 

http://www.star-telegram.com/2013/03/21/4721036/tarrant-lawmaker-seeks-to-create.html#storylink=cpy

Edited April 8, 2013 by Krull

[MacGyver]

Here's the source behind the graph for anyone who is inclined to look at it:

 

http://www.theatlantic.com/business/archive/2013/03/corporate-profits-are-eating-the-economy/273687/

 

I plan to spend a little time on this when I get some free time.

[zapfbroad]

Couple of recent articles touching on the issue:

 

The Next Real Estate Bubble: Farmland

Farmers have been taking on mounting debt, creating an unsustainable increase in land prices and risking a crash that would ripple through our economy. Could the next real estate crash be in farmland?

http://www.american.com/archive/2013/march/the-next-real-estate-bubble-farmland?utm_source=facebook&utm_medium=web&utm_campaign=032913

Farmland prices: Is the bubble about to burst?

The favorable mix of both cash and credit has provided fuel to drive up land values across the Midwest, stoking fears of a bubble ready to burst.

http://www.usatoday.com/story/money/business/2013/03/24/farm-land-prices-bubble/2013451/

 

 

 

This article is one of the most in depth complete with graphs/sources etc:

A bubble to remember -- and anticipate?

http://www.aei.org/outlook/economics/financial-services/a-bubble-to-remember-and-anticipate/

[Oh Shoot]

When people like even Trump say the market is all smoke and mirrors and even he doesn't understand it, you know it's built on shifting sand rather than actual value.

 

I expect the Dot Com thing to happen again any time but on larger scale more across the board. Will it be the one that catches up to and even further degrades the reality of the rank and file,  fomenting the Big Pain that will change everything? Dunno.

 

- OS

[zapfbroad]

Trust in Gold Not Bernanke as U.S. States Promote Bullion

http://www.bloomberg.com/news/2013-04-08/trust-in-gold-not-bernanke-as-u-s-states-promote-bullion.html

[Guest Cami]

Well, I just became a statistic today... 5 years, don't have the energy to read the severance 'package'.

[zapfbroad]

I'm sorry to hear that.

[Guest 6.8 AR]

Well, I just became a statistic today... 5 years, don't have the energy to read the severance 'package'.

I understand how you feel, Cami. My wife was cut after 34 years. Severance, well, it was severance. She

could have kept a job there, but would had to move to another job. Of course, they went up to VP's in the

third cut. She was in the first bunch. I iimagine they are still cutting due to Obamacare.

[Spots]

Well, I just became a statistic today... 5 years, don't have the energy to read the severance 'package'.

 

That sucks. I was there most of last year, got out of the military and went through 3 different jobs for business that went belly up. Keep your chin up, it'll work out for you

[MacGyver]

Well, I just became a statistic today... 5 years, don't have the energy to read the severance 'package'.

That sucks!  I'm really sorry to hear that.

[RobertNashville]

Well, I just became a statistic today... 5 years, don't have the energy to read the severance 'package'.

Sorry to hear.

 

I went through a layoff in January....took almost exactly 2.5 months to get a new position (that is actually better than the one I left).  All that to say; don't let it get you down; there is a good chance it will work out better for you when all the dust settles. ;)

[Poor_Dog]

Well, I just became a statistic today... 5 years, don't have the energy to read the severance 'package'.

 

Dammit Jim...! If that happened to me I don't know what I'd do, probably join the AARP, get on welfare and head on down to Walmart.

 

Something else will come along, my wife got laid off and got a job in the first place she went to.

[Mike.357]

5 years and you get a severance?  Sounds better than 5 years and one days pay I got last May.  But things are better now.  One door closes and another one opens.

 

As for gold in Fort Knox,  thats laughable,  it is not there.

[Wingshooter]

Well, I just became a statistic today... 5 years, don't have the energy to read the severance 'package'.

Sorry to hear it. I was also a statistic last year after 15 years. I wound up with a better job and only missed one paycheck (plus the severance :)) At the time, it seemed like nothing could be worse, but it was actually a blessing. Keep the faith.

[Guest flashlight Dave]

Economic collapse in 2013 or 14!

 

https://www.youtube.com/watch?v=ch-cuMIcmXQ