I’m drunker than you, no doubt.
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When you wake up in 2009, you will be greeted by an amazing unemployment report…
A *DROP* in unemployment claims 9x GREATER than consensus estimates. (http://www.goodnewseconomist.com)
Happy New Year!
lets tosss aaaa cccoinn and…what did you say…humph, snooz
Heads Click here – http://www.goodnewseconomist.com/2009/01/unemployment-drop-is-largest-in-16.html
Tails Click here –
http://www.goodnewseconomist.com/2009/01/unemployment-drop-is-largest-in-16.html
zzzzzzzzzzzzzzzz
I am working on a malatov cocktail of micro-brew, wine, and cheap champagne. Here’s to waking up at 3:00pm tomorrow.
I have to be on a F@#$ing plane in 3 hours. That’s going to be a bad hang over.
Hanging with the old lady here at the crib. Snoe showing up the pass tomorrow. Bought some AGT. Nice technical setups across D/W/M time frames.
While The Fly is proud of being in a drunken stupor for one evening, the SEC has been inebriated for years and years, even when they have others hand them crooks on a silver platter.
You may be drunker than I. But there is no way you are as high as me.
Im seeing purple elephants swimming all around.
“YOU HAVE NO IDEA”
Everyone (ok, not everyone), should read Denningers 2009 predicktions :
Ok, so with that cheery backdrop, here you go with my predictions for 2009…. and I will prefix this by saying this is a list I hope proves to be entirely incorrect. Perhaps there really is a Unicorn that craps skittles even though I’ve yet to find it – this is one round of predictions I’m willing to take a zero score on come December 09.
* The economy will not recover in 2009. Job loss will continue through the year and unemployment will reach 8% in the “headline” statistic by the end of the year. U-6 (broad unemployment, or the closest to “real” unemployment without government “cooking”) will top 15%. All the “talking heads” are predicting a turnaround in the second half of 2009. They will be wrong. Look at their records for 2008 – all of them were predicting closes at or above 1500 for the S&P 500. Why does CNBC continue to put people on the air who, if you listened to them, cost you 40% or more of your money?
* Deflation, not inflation, will become evident well beyond housing. Other capital goods beyond housing will see real price declines for the first time since the 1930s. Debt is inherently deflationary; the “hyperinflationists” will once again be shown to be wrong (how many years running will it be now?)
* Housing prices will continue to decline. I believe we’re about halfway done with the price correction. Those who think we will turn this in 2009 are wrong – unless we get an all-on collapse in prices in early 2009, which I do not believe will occur. I’ve heard several claims we will have positive year-over-year home price changes in 2009. I’ll take the other side of that bet.
* The Fed’s attempt to “pump liquidity” will be shown to be an abject failure. We will see either a Treasury Market selloff or worse, severe instability in the dollar at some point in 2009.
* GDP will post a 12-month negative number and there is a decent shot that we will actually see an official depression print before the end of 2009, defined as a 10% decline peak-to-trough.
* The Stock Market has not bottomed although you may think it has for a few months. The annual range will be quite extreme; I would not be surprised at all to see 1,000 touched on the SPX in the first part of the year. I believe the SPX will at least touch 500 in the next 12-24 months and the current bottom will not hold. It is possible that we could see a crash to SPX 300 and DOW 3,000 some time this year, probably after the spring (when the “Obama Halo” wears off – if it isn’t blown off by economic events first.) Yes, this means I am predicting a fifty percent swing in the SPX in 2009. Lots of money to be made as a trader if you’re quick and good, but an absolute minefield if you’re a long-term investor.
* Precious metals will not be a safe haven. The callers for $1600 and above on gold will be wrong, unless there is a major military conflict. I do not rate that probability as particularly high, but it is an event (along with a major terrorism incident – nuclear or biochemical – that would cause a rocket shot in Gold prices), so I am hedging that call. The risk of this sort of “response” to the economic crisis is, however, real, and will rise significantly going into 2010 and beyond. We’ll revisit this one (a major war) next year.
* The Dollar will not collapse. This is not because we’re in great shape or will truly recover, it is because the rest of the world is in worse shape than we are. Last year pundits were all calling for the dollar to collapse to 40 – it didn’t happen. Now they’re calling the dollar’s strength a “Bear market rally.” Nonsense; the simple truth is that while we’re in bad shape the rest of the world is literally on the precipice of a full-on collapse. European banks are more-levered and less-transparent than our banks as just one example.
* The pound or euro – and perhaps both – will likely be where the FX dislocation initiates if it occurs. I see the potential for the pound and euro to both reach par with the dollar, although I’m not going to go that far out on the tree limb and predict it – yet. Needless to say that would rocket the Dollar Index but it won’t be our strength that does it – it will be their weakness.
* The US Consumer will go from a negative savings rate to a seriously-positive one. I am predicting 4% in 2009 but it could go as high as 10%. The math on this is simple – the “consumerist legion of more” has run its course and all that’s left is debt. It hurts and bad; expecting the American Consumer to cut off his other arm is just plain dumb. By the way this is a good thing in the longer term for America once the excess debt is forced out and defaulted through the system.
* Commercial Real Estate will effectively collapse and most commercial Real Estate REITs will be either insolvent or limping on life support. There will be calls for bailouts (which may be attempted; the calls are already starting to be heard) but it won’t matter – a failed business is a failed business, bailout or no, and overcapacity must go away before sustainable business conditions can return.
* Along with the above, expect 10% of all retail stores to close, and that number could go as high as 20%. That’s not going to be fun; there will be hundreds of malls that wind up literally shuttered across America. Stay away from most retailers and property groups as investments. Firms like SPG and VNO are levitating on the strength of their dividends (7-10% yields at present); I believe this is a sucker play; if retailer defaults force dividend cuts (and I believe they will) the commercial REITs will go straight into the toilet.
* Several states will get in serious financial trouble and outright default of one or more is possible in 2009. California leads this parade. But even if there is a default on a state basis, the effect will be highly localized, as county and municipal governments vary in their wisdom and budget process. The real pain comes in state-wide social and educational programs. Be very careful if you are in municipal bonds or thinking of getting back into them (I recommended they be dumped in 2007 – look at what has happened to the closed-end funds in 08! Aieeee!) as the default risk is VERY REAL. If you’re buying individual issues and do the work to determine not only the risk of default but also the likely recovery if they do default there are some good deals out there – but only if you’re doing the work. “Trust me” (as in buying funds, whether mutual funds or closed-end stuff) is very dangerous.
* Mortgages are not done. The story last year was “Subprime.” This year’s will be “ALT-A”, “Option ARMs” and so-called “Prime”. The Fed and Treasury know this, which is why they are playing games with “agency” debt in a desperate attempt to clear this market before the ticking nuclear devices go off. The amount of debt involved in these “bad deals” is vastly higher than that in the “subprime” space and if they fail to contain it (a near certainty) Round #2 of severe bank instability gets served up on us in the second half of 2009.
* If you want to refinance a mortgage you may get one brief shot at it with long rates around 4%. You’re nuts to buy outright unless you intend to die in the home, but if you have a solid reason to be obtaining a mortgage or wish to refinance you will probably get the opportunity. This assumes the “buydown game” gets going before Treasuries dislocate; if you get the opportunity take it as it is likely to be fleeting. The few places in this country where homes wind up selling for 2.5x incomes (on average) and you have an opportunity to finance at 4% and change will be decent buying opportunities – if you’re sure you can cash flow the note (e.g. your job and/or income stream is not in any danger of collapsing.)
* Those who have said that the corporate bond market is being “unreasonable” in its expectation for defaults will start to look like the jackasses they are. Actual default rates (not projections) on non-investment-grade debt will skyrocket starting in 2009 and there will be no sign of it turning around this year. If you’re playing in this area of the market thinking that “the worst is behind us”, I hope you like walking around bald as the haircuts handed out to folks like you will be especially severe and delivered with a straight razor.
* The calls for “more lending” to consumers and businesses will go exactly nowhere. The problem isn’t credit availability – there’s plenty of money available to lend if you are credit-worthy. Those who are being turned down now simply aren’t credit-worthy when one looks at what they want to do with the money and what they’re backing their repayment capacity with. The more “credit stimulus” is thrown into the economy (and there will be more) the worse the downturn will get.
* General Motors and Chrysler will fail to meet their targets and it will be labor that sinks the deal. At least one and probably both will wind up in some form of bankruptcy in 2009. The UAW is insane; Gettlefinger needs to be strung up by his genitals and pelted with rotten tomatoes by his union “brothers”, and if they had a lick of sense they’d have already done it. They obviously don’t. I give this mess six months tops, with Ford as the only possible survivor. The recent GMAC games show exactly how desperate they are; 0% 5 year loans to people with 620 FICO scores are flat-out insane and the default rates on those loans are going to wind up in economics textbooks five years hence.
* Protectionism and currency manipulation will rear their ugly heads in 2009, originating not here but in Asia as their economies go straight into the toilet. China and Japan are at severe risk here.
* Commodities will appear to be headed for a new bull market but this will turn out to be a false hope as demand continues to collapse. Attempts to manage oil output to prop up the price will fail. Several oil-producing nations will find themselves in serious economic trouble, with Russia being in the lead but by no means alone.
* Sovereign debt defaults will number at least three with many other nations on “watch” for same; we had one last year (Iceland.) Noise about a US “AAA” downgrade will continue. Highest on the list for probables are Russia, which needs oil at roughly double its current price – and stable – to be financially viable. Not going to happen in the near term.
* China will have its first large-scale rumbling of civil unrest as a consequence of collapsing export demand and thus employment. They’ll manage to tamp it down – this year. Don’t take a bet on that holding together longer-term. Those who think China will be “ok” are deluded; they have a horrifying overcapacity problem (debt-financed, of course) and there is no way for them to get out of it. They are truly going to “take it in both holes” down the road, but the worst of it won’t be in 2009 – that is still a year or two in the future.
* Foreign uptake of Treasuries will be choked off – by necessity. It won’t be because they want to screw the US (although they should have a long time ago, given our profligate and unsustainable habits), it will be because they will be forced to redirect their resources inward as their own economies collapse.
* “The City” (London to be precise, Britain generally) will be recognized as getting it “worse than we are” (in America.) This will be the first of many validations of my thesis “we’re screwed, they’re gang-raped.”
* Things will get “revolting” in a number of nations. Not here in America. Yet. If we’re lucky the American Sheep will wake up and stage some of that peaceful protest stuff I outlined above. If we’re not so fortunate 2010 could be really bad.
In terms of recommendations its simple – rallies are to be sold, cash is to be raised and prudence is to be practiced in your own personal financial affairs. Don’t get creative in all things finance, get stingy and prudent. Your personal financial survival could well depend on it.
Juice
I read it yesterday on his site. It kinda gives you the chills. He’s been calling a lot of the stuff that has happened for the past 1.5 yrs.
He knows his shit.
Ill post another article that I read just a few minutes ago.
Juice
Check out this article…..well worth it!!!!!
http://www.minyanville.com/articles/Bernanke-WMT-Paulson-Fed-bush-debt/index/a/20474/from/yahoo
2nd try to post this comment from around half an hour ago:
fwiw i still hold tbt, been learning experience. anyway thought to share:
—
dvr1962 said…
As a former bond trader for 20 years, i can tell you TBT, which i started buyin this a.m. looks like it’s got some major upside. fyi, AZO looks ripe to shrt here.
December 31, 2008 2:14 PM
upsidetrader said…
DVR
thanks for input, funny, im long and holding and i dont hold anything
December 31, 2008 7:08 PM
http://upsidetrader.blogspot.com/2008/12/happy-new-year-and-look-ahead.html
* upsidetrader Dec. 31 at 12:53 PM
* reply
* $tbt 37.60
stocktwits.com
—
cheers, bottoms up: multiple meanings indeed 😉
thx AssNap … Madoff did not act alone. The whole structure of our complacent/corrupt system, from the fed to the SEC, and from the bottom on up, was complicit in his scheme. He needed such a system to do what he did. Madoff is a degenerate product and symbol of our system and society in general.
======================
Tim Knight (not the penny stock gnat self-promoting Timmay) took no prisoners in 2008, much to The Fly’s chagrin .. actually Fly don’t really care.
Another Madoff victim.
Borowitz is an unimaginative, 1st Class Putz.
Juice & Mike – good articles
looks like it will be a traders market for the foreseeable future. It’s hard to disagree with Denniger’s points, except I think there will be simultaneous inflation and deflation in different areas. The human mind tends to simplify information so that decisions can be made: true false, go no-go, inflation deflation. Of course the world is grey on average.
KD is wrong on a number of points, see my Christmas Eve post when I was KoPG about why I don’t read his spew anymore.
But, Japan is going to come through this mess in better condition than expected due to their familiarity with QE (Quantitative Easing). Why else were they reducing their exposure to Treasury debt long before anyone else?
China – has both a culture of saving and a central planning economy that has both the history and the backbone to do really ugly things to survive.
Also, China will continue to devalue the yuan to the USD until they are able to start offloading their $2 trillion plus inventory of US Pesos.
KD has two problems, one he listens to neo-nazis (see my post) and two he looks at the world from a US-centric position.
They’re actually flavours of the same poison as his commentary is so nationalistic that it is blind to a bunch of perceptable truths.
The first being that the two reasons the US has been the “city on the hill”:
1. Military
2. The pervasive standard of the US Peso as reserve currency of choice
The second perceptable truth is that the rest of the world is starting to wonder why the US needs to be the centre of everything especially when the global financial crisis is American as SARS was of Chinese orgin.
Cuervos,
I’ll read your post. I guess I don’t agree will all KD’s stuff after all, but certainly some of it.
The stopping traffic stuff – never happen. If people take to the streets, heads will be busted. Case in point, the Philly’s post-win celebration/wildin. Large crowds tend to be unruly.
I try to look at what people say in isolation – without regard to their other views. I like some music even though I completely disagree with the lyrics, what the band stands for, etc.
My only question is, does a particular point make sense to me? I don’t necessarily care if the source is a lesbian, thespian, commie, hawk, tree hugger, gloom and doomer ,eternal optimist, free trader, upstanding citizen, thief , flat earther, alien surfer dude, denevian slime devil, genius, town fool, de-evolutioner, executioner, etc. – does their point make sense? period.
with russia in a state of depression they will begin to sell off their gold reserves ,causing gold prices to fall ..unfortunate and to no avail this wont help..and now comes a few other nations seeking protection under the cloak of the gold hedge. with prices allready on the downside and the news of more massive sell offs the prices fall faster ..the sell off has no positive effect for any of those countrys ..
this will be just the beginning ..the rest of the paper currency will become worthless .
there will only be one nation with all of the gold and it wont be the U.S. also it wont be used as money
In the year of the Lamb, men with horned ears will take to the streets and produce plumes of atomic waste under the auspices of living Gods, also known as Presidential powers.
NEW LOWS FOR DECEMBER 2009
Fuck you … none of you know from armageddon
you’re all dead anyway .. in the short or long run
KD is a fascist IMO.
Hmmm…
Russia just cut off Ukraine’s nat gas
http://www.theglobeandmail.com/servlet/story/RTGAM.20090101.wrussgas0101/BNStory/International/home
Putin crashed our party last night. Killed our dog, raped the maid, handed out toys for the little ones.
A real, real sweetheart of a guy.
http://punditkitchen.files.wordpress.com/2008/12/political-pictures-putin-thanks.jpg
Denninger = modern day Howard Ruff.
Despair and doom sells to a niche crowd who constantly live in fear.
They mostly fear not being fearful enough, therefore, they thrive on all the depression talk.
Ruff has called for economic collapse for 25 years – the people who bought that thesis and invested in his ideas got flame broiled.
My prediction for 2009 – The Fly quietly disappears from the interwebs. Leaving behind a mystery rivaling that of D.B. Cooper.