Evidence of a Sudden Stop?

[jk]

i have noticed a number of articles referring to how quickly various measures of economic activity have shrunk. i thought it might be worth starting a thread on whether we are - right now - in the midst of a sudden stop. this caught my eye this evening..

from bill fleckenstein's site:

I don't have a question but have information you and your readers might find interesting. I am a consultant in solid waste and recycling and I derive much of my income from a share of the recycling revenue that is received by our clients. Over the last two to three weeks prices on various recycling materials have dropped 50-100%.

Many vendors are no longer even buying some materials even for zero cost. Revenue on cardboard has gone from over $140/ton to as low as zero/ton or no higher than $40/ton. Scrap steel has gone from $250-450/ton to $50/ton. The export markets for these materials have virtually shut down due to the lack of ability to get letters of credit and to the lack of demand in Asian countries. In 23 years I have never seen such a collapse in these markets. I think the lack of demand and revenue for recycled materials may be the canary in the coal mine in terms of just how serious the recession/depression is or will be.
• Thanks for that data, I have heard similar stories about the inability to get letters of credit. Lack of funding has literally stopped commerce in many many areas....

See: Headed for a Sudden Stop

[jk]

Re: Evidence of a Sudden Stop?

item #2

Goldman forecasting biggest rise in joblessness since WWII

By Rex Nutting
Last update: 10:55 a.m. EST Nov. 7, 2008

WASHINGTON (MarketWatch) -- The unemployment rate is expected to rise to 8.5% by the end of next year and inch even higher in early 2010, economists for Goldman Sachs wrote Friday. The cumulative trough-to-peak increase of more than 4 percentage points in the jobless rate would be the most since World War II, they said. Goldman analysts lowered growth forecasts for the next three quarters, and said they now expect the Federal Reserve to cut its interest rate target to 0.50% by December. "The main reason for these changes is the accumulation of evidence that U.S. domestic demand and production are dropping sharply," they wrote. "We do not see a resumption of anything close to trend growth before 2010."

http://www.marketwatch.com/news/story/Goldman-forecasting-biggest-rise-joblessness/story.aspx?guid={C174CCA5-803B-4656-9340-5591106B08D8}&dist=hplatest

[Charles Mackay]

Re: Evidence of a Sudden Stop?

Did the sudden freeze up in foreign capital flows to the US cause the stop that we are now in, or soon to be in?

[metalman]

Re: Evidence of a Sudden Stop?

Did the sudden freeze up in foreign capital flows to the US cause the stop that we are now in, or soon to be in?

the normal sequence is...

1. flows reverse (check)
2. financial crisis (check)
3. sudden top (check)

now flows should briefly turn the other way before the GRAND finale!

then again, this is the first reverse (poor countries to rich) sudden stop in history so, who knows?

[touchring]

Re: Evidence of a Sudden Stop?

How do i buy card board for 0$ a ton?

i have noticed a number of articles referring to how quickly various measures of economic activity have shrunk. i thought it might be worth starting a thread on whether we are - right now - in the midst of a sudden stop. this caught my eye this evening..

from bill fleckenstein's site:

I don't have a question but have information you and your readers might find interesting. I am a consultant in solid waste and recycling and I derive much of my income from a share of the recycling revenue that is received by our clients. Over the last two to three weeks prices on various recycling materials have dropped 50-100%.

Many vendors are no longer even buying some materials even for zero cost. Revenue on cardboard has gone from over $140/ton to as low as zero/ton or no higher than $40/ton. Scrap steel has gone from $250-450/ton to $50/ton. The export markets for these materials have virtually shut down due to the lack of ability to get letters of credit and to the lack of demand in Asian countries. In 23 years I have never seen such a collapse in these markets. I think the lack of demand and revenue for recycled materials may be the canary in the coal mine in terms of just how serious the recession/depression is or will be.
• Thanks for that data, I have heard similar stories about the inability to get letters of credit. Lack of funding has literally stopped commerce in many many areas....

See: Headed for a Sudden Stop

[SeanO]

Re: Evidence of a Sudden Stop?

How do i buy card board for 0$ a ton?

By putting gas in the truck to haul it away.

[DaveBrown42]

Re: Evidence of a Sudden Stop?

Over the last two to three weeks prices on various recycling materials have dropped 50-100%.

Many vendors are no longer even buying some materials even for zero cost. Revenue on cardboard has gone from over $140/ton to as low as zero/ton or no higher than $40/ton. Scrap steel has gone from $250-450/ton to $50/ton.

I heard this exact same thing a week ago from a close friend of mine who happens to be a garbageman. He says that they have a huge mountain of cardboard and the company that normally buys it has told them that it will continue to accept their normal amount, no more, and only at drastically reduced prices. They are scrambling to try to even get rid of it for free.

He says the scrap metal dealers he knows are sitting on huge stockpiles and can't move it. Some are only accepting additional scrap for free.

I was shocked when he mentioned that some of his co-workers are being told they may be laid off "due to the economy". (Apparently this is the time of year when 2009 contracts are bid, and the competitors are very aggressively fighting for some of his company's most stable contracts - hospitals, schools, etc).

I personally lack enough knowledge of the garbage & recycling industry to definitively link this information to the current global crisis (as there may be other factors at work that I'm unaware of), but it's certainly interesting.

(This is in the Detroit area, by the way.)

Footnote: My garbageman friend is also quite adept at spotting jewelry in the trash he picks up. He normally sells the gold he finds at a local jewelry store, but told me the other day that he's decided to hang on to a few pieces "in case everything goes to hell". Ordinarily I'd say this kind of investment advice from a garbageman would be a contrarian indicator, but my friend is a sharp cookie and I'm inclined to agree with him.

[blazespinnaker]

Re: Evidence of a Sudden Stop?

How about GM going bankrupt?


The third image I attached is interesting though. Real time inventory management has decreased inventory/sales over time, so we should 'rightsize' our inventory pretty quickly.

Anyways, you can watch things self destruct here:

http://www.briefing.com/Investor/Pub...icCalendar.htm

Bring your popcorn and a comfy seat.

[touchring]

Re: Evidence of a Sudden Stop?

Footnote: My garbageman friend is also quite adept at spotting jewelry in the trash he picks up. He normally sells the gold he finds at a local jewelry store, but told me the other day that he's decided to hang on to a few pieces "in case everything goes to hell". Ordinarily I'd say this kind of investment advice from a garbageman would be a contrarian indicator, but my friend is a sharp cookie and I'm inclined to agree with him.

Wow, trashing jewelry? New to me.

[BiscayneSunrise]

Re: Evidence of a Sudden Stop?

I heard this exact same thing a week ago from a close friend of mine who happens to be a garbageman. He says that they have a huge mountain of cardboard and the company that normally buys it has told them that it will continue to accept their normal amount, no more, and only at drastically reduced prices. They are scrambling to try to even get rid of it for free.

He says the scrap metal dealers he knows are sitting on huge stockpiles and can't move it. Some are only accepting additional scrap for free.

I was shocked when he mentioned that some of his co-workers are being told they may be laid off "due to the economy". (Apparently this is the time of year when 2009 contracts are bid, and the competitors are very aggressively fighting for some of his company's most stable contracts - hospitals, schools, etc).

I personally lack enough knowledge of the garbage & recycling industry to definitively link this information to the current global crisis (as there may be other factors at work that I'm unaware of), but it's certainly interesting.

(This is in the Detroit area, by the way.)

Footnote: My garbageman friend is also quite adept at spotting jewelry in the trash he picks up. He normally sells the gold he finds at a local jewelry store, but told me the other day that he's decided to hang on to a few pieces "in case everything goes to hell". Ordinarily I'd say this kind of investment advice from a garbageman would be a contrarian indicator, but my friend is a sharp cookie and I'm inclined to agree with him.

Garbagemen are EXACTLY the sort of people I would listen to. They are the Fat Tony's of the world with a real world eye on the economy.

[Charles Mackay]

Re: Evidence of a Sudden Stop?

How about GM going bankrupt?


The third image I attached is interesting though. Real time inventory management has decreased inventory/sales over time, so we should 'rightsize' our inventory pretty quickly.

I wonder if the steady increase of internet sales is the cause of this? No need to keep inventory in big box stores all over the world.

[sutro]

Re: Evidence of a Sudden Stop?

I'm in recycling too and am seeing the same thing.