Physiognomy of Economic Depression - Eric Janszen

[ST]

Re: Physiognomy of Economic Depression - Eric Janszen

To make a long story short, this time the U.S. economy blew up in late 2008. It did not slow down. It did not fall into recession. The Fed did not create it on purpose to bring down inflation

That is debatable. By July 13th, 2008 the Fed and other central bankers had already met to discuss the inflation issues with oil and all other commodities rocketing higher. Their announcement to back Freddie and Fannie, they must have known, would trigger a dollar bull market, a sharp move higher in bank stocks and a strong counter against the trade which every hedge fund and their dog had hopped on board - commodities long. Knock the legs out of this trade and you knock down a lot of leveraged bets which were pro inflation. To think that Paulson could not see this would be naive.

[pescamaaan]

Re: Physiognomy of Economic Depression - Eric Janszen

Will they take off from here along with the economy, or will they rise and fall in response to government stimulus and bounce along at the 9 to 10 million per month level as the depression malingers?.

Is this accurate? when i read sales report, I understand the auto sales numbers posted on a monthly basis are then annualized....thus we are in a period where sales levels (in units) is 10 million per year (Not Month). the height of the bubble they were running at 18-19 million per year.

therefore the charts should be labeled as "monthly annualized sales volumes", No?

I think a correction is needed for the description of some of the charts...

[peakishmael]

Re: Physiognomy of Economic Depression - Eric Janszen

Great Info,

I got the deal of the century on a new Honda yesterday.

Expecting its "Value" too hyperinflate over the next few years!

Hmm. Am I misreading you? In the best of times, cars have always been terrible investments, depreciating quickly, as soon as you drive them off the lot.

If hyperinflation hits, I suspect that demand for vehicles of all kinds (new and used) will continue to fall below supply.

Enjoy your car, but don't expect to turn it into a gold mine in 5 years.

[don]

Re: Physiognomy of Economic Depression - Eric Janszen

Spot on Eric, with one caveat.

The FIRE economy did not collapse. It's most recent bubble collapsed and the even greater credit bubble is going with it but Goldman's plans with Cap & Trade sure looks like a FIRE to me.

More akin to the IMF. Emerging markets finally free themselves of IMF debt servitude. Welcome global meltdown. IMF re-born.

What's to hold back FIRE from simply being the institutional drain on a subsistence economy here? And there's still a few relatively fat porkers to be skewed. Pension funds have been only half wiped out and SS remains. White collar and professional outsourcing continues to rise and there's plenty of mischief left to be done with derivatives and other Dark Matter.

I don't see a political economic sea change anywhere in sight.

Guess that makes the 2009 Depression unique.

[santafe2]

Re: Physiognomy of Economic Depression - Eric Janszen

Thanks for the feedback. Better now?

Fred, I think the original chart posted again.

[charliebrown]

Re: Physiognomy of Economic Depression - Eric Janszen

about 70% of the mcmansions i know are owned by dinks (dual income no kids), or dionks (dual incomes one kid).

[FRED]

Re: Physiognomy of Economic Depression - Eric Janszen

Fred, I think the original chart posted again.

You might have to clear your browser cache to see it, or maybe just hit "refresh."

[raja]

Re: Physiognomy of Economic Depression - Eric Janszen

Hmm. Am I misreading you? In the best of times, cars have always been terrible investments, depreciating quickly, as soon as you drive them off the lot.

If hyperinflation hits, I suspect that demand for vehicles of all kinds (new and used) will continue to fall below supply.

Enjoy your car, but don't expect to turn it into a gold mine in 5 years.

My wife, who lived through the Ukrainian economic meltdown after the Soviet breakup, just bought a new 2009 Camry Hybrid with a $2000 cash discount incentive. She said, "Better buy it now, because the cars they'll be making in the future will be a lot lower quality, (like cars in Ukraine)." She also got the Toyota 7-year warranty vs. the 8-year 3rd party warranty at the same price figuring that Toyota was less likely to go out of business than the 3rd-party insurer.
We are also buying everything we can now, figuring on shortages later . . . plus inflation.

[Retired Commish]

Re: Physiognomy of Economic Depression - Eric Janszen

Terrific read! Having just bought my first new car since 1974, want to relate a strange experience:

"What are auto makers doing by way of incentives to maintain even this awful level of sales volume? Are they able to do so profitably? As we have pointed out before, we cannot have a sustained economic recovery without profits.
RECORD AUTO INCENTIVES

Automakers also have been plying record incentives in the form of cash or special financing to press customer traffic into dealerships, making it more difficult to determine the long-term demand for vehicles.

Edmunds called the month the most expensive June on record, with the average U.S. incentive at $2,930 per vehicle sold, up 20 percent from a year earlier. Edmunds expects incentives to fall as production cuts in recent months pare inventories."

I have typically bought a two-year old car whenever I traded for the last 30 years. Always make an offer and am prepared to walk if they can't deal. This time was somewhat different. Finding the used cars a bit more expensive than I expected, I began looking at the new ones because of the rebates. Made an offer of $11,000 cash plus my 2004 ION for a well-equipped Nissan Sentra. Two hot-dogs later, the sales manager asked if I could split the difference (another $500) and I said no and began leaving. He ask me to stay for another 10 min. while he checked something. He came back out to the big tent and said I could get another $1000 rebate if I was willing to finance the car. This made a total of $3000 in rebates and brought the actual price to $10,500 instead of the $11,000 cash I offered. There was no penalty for early payoff so I said OK and bought the car. I'm now waiting for Nissan to send me the contract and I'll pay it off when I receive it.
I realize it's a depreciating asset but at my age (67) I can afford to enjoy a new car and will likely drive it for 10 years if I live that long. Anybody else ever had an offer like that where they pay you to not part with your money?:rolleyes::rolleyes:

[flintlock]

Re: Physiognomy of Economic Depression - Eric Janszen

I have also been surprised at how so many just think this is another typical recession. I live in an "affluent" area and its amazing how many empty retail stores I see. Drive over into the next county and large swaths look like a ghost town. Premium corner retail sites sitting boarded up.

Those who still have good jobs are living pretty much the same in my area. Spending is down some, but most think this is merely a bump in the road. I hear quite a lot of " When housing comes back next year" talk, as if its a certainty.

Some people still feel wealthy, despite losing big in the stock market and their home values. But I get the idea that some of the spending is just habit and not something they really feel confident about. Its the American pastime and gosh darn it, what do you expect us to do?

[santafe2]

Re: Physiognomy of Economic Depression - Eric Janszen

You might have to clear your browser cache to see it, or maybe just hit "refresh."

Excellent economic advice and IT support......this place is a bargain! Thanks for the help.

[metalman]

Re: Physiognomy of Economic Depression - Eric Janszen

Excellent economic advice and IT support......this place is a bargain! Thanks for the help.

thanks for fixing the chart... couldn't figure it out either. now i get it!

[Basil]

Re: Physiognomy of Economic Depression - Eric Janszen

McMansions are the tail fins of the 2000s. Fun while it lasted, but never to return...even if credit again becomes cheap and plentiful.

Eleven years ago architect Sarah Susanka published a book titled "The Not So Big House" . A few early adopters saw the light long before the McMansion insanity peaked and burned out.

http://www.youtube.com/watch?v=OhcOq6iDOmE

http://books.google.com/books?id=cKS...esult&resnum=4

No word yet on whether Susanka intends to publish a follow up book about "The Not So Big Bunker"...;)

I love the book, but ever notice that she lives in a house that is around 3000 sqf? That is much larger than what I or any of my friends have, and I work from home.

[TheServant]

Re: Physiognomy of Economic Depression - Eric Janszen

No two events of this type are alike. The similarities and differences show up in the data. What impresses us most is how unimpressed many appear to be about the seriousness of this depression. They ask why many restaurants are still booked up and why many malls are still busy, even if apparently the shoppers in them are buying less. Where are soup lines? Where is the high crime rate?

This, to me, is one of the more fascinating psychological aspects of this episode. People just do not want to think about it, even though we seem to be well beyond the point of no return. Even now, with the seriousness of the situation just dawning on a smattering of journalists, the possibility of this being as bad as the Great Depression is still scoffed at, while the idea that it may turn out to be worse is not even entertained.

To get a street level view of this process, I brought my camera with me on my latest bike ride into Boston from the western suburbs where I live. On the usually pristine Minuteman Bike Trail that I ride on as far as Arlington, not seen on previous trips over the past ten years are now: graffiti, piles of burned trash, groups of teenagers hanging out, and police cars parked on the side of the trail. When their parents are struggling with bills and unemployment, teenage kids tend to take it out on the local neighborhood.

From "ground-zero"?

To give a different perspective from Metro Detroit, I drove down to a few Tigers' games last month. I traveled into Pontiac from the west and then down Woodward Ave (25 miles) into the city of Detroit. Other than the staggering difference in wealth between the richest and poorest, the most notable difference to me was the lack of congestion since so many people have left the actual city of Detroit in the past decade. That really caught me off guard. I had not really considered that aspect of the "downturn".

In terms of being run down, the city has been for years. I have only been in the area for 6 years, and in that time, the rundown buildings with "For Sale" signs, in many instances, have been burned out or are starting to fall in on themselves. If you are lucky, someone has been industrious enough to raze the property to leave a vacant lot. This seems true once you get a mile or so out of downtown and continues for 5 miles anyway. If anyone has been in the area longer, I would appreciate a critique if this perspective seems a bit off. I only make it into downtown once or twice a year.

Sorry, no pictures. I forgot my camera.:rolleyes:

[santafe2]

Re: Physiognomy of Economic Depression - Eric Janszen

That is debatable. By July 13th, 2008 the Fed and other central bankers had already met to discuss the inflation issues with oil and all other commodities rocketing higher. Their announcement to back Freddie and Fannie, they must have known, would trigger a dollar bull market, a sharp move higher in bank stocks and a strong counter against the trade which every hedge fund and their dog had hopped on board - commodities long. Knock the legs out of this trade and you knock down a lot of leveraged bets which were pro inflation. To think that Paulson could not see this would be naive.

Hadn't oil just moved so high in price that it finally toppled the economy? Demand destruction and all that good economic stuff? I can't support this so much as I'm just not a great believer in government as competent much less government so competent that it could conspire and pull it off.