Physiognomy of Economic Depression - Eric Janszen

[TheServant]

Re: Physiognomy of Economic Depression - Eric Janszen

That is a very interesting article, and probably not completely outlandish given the economic transformation that will presumably get underway in the coming few years.

Being the Motor City, the mass transmit system has never been developed to any extent. I mean, you don't want to take away the incentive to buy vehicles if that is what you sell. To be fair, if you want to be completely honest with the situation, this is probably a by-product of segregation as well.

Anyway, assuming energy and infrastructure will be the foundation of the economic paradigm in the coming decade, Detroit would be a logical poster child for making a transformation to a friendlier energy/environmental city.
Not only is there a lot of work to be done in these arenas, there will be an abundance of empty factories readily available for any new industries that would be required, as the auto industry settles into its new equilibrium.

...or maybe the area just fades into the night as the country comes to the realization of how difficult it will be be transform to energy sources that are far less efficient than "oil", aside from nuclear that is.

I had to add that to keep some perspective. After all, I'm not frequenting iTulip because I think everything is rainbows and puppy dogs. I come to try to put some perspective on the challenges that we face, and how best to deal with them, both from an investor's and policy maker's point of view.

[skidder]

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.

Don Coxe addressed this line of thought with some interesting tidbits back when this happened via a taped interview I listened to. IIRC, he posited that the announcement that Freddie and Fannie would be backed was put out when Asian markets were open and US markets were closed on a Sunday night. By the time the US markets were opened the shorts were so far underwater it prompted a selloff in the (to date) winning commodity trades to cover losses/margin calls. I also recall hearing something about trading margins being restricted and other banking tactics being implemented right around that time that acted to restrict the ability of hedgies to ride out that storm without liquidating stock to raise cash. Just FYI and I have no actual knowledge whether any of those items mentioned above are fact.

[GRG55]

Re: Physiognomy of Economic Depression - Eric Janszen

Don Coxe addressed this line of thought with some interesting tidbits back when this happened via a taped interview I listened to. IIRC, he posited that the announcement that Freddie and Fannie would be backed was put out when Asian markets were open and US markets were closed on a Sunday night. By the time the US markets were opened the shorts were so far underwater it prompted a selloff in the (to date) winning commodity trades to cover losses/margin calls. I also recall hearing something about trading margins being restricted and other banking tactics being implemented right around that time that acted to restrict the ability of hedgies to ride out that storm without liquidating stock to raise cash. Just FYI and I have no actual knowledge whether any of those items mentioned above are fact.

I think Coxe's reasoning included the view that Paulson and Co. realized there were political limits to the amount of government bail out funds that could be flowed to the banks, and therefore the banks were going to have to start raising more capital in the markets to offset their continuing losses. The move was designed to arrest the continuing fall in the value of bank stocks to facilitate the raising of the capital. A look at the BKX shows it worked...for a little while.

[metalman]

Re: Physiognomy of Economic Depression - Eric Janszen

I didn't say that EJ should watch more bubblevision or that bubblevision = the real world, so I have to assume that you agree with him that the tone of the reports about economic data crafted for an American audience has changed.

Jobless claim press releases masquerading as reporting:

http://news.google.com/news/more?um=...SS8oPq7Ie6e0_M

On a different variation of the same theme, over on CNBC, they're running a series of ads based on the "We told you it (the crash) would happen" theme.

what'd you expect from liars but more lying? cnbs 'we told you so'. right... :rolleyes:

ej's said for ten years he'd change his 'doomer' tone after tshtf... who needs it after the fact? what's the point? too late to prepare... you're f&cked.

now it looks like he's still trying to keep us on the timescale... not crash on monday/soup lines on tues ala doomers or 'green shoots' ala cnbs.

[mcgurme]

Re: Physiognomy of Economic Depression - Eric Janszen

Bart, great plot, thank you.

Now, is what this plot is telling us really a bad thing in the "big picture"? Sure, it will be a nasty readjustment for all. But ultimately, was quality of life really rising as Americans worked harder and harder - especially compared to their European counterparts?

I did a trip through Italy a few years back. Every single day, we had excellent locally raised and prepared food and wine. There weren't a lot of trinkets around - not everyone owned a computer, ipod, etc - but they lived the good life. Up late in the morning, some work, a big lunch, a nap, a bit more work, and then dinner and drinks. We stayed on a working farm, and this was the routine. It was simple, but good.

I for one will not miss the idea here that one must work 50-60 hours per week to "succeed". Right now the people who still have jobs are working harder and harder (Speaking of which, I'll be doing a bunch of work this afternoon... because in my job, 60 hours/wk is considered "normal").

But eventually this will have to stop, or the economic hole will just get deeper and deeper as fewer and fewer people try to shoulder the economy. It can't function that way. A few people will work themselves to death while everyone else will be without jobs, food and shelter. Something will break.

I know it is "socialist" thinking that the US might have a shorter workweek and more vacation time (actually, I don't think it is socialist, I think it is "human"). This would give people time to plant their gardens, get to know their neighbors, and re-build social networks that have long since been frayed or dismantled by our workaholic lifestyles.

While I think the change is not going to be easy, the sooner that folks wake up and realize that this is the new reality - and learn to enjoy it - the better off we'll all be.

Another way to view the existing employment picture. 1964 is as early as the data set goes.

[bart]

Re: Physiognomy of Economic Depression - Eric Janszen

...
I for one will not miss the idea here that one must work 50-60 hours per week to "succeed". Right now the people who still have jobs are working harder and harder (Speaking of which, I'll be doing a bunch of work this afternoon... because in my job, 60 hours/wk is considered "normal").
...
While I think the change is not going to be easy, the sooner that folks wake up and realize that this is the new reality - and learn to enjoy it - the better off we'll all be.

I don't recall the last week that I only "worked" 50 hours... and I'm supposed to be retired. ;)

And more seriously, I can sure think of worse longer term outcomes than a new reality like you describe where more humane and human values gain credence, and some or much of the "Organization Man" stuff falls away... and without precluding those who may want to work that 50-60 hour week too.

[grapejelly]

Re: Physiognomy of Economic Depression - Eric Janszen

People in the "private" sector are working harder and harder simply because they are being taxed, directly through taxes and indirectly through inflation, more and more, to pay for a bigger and bigger freeloader class including:

public "servants"
people on welfare
people on medicare/medicaid
etc.

I am not saying the above people are bad, or haven't earned their monies, or anything like that.

Just pointing out that as this depression drags on, there is a bull market in government largesse and this has to come from somewhere.

Where does it come from?

It comes from people who still work and are productive, a class that is shrinking all the time.

And this happens while real savings are shrinking as their value is taxed indirectly through inflation.

The same thing happened in the 1930s and was responsible for a brief depression turning into an endless one.

So it is happening today.

From some points of view, this is a good thing.

From other points of view it is not.

Like everything else of course.

From a utilitarian perspective, the "total good" of society declines due to disincentives heaped upon the productive class, and due to loss of savings through the inflation tax.

From another perspective, it hardly matters.

[goadam1]

Re: Physiognomy of Economic Depression - Eric Janszen

I think anectdotal stuff is important at this stage and I'm surprisde that so few have chimed in with reports of the real world.

I was working in Boston on newbery street last June. It was packed. The biggest worry I heard from retailers was that one store front wasto be converted into condos and maybe more would follow. I remember having lunch at one of the sidewalk cares with my clients and tried to explain what was coming they didn't believe me. They both lost their jobs and have not found full time work.

In new York, the first stores to close were related to housing(furniture and fixtures). Then came the restaurants and retail that I assume lost their line of credit. Then came the chains to close or cut outlets. But in the last couple of months some new places have opened and things stopped closing. Was it because credit started to flow? Mostly I see new restaurAnts. A new organic coffee places sells out of cookies everyday. Meanwhile, I keep my eye on the big empty space across from my office that used to hold barnes and noble. When it rents and what goes into the space will determine how I invest for the new cycle. So far it is empty. I heard landlords wanted $550 dollars a square foot around the area of the empty b an n. Now they want $150.

The town that I drive to in long island to catch the ferry to my beach house was wiped out in this depression. On the little mainstreet, a third of the stores closed. Not surprisingly, most were housing related ( realtors, furniture, etc.).

[metalman]

Re: Physiognomy of Economic Depression - Eric Janszen

I think anectdotal stuff is important at this stage and I'm surprisde that so few have chimed in with reports of the real world.

I was working in Boston on newbery street last June. It was packed. The biggest worry I heard from retailers was that one store front wasto be converted into condos and maybe more would follow. I remember having lunch at one of the sidewalk cares with my clients and tried to explain what was coming they didn't believe me. They both lost their jobs and have not found full time work.

In new York, the first stores to close were related to housing(furniture and fixtures). Then came the restaurants and retail that I assume lost their line of credit. Then came the chains to close or cut outlets. But in the last couple of months some new places have opened and things stopped closing. Was it because credit started to flow?

nah... recession wiped out the morons who can't manage a 3 mo. dip in cash flow.

Mostly I see new restaurAnts. A new organic coffee places sells out of cookies everyday. Meanwhile, I keep my eye on the big empty space across from my office that used to hold barnes and noble. When it rents and what goes into the space will determine how I invest for the new cycle. So far it is empty. I heard landlords wanted $550 dollars a square foot around the area of the empty b an n. Now they want $150.

now the rent's low enough they can make money selling cookies. lower still, dance club. lower still strip club. lower still... etc. etc.

[ThePythonicCow]

Re: Physiognomy of Economic Depression - Eric Janszen

lower still... etc. etc.

Thank-you, MM, for not decorating this post with your usual fine imagery ;).

[goadam1]

Re: Physiognomy of Economic Depression - Eric Janszen

nah... recession wiped out the morons who can't manage a 3 mo. dip in cash flow.


now the rent's low enough they can make money selling cookies. lower still, dance club. lower still strip club. lower still... etc. etc.

That was my point. What goes in the old spa es say a lot about the post crash economy. If they just stay closed, then either credit isn't working or landlords are holding out if a new balance is acheived, then what does that balance look like. I think a slowing of closing business says her is enough cash flow to maintain business.

[metalman]

Re: Physiognomy of Economic Depression - Eric Janszen

That was my point. What goes in the old spa es say a lot about the post crash economy. If they just stay closed, then either credit isn't working or landlords are holding out if a new balance is acheived, then what does that balance look like. I think a slowing of closing business says her is enough cash flow to maintain business.

my guess is it comes in waves... 1st the retailers with not enough cash to weather a few weak months... 2nd the better run retailers who run out of cash after 6 - 9 months. 3rd come the retailers who throw in the towel 'not worth the trouble' after a year of off business.

[flintlock]

Re: Physiognomy of Economic Depression - Eric Janszen

People in the "private" sector are working harder and harder simply because they are being taxed, directly through taxes and indirectly through inflation, more and more, to pay for a bigger and bigger freeloader class including:

public "servants"
people on welfare
people on medicare/medicaid
etc.

The time is coming when people working in the private sector are going to be considered the "suckers". Working longer hours for less pay while the freeloader class moves smoothly along working 35 hour weeks at a snail's pace. Those that still work. Meanwhile our retired citizens will continue to vote to collect benefits that total more than the average private sector worker makes.

I for one have decided not to play the rat race game anymore. I'm slowing down and working at the pace I want to work. If the customer can't handle that, then too bad. Most don't mind. I'd rather make do with less than kill myself working for that last dollar, half of which ends up paying for the freeloaders anyway.

[goadam1]

Re: Physiognomy of Economic Depression - Eric Janszen

my guess is it comes in waves... 1st the retailers with not enough cash to weather a few weak months... 2nd the better run retailers who run out of cash after 6 - 9 months. 3rd come the retailers who throw in the towel 'not worth the trouble' after a year of off business.

Fair enough. But there will be survivors even if the profit is lower. Smart and effecient businesses that supply what people need will exist. What they are and what they do:tbd. In my business, advertising, the pie is smaller but clever new businesses will grow.

The overarching issue of if here is enough productive economy to create escape debt velocity, I say no. So we see waves of inflation versus deflation. At some point it will all reset. Lois like ej called it spot on on the next downwave

[aaron]

Re: Physiognomy of Economic Depression - Eric Janszen

I for one have decided not to play the rat race game anymore. I'm slowing down and working at the pace I want to work. If the customer can't handle that, then too bad. Most don't mind. I'd rather make do with less than kill myself working for that last dollar, half of which ends up paying for the freeloaders anyway.

IMO you are not working for the free-loaders, you are working to improve the lives of millions of Chinese and Indians. You are also working to improve infrastructure and schools in Iraq. You are working to pull people out of caves in Afghanistan. You are working to feed huge families south of the border.

The only people's lives who have improved in the past 20 years are the 3rd world countries'. I am tired too. Hard work is not rewarded anymore. Even when I had my own business, most of my money was lost to FIRE & taxes. I'd love a 4 day work week now. It is not like I'd miss a day's salary.

On the other hand, I am getting the itch again to strike out on my own. This time will be different! No more "investing" in anything FIRE. Maybe I will have something to show for my efforts. Perhaps this is the difference between the communism of USSR and the communism of USA. Here you still have a chance for success, albeit out of the reach of most people.