The Economy Continues To Send A Ton Of Bearish Signals

TBI - Comstock Partners ^ | 5-18-2013 | Comstock Partners

[blam]

The Economy Continues To Send A Ton Of Bearish Signals

Comstock Partners
May 18, 2013, 5:59 AM

Flickr / ucumari

Comstock Partners is a New York-based hedge fund

It has long been our underlying thesis that the huge amount of household debt accumulated during the housing boom would inhibit consumer spending and economic growth for some time to come, and this is what has been happening over the last few years. The errors recently found in the famous Rogoff-Reinhart (RR) book do not change this view.

Simply put, household debt averaged 77% of disposable personal income (DPI) over the 61-year period since 1952. It crossed over the average line in 1985 and took a sharp upward turn in 2000, eventually peaking at 130% of DPI in 2007. Since that time, consumers have reduced their debt to a level that is now 105% of DPI, still significantly higher than in the past. The result has been a significant slowdown and tepid recovery in consumer spending growth, a process that is far from finished.

The role of household savings is a key element in analyzing both debt and spending. For 41 years between 1951 and 1992 household savings rates as a percent of disposable income were consistently between 7% and 11%. However, as income growth started to slow down, consumers increasingly maintained their old spending habits by going into more debt and reducing their savings rate. This reached an extreme during the prior decade, when the savings rate stayed below 2% from 2005 through 2007,

(snip)

[bert]

Is the market rising because of technical numbers, fundamentals, or giddyness at the perception of the gridlock resulting from the lame duck presidency

[blam]

The Past Two Weeks Were A Preview Of The 'Horror Movie' Coming To The Bond Market This Summer

[mountainlion]

With the FED pumping billions to prop up the economy and the stock market I plan to stay away form that bubble!

[headstamp 2]

This thing has bubble written all over it.

[Mr. Jeeves]

The economy of large, politically well-connected multinationals continues to see solid growth.

To many politicians and journalists, that is "the economy."

[yadent]

Rising because of a seemingly infinite number of purchasing units (dollars) chasing a finite resource (stocks). This is one reason why many companies have increasing profits while having decreasing revenues.

[nascarnation]

I follow the collector car market a bit.
Prices there have recently ramped up and I suspect it’s another case of Baraqqi/Bernanke bucks chasing hard assets.

[Chances Are]

This market continues it’s inexorable rise because, in this economy, there’s really no place else for the money to go.

This market has, for quite some time, been divorced from economic reality.

The poster who mentioned “this has bubble written all over it” sees things clearly.

I am not invested in this market, and have not for quite some time.

Too dangerous.

Why? When the floor falls out from under this market, it’s going to be quick, sustained, and deep, and doubtless without much of a warning.

Why tempt fate?

CA....