The Great Depression has Arrived- Collapsing American Dreams

Best Financial Markets Analysis ArticleIt almost seems amusing that we are still discussing the “coming” depression because of the fact that it is already arrived and settling in. Really, what this entire new “era” is all about is watching our dreams deteriorate right before our eyes.

Want to hear what the real world is like today? Country star John Rich dramatizes this well in his new song, “They're Shutting Detroit Down.”

John Rich – “They're out there losing millions and it's up to me and you to come running to the rescue. Well pardon me if I don't shed a tear/they're selling make believe and we don't buy that here/cause in the real world they're shutting Detroit down, while the boss man takes his bonus pay and jets on out of town/DC's paying out the bankers as the farmers auction ground/while they're living it up on Wall Street in that New York City town, here in the real world they're shutting Detroit down.”

My favorite line is – “the boss man takes his bonus pay and jets on out of town.”

Wow! All these collapsed dreams! All the thousands of baby boomers with calloused hands looking at 50% reduced portfolios. What's a mother to do? Well, there's always Wal-Mart. And McDonalds needs someone to keep their tables clean. And let's not forgot The Waffle House. An old trusted stand in. Work as a short order cook for 60 hours a week. The opportunities are endless for those with empty bank accounts.

It seems that the majority of us are just not destined to move forward. How many thousands of thousands of heads of households are looking at the devastation of their 401K portfolio?

For well over a year, people have been buying the dips and been getting killed for it. We’ve had a parade of Freepers saying “great buying opportunity” since at least Jan./Feb. 2008 when the markets were down 10%. The party line was “bear markets are about a 10% decline, so buy now!”

FWIW - before 2008 there was nothing but denial that we were in or approaching a bear market, so that is a different story.

So this “great time to buy” parade here has been going on all year. It is alot quieter now with the markets off 40% to 50% from their highs. A lot more people are starting to realize there is nothing typical about this bear market but that it is an effect of a generational credit bubble collapse.

At some point the recovery will be well under way and in hindsight we will be able to see who invested wisely and timely. It could well be that right now is a good time to buy stocks and they will be well up from today’s values. It certainly is better than when the markets were double their current value.

That said, since we are in a deep, long recession and possible depression, I wouldn’t be too quick to commit to buying most stocks with company forward earnings looking progressively weaker and more bleak.

I don’t mean to pick on you but I’ve been reading so many posts from Freepers saying what a “great time to buy” it is over the course of the past year, with my believing the weakness will continue as things continue to spiral downward, your post reminded me of so many that came before. I don’t hear from those people much, now that the market if off 40% to 50%.

Now may prove to be a good time to buy, but I don’t understand what market fundamentals you are looking at that you see “a bottom in site”. Are the banks healhty? No. Are the automakers healthy? No, they are on the verge of bankruptcy? Is retail healthy? No, shoppers are continuing to pull back. Has free-dealing credit been restored? No, many people with reasonable credit history still can’t get loans. Is unemployment falling? No, it is accelerating.

Why do you think “the bottom is in site”?

We didn’t have a massive credit bubble collapsing in the 80s. This is completely different and is spiraling out of control. We also had far less global competition in the 80s and that competition is just going to get more intense.

We are in a severe liquidity crisis and a massive credit bubble is collapsing, everyone is deleveraging (selling off assets destroying debt, not buying and expanding).

This is nothing like the 80s.

Sure we’ll get out of this. We got out of the Great Depression. I think a lot of people are underestimating what it is going to take to get out of this and how long and how deep the suffering will be in the meantime. This time, in a couple of years things will not be on their way up. By the end of Obama’s administrtion, the economy will be as bad or worse than it is today.

I too hate the liberals and their media shills, so it is easy for me to suspect them. That is natural for us based on their past behavior. That said, I’m not so sure the recession is being intentionally over-hyped.

For starters, “if it bleeds, it leads” so bad news is always newsworthy. Well, we have had months of bad news, so that gets a lot of play. I don’t see “intentionally” there, so much as I see “crap, unemployment is WAY up more than people said it would be. Banks are folding faster than ever. Business are folding up. The markets are tanking. These declines are historic in speed in magnitude. Hey Joe, should we report these historic problems or just leave them off the front page?”

That’s how I see it. I see an economy with genuine problems we haven’t seen or experienced since before WWII, so I have no problem with seeing this reported. I don’t like the way the liberal media spins it to try to help the liberal politicians, but that is the way it is. As for over-hyping the recession, when housing falls faster than it did in the great depression, when you lose your entire investment banking sector in a month’s time, when entire nations like Iceland go insolvent (just to name 3 examples), I’m not sure reporting this stuff on the news is over-hyping it.

As you pointed out, there are some stock prices that appear to be fantastic bargains out there.

Bank of America at $3 a share? I should mortgage the house and buy every share I can afford, right? Well, maybe and maybe not. I’m 50 years old. What will the model be for Bank of America in the next few decades? What if we do get a full blown depression or Japan’s lost 2 decades. There may not be economic activity to justify locking up my money in Bank of America at $3 a share for 2 decades to see some return. What if they become bankrupt and liquidate? What if they become nationalized and their profit re-directed to the government?

You mention FORD but I can see FORD going bankrupt never to return. I don’t hope for that outcome, but the UAW could force that issue. There are plenty of car companies in the world and the Chinese want in as well with their relatively cheap labor. When this deep recession/mild depression is done, will FORD even have a chance to compete in the world auto market with our labor costs? I’m just not sure anymore. Buying FORD stock today strikes me as an educated gambling rather than an investing.

I just can’t picture the world going forward. I’m not saying the US economy will never recover. I’m certain it will.

As long as we have hard working people who have an incentive to build and create (meaning no socialism and reasonable tax rates), our freedom and creativity and optimism and go-getter people will thrive and keep our economy strong. WE WILL REBOUND. I just don’t know what that rebound will look like. Which US industries today are the buggy-whip makers? I just don’t know. I don’t know what the future banking sector will look like or the future auto industry. I just don’t know.

So yes, there are stocks that look like bargains today, but if we get the depression I’m expecting, than which stocks will be the Pets.com of the future? I just don’t know?

Good luck as you have much more guts than me. No guts, no glory, I guess... I’m going to be looking for things to shake out before I get back into the markets. To me, all stocks look like speculation at this point. I don’t have a good compass in this climate. (Again, I am talking buy-and-hold only as that is what I do and what I believe the vast bulk of investors do).

That works for me. I’m not psychic. We play our expectations and the best guesser is best prepared.

I might be stuck in a pessimistic mode. The most bearish analysts have been right for 2 years now (more actually) and I will probably over-correct and have to see some actual sign of recovery before I can get out of this bearish mode.

I can only hope I don’t do that as once you see a change, it is too late to take advantage of it. That said, I may just be stuck in Bear mode. I don’t know. I delude myself into thinking I’m reading the tea leaves correctly, but who knows.

Good luck. I hope whatever happens that you come out of it OK.

Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.