Posted on 09/29/2007 6:20:51 PM PDT by shrinkermd
The severe housing slump is already beginning to hit consumer spending. The International Shopping Center Chain Store Index has now declined more than 1% for two straight weeks for the first time since December 2004, and has broken down to its lowest level of the year as a result of slower job growth, a diminishing wealth effect, record debt burdens, little savings cushion and high energy prices. The 2006 peak for MEW has been raised to almost $1 trillion with the second quarter 2007 estimate still at a relatively high $500 million. ISI states that that this means the coming decline in MEW will be greater than previously estimated, increasing the coming hit to consumer spending.
Furthermore, the developing economic weakness is not restricted to housing and consumer spending. Core new orders for durable goods fell 0.7% in August and are down 2% since year-end, indicating future weakness in capital goods expenditures. The economy.com survey of business confidence has been falling sharply, also not a good omen for employment or capex. ISI Group also points out that the Conference Board leading indicators have been unchanged for 21 months. That has proven to be a recessionary signal in the past.
In our view, therefore, the chance of recession is high and will not be stopped by the current Fed rate cut or those to come. History indicates that once recessionary forces take hold they play out despite any moves by the central bank. In addition, since the stock market has not discounted a recession the downside risks are high. The last eight recessions were associated with an average market decline of 30%. In comparison the S&P 500 at its low a few weeks ago was only about 10% below its peak.
(Excerpt) Read more at comstockfunds.com ...
I know, buy gold and their newsletter and everything will be okay.
One of the things they don’t mention is the price of oil. If signs were truly recessionary, oil prices would be in free fall despite a weak dollar.
Has the business cycle been repealed? No. But these people cry wolf so many damn times, I don’t listen any more. The market, according to Liz Rappaport, was supposed to collapse after labor day.
"If recession should threaten serious consequences for business (as is not indicated at present) there is little doubt that the Federal Reserve System would take steps to ease the money market and so check the movement."
---Harvard Economic Society, October 19, 1929
Japan dropped interest rates to ZERO, and even that couldn't stop their deflation.
But..., but..., but..., nobody wants to hear that there is no Santa Claus, Easter Bunny, Tooth Fairy, etc...
After all..., " It Is Different This Time!"
I don’t think you’ll see the price of oil collapse for two reasons:
First, the speculators have a premium built into the crude futures market most of the time now, based on Iran’s actions.
Second, China and India are gobbling up as much oil as they can lay their hands on, so worldwide demand remains pretty firm.
Lastly, WRT to a US recession causing oil prices to go down: this is no longer the case. As a percentage of the US economy, oil expenditures aren’t what they were 20 to 30 years ago. Just as high oil prices aren’t as much an impediment to economic growth, you won’t see as big a drop in oil prices if we go into recession. The level of correlation and coupling we used to see in the American economy to oil isn’t there any more.
This past spring when Greenspan started shooting off his mouth, it was only a 30% chance of recession.
You can bank on a serious recession. You have to have your head buried pretty deep not to be able to see this one comming.
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