Thursday, June 11, 2009

Here Be There Dragons


It can't go on forever, and it won't. What will shock America into action is the prospect of fiscal collapse, which will grow more vivid each year. In 2008 federal borrowing accounted for 41% of GDP, about the postwar average. By 2019 the burden will double to 82% by the CBO's reckoning, reaching $17.3 trillion, nearly triple last year's level. By that point $1 of every six the U.S. spends will go to interest, compared with one in 12 last year. The U.S. trajectory points to the area that medieval maps labeled "Here Lie Dragons."

Read the rest at CNN/Fortune.

Ahhh... there be that pesky dragon:

29 comments:

Northern Renter said...

First off, Dawg, you should check your email.

Second, it will shock enough people... eventually. We got shocked in Canada when federal debt reached 75% of GDP and the New York Times sneered at our currency as the Northern Peso. The feds cuts spending and raised taxes. Glory be, it worked!

NR

Lou Minatti said...

Let me second Northern Renter. But by 2019 it won't matter because the average gross income will be $250,000 and a loaf of bread will cost $15.

Bakersfield houses will still cost on average $120k.

Aaron said...

haven't posted in a while. If you are in the market get out now. If you want a nice ETF try FAZ. 3x the RIFIN bear. We have hit the top and it's all downhill now to 825 on the S&P. then bounce maybe back to 900 before retesting 670 or so in October. mark this post! :)

been a fun ride in the markets!

Son of Brock Landers said...

Lou - I know this was before my time, but didnt Dan Akroyd do a skit as Jimmy Carter talking about the future of America where everyone is a millionaire and drove a million dollar car? This was back when SNL made fun of Democrats.

Mr. Outspoken said...

I have to admit I came back just to post about the market. I have to agree with Aaron. It's the high so far in '09, I don't know if it's the top, but I'm starting to get scared. I mean has there been any news to drive the market up? All I've heard is that job losses have slowed, but housing is still dropping with all signs that it is moving lower. Now oil is starting to head up, and state budgets are still clusterfucked. How is the market up 30%? The last few days it showed some sign of unwinding and then today Voom. huh?

wagga said...

Cut Spending And Raise Taxes = CSART.
Feel free to add that arrow to the Dawg Acronym Quiver. Shoot Arnie with it.

Arnie ran on a promise to abolish the motor vehicle tax (4-5B/yr.?) 5 years ago. Product sounds close to the budget current deficit.

Yes, I know the Dems would have spent it anyway...

Rob Dawg said...

I never thought we'd ever climb past 8200 so don't look to me for good advice. That said 8800 to 6800 could be an eyeblink. This bullshit about recovery is only eclipsed by the myth of $4T "on the sidelines." And "tech." What's up with them? People are buying iPods to beat inflation?

Spotted Toad said...

There'll be a new "golden age" of sorts in this country when the Boomers are out of the workforce.

You know, when people who aren't idealistic, hypocritical fools are running the show.

Lou Minatti said...

Funny how no one here believes the rally is legit. I think the rally is absurd. I look at oil and the S&P and unemployment and CRE and shake my head, but each day for the past 3 months I am proven wrong.

I guess that we're all idiots who don't get it. If you don't want to admit that you're an idiot, cool. I admit that I am an idiot for being too bearish.

Likkered Up said...

Lol, Casey's new scam is the same as the old scam. Connectrealty.com is exactly like everything he's been involved with in the past. It's got to be like honey to him. All the buzzwords are there: team building, passive income, blogs, tweets blah blah blah.

Pleather Murse said...
This comment has been removed by the author.
Pleather Murse said...

The market is up, that's as "legit" a rally as a rally can be. I'm pissed that I missed out on it while waiting for it to show itself as something it's not. It's in such a tight range now there aren't many bounces to play right now. Consolidation towards something.

w said...

Spotted Toad, except that as the boomers retire they are going to expect us to take their jobs but hand over the pay as taxes to fund their retirements.

Aaron said...

check out this site for technicals on the market and why we have topped or are damn near close.

http://danericselliottwaves.blogspot.com/

it is calling for 990 as a top. I believe that is wrong and the fact that we have tried to break through 660 on the RIFIN 6 times and failed in the last few days means that the financials cannot overcome that barrier. look at the charts for JPM, GS, MS, C, AXP...they all look tired. BAC is the exception and that is b/c Cramer is screaming to the sheep to buy it and of course his sheeples buy it. it was up 28 cents after hours last night b/c of that idiot.

Also, yesterday afternoon something interesting happened. starting at 3:29 until 3:32 someone BIG got out of the market. the indices tanked 60 points in the blink of an eye. massive selling across the board so someone pulled a lot of chips off the table in a hurry. My estimate is that it was 900 million to 1.3 billion. Can't tie it down anymore as it's just about impossible to be more exact without access to the data that the bigwigs have access to. I guarantee they know who did it. If you noticed we have been teetering up at 930-950 on the S&P for all of June. I think the big guys have been positioning themselves for the ride down.

Mr. S said...

Aaron,

Average volume since March has dried up and now this 2 week consolidation in the 940-950 band.

Personally, I think that 990 might be just about right for a blow-off top. Enough so that I've got a small exposure to July 98 calls and August 89 puts. My guess is a blow-off top and retrenchment. How far that retrace goes, I'm not sure.

Also, why is SPY showing up as "Hard to borrow"? Seriously? If I remember correctly, it's the most heavily traded issue on the exhcange.

Captain Nemo said...

Re: High-tech recovery

There have been reports that the major semiconductor foundries' business will soon be capacity limited and customers will be put on allocation.

Rob Dawg said...

We don't talk markets very often but when we do I am always blown away by the quality of comments.

Bill in NC said...

Stock markets often rally in the midst a rapidly depreciating currency.

I'm sure we'll set new stock market highs as oil jumps above $150 and gold approaches $2,000/troy ounce.

Because people will be looking for anywhere to keep their money rather than directly in U.S. dollars.

Rob Dawg said...

Bill,
I think the rest of us think that is "the other shoe."

Serious, full spectrum inflation is surely in the cards but only after this oil bubble and bear market stock rise capitulate. Oil demand is falling 3-4% yoy which is huge. The entire supply chain is drowning in oil. Stocks are about to see tech bubble levels of P/E reporting. The banks, Reits and HBs are looking at doubles, triples and more in stock prices from the lows. It would be hubris to not expect a retest at least.

Let's pop these latest bubbles and then ride the inflation pony.

Mr. S said...

Cpt. Nemo -

I've seen and read about the capex purchases from TSMC for example. However, there is still considerable capacity in the US fabs. Some of the IDM fabs in the US had done limited "foundry" work in addition to their own production. Considering the spare capacity that still exists there - from what I hear utilization starting to get to perhaps 70%, which is up a lot - you might actually see some of the US IDMs making chips to get their utilization numbers up.

Russell said...

What would the DOW be at if the exact same stocks were in the index as just 7 years ago?

It wouldn't be 8000, that's for sure.

Andrew said...

Oil speculators... can't live with 'em, can't summarily execute them. :-p

H Simpson said...

Nemo

the foundries maxing capacity is an aberation.
companies have been holding off on technology refreshes for several years, but are running out of power and storage.

With Vista finally dead and the more stable NT back as the new windoze, the big boys are placing laptop/desktop orders to swap out some of their older equipment.

I would not extend that thinking to all capital projects.

h.

Aelfscine said...

As much as I love Dawg, I have to wonder if maybe the sky is NOT always falling.

Monica said...

How do you know Casey is marketing connectreality.com? What exactly is he doing? I didn't find out about that one yet.

Rob Dawg said...

Interesting perspective on what goes on here. We are experiencing massive upheavals and trying to think them through. Once we get through this part I think we may experience some truly wondrous times. We just have to get through this part first.

Captain Nemo said...

US cities may have to be bulldozed in order to survive

Monica said...

Casey has a pictured titled "After Connect Realty Overview at Sacramento Association of Realtors". So if I paid more attention, I would have realized that the comment about his "latest scam" was about that. But is there more information available? What exactly is Casey doing about that Connect Realty? Is he really running a scam or business related to that?

tj and the bear said...

For any that follow EW counts, IMHO we're definitely nearing the highs of wave 4; wave 5 down will be absolutely brutal and take us well below 666.

The only question, as always, is exactly when that occurs. We could easily bounce around in the 900's for the rest of the summer.

That said, the fundamentals continue to worsen. The total hours worked give lie to any employment stabilization, and the rising 10T rates are stomping on any green shoots in housing. Just wait until the higher gas prices and the automaker bankruptcies hit home.

Yeah, much more fun ahead.