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Open Thread - Economy Booming?

Posted on January 5, 2006
Filed Under Uncategorized |

Treasury Secretary John Snow issued a wake-up call to the financial press on Thursday. In a speech prepared for delivery to the Chamber of Commerce, Snow said the U.S. economy is on “solid footing.” Snow said he agreed with a suggestion in an op-ed by columnist Robert Samuelson that good economic news is bad news for the news business. “The press may find this economy of ours to be downright boring…but I don’t find it boring,” Snow said. “Rather it is a reason for optimism,” he said.

Are you feeling optimistic? Is the economy booming? How are real folks doing out there? Let us hear it!!!

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31 Comments so far
  1. Jimbo January 5, 2006 7:04 pm

    Its really funny that you should post this now, because I was just thinking the same thing. Not that the economy is exactly booming, but…

    Here is the thing. I’m not doing badly. I’ve got a job that pays decently, and it is not a terrible job. My debts are down, and I’m actually able to save. My 401k has been doing better over the last few years, but still not back to where it was.

    At the same time, I feel like there is a sort of malaise that has settled in like fog, not just on me, but over my friends as well. We’re all working, but somehow, there is no reward to the work. It is just pushing paper, going through the motions. Something is missing. I don’t own a home, and I doubt that I will be able to any time soon. I don’t see saving a tremendous amout for retirement. I guess I’m just getting by, or just above getting by.

    The excitement of the 90’s is gone. Maybe I’ve gotten older, but it seems like those years were so much more optimistic. I worked for a dot.com and there were all the fun, the parties - I worked harder then than I do now, don’t get me wrong - but there seemed to be so much optimism that now seems to be missing. Now there seems to be so much to worry about - so much low level anxiety - terrorists, bird flu, economic collapse…I dunno. Even though I have a job, it doesn’t seem like there is enough for me to do. I’d kind of like to be layed off, but then I’d have to worry about finding a new job.

    Sorry, I guess I’m rambling, but I’d call this the “Blah Economy.”

    Jimbo

  2. Rabach January 5, 2006 7:23 pm

    Hmmm…

    That is a good question. One thing to remember is a lot of ‘positive’ news reports on the economy are payed for by the US government.

    Though I have done fairly well for myself in the last year or so. I also understand that a large percentage of this expendable income that America has is coming for the housing boom. What happens when the ‘bubble’ pops? Even if the prices only go down a small percentage there is still the whole concept that they are not making, as in my area of the country, $20K or more per year off their home. What about the people who have interest-only payments intending to sell their home at a large profit? What about the people with the flexible interest rate?

    Well if you want here is some advice from an average ‘Joe’ who spends a lot of time researching business related news. Jump or stay on the rollercoaster, enjoy the extra $ but make sure to save some because it is surely going to rain. I just see the downfall of the American economy around the corner. Perhaps this is the party before the price is paid.

    Well we will all see sooner or later. Who knows? Maybe the economy will start booming like it did in the 90’s again?

    Rabach

  3. Brook January 5, 2006 9:01 pm

    I’m personally not optimistic, but that goes contrary to everything I’m experiencing. Income is up, professionally managed accounts are up and the manufacuring company where I work is doing great. The homes in my area stay on the market longer, but are still selling. Everyone I talk to about home prices say they plan on staying where they are so the prices don’t really matter). The concerns I had for energy bills have not been realized. Something may happen this year, but there’s nothing I can do to change it so I might as well relax and enjoy. Good luck to everyone else and have a good new year.

  4. Rich January 5, 2006 9:56 pm

    Tsunami’s, floods, quakes, eruptions, scams, lies, oil prices, Chinese goods, Wal-Mart, flat markets, manipulation, fear, apathy, house prices, interest rates and whacky weather are all combining to paralyze us all. I think we are, on some level, so over stimulated (maybe on a cosmic level?) that our glands are no longer able to cope, so all of the excitement has gone and we’re just waiting for the next big (bigger) thing — whether it’s a massive terrorist attack, financial crash, earth change or invention that saves the world!? I dunno!

    “Stuff” that has happened is constantly breaking records, and we are getting more and more apathetic about it.

    Perhaps that means its time for the big financial crash, but I get the feeling this thing can muddle along for quite a while longer.

    One other observation I would make is that in sport and other human endeavors humanity appears to be breaking more and more world records, life in general on every level, positive and negative, is getting more extreme.

    I guess that is what I’m saying, everything is going extreme. Therefore it’s only a matter of time before we get extremely bad economic news.

  5. James January 5, 2006 10:05 pm

    Rich -

    Things do seem to be getting extreme, in both directions, as you mention. So why is your conclusion that we’ll get extremely bad news? Wouldn’t it be just as likely that we get extremely good news?

  6. Gomer January 6, 2006 5:31 am

    I’m sure of one thing. We are lied to on a regular basis by our government that pumps up so many of these reports.
    But going back a long way, “Every” administration is only the result of strings being pulled in the shadows.
    Central Bankers have the entire globe in a theatre of well thought out scenes to push for wealth and more wealth and ultimately something totally out of reasoning to the everyday american. From what seems like a credible source, I learn the “M3″ publication will no longer be public, which says there has to be a fire somewhere that they don’t want us to know about. It’s been a slow systematic process for hundreds of years that’s unseen in our everyday lifes.
    This possible Iran attack that so many believe will happen before the end of March, “will” without any doubt change the course dramatically. If this attack happens, it’s about “MONEY” in someway, shape or form.
    If Iran actually were able to pull off the “Oil Bource” then that would suck the American economy down the tube.
    The general public over the past hundreds of years have been “CONDITIONED” to beleive what the Media reports and to believe the administration would lie every now and then but “never” do corrupt acts that are ultimately for the incredible greed of the elite shadow that is never seen by anyone who doesn’t take time to “dig” and find evidence of it’s existence.
    I’m not a pesimist or a gloom and doomer.
    “BUT I AM AWARE”
    You literally have to dig deep on a daily basis to find the positive of what happening here and around the world.
    Theres and ultimate plan alright, but the elite shadow that believe they are totally in control are only a slow and temporary of a greater plan.
    “I Challenge Anyone To Dig” and tell me there is nothing going on behind and above our government that is not easily visible to us.

    It’s easy to throw out the negatives “GM,Ford and so many other american icons that are as much worthless to growth as there being torn apart by the slow grinding process of the very ones you should be “digging” for evidence of.

    Life is awesome, but it’s not controlled by the obvious things throw in our faces by sugar coated reports that are to keep us blind until the grinding process can take the course chosen by this behind the scenes power.

    Take Care

    But Don’t Stay Blind

    “DIG”

  7. King George January 6, 2006 6:49 am

    Of course times are good “today” because of this fact
    lifted from the great Mogambo’s article of 12.28.05:

    But, getting back to the subject, the total notional size of existing
    financial instruments is six times the size of all the actual buying and
    selling of goods and service in the whole freaking world? Yow yow yow! But
    even THAT is insignificant, as he argues, “Again, the focus is wrongly on
    the relatively puny goods-and-services economy. But it is the $250
    trillion financial economy that we should be concerned about, since it
    rests entirely on collateral that has been artificially inflated via
    credit stimulus.”

    The U.S. is on a spending binge unparalled in our
    history. The piper will be paid and it won’t be
    a pretty sight.

  8. Rich January 6, 2006 7:04 am

    Hey James.

    Michael posted an article a while back about the DOW at 40,000 or 400 (something like that) and I agree, it could go either way. I half suspect that the housing bubble is deflating and that the stock market will inflate again, this time even more than the past, in order to provide consumers with the financial lift necessary to sustain consumption - so vital to the US economy and the survival of the USD.

    So, in that case there would be an extreme of positive and negative. House prices going down could wipe out millions of people if they can’t benefit from a rising stock market (and with tougher bankruptcy laws it won’t be pretty), but rising stocks would obviously benefit millions too. Just look for extremes!

    In the long haul a massive shake up of the world is absolutely necessary and inevitable. Whether it is a positive thing depends on perspective. Asking a survivor of the latest tsunami if it was a positive thing, when all of their relatives died in it, is one thing. But looking back 1 year later and seeing that the event caused the west to start sitting up and taking more notice of global events is a good thing.

    Change is inevitable, as we all know. But we appear to be in a time of not just inevitable change, but accelerated change on all levels - which will be good and bad. The realization that this is going on so far, with humanity, has been subconscious (in my opinion) and that has caused a form of mild paralysis - - because it is simply too much to think about all at once. Most people live in a stable world in their minds, and most of us were raised to believe we live on a stable mudball that evolves over billions of years, etc.

    Well some of us are realizing that ain’t the case around about now. When the economy finally tips over, which is inevitable in my opinion, it will be ugly. But it could get much better first, somehow, don’t know how. I do know to expect the unexpected.

  9. The Duke January 6, 2006 7:58 am

    While we are not in a boom such as the 90’s (which was driven by telecom deregulation and Y2k spending), for some time we have been in a gradually growing economic environment. I’m booked solid through April by manufacturing organizations, so they’re cutting loose some of the cash they’re holding, which should make up for any decrease in consumer spending.

    Basically you have to stop listening to the mainstream media, who will do anything they can to convince us that things are bad as long as Bush is in office. Pay attention to your own situation … as several commenters have indicated, they’re doing fine.

  10. James January 6, 2006 8:20 am

    I agree with what Samuelson says - good news of any kind (not just in business) is bad for the news business. Just turn on the TV news and you’re overwhelmed with bad news - killings seem to dominate. If the newspaper and TV news was full of happy stories, of people getting along with one another, of helping out, of new scientific discoveries that reversed bird flu and global warming…geez, can you imagine how bored people would be?

    Somehow people have come to think it is hip to worry about what could go wrong. To see the bright side of things or the positive things is considered naive - 1950’s - Leave it to Beaver.

    Dr. Weil recommends doing a “news fast” - where you don’t read the news or watch the TV news. Why? Because it is all bad IN SPITE OF THE FACT THAT WHAT GOES ON IN PEOPLE’S LIVES IS MOSTLY GOOD! So instead of enjoying the goodness of their lives, people get depressed about stuff that isn’t really real. Is bird flu “real”? Global warming? The collapse of the dollar and the global economy? Well, if it comes to visit you, then you can act. In the mean time, worrying about it (without doing anything about it) is a waste of time.

    I agree with this site - how it says “Turn off the TV and Think.” It should say “Turn off the TV and think about how good your life is, because chances are it is much better than the news, which is just pollution for the mind and soul.

  11. Mark A January 6, 2006 9:26 am

    Three years ago I thought we would see the whole thing (economy) come down like a deck of cards. Corporate crime,natural disasters, terrorism, national debt, emerging market in China,Fanny Mae and Freddy Mack all seemed to be part of a convergence. I guess I was wrong, somehow, someway the manipulators have managed to keep playing the game. I wonder did anyone from government go to jail in the 1929 crash? I still think it will be foriegn interests who will dump the dollar that will create the crash just like Thailand had. I’m long on precious metals since 1999.
    Happy new year.

  12. Dave January 6, 2006 9:58 am

    If the economy was so damned good why are we making so much on comodities. Obviously the demand is outstripping supply and the trends show more on the horizon, peak oil production alone would be bad enough but similar resource shortages are starting to show up in all farm commodities and water supply. The only thing there isnt a shortage of is paper and human delusion and mouths to feed. All the things that are becomming more available are stuff we dont really need, digital cameras ipods and production of consumer goods is reaching oversupply leading to price deflation even as the raw materials soar, where is the profit margin going to come from.

    The world has been and continues to lose faith in the dollar and for good reason.

    Its all going great.

  13. Administrator January 6, 2006 10:21 am

    Dear Friends,

    The thoughtful posts here have reminded me of a passage in a book I am reading called “We Can Change the World” by David Stratman, which is available on his website, here: http://www.newdemocracyworld.org/bookad.htm

    He talks about the Situationists in France, who in 1957 set out to reintroduce the idea of revolution to modern society. Some of what the Situationists believed echo the comments that have been posted to this blog, and that I think a lot of people feel but don’t know how to express:

    “The Situationists believed that ‘everyday life is the measure of all things.’ They maintained that, ‘In societies where modern conditions of production prevail, all of life presents itself as an immense accumulation of ’spectacles.’ The spectacle is the organization of appearances by the ruling class, to make people believe that their lives are humanly satisfying — lives which are in fact impoverished and unfree, where their jobs have been dehumanized and their only activity consists in the passive consumption of commodities which seem endlessly produced by economic forces with the appearance of natural laws. The spectacle replaces religion in its function of concealing man from himself. ‘Docility…results from a mass of minor hypnoses: news, culture…advertising, mechanisms of conditioning and suggestion ready to serve any order…’

    “They believed that modern capitalist society tends to atomize people into isolated consumers, in which the abundace of consumer goods is merely the flip side of alienation in production. Society is characterized by a new kind of poverty. People do not lack material goods, they lack human fulfillment People are trapped in repetitive, isolated, specialized activities in which they are “as deprived as possible of communication and self-realization”

    pp. 105-106

    What Jimbo said in post #1 immediately brought this to mind. I believe that people feel a lack of true meaning in their lives but don’t know what to do about it. Maybe this is why there is such a fascination with bad news. In that way, people can look outside themselves and feel the sorrow and anger that they are afraid to acknowledge inside themselves.

    Perhaps we are all asking the wrong questions. If everyday life is the measure of all things, then what does it matter if the economy booms or busts, if either way everyday life is miserable?

    Michael

  14. King George January 6, 2006 11:13 am

    No doubt Mr. Brooks would say things are going just jim dandy. Cut from today’s “Daily Reckoning”.

    The
    International Herald Tribune ratted out David Brooks, of DHB Industries,
    maker of bulletproof vests for the military. The vests are worn by the
    poor grunts sent on Mr. Bush’s fool’s errand. Mr. Brooks wears silk. The
    IHT describes a private party for the vest-maker’s daughter, held at the
    Rainbow Room at Rockefeller Center:

    “The bash was headlined by a list of performers that could easily have
    carried the Super Bowl halftime extravaganza. The superstar rapper 50 Cent
    and the front men from the rock group Aerosmith were among the night’s
    many performers. According to the The Daily News in New York, the party
    [cost] $10 million…”

    Brooks can afford it. Prior to the Bush administration’s war to make the
    world safe for democracy, the man made $525,000 a year. In 2004, thanks to
    fat government contracts, he made $256 million, in compensation and stock
    sales.

  15. jakbqwik January 6, 2006 11:32 am

    test

  16. jakbqwik January 6, 2006 11:43 am

    I read bullnotbull, yelnick, safehaven…man, you name it. Sometimes I wonder if I’m just a pessimist by nature and these sites feed me what I want to read. I’m very happily married, three great kids, self-employed (finally) and making good money, but I have this “think” in the back of my head telling me we’re burning the furniture right now to stay warm…you know, eating the seed-corn instead of planting a crop for next year.

    Every action causes an equal and opposite reaction (even though we can’t always see it) and everything has a price, whether that price be financial or otherwise…these two threads of thought have me thinking we’re on the brink of total, cataclysmic, worldwide economic collapse…I’m talking massive depression here.

    My brother has averaged 5% per MONTH trading stocks over the past year or so. I’m 100% in short-term T-Bills & CD’s because when recession, and later, depression, sets in, my greenbacks will be worth more than they are right now. Gold will drop to $200/ounce, the DOW to 3,000…I will then buy up as much gold and land as I can afford becasue the FED will likely hyperinflate us out of the depression. As far as a timeframe…I don’t know. I’ll just keep working hard, paying off ALL debt, saving as much money as I can, and reading the tea-leaves…I’ll bide my time and keep earning as much per year in interest as some guys are making every month in the stock markets, but my time will come…wait and see.

    I say the DOW crashes by at least 40% before the end of August this year…and it steadily drops from there…massive unemployment, prices dropping on everything (deflation)…we’ll make it though…money ain’t everything, not even close.

  17. bap309 January 6, 2006 11:47 am

    I think we are in a so-so economic cycle,however, the future does not look bright to me. I am concerned about the deficits, consumer spending peaking, housing market bubbles and a host of other issues including exportation of our entire manufacturing business to China and other countries. I also think that the high price of gas has to be a drag on future growth. When you factor in the new head of the FED who thinks he can keep us out of deflation by pouring more and more money into the system the future certainly looks bleak to me.
    I am 57 years old and have no intention of retiring anytime soon because I cannot afford to. If inflation reappears on the horizon there are a great many more baby boomers who will be in the same boat as I am. What then.

  18. Peter Jones January 6, 2006 1:01 pm

    I say we’re probably near a market top, when Nystrom capitulates to Bull! I found it interesting that your two main data points - Gold and Dollar proces, were in huge reversals already today. Gold is on a scary ride up, yet there is the wall of worry. Stocks do not show the wall of worry, but instead complacency, and none of the volatility you get in a true bull market. And do investors really believe that stocks are represening the rates of earnings growth their P/E and valuations suggest? It continues on momentum and professional investor buying.

    Whenever gold, bonds, and stocks are rallying, it would be foolish to bet on stocks “in the long run,” since the other two markets are long by nature. With that said, stocks are great in the short run if you have the balls. I don’t, I’m happy keeping debt free and doing nicely by gold funds, GLD, and ING Direct savings.

    WIth an inverted yield curve, weak employment (and lots of January layoffs going on with my clients right now), I am also hunkering down for a weak year. I’d like to be surprised, but I watch what bond people say for a glimpse of the future.

  19. John M. January 6, 2006 1:25 pm

    Maybe ‘King Kong’ is a symbol of the derivatives market ahead?

  20. Kelleher January 6, 2006 2:38 pm

    The U.S. economy is bipolar, and yes one side is doing quite well. The other side (much larger in terms of headcount) is just scraping by using easy credit to purchase daily needs. The Federal Reserve is commited to “price stability” and it looks like they extend goal that to include prices of equities. Their frequent interventions are now the subject of jokes. From what I observe, it seems government inflation numbers are fudged lower, and the productivity numbers are fudged higher to keep up the illusion that our GDP growth is stable at around 3%.

    How long can the central bankers play this game? Who knows? China, and Korea are potential economic train wrecks that could happen any time. Mechanisms are in place to add almost infinite liquidity to the markets and banks, so I’d bet on the tried and true fix of inflating away troublesome debts. Those who see deflation down the road should keep in mind Dr. Bernanke’s comments that it won’t happen on his watch.

  21. Nick Hodgson January 6, 2006 4:53 pm

    The deficit is getting bigger.
    the national debts are getting bigger.
    the housing market is receding.
    interest rates are rising.
    M3 is going to be secret from March onwards.
    Gas is still a wallop on the average mans wallet.
    inflation is here and growing .
    But yes we still have a cushion and money can still be printed.
    And as long as the chinese support our treasuries we can smile at thier faith in our greenish paper.
    But they have announced they are looking elsewhere to put their hard worked for gains.
    The Iranians are refusing dollars in march for thier OIL
    huge things are happeing to undermine the dollar.
    Interest rates will go up and up to protect the mighty dollar from collapsing .. and with it a housing crash and unemployment..
    India has just is signingonto a ifve nation gold mutual fund ETF
    http://economictimes.indiatimes.com/articleshow/1359239.cms
    Gold the barbaric relic that has been so rudely ridiculed is becoming a currency of choice.or at least an asset instead of currency….
    this all bodes ill for the dollar and our dollar based investements..
    please all one and all protect yourselves with a little gold and silver and a few equities in the same..
    But then again those who have read this far are already there…..
    last year was a very tough year .. i wrote that it would be on the catastrophe front.. on this website. I quoted an Indian mystic called Amma and people thought i was nuts..
    New Orleans and the tsuanmi along with the pakistan quake.
    to mention a few. Still we really havent got the end of it by a long yard…but i think the next catastrophe will be a slow unfurling of the dollar curtain .. America has simply printed tomany of them and the world is thinking about not letting us be the world currency. So that leaves a lot of unwanted dollars to dilute the rest.

    Have a wonderfull Year everyone…..Thanks Michael ..
    its great to have this incredable website back.. it is one of my most visited …

  22. Jason M January 6, 2006 5:51 pm

    Back in 1995 I was fresh out of Stanford. Guys I went to school with were busy creating search engines and building out the web infrastructure that we are using right now.

    I moved to Hollywood to pursue writing, and worked at a Studio making coffee and ordering lunch for the executives. But I had my trusty desktop mac, and I followed the markets. I found an online community called the Motley Fool and I invested in stocks and got in early on some pretty big moves.

    The Motley Fool has since become a kind of conglomerate. But in those days, it was pretty shocking how much candid information you could get. You could get out way ahead of things that the average broker didn’t know because of these pockets of honesty you could find. Little groups of people who weren’t doing anything more than trying to help each other out.

    Then the industry started to figure out how to hype stocks online and it all got ruined.

    But here I am… 10 years later.

    Things are starting to turn in the other direction. And, for the first time since the rise of the internet, we are in a commodities bull. The early stages, sure, but it’s there. And it’s just us contrarians with a feeling in our guts. And sure, we like the money that we know we can make from all this. But the most important thing is to be told you’re not crazy.

    And it’s funny how people from all kinds of disciplines come together here, like the sojourners in Spielberg’s “Close Encounters” all converging at that same desert mountain.

    Some go on feeling — a feeling that there is a reckoning ahead for the actions and policies of this country. Others are contrarians who’ve studied the charts and numbers. Still others are historians who understand that empires don’t last forever.

    The point is that this is one of those pockets of honesty. And cherish it, folks, because, when the whirlwind does start, there will be dust kicked up in your eyes and it will be hard to tell the truth seekers from the scoundrels.

    I’m no Chicken Little. I don’t see Armageddon. We’re replaying Nixon and Carter here, that’s all. Only problem is that, as a country, we are a fat, coddled, spineless bunch, so it’s going to FEEL a lot worse this time around.

    Until 2008, expect a weak dollar. That means higher gas prices, luxury goods, and higher interest rates. Gold up in the near term, of course. I expect $750 before 2007 is out. Wages will not track with inflation, but people will squeak by. Housing prices will stay about the same but the actual value will be cut 20-30 percent because the dollar is tanking. Panic re-fis will continue to create revenue as rates inch up to mid 6-7 range.

    After 2008, new administration will come in and get blindsided. Cuts will be made to the mortgage deduction allowances to try to balance the budget. 3-5 year ARMS will start to expire and housing market will crash 20-30 percent. That’s when deflation starts because of the debt vaccuum. Interest rates in the 10s. Lots of foreign investors buying U.S. property with cash at fire sale prices. Coasts affected much more than the middle of the country of course.

    Good news is nwe administration will finally get serious about retooling the auto industry and allowing mass production of fuel efficient cars. It will be politically easier at this point because Ford/GM conglomerate will already have declared bankruptcy. Bad news is that government will force auto workers into an agreement with minimal pension and health protection… But that’s life.

    That’s my best guess right now.

    Thanks, Michael for running this site. I’ll check out that Stratman book.

    And good luck to all.

    Jason

  23. ChemicalGal January 6, 2006 6:48 pm

    Yes, Michael, thank you for this sight, missed it. visited Depression 2 almost every day to see if it was up again yet. And checked in on Bull not Bull daily.
    Is the economy booming? Boy it looks like it, but it has an uneasy feel to it. Like it’s not real and could disappear at a moments notice.

    Average families in my lower middle income area are making it. Some are way overextended with credit. Some are on a cash only basis and cutting back on heating homes to 60 / 65 degrees to keep costs down. But that’s doable.

    What we are seeing on the street are homeless, unemployed people. They say unemployment is down, but where? Are people that were drawing unemployment running out of benefits and dropping off the charts?

    Some say if you want to work there are jobs. But you keep hearing about thousands of people being laid off. If they are laid off, they are unemployed and there weren’t that many thousands of jobs open, so how can unemployment be down? Nothing makes any sense.

    For me, I am planning for the worst, if it doesn’t happen, I’m in great shape. If it does, maybe I’ll survive and maybe I can help someone else survive too.

    Best to all of you, and thanks again Michael & Rich
    ChemicalGal

  24. Steve January 7, 2006 9:56 am

    It would appear that with GDP growing at an annual rate of 4.1% that the economy is humming along, skies are blue, birds are singing, etc. However, it is sometimes hard to rationalize what numbers are being reported with the actual dynamics one experiences in the process of living each day.

    Durable manufacturing, industrial output, domestic autos, and domestic and imported trucks are all down, year over year. Consumer income, consumer spending, personal consumption, and import autos are all up. GM and Ford have reported that each firm will shortly be surplussing around 30,000 workers. Industrial outsourcing and the hollowing-out of American industry continues apace.

    What tends to reconcile a declining manufacturing base with consumers spending their rear ends off is the parabolic rise in household debt. Not only is this stratospheric household debt level unsustainable over the long-term, but its unravelling is sure to cause major headaches and heartaches in this country as well as the global econony. Aggregate demand will not remain healthy in a mortgaged environment of a shuttered industrial base. Since consumer spending accounts for around 70% of the US GDP, a future collapse in aggregate demand will equate to a collapse in the economy.

    Currently, the index of leading indicators is rising. This rising, leading index forecasts that the coincident index will be rising, also, which supports the reported contention of a reasonably strong economy. However, the index of lagging indicators is now rising which suggests that the leading indicators rally is to be short-lived and suspect. We appear to be nearing, or at, a peak in the business cycle.

    Two factors suggest that the economy in 2006 will be less robust than in 2005. Using a Federal Reserve model which utilizes the spread between 30 year and 10 year treausry yields to forecast the rate of change for GDP one year in advance, this model currently indicates that GDP change for 2006 will be 2.0%, as compared to the present 4.1% — economic softening! Also, the treasury yield curve has inverted from 6 months to 5 years out, which indicates that Dr. Bond Market is looking for the next 5 years to experience less than stellar economic growth.

    For the US stock market, using forecast earnings for 2006 by Standard and Poors, we find forward earnings of $76.80 and a present SP500 index price of 1285. Comparing an earnings yield of 6.0% with the 10 year treasury yield of 4.37%, the level of forecast earnings suggests a fair value for the SP500 of 1765 — 37% higher than the index’s value on Friday! However, I don’t believe that the SP500 will experience such an advance. The inverted yield curve forecasts a decline in earnings which I expect the Standard and Poors analysts will account for as the year progresses.

    A weaker economy in 2006 will take down the stock market, reduce the demand for commodities and gold (which both appear to have gone parabolic), mitigate energy prices, bring down interest rates, reduce the demand for expensive housing, and dampen the rise in the dollar (global liquidity is decreasing which is bullish for the dollar).

    I feel that the best investment for 2006 will be in upgrading one’s job skills and employability quotient.

    Happy new year!

  25. Steven January 8, 2006 12:36 am

    I believe that this decade is basically a rerun of the 1980’s.
    The war on terror has replaced the cold war, a conservative tax cutting Republican administration is in power for 2 terms although it looks like at least one branch of Congress will go to the Democrats as in 1986. The economy is doing fairly well on a macro level, but debt continues to rise. Joe Gibbs and Bill Parcells are back coaching in the NFC east, oil is high but should fall drastically by this summer just like 20 years ago. The stock market should thus be able to rally smartly until oil puts in its V-bottom sometime at the beginning of next year, precipiting another decline in the dollar which triggers a massive crash in stocks later in 07 like it did in 1987, followed by an uptrend leading into the election year of 08 when a one term Republican will be elected president. This decade’s equivalent of the S&L debacle will be the demise of the government funded pension bailout system around the beginning of 09, etc, etc. Hopefully by the end of 09 the war on terror will be declared won as was the case with the Berlin Wall coming down signaling the end of the Cold war.

    Also regarding David Stratman’s book about the New Situationists-a fabulous organization exists that was founded on similar ideas.

    Go to http://www.zendik.org

    Read how there is an alternative to the competition among humans that is depriving the human race of its true humanity.

    Thanks.

  26. Michael Nystrom January 8, 2006 2:38 pm

    Dear Jason,

    Thank you so much for your comments. I cannot tell you how much they mean to me. I think you are completely right about the different perspectives that we have assembled here – everyone comes at the same problem from a different angle, and that is extremely valuable. The most important thing for all of us to remember is that we can all learn from the others here, provided we don’t dismiss others’ arguments outright simply because we don’t agree with them.

    It seems that this has become a real problem in American discourse – that in order to be “right” we must discredit and demolish the opponent to make him wrong. At least that is what we see on TV in politics, and on those terrible shouting match shows like “Crossfire.” Nothing is accomplished, nothing is learned because minds remain closed.

    I appreciate your views, that this is not the end of the world – there are a lot of Chicken Littles running around right now. The markets are imbalanced sure, and they need to readjust. That readjustment will be painful, but it will not be the end of the world. In fact there are a number of ways to profit from the inevitable fluctuations in the market. What I find interesting about this thread is that so many people seem to be doing okay, but they’re worried about the “others” who may not be. I wonder why that is.

  27. Michael Nystrom January 8, 2006 2:40 pm

    Hi ChemicalGal,

    Glad to have you back! I am sorry to have been away for so long, but my life went through a big transition, and Depression2 was part of that. It became increasingly difficult for me to deal with the implicit negativity of the concept that we were headed towards a second great depression, with no wiggle room in that idea, and it got me feeling very bleak. At the same time I got tangled up with some personal issues, explored a religious cult, went through a nasty divorce, and my father passed away, so keeping up Depression2 was not high on my priority list. In the end, the hosting contract lapsed, and most of the site was lost.

    I guess in a way it was like going through my own depression, too. The days were dark and Depression2 became kind of a symbol of that darkness. Things can get so bad in life, and you don’t know what it means, but when you come through it, it is a blessing. You see what it is that really matters, what is true, and you can find beauty in the smallest, seemingly most insignificant things that you never noticed before. At the same time, it gives you strength to know what you can take, and make it through.

    Yes, the second great depression is coming, but I think that all the worrying and fretting over it that many seem to like to indulge in is actually worse than what it will be when it actually arrives. There is always something to celebrate. The life that we lead is determined by what we focus on. I learned that first hand, and so I rejiggered my idea to encompass more, to be more inclusive of the positive side of the looming great depression.

    The Prophet on Love
    Kahlil Gibran

    Then it was said, Speak to us of Love.
    And the prophet raised his head and looked upon the people,
    and there fell a stillness upon them.
    And with a great voice he said:
    When love beckons to you, follow him,
    though his ways are hard and steep.
    And when his wings enfold you, yield to him,
    though the sword hidden among his pinions may wound you.
    And when he speaks to you, believe in him,
    though his voice may shatter your dreams as easily as the north wind lays waste the garden.
    For even as love crowns you, so shall he crucify you.
    Even as he is for your growth, so is he for your pruning.
    Even as he ascends to your height and caresses your
    tenderest branches that quiver in the sun,
    so shall he descend to your roots and shake them in
    their clinging to the earth.
    Like sheaves of corn he gathers you unto himself.
    He sifts you free from your husks.
    He grinds you to whiteness and kneads you until you are pliant.
    And then he assigns you to his sacred fire, that you may
    become bread of the sacred feast.
    All these things shall love do unto you that you may know the secrets of your heart, and in that knowledge become a fragment of Life’s heart.
    Think not you can direct the course of love, for love,
    if it finds you worthy, directs your course.
    Love give naught but of itself, and takes naught but from itself.
    Love possesses not, nor would it be possessed;
    for love is sufficient unto itself.
    Love has no other desire but to fulfill itself.
    When you love, let these be your desires:
    to melt and be like a running brook that sings its melody, to the night.
    to know the pain of too much tenderness.
    to be wounded by your own understanding of love; and bleed willingly and joyfully;
    to wake at dawn with a winged heart and give thanks for another day of loving;
    to rest at the noon hour and mediate love’s ecstasy;
    to return home at eventide with gratitude;
    and then to sleep with a prayer for your beloved in your heart and a song of praise upon your lips.

  28. Guy Incognito January 9, 2006 2:17 pm

    Is the economy booming? What a funny question. If you use the classic definition of “economic boom”, then NO, we are not booming, and haven’t been since the early 70’s (funny how it seemed to coincide with the end of Bretton-Woods.

    Most of the folks I talk to are still working, although not exactly in the dream job they had in the 90’s. The pay is a bit lower, and hours are a little longer, but we all still have a roof over our heads and food in our mouths.

    Unfortunately, every young (> 45 years old) family in our housing development has not only a mortgage, but a home equity loan. The 2nd mortage was used by some to pay for a few household extra necessities, like home theater systems or an SUV. Some, like myself, used the money to get out of the mountain of credit card debt we were under. Only two families sunk the money into home additions/improvements.

    So along with the first and second mortgages, many folks still have high credit card debts (> $5000). When the minimum monthly payments begin to double, a little more of the incidental money will be gone from the monthly shopping spree that defines the American economy. I noticed that our natural gas bill was very high, even though we turned our thermostat down to 65 degrees. The monthly bill was still over $300. Our neighbors had their heat at 72 degrees, and had the unexpected surprise of an almost $500 bill. Granted, December was a bit on the cold side, but everyone will need to wear a few more sweaters to keep warm.

    Luckily, nobody I live near has an ARM for a mortgage, but I know several individuals who do. Their ARM’s went up past the adjustable 30-year fixed rate recently, so all are struggling to lock in their mortgage. (They really should have done this last year, but who really thinks about those things).

    So the combination of 2 mortgages, credit card minimums going up, higher home heating bills, and the only refinancing going on is to lock in fixed rates (vs. cashing out a few dollars for those nice extras I’ve mentioned earlier), we’re all taking a hard look at our budgets, and some of us are actually developing a monthly budget.

    Needless to say, there are very few people I live near/work with that plan on spending money for the extras. I’ve even heard a few people talk about saving some of it.

    Now, here’s the kicker. 70% of our economy is based on consumer spending. What if everybody spends even 10% less in 2006 than they did in 2005? Any growth would go down the tubes, and I’d dare say we’d be heading into a recession.

    And all that is local stuff. I’ve not mentioned the geo-political ramifications of Iran’s oil borse, or declining oil production, or a falling dollar (which I think will continue thru most of ’06).

    Is the economy booming? No, it’s ailing!

  29. Alan Slawter January 10, 2006 5:17 pm

    I’m an engineer, not an economist; but one thing is certain. Mathematical principles apply to all systems.

    While the Fed think tiny moves continuously will create a soft landing, there is a reason why the won’t: Integral Windup. There is a WAG that six months latency between a rate move and it’s effect means that there is a whole lot of pent-up downward energy yet to be released. When it does come, it will keep coming no matter what they do. Kind of like turning a jetliner on a dime–it just doesn’t work that way.

    We’ll see soon enough.

  30. Early Motherhood May 15, 2006 5:35 pm

    Your 12-month-old’s development

    Taking his first steps
    That major rite of passage is almost here, if it hasn’t happened already — sometime this month your baby may take his first steps alone. (If he doesn’t, don’t worry — it takes some babies several more weeks …

  31. Early Motherhood May 15, 2006 5:37 pm

    Your 10-month-old’s development

    More Mobility
    By the time he’s 10 months old, your baby will probably be able to crawl well on his hands and knees, with his trunk parallel to the floor. (Many babies begin trying to crawl before 10 months, but master the skill only now.) He may …

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