It's Going To Get Worse, A Whole Lot Worse

[SAMSON123]

Wall Street Journal
Market Watch

Aug. 17, 2010, 12:01 a.m. EDT ·

Warning, bear market 2010: 11 'sells.' Only 6 'buys'
New Normal: Bankrupt nation. Deflation. Zeros. Junk. No jobs. Depression


By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) -- Yes, it's going to get worse, a whole lot worse ... Bill Gross warns this is the "New Normal. Forget 10% returns. Think 5%". ... Economist Larry Kotlikoff, author of The Coming Generational Storm, warns: "Let's get real. The U.S. is bankrupt. Neither spending nor taxing will help the country pay its bills" ... Economist Peter Morici warns: "Unemployment is stuck near 10%. Deflation coming. Stock market threatens collapse. The Federal Reserve and Barack Obama are out of bullets. Near zero federal funds rates, central bank purchases, a $1.6 trillion deficit have failed to revive the economy." ... Simon Johnson, co-author of 13 Bankers, warns: "We came close to another Great Depression, next time we may not be so lucky." Why? Because Wall Street's already well into the next bubble/bust cycle -- the "doom cycle."

Warning: More bad news ahead. Welcome to a bleak second half 2010, worse for 2011.

It's early morning: In comes economist Gary Shilling's new Insight newsletter, just before I head for the kitchen to make my wife's breakfast. Gary's "Mid-Course Checkup" doesn't raise my spirits. Sure, he's got bragging rights. His January forecasts are still on the money. But don't you just hate guys like him? Brilliant. Honest. Great track record. I guess that's why he's been a long-time Forbes columnist. Investors listen when he talks.

After cooking her breakfast I'm flipping through the L.A. Times' entertainment section, avoiding the business and financial pages. Didn't want to spoil my breakfast too. Suddenly, big headline stops me: "Buy, Sell, Hope." Hope? What's that? Good news about markets? You buy, you sell, you hope? Is "hope" America's last market strategy?

No, "Buy Sell Hope" was a grabber headline. A story about moviemakers buying film rights of bestsellers hoping to sell lots of movie tickets to millions who bought the book. Doesn't always work. A metaphor: Economic theories often fail. The focus: Julie Roberts's new film "Eat Pray Love," based on Elizabeth Gilbert's 8 million copy bestseller, a book filled with New Age advice rivaling the best of Eckhart Tolle and Deepak Chopra.

But that gave me a bright idea: Let's blend the two. See if we can brighten some of Shilling's gloomier forecasts and recommendations for 2010-2011 with some of Gilbert's upbeat advice ... imagining "Pretty Woman" Julia, the Eat-Pray-Love lead, doing a voice-over for Gilbert. So here we go: First, Shilling's 6 "buys," then the 11 "sells," 17 strategies for 2010. He admits some mixed results, but he's "sticking with them for the second half" and on into the coming dark days of 2011. I'm sticking with Julia:

1. Buy Treasury Bonds: Stay with this big winner. Stockholders hate them, but this is a safe haven in the coming deflation storm on into 2011. Long maturities. Zero-coupons. Lower commissions. That's "Insight." Now imagine Eat-Pray-Love's Julia's voiceover: "There's no trouble in this world so serious that it can't be cured with a hot bath, a glass of whiskey and the Book of Common Prayer." Okay, guys would prefer an NFL game with his buddies and a Bud. Winners all around.

2. Buy Income-Producing Securities: Still viable. Stock market's gone nowhere for 12 years, says Shilling. Pick selective income-producers: utilities, drugs, telecoms, hi-grade munis, preferreds, etc. Buy direct or ETFs. Then Julia reminds us: "God never slams a door in your face without opening a box of Girl Scout cookies."

3. Buy Consumer Staples and Foods: Less volatility than S&P 500. Hey, you gotta eat, brush teeth, wash your clothes. Good bet in good and bad times. Julia agrees: "In a world of disorder and disaster and fraud, sometimes ... the meal is the only currency that is real."

4. Buy Small Luxuries: Stay aboard. Yes, discounts, house brands, frugality's in. But still, we all want the best of the little things, "cheap chic," say Gary and Fred. Not Julia's Girl-Scout cookies, treat yourself with favorite chocolates, wine, cigars.

5. Buy The Dollar: Should continue to rise. Bet on futures, puts, ETFs on the dollar index. Julia is patriotic and spiritual: "Faith is belief in what you cannot see or prove or touch. Faith is walking face-first and full-speed into the dark."

6. Buy Eurodollar Futures: Unbelievable winner, and more to go. And if you're traveling, Julia tempts with this mouth-waterer: "Please go to this pizzeria. Order the margherita pizza with double mozzarella. If you do not eat this pizza when you are in Naples, please lie to me and tell me that you did." Yes, it's all in your head.

Okay folks, that's it, only six Insight "buys." Here's what our Eat-Pray-Love guru might add when you buy-sell-hope: "You have every right to cherry-pick when it comes to moving your spirit and finding peace in God. You take whatever works from wherever you can find it, and you keep moving toward the light." Yes, even with these 11 "sells."

7. Sell U.S. Stocks in General: Declines likely to continue. In May, Insight warned the recovery was "Four Cylinders, One Firing." Only inventory was firing. Missing? Jobs. Consumers. Housing. Slow growth. All in "secular bear that started in 2000 and has years to run." Yes, years. Can you still be happy? Yes, says Julia's guru: "People universally tend to think that happiness is a stroke of luck, something that will maybe descend upon you like fine weather if you're fortunate enough. But that's not how happiness works. Happiness is the consequence of personal effort. You fight for it, strive for it, insist upon it." Harder in a recession, but you just do it.

8. Sell Homebuilder & Selected Related Stocks: More weakness ahead. And it will get worse. Millions mortgage-holders under water, can't sell, can't refi. Families in stress. Solution: Eat-Pray-Love and listen: "Real, sane, mature love--the kind that pays the mortgage year after year and picks up the kids after school--is not based on infatuation but on affection and respect."

9. Sell Selected Big-Ticket Consumer Discretionary Equities: Still vulnerable: Autos, appliances, hospitality. Rebates gone. Postponing purchases. Save, get frugal, flow with reality. Julia: "Every day a person is presented with not two or even three but dozens of choices ... our modern world has become a neurosis-generating machine of the highest order." Stop, make time to eat, to pray, to love.

10. Sell Banks and Other Financial Institutions: Remain vulnerable. Including Fannie, Freddie, regionals, small banks. More regulations. By 2014 bank portfolios have $800 billion mortgages coming due, two-thirds underwater. Huge impact on capital. Sell. What would Julia say: Eat in moderation, love, pray a lot.

11. Sell Consumer Lenders' Stocks: More declines in credit cards, etc. Americans save more, cut their borrow'n'spend binge. Reduce stress says Julia: "The only thing the mind hears all day is clanging bells and noise and argument, and all it wants is quietude. The only place the mind will ever find peace is inside the silence of the heart. That's where you need to go." You too.

12. Sell Low & Old Tech Capital Equipment Producers: Falling trend. Mega excess capacity. Capital spending dropping says Insight. Julia worries that you're holding onto the past: "You must find another reason to work, other than the desire for success or recognition." Your passion "must come from another place."

13. If You Plan to Sell Your House, Second Home or Investment Houses Any Time Soon, Do So Yesterday: Too much inventory, and fear. Warning: Down another 20%. Julia says you will survive because "somewhere within us all, there does exist a supreme self who is eternally at peace." That's your true home.

14. Sell Junk Bonds: Rally's overdone, warns Gary. Slow growth recovery, deflation fears, "lethal for many junk bonds." The "New Normal" cuts returns in half. We chase junk. Bigger risks. Julia: "That's your problem. You're wishing too much, baby. You gotta stop wearing your wishbone where your backbone oughta be." Accept the New Normal. Stop chasing deals like a teenager in heat.

15. Sell Commercial Real Estate: Got ahead of itself. Hotel occupancies down. Office vacancies up. Refinancing trouble looms. Maybe short REITs and ETFs. Julia knows our "world is so corrupted, misspoken, unstable, exaggerated and unfair, one should trust only what one can experience with one's own senses." Are you trusting Wall Street? Or your own life experiences?

16. Sell Most Commodities: Soft economy, soft commodities. Insight warns of "unattractive investments in coming years of weak demand, excessive capacity and soft prices." China's a big importer, aggressively tying up global supplies. Risky bets. So imagine you're lost and listen to your Eat-Pray-Love guru: "When you're lost in those woods, it sometimes takes you a while to realize that you are lost. For the longest time, you can convince yourself that you've just wandered a few feet off the path ... Then night falls again ... you still have no idea where you are ... you have bewildered yourself so far off the path that you don't even know from which direction the sun rises anymore." Are commodities taking you off your path?

17. Sell Developing Country Stocks, Bonds: They depend on exports, are vulnerable to global weakness. China overheating. Risks in India, Brazil, Vietnam, etc. Wall Street pushes overseas investing, they love the commissions. Warning, go slow cautions Julia: "Time, when pursued like a bandit, will behave like one; always remaining one country or one room ahead of you, changing its name and hair color to elude you, slipping out the back door of the motel just as you're banging through the lobby with your newest search warrant, leaving only a burning cigarette in the ashtray to taunt you." The only real winner investing overseas is your Wall Street broker collecting all commissions you pay.

What a combo: Warnings from Gary Shilling's "Buy-Sell-Hope" Insights newsletter. Plus Girl Scout Cookie advice from our Eat-Pray-Love guru, with "Pretty Woman" Julia Roberts' voice-over. Let's top it off with one more of her jewels: "The Bhagavad Gita, that ancient Indian Yogic text, says that it is better to live your own destiny imperfectly than to live an imitation of somebody else's life with perfection. So now I have started living my own life. Imperfect and clumsy as it may look, it is resembling me now, thoroughly." Get it? The market, the economy, the whole world may crash ... but will you crash with it? Or will you still be the "best you?" Will you fulfill your destiny?

http://www.marketwatch.com/story/its-going-to-get-worse-a-whole-lot-worse-2010-08-17

[Soul Crusher]

We are royally screwed IMHO. 

However, that is not an entirely bad thing as we need a re-set anyway on all levels.   

[tallgerman]

anyone even palin simply do opposite of obama
1 cut spending
2 pay off deficit
3 end pensions for governmetn workers
4 end unemployment & stop paying people to do nothing
5 end adjudication from the bench
6 end governmetn loans for houses

[240 is Back]

I'm investing in Tungsten.

If we coat enough of it in gold, the ensuing tungsten shortage will make me a millionaire overnight!

[240 is Back]

anyone even palin simply do opposite of obama
1 cut spending
2 pay off deficit
3 end pensions for governmetn workers
4 end unemployment & stop paying people to do nothing
5 end adjudication from the bench
6 end governmetn loans for houses

Didn't palin either show inaction, or do the OPPOSITE of each of these while Governor?

[Soul Crusher]

Didn't palin either show inaction, or do the OPPOSITE of each of these while Governor?

  

Face it 240 - Palin would or could not possibly be any worse than obama, even if she quit half way through. 

Obama is beyond horrific at this point.  whether its my financial guy, the accountant, my clients, people at the gym, my parents, their friends, my GF and her very liberal parents, every is utterly disgusted at the govt the last two years. 

I know its hard for you since you bought into the hope and change bs, especially since ZERO came to Ft. Meyers, but face it bro, we are ascrewed royally. 

[240 is Back]

 

Face it 240 - Palin would or could not possibly be any worse than obama, even if she quit half way through. 

Obama is beyond horrific at this point.  whether its my financial guy, the accountant, my clients, people at the gym, my parents, their friends, my GF and her very liberal parents, every is utterly disgusted at the govt the last two years. 

I know its hard for you since you bought into the hope and change bs, especially since ZERO came to Ft. Meyers, but face it bro, we are ascrewed royally. 

we're collectively screwed.

hopefully those of us with a little political understanding and economic realization are prepared.  so individually, we may be a'ight.

Thune 2012 baby.

[Soul Crusher]

we're collectively screwed.

hopefully those of us with a little political understanding and economic realization are prepared.  so individually, we may be a'ight.

Thune 2012 baby.

I'm hoping Obama and the dems get mangled so bad in November that he resigns in shame and Biden and the GOP actually get something done to clean up tih smess from the last 4 years of Dem control of the congress.   

[Skip8282]

I'm hoping Obama and the dems get mangled so bad in November that he resigns in shame and Biden and the GOP actually get something done to clean up tih smess from the last 4 years of Dem control of the congress.   

It's not looking good for the Dems right now.

[tonymctones]

its going to take alot of delicate delicate manuevering to get us out of this, I still have no idea how the FED is going to get the trillions of bad debt off their books.

We will have to fight likely insane inflation once the economy finally does start to pick back up which means higher interest rates for treasury bonds so that probably will be a decent investment...

and we will inevitably have all of our taxes raised in order to pay for this shit...cutting spending now is shouldnt be a neccisity it should be MANDATORY...

[Arnold jr]

we're collectively screwed.

hopefully those of us with a little political understanding and economic realization are prepared.  so individually, we may be a'ight.

Thune 2012 baby.

I believe it's worse than most want to admit, meaning, even those who are prepared economically, well, it won't matter. We are headed now towards massive deflation and we all know what follows that. Further, if we look at history we can look at post WW1 Germany, we're headed down a very similar path.

its going to take alot of delicate delicate manuevering to get us out of this, I still have no idea how the FED is going to get the trillions of bad debt off their books.

We will have to fight likely insane inflation once the economy finally does start to pick back up which means higher interest rates for treasury bonds so that probably will be a decent investment...

and we will inevitably have all of our taxes raised in order to pay for this shit...cutting spending now is shouldnt be a neccisity it should be MANDATORY...

The Fed, those geniuses? Well as it is right now we're monetizing our own debt, this means we are in the process of buying our own debt, something that was promised would never be done under Obama's watch, yet here we are...pure arrogant stupidity.

[MB]

We will not get out of this.  It's not too late, but unfortunately politicians want people to feel good, so they spend.  This is the opposite of what needs to be done.  The irony is if the government did nothing, absolutely nothing, the country would begin to prosper.  

[Lundgren]

We will not get out of this.  It's not too late, but unfortunately politicians want people to feel good, so they spend.  This is the opposite of what needs to be done.  The irony is if the government did nothing, absolutely nothing, the country would begin to prosper.  

Lol if obama did nothing all the western economies would of went bankrupt. The bailout would of happen regardless of which party was in power. I don't think you guys quite get how fragile the economy is. I'm quite right of center my only critic of obama is that he hasn't done anything. The bailout wasn't really his decision, and obama care didn't go ahead. So he's not really anything, just a inbetween pres's guy. He won't be remember, atleast compared to bush's fuck ups.

[Arnold jr]

Lol if obama did nothing all the western economies would of went bankrupt. The bailout would of happen regardless of which party was in power. I don't think you guys quite get how fragile the economy is. I'm quite right of center my only critic of obama is that he hasn't done anything. The bailout wasn't really his decision, and obama care didn't go ahead. So he's not really anything, just a inbetween pres's guy. He won't be remember, atleast compared to bush's fuck ups.

So many things wrong with what you just said.

*Bailouts, Europe has begged us to stop with the bailouts, European style socialist countries have begged us to stop, they see what this has done to them but Obama didn't listen, in fact he mocked them.

*Health care, what do you mean it "didn't go ahead" of course it did, in a little over a yr that program will be full blown...we're already seeing the initial effects, health care cost are already rising rapidly due to the foreseen future.

*Bush, so sick of people bringing him up, who cares, he is not the president anymore, he hasn't been the president for a long time. Did he make mistakes? Yes, did he make some big mistakes? Absolutely, but this mess is not a "Bush Mess" this is an American mess that has been building for nearly 20 yrs.

*Would the bailout have happened if he wasn't president? Hard to say for sure, if McCain had won being that he's definitely a progressive himself, only to a smaller degree, he may have signed off on a smaller bailout, that's very possible, but you're missing the point as are so many others, IT IS NOT ABOUT PARTY! Heaven help us, why can't people see this!!! It's about progressives vs. free-market, the fight is with progressives. Guess what? There are Democrats who are not progressives, just as there are Republicans who are...it has infected both parties and it's killing us!

[tonymctones]

Lol if obama did nothing all the western economies would of went bankrupt. The bailout would of happen regardless of which party was in power. I don't think you guys quite get how fragile the economy is. I'm quite right of center my only critic of obama is that he hasn't done anything. The bailout wasn't really his decision, and obama care didn't go ahead. So he's not really anything, just a inbetween pres's guy. He won't be remember, atleast compared to bush's fuck ups.

LOL i assume your talking about the bank bail outs or TARP...that happend under bush...remember that guy you hate?

obama did the stimulus...which did shit

[SAMSON123]

So many things wrong with what you just said.

*Bailouts, Europe has begged us to stop with the bailouts, European style socialist countries have begged us to stop, they see what this has done to them but Obama didn't listen, in fact he mocked them.

*Health care, what do you mean it "didn't go ahead" of course it did, in a little over a yr that program will be full blown...we're already seeing the initial effects, health care cost are already rising rapidly due to the foreseen future.

*Bush, so sick of people bringing him up, who cares, he is not the president anymore, he hasn't been the president for a long time. Did he make mistakes? Yes, did he make some big mistakes? Absolutely, but this mess is not a "Bush Mess" this is an American mess that has been building for nearly 20 yrs.

*Would the bailout have happened if he wasn't president? Hard to say for sure, if McCain had won being that he's definitely a progressive himself, only to a smaller degree, he may have signed off on a smaller bailout, that's very possible, but you're missing the point as are so many others, IT IS NOT ABOUT PARTY! Heaven help us, why can't people see this!!! It's about progressives vs. free-market, the fight is with progressives. Guess what? There are Democrats who are not progressives, just as there are Republicans who are...it has infected both parties and it's killing us!

You may feel what you will about Bush, but he is brought up continually, because it is his actions which has brought america into the state that it is in. Wall Street Scandal, Two Wars, Real Estate scandal, Banker Scandal, Outsourcing of business, etc etc etc. Just about all of this was done under Bush...the full effects didn't come into full fruition until the time of Obama, who did not help matters much with the bailout.

[MRDUMPLING]

You may feel what you will about Bush, but he is brought up continually, because it is his actions which has brought america into the state that it is in. Wall Street Scandal, Two Wars, Real Estate scandal, Banker Scandal, Outsourcing of business, etc etc etc. Just about all of this was done under Bush...the full effects didn't come into full fruition until the time of Obama, who did not help matters much with the bailout.

No, the actions of American presidents and the apathy of the American people since 1913 is the reason we are in this mess.   

[SAMSON123]

No, the actions of American presidents and the apathy of the American people since 1913 is the reason we are in this mess.   

There is no doubt that everything since 1913 involving personal income taxes, the IRS, the breaking of gold from the dollar, the creation of FIAT money etc etc has played a major role in the destruction of america. Sadly most of these things were brought into existence through fear, terror, clandestine government actions, wars etc etc, so the public can not outright be blamed as they were made to believe it was being done with the best of intentions... clearly now the people of america can see that the INTENTIONS were not in their best interest, but of a select few.

[tonymctones]

You may feel what you will about Bush, but he is brought up continually, because it is his actions which has brought america into the state that it is in. Wall Street Scandal, Two Wars, Real Estate scandal, Banker Scandal, Outsourcing of business, etc etc etc. Just about all of this was done under Bush...the full effects didn't come into full fruition until the time of Obama, who did not help matters much with the bailout.

LMFAO how did bush contribute to the wall street scandal and the real estate mess?

this is going to be another "physics is different on other planets" moment...

[SAMSON123]

LMFAO how did bush contribute to the wall street scandal and the real estate mess?

this is going to be another "physics is different on other planets" moment...

You should be too embarrassed to let the world know you're stupid enough to even ask this question. are you really that disconnected to reality of what is happening and has happened in america and under which administration that you don't know the answer???

I almost want to shed a tear for you 

[MuscleMcMannus]

its going to take alot of delicate delicate manuevering to get us out of this, I still have no idea how the FED is going to get the trillions of bad debt off their books.

We will have to fight likely insane inflation once the economy finally does start to pick back up which means higher interest rates for treasury bonds so that probably will be a decent investment...

and we will inevitably have all of our taxes raised in order to pay for this shit...cutting spending now is shouldnt be a neccisity it should be MANDATORY...

So maybe you should get off your lazy ass and get a job slick. 

[tarzan]

There is no doubt that everything since 1913 involving personal income taxes, the IRS, the breaking of gold from the dollar, the creation of FIAT money etc etc has played a major role in the destruction of america. Sadly most of these things were brought into existence through fear, terror, clandestine government actions, wars etc etc, so the public can not outright be blamed as they were made to believe it was being done with the best of intentions... clearly now the people of america can see that the INTENTIONS were not in their best interest, but of a select few.

True, true.

[24KT]

I'm investing in Tungsten.

If we coat enough of it in gold, the ensuing tungsten shortage will make me a millionaire overnight!

[tonymctones]

You should be too embarrassed to let the world know you're stupid enough to even ask this question. are you really that disconnected to reality of what is happening and has happened in america and under which administration that you don't know the answer???

I almost want to shed a tear for you 

LMAO i expected nothing else from samsonenterprises but a deflection...

come on moran show me as the idiot I am...what did bush do to contribute to the real estate mess and wall street?

[tonymctones]

So maybe you should get off your lazy ass and get a job slick. 

LOL have one hoss as well as an internship and school at night...dont worry about me Ill be just fine but thanks for caring must be in your nature and the reason you became a nurse