Thought I'd take a moment on this Sunday afternoon to do a quick revisit of the variables I track regarding the recession we are in and whether such variables are getting better, worse, or unchanged.
You can see my past posts on this topic here:
Top 10 Reasons This Recession Will Never End
Update 1
Update 2
Update 3
Now for Update 4:
1. Crashes hurt for a long time - worse - All you have to do is take a look at a six month chart of the DOW to see that the pain continues and is actually get worse. Every time the market finds an excuse to push back upwards, it inevitably comes to its senses and crashes back down, reflecting that the situation is not fixed and that no fix is really in sight. While corporate profits are stable in the US, employers have been laying people off, clearly demonstrating they do not see a recovery at hand.
What the trends in these variables seems to suggest, and the markets seem to reflect this as well, is that most of the macro trends, at least since March, have not gotten better.
You can see my past posts on this topic here:
Top 10 Reasons This Recession Will Never End
Update 1
Update 2
Update 3
Now for Update 4:
1. Crashes hurt for a long time - worse - All you have to do is take a look at a six month chart of the DOW to see that the pain continues and is actually get worse. Every time the market finds an excuse to push back upwards, it inevitably comes to its senses and crashes back down, reflecting that the situation is not fixed and that no fix is really in sight. While corporate profits are stable in the US, employers have been laying people off, clearly demonstrating they do not see a recovery at hand.
Anyway, you get the drift.
2. Until Debt do us Part - worse - Europe is now officially crashing under the debt of the PIIGS. The US super committee failed to reach a budget resolution, which risked a downgrade in their credit rating (which did not happen, yet). Now there is talk of the IMF (funded largely by the US) will step in to save Europe (so the US tax payer will take on more debt in the form of the Fed printing money and giving it to the IMF).
On the positive front though, consumer spending has been increasing lately. The bad news though is that it's not from increases in their personal income as they've been dipping in to their savings to fuel the spending. And it's unclear how much of that spending is the result of consumer confidence and how much of it is simply purchases they have put off over the past three years that they have no choice but to make now.
3. Eroded Trust - unchanged - OWS continues strong. Protesters getting pepper sprayed at UC Davis. Super committee budget failure. MF Global goes bankrupt (investors money 'missing' to tune of 1.2 billion).
Anyway, you get the drift.
Anyway, you get the drift.
4. Anxiety - unchanged - In my last post I ranked this as slightly positive. I think it continues to be so. Most people right now are believing the headlines out of mainstream media that say that things are very slowly getting better. I expect this variable to tank hard when the markets price in what is really going on. But for now it's unchanged.
5. Growth versus Replacement Cycle - unchanged - Not much to say here, we're still in a replacement cycle as innovation takes a back seat. I guess the only new item here is how Solyndra went belly up after $500 million of government investment in the solar company.
6. Shareholder model breakdown - unchanged - Unchanged may not seem bad, but remember in my last update I ranked this variables as 'way worse', and it remains such. But at least they haven't turned even worse than way worse =)
7. Lowest Common Denominator Thinking - unchanged - I still see LCDT as staying in the background. If anything. OWS and their focus on the 99 per cent has shifted attitudes away from 'they should get less' to 'those will less should get more'. Right or wrong, it's a marginal shift away from LCDT that we saw months ago.
8. Globalization - worse - You've got Russia and China supporting Iran. You've got troops being placed in Australia. You've got the US warning China about currency manipulation. You've got the EU begging China for money (and China declining).
Anyway, globalization is turning into global strife with very real overtones of major military conflicts down the road between current super powers.
Anyway, globalization is turning into global strife with very real overtones of major military conflicts down the road between current super powers.
9. Baby Boomer Cost - unchanged - no real change.
10. Extremism - unchanged - While the global actors are behaving badly (see #8) so far none of this has come to actual actions. This variable though could easily turn negative again in the coming months with the EU crisis unfolding and tensions between Russia, China and the US unfold.
11. Bonus: inflation - unchanged - Costs of goods are pretty much what they were a few months ago. Gas prices seem stable. If anything, the Christmas sales might be driving down costs temporarily.
So there you have it. Things are pretty much the same as they were in my last update about two months ago (which was not a rosy update).
For fun I thought I'd input a short chart tracking these variables since I started this blog entry back in March 2011 to see what is trending.
Now remember, this analysis is not empirical (I'm not tracking stuff like ISM numbers and I give little weight to 'numbers' that come out of the government, which in my opinion are bogus half the time). This is almost a PR analysis, simply tracking the macro issues and whether they are getting better or worse.
What the trends in these variables seems to suggest, and the markets seem to reflect this as well, is that most of the macro trends, at least since March, have not gotten better.
The only trends that have gotten better has been anxiety levels among the population and people's propensity to want to see others do worse if they have it better (LCDT).
These are positive things, but not so much for the economy (although they are required for a healthy, growing economy). They are more things you tend to see before a revolution (at least when they are the ONLY positive trends emerging).
Lowered anxiety reflects that people are no longer as 'afraid' as they use to be. But that doesn't mean they aren't upset, it just means they aren't worrying so much about the world falling apart. This can lead to things like the population rising up, such as we are seeing with Occupy Wall Street. When fear starts to go down, either anger or productivity tend to emerge - people either get busy working or they get busy fighting.
Lowered anxiety reflects that people are no longer as 'afraid' as they use to be. But that doesn't mean they aren't upset, it just means they aren't worrying so much about the world falling apart. This can lead to things like the population rising up, such as we are seeing with Occupy Wall Street. When fear starts to go down, either anger or productivity tend to emerge - people either get busy working or they get busy fighting.
With regards to LCDT, yet again, this isn't necessarily good for the economy, although it is positive in terms of society. Less LCDT means that people are not going after each other as much as they use to. However, the reason for this could very well be that the 99 per cent are starting to unify against the one per cent.
The emerging empowerment and participation by 'the people' is a positive thing. In my opinion, a HUGE reason we had this crash was decades of apathy among the population which allowed corruption and greed to go unchallenged.
We'll see where things are at in a couple months, but I'm not holding my breath on things getting better any time soon.
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