Scary quotes
November 12, 2008 – 7:54 pm
On the heels of that WSJ op-ed broaching the possibility of another Great Depression…
Merrill’s CEO John Thain at a conference yesterday:
“Right now, the US economy is contracting very rapidly. We are looking at a period of global slowdown. This is not like 1987 or 1998 or 2001. The contraction going on is bigger than that. We will, in fact, look back to the 1929 period to see the kind of slow-down we’re seeing now.“
Best Buy’s CEO on today’s earnings call:
“Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we’ve ever seen. Best Buy simply can’t adjust fast enough to maintain our earnings momentum for this year.”
And how ’bout this from former Goldman Sachs chairman John Whitehead:
I think [this slump will] be worse than the depression. We’re talking about reducing the credit of the United States of America, which is the backbone of the economic system. … I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America. … I just want to get people thinking about this, and to realize this is a road to disaster. I’ve always been a positive person and optimistic, but I don’t see a solution here.
Contrast this with the guests on CNBC who are still finding excuses to buy stocks. Folks, they’re telling you stocks are cheap because they’re asset managers: They get paid based on the amount of capital they have under management. If you’re not invested in stocks, they don’t have jobs.
Consumer spending makes up 70% of the economy. “Rapid, seismic changes in consumer behavior” mean GDP will contract, significantly.
The collective earnings of the S&P 500 companies will be about $60 next year. Put a 10x multiple on that and you get an index value of 600. That means the market has, at least, another 30% to fall. I wouldn’t go anywhere near stocks now. They are not cheap relative to earnings.
…
AmEx just applied for $3.5 billion in bailout money; Detroit may get another $25 billion; GE said the Fed will backstop $139 billion of its debt. Want your own TARP money? Here’s a link to the application. I plan to fill it out and send to Treasury. I hope readers will do the same. Let’s flood them with bailout requests.
Posted in Economy, credit crunch |
11 Responses to “Scary quotes”
This is a big reason there should be no bailout to GM - the prospects for the company are poor with little doubt they will still be in a bad way this time next year and wanting more money. Would you throw a life preserver if you saw an anvil fall in the water?
There have to be customers to support a company, all the gov’t money in the world won’t substitute. Ask those who tried to run the USSR.
And per the Great Depression, where is the equivalent of WWII as a production/sales rescue mechanism? Americans, at least, are overloaded with stuff. There are more families with three cars than there are with one and we are seeing now how folks can get along just fine without buying new ones. I’ve never owned a car I didn’t keep for ten years and what is the current average age of the U.S. car fleet? I doubt it’s even 5 years.
The employment news is bad because the great employer - the service industry - is dumping people left and right and we have lost most of our manufacturing to cheaper foreign labor, so where are folks to go for work?
Yes, this could be very very bad.
By CB on Nov 12, 2008
This wasn’t supposed to happen with a flexible paper system. Remember the hypocrits blamed 1929 on gold standard. In reality you can blame on lack of regulation. Alan Grenspan is a criminal. He should be court marshalled and executed or put in prison for the rest of his life. Same for all the bastards that promoted the “free for all” attitude of no regulation.
By Marc Authier on Nov 12, 2008
Yes, I agree with the post above. There is no where else to look for a job. We have borrowed to the hilt, the debt is coming home to roost. Wait till the U.S. credit rating is lowered, you will see a 1,000 point drop on the DOW. When foreigners stop buying our debt (cause we can’t pay it back anyway), the show is over, total economic collapse.
By dschriv on Nov 12, 2008
Why is it that we do not see any movement in prosecuting any of these people, are they untouchable, or is it that most of the government officials,judges, etc, were in the same boat.
we need to restart the economy and resuscitate the system, if the country is going to default let us do it now and the world will have to deal with it.
They all profited from our great variety of toxic mortgages, then we should all share in the pain. Did anyone in Rome ask what would happen to that family in Woodbridge, Virginia once they signed on the doted line on the loan they funded through the certificates issued by the special purpose vehicles created by wall street. In fact every home owner in America should file a quiet title action on their homes, and challenge the current lender to produce the original note that was destroyed, and to bring everyone of the investors who actually ut the money on the table, yo will be amazed how many people will find themselves with free and clear title on their homes.
We need a new start, file a quiet title action.
By Jose on Nov 12, 2008
The economy is falling apart fast and any foreigner who is stupid enough to invest in our debt deserves the shame to never it see it materialize beyond toilet paper. I would stir clear of any stocks these are revolutionary times the worst is yet to come we are inundated in corruption and greed you can only push people to the brink and censor the the media to a point. That’s reality, it’s a damn shame.
By Paula J. on Nov 13, 2008
Yes the regulators and the paid off lawmakers let this go on but by then it had grown too big and uncontrollable to ever manage, all this really goes back to the day it was decided that deficit spending was ok presumably codified around ‘71 at Bretton Woods and presumably finally to take off in the early 80’s boom. yes it did work for a while but all the time had it’s own destruction inbuilt, so back to today we have never lived with savings nationally, never known a surplus, never been encouraged to save carefully instead we have this. Naturally enough it now all has to revert back very painfully but it must happen. One question: those who originally decided on this course, the same financiers and politicians - to let them be the ones to lead us out of this is really stupid and dangerous for us all!
By Martin on Nov 13, 2008
Jose, there’s a reason your idea was formed on a blog and will remain there - it’s idiotic. An action to quiet title cannot do what you claim.
What do you want these guys (CEOs, money managers, hedgies, etc) to say? You rail on them when they’re optimistic, and you rail on them when they’re pessimistic. We’re the ones who live in the real world, not them. We know the economy sucks and will get worse. They’re not telling us anything we don’t know. Quit treating them like freakin’ oracles. Who cares what they have to say, it has absolutely no impact on any of our lives.
You all are acting like a bunch of monkeys in a cage when their bananas have been taken away. The fact is, CEOs and government officials are not our zookeepers. We control our lives, they don’t. But you make them happy when you ask for things from them, whether it’s free health care or more regulation.
And I just can’t understand the way you guys think. The word pessimistic doesn’t do it justice. It really sounds like you WANT the destruction of the US economy, and all for the sake of being right. Because there’s nothing in it for anyone if we enter a depression (except short sellers, and it’ll even bite them). And what’s more, you are crying all the way down.
Yeah, so the sh** is hitting the fan. We’ll all have to cut back and return to a more conservative existence. Take care of yourself and your family. Get 2,3,4 jobs if you have to, and buckle down. An economic implosion is depressing only if you value your big screen tv and 4,000 sq ft house more than your relationships and your will to live.
Grow a sack, people.
By jay on Nov 13, 2008
They should change the name from TARP to CARP.
By Rey on Nov 13, 2008
In general, it seems to me as if the CNBC people are way, way more hysterically negative than I’d expect them to be.
It’s really interesting to see the Squawk Box panelists slam the idea of bailing out GM on a night when a lot of the ads are Cadillac ads.
To me, the real problem with CNBC is that, given the state of the economy, it puts on too few economists and economic historians. When it does put them on, it doesn’t give them a chance to make much of an argument.
I have a feeling that Laurence Meyer, for example, could come up with a pretty interesting analysis of what’s going on that would be heavy on supply and demand curves. I’d like to see him go up against similar types of academic economists that different philosophies and really debate one another’s ideas about what’s been going on, instead of just debating who’s more caring and who’s more free-market than the other guy.
By A.L. on Nov 13, 2008
We need to get the federal government out of the mortgage/banking business of which they have no clue. We need to let the states take care of their own state and own problem and tell the lenders that wrote and approved these exotic loans that are now being foreclosed on to fix all the foreclosures in their state before they can come back and lend in their state. The big banks are forcing small locally owned mortgage companies out that care and see their local clients in their community and their client sits across the desk, they see them at the ball game, grocery store, they care about their community. . but what you have is the 3 Major credit bureaus selling trigger leads to telemarketers that get your local client on the phone and convinces them to make the biggest purchase in their life with a SS# name and an address telling them they can now buy their dream house and have no regard for them and their family ,, they never care about you or your family and just wanted to price your loan with a 3 point yield spreaed premium on the back of your loan instead of giving you a par rate. . so, now fannie/freddie came out with a new GFE (good faith estimate) that is even more confusing for the borrower. Oh, and yeah that telemaketer that bought your clients information from the bureau’s lives in another state and never shows up when you are signing on the biggest contract of your life and you can’t even reach him on the phone, , ,You can’t teach ethics !!! Everyone is being hurt by this.. New York state tried to sue the bureaus but I guess the bureaus had more money .. Just think when I pull a local clients credit report for real estate purposes they sell it and get paid again ..It was my understanding the state of Washington told CW Home Loans to stay out of their state until they can clean up the foreclosures they left there and the neighborhoods/families they destroyed approving these types of loans..If a 30 year fixed rate was 5.5% (par) I could lock and doc at least 5 loans in my pipeline. . Does Bernake look at a lender rate sheet after he keeps lowering the funds rate?? He should!!!.. It’s doing nothing to help!!! Unless we can get better rates for even the “A” paper borrowers we can all just forget it. . .there are not even good rates for the perfect, full documantation , full time worker borrower. . .Would appreciate your take. Angela@themortgagehouseinc.net
By Angela on Nov 14, 2008
I have no idea what Martin was saying above to Jose. That was a weird, random attack that bears no relation to what Jose said in his post. Grow a brain, Martin.
By Tom on Nov 16, 2008