Where is the US economy headed?

Good afternoon. I note that (1) shares of Citigroup (C) are down something like 23% today ALONE, dragging the markets in general and the Dow (-250 points) into a slide. (2) C has announced that it is moving up its reporting of 4th Q losses from next week (after the inauguation) to this Friday (1/16).
I would be willing to bet that something big is going to happen to C this weekend and, by design, the Bush and Obama people want to get it over with before Tuesday.

3 Replies

@realjohnboy,

RJB, this concerns me also.

Not tuned in like you, but following along to help a friend out.

"Citigroup Inc. has the world's largest financial services network, spanning 107 countries with approximately 12,000 offices worldwide. The company employs approximately 358,000 staff around the world, and holds over 200 million customer accounts in more than 100 countries. It is the world's largest bank by revenues as of 2008."

This may not end well...

1 Reply

@hamburger,

hamburger, I am never going to claim the 50's was free of corruption, or any other period either, however, I firmly believe that dishonesty on on the rise, in general, throughout society. I base this on a number of things, but one is that of my experience in business, the attitudes toward financial obligations have suffered noticably in the last 10 years especially. Aside from my own observations, I could cite incarceration rates, surveys of honesty, proliferation of identity theft businsses, lots of things, but again, going back to my own persoanl observation and experience, I have talked to a number of people in business, and they agree with me, people paying their bills nowadays is more like doing you a favor than it is their duty to do it, in particular large companies. Large companies have an attitude of throwing their weight around, to run over little people, ethics is on the decrease. The troubling part of this is the government is worse and getting worse, the bureaucracies are very poorly run, and the left hand knows not what the right hand is doing, it is in danger of becoming complete chaos. Not that it hasn't always been that way to an extent, but I think it is getting worse. It is to the point that you wonder whether you can trust the people in agencies, like Social Security, perhaps they are stealing your information, or the IRS, etc. When morality breaks down, we become more like a third world country where you have to pay everybody off to get anything done or go somewhere.

So, I will be glad to quit here in a few years or less. All of this is more than troubling, and I don't know if the trend will reverse itself or not, I doubt that it will, considering the educational system in place right now, and the pop culture type of culture that we live in.

And now we have selections for the cabinet that are more than troubling, a Treasury guy that doesn't pay taxes, but no problem according to the Dems, a Secretary of State, Clinton, a family that has received tons of money from various foreign countries, but no problem. The president, a product of Chicago politics and corrupt housing projects, etc., but no problem, he is the messiah, the list goes on.

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@realjohnboy,

good evening , all !
not even mcdonald shares held up under today's market pressure .
i honestly think that's pretty bad news for the economy .
apparently people are even cutting down on the inexpensive "pleasures" in life .

i heard on MSNBC that "overstock" is one of the few companies during roaring business .
the owner/president said that he feels sorry for his fellow americans , but ... someone has to move the merchandise .
i read in canadian busines news that he told a reporter that he put pretty well all of his money into gold - he doesn't have much confidence in a quick recovery .

http://lateline.muzi.net/news/ll/english/10059194.shtml?cc=25375&ccr=

Quote:

McDonald's profit up, but stock falls on flat sales
2008-01-28

McDonald's Corp (MCD.N), the world's largest restaurant chain operator, on Monday posted flat U.S. same-store sales in December, sending its shares down 8 percent and weighing on the entire restaurant sector.

McDonald's cited softer consumer spending and severe winter weather for the flat U.S. December sales at restaurants open at least 13 months.

That result, the weakest monthly U.S. sales number since the company posted a decline in March 2003, spooked investors -- who worried that consumers had begun cutting back on spending at inexpensive and traditionally recession-resistant fast food chains.

that is NOT good news .
hbg

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@realjohnboy,

managed to retrieve the interview with the chairman/ceo of "overstock"
....................................................................................................
see for full article - shortened version posted :

http://www.theglobeandmail.com/servlet/story/LAC.20090110.RTAKINGSTOCK10/TPStory/?query=overstock

Quote:

A vet's report on the retailing ship of state: 'worm-eaten'

January 10, 2009

Anyone who has picked up a magazine or journal lately can't help but notice that their favourite periodicals are getting thinner as the economic news steadily worsens.
...
So this seemed like a good time to check in with a prominent retailer for a realistic assessment of what's happening on the ground.
...
But our attention is also drawn to the ongoing saga of Wall Street magician Bernie Madoff, who made $50-billion (U.S.) in investors' money vanish. How can we resist the chance to skewer the watchdogs who kept their eyes tightly shut in a demonstration of the see-no-evil method of securities regulation?

Fortunately, we can squeeze in both topics with a single phone call to Salt Lake City, where Patrick Byrne resides.

Mr. Byrne has had plenty of experience in retailing as well as the wacky world of Wall Street. He has long warned of disaster on both fronts, sparking a torrent of abuse from critics. He has a right to feel vindicated now, although he won't use that description.

"Now I know that there are tens of thousands of people worrying about the same things that have kept me awake at night for 3½ years, and feeling like a bit of a nut," says the always frank chairman and CEO of online discount retailer Overstock.com. "Only in that sense do I feel better. I feel horrible for my country and for Canada, because obviously our fortunes are linked."

Mr. Byrne sketches a bleak landscape indeed. "People don't understand how worm-eaten the timbers of this ship have gotten."

The U.S. National Retail Federation predicts 14,000 stores will shut their doors this year, more than double the total of 2008. But that number is conservative, he says. "I think there's going to be retail Armageddon across the U.S. sector."
...
Back in 2005, he declared war on naked shorts and has long railed against the SEC, which he has tried to persuade Congress is "more crooked than a streetwalker's stumble."

Naked shorting has nothing to do with retailing sexy underwear and everything to do with hedge funds exploiting loopholes to manipulate stock prices. (An ally in the lengthy feud is famed Canadian value investor Prem Watsa, who happens to be a big Overstock investor.)

One of those loopholes was even known colloquially as the "Madoff exception."

Mr. Byrne knows he has been labelled as something of a fruitcake for his fervent belief that dark conspiratorial forces have been at work in the markets. But he can live with that. The only U.S. asset he still owns, apart from his Overstock shares, is the loft he lives in. Everything else is in gold bullion.

"The world needs Warren Buffett out there calming everybody and telling them things are going to be okay," he says of his former employer. "And I think the world needs that crazy guy in Utah telling people: 'Get two weeks' supply of food in your closet.' "

rjb , what are your thoughts on what mr. byrne said ?
personally , i am not (yet) as pessimistic as mr. byrne - but i'm sure not as confident as i was just three months ago .
hbg

1 Reply

@Rockhead,

Despite the tremendous scale of Citi, Rockhead, it should be noted that it has a market cap of less then $25B. The talk is about splitting up the company's divisions over time, but I can see a situation where the company could be sold in its entirety this weekend. Morgan Stanley or BOA or a foreign bank.
A problem in this scenario is that Treasury has spent the 1st half of the $700B TARP money and Congress is dragging its heels (correctly or not) on releasing the rest. Citi has an identified pile of "toxic" assets on the books at $150B.
Still, I am convinced that the govt (Bush and Obama) don't want to see Citi going into the new administration lying in the middle of the street bleeding to death.
I note that Morgan also will report results on Friday instead of 6 days later. At least I think I saw that earlier today.

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@hamburger,

Hbg: The "retail Armageddon" that Patrick Byrne predicts is certainly likely. I don't know where the Retail Federation got 8,000 closures in 2008 and an estimated 14,000 in 2009. Perhaps they were looking at retailers over a certain size or at their own membership role. I would bump that to 80,000 and 140,000 for the sake of discussion. And even that may be low by a lot. But a projection of almost double.
Using the 140,000 estimate, that could mean some 1.5 million job losses in the retail field in 2009. Last year, as I recall, the U.S. lost 2.5M jobs, but that number is a sham. It doesn't count the some 10M who had their hours cut from 40 to 35 to 30 hours a week. That, for a worker in retail making just above minimum wage means little discretionary spending for shopping, whether it means the GAP or even Wal-Mart and McD's. That, I think, is what Byrne was alluding to re "retail Armageddon."
He could, but I tend to doubt it, have been referring to a fundamental change in shoppers' attitudes re consumption of stuff. I have written about that here or elsewhere before.

On a personal note, my chain of retail stores had a pretty bad holiday season, down some high-teens %. Fortunately, we saw it coming and didn't buy much. And I own the building with no mortgage.
We contacted all of the art teachers in December and suggested that they look carefully at what they were going to require their students to buy. My staff tells me they didn't trim and, in fact, the average ticket was up about 20% when the kids started coming in yesterday. Go figure.
I can figure. These students go to an elite University. Their parents may have taken a hit on their 401, but they are still working and earning.

Sorry for the long post, Hbg, from the retail trench.

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rjb : i apprciate your report from the "retail trenches" .
sure hope your business will come through these tough economic times without too many scratches and dents !

just read a report from the American Economic Association (AEA) - reported by the british ECONOMIST .
i'll just post the link so i won't take up precious space .
you may find the article of interest - though it is not very encouraging .
based upon past downturn/recovery cycles , they think it'll be 3 to 5 years before we are out of the woods - not exactly an uplifting report !
take care !!!
hbg

http://www.economist.com/finance/displayStory.cfm?story_id=12887385&source=hptextfeature

1 Reply

@hamburger,

hbg, I just skimmed over the AEA report, but they're trying to extroplate past info into future ones that just will not work. All the dynamics have changed not only with the US economy but also the worlds'. We're in for strange times, but the only sure thing is that things are going to get much worse before we begin to see some improvements - or even stability (if there will ever be such a thing).

Extreme roller coasters are kid stuff compared to what we're all going to experience in the near term. We just gotta hope that Obama and his team will help resuscitate our economy into the positive zone sooner than later.

2 Replies

@cicerone imposter,

We're in clover ci. Nothing like it has ever been known in the whole history of life in evolution.

Why are you such a pessimist? It must be from reading all that Darwin stuff. Study the guy's face sometime. The reincarnation of Job.

Check the Brit thread on the restaurant owner applying for bail-out money.

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@cicerone imposter,

c.i. wrote :

Quote:

I just skimmed over the AEA report, but they're trying to extroplate past info into future ones that just will not work. All the dynamics have changed not only with the US economy but also the worlds'. We're in for strange times, but the only sure thing is that things are going to get much worse before we begin to see some improvements - or even stability (if there will ever be such a thing).

that's what i read into the report by the AEA . they said that past cycles have run for three to five years . since the market turned sour about 4 months ago , i would guess that it will go further down for another two to three years before hitting bottom . recovery will come later ... ... hopefully .
note that i said " GUESS " .
take care ! hbg

Extreme roller coasters are kid stuff compared to what we're all going to experience in the near term. We just gotta hope that Obama and his team will help resuscitate our economy into the positive zone sooner than later.

president elect obama seems like a good guy to me , but he is between a rock and a hard place imo (other economies around the world seem to be in the same place ) .
so what to do :
- keep pumping blood ( money ) into the sick patient hoping he will recover and be able to pay the bill ,
- hope that somehow the patient will be able to recover on his own (bedside prayers ? ) .
as i've said before : obama's job is not one that will make him unlimited friends . just about the whole world expects him to be THE ONE to rescue them . he would have to be SUPERMAN (btw i saw on the business news this morning that a SUPERMAN comic featuring obama is already available and more issues will follow ) . hbg

1 Reply

@hamburger,

Re: cicerone imposter (Post 3534310)
c.i. wrote :

Quote:

I just skimmed over the AEA report, but they're trying to extroplate past info into future ones that just will not work. All the dynamics have changed not only with the US economy but also the worlds'. We're in for strange times, but the only sure thing is that things are going to get much worse before we begin to see some improvements - or even stability (if there will ever be such a thing).

hbg wrote:
that's what i read into the report by the AEA . they said that past cycles have run for three to five years . since the market turned sour about 4 months ago , i would guess that it will go further down for another two to three years before hitting bottom . recovery will come later ... ... hopefully .
note that i said " GUESS " .
take care ! hbg

But that's what I'm challenging; their "...three to five years...and...go further down for another two to three years..."

Extreme roller coasters are kid stuff compared to what we're all going to experience in the near term. We just gotta hope that Obama and his team will help resuscitate our economy into the positive zone sooner than later.

president elect obama seems like a good guy to me , but he is between a rock and a hard place imo (other economies around the world seem to be in the same place ) .
so what to do :
- keep pumping blood ( money ) into the sick patient hoping he will recover and be able to pay the bill ,
- hope that somehow the patient will be able to recover on his own (bedside prayers ? ) .
as i've said before : obama's job is not one that will make him unlimited friends . just about the whole world expects him to be THE ONE to rescue them . he would have to be SUPERMAN (btw i saw on the business news this morning that a SUPERMAN comic featuring obama is already available and more issues will follow ) . hbg

Superman, indeed! LOL

2 Replies

@cicerone imposter,

c.i. wrote :

Quote:

But that's what I'm challenging; their "...three to five years...and...go further down for another two to three years..."

"all will be revealed in good time" - stick around for the surprise Shocked

or check with the CARNAC - THE MAGNIFICENT :
"and the question is ... "

http://routingbyrumor.files.wordpress.com/2008/01/carnac-the-magnificent.jpg

hoping we will come through with some humour left !
hbg

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@cicerone imposter,

I agree, C.I., that present conditions are unique (for the most part) and that extrapolation is dangerous (because of the scope--the global nature--of this bear market). Nevertheless, I'm doing the "patriotic" thing and not withdrawing any investments from the market. As I see it (and this IS very subjective, I agree), it's best to gauge my present market holdings not from the direction of their high (on paper) but from their beginning "lows" (on paper). I really don't mind losing "unearned income" (money for which I did not sweat a drop), so long as I have no debts, social security and pension coming in.

1 Reply

@JLNobody,

JLN, We're in the same "boat." I also look at how much we actually invested vs where we stand today - after over a decade of withdrawing $$$s to travel around the world, and we're still "ahead." My wife lost 11% last year, and I lost 18%. Did some manipulations to increase our bond holdings last year, but I still feel very comfortable with where we are "today." Holding steady as she goes...

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@okie,

Okie,
Realistically, I don't ever want to see the 50's again! In New Orleans it was separate and unequal! Oh sure, I enjoyed the music and even the fashions, as I entered my teens in 1959, but I chose to stay in all-Black Xavier instead of integrating the all-white Dominican High School, with its' racist segregationist parents yelling obscenities at Catholics of Color! No, the 50's were terrible!
Teenagers got pregnant then, just as they do now! Only thing, they sent you away, or they planned a "shot-gun" wedding! A couple of my friends "disappeared"! It was frowned upon by hypocritical society, that didn't teach you anything about sexuality. I lived through that, too! I hated authority then and worse, now!
They also executed the Rosenbergs in the late 50's. At the research lab that I worked for, several Chinese Nationals were caught stealing trade secrets. They were arrested, charged with industrial espionage and deported! So no, I don't want to relive the 50's!
You talk as though with Democrats in charge, will we be any worse off than with Bush? Obama has a huge mess to clean up, no thanks to free spending Bush, his 2 wars and Halliburton pillaging the Treasury. No, I don't like any politicians but hopefully Obama will repair some of the tears in the Constitution! These so called "conservatives" were free spending DixieCrats!

1 Reply

@teenyboone,

teeny, I respect your experience and opinion. I would point out that the southern Democrats were the bastions of segregation, heck, former KKK member, Robert Byrd was a prominent Democrat in congress until recently. Also, Martin Luther King was a Republican. I just finished reading some WWII books and FDR and some of his cabinet did more to furthere some really bad stuff than anybody recently, blacks were kept separated in the military, he rounded up over 100,000 Japanese Americans and placed them in concentration camps or internment camps out in the middle of nowhere, like Wyoming, etc., in very desolated conditions. Bill Clinton's mentor was a staunch segregationist in Arkansas. A Republican, Lincoln, freed the slaves, and Eisenhower began to change things in the 50's. It is my opinion that you have the potential to see the light in terms of which party really cares about you. It isn't the Dems, they want to only USE you.

Sex, we never had any education, but we learned all we needed to know by observation, I grew up on the farm, I have no regrets whatsoever about any of this, the birds and the bees were obvious. The Chinese nationals, isn't that what should have happened to them, I don't get your beef? Clinton sold stuff to China for campaign money, do you favor that instead?

teeny, in regard to Halliburton, good grief, you have swallowed the propaganda, every president has used Halliburton, besides, Cheney divested his holdings in Halliburton. If you think you have seen corruption, I would advise you that you haven't seen anything yet, just wait until Chicago politics enters Washington. The tears in the Constitution, only in the minds of leftie whackos, Bush as commander in chief has the power to protect this country, and that is what he did.

I do not favor shotgun weddings, but anymore it is all too common for people to shack up a dozen times or a hundred times without considering marriage. And how many broken homes, how many fatherless children, how many children killed or abused by the mothers boyfriends, how much cultural suffering do you need to see before you realize some moral standard is preferable?

Teeny, have you ever owned a business? If you did, you would become a Republican because your eyes would be opened to what is really going on.

2 Replies

@okie,

okie wrote:

Quote:

"...besides, Cheney divested his holdings in Halliburton."

Of coarse, okie has all the inside info on Cheney's doings; inside and outside of government.

1 Reply

@cicerone imposter,

ci, is it time to sell, or hold, stock market I am talking about? Will it tank alot worse, or will it improve now? Honest question.

1 Reply

@okie,

I believe, honestly, that it's a good time to increase bond holdings because I also believe our economy has not seen its worst period, but I'd hang onto a reasonable portion of equities to keep the faith in our economy. Otherwise, if we do end up in the worst of scenarios, we'll all be in the same "boat."

Nobody can foretell how the market will react during the future, because nobody really knows when our economy will begin to show improvement. There are always speculators who will maintain some level of the market "in balance" based on their own crystal balls.

My philosophy is "always keep the faith." Anything else is not acceptable to any individual or the masses. It's going to be hard to maintain the glass half full scenario, but that is our only hope - that Obama's team will eventually work our economy back to ticking like a good clock. Maybe not in a couple of years, but in the foreseeable future - like five or six years.

The best advise is never put all your eggs in one basket: diversity of funds will protect your assets during the worst of times.

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