Parnelli

I've noticed more than a few RL's selling their cars do to the conomy. As an investment advisor I'm perplexed as to why the stock market keeps rising while everybody seems to think the economy is in the hole and not getting much better. I'd be curious as to everybody's brief thoughts. Thx!

air eater

Since you are the investment advisor, I'm more interested in hearing your opinion than expressing my own.

993MAN

I see the same thing is happening here is NZ. The govt are talking it up but the normal person in the street is still finding it hard. Unemployment is still going the wrong way and speaking as a person that owns a business, it's still bloody hard out there.
But then you hear on the news that new car sales are soaring and house sales are strong.
Then you listen to the news on another channel and it's all doom and gloom.
No one knows who to believe anymore.

24FPS

surprised to hear this about NZ... how 'bout AU? i was hearing AU was not feeling too much in my old industry (ad/branding biz) @ least.

IMHO saw a ton of downsizing to show Q profits for big co's held by larger congloms... which was not 'real' profit at all. (imho it's snowballed)

Diller put it well a few years back when fear was beginning to blaze; said companies had a higher obligation, especially in tough times like these:

From "Lay-off the lay-offs"

“The idea of a company that’s earning money, not losing money, that’s not, let’s say ‘industrially endangered,’ to have just cutbacks so they can earn another $12 million or $20 million or $40 million in a year where no one’s counting is really a horrible act when you think about it on every level. First of all, it’s certainly not necessary. It’s doing it at the worst time. It’s throwing people out to a larger, what is inevitably a larger unemployment heap for frankly no good reason.”

“It’s not that you don’t want to earn as much money as you can — it is your obligation, of course — but companies have obligations beyond that and they certainly have obligations beyond that at certain times, in the times in which they operate. And they also certainly ought to know that meeting and beating expectations is probably yesterday’s game and it will be increasingly so, which would be by the way very healthy for companies. Running a company that meets and beats expectations, and that runs their company accordingly, are companies that I would question why anyone would invest in.”

goofballdeluxe

I think companies are generally doing OK, which is one of the reasons the market is doing well; in fact many companies have actually shown growth during this economic episode. Also the gov't pumped so much money in the system, which is another reason there's a rise in the stock market. Another reason is when you have such a drastic fall, it's more likely to have a similar rise back up.

But.

It's probably only a temporary rush until the market evens out or corrects. The $757 Billion TARP infusion bump won't last forever. And the fact that many corporations are showing good numbers is only good for the corporations, the people who have money to invest in them, and the executives that run them.

But for the average Joe, the economy does suck. Wages are stagnant or declining. The fact that companies are showing growth despite layoffs means that the people who are still employed are doing more work for the same or less pay, while executive pay is still at all-time highs.

The massive debt the gov't has means that taxes must go up or spending goes down. Either hurts the middle class. Also, the average American worker, too, is loaded down with debt. So any extra income, if there is any, goes to service debt.

But the best is yet to come. All this printing of trillions of dollars will come back to haunt us soon because of the inflation. So whatever money the Average Joe has left will be worth less and less.

It's not going to be pretty.

fast_freddy

Purchase/sale of used luxury items such as our cars (not the 959 "set") are lagging indicators of the economy. Many of the cars bought were used with the Real Estate ATM, now that "well" has run dry people are selling them to raise cash to pay bills.

TRINITONY

^ very true....

Bob Makela

Can't say there's been too many problems here in British Columbia. Even after all the expenses of putting on the Olympics and the doom and gloom of how we're going to pay for all the infrastructure upgrades housing sales are expected to remain healthy and housing starts are forecast to rise by 35 to 40%; both of which are good economic indicators. Sorry you folks in the good old US of A have been having such a crappy time down there.

NC TRACKRAT

FWIW, I concur with GOOFBALLDELUXE. This economy is very much like the proverbial "Perpetual Motion Machine", i.e., unsustainable. It's a legalized Ponzi Scheme. Sooner or later, the "piper" must be paid, either by a)printing more money, thereby making the money worth less, b) paying down the debt by raising taxes, 3) spending less or 4)a combination of the three. (Hmmm, all these years and I still remember what I learned in ECON 101. The book was by Samuelson as I recall. What a shame our government can't seem to get it.)

goofballdeluxe

That's because, by and large, the Canadians were smart enough not to buy into the moronic idea of de-regulating every business, like they did in the US.

Greed, stupidity and avarice have laid bare what a flawed system we have down here.

Parnelli

Personally I am not buying into the 'V' shaped recovery. More like a W or U at best (let's hope it's not an 'L' like many predict). All these "growth" numbers everybody is quoting are off of VERY low bases (Q1 '09). They are not sustainable growth numbers. Once the gov't turns off the zero interest rate spigot I think many of these banks and hedge funds will get hurt badly as they can no longer borrow at zero and lend out at a premium.
It was a year ago last month that the SP 500 hit 666...today it's back up over 1175. I saw clients and other people freaking big time. Now they act like we'll never go down again. Didn't they learn anything from that period? People are chasing risk based assets like the good old days of 2007 again. They WILL get burned sooner or later. I'm sure they all think they know when to hit the exits when the party ends but it never actually works that way.
Don't get me wrong, long term I am bullish but in the near/intermediate term I just am not buying into much more upside. Once the last of the"underweighted" mutual fund managers (who are usually mandated to be fully invested) gets squeezed into the market causing the perverbial spike (to SP 500 1230-50ish?) it'll be time to hit the exits.

Just one man' opinion. Am interested in others, though.

jimbo3

A capitalist economy is not a Ponzi scheme at all. The economy is not a "zero sum game"- one does not win by others losing. The economy does expand.

However, as the economy expands, parts of it don't grow proportionately and, as a result, the economy needs to get back into proportion, mainly through recession. Monetary and other gov't policies can also overheat an economy, which can also lead to recessionary or inflationary pressures. Seriously oversimplistic, but that's basically it in a nutshell.

Samuelson's books are the only textbooks I saved from college, BTW. Still have them 30 years later.

IXLR8

I'm hunting down a couple of books by author Matthew Crawford:

• The Case for Working with Your Hands
• Shop Craft as Soulcraft - An inquiry Into the Value of Work

Philosopher and motorcycle repair-shop owner Crawford extols the value of making and fixing things in this masterful paean to what he calls manual competence, the ability to work with one's hands.

According to the author, our alienation from how our possessions are made and how they work takes many forms: the decline of shop class, the design of goods whose workings cannot be accessed by users (such as recent Mercedes models built without oil dipsticks) and the general disdain with which we regard the trades in our emerging information economy.

Unlike today's knowledge worker, whose work is often so abstract that standards of excellence cannot exist in many fields (consider corporate executives awarded bonuses as their companies sink into bankruptcy), the person who works with his or her hands submits to standards inherent in the work itself: the lights either turn on or they don't, the toilet flushes or it doesn't, the motorcycle roars or sputters.

With wit and humor, the author deftly mixes the details of his own experience as a tradesman and then proprietor of a motorcycle repair shop with more philosophical considerations.

air eater

Thanks for the well thought out opinion.
I and a small equity group have been buying primarily raw commercial dirt at ridulously low prices. The former owners got caught up in paying top dollar with little or no down and 5 year ballons. Now the dirt has been reappraised at 50-60% of what they paid, so they have to put more cash into the game to refinance. Most don't have the cash to stay in so we've been stepping into the middle of some of those opportunities and hopefully will reep the benefits before they put me in the six foot deep hole.
Gamble? Hell yes, but we only invest in what we can afford to lose. There is a finite amount of quality commercial dirt, so we are banking on a long term bet.

Leander

What is "commercial dirt"?