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  • Where is the Economy Going in 2011/2012?

    A couple of months ago, I was pretty bullish on the overall US economy for 2010/2011. Some of the leading indicators that we use to predict employment and job growth looked very positive, corporate earnings were up, and consumer credit card behavior was much improved.

    I am now less optimistic. The job gains have yet to materialize at all, I think there are still huge problems in the housing market, and so on. I was wondering what the keen minds of CUF felt about how things will be in 2011/2012. Back a couple of months ago, I would have predicted a fairly strong recovery. Now I am leaning toward a continued slow recovery with very slow job growth, but I would not be surprised to see us slip into recession again. Pick the choice above that is closest to what you think will happen, and you can use your responses to explain yourself or let me know how my choices were lame.
    53
    Strong Recovery
    0.00%
    0
    Slow Recovery with Little Improvement in Employment
    58.49%
    31
    Double Dip, but Not as Bad as 2008/2009
    33.96%
    18
    Severe Down: Worse in 2011/2012 than 2008/2009
    7.55%
    4

  • #2
    I'll qualify my response by giving my probabilities for each scenario:

    Strong recovery: 10%
    Slow recovery: 55%
    Double Dip: 35%
    Depression: 10%

    My double dip probability may be slightly optimistic, but I'm a Polyanna that way.
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    "Outlined against a blue, gray
    October sky the Four Horsemen rode again"
    Grantland Rice, 1924

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    • #3
      This is tough to answer because it depends on which party controls the House/Senate. If it's Repubs, then I see a double dip, but not so bad. If it's the Dems, I think it will be worse.

      I based my vote on the Repubs reclaiming control of either the House or Senate.
      "Socialism is a philosophy of failure, the creed of ignorance and the gospel of envy; its inherent virtue is the equal sharing of misery." - Winston Churchill


      "I only know what I hear on the news." - Dear Leader

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      • #4
        Originally posted by Clark Addison View Post
        A couple of months ago, I was pretty bullish on the overall US economy for 2010/2011. Some of the leading indicators that we use to predict employment and job growth looked very positive, corporate earnings were up, and consumer credit card behavior was much improved.

        I am now less optimistic. The job gains have yet to materialize at all, I think there are still huge problems in the housing market, and so on. I was wondering what the keen minds of CUF felt about how things will be in 2011/2012. Back a couple of months ago, I would have predicted a fairly strong recovery. Now I am leaning toward a continued slow recovery with very slow job growth, but I would not be surprised to see us slip into recession again. Pick the choice above that is closest to what you think will happen, and you can use your responses to explain yourself or let me know how my choices were lame.
        Supposedly large corporations (whatever that means, a pretty vague description) are sitting on a ton of cash. Some people speculate there could be a large amount of M&A activity that results. The others will wait for the uncertainty to subside before they decide to invest in any capital improvements/purchase inventory.
        Part of it is based on academic grounds. Among major conferences, the Pac-10 is the best academically, largely because of Stanford, Cal and UCLA. “Colorado is on a par with Oregon,” he said. “Utah isn’t even in the picture.”

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        • #5
          Originally posted by Color Me Badd Fan View Post
          Supposedly large corporations (whatever that means, a pretty vague description) are sitting on a ton of cash. Some people speculate there could be a large amount of M&A activity that results. The others will wait for the uncertainty to subside before they decide to invest in any capital improvements/purchase inventory.
          I wonder how much the increase in capital gains is influencing the M&A activity. Laffer wrote a opinion piece in the WSJ a few weeks back on the subject. His theory was that next year could get real ugly as anyone dreaming of sale is jumping today like a ratt from a sinking ship - round and round!

          I don't like Obama much and I believe some of his policies are not helpful, but this mess is going to take a long time to sort out. Savings dropped from 6% to 5.9%this last quarter and consumer spending ticked up a nudge, but I wonder what is really healthy. The boom of the 90's and the first half of the 2000's were just not a genuine reflection of US GDP. I wonder if we really know what our real output, based upon consumers spending what they can actually afford. I also would like to know if any of the esteemed needlenecked wankers of academia have published any articles or journals that a dumbshit, such as myself, could understand that breaks down the optimal balance between consumer spending versus savings. I don't believe it is nearly as much the financial and regulatory uncertainity that keeps businesses from hiring, as much as I don't think businesses believe the people are ready to start buying stuff.
          Do Your Damnedest In An Ostentatious Manner All The Time!
          -General George S. Patton

          I'm choosing to mostly ignore your fatuity here and instead overwhelm you with so much data that you'll maybe, just maybe, realize that you have reams to read on this subject before you can contribute meaningfully to any conversation on this topic.
          -DOCTOR Wuap

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          • #6
            Originally posted by Goatnapper'96 View Post
            I wonder how much the increase in capital gains is influencing the M&A activity. Laffer wrote a opinion piece in the WSJ a few weeks back on the subject. His theory was that next year could get real ugly as anyone dreaming of sale is jumping today like a ratt from a sinking ship - round and round!

            I don't like Obama much and I believe some of his policies are not helpful, but this mess is going to take a long time to sort out. Savings dropped from 6% to 5.9%this last quarter and consumer spending ticked up a nudge, but I wonder what is really healthy. The boom of the 90's and the first half of the 2000's were just not a genuine reflection of US GDP. I wonder if we really know what our real output, based upon consumers spending what they can actually afford. I also would like to know if any of the esteemed needlenecked wankers of academia have published any articles or journals that a dumbshit, such as myself, could understand that breaks down the optimal balance between consumer spending versus savings. I don't believe it is nearly as much the financial and regulatory uncertainity that keeps businesses from hiring, as much as I don't think businesses believe the people are ready to start buying stuff.
            So you're saying the US will find a way out of this mess, just give it time?
            There's no such thing as luck, only drunken invincibility. Make it happen.

            Tila Tequila and Juggalos, America’s saddest punchline since the South.

            Yesterday was Thursday, Thursday
            Today is Friday, Friday (Partyin’)

            Tomorrow is Saturday
            And Sunday comes afterwards

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            • #7
              I found it interesting that Obama's economic brain trust are now distancing themselves more from him. Peter Orszag and Christina Romer have resigned. Even Paul Krugman has become more critical of the Obama administration in his blog. (I love to read Krugman's blog for the comments to his postings.)
              "If there is one thing I am, it's always right." -Ted Nugent.
              "I honestly believe saying someone is a smart lawyer is damning with faint praise. The smartest people become engineers and scientists." -SU.
              "Yet I still see wisdom in that which Uncle Ted posts." -creek.
              GIVE 'EM HELL, BRIGHAM!

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              • #8
                Originally posted by landpoke View Post
                So you're saying the US will find a way out of this mess, just give it time?
                Who is going to overtake us? China? I have one simple rule for predicting future economic dominance, bra size. Dude, without enormous investment in the enhancement industry we got that one sewn up!

                I think things in the US will be better than anywhere else. The US can go all batshit progressive socialistic, but if we are still the curve buster concerning whose political economy most closely reflects free market capitalism, methinks there will be incentive for folks to invest in US industries. I am assuming you will continue to do your patriotic duty and ensure the mother of all elements from which we can generate filthy lucre flows like the milk and honey of the Promised Land from daysgoneby!
                Do Your Damnedest In An Ostentatious Manner All The Time!
                -General George S. Patton

                I'm choosing to mostly ignore your fatuity here and instead overwhelm you with so much data that you'll maybe, just maybe, realize that you have reams to read on this subject before you can contribute meaningfully to any conversation on this topic.
                -DOCTOR Wuap

                Comment


                • #9
                  Originally posted by Goatnapper'96 View Post
                  Who is going to overtake us? China? I have one simple rule for predicting future economic dominance, bra size. Dude, without enormous investment in the enhancement industry we got that one sewn up!

                  I think things in the US will be better than anywhere else. The US can go all batshit progressive socialistic, but if we are still the curve buster concerning whose political economy most closely reflects free market capitalism, methinks there will be incentive for folks to invest in US industries. I am assuming you will continue to do your patriotic duty and ensure the mother of all elements from which we can generate filthy lucre flows like the milk and honey of the Promised Land from daysgoneby!
                  I was just trying to make a lame riff off your RATT reference.
                  There's no such thing as luck, only drunken invincibility. Make it happen.

                  Tila Tequila and Juggalos, America’s saddest punchline since the South.

                  Yesterday was Thursday, Thursday
                  Today is Friday, Friday (Partyin’)

                  Tomorrow is Saturday
                  And Sunday comes afterwards

                  Comment


                  • #10
                    Originally posted by landpoke View Post
                    I was just trying to make a lame riff off your RATT reference.
                    It has been a long time since I followed RATT closely, but I don't think they ever toured in India or China. Speaks volumes.
                    Do Your Damnedest In An Ostentatious Manner All The Time!
                    -General George S. Patton

                    I'm choosing to mostly ignore your fatuity here and instead overwhelm you with so much data that you'll maybe, just maybe, realize that you have reams to read on this subject before you can contribute meaningfully to any conversation on this topic.
                    -DOCTOR Wuap

                    Comment


                    • #11
                      I think we are entering a long and difficult recovery. In fact, if you would have put "nowhere" as an option that is the one I would have selected. I'm not an economic historian, but I get the feeling more and more each day that we are going to be Japan during the 90s with low to zero interest rates and very little growth, and probably some contraction. Employment will remain high. Personally I think this could last for a decade or so, but who really knows?

                      The problem that I see is that we had such a great run for so many years that the true economy was vastly overinflated. When that bubble popped we poured trillions of dolllars into the economy to stop it from deflating all the way, which could have been disasterous. So we stopped the economy from going back to where it truly should have been and we will continue to artificially prop it up with monetary policy (including low interest rates and government investments in financial securities). Now we get to wait until the true economy catches up to where we are currently and in my "finger in the air" prediction that could take a decade.

                      I hope I'm wrong.

                      As for companies sitting on cash, that is true. The marketplace is very volatile. I know companies that were going to the market and selling equities or taking out debt on an almost quarterly basis back in 2008. They had projects coming out their ears. A lot of that has dried up and companies are scratching for profitable projects. Companies are also hesitant to go to market so to play it safe they sit on their cash in case a good project comes along or in case of a double dip so they can have the cash necessary to get them through without having to go to market with an undervalued stock price.

                      I will say that 2010 has been a better year than 2009 for the company I work for, but a lot of that has to do with weather and energy prices than the economy.
                      "Discipleship is not a spectator sport. We cannot expect to experience the blessing of faith by standing inactive on the sidelines any more than we can experience the benefits of health by sitting on a sofa watching sporting events on television and giving advice to the athletes. And yet for some, “spectator discipleship” is a preferred if not primary way of worshipping." -Pres. Uchtdorf

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                      • #12
                        Originally posted by Eddie Jones View Post
                        As for companies sitting on cash, that is true. The marketplace is very volatile. I know companies that were going to the market and selling equities or taking out debt on an almost quarterly basis back in 2008. They had projects coming out their ears. A lot of that has dried up and companies are scratching for profitable projects. Companies are also hesitant to go to market so to play it safe they sit on their cash in case a good project comes along or in case of a double dip so they can have the cash necessary to get them through without having to go to market with an undervalued stock price.
                        Yep.
                        Everything in life is an approximation.

                        http://twitter.com/CougarStats

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                        • #13
                          Originally posted by Indy Coug View Post
                          Yep.
                          I'll also just add that many large companies that have pension plans are also going to get hit hard by the securities prices that fell in 2008. Minimum funding requirements for pension plans are based on many factors, but one of those includes a two year or six quarter lookback period to determine the appropriate discount rate for the assets. Interest rates spiked at the end of 2008, which resulted in that interest rate being used over the passed couple years in the actuarial calculation to determine the pension liability (higher interest rates means a lower liability when discounted). This high interest rate helped offset the steep drop in pension assets.

                          Now that interest rates are unusually low and by the beginning of 2011 interest rates will most likely have been low for the passes two years, the discount rate used to calculate the minimum funding requirement is going to be really low, which will result in a much higher pension liability. Couple that high liability in with pension assets that have still not recovered and you have a recipe for millions, tens of millions, and hunreds of millions of dollars that will be required to be put into pension plans to meet federal requirements. Most of these copmanies know this and are lobbying for some federal relief (delay the timing of payments, etc.), which relief is coming slowly. However, putting $100 million into a pension plan is usually not something a company would like to do with their cash.
                          "Discipleship is not a spectator sport. We cannot expect to experience the blessing of faith by standing inactive on the sidelines any more than we can experience the benefits of health by sitting on a sofa watching sporting events on television and giving advice to the athletes. And yet for some, “spectator discipleship” is a preferred if not primary way of worshipping." -Pres. Uchtdorf

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                          • #14
                            Originally posted by Eddie Jones View Post
                            I'll also just add that many large companies that have pension plans are also going to get hit hard by the securities prices that fell in 2008. Minimum funding requirements for pension plans are based on many factors, but one of those includes a two year or six quarter lookback period to determine the appropriate discount rate for the assets. Interest rates spiked at the end of 2008, which resulted in that interest rate being used over the passed couple years in the actuarial calculation to determine the pension liability (higher interest rates means a lower liability when discounted). This high interest rate helped offset the steep drop in pension assets.

                            Now that interest rates are unusually low and by the beginning of 2011 interest rates will most likely have been low for the passes two years, the discount rate used to calculate the minimum funding requirement is going to be really low, which will result in a much higher pension liability. Couple that high liability in with pension assets that have still not recovered and you have a recipe for millions, tens of millions, and hunreds of millions of dollars that will be required to be put into pension plans to meet federal requirements. Most of these copmanies know this and are lobbying for some federal relief (delay the timing of payments, etc.), which relief is coming slowly. However, putting $100 million into a pension plan is usually not something a company would like to do with their cash.
                            While I'm not a pension actuary, unless things have changed significantly over the last 10 years or so, the calculation methodology for testing pension funding adequacy is beyond archaic and obsolete. I hope that's changed in an era of highly volatile interest rates, pension failures and increased financial modeling sophistication.
                            Everything in life is an approximation.

                            http://twitter.com/CougarStats

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                            • #15
                              Originally posted by Indy Coug View Post
                              While I'm not a pension actuary, unless things have changed significantly over the last 10 years or so, the calculation methodology for testing pension funding adequacy is beyond archaic and obsolete. I hope that's changed in an era of highly volatile interest rates, pension failures and increased financial modeling sophistication.
                              You're being too nice to pension actuaries and the calculation methodology. I'm not sure if it has changed but my inclination is that it hasn't, although you get more options from which to pull your discount rate. You can pull the prior three year end points (so at 12/31/10 you can use 12/31/10, 12/31/09, and 12/31/08 - see 2008 drops off next year whcih means trouble to companies with pensions) or you can use the prior 6 quarter points (doesn't include 2008 obviously). See, I learned something having sat through a couple three hour meetings with actuaries.

                              Bottom line is it's just not the lack of profitable projects, but it's also the fact that companies know they might need to put cash in non-investment type of things like pensions, even though these pension funds were fully funded prior to the recession.
                              "Discipleship is not a spectator sport. We cannot expect to experience the blessing of faith by standing inactive on the sidelines any more than we can experience the benefits of health by sitting on a sofa watching sporting events on television and giving advice to the athletes. And yet for some, “spectator discipleship” is a preferred if not primary way of worshipping." -Pres. Uchtdorf

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