The end of the end of the recession

From Zero Hedge (and he didn't mention much about the disaster of the Commercial Real Estate market, or that the S&P 500 is trading at an overall P/E of 140, or several other trouble areas):

http://www.zerohedge.com/sites/default/files/The%20End%20Of%20The%20End%20Of%20The%20Recession.pdf

A couple of corrections needed for the above slide show.

Not to just pick on the MSM reporting. I was sent (by several readers) a housing analysis yesterday. It was some sort of weird mash up between the excellent David Rosenberg and some blogger. The charts are great, but the analysis is sometimes inaccurate. The "research" made comments like this for the NAHB HMI: “Sales outlook is stuck at 26, and anything under 50 is a contraction”. Not correct. The NAHB index is a sentiment indicator and doesn’t indicate contraction. Any number under 50 indicates more builders view sales as poor than good. See this chart - the index moves with new home sales and housing starts. And another example: "Architectural billings Index slipped five points last month to 37.7 - a sign residential construction is just bouncing along bottom". The ABI is primarily for non-residential construction.

I'm not trying to pick on or embarrass any particular publication or blogger. But it helps to know your sources. And I could be wrong about prices; we will know when the October and November data is released (a six month wait!)


http://www.calculatedriskblog.com/2009/07/few-comments-on-housing-reports.html

Fewer millionaires to tax

One problem with the government wanting to surcharge the wealthy for healthcare (and other programs) is that they are rapidly dissappearing. There are 18% fewer millionaires than last year. Tax revenues are falling tremendously - some areas like California it's over 40%. Where is the money going to come from to continue to prop up government spending? Just wait for the next stock market crash - then things will get very interesting.

http://www.newsweek.com/id/208496

Consulting firm CapGemini conducts an annual census of high-net-worth individuals, defined as people with at least $1 million in investable assets, excluding primary residences. "We've been doing this report for 13 years and haven't seen this kind of loss of wealth since we started," said Ileana van der Linde, principal at CapGemini's wealth-management practice. North America saw an 18.5 percent decline in its high-net-worth population, from 3.02 million in 2007 to 2.46 million in 2008. Even though they were more likely to be diversified in bonds and cash—instead of simply plowing money into stocks—the HNWIs' collective net worth fell from $10.85 trillion in 2007 to $8.44 trillion in 2008, down 22.2 percent. The ultra-HNWIs—those with at least $30 million in assets—suffered even more. That segment of the population fell 25 percent.

The rich get (a lot) richer

Shareholders need to put a stop to the top execs of companies taking much more than what they should be. They are essentially stealing money from the shareholders.

http://www.alternet.org/blogs/peek/141481/executives_receive_one-third_of_all_pay_in_the_u.s./

Executives and other highly compensated employees now receive more than one-third of all pay in the U.S., according to a Wall Street Journal analysis of Social Security Administration data — without counting billions of dollars more in pay that remains off federal radar screens that measure wages and salaries. Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total U.S. pay in 2007, the latest figures available. The compensation numbers don’t include incentive stock options, unexercised stock options, unvested restricted stock units and certain benefits.

Gee, I wonder if the top execs got the lion share of stock options and other benefits.

And this:

Between 1979 and 2006, the inflation-adjusted after-tax income of the richest 1 percent of households increased by 256 percent, compared to 21 percent for families in the middle income quintile.

Giving bonuses based on stock price is BS - most of the gains and losses have little to do with the performance of the top execs. And now that earnings and revenues are cratering guess who is still raking in bonuses and huge pay. Do you think any of the execs that got big pay-offs in 2006 and 2007 are willing to give any of the money back now that the stock prices for their companies has crashed? Not a chance. Take the money and run (ie take a golden parachute when things get real bad). Shareholders need to put a stop to this crap. It's out of control. The US is rapidly becoming a banana republic.

Rational Expectation Theory

Great article on Rational Expectation Theory and why there will be no V-shaped recovery.

Also, here are a couple of very interesting points in the article:

It’s a widely accepted notion that long term stock investors make money. Actually, this is not true. Most companies don’t last for more than 20 years. How can long term investment make money for you? The bankruptcy of General Motors should remind people that this notion is ridiculous. General Motors was a symbol of the U.S. economy, a century-old company that succumbed to bankruptcy. In the long run, all companies go bankrupt.

Property on the surface is better than the stock market. It is something physical that investors can touch. However, it doesn’t hold much value in the long run either. Look at Japan: Its property prices are lower than they were three decades ago. U.S. property prices will likely bottom below levels of 20 years ago, after adjusting for inflation.

China’s property market holds even less value in the long run. Chinese properties are sitting on land leased for 70 years for residential properties and 50 years for commercial properties. Their residual values are zero at the end. The hope for perpetual appreciation is a joke. If you accept zero value at the end of 70 years, the property value should only be the use value during those 70 years. The use value is fully reflected in rental yield. The current rental yield is half the mortgage interest rate. How could properties not be overvalued? The bulls want buyers to ignore rental yield and focus on appreciation. But appreciation in the long run isn’t possible. Depreciation is, as the end value is zero.

http://english.caijing.com.cn/2009-06-09/110180019.html

10 reasons why there will be no improvement 2H 2009

There are no green shoots. There will be no second half recovery.

http://www.doctorhousingbubble.com/the-financial-and-economic-argument-for-no-green-shoots-no-deus-ex-machina-for-the-economy-10-charts-showing-why-there-will-be-no-second-half-recovery-in-2009/