Posted May 15, 2009 09:31am EDT by Aaron Task in Investing, Recession, Banking, Autos, Housing
The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was "preposterous" to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.
"We're in a complete mess and the consumer is smart enough to know it," says Davidowitz, whose firm does consulting for the retail industry. "If the consumer isn't petrified, he or she is a damn fool."
Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."
This outlook is based on the following main points:
With the unemployment rate rising into double digits - and that's not counting the millions of "underemployed" Americans - consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity.
Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on not just mortgages but student loans and auto loans and credit card debt.
More consumer loan defaults will hit banks, which are also threatened by what Davidowitz calls a "depression" in commercial real estate, noting the recent bankruptcy of General Growth Properties and distressed sales by Developers Diversified and other REITs.
As for all the hullabaloo about the stress tests, he says they were a sham and part of a "con game to get private money to finance these institutions because [Treasury] can't get more money from Congress. It's the ‘greater fool' theory."
"We're now in Barack Obama's world where money goes into the most inefficient parts of the economy and we're bailing everyone out," says Daviowitz, who opposes bailouts for financials and automakers alike. "The bailout money is in the sewer and gone."
Link with Video
The excrement is about to hit the rotating oscillating device
ReplyDeleteNobody wants to comment on your blog because noone wants to deal with the truth. Hang in there, anyway. Probably, spreading the "truth" would make things worse,in any case.
ReplyDeleteI went to the bank today and I wanted to invest in "insured bonds." they told me that they don't sell "insured bonds" since the insurers can't insure paper that has a higher credit rating than they have. Ouch!
ReplyDelete14% U3 unemployment by December 31st.
ReplyDelete30% U6 unemployment by December 31st.
20%+ credit card defaults by December 31st.
(Viability requires less than 3% conservatively)
3-6% GDP contraction
Massive inflation coming..
YAH.
"I went to the bank today and I wanted to invest in "insured bonds." they told me that they don't sell "insured bonds" since the insurers can't insure paper that has a higher credit rating than they have. Ouch!"
ReplyDeleteI went in to my local Chase Branch in Carmel Indiana last Wednesday and the blonde girl helping people open new accounts could be overheard proclaiming to people in the waiting area that "the bottom is here" and "I wouldn't worry, things are going to start looking up now"...she was all of maybe 23 years old.
I felt compelled to go over and ask her if her boss had told her to say that, than I thought better of it. What's the use anyway? You won't convince most people. They believe what they WANT to believe, and that's about it.
Then when I made my way to the counter, they gave me guff for cashing my paycheck instead of depositing it because I only had a few bucks in my account. I told them that was the way I wanted to keep it for now and I could go cash my check at another bank and open an account if they wouldn't cash mine, so they relented.