Well Todd,
I guess it would take to say who’s shoes you are in? Bankng is improving with the Fed’s helping hand. Industry is not unhappy about the weak dollar for exports. Oil Companies, well let’s just say they are enjoying their party. Real Estate depends on which end you are looking at, but the money they made during thier boom time, should be enought to carry them through.

But for the working middle class, I would have to say the land of plenty (not to meantion the land of just enough) is stll far ahead. We will be the ones forced to pay for all this bad management in the long run as we have always done. Banking looses on lending, our costs go up. Industry demands increase for exports, supply for us can drop, we pay more. Oil companies decided no new refineries, then one has to be shut down, we pay. The flood of foreclosers drive our home values down, and cause a buyers market, but with lending so tight, who will buy? And those poor people forced into bankrupcy from the foreclosers, the middle class again picks up the tab for them to survive to give them time to get back on their feet.

It will take the middle class a while to pay off the debt caused by the upper class CEO’s mistakes in business. Wish the reverse was in effect, but as we in the middle class know, we even have to pay for own mistakes.

Guess that old saying is correct, “He who stands in the middle of the road, gets run over by both directions”.

Todd,

I definitely agree that the market will get worst before it gets better. Everyone no matter the class are catching the blunt blows from the tighten economy. Yes, the oil companies are having a ball. I guess everyone has to see how they will pull out of it. I believe the word of God - “In the time of famine, I shall be satisfied”.

Todd: “Even more worrrying, banks continue to tighten lending standards.”
Comment: That’s right, but is this really a bad thing? Should we not make sure that loans can be paid off? Should we rush to create a new credit crisis just to overcome the old one?

Hello Todd,
Well its too early for anyone to comment on that, Most of the badly hit sectors are still showing no signs of recovery like banks are still writing off, cutting jobs and real estate prices down to all time low. So its interesting to know what is making anyone think we have seen the worst. May be the americans are making the same mistake twice, of hurrying into the aftermath even befor the full scale of the crisis is still unfolding…

Todd - What does “the worst is over” mean?
Does it mean that:
1) housing prices are going to continue to decrease but at a decreasing rate or flatten out or start increasing again? or
2) that financial institution write downs are over or that the write downs are not going to be as large? or
3) bankrupcy rates are going to return to historical rates? or
4) that somehow folks have paid down their credit debts and now have money to spend again so more people don’t lose their jobs?
5) The oil prices are going to return to $60 a barrel to help bring down inflation?
etc,, etc., etc.

Really Todd - does anybody really think the U.S. economy has really hit bottom? It is a good thing the truth isn’t clear otherwise it would be worse.

LOOKING FOR SIGNPOSTS

What are the signposts you would look for in judging when the “bottom” is reached in the current economic turndown?

I respect your analysis more than any other in the current news environment. I urge you to apply your judgement and knowledge to this forward-looking issue. While predicting the future is hard, proposing “signposts to look for” is more reasonable and responsible. If I may presume to offer you a suggestion, maintaining a sset of proposed “signposts for changes in the economy (or market)” is something you could turn into a “signature” element in your journalistic work.

==============
Personally….

I invested all my savings in closed end funds investing in India in 2003, selling out completely into cash last October after quintupling my money; I am now completely defensive, in line with your views, and 100% in 30-year T-bonds waiting for the commodities bubble to burst and inflationary fears to abate. Since recovery in the US/UK housing markets will require lower long-term interest rates, I believe that government policy will complement a commodities price decline in restoring the price of long-term bonds, providing an investment strategy for a bad economy.

I am waiting for the right “signposts” to appear so I can reinvest in the India funds, as I find the Indian economy the most reliable one to offer strong growth for the next couple of decades. I believe Indian (and all emerging market) equities will suffer more than they should when American markets fall toward their bottom after the current “dead cat bounce” runs its course, and will then become undervalued, creating an echo of the outstanding investment opportunity I luckily caught in 2003. Comments on my personal strategy would be welcome.

According to the current climate as far as I understand it costs more for the USA to buy products and to ship them from abroad. Would that not be a better idea now to create jobs and start producing goods in theUSA? I think this would be great for the economy and for the people. Also local products would give back the confidence in peoples heads and in our pockets as well.
I also have something I would like to ask you that I can not understand.
Why is there a property price decline in the UK. Why are the banks unwilling to lend as it is very clear that they are causing the slowdown and they are responsible their own losses.
As we are looking at the current economical situation, there are way enough reasons for people to not spend their money in ther UK there were no tendencies that people would default.

Thanks Todd, I will keep reading your blog, it is brilliant!

Todd,
here my voice coming from south of Italy, but still feeling as it is the center of the world. Because, yes, as the earth is round, aren’t we always in the perfect middle of it?
What I said means that not only Alan can give you the best scenario prospectives, but I can also tell the true and the future!
So, in this bear market I suggest to believe in comunication, meaning tranportation, wire less, sea, earth and sky.
Once again a better and bigger world view has to prevail.
An economist has not to discuss on the American economy, only.
A journalist has not to create his articles by consulting the internet, only.
A president, has not to look at his country, only.
All of theme have to cope with the world.
The three of theme should be able to live in a depressed area by pickin tomatos, in south of Italy, of course! And than, give answers!
Small economies can teach you how to solve world problems.
Maria Giovanna
ps hello to everybody!

At what point does this figures(writedowns) begin to take a tmore damaging toll on the economy that can not be ignored again? frankly, i dont think the UK banks made or will make as risky bets as they did in the states. Or am i wrong?
Gbenga Ajayi

Todd,

I do believe the road will get bumpier before it smoothens out. In addition to the points you mentioned, inflation is a growing concern. Commodities like Rice have sky-rocketed, oil prices have hit all time highs. And while the Fed had the flexibility to cut rates to spur the economy during the past FOMC meetings, it might not be the case going forward as inflation becomes their number one priority. And we might even here the word Stagflation creep back into the market.
Even with the previous rate cuts, it’s starting to seem that the main goal now is not to avoid a recession, but rather to cushion the fall with as much padding as possible.

Todd, good call. The general economy is still in the slow downward spiral, as 70% is consumer driven, Higher gasoline princes are sucking what little disposible income is left in many peoples pockets, not only at the pump, but at every level of the retail economy. Throw in commodity speculation for basic foodstuffs, and company sales slow, layoffs, more credit card defaults, mortgage defaults, business bankruptcies etc. As personal incomes for most americans has grown at a much smaller percentage as everything else, people are less likely to dig themselves out of debt any faster, probably longe and slower, if at all.. So yeah, the lift is heading for the basement.

As for UK housing, I believe almost all UK property bubble bursts, happen when housing becomes so expensive first time home buyers can no longer afford entry level houses, People get caught in chains, the chains fall apart. Until housing prices reach a point of affordability, and entry level buyers can get back into the game, the entire system pretty much falls apart, all the way up the chain.

Dear Mr. Copper,
Please remind WV that who started to give away their jobs. I believed must be Mr. Bill Clinton. Remember the Nafta.Maybe they can contribute their wealth to the
states that is currently suffering due to lost of jobs. Remember they have millions of dollars.

Todd, the worst is not over. The credit contraction will take its toll and asset prices will never recover once the reality sets in. Tide is going out. Simple. The excesses can be corrected only this way. The best time to buy assets will come provided one has the CASH!

Todd: Three items of note here. .

1.) Banks should not be rescued. The whole market is based upon identifying risk, measuring risk, accepting it and protecting against it. If the failures don’t fail…… the system has not worked and the problems will continue in the future. Rather than rewarding those who made mistakes reward those who were less greedy and supported their shareholders.

2.) Any Banking 101 book would show that the lending that went on to get the system into this mess was ill advised, running against all principles of good lending and in some case probably criminal. I used to lend money and the way we saw it…lending money to those who will not be able repay it was unethical, we said no thanks and moved on.

3.) In the past it was third world debt, today it is sub-prime and the next big one will be derivatives. They are one big house of cards and trying to get an handle on the risk is very difficult. Try to understand counterparty risk and very soon you will see that all we need is one link in the chain to break and we are back into another big problem.

Mr. Benjamin.I want you to know, I loved your article on the great wisdom you have given us red blooded Americans on $200 a barrel? Wh0’sthe blame for oil prices? For forty five years my pet peeve has been, WHY GASOLINE? Todd ,do something to wake us Americans up. Have you looked into http://www.life after the oil crash.net? Engines that have been powered by compressed air have been around since 1872, that’s right 1872. Powerful engines, that moved large street trollie cars. Check out htp://www.the air car.com. An investment of over $16,000.00 will get you one. Up to 100 miles per hour. Cost to power $0.00. America needs a new Edison, Todd, you can be that person , using your pen!!! Thanks again

Dear Todd,

I am an American who owns and operates a business in the Russian Federation. Although much of the world’s economic woes have yet to seriously impact this market we are seeing a steady “tightening” in the financial markets, both in short term and medium term financing. The worst does not seem to be over to me and I agree with you that the greater impact on the global economy has yet to be felt.

I do however, draw a parallel from the 1998 financial crisis in Russia which in many ways was just a reapportionment of wealth following a time of hyper-growth and wealth accumulation. When our true financial geniuses, in the likes of Buffett and Soros, continue to talk the markets down, especially when so many of us are listening to them, leads one to ask the question — in who’s interest are they speaking of? One only needs to follow their actions over the past year to answer that question quite easily…their own, and why not, it’s business after all! Psychologically, most of us are exactly where they want us

And yes, we are all that gullible.

The worst isn’t over yet because those who help outline our financial parameters haven’t reached the right position just yet. Admittedly cynical, but…