The Recessions is Over, According to Goldman Sachs

Posted by Ray on August 19, 2009 under Main | Be the First to Comment

While this is tempting to think it is simply not true based on what I see. While I lack the credentials of the likes of a Edward McKlevely or a Ron Insana, who failed miserably in the real world, but will now share his “winning” strategy with you for $1,000, but I see the data, talk with real people all the time and am not blind to reality. From what I see we are nearing the end of the first part of the W I see coming, but we are nowhere near the end of this thing.

How in the world can there be a jobless, revenue-less, earning-less, and spending-less recover? You cannot, but that is what we are being told regardless of the fact that all the earnings report show not-so-hot data. Consider that the HP earnings looked good, but when you read the full report it showed that growth happened in China, etc. and that the bulk of earnings were due to the EDS acquisition. Also of note was the language in the report, such as: stabilizing, when there is a recover, etc. They were not using language like stabilized or in this recovery. That, in my book, is a ‘tell’ that they know things are tough.

The data from other companies shows very similar drops in revenue, growth and other ancillary information. The ports of Los Angeles and Long Beach are showing significant signs of slow down with volume 16% and 26% less, respectively, than just a year ago. Look at the Baltic Dry Index which has virtually crashed in recent weeks and is a direct sign that production is slowing in China. Based on that, where do these people coming off saying it is over when the underlining data shows, clearly, the opposite? I suspect they bought into the “just think everything is fine and it will be” much CNBC & Co.

However, this recession is not over and the data is tipped in my favor to make that statement. I do believe we will have growth in 3Q09, but that is just because of pent up demand that has to be met and that demand will dissipate fairly quickly. Retail sales were terrible, even Wal-Mart is having troubles, what does that tell you? It tells me that people are saving or paying off debt at a much faster rate than we thought, but more than likely people are just plain old broke.

I realize the unemployment rate has dropped, but that is because people ran out of benefits and not because they found work. There are some serious problems going on that programs like ‘cash for clunkers’ cannot solve, not to mention the government is dragging their feet to pay up and dealers are now pulling out of the program. If people do not have a job they cannot spend money and our economy is based, to the tune of 70%, on people spending money. While it is our fault that we let our economy be built on a service sector versus a manufacturing structure the fact remains that if we do not spend we are done, but who wants to spend if they are worried about losing their job? See the problem?

You may see the problem, but apparently economists do not as 90% say the recession is either over or close to being over. I have always hated the ‘Ivory Tower’ analysis and that is what these guys are doing. However, even looking at the best data that materialized in the past few months it has all shown how done the consumer is. This is definitely a case of ‘tell the people it is over and they will believe you’ mentality, but this time it is different because the people know it is worse, not better.

The days of tapping your credit card to buy that video game is over. Consumers lost their rears in the stock market, they lost in the housing market and credit card companies, i.e. the banks, who the people bailed out, are reaping the rewards. Minimum payments went up, their interest rates went up, the mortgage modification program is worthless to most people and people are losing their jobs, but everyone says don’t count the consumer out. They usually follow up by saying that this recession is no different than other recessions, not one data point confirms that statement.

This time is different and we all know it is because we can see what is happening. We are going to get s temporary reprieve from really horrible news, but that will be short lived. All of the evidence points to a perpetual problem that just cannot be magically fixed. People need jobs, period, and until that problem is fixed we are in for some really tough times. I hate to be the bearer of bad news, but that is how I and other, accredited, people see it. Don’t get sucked into a bear market rally, be sure to use your head, and do not let other people tell you different from what you know to be true. Especially when they did not even see this thing coming.