4th QTR GDP drops to 6.2%...Only 3.8% to go and it's offically a DEPRESSION

Random Ramblings
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Estimates were for a drop of 3%-4%. Offically…A DEPRESSION is a yearly drop in GDP of 10% or more.

So here’s where we are…

Jobless claims have moved into the 600,000/week range from 2008’s STAGGERING 500,000/week. Think it’s just CHANCE that those GDP numbers are moving in LOCK STEP with unemployment??? NOPE…It’s all tied together folks.

Home prices CONTINUE to fall. And it WILL get worse as those jobless claims start to impact people who NEVER bought homes they couldn’t afford. Unfortunately for them, NOT HAVING A JOB makes paying ANY mortgage difficult at best.

The market continues to decay as more and more people realize that…
AGAIN they’ve been LIED TO…Last year all the Wall St. geniuses were DEBATING whether we’d even HAVE a RECESSION???
:banghead :banghead :banghead

Now we have the delution of Citi common stock by the goverment in an attempt to shore up our ZOMBIE BANKING SYSTEM.

Commercial Real Estate is being boarded up quicker than residential homes. Circuit City, Linens and Things, KB Toy, Eddie Bauer, ect. ect.
Local shopping malls look like Ghost Towns.

An now for the final death blow…

We’re gonna raise the tax rates and END the HOME MORTGAGE INTEREST RATE DEDUCTIONS for home owners that make over a certain level of income. :banghead :banghead :banghead

The tax policy we’re about to get is going to BURY what’s left of this economy.

I’ve said this before…

You play the hand your DEALT…NOT the hand you WANT!!!

The writting is on the wall. This down cycle will be like NOTHING we have ever seen before.

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Looks like the DJIA will go below 7000 today.

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Depression?? I’M ALREADY DEPRESSED!! :biggrin Actually its sad to the people around me getting laid off. These are hardworking smart people. One couple I know are getting laid off. He’s an accountant and she’s a teacher. They could lose their home. They bought their home based on their income. I followed my father in-law’s advice and used 50% of our household income to buy a home and maintain a debt ratio of less than 28% of our NET income. my wife and I both work in healthcare and feel pretty secure. But if we both lost our jobs, we’d still survive with some serious belt tightening. There are a few nice houses for sale in my town that are great deals. My wife wants to buy now. But if we wait a yr. we can afford to do it with more money down and (hopefully) lower home prices. I’m sticking to my guns!!! :cool Speaking of guns, maybe its time to start stocking up! :shocked

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I have a BB gun, does that count? The cops have all of my real guns, long story. My father is an idiot…ok that’s the shorter version of the story.

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A good investment would be assult rifles. BO is about to put another ban on them. Get them while they are legal.

You can get a good AK-47 for around 600 bucks right now.

http://abcnews.go.com/Politics/story?id=6960824&page=1

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fdjake…

not following the math here…

4th QTR GDP drops to 6.2%…Only 3.8% to go and it’s offically a DEPRESSION.

Estimates were for a drop of 3%-4%. Offically…A DEPRESSION is a yearly drop in GDP of 10% or more.

Not debating the tailspin…just the 4th quarter vs. annual numbers…

Mike

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Well Mike let’s look at it…

The “EXPERTS” saw a drop of 3-4%…We HAD a drop of 6.2%.

Now in my world I see NOTHING that is going to SLOW that level of descent. As a matter of fact EVERYTHING I see tells me that drop will accelerate.

I understand an offical depression is a YEARLY drop of 10% or more…

What I don;t think the “EXPERTS” understand is we have entered what Roubini refers to as the “NEGATIVE FEEDBACK LOOP”

Here’s how it works in a nut shell…

Your neighbor loses his job. He SHUTS DOWN economically. The restaurant, clothing store, hardware store, car dealership, he once went to slows it’s ordering for everything they buy because your neighbor is one of 600,000 a WEEK this is happening to. This in turn, creates lay offs in OTHER businesses. Once those businesses make the EASY cuts (things like PEOPLE), they then face the HARD CUTS like NOT paying back their loans. Anyone watching the business default rates on lines of credit??? (UP 50% from last year) Banks get nervous so they pull in those credit lines at EXACTLY the MOMENT those businesses are in DESPARATE need of CAPITAL!!! (Meredith Whitney NAILED this exact scenerio over a year ago) And it goes on and on…

Oh…this WILL BE a depression…The new tax policy just GUARANTEED IT!!!

It’s all happening…My guess is we’ll all be talking about this for a LONG TIME. It will be an event (like the first depression) that will leave permanent scars on lot’s of Americans.

Here’s what we STILL have to look forward to!!!

A commercial Real estate collapse on par with the residential version we have now. Tell me WHO comes up with the FINANCING on all the commercial buildings PURCHASED or BUILT in the last 5 years that are NOW about hit the first re-adjust.

A State by State economic DISASTER in which LAY OFFS will be in the HUNDREDS OF THOUSANDS. Remember THESE JOBS were suppose to be SAFE. NO ONE takes a State job for the MONEY…They take them because they can be reasonably certain they won’t lose it. THOSE DAYS ARE OVER. MASSIVE lay offs of State and Municipal workers are coming and coming FAST. NONE of those numbers are in the estimates. That’s why the estimates are a JOKE!!

Obama’s stimulus pays out about 60% of ALL State aid to MEDICAID…WHOO HOOOO…I can see the jobs being created all ready!!!
No…not ONE job will be created. That money is GONE…It’s going to pay for NURSING HOME CARE for people who have NOTHING IN THEIR RETIREMENT YEARS. Guess what??? There’s MILLIONS of them about to join the PARTY Mike!!! It’s called the baby boom generation. TENS OF MILLIONS are now entering their DRUG MAINTAINANCE YEARS, thier diabetic years, their high blood pressure years, ect…GUESS who’s gonna buy those MEDS for them MIke???

WE ARE!!!

So Mike…We’re at 6.2 and have accelerating WEEKLY JOBLESS claims…That means we’re 3.8% away from our FIRST 10% GDP quarterly drop. With everything we’re facing SHOW ME how we DON’T GET THERE.

GREAT DEPRESSION II sign ups right here!!!

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GREAT DEPRESSION II sign ups right here!!!!

would need your password for that…

…just kidding

my gut feeling is that redemptions with the stock market selloff will accelerate once we breach the emotional 7000 level of the DOW.

desperate times call for desperate measures.

scary stuff with the commercial shoe…not exactly like the financing for a SFH.

thanks for the post…

Mike

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John…

figures that a rehabber like yourself would come up with a good workaround like that.

when you get a chance…need a 5th line for Harry Reid.

come to think of it…probably a few more out there.

Mike

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Hey Mike,

I just wanted to lay out my thinking on this stuff. I hope it didn’t come across like I was debating with you on this topic. I KNOW you “get it.”

I get a little PO’d sometimes when I consistantly see the people of this country out right LIED TO by supposed “EXPERTS” It makes me sick.

Notice the Jim Cramers, and other talking heads ALL called a bottom in this market at the mid 7000 range. I COULD NOT BELIEVE what I was hearing. We spent DECADES kidding ourselves about money we NEVER HAD…Now the bill is due and the entire country is literally BROKE.

It’s gonna be bad…REAL BAD…

I would seriously be buying as much GOLD as you could right now. 2 scenerios will make that investment appreciate.

  1. The guaranteed to show up INFLATION that ALWAYS accompanies a Goverment printing spree.
  2. The realization that we ARE NOT at a bottom in stocks and this WILL get worse. As people see what little thats left of their 401K’s evaporating they bail out of stocks as quick as they’re RUNNING away from real estate now. ( and THAT will be the true bottom)
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So I gotta ask, are you still long on ford?? Im just curious.

John

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YES…

Anyone happen to notice what this 800 point DROP in the DOW has done to Fords stock???

NOTHING…Absoluely NOTHING…(actually Ford went UP to $2)

Yet if you happen own GE… The once SHINING STAR of the DOW…YOU GOT YOUR @SS HANDED TO YOU LAST WEEK.

The BAD news is ALL IN Fords stock price. Could it go to $1…Yes it could…Will I care??? NO I WON’T. I’LL BE BUYING MORE.

It’s a 5 year plan…Believe it or not…and I know this is RADICAL THINKING…People will buy new cars some day. They’ll buy them from Ford too. Ford might not beat Toyota,But am I the ONLY one here who thinks that Fords sales just might improve when this country finally moves out of this mess.

Here’s an interesting stat for you…

In 1990 the Nikkei traded at 38,000
In 1990 HONDA traded at $4.36…Remember 1990??? WE had a BIG BAD RECESSION…

Let’s move forward…

2009 Nikkei is at 7500
2009 Honda is at $24.00

So to recap…Japans stock market has fallen 80% from it’s 1990 highs, yet HONDA is UP almost 600% in that exact same time frame. (if I had used 2007 for the comparison Hondas stock was actually $40, so it would be almost a 1000% increase) Markets will do what they will…But PEOPLE WILL BUY CARS…At some point they MUST replace those old units. The point being…Our stock market could LAY THERE or FALL for a decade… Certain individual stocks WILL NOT.

If my estimates are correct (based on past recessions) consumers will start replacing their old cars by the MILLIONS sometime in 2012 to 2013. This time frame is simply based on yearly sales of NEW CARS. They PEAKED in 2005-06. That means that by 2012-2013 ALL those cars will be out of warranty, be about 7 to 8 years old, and have over 100,000 miles on them.

It’s THE PERFECT SET UP…This will happen just as the economy STABILIZES. Notice I didn’t say EXPANDS…I’m playing worst case scenerio here. The economy in most likely NOT FALLING by 2012-2013. If it’s expanding… EVEN BETTER!!!

The bottom line is this…

Cars are NOT luxury items…They are NEEDED by millions of people to get to WORK. Once this cycle breaks…There is going to be HUGE, HUGE, HUGE, pent up demand for new cars. This is EASILY seen in the catastrophic drop in NEW car sales we currently are experiencing. REMEMBER…Everything OVER CORRECTS…This isn’t MY theory…It has happened in EVERY SINGLE RECESSION this country has ever had.

So yes…I’m as LONG FORD as you could be and have been adding SHARES to my current postion.

I’m not the only one who see’s this…

http://online.wsj.com/article/SB123414690415262141.html?
mod=todays_us_page_one
If that link doesn’t work… GOOGLE…Pent up demand could pull economy out of hole

Notice in this article the references to 1980 and that recession…

One other point about that 1980 recession you might want to look at???

FORD Stock price in 1981???

$1.00/share

FORD Stock price 6 years later 1987???

$14/share

I’ll GLADLY wait 6 years for a possible 1400% return. We’ll see how it plays out.

PS…For anyone smart enough to have held those Ford shares to 1998-99???

Those folks were rewarded with 3 STOCK SPLITS and a 1999 closing price of $37/share.

Let’s look at those stock splits and that appreciation…Let’s say you did what Rich in CT is thinking of doing, but it’s 1981. Rich takes his $3000 and buys Ford stock at $1.00 (he could have bought that stock at that price over many MONTHS in 1980-81 so timing isn’t an issue)
To make the math easy we’ll say he got 3000 shares at $1 each.

So Rich sits on his 3000 shares and WAITS…By 1987 Rich has $14,000.
In 1989 Rich gets notified that he now has 6000 shares of Fords stock in a 2 for 1 split. The stock splits again in 1998 so Rich has 12,000 shares. It splits AGAIN in 2001 and Rich now has 24,000 shares at $30 each for a total of $720,000 on his $3000 investment.
I’m not trying to say ANYONE would have held on that long or that Ford will split it’s stock that way in the future.

What I am saying is that there were EXPERTS out there in 1981 (just like here) that thought this stock was DOGSH*T.

But hey…things are diffferent this time. :banghead :banghead :banghead

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FDJake,

I agree with you that Ford will go up long term, assuming they survive (and I’m assuming that they will). Obama is not going to turn his back on the unions that elected him.

However, if you buy Ford stock at $2 and it goes to $14, you have a 7 fold increase. On the other hand, if you buy Ford stock at $1 and it goes to $14, you have a 14 fold increase. If we are truly entering a DEPRESSION as you and I both believe, then people aren’t going to be buying large numbers of cars anytime soon. So, I’d rather be patient and buy Ford at $1 than $2. In addition, Ford stock has been declining during the 800 point drop on the DOW. It hit a low of $1.50 on February 20th. As I’ve pointed out, stocks near bankruptcy trade (with big moves) on news. That’s why it’s back at $2.00 right now and why it will make it’s way back to $1.00 in the future.

Mike

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Mike, I agree with you…

I think YOU and everyone reading here will have plenty of opportunity to buy this stock at $1.00.

The only thing we may disagree on is this…

PLEASE. PLEASE, PLEASE, do not trade this stock…If you get a shot at $1.00 just BUY it and HOLD it. I’ve DONE THIS BEFORE. You can make some short term money trading, no doubt about that…But this type of scenerio comes along one or twice in your lifetime. Don’t play around with it. BUY IT and HOLD it if you score it at $1.00 because there will come a day when you get caught OUT. At that point you won’t be worrying about wether you bought it at $1 or $2. You’ll be SICK thinking you OWNED it at those levels and NOW have to buy it BACK at $5!!

The pay off for you and your family could be mind blowing in this stock. I’d hate to see you miss out. Instead of trying to pick the bottom, JUST start BUYING it. If everything Mullally is doing on a corporate level gets some help from an economy that just STABILIZES. The payoff here is HUGE.

It should also be said that this IS a high risk investment and NO ONE should be putting money into this they can’t afford to lose.

Rich in CT has the best attitude towards this investment I’ve read here.

Mike…BUY IT…Don’t PLAY with it.

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I’m buying as soon as the login for my Fidelity account lands in my mailbox regardless of the price. If it goes down to $1, which I think it will I’m gonna scrape up whatever cash I can, put it into an Etrade account and buy more F with it. Shit, even if it’s $100 I can get 100 shares. If I lost $100 my life would not end, if I gained an easy $6-800 in a few years time from $100 investment that would be a nice little bonus.

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fdjake…

what are your feelings about the outlook for GM and Chrysler…their survivability?

that said…what about the suppliers that service the Big 3…their survivability and how this disruption in the supply chain would/could affect Ford.

Personally…I have no desire to be “married” to a stock like this.

Some excellent opportunities are out there…low hanging fruit.

Take a look at this list:

http://en.wikipedia.org/wiki/List_of_S%26P_500_companies

With the major indexes now having lost 50% of previous highs…it’s a prime time to start using the “sort” function on your Excel spreadsheet.

I’ll take a list like this…copy it into Excel…and just keep the symbol and company name columns…I’ll then add columns for Average Daily Volume and Current Stock Price.

Then comes the fun part…sorting low to high based on stock price.

C will be near the top…just like F will…both being stocks in the couple dollar range.

But further study will reveal that C’s intradays show violent swings…while F is dead wood.

Comparatively speaking…F don’t mean nothing right now. But these, on the otherhand…are the oxygen for the economy:

http://www.analyzeindices.com/ind/banks.htm

Significant trades in this area, (with the right training and tools), can be had.

I don’t consider this playing…to me it’s called income.

The dead wood, (F), will probably pan out…and very nicely at that.

But serious money is out there…right now.

-Mike
btw…C a zombie?..yes, of course…but if that zombie that holds pooled residential mortgages…credit card debt…commercial mortgages…goes. So do we. Pretty sick system…as you say…play the hand you’re dealt.

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If anything is to die I think GM or Chrysler would certainly go before Ford does. That being said I don’t think this country will allow any to go under. I’d certainly not want to have money in Citibank right now, if anything is to go under that is far more likely than Ford is I would think. While I don’t think they gov’t will let that one drop as well I think it’s more likely.

I think the vendors will get beat worse than the automakers are. The one with the best prices will get the contracts, the rest will fall away with no gov’t agency to help them. The ones that live will suffer severe layoffs and have a tough time weathering the storm. These little parts suppliers just don’t have the cash reserves that Ford does to ride it out so it will be a bumpy ride.

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Ford stock 5 days ago…$1.67
Dow Jones 5 days ago…7413

Ford stock Fridays close… $2.00
Dow Jones Friday…7062

According to my math Ford has actualy moved UP as the dow lost almost 400 points.

Most of the bad news is IN the price of Fords stock. The original move UP in Ford (January) was tied to the circus in Washington. I couldn’t have been happier to see Ford pass on the goverment bailout money.

Check out www.autoblog.com for the story on the new Ford Crossover that will be built in Kentucky. They have a nice piece from a local news station on the car. It’s a winner!!! Here’s a pic…

http://www.carwale.com/blog/wp-content/uploads/2008/04/11.jpg

Here’s a road test review…This vehicle has been in Europe since 2008.

http://www.youtube.com/watch?v=-Vhc8_czaSc&NR=1

The KEY to this investment is Ford’s European car portfolio. The plan is to bring the Fords being sold in Europe to the United States over the next 1-3 years. So…If we KNOW what’s coming here…Why not look at what the automotive press is saying about these cars???

The new 2012 Ford Fusion is based on this car…Here’s another review.

http://www.youtube.com/watch?v=mfE-e3ibFxE&feature=Playlist&p=09E8D28362158967&playnext=1&index=15

How about the 2010 Ford Focus??? Want to see what’s coming?? Want to see what the Europeans think of this car???

http://www.youtube.com/watch?v=dTY3NS1ardE

This is the BEAUTY of this investment…We have an ENGINEER running Ford now (Alan Mulally) …He looked at Fords $1,000,000,000 profit (Yep, that’s right $1 billion PROFIT in Europe 2008) and asked a simple question…

WHY IN GODS NAME AREN’T WE BUILDING AND SELLING THESE CARS IN THE U.S.???

Seems there was a pissing contest at Ford in the 1990’s. Instead of developing cars people actually WANTED, Ford USA built crap…Ford Europe however built GREAT cars, cars people actually CHOSE over Toyota and Honda…When Mulally got to Ford he gave the BOOT to Ford USA’s then President and promoted Ford Europes President to GLOBAL PRODUCT President.

That in a nut shell, is why AMERICANS are about to see a side of FORD they NEVER KNEW EXISTED!!!

The show starts in 2010-2011

Stay tuned…

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I know this has nothing to do with your discussion per se, but I can offer some insight into the mind of the customer.

Two weeks ago my wife and I had to turn in our lease vehicle. A 2006 Jeep Commander limited. We tried to work with Chrysler Financial to keep it as we know it was a nice loaded out vehicle that we had taken great care of. However they would not negotiate the term, the interest rate, or the extended warranty. So we went out and started pricing new vehicles. To our suprise we found a fantastic deal on a Ford expedition EL that had many after market upgrades that the dealer had made for a customer that ended up not qualifying. Before we pulled the trigger on the deal we went to the Chevy dealership up the road to see what they had to offer. They treated us very poorly. They would not negotiate the price (who pays sticker price for a car?), they were stingy with the incentives, and downright rude in general. BTW their showroom was empty of customers. So before we pulled the trigger on the Ford deal we spoke to a couple more local Ford dealerships but no one could match the deal for the car we were looking at. So to make a long story short we headed back to Ford, and bought the Expedition EL. we got a fantastic financing rate. Not 0%, but very close to it, and we financed it over a long period of time. If they want to give me their money almost for free I will be happy to take it for as long as I can. We got a great warranty, and they bent over backwards to get us the deal we wanted.

Chrsyler and GM could not have cared less about us. I don’t know whether the bail-out money is making them feel invincible or what, but the Ford people knew they had real customers ready to buy and they ran with it. I feel confidant that Ford will be the Auto Manufacturer that survives these economic times.