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This Economy Is No Fairy Tale, But …

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This Economy Is No Fairy Tale, But …

we can sure draw some analogies.

Reflecting on the United States economy and the economic woes reported from the rest of the world’s financial systems these past few weeks, we have noticed a possible correlation to the childhood fairy tale “Chicken Little.”

You probably recall from this old English folk tale that a tiny little chicken called Chicken Little felt a rose leaf fall on her tail one day and immediately ran in great fright crying “the sky is falling!”

First one she told was Henny Penny who joined her in spreading the message. On their way to tell the king, they met Ducky Lucky who joined their chorus. Then Goosey Loosey and Turkey Lurkey also voted for the tale.

Did we say “voted”? Well, they joined the parade of characters till they all met Foxy Loxy who lured them into his den by promising to tell them where the king lives.

The story goes that Foxy Loxy led them into his den and they never came out again.

You can draw your own conclusions about what happened to Chicken Little, Henny Penny, Ducky Lucky, Goosey Loosey, and Turkey Lurkey, but you can be sure that the foxy one came out of that deal okay.

Now there are those who predict that our economy will never emerge from the den it’s in, but that’s not our area of expertise, so we won’t speculate here. Our business is running a business and we plan to keep doing just that.

We believe in persistence and hard work. Those whose wares we represent have their hopes tied into the products we represent. We don’t’ plan to let them down. We plan to be here; to keep on working and hopefully only paying our fair share to the common good in order to remain in business.

We hope to pass along many good deals to you in the coming months. We don’t expect to ever be a Wall Street presence; we are what has come to be called a Main Street business.

We are drowning out those who are trying to spread the message that the rose that fell on Wall Street was actually a thorny stem or the whole bush. We know based on history that some people will come out of this slumping economy smelling like a rose.

We know that some people are simply going to see and seize opportunity out of this turmoil and disruption. Some people are not going to fare so well and are going to need assistance. We support many organizations trying to provide that help.

In some respects poverty and unemployment are big business. Like a friend of mine said after being unemployed for four months a few years ago, “if it weren’t for unemployment, a lot of people would sure be out of work.”

Think about it. The unemployment system here in the United States is huge. We hope our customers don’t have to file to collect, but if you do, you will encounter counselors, clerks, and a cast of helpers that include those who actually keep the records and generate the checks to say nothing of the landlords collecting rent for the space these agencies use. If someone wasn’t unemployed, those people surely would be. Even our culture of helping those with less actually employs lots of people to distribute money, food, shelter, clothing, and other things of need.

We can’t predict where the large-scale economy is going, but we do believe that it will keep going and those who don’t give up on it will be a big part of its recovery.

We plan to be just as “foxy” as we can be to lure you into our den and connect you with some of the finest products from around the world. We can assure you that you’ll come out okay.

Please Reply and Share with us at: http://i-shoptheworld.com/2008/10/29/this-economy-is-no-fairy-tale-but/ all Your thoughts, Comments, etc. on any/all of the following related to the current Economic situation and How we may All work Together to Improve our World Economy for Everyone’s Mutual Benefits! , namely:

- Do You really think the economy is as bad as the news media has been portraying it?

or …

- Do you think this is all just a fairy story they/the media have concocted, just like Chicken Little, to convince everyone that the “sky is falling”?

and if so …

Why?

- Do You think the media telling everyone the economy is bad, just like Chicken Little, is creating a “self fulfilling prophecy” and making the economy worse than it is really otherwise?

- Is the economy in Your country “better” or “worse” than as reported by the news media in the United States?

- How has any of this affected your personal finances and/or family finances thus far?

- What are You doing Now to prevent the reported economic situation from (further) affecting Your personal finances and/or family finances?

- What do You think can and/or should be done to improve the Global Economy?

- And Who should be doing these things to improve the Global Economy?

- What may we All do to work Together to Improve our World Economy?
for Everyone’s Mutual Benefits!

We look forward to hearing All of Your thoughts, Comments, etc. on any/all of these topics related to the current Economic situation and How we may All work Together to Improve our World Economy for Everyone’s Mutual Benefits!

United States Economy Collapsing

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Over 90% of America did not want to passage of HR3997. The US Congress was held at “Executive Gun Point” and told: “you either pass this bill or we will declare martial law.” The most painful part of HR3997 is the shift in the final bill. What was the shift? Unbeknownst to the American people, however, is that since September 20th, the 0 billion bailout bill signed into law by their President yesterday was expanded from its original 3 pages to a 451 page virtual novel of new laws virtually enslaving them to the foreign holders of their debt. In addition, there are reports circulating in the Kremlin today are stating that the first deployment of Chinas elite People’s Armed Police (PAP) under an agreement signed between the United States and China, and US Homeowners Soon To Be Evicted By Chinese Police Under New Law HR3997. Even more disturbing, these reports continue, are that these new laws not only give Chinese and European banks control over the mortgage debt of the American people, they now include their credit card balances, and which virtually the entire US populace have indebtedness to. To how utterly chilling this new US law for the American people, titled the Emergency Economic Stabilization Act of 2008, Russian legal experts point out in these reports that: Section 101 (a)(1) establishes what is termed the Troubled Asset Relief Program (TARP) to which substantial portions of what the American people currently owe to their banks and financial institutions is to …
Video Rating: 4 / 5

Commanding Heights – The Battle for the World Economy [VHS]

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Commanding Heights – The Battle for the World Economy [VHS]

How will globalization shape our lives in the twenty-first century? Commanding Heights: The Battle for the World Economy confronts head-on Americans’ critical concerns about the new interconnected world. Based on the best-selling book by Pulitzer Prize-winner Daniel Yergin and Joseph Stanislaw, this groundbreaking series explores our changing world-the new rules of the game; the winners and losers in the clash between government and the marketplace; the great debate over the impact of globaliz

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Price: $ 6.45

Freefall: America, Free Markets, and the Sinking of the World Economy

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Freefall: America, Free Markets, and the Sinking of the World Economy

The New York Times bestseller: “A lucid account” (New York Times) of the recent financial crisis and the way forward by the Nobel Prize-winning economist, with a new afterword. The Great Recession, as it has come to be called, has impacted more people worldwide than any crisis since the Great Depression. Flawed government policy and unscrupulous personal and corporate behavior in the United States created the current financial meltdown, which was exported across the globe with devastating cons

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The Economy, Bailout and Capital Markets

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The Economy, Bailout and Capital Markets

This past Friday’s  unemployment report was truly shocking. The reported drop of 533,000 lost jobs in the month of November was substantially larger than the 350,000 median estimates by many economists and our own estimate of 300,000-400,000 for the month. This level of monthly job loss is greater than was experienced in the last recession of 2001-02 and rivals any of the worst recessions in the post-war period. In addition, the job losses previously recorded for the months of  September and October were dramatically revised downward to levels averaging over 350,000 for the two months, 100,000 greater than the average previously reported. Thus, the job market, like much of the rest of the U.S. and international economies has declined severely and precipitously since last summer. But the November unemployment report is far worse than the surface numbers indicate. Yes, the job losses are widespread and worsening in the service sectors as well as manufacturing and construction. This continues the pattern of increased job erosion seen since the second half of 2007. However, the level of 500,000 monthly job losses was not expected to be seen until the first half of next year when it was expected the level of unemployment might be peaking. To be at this level in November when the economy is still declining is daunting and obviously raises the possibility of monthly job losses in the 750,000 range. Such additional job losses would easily take the unemployment rate to 7.5% or higher which would confirm the worst expectations of many economists, including ourselves. But there is something else in the government’s employment report that is causing us to look at unemployment in the current recessionary cycle as unlike anything we have experienced since the Great Depression of the 1930’s.  The government report on Friday mentioned that there were 1.9 million people who were available and had looked for work over the past 12 months and not found employment and according to the government’s report “were not counted as unemployed because they had not searched for work in the 4 weeks preceding the employment survey” for November. If we add this 1.9 million to the 10.3 million reported as unemployed in the report, we get an unemployment rate of 7.9% based on a civilian labor force of approximately 155 million per government statistics. We believe this 7.9% level of unemployment is a more accurate measure of job destruction than the reported unemployment rate in the government release. We believe this is validated by the “free fall” of the U.S. economy since the second quarter of this year particularly when measured by consumer spending and retail sales over the past three months. While U.S. GDP contracted at .5% in the third quarter, we believe GDP in the fourth quarter of this year will contract at approximately 5% with another 3%-5% contraction in the first quarter of 2009. We continue to estimate virtually no growth in U.S. GDP in 2008 as economic decline in the second half of this year outweighs the modest growth in the first half. Please see our recent Economic Presentations on our Presentations Page on our website for more detailed analyses, forecasts and conclusions.

Earlier in the week, the National Bureau of Economic Research (NBER), a committee of largely academic economists, that is the official arbiter of economic cycles, declared the U.S. economy has been in recession since December, 2007.  It confirms our analysis of the economy in our article, “We Think We Are Here”, March 10, 2008 in which we stated that we thought the economy was entering recession in the first quarter of this year. It was based on a sequence of weak economic data which included increased unemployment over the second half of 2007 and the first quarter of 2008; weakening industrial activity; increased credit losses in the financial system; worsening financial condition of U.S. consumers; spreading real estate weakness from residential to commercial markets; weakening corporate profits and weakening economies overseas.  Since we wrote that article, all of these important facets of the economy have steadily deteriorated led by intensified weakness in the consumer sector.  We have been concerned about the state of consumer finances for two years and we have consistently written about the housing bubble and overextension of consumer spending versus their income. And we warned about the doomsday scenario of a depleted consumer “knocked out” by a weakening economy leading to unemployment. Likewise we cautioned in our article “Postscripts on the Credit and Private Equity Cycles”, June 24, 2007, that the adverse credit cycle was going to get increasingly worse with dire consequences for the financial sector. In fact our byline on that article was “When a credit cycle turns negative, it does not turn negative a little bit”. Since the summer of 2007, we have witnessed the worst meltdown of the international credit system since the Great Depression of the 1930’s.  The responses of world governments and central banks to the increasing credit crisis were traditional post war economic stimuli, i.e. lower interest rates and taxpayer rebate programs. We wrote in several articles, (“Can the Fed Save Wall St.”, Part 1 and 2), August 12, 2007 and September 21, 2007 and “The Treasury Plan. Is this the Solution?” December 7, 2007 the lack of success inherent in those programs given the depleted financial condition of U.S. consumers and the necessity of expunging bad debts off the books of banks and other credit intermediaries. We also believed corporate profits, the backbone of the economic and stock market growth over the 2006-07 period were weakening sooner and faster than most market analysts had expected. But in two articles, “And Then There Was…” , October 21, 2007 and “GE, The Earnings Cycle and Food”, April 14, 2008 we warned about the rapid deterioration in corporate earnings which had been a bulwark in the corporate and stock market renaissance of the 2003-2006 period. Indeed, S & P 500 Index earnings in the third quarter were down over 20% year over year and would have been at an all time low were it not for earnings from the oil industry. So what began as a mild, containable credit air bubble in subprime mortgages has ballooned into a pervasive credit finance meltdown which has resulted in a zero demand environment in both business and consumer sectors. Now, as mentioned above, chronically worsening unemployment threatens to make the current recession deeper and more extended than previously expected. We now believe GDP for the U.S. next year could also be at zero on a December to December basis. That would make U.S. GDP growth for the 2007-2009 periods less than 1% on average for the three years.

As bad as the recession is in the U.S. it has spread in full force overseas as we recounted in our articles “Is This the End”, September 9, 2007 , “The Other Shoe”, January 7, 2008 and our International Economics article, “The Virus Has Spread”, August 6, 2008 and it is worse overseas as we stated in the August 6th commentary. The U.S. recession has suppressed the exports many foreign economies depend upon for their growth, credit losses from international and domestic asset declines have created an international banking crisis, and the collapse of commodity prices has torpedoed the high flying economies selling oil and other industrial and agricultural commodities that led world economic growth since 2004. The results are economic recessions in Western Europe, Japan, Australia and now Canada in addition to the U.S. While not in recession, India and China, the locomotives of world economic growth over the past four years have slowed dramatically to mid single digit rates and in fact have had to institute multi-billion dollar stimulus programs to keep their economic growth from falling further. In addition there are major economic stimulus programs underway in Europe and Japan. The weakness overseas is expected to be a major depressant to world economic growth in 2009.

With most major industrialized and emerging industrialized economies instituting economic stimulus programs to battle the worldwide recession that has taken hold, it is appropriate to evaluate the theory and success of these programs. We have commented in previous articles on the futility of the U.S. rescue programs (“Can the Fed Save Wall St”, Parts 1 & 2, August 12 and September 21, 2007 and “The Treasury Plan. Is This the Solution?”, December 7, 2007) up to the current time. Finally, last March, the U.S. government caught on to the need to remove bad credits from lenders and pump massive amounts of liquidity into the banking system. That restored credit stability within the banking system and then inexplicably, the U.S. government recently switched gears and decided to back consumer loans to mitigate increasing losses. We and a number of other analysts are puzzled by the unevenness of the U.S. government’s response to the current credit crisis. The capital markets have rallied recently hoping the new economic team of President elect Obama will have a more successful program. However, given the aforementioned severe increase in unemployment and the cutback in consumer spending, we believe nothing less than a targeted second consumer rebate program IN ADDITION to a resumption of purchasing bad credits from lenders and capital infusions to the banking industry is the formula for ultimate recovery from this recession. If consumers are expected to consume, they need to get their balance sheets de-leveraged and have enough liquidity to begin to exercise discretionary spending. Giving money to banks and auto companies will not move “goods off the shelves” in the current demand freeze. In the absence of a resuscitated consumer, this recession will last well into next year.

Likewise, the stimulation of overseas economies by government spending programs will have limited success for two major reasons. First, nobody will get exports “cranked up” as long as the U.S., Western Europe and Japan are in recession. Second, the collapse of commodity prices will severely depress the stimulative spending of commodity based economies like Canada, Australia and now the Middle East. So in the end, worldwide economic recovery will depend on the U.S. as it has since World War II.
To be sure, the U.S. and foreign governments and their central banks are sparing no expense or spending to cure the worldwide financial crisis and recessions. As a result fiscal budget deficits and increases in national debt will increase substantially over this year and next. We have previously written about the large future cost to U.S. and other credit and currency markets to the deteriorating national balance sheets, particularly for the U.S.
Consistent with the worldwide recessions and deteriorating economic outlooks for 2009, worldwide capital markets have virtually collapsed this year. U.S. equity markets are down approximately 40% year to date and overseas equity markets which have outperformed those of the U.S. for the past three years, are down by more than 50%. In addition, international credit markets have been crippled in the non-government sectors by the international banking and mortgage security losses. Now the spread of recession to the corporate sectors have depressed corporate bond prices and increased the spreads over non-government securities. This will continue until economic conditions stabilize. After outstripping all other asset markets over the past four years, the recent collapse in commodity prices has thrown previous profits in commodity assets into big losses since the summer. In addition, one of the biggest capital market casualties this year has been the hedge fund industry. After excessive proliferation over the past four years, a “shakeout” of this industry was inevitable. The demise of leveraged derivatives, the collapse of equity and non-government bond markets, the cutoff of bank credit and finally a stampede of redemptions by investors have caused hedge funds to sell marketable assets further depressing capital markets and have resulted in an increasing number of hedge funds to close.  In addition, the “drying up” of credit and the erosion of corporate profitability has put an end to the leveraged buyout mania of private equity funds. We had warned about the speculative excesses of the merger and acquisition craze in our article “Caution: Asset Bubble Building”, November 19, 2006 and the demise of this cycle is creating quite a bit of pain for the managements and investors in these firms who have “overpaid” with high amounts of leverage for firms that are now “reeling” in this recession. As a result of the credit and capital markets meltdown will be a new era of regulation, transparency and more financial discipline in investing. The attrition and change in hedge fund and private equity strategies is positive for sound investment in these sectors going forward. In fact we believe a shift of private equity firms to infrastructure investment is very attractive for investors.

Going forward, we view worldwide equity markets, particularly U.S. equity markets, as much undervalued looking forward 2-3 years.  Many market analysts are increasingly of the opinion that much of the bad economic news is already known and discounted in the U.S. stock market. However, our more pessimistic outlook on unemployment and the uncertainty of a more successful economic rescue program add to the continued downside risk to U.S. and overseas equity markets. As a result, the risk in equity markets at this juncture is that the U.S. recession lasts longer than calendar 2009 and is more severe in terms of corporate earnings declines and failures. For bond markets, there is more risk in that this is still a credit erosion cycle. Non-government bonds will continue to sell at inflated spreads over U.S. Treasuries until the recession bottoms. Longer term, we believe there will be a dramatic increase in interest rates as economic and financial conditions stabilize and then improve in the 2009-2011 period. The huge financing of the current economic stimulus and recovery programs will necessitate large bond offerings that will cause a large increase in yields from current levels. Commodities and commodity stocks will be depressed for most of 2009, reaffirming our economic forecast in our August 11, 2008 article on the “Dollar, Commodities and Geo-Politics”. We would still maintain a defensive posture in regards to capital asset strategy with well above normal cash positions. We would avoid fixed income instruments, particularly sovereign debt. There are some attractive fixed income opportunities in municipal debt markets but here also selectivity and credit due diligence is required. State and local governments are another big casualty of this recession and their creditworthiness is being increasingly strained. Downgrades in municipal credits are to be expected over the next two years. Once the current economic cycle bottoms, we expect huge stock market rallies led by U.S. equities and followed subsequently by overseas markets. We continue to be attracted to infrastructure investment as the long term need for infrastructure upgrade and expansion is large. Other sectors we view as attractive for investment include electric power generation, energy conservation, agriculture, water conservation and development, healthcare and education overhaul.

We invite questions regarding our current views and forecasts of the economy and capital markets for the remainder of this year and next and the longer term economic and capital market outlooks

President Obama Talks with Virginia Families on the Economy

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After meeting with a family at their home in Fairfax, Virginia, the President holds a discussion on the economy with families from the area.

Global economy gradually recovering -China’s Li

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Global economy gradually recovering -China’s Li
Global economy gradually recovering -China’s Li
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GLOBAL ECONOMY WEEKAHEAD-Clouds linger over US, Europe, Japan
GLOBAL ECONOMY WEEKAHEAD-Clouds linger over US, Europe, Japan
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Jobs & economy to top Fianna Fáil think-in
Job creation and the economy are set to top the agenda as the Fianna Fáil Parliamentary Party meets in Galway over the next two days.
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Economy sending alcoholics to hospitals

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Economy sending alcoholics to hospitals
The economy is taking its toll on alcoholics who are feeling the effects in a dangerous way.
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Economy: Fears of second recession ease, for now
WASHINGTON — No, the economy isn’t roaring ahead. And no, companies aren’t making lots of job offers. But a fresh batch of economic data Thursday at least eased summertime fears that the economy might be on the brink of another recession.
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China economy shows inner strength in buoyant data
China economy shows inner strength in buoyant data
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