Do keep in mind that I’m predicting the government will tell us that we’re in positive growth for Q3, 2009 – and I expect this to continue at least through Q2, 2010…with an outside chance it might go all the way through Q1, 2011. But I’m also saying that its complete BS – its just shuffling money around. Here’s an excellent take which tracks with my views:
…We see more than 100% of GDP growth as completely dependent on government(s) spending.
The Federal Housing Administration has issued more than a trillion dollars in mortgages this year, picking up where Fannie Mae and Freddie Mac left off (they really haven’t stopped either). Delinquency rates are approaching 17%.
Real GDP may be positive for the quarter, but when the government is involved there are lots of shenanigans.
For example, we’ve heard it plans to deduct the cash rebate for cars from the sales price, thus lowering the GDP deflator and artificially raising the reported real GDP number.
Senseless…
…When the market realizes that the Fed can’t create inflation (a full monetization of the majority of debt; something that would make even Ben blink), it’ll see that the S&P 500 is really trading at 20 times earnings that are not growing.
It’ll realize that all we’ve done is actually increase the overall debt in the system with massive stimulus and spending.
It’ll see the risk in stocks as extremely high.
Its what I expect, too – and my prediction is March of 2010 is when the proverbial poop will hit the fan. It might come sooner than that – the upcoming Christmas shopping season looks to be a disaster, and as that bad news comes home it might start the renewed slide in stocks right after Thanksgiving. On the other hand, Obama and Co might manage to weave and dodge (and borrow and print) their way through for a while longer…but eventually the truth comes out: we can’t spend our way to wealth, and when you’re broke the worst thing you can do is borrow more money.
Credit is contracting; incomes are falling, home prices continue to slide (in spite of some alleged stats to the contrary…my house is probably worth $153,000.00…three months ago, it would have fetched about $187,000.00; all around the country, this is what is happening…especially in FL, NV, CA and AZ), corporate insiders continue to bail out of stocks, unemployment continues to grow…its called a Depression. It can be fixed – but not by Obama’s warmed over New Deal.
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