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alstry (35.70)

Alstry DISAGREES with Mish?????

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December 29, 2008 – Comments (13)

First, Mish has an excellent blog today on his disagreement with Nobel Prize winning economist Paul Krugman.  For the most part, I think Mish is dead on and my disagreement is more on degree rather than substance.

Here is his blog and a good read for those interested.....

http://globaleconomicanalysis.blogspot.com/2008/12/krugman-still-wrong-after-all-these.html

 

My disagreement is on the following relatively minor point......

Nonetheless let's try it Krugman's way looking at what industries were directly impacted by the [credit]bubble.

Direct Impact of Housing Slowdown

Manufacturing

Retail

Shipping

Finance

Construction

Travel

Leisure

Restaurants

Energy

Commodities

Trucks and SUVs

City, State, Local Government Spending


Little Impact of Housing Slowdown

Health care

Education

It is my positions that Health Care and Education were substantially impacted by the credit boom.  Huge dollars flowed into both as a result of donations from gains directly caused by the easy credit environment.  Health care premiums skyrocketed for similar reasons and people could afford to pay due directly to the credit boom.  Many endowments were funded directly resulting from the credit boom.....

It is my belief that the impact on Health Care and Education will be just as profound as other sectors....it is just that the timing will be a bit later......

You will see the impact really start to kick in once the New Year starts........Madoff is a good first step demonstrating the negative impact on endowments, charitable medical causes, ect.........

Overall..... an excellent blog by Mish and a good read for those trying to understand the problem......even if I don't fully agree with his post.

13 Comments – Post Your Own

#1) On December 29, 2008 at 1:50 PM, GNUBEE (24.85) wrote:

Alstry, what education is being looked at? If public education is included, it's gonna get whollapped, just the same as local/state is.

Because public education is largely funded by .....homeowners.....but wait homeowners never benefitted from easy credit right?....whoopsies.

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#2) On December 29, 2008 at 2:07 PM, alstry (35.70) wrote:

It will be all forms of education...public, private, primary, middle, high, colleges, universities, ect.....

if it needs money to function.....it will be affected by the credit crisis.

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#3) On December 29, 2008 at 2:56 PM, dwot (99.50) wrote:

I completely agree that education and health care are going to be hit big time.  Look at the cuts of education endowments happening already.

And it isn't going to be big loans because you will have a good job...  Wages going down means that it will take people until their 30s just to pay for their education.

There is an enormous decline in parenthood in the well educated.

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#4) On December 29, 2008 at 3:47 PM, DemonDoug (98.73) wrote:

I also agree that health care is going to be hit, but not as hard as education.  The days of paying 40k tuition to read books about "womyn" and talk about plato and drawing pencil art will be crashing to a halt real soon.

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#5) On December 29, 2008 at 3:54 PM, alstry (35.70) wrote:

Demon,

If you can figure out how families and businesses are going to keep paying $12-$15K for health insurance makes you a smarter person than I.....which I think is a given anyway.

Its one thing when everyone is borrowing for everything....but when that stops......all slows down???

Does this still make me more bearish than you????

DWOT.....although we don't play much together....I love your blog.

 

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#6) On December 29, 2008 at 4:48 PM, angusthermopylae (41.33) wrote:

alstry,

I posted a question on floridabuilder's blog a while ago (never got an answer from anyone--I think it was toward the end of his blogging, and he was getting tired...)

The question was basically along the lines of Mish's article that you linked:  A lot of things go into a house (parts, pieces, equipment, skill and labor), and those items were a big signal that things were going down hill way before the "housing crisis" was even a common term.

So, my question was along the lines of "How much time does it take to recover from that destruction?" Skilled labor finds other jobs; nail, bolt, and hammer manufacturers go out of business; the wood supply industry shrinks (maybe leaving only a couple of survivors...); on and on.

The question isn't meant to get a guru's prediction of the bottom--the question is meant to figure out how long an uphill battle it will be to recover.  For example:  Let's say that nail-gun manufacturer X is the only survivor of the "crisis."  If demand for housing were to pick up tomorrow, there would be a long lead time for X to supply all the nail guns necessary to build those houses...or a lot of guys are going to have a lot of sore thumbs, and the rhetorical "housing recovery" will be a lot slower than it should be...

(...conversely, could this lead to another bubble?  Demand is high, production capability is low, so prices skyrocket again...ouch!  If this is true, expect several mini-bubble/collapses along the road to recovery...)

The same applies to labor, wood, trucking, architects, microwaves, etc., etc.  The after-effects of the downturn are not only going to spread to "unexpected" areas, but the mere fact of a downturn is going to inhibit recovery!

So, am I stating the obvious, completely incorrect, or is there something to this "circle of [financial] life" stuff?

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#7) On December 29, 2008 at 5:05 PM, alstry (35.70) wrote:

angus

You are just thinking logically....it is not a crime or something to be ashamed  of...

 

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#8) On December 29, 2008 at 6:26 PM, angusthermopylae (41.33) wrote:

*blushes*

garsh...

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#9) On December 29, 2008 at 6:30 PM, BGriffinFlorida (27.15) wrote:

As to health care, A family member who is a doctor, remarked to me her surprise at the year end rush she has been experiencing, since it was counter to the downturn.

She is now of the opinion that the rush is due to those who fear job loss (and loss of benefits) and those who have benefits that will soon no longer be in effect.

ALSTRY, as usual you are on target.  This anecdotal evidence suggests the downturn in healthcare might not be too far off.

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#10) On December 29, 2008 at 8:30 PM, alstry (35.70) wrote:

BGriffen,

I have contacts in the industry....the downturn is real and it will be felt immediately.....especially once the new year starts and budgets are finalized.

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#11) On December 30, 2008 at 12:17 AM, jegr5347 (< 20) wrote:

The Fred Thompson's video on Mish's website is just phenomenal. It is exactly how I feel about the recovery. Economic policies that stimulate consumption and borrowing as opposed to saving and investing are doomed and will only drag the recession.

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#12) On December 30, 2008 at 12:56 PM, Option1307 (30.51) wrote:

 alstry

I have contacts in the industry....the downturn is real and it will be felt immediately.....especially once the new year starts and budgets are finalized.

I completely agree with this statement. I also have a lot of contacts (including family) in the industry and they have shared with me as of late that their numbers are lower than normal. In their eyes, people have been putting off medical check-up's and other non-essential aspects, only keeping appointments that are absoluetely necessary. This includes less hospital visits, procedures, and medicines. I also have been hearing about significant layoffs in the biotechnology/pharmaceutical industry as well.

I wasn't sure if this was just a localized event or if this was widespread, it's interesting to hear that you are finding similar thoughts out there. 

A slowdown in health care? If this is true, things truely are awful out there because for most, healthcare is the last expensive to go...

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#13) On December 30, 2008 at 12:57 PM, Option1307 (30.51) wrote:

oops...

*last expense.

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