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alstry (35.42)

Alstry's Accellerating Deceleration

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December 08, 2008 – Comments (10)

Broadcom cuts view, citing recent 'cancellations'

The salient word is recent.  Broadcom is a technology company....and it is not just Broadcom only....it is company after company and industry after industry.

Basically, the rate of slowing is speeding up.  It is spreading wider as well as deeper.  This was inevitable as access to money dwindled, fewer could spend, and a concept I have alluded to for some time.  I call it concentric contraction.....or a contraction to a center point.  It is a theory I developed about three years ago that we are now seeing tangibly day after day with enhanced clarity.

Each time a company shuts down a plant....it likely causes its suppliers to cut back as well.  We are seeing hundreds of plants shutting  down everyday at ever increasing rates.  Soon much will slow to a trickle.....especially as we close out the year.

We are already at almost 7% reported unemployment that that doesn't count the tens of thousands of reductions we have read about in recent weeks and the planned reductions that we know are around the corner.  Now businesses are cancelling orders....others are declaring bankruptcy in an attempt to reorganize, and more are shutting down completely.  Expect many more layoffs ahead as ring in the new year.

It seems we are approaching the top of the roller coaster......hands up everyone.

 

10 Comments – Post Your Own

#1) On December 08, 2008 at 8:52 PM, JGus (28.76) wrote:

In String of Bad News, Omens of a Long Recession

...Most frightening of all is that the worst job losses may be yet to come. If history is any guide, millions more Americans could lose their jobs before businesses start to expand again.

The worst jolts to the labor market tend to be only the precursor of six months or more of additional layoffs. Employment suffered a major contraction in December 1981 and January 1982, and workers did not see a stable market for about 10 months, including another big round of layoffs in July 1982.

A similar pattern occurred in the other great postwar recession, in 1974, when several months of a stagnant labor market were followed by a violent contraction over the new year. After the worst month, December 1974, the job market took about six more months to stabilize.

So in the best case — where November’s 533,000 lost jobs signals the bottom of the labor market contraction — workers could face six more months or so of hard times.

“We’ll be lucky if the unemployment rate is below double digits by the end of next year,” said Jared Bernstein, who will be the chief economic adviser to Vice President-elect Joseph R. Biden Jr. “Even if the economy improves, the growth won’t be enough to rehire laid-off workers, much less absorb those coming into the labor force.”

There is no guarantee, of course, that November’s numbers will be the worst of the current round of layoffs. Even before Lehman Brothers collapsed, employers were on the defensive, cutting more than 400,000 jobs after Labor Day.

Now that the full magnitude of the financial crisis is apparent, companies are tightening their belts further. Just last week, AT&T, Credit Suisse, DuPont and Viacom announced deep cuts. Layoffs are expected in the financial and automotive industries after the new year.

“This current environment requires action, and that’s what we’re doing,” said Mohammed Nakhooda, a spokesman for Nortel Networks, the maker of telecommunications equipment, which has lost business this fall from large corporate clients cutting costs.

Nortel, based in Toronto, said it would cut about 1,300 jobs, or 5 percent of its work force, including some at its United States operations. It will also begin a hiring freeze and cut back on employee travel.

“It’s tough but it’s necessary,” Mr. Nakhooda said. “The business environment has obviously changed pretty drastically over a short period of time.”

Some economists predict that the economy could lose as many jobs in the first six months of 2009 as the entirety of 2008. Nearly two million jobs have been lost since the start of the recession last year, two-thirds of them since September.

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#2) On December 08, 2008 at 9:03 PM, jgseattle (32.43) wrote:

Sounds like concentric contraction is a move to the mean to me. 

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#3) On December 08, 2008 at 9:26 PM, alstry (35.42) wrote:

Lehman, Circuit City, Tribune ... Chapter 11 deluge?
Conditions are ripe for steady stream of bankruptcy filings, like we've seen with companies from WaMu to Pilgrim's Pride.

The path to any destination begins with the first step.  When conditions are ripe.......you may get a stampede.

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#4) On December 08, 2008 at 9:36 PM, BradAllenton (31.44) wrote:

Soooo what should we do?

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#5) On December 08, 2008 at 9:42 PM, alstry (35.42) wrote:

Act prudently.

Party heavily.

Spend time with your family.

Help those who are less fortunate that you.

Improve your skills.

Have a good balance between cash, a hedge against cash, and a hedge against the hedge hedging the cash.  Some people are advocating gold, others the Swiss Franc, me.......some quality cases of vodka or wine seem as good as anything.

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#6) On December 08, 2008 at 10:24 PM, FAHayek (95.18) wrote:

Hedge with anything you like, as long as it derives value outside of debt or the fiat currencies, which are attached to the socialist planning of it's value. I think art could be a good play, even real estate, it is pretty cheap, if you are risky, but please make sure it has a function, or intrinsic value.

According to the numbers, no not the ones skewed by the government, the real ones, we are seeing the culmination of the real wage growth stagnation, now 2 people work per house and earn maybe 15% more over the last decade. that is not good, which is why they borrowed to make up for the short fall. Well, like all good centrally planned, market coordinated socialist plans, they fail, because they destroy the supply to demand and the natural laws of a free market economy.

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#7) On December 08, 2008 at 10:25 PM, Zanibel17 (97.15) wrote:

I like the idea of storing a cache of alcohol as hedge against economic disaster.  Should we stock up on cigarettes as well?

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#8) On December 08, 2008 at 10:34 PM, FAHayek (95.18) wrote:

I love alcohol as ah edge, I have an entire mini wine cooler, with 50 bottles of wines, champagne, and some scotch. It appreciates in value, tastes good and you will be needing it if the economy continues down this downward spiral.

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#9) On December 09, 2008 at 12:12 AM, DemonDoug (73.55) wrote:

no no, because, the markets were up, so it's all good!

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#10) On December 09, 2008 at 1:46 AM, alstry (35.42) wrote:

Dec. 9 (Bloomberg) -- Sony Corp., the world’s second-largest maker of consumer electronics, said it will cut 8,000 jobs and reduce investment in electronics as an “acute downturn” in the economy hurts profitability.

At least it wasn't 9000.

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