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alstry (35.47)

Get Ready!!!!! AVALANCHE!!!!!!!!!!!!

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December 06, 2008 – Comments (16)

You are going to start reading things you have never seen before.  You are going to hear our leaders use words like HISTORIC or UNPRECEDENTED or UNEXPECTED.  The first two may be true, but for leaders of this blog and others, it will be anything but unexpected.  As cutbacks take place, services and the quality of the delivery of services will deminish dramatically.

The downward spiral really has just begun.  It will get so bad that even those that have been long time bears will begin to become Bulls (it is much more exhausting and mentally draining to be a bear than a bull...cheerleading is fun).....but if my perspective is correct, they are still way too early.  Let's hope I am wrong.

From Bill Fleckenstein:

"After considerable thought and deliberation I have decided to make a major change in my life: I am going to close my hedge fund. I have several reasons for no longer wishing to run a short-only fund as I have for the past 12 years. First, my original reason for starting the fund was because of developments I saw occurring in the late 1990s that I wanted no part of. I felt that Greenspan was fomenting an environment that would lead to disaster, as consultants, financial advisors, and the public at large were losing all respect for risk. Of course, the reckless behavior carried far higher and lasted much, much longer than I ever imagined it could. However, the recent carnage in the stock market, real estate market and the financial system (as well as the job losses) has washed away those excesses to a large degree and it has violently demonstrated the risks associated with investing....

Lastly, on a personal note, I no longer want to run a short-only hedge fund, as it is very stressful, nerve-wracking and generally not very much fun, entailing an intense focus on the short term to effect risk control. In addition, one views the world differently when operating solely from the short side and I would like to widen my focus as I did when I managed money from 1982-1995. My wife is especially happy about this potential change."

On a personal note....I really can relate to Mr. Fleckenstein.

Ken Heebner in WSJ:

Fund Manager Turns Bullish on Financials

After making a fortune betting against financial stocks until last summer, mutual-fund manager Kenneth Heebner is turning bullish on the sector.

Mr. Heebner, who runs one of last year's best-performing mutual funds, is sure banks and insurers will recover next year, thanks to Treasury Department and Federal Reserve efforts to bolster lending.

Only time will tell if he is right. Meanwhile, that switch has harmed his performance lately.

His CGM Focus fund, which for years has posted a string of market-beating returns, this year is lagging behind the Standard & Poor's 500-stock index by 11 percentage points. For only the second time in his 11-year tenure, he is in the red, off 52%.

Here is some Governor talk:

Government will have to change "in a historic way," he said. As part of that, he said, "there's no question that there will be spending cuts in programs that have existed for a while."

Warning that Minnesotans are facing a time of "pain and sacrifice," officials Thursday said they would slash state spending and rethink the role of government in the aftermath of a towering deficit that tops $5.2 billion over the next two and a half years.

If you think Minnesota faces stesses, California can't even pay its vendors.......

California, the world’s eighth largest economy, may pay vendors with IOUs for only the second time since the Great Depression, State Finance Director Mike Genest said.

Governor Arnold Schwarzenegger warned that he may issue the warrants, which are a promise to pay with interest, to suppliers and contractors as the seizure in credit markets may make it too costly to borrow.

“It’s getting worse very quickly,” Schwarzenegger, a 61- year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. “It’s like an avalanche in that it gains momentum. And that’s what we’re in right now, so it’s a real crisis.”

I only used a snowball analogy, but in true Hollywood fashion, the Governator uses an avalanche.  Any thoughts on what is the difference between a real crisis and a fake crisis?

If you think its bad now, just wait until all those employees paying taxes this year won't be paying next year due to millions of job losses or pay reductions.  Also, nor will all the businesses shutting down.  Not only will millions of money losing corporations not be paying taxes, what about when they start asking for the NOL carrybacks.  That will be billions and billions that the governments will be forced to REFUND to the corporations.....especially banks and builders. 

The avalanche has just started.  Stay calm.  Stay cool and/or warm.  Stay well stocked.  My suggestion is something with a long shelf life........cigars and whisky sounds like a pretty good start.

The rhetoric is just leaving the starting gate.  Can any of you pay your vendors, your grocery bills, or your state property taxes with IOU's???? 

It is simply amazing how many are simply staring at their feet hoping the avalanche is only Alstry's snowball.

 

 


 

16 Comments – Post Your Own

#1) On December 06, 2008 at 8:10 AM, alstry (35.47) wrote:

Not even Hospitals will remain immune.

From the  WSJ:

The researchers surveyed 3,562 emergency medicine clinicians in 65 hospitals. The majority of those surveyed said their emergency departments consistently lack sufficient space to deliver patient care, with a third saying the number of patients consistently exceeds their capacity to provide safe care. On the staffing front, two-thirds reported that nursing staff is insufficient to handle patient loads during busy periods, and 40% said they don’t have enough doctors to handle patient loads when it gets busy.

There have been plenty of reports about emergency care’s dire straits, including the Institute of Medicine’s 2006 report that declared the emergency system “at the breaking point.” But the study’s authors say it is the first time staffers have been surveyed about their own perceptions and experiences.

The study team, which included researchers from Massachusetts General Hospital, Harvard, Yale, and Cornell, makes some fairly obvious recommendations. Some would take money the system doesn’t have right now and some could be accomplished with better management.

“We need more investment in ER care as a whole from a national perspective and more attention and investment from hospital leaders,” Magid says.

Maybe they could just pay with IOUs.  Is it just me, or is the world a little naive???????

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#2) On December 06, 2008 at 8:50 AM, alstry (35.47) wrote:

The KEY right now is the economic destruction is accelerating.  Few want to admit it...unless they own a business, run a state, are losing their jobs, or living in reality.

“It’s getting worse very quickly,” Schwarzenegger, a 61- year-old Republican, told reporters

SAN FRANCISCO (MarketWatch) -- Toyota Motor Co.  plans further production cuts across the board at its North American plants because of poor sales and high inventory at factories, The Wall Street Journal reported late Friday on its Web site. The cuts are in addition to those announced in November. "This affects production at each plant we have in North America," a Toyota spokesman told the Journal. "Suffice to say, inventory is too high in general."

From my perspective, we are still in the early part of the deceleration........if everyone keeps cutting, in the not too distant future there won't be much left to cut.  Cutting forces more cutting causing even more to be cut.  Anyone ever cut a hedge a little too much and then everything around it needs to be cut to match? 

When jobs are cut, those workers can't buy.  Then stores must cut causing even more cutting.  Pretty soon, as the cuts get deeper and deeper, we may all be using IOUs. 

Whoops, isn't that what a dollar is????

The irony of life is life is ironic.

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#3) On December 06, 2008 at 11:36 AM, nuf2bdangrus (< 20) wrote:

When this is finally over, when we stop clamouring for our instant gratification bottom, the financial landscape will look nothing like what it is today.  The bailouts only forestall the inevitable.  It is the last gasp of a failed credit driven economy.  Until we shift from debt to savings, the crisis will cintinue.

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#4) On December 06, 2008 at 11:38 AM, alstry (35.47) wrote:

SHOW ME THE MONEY!!!!!!

Dec. 6 (Bloomberg) -- President-elect Barack Obama promised to make the “single largest new investment,” in America’s roads, require public buildings to be more energy-efficient, and to modernize health care with electronic medical records.

Using his weekly radio address to unveil five components of his plan to save or create 2.5 million jobs, Obama pledged that he would not “do it the old Washington way.”

“We won’t just throw money at the problem,” he said.

Where the heck does Obama think he is going to get the money to actually make this "iinvestment?"  Fewer and fewer dollars are coming via taxes.  We already have record deficits. Next year will be even worse!!!!  California can't even pay its current obligations. 

How many IOUs do you think we can print???????

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#5) On December 06, 2008 at 1:56 PM, Nainara (< 20) wrote:

As cutbacks take place, services and the quality of the delivery of services will deminish dramatically.

I tend to disagree with this. Nothing motivates American laborers like the possibility of having their jobs axed. While businesses are moving to reduce their expenses, I suspect that the productivity of the average worker (or at least the ones who remain employed) will receive a significant boost. From the service-oriented part of the economy with low input costs, I think we'll see a major decline in the price of services, and a major improvement in the quality.

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#6) On December 06, 2008 at 4:11 PM, alstry (35.47) wrote:

Thanks for disagreeing......I really get tired of people agreeing with me just because I am usually right.

Productivity only goes so far.  If you have to fire the lawnservice guy, then the grass grows tall.  If you have to fire the elevator maintenance guy, the elevator might fall.  If you have to fire the secretary, you may never receive the call.  If you have to fire the traffic technicians, traffic may slow to a crawl.  If you have to fire the policemen, there may never a ball.  In the end, if there is no money, the econonmy hits the wall.

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#7) On December 06, 2008 at 5:34 PM, legalmitch (40.09) wrote:

deleveraging is gonna make the big boys bleed

they just wont make it in a ring

where cash is king.

and the gov will print as many IOUs as it'll need

'cause when the economy hits the wall, 

it's the wall that's gonna fall.

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#8) On December 06, 2008 at 5:39 PM, columbia1 wrote:

How much time did it take you to get that to rhyme? must be a slow Saturday ;)

In my opinion the fan just keeps getting bigger, the pile just keeps getting bigger, and when the $hit finally does hits the fan, it is going to blow that wall down!

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#9) On December 06, 2008 at 5:48 PM, TimothyVR (< 20) wrote:

What you are describing is the complete collapse of society and the destruction of American life - far worse than the Great Depression.

Am I being foolish to suggest that perhaps there are other scenarios besides absolute disaster, chaos and catastrophe?

If you are correct and unrestrained hysteria, screaming and carrying on is the only option, then why does this site even exist? Surely the end of society is not a time to even think about the possibility of investing anything, because there is nothing to invest in.

The title of this is Avalanche, followed by a string of exclamation points. What will be left to say in a few months, when the GDP numbers come in? And more unemployment news? The only thing left will be Munch's silent Scream.

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#10) On December 06, 2008 at 9:44 PM, dexion10 (28.21) wrote:

Alstry is right. 

Take no joy in the news because we'll all be living "the news" in six months.

Measure my words with your own eyes.... 

So much wealth has been destroyed and government balance sheets are SOOO weak that we can't back to where we were.

Measure this statement with your own mind:

We're destroying high paying service jobs and trying to replace them with infrastructure jobs.... Do you anticipate mortgage bankers and investment bankers taking on engineering jobs, or laying asphalt???

 

Yeah that's how screwed we are folks.

 

Bottom Calling:

Idiots calling for bottoms in stocks are ignoring the fact that stocks have benefited from levered earnings for 20 years and we have no idea what unlevered earnings look like.

While its great that we are creating a bunch of money for banks and automakers has anyone yet realized we've done very little to create money for the consumers

so far I see no mechanism for putting money into the pockets of the masses before millions of consumers go bankrupt...

THIS WILL GET VERY UGLY

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#11) On December 06, 2008 at 10:39 PM, Mary953 (38.78) wrote:

The complete collapse of society is not dependant on the stock market or the almighty dollar.  It is not tied to the political manuverings of the Washington powerbrokers. We have the ultimate ability to decide what we will allow to have happen in our country.  I am not being naive in this.  There are large areas of this country where people are strong-willed, strong-minded, and join together in community out of choice and with intelligence.  We are not children to be led by the hand.  Certainly this last election, with such strong vibrant candidates, such choices, made that clear.  Both sides had someone to rally to.  After 9/11, there was strength. It is only when we stop to look back to make sure we are not stepping out alone that we falter.

If you doubt this, look at this entire site.  You have here a large number of people with a shared interest in our own personal economies and thus an interest in the economy of our nation and globe as a whole.  Does this mean that we can only buy a loaf of bread if we have the pretty little green IOU's printed in Denver and Philadelphia with the proper faces on them?  No.  It means that if I have to either trade a wheelbarrow of paper for a loaf of bread or repair someone's house for a bushel of beans and a few loaves of bread, then I'll be there, hammer in hand, ready to work, kids beside me to work with me. 

When there are no monetary vehicles of investment left, we will invest in ourselves and each other.  But it won't make a good reality TV series, so don't look for it in primetime.

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#12) On December 06, 2008 at 11:01 PM, EdsPerky (< 20) wrote:

Is it going to be cash, gold or silver?

As a small businessman I've seen my business detioriorate over the past 7 years, ever since 9-11-01.  I don't see any of the government programs bringing jobs to the private sector where true economic growth has to come from.  I'm afraid our gov't is digging a much deeper hole for all of us and that brings my question, do we liquidate our stocks & bonds and invest in the old tried and true - gold, silver, cash?

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#13) On December 06, 2008 at 11:35 PM, abitare (99.26) wrote:

Fleckenstein was one of the few honest brokers of information, but I understand his postion. I have been a bear for a year and it is a lonely place.  People do not like to hear bad news.

I bought more physical gold and silver tonight, it is insurance, it will not make me rich. But make no mistake enterpenuers are positioning themselves and people will rise and prosper at some point beyond the current condition.

As I have said before, just being here in Fooldom and receiving cannidate accessments, puts you ahead of 90% of the population. 

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#14) On December 07, 2008 at 1:38 AM, starbucks4ever (99.52) wrote:

"It’s getting worse very quickly,” Schwarzenegger, a 61- year-old Republican, told reporters Dec. 1 after declaring a fiscal emergency and ordering the Legislature into a special session to find ways to close the deficit. “It’s like an avalanche in that it gains momentum. And that’s what we’re in right now, so it’s a real crisis."  

California is truly a basket case. They will sooner sell their kidney to a body-part dealership together with the liver, a lung, and both tescicles to boot than they will vote to raise the property tax by 20% to pay off the creditors. It's an entirely artificial crisis, 100% created by the same governator who is now weeping and crying for help. 

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#15) On December 07, 2008 at 1:11 PM, kceRick (< 20) wrote:

Thanks, Mary953, for your perspective. It's good to know there are some wise adults in the community. [ as in - "where there is one - there must be more"].

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#16) On December 30, 2008 at 4:19 PM, XMFSinchiruna (28.50) wrote:

Great discussion here. My own $0.02:

Unfortunately, I too see no other plausible scenario from this point than still-worsening economic conditions and ultimately a crisis of confidence for the USD relative to other FIAT currencies of the world. Does this mean we should all run and hide?... I'm not. I am still long plenty of stocks in select sectors: namely gold, silver, oil, gas, coal, copper, etc. 

On the other hand, do I think it's highly advisable for families to take certain precautions to prepare for the posibility of disruptions to services or other previously unthinkable scenarios up to and including a major dollar crisis?... I think it's only prudent to prepare. At least food and water ... did you all see what happened in Iceland in the days following their systemic collapse? 

On that point, I too appreciated the comments offered by Mary953 above. I'll end with an excerpt from a bog post I made a year ago. My wishes for this holiday season remain precisely what they were a year ago:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=25209&t=01006124249416869148

"And so, I urge you to take a fresh look at gold and silver, because though it may seem counter-intuitive to purchase more at these historically high levels, the circumstances at play here are purely unprecedented and collectively create a very compelling case for the prices of gold and silver.  I am concerned for my fellow Americans as we head into this Christmas season.  I think we stand on the verge of a horrible economic collapse, and I worry for those who are not prepared... for those who are mired in debt, or perhaps purchasing homes because they think the housing market couldn't possibly get worse from here, or spending more than they can afford for Christmas just as the rug is about to be swept out from beneath them. 

My Christmas wish?:  that Americans will spend their Christmas budgets on food, water, and other emergency supplies to care for their families when distribution networks are disrupted by the economic tsunami ahead; that they will shift to much greater proportions of energy and precious metals equities within their investment portfolios, and that they will each purchase a small amount of physical gold to hold for all time.  And my New Years' wish?:  that we will all remember to be kind to each other when the chips are down.  I think we will all encounter challenges like we've never before faced (as individuals and as a nation), and I sincerely hope that we can all find that deepest well of humanity within us, and work together as brethren and countrymen through the crisis.  May peace and prosperity abound, but failing that, may humanity and liberty endure forever!"

 

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