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alstry (35.37)

Is 30% unemployment around the corner?????

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January 02, 2009 – Comments (16)

Right now, reported unemployment is approaching 7%.......some say the real rate is closer to 12-15%.

Recent articles indicate over 25% of all retail business facing serious financial stress.  Domestic car dealerships are in critical condition.

From the WSJ:

One problem for the domestic-brand dealers is that there are so many of them. At the start of 2008, according to the National Automotive Dealers Association, the U.S. had 20,700 new-vehicle dealers, of which about two-thirds sold domestic makes. But those brands accounted for only about half of sales.

GM alone has 6,426 dealers, the company says. Toyota, with U.S. sales equaling about 85% of GM's, has just 1,461 dealers.

If we closed over half the domestic auto dealerships in America, we would still like have too many based on Toyota's footprint.

The impact of closing 25% of retail stores and 50% of domestic auto dealerships will be enormous.  As commercial construction winds down, we can expect 50% of all construction workers to become idle.

It has become clear that most projections for unemployment are still way too optimistic.  We are gutting important industries that employ significant numbers of workers by 25-50% and more.  These industries include autos, airlines, construction, banking, hotels, retail, mortgage, finance, trucking and more.

As I told you, America is shrinking rapidly.  Pawn shops are overflowing with luxury goods.  The state of California is about to run out of money in the next few months.  Many cities are on the verge of bankruptcy......and Americans still have their heads in the sand...but don't get down.....the rest of the world is facing similar issues.

We will get through this....but in the mean time, will will likely see a sharp increases in bankruptcies, expect your house to  drop in value about 50%, decent cars will probably cost less than $20K,  and families will likely be forced to become closer.

Once American wages drop about 50%, we will be able to compete with any nation in the world and our children will be standing on a strong foundation to compete globally.  I have to tell you, as we enter the New Year things are starting to look brighter.  We may see the DOW below 2000, but that will be just fine......thank about how many shares you will be able to buy at an attractive price.

16 Comments – Post Your Own

#1) On January 02, 2009 at 11:54 PM, alstry (35.37) wrote:

Remember the distress is really just starting to pick up.  In the next 90 days you will see the rate of decline increase dramatically if we maintain the current course. 

It is increasing as we speak!!!!!!!

U.S. Manufacturing Shrinks at Fastest Pace Since 1980 as Recession Spreads

Jan. 2 (Bloomberg) -- The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year.

The Institute for Supply Management’s factory index fell to 32.4, below economists’ forecasts and the lowest level since 1980, from 36.2 the prior month. Readings less than 50 signal contraction. The group’s new-orders measure reached the lowest level on record and prices slid the most since 1949.

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#2) On January 03, 2009 at 12:12 AM, Jerryskidz (29.47) wrote:

Although the level of stupidity on the caps blog is high by all accounts and the predictions by fellow bloggers are as random and useless as sand in my pants. 

You take the more ignorant tact of copying and pasting AP wires and coming to worthless conclusions.  It is difficult to determine if you think you are the second coming of Jesus or the anti-christ.

If you could see the future you would be worth billions if you started with 10,000 and a 100% annual multiplier. 

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#3) On January 03, 2009 at 12:20 AM, plazadetoros (< 20) wrote:

Misery does not have to have company.

We have to start offering low mortgages directly to people at below 5%. Skip the middle man who wants to charge points an outrageous fees to process a loan.

The 700 billion package is not trickling down to main street in the form of low affordable loans.

If people can refinance their houses at a low cost  and at a low fix rate,then they will have more economic stability and therefore can be in a mood to spend some money in cars and other goods.

Also, We will have to go back to basics and compete globally based on fair trade.

Why do we have to go down the gutter with China or India where people make $100 a month where industries can expose their workers to any chemical and where they have no environmental regulations.?

We need to compete on an equal level field of labor and environmental privciples. 

 

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#4) On January 03, 2009 at 12:55 AM, Option1307 (29.74) wrote:

onlygreenthumbs

If you don't like people's blogs and "perdictions", I have some advice for you...

Don't read them.

 

You have made the same comment several times tonight on multiple blogs about the worthless comments of others. While I don't agree with all I read here, I do appreciate many of the various opinions I read here on Caps. I guess my point is: a. If you are unintersted in others blogs, don't read them. b. If you have other opinions that are far superior (either supporting your own ideas or discrediting others), please share them. Honestly, I love Caps because of the differences of opinions, so please share.

 

If you just are going to tell people their ideas are worthless without providing any of your own insight, then please stop commenting on the blogs here on Caps....Because your contribution is also worthless.

 

p.s. I honestly want to hear your thoughts about where the market is going, all opinions are good to hear.

 

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#5) On January 03, 2009 at 2:25 AM, TheOriginalPrez (36.46) wrote:

A simple response based on simple economic understanding.

The World and its economies are so much more complex than you could think. Your post is simple, and in a simple world, it may hold true.

Go grab an economics book and read up.

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#6) On January 03, 2009 at 2:38 AM, TheOriginalPrez (36.46) wrote:

I just wanted to add that during the Great Depression, unemployment hit 25%. There are 2 major difference between now and then, and thats Government Intervention and The Global Economy.

 

I think we have not yet hit bottom. I think we are going to be looking at 2 years before we see the upswing. Hopefully, from this painful lesson, people will learn but i doubt it.

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#7) On January 03, 2009 at 4:40 AM, saunafool (98.67) wrote:

No. Unemployment will not hit 30%. Not even close.

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#8) On January 03, 2009 at 9:51 AM, alstry (35.37) wrote:

Sauna,

I actually think unemployment will likely exceed 30%.  But I figured that might be too inflamatory......for now.

A few years ago, I as having dinner with an economist who works for the Federal Reserve who gets published in the newspapers with some frequency.  I warned him then about dealing with the mortgage crisis and its impact on banking and he dismissed it as unlikely.

I am now more confident about 25-30% unemployment than I was about the impact of the mortgage crisis a few years ago.  At this point, 25-30% unemployment seems conservative.  It could go much higher....but it won't be the end of the world.

Simply a transition period in American history....the other alternative would be to cut most everyone's wages 30%....that is also a possible outcome and have a similar effect.

When it happens, we will adjust and move forward.  Alstry is all about moving forward.

Only,

No diety..........just right:)

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#9) On January 03, 2009 at 10:42 AM, eldemonio (98.64) wrote:

I'm predicting 75% unemployment. 

All of our jobs will be taken over by evil robots who will harvet our children and use their bodies as batteries.

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#10) On January 03, 2009 at 11:09 AM, alstry (35.37) wrote:

You may be right.....but I am not ready to go there yet.

As far as the evil robots, I am not sure the technology is there yet for robots to think independently.

Think of the current situation as a virus....and now the virus is spreading rapidly.

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#11) On January 03, 2009 at 12:57 PM, dinodelaurentis (74.61) wrote:

alstry,

 i think you may be right. too much denial, too many bad decicions and a goverment trying to print its way out of debt by creating more debt does seem to be healthy indicators of economic recovery to me...

but i don't have an education in economics. not on paper. but i think i paid for one any way.

i can balance my checkbook, make change for a dollar and pay my bills. i've done it for years. and if that ain't an education in daily economics then i guess i need a dictionary before a book on economics.

 in my daily life i meet people who are scared, including folks who make 6 figures a year.

good.

being scared may energize them to heightened awareness. open their third eye. teach them to be here now. just being aware is a proper step towards avoiding disaster.

unlike some fools who insist that everything is fine. a momentary rough spot they've said. just relax they've said. things are fine.

good.

this makes it easier for me and mine to find opportunity in chaos.

and in the words of muhamed ali to his boxing opponents:

"need to be relaxed before the fight? good. stay relaxed."

if circumstance is really working against you, you might consider struggling a little harder. using your two hands to defend your one life.

forewarned is forearmed

thanks dude.

           dino delaurentis

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#12) On January 03, 2009 at 2:25 PM, alstry (35.37) wrote:

Dino,

Understanding business has little to do with economics and more to do with balancing a checkbook.  If your checks bounce, without being able to raise cash, you are screwed....it is as simple as that.

I have an economics degree, I have aquaintances with degrees a mile long from the best schools in America, and in the end....the best minds in business have very little formal economics training.

Basic addition and subtraction is all you need.  Understanding people and human nature is key.  If you want to speed things up a bit, mulitplication and division can assist.

Now is the time to rope a dope.....pretty soon you will be the world's tallest midget.

This is far bigger than we are being told.......we will be a different nation in the next 90 days......if you have ever had a person die in your arms......you know what I mean.

But just to make things clear, it is the death of a system, not the end of the world.

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#13) On January 03, 2009 at 2:50 PM, semper77 (32.59) wrote:

Hi Alstry - I just devoted blog posting to you to respond to this thread : 

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=125778&t=01003021193161383106

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#14) On January 03, 2009 at 5:08 PM, lucas1985 (< 20) wrote:

30% unemployment is socially unsustainable, specially on the wealthiest nation on Earth. You can't recover in the short or medium term when society is angry/cynical and doesn't abide the law.

Politicians can't/won't allow the breaking of the social fabric, the most important thing for a country's long term prosperity.

Statistically, the USA won't suffer another Great Depression, but the economic and social impact of this recession (which will be as bad as the ones in the 70s and early 80s if not worse) will be long lasting.

If Obama and his team can keep the social fabric in good shape (a difficult task considering that Americans will get a big blow in their living standard/purchasing power) while sowing the seeds for long-term growth (infrastructure, education, healthcare, green manufacturing and living, vast reshaping of financial markets both in the USA and worldwide, finishing the FIRE economy and keeping the creditworthiness of the USA), you may begin to smile in 400 days.

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#15) On January 03, 2009 at 5:22 PM, Jimmy2008 (< 20) wrote:

Come on, Lucas,

30% unemployment is socially unsustainable, specially on the wealthiest nation on Earth.

I have no clue what unemployment it would be. However, we are absolutely not the wealthiest nation in the world! Perhaps the most indebted nation on earth! Our per capita debt is among the highest in the world. We are borke!

 

 

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#16) On January 03, 2009 at 11:59 PM, lucas1985 (< 20) wrote:

@Jimmy2008,

Yes, the USA still is the wealthiest country on this world. Quality of life is another thing, though.

You can argue that most of the growth in the latest 30 years has been fueled by debt and you're right on this. The FIRE economy has replaced manufacturing. Real wages have fallen. The financial sector has taken over the entire economy and it's many times bigger than the GDP. The main reason for the growth in perceived wealth is asset inflation (real state, bonds and stock). This worked well when house prices were rising and commodities were in a long bear market. The growth in productivity, thanks to the IT revolution, cheap imports (thanks to low labor cost in China) and the forced savings of many countries (thanks to a flawed model of developing throught export-fueled growth) allowed a great expansion of the monetary base without effects on the CPI and interest rates.

If unemployment reachs 30%, the advice of permabears and goldbugs (hoarding gold/silver, canned goods, guns/ammo) would be sound. However I think that they're wrong (they're wrong most of the time, by the way).

http://michael-hudson.com/

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