Predicting the Future
I've been thinking about doing this for some time, but have held off. Now it's time to take the plunge. Here is my prediction for the economy for the remainder of 2010.
As the summer wears on and into the fall, housing prices will crash once again. Along with them, this time, durable goods will also crash. You'll see this reflected in the increasing number of "sales" at your local Wal-Mart and other retail stores. Formerly thriving strip malls will start to look like ghost towns, where they haven't already, and you will notice a increase of vacancies at your local shopping mall. Going into the mid-term election things will get bleak.
The elections make things a bit dicey, but I think it's safe to say regardless of the results, by the end of the year we will see another round of "stimulus" using borrowed funds. The size of the stimulus may be mitigated by how the elections are looking, or how they turned out (depending on the exact timing) but I'll give it a range of anywhere from $100 Billion to $600 Billion. It will be interesting to watch sales of treasury bonds after the stimulus is announced to see if there is any creaking in the hull yet. I predict that this round of bond sales will not fail, but will bring us precipitously closer to the point where they will. We may see yields start to spike, and that will be a dangerous sign if they do.
Europe is at least right now talking the talk of austerity. If they actually show they have the mettle to stick with it I predict a turnaround in the Euro and falling bond prices across Europe as investors start to look at the U.S. with a skeptical eye. However, this is a big IF. All the talk of austerity could be just that. Talk. Politicians are well known for saying the right thing at the right time to calm investors nerves. If it ends up showing itself to be just talk then I expect the scrutiny to stay on Europe while we dig ourselves an even deeper hole.
That's how I see it. We'll see what happens.
by Carlton Smith
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Keeping Up the Illusion
Mike Shedlock at Mish's Global Economic Trend Analysis has an interesting piece on a recent economic report issued by the Census Bureau. The data released shows a decrease in retail sales from a month ago, but a nice increase over a year ago. Mish's take?
The methodology misses stores that went out of business and have no retail sales. Circuit City is a prime example but also note that thousands of small strip mall stores are now shuttered as well. Some of that volume went to the surveyed stores making it appear sales went up.
This is quite typical of the data we frequently see from the government, and is parroted by the mainstream media. "Yay! The economy is recovering! Look at the numbers!" But this is nothing more than an illusion, reported to make you feel better about the situation while keeping you misinformed.
Here is a hypothetical to illustrate how the mirage works. Let's say that your neighborhood has a Home Depot and a Lowe's right next door to each other, and each store does about $100,000 in sales per month. Then the economy takes a downward turn, and both of their sales begin to decline. After about six months each store is only doing about $80,000 in sales per month. Let's also say that for some reason at this location the Lowe's profit margin is a bit tighter than the Home Depot's or the management is a bit more conservative or for whatever reason, Lowe's decides to close the store. After the store is closed, the following month, Home Depot records $150,000 in sales. That's quite a spike for the Home Depot, but the total sales for their type of products in that location has actually gone down another $10,000. So, an area that once supported $200,000 in sales between two stores now only supports one store doing $150,000. The trend is obviously downward. But the Census decides to collect data throughout this period only from the Home Depot location. And they track a huge spike the month after the Lowe's goes out of business and show a "recovery in retail sales."
It's a nice little game if your goal is to make people think things are better than they are.
by Carlton Smith Print This Post
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