When
David Rosenberg, a top economic analyst and strategist at Merrill Lynch/Bank of America, the largest bank in the U.S., packed up and left his job a few months ago for Toronto-based Gleskin Sheff & Associates, a lot of people took notice.
Tonight, he's published a collaborative piece--they refer to it as an "analysis"--in conjunction with blogger Tyler Durden over at Zero Hedge, entitled: "The End Of The End Of The Recession."
Their 72-page document, with well over half of it being graphics, takes considerably less than an hour to get through, cover to cover. I cannot recommend this highly enough! IMHO, it's a must-read for anyone that's following the economy.
Putting it succinctly, it's jam-packed with hardcore statistical evidence that tells us we've got a minimum of a very, very difficult, five-year recovery ahead of us. And, if you're coming at this from the "green shoots" school, and you believe in the propaganda that tells us that "a recovery is just around the corner," then there's probably nothing for you to see here; move along.
If you're like the rest of us, and you can handle the truth about our economy, here's a quick summary (the link to the document is in the second paragraph, above), starting with the bullet-pointed Introduction, to give you a little sense of the flavor of this thing:
The End of The End of The Recession
Introduction to The End of The End of The Recession
by Tyler Durden of Zero Hedge, in collaboration with David Rosenberg of Gleskin Sheff & Associates
-Zero Hedge is pleased to provide its perspectives on the highly pertinent topic of the ongoing recession
-This presentation has been prepared in collaboration with terrific work of David Rosenberg, Chief Economist & Strategist, Gleskin Sheff + Associates Inc.
-We believe an aggressive "fact-finding" investigation into the true depths of the recession is critical due to increased pressure by Members of the Mainstream Media and conflicted Investment Banks to present a myopic, unjustified opinion
-Furthermore, opinions based on overoptimistic projections and "hope" are the primary reason the Credit Bubble persisted as long as it did
--If the general population and regulatory authorities had approached rating agencies about the optimism quotient in their faulty models, it is likely that the current correction would have been nowhere near as severe
-As there is an all too real threat of a relapse into the same kind of optimistic zeal and the resultant formation of yet another asset bubble, Zero Hedge is presenting the factual side of the story
-We demand that readers question any and all assumptions presented herein (as well as everywhere else) on this most critical subject
My summary of the analysis (and I highly recommend you read it instead of reading this; if you have the time, it's well worth it; if you don't have the time, you might want to reconsider your schedule and find a few open minutes to check it out since there are huge amounts of graphics supporting the facts that I breeze through, below):
The US Consumer = 70% of U.S. GDP
-Average consumer income is declining and retail sales are way off.
-There are too many cars on the street; and the average American household population s shrinking while square footage of the average home is greater than it ever was. (Say bye, bye to those McMansions in our "new normal" world of frugality.)
-Auto sales will remain low for seven years.
-The housing correction will continue to be very painful for a very long time.
-Folks own 20% more stuff than they did in the early 90's; 40% more stuff than they did in the early 80''s.
-We're seeing deflation ruling the day despite the Fed attempting to prevent it.
-The U.S. consumer will need to take six or eight years to deleverage if we're going to get through this period successfully, and that's according to Harvard economist Kenneth Rogoff.
-We're heading towards a new, frugal normal, but we have a very long way to go before we get there.
Business Outlook and Conditions
-Business is declining 18% year-over-year, as of May, and these are borderline Depression-era statistics.
-The July Philadelphia Federal Reserve Branch's numbers are nothing short of devastating. Intense recessionary trends continue in 45 of our 50 states.
-The hotel industry is in the midst of a dramatic downturn, and this is as much of an indicator of business, in general, as it is for the hotel industry, directly.
-"Everything is negative" and most numbers are getting worse and/or bottom-bouncing.
sales are off
shipments and other indicators are way off, anecdotal information confirms the stats
profit margins are at record-setting lows
unemployment keeps escalating (more about this later on in this document)
-93% of businesses are saying the stimulus is not having a noticeable effect upon the economy.
Industry & Manufacturing
-Shipping is dramatically lower than previous years. Railroad freight levels are falling off the charts in comparison to last year.
-Containerboard pricing (i.e.: boxes, etc.), a key indicator in any commercial upswing, is way off.
-Leading indicators are improving while Coincidental indicators are getting worse and worse (a total contradiction in terms; but, this tells us they're not going to call a recovery anytime soon). We are reminded that recessions simply do not end--nor are they called as ending, formally--until the Coincidental indicators tell us so.
-There's an overall deflationary trend occurring here, still. And, in many instances, the month-over-month comparisons are getting worse, not better.
-Capacity Utilization rates are hitting all-time record lows. "The amount of slack in our economy is staggering...The new low normal will continue for many years."
Unemployment
-People have already been on unemployment for so long, it's expiring at the highest rates measured since these indices have been in existence. (i.e.: the Federal Emergency Claims and Extended Benefits Program expanded by 170,000, last week, alone.) Emergency and Extended Benefits programs are virtually "off the charts." (You should see these graphics. They're stunning.)
-OR, RI, MI, SC, and CA are already above 20% unemployment, when measured by the US Department of Labor's Bureau of Labor Statistics' U.6 Index. FL, WA, and NC are not far behind.
-The Federal Reserve has recently upwardly revised projections as far as unemployment's concerned.
Housing
-The "new normal" for home sales will be roughly 600,000 units per year, at the height of the real estate bubble it was 1.4 million units.
-It will take a good five years "to mop-up excess inventory in the housing market.
-If the banks are "pregnant" with all of these extra assets for an extended period of time--which they will be--it's going to present a major problem for them in terms of turning them into cash.
-Housing vacancies are way up and it's "...no longer considered an appropriate investment class."
-Ongoing sales outlook for real estate is almost certainly one of bottom-bouncing for many, many years; with any comments relating to "improvement," being little more than propaganda.
-Q2 2009 foreclosure activity was at the highest level ever recorded. Banks are holding onto properties, which Zero Hedge and Rosenberg tell us will just "...delay the pain."
-Whitney Tilson, a housing exert, tells us, "...housing is a dead asset for years to come."
-Architectural billings continue to slip down to the lowest points ever recorded, a leading indicator for the construction industry.
"The Revenueless Recovery"
-Sales for almost all but a few major companies are tanking at record levels, year-over-year. (This not-so-tacitly reminds us how out of whack the stock markets are right now.)
-With industry operating levels at 65%, this represents a record amount of slack in our economy.
-Commerical real estate defaults are skyrocketing. The banks will continue to have their balance sheets hammered for many years to come.
-Tech firm revenues are just as bad, if not worse, in comparison to other sectors, too.
-Year over year revenues are down 18%, on average. (Virtually unheard of, measurement-wise.)
State/Muni Budget Collapse
-State tax revenues have collapsed 11.7%, year-over-year, the worst decline since they started keeping records on this, in 1946. 45 of 50 states are reporting revenue declines.
-The cumulative state budget gap for 2010 is $146 billion.
-Draconian cuts in social services are occurring nationwide. Arianna Huffington had a great, great post on this on Thursday, entitled: "States Forced to Cut Services to the Bone: The Opportunity Cost of the Bank Bailout."
-New York City is now "...on the brink." (Pension benefits and other costs are escalating while revenues are diminishing. This is happening around the country.)
Household Taxation
-Three tax increases in Congress right now will cover healthcare, Social Security and reduction of the deficit.
-If these three measures pass, the top marginal tax rate will increase to 45%, which happens to be roughly where it was 30 years ago, in 1979. (Say "good-bye," Ronnie.)
U.S. Bond Market
-Corporate bond downgrades (by S&P) are approaching a record pace. If companies' ability to finance debt is obliterated, the companies are obliterated.
-Corporate bond defaults are hitting record levels.
-Credit is not easing up for small companies, at all. It's getting worse. Anything positive we're hearing about this is just total bullshit.
Inflation/Deflation
-Inflation's not the problem, deflation is.
-The overall inflation rate is running -1.4%, which is the lowest on record since 1950.
-Excess slack in the economy will take a long time (many, many years) to absorb.
-Federal Reserve's balance sheet has "ballooned."
-There's very little "velocity" to our nation's cash. We have "flat monetary supply."
-Banks are hoarding cash, as opposed to extending it for credit-related purposes.
-Concerns about near-term inflation are totally unfounded.
-Deflation will continue for a significant length of time...perhaps many years.
Conclusion
-"...the economy is leaps and bounds away from anything remotely resembling a recovery."
AGAIN, LINK TO THE ACTUAL DOCUMENT, WHICH I'M SUMMARIZING HERE, FOR EXCELLENT SUPPORTING GRAPHICS AND RELATED STATISTICS AND QUALITATIVE COMMENTARY. IT'S WELL WORTH YOUR EFFORT.
(Note: These are not the graphics you're used to seeing in others' diaries in this community!)
