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To the Liberty Tree!
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Discussion Starter · #1 ·
http://finance.yahoo.com/tech-ticke...'Prophet'?tickers=WMT,TGT,MER,MCO,MHP,XLY,XLF

Economic Slowdown Just Getting Started, Says Credit Crisis 'Prophet'

Posted Aug 07, 2008 11:29am EDT by Aaron Task in Investing, Recession, Banking
Related: WMT, TGT, MER, MCO, MHP, XLY, XLF


Disappointing July same-store sales figures from Wal-Mart and Target today point not just to the struggling consumer, but why this economic slowdown is just getting started, says Joshua Rosner, managing director at Graham Fisher & Co.

Recent slowdowns have been corporate driven, which Rosner notes are typically short and sharp as CEOs seek to slash costs (and jobs) in order to quickly "rightsize" their businesses.

In a consumer-led slowdown, like the one underway, slowing consumer spending first hit retailers, then manufacturing, then warehouse space, he explains. In such a scenario, rising unemployment is a lagging indicator, meaning the recent four-year high 5.7% unemployment rate is highly unlikely to be the peak.

As unemployment keeps rising, consumer spending will slow further, putting more pressure on corporate balance sheets, leading to more jobs losses (repeat ad nauseum).

That, in turn, will lead to defaults on commercial mortgage-backed securities (and related losses for their holders) on par with what's occurred in residential MBS, says Rosner, one of the first on Wall Street to warn of the looming crisis.

The timing remains uncertain but Rosner says it will come only after "capitulation" by the rating agencies and corporate executives, who he says are still playing "accounting games" and not really owing up to the severity of losses.
 

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Sales have gone down in the grocery store where I work. More people have applied for food stamps and several of our employees have been going to the food bank on a regular basis, and they are happy to get what they are getting.

Our store showed a profit this year. I am sure it is because of the price hikes on all of the food and products we sell. Several employees have started riding their bikes to work, bringing their own lunches and cutting back on the luxuries in their lives.

I can see it getting worse in the near future. Just wait with Thanksgiving and Christmas around the corner, the spending this year is going to be far lower then anyone would have ever guessed. I predict in January, a record number of lost jobs because of the very bad economy through the holidays.
 

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Displaced Texan
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I live in a place where folks still throw money away in gaming. I don't understand it...you may as well open the door to any casino, throw your cash on the floor - "Here ya go!" then walk away. This city was built on loosers- the machines are geared toward taking your money- and all we see are people sitting there sipping cocktails and feeding cash into these machines. Meanwhile- our grocery stores are hiking up prices on EVERYTHING. If you don't clip coupons & shop the sale items....you're an idiot! I hate to say it, but up until a few months ago- we enjoyed our money. Now we hold onto every nickel like it was our last. I hate living this way, worry worry worry.
As far as Christmas...we do everything we can to avoid being stuck in the mindless lines and crowds- hoarding crap in the shopping carts and fighting the checkout lines. I can imagine how sales will drop dramatically this season. I think walmart will be the only place doing real business. People are afraid to spend too much.
 

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To the Liberty Tree!
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Discussion Starter · #4 ·
Ramona - I think that you are quite right about Christmas this year. Most people I know have already said that they plan to cut WAY back on holiday spending.

Texjen - The problem is Walmart is posting losses too. Costco and Bjs' are the ones still with profits. Are people simply stocking up for things to come?
 

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Haha
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I agree I can see Christmas as being the turning point. With the price of heating homes going up 35% this winter I am sure the stores will feel the pain as people would rather stay home and not shop or travel. I decided since Christmas is a big holiday for my extended family and I have a lot of nieces and nephews to get presents for I started getting little things here and there on clearence. Usually a kid will be just as satisfied with a few cheap toys than one expensive one.

-Cade
 

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Displaced Texan
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Amen to that Cade. We decided that little kids are the ones that like to see gifts under the tree. They don't understand the REAL meaning of Christmas anyway. Even if they go to Sunday School....they still want to open SOMETHING. Our teenage boys want ski passes and a trip to Baja for some SUN!!! Easy enough for us, but getting more expensive as the years go by.
 

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Watchin tha world go by
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consumer spending is 2/3 of the economy, they will have a new stimulus/debt package word is in fall.

when consumer spending dries up --- its over
 
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I have been trying to plan ahead, just like the rest of you. This month I got a windfall. After a few cheap extras. TDW and I got her a 20 gage and me a 12 gage(home Defense). Paid the bills threw next month. Got her a Kitchen Aid mixer with the grain grinder attachment.

We spend a lot stocking the pantry. The 100 lbs of wheat and 100 lbs of popcorn(Makes the best corn meal you ever tried) are ready in 6 gal sealed buckets.

We picked up 10ea 1.5 lbs canned hams, 24ea cans of spam, and several cases of canned goods. With the beans and rice we have, I am sure we can hold out for some time.

For the Holidays, we will be getting the grand kids a few toys and winter cloths. My son and his wife get the gas tank filled.

TDW and I agree to do like we always do. I get sox's and T shirts. She gets sox and new long johns.

We have the opportunity to plan ahead. We have the extra funds to prepare. I do feel sorry for those that do not plan ahead.

Don
 

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Elitist Gun Snob
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I think one major reason this continues is because of the media. The media keeps pounding the idea that we're crashing into the general public's head, so of course they believe it and react accordingly. How do you react to low consumer spending? By not spending yourself. If you think everyone else is holding out, then you will too. It's created a vicious cycle....
 

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I think one major reason this continues is because of the media. The media keeps pounding the idea that we're crashing into the general public's head, so of course they believe it and react accordingly. How do you react to low consumer spending? By not spending yourself. If you think everyone else is holding out, then you will too. It's created a vicious cycle....
Or, American's are so overextended they have no credit left to buy crap with. The country has had a negative savings rate for several years. The "wealth" they thought they had in their homes is rapidly disappearing. Inflation in consumer prices is double digits (the real rate, not the govt published rate). Not ot mention the fake unemployment rate. Inflation in prices, deflation in assets, equals downturn.

People are spending less not because they've been brainwashed by the media, but becasue they have less to spend.
 

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Displaced Texan
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We buy exactly the same amount of groceries....we just shop with coupons & sales now. We are still stocking up for preparedness' sake, just smarter now. We still buy shoes, clothes, school supplies, and luxuries....we just pay more attention to discounts. We still travel, go out to eat- get haircuts and run our A/C- but we are more conservative than before.

Today I walked through the .99 cent store just to see what's new. I couldn't find a cart- or even a basket. There were folks with lots and lots of food items. I suppose they feel as if they are getting more for their money buy shopping here. But they are still spending money.
 

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Simply, an AMERICAN...
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Or, American's are so overextended they have no credit left to buy crap with. The country has had a negative savings rate for several years. The "wealth" they thought they had in their homes is rapidly disappearing. Inflation in consumer prices is double digits (the real rate, not the govt published rate). Not ot mention the fake unemployment rate. Inflation in prices, deflation in assets, equals downturn.

People are spending less not because they've been brainwashed by the media, but becasue they have less to spend.
Exactly... I think it's time to stop "blaming" the "media". :rolleyes:

Iraq is bad..."media's fault"
Bush is an idiot..."media's fault"
Recession..."media's fault"
 

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I believe if I blamed anyone for my actions or my decision making, then I would be admitting to my own "automaton" ignorance. Instead I admit to what I have done and try to make better choices next time. We tend to point the finger at everyone but ourselves.

This is in response to those blaming the media, political leaders, etc. Make no mistake... humanity has done this to themselves. All the troubles of our times are inherited to use because we ourselves created it.

Here we have an opportunity to create a new future and better ourselves; or we can create more destruction and pass this on to future generations.
 

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Simply, an AMERICAN...
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I'm not blaming the media. I'm blaming the idiots that pay attention to it.

"I think one major reason this continues is because of the media. The media keeps pounding the idea that we're crashing into the general public's head, so of course they believe it and react accordingly."


The media points out REALITY....:thumb:

News Flash.....economy sucks. It would STILL suck without the media telling us it sucked. :thumb:
 

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Displaced Texan
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You have to eat. You DON'T have to watch tv.
You have to go back to school shopping & such.
The Earth is still spinning, despite the forclosures. Folks just need to be a little better at trading money for things. (or swiping little plastic cards)

We, as grown-ups have to have our common, normal day-to-day lifestyles. You pick up a magazine and want to look like the babe in the bikini. You watch CNN and want to cry. Sometimes PUKE! Then cry. But Christmas is coming. There will be presents under the tree, pumpkin pie & turkey in the oven at Thanksgiving. You may cut a vein and bleed to get on an airplane to see your family this season- but you'll still do it.
 

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You have to eat. You DON'T have to watch tv.
You have to go back to school shopping & such.
The Earth is still spinning, despite the forclosures. Folks just need to be a little better at trading money for things. (or swiping little plastic cards)
Unfortunately, our economy runs on conspicuous consumption and discretionary spending.

As people can no longer have extra cash/credit buy "A", the people that manufacture, distribute and sell "A" lose work and income, making them unable to buy "B", which leads to the people that manufacture, distribute and sell "B" losing work and income, making them unable to buy "C" et cetera.

There is a reason economists use consumer spending as one of the leading economic indicators.:)
 
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