Old Project Avalon Forum (ARCHIVE) - View Single Post - BOB CHAPMAN ~ "The International Forecaster" UPDATES

peaceandlove · 12-05-2009, 12:02 AM

Since Bob Chapman has updates at his website Wednesday and Saturday, and with global financials errant, I thought it would be a good idea to contain them under one thread starting 12/2/2009.

We Are Not Yet Buying Into The Idea Of Recovery

By: Bob Chapman
Posted: December 2nd, 2009

Dubai faces bankruptcy, profits coming from cost cutting, growth not what it is claimed, profits for offshore profits remain in tax-free havens, Fed in Congress crosshairs, stimulus package not reaching small business.

This past week was one of utmost turmoil in world markets. In the midst of an American holiday, Dubai faced bankruptcy for some $100 billion. Another unsuspected untoward event. The exposure of the Dubai event coming as it did could have been discovered at any given time, thus, we question the timing. We can understand why the London market was off some 300 Dow points, but exposure to Dubai was very limited in Europe, the US and in Asia. Could it have been an excuse to take down the US and European markets and gold and silver? We do not know, but we have come to question everything that happens.

We are predicting a very damaging year in 2010 for both stocks and bonds. One of the big questions is the implementation of Basil II and III and the FASB. If their stricter accounting practices are enforced the corporate world is in for a heap of trouble. Financial firms are in particular danger. In this past 3rd quarter non-financial corporate profits fell 12%. The result was that $97 billion of $123 billion in profits came from the financial sector. This is not a balanced performance. It is very disturbing because most of corporate profits come from cost cutting – that is firing employees. That method of fattening the bottom line cannot continue indefinitely. Lending is not supplying those profits, because loan origination is off 16.2% yoy. Loan defaults were up 10% and a record 5% of loans were not current. Lending fell $2.8 billion, the most since records began in 1984. Ninety percent of loans go to consumers and business, which means consumers consumption of GDP, has had to fall. It’s currently 69.3%, down from 72%. Loans to businesses have fallen 6.5% and small and medium-sized businessmen create 70% to 80% of all jobs. That means improving the employment situation is going to be very difficult. The exceptions are transnational conglomerates, which continue to offshore our production and outsource service jobs. Their profits are up 29%, but they have caused unemployment of 7 million good paying jobs over the past nine years. If you remove the financials, profits are up 7% off their lows. The financial stocks have appreciated 135% off their March lows, which we believe leaves them very vulnerable. Industrials are up 80%. While this was going on business profits fell 0.4% in the 3rd quarter with no relief in sight. Growth rates are falling at the highest rate in decades. We are hard pressed to believe that 3rd quarter growth was 2.8%. What growth there was came from the federal government. Not only is employment falling, but wages have been at a standstill and have been for two years. The government says inflation is 1.2%. We say it is 7-1/8%. Without higher wages buying power is falling 5% or so – hardly inducive for consumer consumption.

Continues: http://www.theinternationalforecaste...ea_Of_Recovery

Home Page: http://www.theinternationalforecaster.com/

12-05-2009, 12:02 AM	#1
peaceandlove Avalon Senior Member Join Date: Sep 2008 Location: Turtle Island Posts: 2,776	BOB CHAPMAN ~ "The International Forecaster" UPDATES Since Bob Chapman has updates at his website Wednesday and Saturday, and with global financials errant, I thought it would be a good idea to contain them under one thread starting 12/2/2009. We Are Not Yet Buying Into The Idea Of Recovery By: Bob Chapman Posted: December 2nd, 2009 Dubai faces bankruptcy, profits coming from cost cutting, growth not what it is claimed, profits for offshore profits remain in tax-free havens, Fed in Congress crosshairs, stimulus package not reaching small business. This past week was one of utmost turmoil in world markets. In the midst of an American holiday, Dubai faced bankruptcy for some $100 billion. Another unsuspected untoward event. The exposure of the Dubai event coming as it did could have been discovered at any given time, thus, we question the timing. We can understand why the London market was off some 300 Dow points, but exposure to Dubai was very limited in Europe, the US and in Asia. Could it have been an excuse to take down the US and European markets and gold and silver? We do not know, but we have come to question everything that happens. We are predicting a very damaging year in 2010 for both stocks and bonds. One of the big questions is the implementation of Basil II and III and the FASB. If their stricter accounting practices are enforced the corporate world is in for a heap of trouble. Financial firms are in particular danger. In this past 3rd quarter non-financial corporate profits fell 12%. The result was that $97 billion of $123 billion in profits came from the financial sector. This is not a balanced performance. It is very disturbing because most of corporate profits come from cost cutting – that is firing employees. That method of fattening the bottom line cannot continue indefinitely. Lending is not supplying those profits, because loan origination is off 16.2% yoy. Loan defaults were up 10% and a record 5% of loans were not current. Lending fell $2.8 billion, the most since records began in 1984. Ninety percent of loans go to consumers and business, which means consumers consumption of GDP, has had to fall. It’s currently 69.3%, down from 72%. Loans to businesses have fallen 6.5% and small and medium-sized businessmen create 70% to 80% of all jobs. That means improving the employment situation is going to be very difficult. The exceptions are transnational conglomerates, which continue to offshore our production and outsource service jobs. Their profits are up 29%, but they have caused unemployment of 7 million good paying jobs over the past nine years. If you remove the financials, profits are up 7% off their lows. The financial stocks have appreciated 135% off their March lows, which we believe leaves them very vulnerable. Industrials are up 80%. While this was going on business profits fell 0.4% in the 3rd quarter with no relief in sight. Growth rates are falling at the highest rate in decades. We are hard pressed to believe that 3rd quarter growth was 2.8%. What growth there was came from the federal government. Not only is employment falling, but wages have been at a standstill and have been for two years. The government says inflation is 1.2%. We say it is 7-1/8%. Without higher wages buying power is falling 5% or so – hardly inducive for consumer consumption. Continues: http://www.theinternationalforecaste...ea_Of_Recovery Home Page: http://www.theinternationalforecaster.com/ Last edited by peaceandlove; 12-31-2009 at 07:22 AM.