US to enter depression china to implode

Mr Edwards who predicted this current market decline is predicting further bad news.. apparently the US is going to enter a prolonged depression and china is going to implode!

http://www.theaustralian.news.com.au/business/story/0,28124,24919910-643,00.html

He is recommending closing up shop as far as investing goes.

Do you think this is a bit far fetched? I mean things are getting worse, so they could get even worse and fulfill this prediction.

I don't think the "US in depression" view is particularly far-fetched and I've been saying for some time China is the potential black swan in all this.

Authoritarian regimes experimenting with greater economic freedom are by definition unpredicatable beasts if things go wrong. The difficulty is that it's not as if you can say, "Well the last time we saw a communist dictatorship of more than a billion people in the midst of an economic boom delivering fundamental structural and cultural changes that subsequently stopped in its tracks, *insert outcome* happened".

My biggest concern about China is the political upheaval possible as all those workers realise the boom is over, get dumped like last weeks garbage, wander back to their villages and start to wonder if things should be different.

Tiananmen Square anoyone?

When we describe what has happened to the financial markets over the last 18 months as unprecedented, we haven't been joking.
 
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Mr Edwards is, of course, entitled to his opinion and being as there is no official definition of "depression" he could always say that "by my definition the US is to go into a depression".

Personally I don't like the use of the D word myself because, unsurprisingly, people draw comparisons with the last depression.

Last time the US entered depression it's GDP fell over 25% and unemployment exceeded 20%.

We are not anywhere near that, nor are we likely to be.
 
I think he's pretty right on both counts. Certainly,for the US, there's a lot of US commentators ( Rogers, Faber, Schiff) who have been saying this for some time now...and now, the "nodding heads of CNN and CNBC e.g." who previously dis-agreed with them vehemently and publicly are gradually starting to sing the same tune. I try hard, and I read all that I can, but I just can't see ANYTHING positive for the US. From the auto industry on "life support" to the financial rogues and scandals, to the crumbling infra-structure, to their ever growing and un-payable external debt to the accelerating unemployment to the Iraq debacle .... where does it EVER get positive?? I can't see it. I wouldn't want to be Obama for quids. Just watch him age.

China's only hope, now that it's largest customer has "shut up shop", is to make a HUGE change of direction from "exporter" to "developer of the Chinese economy and improver of the Chinese way of life". They certainly have the financial capacity to give this a "fair shake" .... but, in reality you have to change the focus. All those thousands of factories making cuddly-toys for Walmart are NOT the same facilities you need to develop the domestic scene. The you have the socio-political issue...is it in the interests of Beijing to educate & improve the "lot" of the average Chinese? This is not a democracy... "for the people etc" . It's going to be interesting.
LL
 
I find it quite amusing really.
Just last year people were saying dont worry about commodity prices the BRICS will support the rest of the world. Resources will be stronger for longer (now its wronger for longer:p).

After commodities collapsed (or just went back to their 'normal trading range'????) people said buy gold, with central banks lowering interest rates gold will sky rocket. Yet gold continues to be range bound between US$800-$900 and is now trading at the bottom of that range.

Now people are saying the end of the world is upon us, the US is going into perpetual depression, China is going to implode.

I wonder what next year's new theme will be??????

I believe in simplicity and the KISS principle. The world is much more interweaved than we give it credit for. Mankind is also a creature of adaption.

Therefore Chilli's strategy for exiting the rat race:
1) Spend less than you earn.
2) Alocate savings to those investment classes that have been proven wealth generators over long periods of time. ie invest dont speculate.
3) Take a long term viewpoint, dont try to short cut the investment process or turbo charge your investments (ie dont stormify it:p)
4) Invest for either income or capital gains, but always ensure that your income stream covers your interest expense with a comfortable margin (ie dont rely on capital appreciation to offset interest costs)
5) Avoid investing (speculating?) in the latest hot thing to make money, by the time you hear about this, the smart money will be looking at exiting.
6) Dont extrapolate estimated long term profits from recent short term trends, over the long term an investment class will perform according to its long term trend, there is NEVER its different this time.
7) Once your net cash income exceeds your targeted required living expenses after a margin of safety to account for unknown factors exit the rat race and live happily ever after.
 
with depression versus recession - there was a very interesting example on the abc financial segment last night where recession is now considered "not" to be two quarters of negative growth but rather an increase in unemployment of more than 1.5% in any given year.

the arguement was given that the format for calculating negative growth has changed dramatically over the last 100 years so that what was relevant for the calculation 20 years ago is no longer relevant ... but over the entire time - the last 5 severe recessions and one depression for australia - unemployment increased by the 1.5% or more in a year.

depression was also described as a recession that continued for longer than 4 years (ie, employment dropping 1.5% or more every year for 4 years) ... or something like that, all very interesting ... so it is just opinion whether the usa is in recession or depression.

anyhow - i agree that a lot depends on how china views the outlook. if the powers that be believe that the recession is short lived then they will very likely turn their focus inwards, in the expectation of coming back out in another 2 years or so. granted the cuddly teddy factory won't turn their hands to produce roads and infrastructure, but the cuddly teddy workers can.

to be watched
 
They should have used a different pic for the article, to give it more credibility.

superbear2.gif

Super bear, Albert Edwards
 
Therefore Chilli's strategy for exiting the rat race:
1) Spend less than you earn.
2) Alocate savings to those investment classes that have been proven wealth generators over long periods of time. ie invest dont speculate.
3) Take a long term viewpoint, dont try to short cut the investment process or turbo charge your investments (ie dont stormify it:p)
4) Invest for either income or capital gains, but always ensure that your income stream covers your interest expense with a comfortable margin (ie dont rely on capital appreciation to offset interest costs)
5) Avoid investing (speculating?) in the latest hot thing to make money, by the time you hear about this, the smart money will be looking at exiting.
6) Dont extrapolate estimated long term profits from recent short term trends, over the long term an investment class will perform according to its long term trend, there is NEVER its different this time.
7) Once your net cash income exceeds your targeted required living expenses after a margin of safety to account for unknown factors exit the rat race and live happily ever after.

thats all good and well, but how long to you think it will take to have enough invested to replace your income?

You would need $1,000,000 invested to get $80,000 PA income... I dont think most people will ever get $1m in cash.
 
I think he's pretty right on both counts. Certainly,for the US, there's a lot of US commentators ( Rogers, Faber, Schiff) who have been saying this for some time now...and now, the "nodding heads of CNN and CNBC e.g." who previously dis-agreed with them vehemently and publicly are gradually starting to sing the same tune.

in that case - it's all roses.

remember, by the time the media jump on board,, it's alreadytoo late and the fundamentals have probably already changed.

especially taking the word of the dodos over at CNBC....:rolleyes:
 
I find it quite amusing really.
Just last year people were saying dont worry about commodity prices the BRICS will support the rest of the world. Resources will be stronger for longer (now its wronger for longer:p).

Now people are saying the end of the world is upon us, the US is going into perpetual depression, China is going to implode.

...but not the same people ;)
 
You would need $1,000,000 invested to get $80,000 PA income... I dont think most people will ever get $1m in cash.

Seeing as though this thread is full of "I thinks" and "I believes" and "my opinion is"....thought I'd throw mine in as well. It's worth the same 2c.


How many people actually NEED 80K p.a. of free cashflow to live off. Bugger all would be my estimate.

Why ?? Because most people don't have anywhere near that level of free cashflow every year, and they still adequately live, so by definition you don't NEED it.

Plenty of people convince themselves they NEED it, especially when they do forward calculations, but this squarely fits into the WANT bucket. Life's little luxuries.


Nobody needs ;

1. A new car every few years to reduce the maintenance hassles.
2. An overseas trip every few years to taste and experience the world.
3. A little bit on the side to spoil the grandkids with.
4. Gucci and D&G fashion gumpf.
5. Pedicure and manicure with the girlfriend / daughter every 3 months as a special treat.

All of the above and a myriad more are all WANTS of a decadent western society, that everyone else in the world is currently scrambling to attain.

Normal home cooked food / reasonable shelter / adequate clothing / normal transportation. These are the things we NEED.

Everything else is a bonus and should be considered a luxury.
 
Perhaps china will turn to millitarism over capitalism??
Who knows!

Im just setting myself up for whatever comes, with the aim to make money from whatever situation arrises.
 
in that case - it's all roses.
remember, by the time the media jump on board,, it's alreadytoo late and the fundamentals have probably already changed.
especially taking the word of the dodos over at CNBC....:rolleyes:

To say the media have "jumped on board" is maybe too stong at this point in time. They are at the stage where (a) they now have to accept that blokes like Schiff etc HAVE got some things very right and hence (b) because of this are now listening just a little more intently to their forecasts without so much interrupting. Still a lot of disbelief however that "they're in the hand-basket, the destination is set...only the timing remains as a variable". It's interesting to watch.
LL
 
Do you think this is a bit far fetched?

I guess after all the things that happened in 2008 anything is possible
but I think his views are quite extreme.

Sure, company stocks could come down as profits fall
but it's not the end of the world as he is trying to tell us.

cheers
 
thats all good and well, but how long to you think it will take to have enough invested to replace your income?

You would need $1,000,000 invested to get $80,000 PA income... I dont think most people will ever get $1m in cash.

Its easy if you start saving from a younge age. The problem is most people never save. Once they finish high school they need to borrow to buy a car, once they finish uni they need to travel, once they have a good job, they need a better car and a 'nice' place to rent with nice do-dah's to compensate for the stress/boredom/reward myself mentality. Once they approach marriage they need to pay for a mortgage and then when the kids come......

If you start saving when you are younge, it becomes ingrained into your personality, you also never lived the lifestyle funded by spending 100%+ of your salary so you dont miss what you never had.

However the main benefit of saving at a younge age, you dont need to engage in risky investment endevours because your time is running out, you leave plenty of time for the magic of compounding to do its work for you.
 
Hi all,

TPFKAD,

Maybe I should have a chat with your wife....

A little bit on the side

Pedicure and manicure with the girlfriend

:p

On topic!!

Why oh why do all these "experts", expect a depression like last time, when the inputs this time are different!!
In the last depression, the US government curtailed spending, they are now spending more and are racking up a huge deficit, other western governments are following that lead.

Helicopter Ben did not get his name from his piloting skills.

bye
 
Why oh why do all these "experts", expect a depression like last time, when the inputs this time are different!!
In the last depression, the US government curtailed spending, they are now spending more and are racking up a huge deficit, other western governments are following that lead.

Hi Bill, I can only tell you what I read. The difference "this time" is the size and nature of the existing US debt. Back-a-way, the US debt was held in long term (like 30year) gov. bonds that were held by US citizens. Today, the debt is all external (T-bills held by countries like China, Korea, oil nations) and the bills are mostly short term, like 3 years, so regular renewals. The US already can't pay the interest on the existing debt. They currently just issue more T-bills with later exp. dates. Now you're exactly right, for as long as the China's etc are happy to give the US their hard earned money with no hope of it being returned, the game goes on. But, the general feeling is, when the lending nations work out it's a "one way street" either they will stop, or IR on T-bills will skyrocket. And you're right again, the only other source is the printing press. The amounts are, as you hear, trillions. The economists then say, you start printing USD trillions, in order to 1)pay the int. and 2)fund the new Obama deficits, the US dollar goes to crap and hyper-inflation sets in...like Zimbabwe who just issued a 100trillion note. So, yes, you're right, the printing press will give the US a "high" for a while, but with a nasty headache in the morning.
LL
 
Its easy if you start saving from a younge age. The problem is most people never save. Once they finish high school they need to borrow to buy a car, once they finish uni they need to travel, once they have a good job, they need a better car and a 'nice' place to rent with nice do-dah's to compensate for the stress/boredom/reward myself mentality. Once they approach marriage they need to pay for a mortgage and then when the kids come......

If you start saving when you are younge, it becomes ingrained into your personality, you also never lived the lifestyle funded by spending 100%+ of your salary so you dont miss what you never had.

However the main benefit of saving at a younge age, you dont need to engage in risky investment endevours because your time is running out, you leave plenty of time for the magic of compounding to do its work for you.

yep I agree with this, if you start as soon as you work, you can achieve it by the time your 30 or 35.. then you have the rest of your life ahead of you.. but the problem is most people need to reach 30, or even 40 before they realize then need to build up wealth.. by then, you really dont have time on your side.
 
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