Global Economy? BearSh*t!!

As I took a walk this morning, I was reminded why I am so bearish on the US economy. During my 30 minute expedition, I counted 67 for sale signs of which 12 noted the asking price has recently been reduced. This is not a problem isolated in my S. Tampa neighborhood, this is an epidemic spread across the country affecting many major population centers. I note Miami, Tampa, Phoenix, Las Vegas, San Diego, Los Angeles, Atlanta and many parts of the Midwest. The Daily Bear recognizes the housing meltdown alone will not likely take down the US consumer. However, the Daily Bear is perplexed as to how US consumer sentiment and stock market confidence can so be so bullish in a time of a record collapse in the housing market. Few experts would dispute the magnitude of the contribution from housing during the rise of this bull market. How come the same is not felt now as the housing market enters depression.

The million dollar answer.... this is a global market, the US consumer does not matter... We at the Daily Bear would disagree. Can the global market continue to be robust without the US consumer. We are skeptical.

According to our research, if the US consumer slows considerably, we believe the ripple effect will be dramatic. Why?

The global economy is too dependent on exports to the United States. We believe the US accounts for ~ 20-25% of Japan's total exports, 84 percent of Canada's, 86 percent of Mexico's and about 40 percent of China's. What happens when 40% of China's economy experiences a major flu? It is likely the sickness spreads throughout the region and will reverberate in Japan, Taiwan, South Korea and so on.

The US and China account for 40%+ of global growth..... Any questions....

We believe the question remains, not if but when the US consumer falters.

This week, we experienced the first major crack. US retails sales.

Retail sales fell .9% in June, the largest fall since August 2005

even excluding the volatile auto data, sales fell .4%

Furniture sales down 3%

Building materials down 2.3%

Electronics and clothing down 1.4%

This data is causing further deterioration in the dollar which reached a life time low against the Euro. Euro $1.3812 against the dollar.

Additionally, import prices rose 1% for the 5th consecutive month. Imported petroleum prices have climbed 28.1% since January, the Labor Department said.

Excluding petroleum, import prices - a closely monitored indicator by the Fed as potential source of inflation, ticked up by 0.2% after a 0.5% gain in May.


"The price data was high and that is just another indication that inflation maybe isn't moderating as fast as the Fed expects," said Adam Brown, analyst at Barclays Capital.


You think??? We all know the CPI is lagging behind in real terms the level of inflation. The disconnect between the CPI data and our currency to gold differential is troubling.


If the US dollar falls below the "mother of all support levels" 80.00 for a sustained period, watch out, gold likely to climb to over $700 and interest rates will skyrocket.

The Fed finds itself in a precarious situation.. Lower and face hyperinflation, raise and face deep recession. Thanks Alan... We believe the bias is towards raising rates, recessions are recoverable while taming hyperinflation is considerably much more difficult.

Despite the record deceleration in equity extraction, falling housing prices, record levels of mortgage resets, record foreclosure growth, record high oil prices, record high consumer debt, record high interest rate on consumer debt, massive trade deficits, a reduction in Chinese currency purchases and out of control rise in food prices, the global economy will save the day.

Just remember these parting words (from 1999)

New Economy

Eye balls

Mind Share

Paradigm Shift

Global Economy



US Dollar