"The Worst Is Yet to Come": If You're Not Petrified, You're Not Paying Attention

[NYadgal]

Posted: 5/15/09 at 2:17pm

The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was "preposterous" to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.

"We're in a complete mess and the consumer is smart enough to know it," says Davidowitz, whose firm does consulting for the retail industry. "If the consumer isn't petrified, he or she is a damn fool."

Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."

This outlook is based on the following main points:

With the unemployment rate rising into double digits - and that's not counting the millions of "underemployed" Americans - consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity.
Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on not just mortgages but student loans and auto loans and credit card debt.
More consumer loan defaults will hit banks, which are also threatened by what Davidowitz calls a "depression" in commercial real estate, noting the recent bankruptcy of General Growth Properties and distressed sales by Developers Diversified and other REITs.
As for all the hullabaloo about the stress tests, he says they were a sham and part of a "con game to get private money to finance these institutions because [Treasury] can't get more money from Congress. It's the ?greater fool' theory."

"We're now in Barack Obama's world where money goes into the most inefficient parts of the economy and we're bailing everyone out," says Daviowitz, who opposes bailouts for financials and automakers alike. "The bailout money is in the sewer and gone."


um,...so, how do you really feel?

Article link

[NYadgal]

Posted: 5/15/09 at 2:22pm

(for some reason I can't edit the above post to get rid of the ? incorrect punctuation...)

[PalJoey]

Posted: 5/15/09 at 2:28pm

That's because that punctuation is in the sewer and gone.

And if you're not petrified, you're a damn fool.

[NYadgal]

Posted: 5/15/09 at 2:30pm

I am now!

[Q]

Posted: 5/15/09 at 2:33pm

"Living standards will never be the same"

The 'standards' were fabricated for many, MANY people - the ones with an AVERAGE of 14 credit cards. This country has been overdue for a wake-up call, and we're having it. It's far from over.

[DottieD'Luscia]

Posted: 5/15/09 at 2:34pm

Considering that most employees at my firm have taken a salary reduction (in some cases up to 30%), I totally believe we're not out of the woods yet.