By plant, I mean an insider who's job is to spread sunshine where darkness presides. The economy is on the brink of the biggest recession since late 70's and he's still trying to convince us all is well. Can he be sincere? I like you Norm. Your never rude and always professional. I still think its very possible you work for BBT and are either full of it or deliberately trying to sway public opinion.
'The economy is on the brink of the biggest recession since late 70's and he's still trying to convince us all is well.'
I disagree. Our population is growing 1% per year. American business is doing well. S&P 500 earnings for next year are estimated at $100 plus and their cash hoard is enormous - well over $1 trillion. Their earnings are largely driven by growth in emerging nations which will continue at 7 to 8% in 2012. Capex is beginning to recover. Also, I think our reliance on foreign oil will continue to decrease. We're still importing about $300 billion of oil per year but I think that's going to drop thanks to North Dakota oil and big increases in natural gas from the huge amount of shale deposits. The Consumer has significantly reduced indebtedness. Banks are in a much stronger position than 2008. State and local gov't has already cut 550,000 jobs in the last 2 years - so I think most of that pain is over with.
We're already at the bottom in housing and commercial construction. We're down something like 80%. It's not going to 0. The vast majority of job losses in the last recession came from the construction bust and we're shown no improvement to date although multifamily construction projects seem to be coming to life.
New car sales have been running well below trend line for years. The same is also true of durable goods. Huge pent up demand for household appliances and cars.
So I see consumer spending continue to increase modestly at around 1.5 to 2% per year. Capex should improve driven by growth in emerging nations and I look for our balance of trade to improve some as we wean ourselves off foreign oil. State and local government spending may decline modestly but most of the bitter medicine has already been absorbed. Federal spending needs to be reduced by a least $150 billion (4%) in 2012 and entitlements need major reform.
"Economy not on the brink?" Zero jobs created, $1.5 trillion debt this year alone. One of two things is going to happen. Unemployment goes to 18% or inflation goes to 10% Either way, our standard of living takes a serious hit because in either situation, the Fed government won't have the tax base to pay for Social Services, Infrastructure, Military and the many other services we are used to having. We have lived well as a country for 40 years from the industrial revolution. Problem is, that money is not flowing into our economy anymore. Those companies are on life support and one by one are dissappearing $8 an hour jobs in foriegn countries. Technology is only delaying the inevitable for many of our companies. Some benefit greatly from tech advances, but the middle class, the auto, steel, appliance workers are retired, spending their billions on retirement. When that is spent, game over!!
GDP growth for the first half was almost non-existent and the second qtr may still be revised to negative. Every major financial institution (GS, MS, UBS, etc) has cut growth rate estimates for the second half (some twice). Recent data points have been terrible (latest Aug employment). S&P earnings estimates have and are being cut. $100 next year is a dream.
I do not see how you can suggest that recession is not likely - many analysts now have the liklihood at 50% or more).
QE3 ( http://www.financialsense.com/contributors/bruce-krasting/2011/09/01/the-feds-plan-rumors-of-news ) may provide a respite, but this situation will not be over until the financial system is flushed of 10s of trillions $s of toxic derivatives.
You need to trade those rose colored glasses for ones with clear lenses. :>)
I do not work for bbt directly or indirectly. In fact I've never worked for any bank. I've banked with them for 11 years. The information I post on this board is based on public information found either in bbt financials, conference calls, web presentations, shareholder meeting, analyst reports, gov't reports etc.
I do not post messages based on requests. My messages are my own thoughts and not the thoughts of other people.
I think bbt is a solid bank and a great investment at current price level. I think King has done a nice job given a tough environment. I have been critical of King for the way he handled marks on reos. It still pisses me off each quarter when I see a $150 million charge flow through the valuation allowance for reos. Most of this is additional marks. This has been going on for 2 years. Current mark on reos is 54% and I sincerely hope we are at the end. Given the huge amount of charges run through valuation allowance I do not think it is appropriate for King to compare bbt quarterly charge-offs vs. competition. The # are greatly distorted.
The additional marks are due primarily to an absolutely horrendous real estate market for adc land. I do not fault King for the additional marks but I am critical of the way he attempted to gloss over the subject of marks in previous conference calls. He confused me and some other folks.
Regarding King's pay, I think it's competitive but believe it is too much. His pay should be based on return on equity. High return = high pay. Low return = low pay. I also think bbt is too generous with options and their strike prices awarded to key personnel given roe over last few years. I'm glad to see that shareholders will be able to express their opinions on the subject of pay at subsequent annual meetings. Pay system should be based on carrot and stick.
"consider yourself enlightened."
Per Standard and Poors, 2009 operating earnings and dividend payments for the s&p 500 were $60.80 and $22.31 respectively.
With a p/e of 123, your chart implies that s&p 500 earnings were around $5. Earnings were definitely down in 2009 from their prior peak by maybe 25% but they were definitely not down 90% plus as your chart implies. Your chart perhaps includes massive writedowns of goodwill and intangibles and restructurings which makes the data meaningless.
I am not enlightened by your chart. What I have concluded is that your mind set is common among investors. Lack of fact drives fear resulting in bad investment decisions over the long term.
The chart you showed, consumer debt to gdp peaked at 300%. So the chart implies that consumer debt is about $45 trillion. The Federal Reserve reports consumer debt at $2.4 trillion at 6/30/2011. Entire loans outstanding for the entire US banking system only total $6.7 trillion.
So who do you believe? Some guy from Australia who says US consumer debt peaked at $45 Trillion or the Federal Reserve System who says it's 5% of that amount? My money is on the Fed. Apparently, you place great faith in the aussie.
Regarding Japan, the nikkei 225 had a p/e close to 100 in 1990 when their market tanked. Our p/e has averaged around 15 or so. Currently, it's around 12 times earnings.
Look I don't mean to be overly critical but come on now, Inlet, you need to be able to differentiate reality from baloney.
As to deflation - it is about more than housing prices.
I personally have lost more in interest income since 2008 than the decline in my house (using 2008 levels as a benchmark). Deflation is also about the return on your riskless investments. And the FED has told us this will continue for another two years (at least).
So yes deflation will continue - the FED has told you so as they take your money with exceedingly low interest rates.
A picture is worth a 1000 words (of course with deflation that may be 500 words now - so here is 2 pictures):
I find it hard to look at these pictures and not believe we are following the same path as Japan.
Sorry I was wrong about consumer debt to GDP - it is 260%+ of GDP (not even close to GDP) and a chart shows that the decline (after years of parabolic rise) is marginal:
You wanted a longer view, I am giving you a longer view - not just recent data points. You are right the trend is clear.
As to deflation - after 50-60 years of piling debt on top of debt a cleansing will not happen within a few months or even a couple of years, but it will take many years. After over 20 years Japan has still not resolved their issues and the Great Depression took a long time and a lot of deflation to cure the excesses of the past.
I stand firmly behind my statements because history tells us what is likely to happen. It may not repeat exactly, but it sure as hell will rhyme.
Sorry if I confused you - but the "aussie's" chart is a total of personal and corporate debt (including mortgage debt of around 13 trillion). Unless there is a reason to ignore corporate and mortgage debt I will go with the aussie's chart. Like I said earlier personal debt is slightly more than GDP of around $14 trillion.
Throw in the Federal govt's debt and you are near 360% of GDP. This does not include something over $100 trillion in Social Security and Medicare future obligations. Throw in state and local government debt and you are well over 400% of GDP (probably close to 500%).
I looked at Mortgage debt 2008 vs latest 2011 data and you can see the impact on that from all the foreclosures. It appears to me that possibly 50% of any personal debt reduction is possibly from reduction in mortgage debt due to foreclosures.
Try and spin it any way you want the USA has a terrible debt problem and there is no way the government or the FED can fix it. The system has to be cleansed - and that is going to take years.
BTW - this is my OPTIMISTIC outlook.
"In 2009 the PE average on the SnP 500 got over 100 as there was no E. You need a chart?"
S&P 500 dropped to around 700 in 2009 so Inlet says that S&P 500 earnings dropped to $7 and rebounded to $95 in 2011. News to me. Please enlighten me and show me the data.