Weekend Tidbits

David A. Rosenberg
Chief Economist & Strategist
Market Musings & Data Deciphering
Breakfast with Dave
Rosies Tidbit

Muddle Through, R.I.P.?
A must read from John Mauldin.
I defined a Muddle Through Economy in the past as one of slow growth (in the area of 1-2%) and a slack employment environment, such as we had in 2002 and the early part of 2003. In early 2007, I suggested we would return at some point to such an environment at the end of the recession I was predicting.
I am not surprised about the response of the Fed to the current recession and credit crisis, whether it's the large monetization of debt or the low interest rates. Assuming they more or less remove the monetary easing in a reasonable manner, there is nothing that would make me think we do not eventually recover, albeit at a very slow Muddle Through pace, with a jobless recovery that lasts for several years. It will not be pleasant, but we'll survive.
However, gentle reader, never in my wildest dreams did I think we could be looking at government deficits of $1.5 trillion dollars and actually budgeting future deficits of over $1 trillion as far as the eye can see. And there is real reason to think that under current plans, $1 trillion deficits are optimistic. Look at the graph above from the Heritage Foundation. They suggest that current policy would bring us closer to a $2 trillion deficit by 2019.
And that assumes nominal growth that is north of 3% and unemployment dropping back below 5% in reasonably short order. If you make less optimistic assumptions, the number can become much larger rather quickly. Where do we find that much money to finance that large a deficit? We will look at what might be the answer, but first we need to look at a basic concept in economics.

The China Files (Special Project): Real Estate - Outside the Box Special Edition

Florida Unemployment Rate Hits Series High 11%

Inspector General Report: FHA Lacks Resources to Ensure Lenders Meet Requirements

Bank Failure #99: San Joaquin Bank, Bakersfield, California

Martha Stewart & Kmart Get a Divorce (MSO, SHLD, HD)

Corporate Bonds
October 16th, 2009 2:06 pm
There is very little going on in the corporate bond market. The consensus is that spreads are dramatically unchanged but firm.
When I reported this morning they were a bit squishy.
Participants with whom I spoke did hold the opinion that issuance could pick up next week. As one contact put it, GE, JPM, GS and Bof A are serial borrowers. With earnings constraints removed it is a good bet that there will be something for sale by some name in that group next week.

A Rare Glimpse Into The Fed's Discount Window Courtesy Of The Brewing Lehman-Barclays Scandal

Investors Will Sell Financials, Buy Tech Stocks, Acampora Says