I think we're finally reaching a point where the non-recovery can no longer be denied. This past week many of the economic indicators were negative and the ECRI moved to -10.5 which in the past (99% of the time) indicates recession. Whether the NBER considers this a new recession or just a continuation of the prior remains to be seen. Without govt. spending (that we all ultimately pay for anyway) there would have been little growth. Recent calculations suggest that for every dollar of govt. spending we're now getting a -.40 cent gain (drag)....this isn't good.

I expect July unemployment could be a tipping point where the markets recognize the reality of a very maladjusted US economy.

Austerity is coming, we know this. I thoroughly expect a VAT within a year. We cannot tax enough to even begin thinking about reducing the deficit. It's a short hop from the new 1099 rules hidden in the health care bill to a full VAT.

For over three decades we have been living off nothing but credit expansion and that my friends has come to an end. If the consumer doesn't (or as I believe can't) spend or borrow to consume we will continue to contract. There's nothing to drive employment up at this point.

The key to surviving the future will be to have a very thin economic profile, as little debt as possible and no questions about servicing that debt, even if unemployed. People with broad economic profiles will be the most vulnerable to and most likely to fall. Having cash right now is a good thing.

I think the second half of the year will be bad, and a couple of the analysts I read suggest liquidating assets to cash before the end of the year if possible. In so far as I can I've been doing that, but be aware that the value of the dollar is also an issue too.

my .02

steve a

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Steve A
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