Tonight's "The Big Idea" - Lowered Expectations with Jim Cramer

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no_vaseline_IHB

no_vaseline_IHB

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My least favorite program on CNBC - "The Big Idea with Donny Deutsch" - had my my second least favorite CNBC personality (although most entertaining) - Jim Cramer tonight.



<a href="http://www.cnbc.com/id/27221342/">http://www.cnbc.com/id/27221342/</a>



Comments like "if you want the dream, maybe you move in with relatives. And when WalMart lowers prices on you and you go bust, then what?" and "refuse to fail isn't possible".



Jim nearly started crying at :31 into the program. Donny took a quick break and saved him.



The day the American Dream died. Interesting times indeed.



If you think Irvine is immune, you might want to try to catch it later.
 
<blockquote>Comments like ?if you want the dream, maybe you move in with relatives.</blockquote>
Just shoot me if I have to move in with my relatives.
 
[quote author="CalGal" date=1224236094]<blockquote>Comments like ?if you want the dream, maybe you move in with relatives.</blockquote>
Just shoot me if I have to move in with my relatives.</blockquote>


During the great depression, my okie relatives lived 18 deep in a three room house. They were thankful to have a roof. Some of my okie relatives were living in the orchard between picking peaches near Merced.



These two cheerleaders are talking about the end of the conspicuous consumer.



"Humble is the new black."
 
I still get the sense the general public has no idea what is to come. The last month with the frozen credit markets and the steep drop in the equities markets is going to have just as big an impact as 9/11 did. It was another 9/11 just stretched out over 30 days. Our lives and our lifestyles will never be the same.
 
[quote author="IrvineRenter" date=1224239271]I still get the sense the general public has no idea what is to come.</blockquote>


Absolutely zero. No concept whatsoever.



I'm hoping we get lucky and this is like the farm bust I lived through in the early 1980's, where 1/3 of my neighbors lost their multi-generational operations. These were not folks who were getting bottle service at ultralounges.



I suspect it will be much worse, and I'm not sure we have the mettle to make it.
 
[quote author="no_vaseline" date=1224239633][quote author="IrvineRenter" date=1224239271]I still get the sense the general public has no idea what is to come.</blockquote>


Absolutely zero. No concept whatsoever.</blockquote>


So what's your take? How bad can it get...isn't it already pretty ugly? Isn't as bad as you could have imagined? I'd be surprised to hear that many people really predicted a 40% decrease in stock market. If you really did, you must be much richer today than yesterday.



I also thought it would be ugly in 2008. I thought stock would drop somewhat and I was called crazy, but I must admit, it is worse (way way worse) than I imagined and am still unsure of the future.



Got a crystal ball to share?
 
[quote author="Roo" date=1224242493][quote author="no_vaseline" date=1224239633][quote author="IrvineRenter" date=1224239271]I still get the sense the general public has no idea what is to come.</blockquote>


Absolutely zero. No concept whatsoever.</blockquote>


So what's your take? How bad can it get...isn't it already pretty ugly? </blockquote>


Frankly, I don't think it's bad at all. Yet.



And I didn't perdict shit. Go ask Awgee. He's got the crystal ball. I though he was crazy. Now I recognize that he was right. The CDO deal is insane. Carl Ican ran - MAX - 10:1 duiring the corporate raider days of the 1980's. Most of these guys were up around 40:1. Some are bragging today that they are now down to 18:1.



How bad can it get?



<img src="http://eldib.files.wordpress.com/2008/04/mbw-depression.jpg" alt="" />



I've seen working class pepole line up at food banks several times in my life. Thankfully I haven't had to join them. Yet.
 
Here is one from Santa Ana. And what a great name: "Surplus Commodities Distribution Day."



http://img802.mytextgraphics.com/photolava/2008/10/17/breadline-4c80i1hsv.jpeg



Courtesy of <a href="http://ochistorical.blogspot.com/2008/10/santa-ana-el-toro-costa-mesa-etc.html">OC History Roundup.</a>



I can't help but note how well dressed many of those people were. Should it all go to sh!t (or when), I would hope that I too would maintain my dignity.



[Thanks for fixing the pic size, Graph!]
 
[quote author="Roo" date=1224242493][quote author="no_vaseline" date=1224239633][quote author="IrvineRenter" date=1224239271]I still get the sense the general public has no idea what is to come.</blockquote>


Absolutely zero. No concept whatsoever.</blockquote>


So what's your take? How bad can it get...isn't it already pretty ugly? Isn't as bad as you could have imagined? I'd be surprised to hear that many people really predicted a 40% decrease in stock market. If you really did, you must be much richer today than yesterday.



I also thought it would be ugly in 2008. I thought stock would drop somewhat and I was called crazy, but I must admit, it is worse (way way worse) than I imagined and am still unsure of the future.



Got a crystal ball to share?</blockquote>


I predicted oil price would go down to $75 and it did lower than that. I made sure not to drive to work to help lower the price down. I telecommute often.

I predicted the DJ to be lower than 11,000, my family has a lot of cash sitting for that drop, but DJ went lower than 8000 at one point. So who knows how much more it will be.
 
[quote author="EvaLSeraphim" date=1224247515]Here is one from Santa Ana. And what a great name: "Surplus Commodities Distribution Day."



http://img802.mytextgraphics.com/photolava/2008/10/17/breadline-4c80i1hsv.jpeg



Courtesy of <a href="http://ochistorical.blogspot.com/2008/10/santa-ana-el-toro-costa-mesa-etc.html">OC History Roundup.</a>



I can't help but note how well dressed many of those people were. Should it all go to sh!t (or when), I would hope that I too would maintain my dignity.</blockquote>


I think there are homeless people sleeping under some bridge in Irvine. My spouse was not sure this person was homeless becaus he had brand new tennis shoes. However, he had a cart nearby.
 
Today's homeless are (usually) folks who suffer from mental illness that are wandering the streets - untreated.



The homeless of the 1930's were dead broke and starving.
 
[quote author="CalGal" date=1224236094]<blockquote>Comments like ?if you want the dream, maybe you move in with relatives.</blockquote>
Just shoot me if I have to move in with my relatives.</blockquote>


In my neighborhood, one person who rented in Irvine for 11 years, now broke, went back to live with her relatives in the Midwest. In the tech burst, friends of our who are headhunters moved to Colorado and Utah. They sold their houses in Santa Barbara and in Sillicon Valley.

PS: I saw on "househunter" a 3 BR SFR in Michigan sold for $70K.
 
[quote author="IrvineRenter" date=1224239271]I still get the sense the general public has no idea what is to come. The last month with the frozen credit markets and the steep drop in the equities markets is going to have just as big an impact as 9/11 did. It was another 9/11 just stretched out over 30 days. Our lives and our lifestyles will never be the same.</blockquote>


Wow, this is so cataclysmic. I don't think it will be the same as it was between 2000 and late 2007, but I'm sure many of us will be able to adapt to the lifestyles we had before then, if necessary. I mean this period of irrational exuberance was only over the last few years. There is still money out there, and lots of it. Obviously there will have to be less reliance on leveraging, but after a few years of various "market corrections," we will really be alright IR, really.
 
[quote author="JLegend" date=1224294130][quote author="IrvineRenter" date=1224239271]I still get the sense the general public has no idea what is to come. The last month with the frozen credit markets and the steep drop in the equities markets is going to have just as big an impact as 9/11 did. It was another 9/11 just stretched out over 30 days. Our lives and our lifestyles will never be the same.</blockquote>


Wow, this is so cataclysmic. I don't think it will be the same as it was between 2000 and late 2007, but I'm sure many of us will be able to adapt to the lifestyles we had before then, if necessary. I mean this period of irrational exuberance was only over the last few years. There is still money out there, and lots of it. Obviously there will have to be less reliance on leveraging, but after a few years of various "market corrections," we will really be alright IR, really.</blockquote>


Yeap, lots still have money. WSJ just had an article, only in America, where a billionaire can turn millionaire overnight. Think AIG. ;-)
 
[quote author="skek" date=1224296118]I agree with JLegend. We're going into a severe recession, but we'll come out of it alright. The 9/11 analogy is appropriate because immediately after 9/11, everyone was saying the same thing -- "our lives will never be the same." Yet, as tragic as that day was, America proved to be more resilient than the paper tiger bin Laden made us out to be. Easy credit may be gone, but we'll adjust -- we always do.



I have faith in America, and frankly, I think the current economic crisis will probably go a long way to restore the good old-fashioned American work ethic that seems to have fallen out of favor lately.</blockquote>


For the long term, I think it will have a lot to do with whether other countries have faith in the US. We've been living a charmed life as the defacto reserve currency for 50+ years. But at some point, taxes are going to have to be raised (a lot!) to pay off the $5T that GWshrub has just run up on our collective tab. And we will have to pay higher interest to just roll over our $10T debt, not to mention financing new borrowing.



I think that this will mean higher taxes and a significant decline in the standard of living for quite a long time.





Does this mean more kitchen gardens and one car families? Smaller houses for both price and heating/cooling?
 
[quote author="Roo" date=1224242493][quote author="no_vaseline" date=1224239633][quote author="IrvineRenter" date=1224239271]I still get the sense the general public has no idea what is to come.</blockquote>


Absolutely zero. No concept whatsoever.</blockquote>


So what's your take? How bad can it get...isn't it already pretty ugly? Isn't as bad as you could have imagined? I'd be surprised to hear that many people really predicted a 40% decrease in stock market. If you really did, you must be much richer today than yesterday.



I also thought it would be ugly in 2008. I thought stock would drop somewhat and I was called crazy, but I must admit, it is worse (way way worse) than I imagined and am still unsure of the future.



Got a crystal ball to share?</blockquote>


It is the longer-term ramifications of the drop in asset prices that people don't grasp. First, anyone who was dependent upon a lifestyle of ever-increasing debt is about to experience a dramatic decline in their standard of living. This is the most obvious change, and the one most people are in denial about. The recession is going to force these people into a new way of managing their finances. Their collective sense of entitlement will be challenged. Second, there are going to be a lot more layoffs. Unemployment is going to reach very high levels. This is going to cause a big drop in the standard of living of many who had nothing to do with the housing bubble. Third, we are all going to face a decline in our standard of living as incomes stagnate and costs continue to rise. The rest of the world is probably not going to be so keen on loaning us huge amounts of low-interest money. This may force the FED to raise interest rates to keep financing the 10 trillion dollar debt. As more money goes toward interest, less is going to be available to invest in productive assets or to consume. Most of these problems will not go away when the recession does. Recessions are short lived phenomenons, but just because we start growing our economy again does not mean we will resume the big house party of the Great Housing Bubble.



In short, the borrow-and-spend way-of-life is over.
 
[quote author="no_vaseline" date=1224280339]Today's homeless are (usually) folks who suffer from mental illness that are wandering the streets - untreated.



The homeless of the 1930's were dead broke and starving.</blockquote>


As a side note, unfortunately, being homeless and having a mental illness often go hand in hand. There's a known association, but people aren't sure whether one's the chicken or the egg. Being homeless creates stresses that us normal people never even consider (where you're going to get food, where you'll sleep, whether some band of kids or some other homeless guy is going to beat you silly for what you do have). Think about that guy who snapped and killed his family in the Valley... he snapped under the pressure, and didn't even get to the completely broke and starving part.



If economic armageddon does arrive (and I can imaging some pretty scary shit down the road, but am hopeful we won't get there (paraonoid optimist?)), the population of homeless and mentally ill will skyrocket.
 
[quote author="skek" date=1224296118]I have faith in America, and frankly, I think the current economic crisis will probably go a long way to restore the good old-fashioned American work ethic that seems to have fallen out of favor lately.</blockquote>


I think you underestimate the corrosive nature of "lowered expectations".
 
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