Bernanke: Recovery "close to faltering".

How bad can it get if the US falls into recession?

NEW YORK (AP) — Are investors overreacting to the prospect of arecession?

The slightly better jobs report on Friday notwithstanding, the odds of a recession appear to be climbing, and that's bringing back scary memories. Though stocks may look cheap thanks to record corporate profits, that was also true the last time the U.S. was heading into a downturn. Based on recent recessions, profits could fall a third if the economy crumbles.

Investors have been worried about a new recession for months. Headlines last week ratcheted up the fear.

On Tuesday, the Federal Reserve Chairman Ben Bernanke testified to Congress that the recovery is "close to faltering." Goldman Sachs said Europe could fall into recession by the end of the year, and push the U.S. "to the edge" of one itself. A co-founder of theEconomic Cycle Research Institute, a forecasting firm that called the last three downturns, made the rounds of TV news shows to say a U.S. recession was all but inevitable.

With memories of the Great Recession so fresh, investors are understandably spooked. A year after that downturn began in Dec. 2007, profits at companies in the Standard & Poor's 500 index turned into losses. Three months after that, stocks hit bottom at half their pre-recession peak.

But recessions come in many varieties, and most are less scary than the last one. A review of past ones shows that:

— Profit drops range widely. From peak to trough, profits at S&P 500 companies, excluding financial firms, fell an average 32 percent in the past five recessions, according to Adam Parker, U.S. equity strategist at Morgan Stanley. He excludes financial firms because their record write-offs in the last recession turned S&P profits into losses, and would exaggerate the drop at the average company in the index.

The biggest fall in profits: 57 percent from the peak before the 2001 dot-com recession. Profits during the 1981-82 recession fell 17 percent.

— Recessions usually last less than a year. A recession that began in January 1980 was over in six months. The Great Recession that ended June 2009 lasted 18 months, the longest since the Great Depression. The 11 recessions since World War II averaged 11 months.

— Stock investors can get clobbered, but not always. Bear markets that accompany recessions have pulled stocks down an average 38 percent in the last five downturns, based on data from Sam Stovall, chief investment strategist at Standard & Poor's. From their October 2007 peak before the last recession, stocks fell 57 percent. But in the bear market during the recession that began in July 1990, they fell only 20 percent.

— By the time the economy falls into recession, much of the damage to stocks is usually over. The stock market famously looks forward six to nine months, and that's mostly true on the cusp of downturns, too. Stocks had been dropping for a year by the time the 2001 recession began. That's worth remembering if another recession is coming. The S&P 500 is already down 15 percent from its recent peak in April.

Problem is, not even experts who study downturns can predict exactly what kind of recession may come next. "Everyone wants a recession playbook, but there aren't enough similarities with prior cycles to know which one to pick," says Morgan Stanley's Parker.

To be sure, most Wall Street analysts and economists think one isn't even likely now. Jim Paulsen, chief investment strategist at Wells Capital Management, notes that recessions are typically preceded by what he calls "excesses" that need to be purged from the economy. He doesn't think that's true today.

"Have banks been aggressively overextending loans? Has anyone been borrowing too much lately? Are companies overstaffed?" Paulsen writes in a recent report. "It's hard to see why the U.S. would experience a recession when almost nothing requires a correction."

Even if he's wrong, investors bracing for a downturn on the scale of the last one may be pleasantly surprised.

In the Great Recession, the output of many countries shrank at the same time, punishing earnings of U.S. companies that had hoped sales abroad would soften the blow from lower U.S. sales. Fear spread that banks wouldn't make good on their own loans, and that led them to stop making loans to businesses of all kinds. Companies cut more than 600,000 workers a month for six months in a row. With fewer jobs, people had less money to spend and companies sold less, which led them to cut more jobs.

How likely is a repeat?

Banks have fatter cushions against losses now than before the financial crisis. Companies in the S&P 500 are making more money than ever, and squirreling away some as cash reserves, a sort of rainy-day fund. They've laid off so much staff and are running so lean, it won't be as easy to cut jobs like they did in the last recession.

The government reported Friday that non-farm payrolls rose 103,000 in September, better than expected but not enough to lower the unemployment rate. That rate held steady at 9.1 percent.

So if a recession is coming, how bad might it get? That depends on whether the U.S. falls into one alone or together with other countries as it did the last time.

Parker, of Morgan Stanley, is a sort of grim optimist. He doesn't think stocks are the bargains that Wall Street analysts claim. But he doesn't think a worldwide downturn that would send them plummeting is likely, either. If a U.S. recession is coming, he thinks the odds favor a garden-variety one. He says profits for S&P 500 companies could fall to maybe $85 per share in 2012, a quarter below the $112 that analysts expect now.

That could still hurt stocks. But since they're down already, the fall from here might qualify more as a slide than a crash.

Death of American Capitalism:' The 10 final scenes

ARROYO GRANDE, Calif. (MarketWatch) -- Good news, Americans are "downbeat about today. Upbeat about tomorrow," says the latest USA Today/Gallup Poll. "Americans feel battered by hard times, record home foreclosures, stubbornly high unemployment rates and war."

And yes, we are "fed up with Washington and convinced more than 3 to 1 that the nation is heading in the wrong direction," yet there's "confidence that there will be better times ahead, that the classic American dream endures and hasn't been extinguished. It's not even at its low ebb." Why? Because we're in denial!

Do Main Street's 95 million investors know something Warren Buffett's long-time partner, Charlie Munger, doesn't know? Munger is warning us "It's Over" for America. Yes, "o-v-e-r," America's in decline, at the end-of-days, coming to "financial ruin," says Munger.

Optimism has always been the enduring spirit that made us a great nation, brought us back from overwhelming challenges and impossible odds -- WW II, the Civil War, the 1776 Revolution. Yes, that spirit still burns in our soul, says the poll.

But we also know, as we said earlier in "The Death of the Soul of Capitalism," that over the long-term, through many centuries, historians give nations an average of about 200 years before they burn out. Why? Because the "blind optimism" that makes a nation great in the early years of its rise to power and glory becomes, paradoxically, its worst enemy in the end-days.

Their arrogance traps them in a self-sabotaging cycle that weakens their resolve, makes them vulnerable to new, unpredictable challenges, ultimately destroying them from within. That happens over and over throughout history, even as their optimistic brains tell them they're still the greatest.

So for a moment, please set aside your "optimism," listen to our translation of Munger's drama as a 10-scene crime-thriller about America on the "road to ruin."

Plot notes: Warning, America is on a 'road to financial ruin'

Turns out that like Buffett, whose tales we detailed earlier, Munger's a good storyteller. His parable, "Basically It's Over: A parable about how one nation came to financial ruin," appeared in Slate magazine. Clearly he's warning about the end of capitalism, the end of democracy, the coming end of America.

In his parable Munger calls America "Basicland ... rich in all nature's bounty." In our recasting it as a drama, we'll use "America" rather than "Basicland" in the narrative to drive home the full impact of Munger's powerful message.

Scene 1: Power and wealth create false sense of invincibility

Significantly, Munger says 2012 is the turning point, a signal, the moment setting up the final crisis scene. We've often made a similar timing prediction, one tied to the 2012 election, and a reminder of the warning made by Jared Diamond in "Collapse: How Societies Choose to Fail or Succeed." In the late stages of a nation's cycle: A crisis hits. Everyone, leaders and citizens, act surprised. But it's too late: "Civilizations share a sharp curve of decline. Indeed, a society's demise may begin only a decade or two after it reaches its peak population, wealth and power." Just 20 short years to ruin?

Munger warns: "Even a country as cautious, sound, and generous as America could come to ruin if it failed to address the dangers that can be caused by the ordinary accidents of life. These dangers were significant by 2012, when the extreme prosperity of America had created a peculiar outcome: As their affluence and leisure time grew, America's citizens more and more whiled away their time in the excitement of casino gambling." Yes, Main Street "feels battered" while Wall Street gambling casinos generate billions.

Scene 2: Greed consumes America: Gambling replaces real work

In Munger's brilliant parable "the winnings of the casinos eventually amounted to 25% of America's GDP, while 22% of all employee earnings in America were paid to persons employed by the casinos" and "many of the gamblers were highly talented engineers attracted partly by casino poker but mostly by bets available in the bucket shop systems, with the bets now called financial derivatives." Yes, the same derivative bets Buffetttargeted when he warned against "financial weapons of mass destruction."

http://www.marketwatch.com/story/death-of-us-capitalism-the-final-10-scenes-2010-02-23?pagenumber=1

Must Read

Full Report: The Economic Elite Vs. The People of the United States of America

Yes, of course, we all have very strong differences of opinion on many issues. However, like our Founding Fathers before us, we must put aside our differences and unite to fight a common enemy.

It has now become evident to a critical mass that the Republican and Democratic parties, along with all three branches of our government, have been bought off by a well-organized Economic Elite who are tactically destroying our way of life. The harsh truth is that 99% of the US population no longer has political representation. The US economy, government and tax system are now blatantly rigged against us.

Current statistical societal indicators clearly demonstrate that a strategic attack has been launched and an analysis of current governmental policies prove that conditions for 99% of Americans will continue to deteriorate. The Economic Elite have engineered a financial coup and have brought war to our doorstep. . . and make no mistake, they have launched a war to eliminate the US middle class.

To those who feel I am using extreme rhetoric, I ask you to please take a few minutes of your time to hear me out and research the evidence put forth. The facts are there for the unprejudiced, rational and reasoned mind to absorb. It is the unfortunate reality of our current crisis.

Unless we all unite and organize on common ground, our very way of life and the ideals that our country was founded upon will continue to unravel.

Before exposing exactly who the Economic Elite are, and discussing common sense ways in which we can defeat them, let’s take a look at how much damage they have already caused.

I: Casualties of Economic Terrorism, Surveying the Damage

The devastating numbers across-the-board on the economic front are staggering. I’ll go through some of them here, many we have already become all too familiar with. We hear some of these numbers all the time, so much so that it appears as if we have already begun “to normalize the unthinkable.” You may be sick of hearing them, but behind each number is an enormous amount of individual suffering, American lives and families who are struggling worse than they ever have.

America is the richest nation in history, yet we now have the highest poverty rate in the industrialized world with an unprecedented number of Americans living in dire straits and over 50 million citizens already living in poverty.

The government has come up with clever ways to downplay all of these numbers, but we have over 50 million people who need to use food stamps to eat, and a stunning 50% of US childrenwill use a food stamp to eat at some point in their childhood. Approximately 20,000 people are added to this total every day. In 2009, one out of five US households didn’t have enough money to buy food. In households with children, this number rose to 24%, as the hunger rate among US citizens has now reached an all time high.

We also currently have over 50 million US citizens without healthcare. 1.4 million Americans filed for bankruptcy in 2009, a 32% increase from 2008. As bankruptcies continue to skyrocket, medical bankruptcies are responsible for over 60% of them, and over 75% of the medical bankruptcies filed are from people who have healthcare insurance. We have the most expensive healthcare system in the world, we are forced to pay twice as much as other countries and the overall care we get in return ranks 37th in the world.

In total, Americans have lost $5 trillion from their pensions and savings since the economic crisis began and $13 trillion in the value of their homes. During the first full year of the crisis, workers between the age of 55 – 60, who have worked for 20 – 29 years, have lost an average of 25% off their 401k. “Personal debt has risen from 65% of income in 1980 to 125% today.” Over five million US families have already lost their homes, in total 13 million US families are expected to lose their home by 2014, with 25% of current mortgages underwater. Deutsche Bank has an even grimmer prediction: “The percentage of ‘underwater’ loans may rise to 48 percent, or 25 million homes.” Every day 10,000 US homes enter foreclosure. Statistics show that an increasing number of these people are not finding shelter elsewhere, there are now over 3 million homelessAmericans, the fastest growing segment of the homeless population is single parents with children.

One place more and more Americans are finding a home is in prison. With a prison population of2.3 million people, we now have more people incarcerated than any other nation in the world – the per capita statistics are 700 per 100,000 citizens. In comparison, China has 110 per 100,000, France has 80 per 100,000, Saudi Arabia has 45 per 100,000. The prison industry is thriving and expecting major growth over the next few years. A recent report from the Hartford Advocate titled “Incarceration Nation” revealed that “a new prison opens every week somewhere in America.”

Mass Unemployment

The government unemployment rate is deceptive on several levels. It doesn’t count people who are “involuntary part-time workers,” meaning workers who are working part-time but want to find full-time work. It also doesn’t count “discouraged workers,” meaning long-term unemployed people who lost hope and don’t consistently look for work. As time goes by, more and more people stop consistently looking for work and are discounted from the unemployment figure. For instance, in January, 1.1 million workers were eliminated from the unemployment total because they were “officially” labeled “discouraged workers.” So instead of the number rising, we will hear deceptive reports about unemployment leveling off.

On top of this, the Bureau of Labor Statistics recently discovered that 824,000 job losses were never accounted for due to a “modeling error” in their data. Even in their initial January data there appears to be a huge understating, with the newest report saying the economy lost 20,000 jobs. TrimTabs employment analysis, which has consistently provided more accurate data, “estimated that the U.S. economy shed 104,000 jobs in January.”

When you factor in all these uncounted workers — “involuntary part-time” and “discouraged workers” — the unemployment rate rises from 9.7% to over 20%. In total, we now have over 30 million US citizens who are unemployed or underemployed. The rarely cited “employment-participation” rate, which reveals the percentage of the population that is currently in the workforce, has now fallen to 64%.

Even based on the “official” unemployment rate, just to get back to the unemployment level of 4.6% that we had in 2007, we need to create over 10 million new jobs, and most every serious economist will tell you that these jobs are not coming back. In fact, we are still consistently shedding jobs, on just one day, January 27th, several companies announced new cuts of more than 60,000 jobs.

Due to the length of this crisis already, millions of Americans are reaching a point where the unemployment benefits that they have been surviving off of are coming to an end. More workers have already been out of work longer than at any point since statistics have been recorded, withover six million now unemployed for over six months. A record 20 million Americans qualified for unemployment insurance benefits last year, causing 27 states to run out of funds, with seven more also expected to go into the red within the next few months. In total, 40 state programsare expected to go broke.

Most economists believe that the unemployment rate will remain high for the foreseeable future. What will happen when we have millions of laid-off workers without any unemployment benefits to save them?

Working More for Less

The millions struggling to find work are just part of the story. Due to the fact that we now have a record high six people for every one job opening, companies have been able to further increase the workload on their remaining employees. They have been able to increase the amount of hours Americans are working, reduce wages and drastically cut back on benefits. Even though Americans were already the most productive workers in the world before the economic crisis, in the third quarter of 2009, average worker productivity increased by an annualized rate of 9.5%, at the same time unit labor cost decreased by 5.2%. This has led to record profits for many companies. Of the 220 companies in the S&P 500 who have reported fourth-quarter results thus far, 78% of them had “better-than-expected profits” with earnings 17% above expectations, “thehighest for any quarter since Thomson Reuters began tracking data.”

According to the Bureau of Labor Statistics, the national median wage was only $32,390 per yearin 2008, and median household income fell by 3.6% while the unemployment rate was 5.8%. With the unemployment rate now at 10%, median income has been falling at a 5% rate and is expected to continue its decline. Not surprisingly, Americans’ job satisfaction level is now at an all time low.

There are also a growing number of employed people who, despite having a job, are still living in poverty. There are at least 15 million workers who now fall into this rapidly growing category. $32,390 a year is not going to get you far in today’s economy, and half of the country is making less than that. This is why many Americans are now forced to work two jobs to provide for their family to hopefully make ends meet.

A Crime Against Humanity

The mainstream news media will numb us to this horrifying reality by endlessly talking about the latest numbers, but they never piece them together to show you the whole devastating picture, and they rarely show you all the immense individual suffering behind them. This is how they “normalize the unthinkable” and make us become passive in the face of such a high casualty count.

Behind each of these numbers, is a tremendous amount of misery, the physical toll is only outdone by the severe psychological toll. Anyone who has had to put off medical care, or who couldn’t get medical care for one of their family members due to financial circumstances, can tell you about the psychological toll that is on top of the physical suffering. Anyone who has felt the stress of wondering how they were going to get their child’s next meal or their own, or the stress of not knowing how you are going to pay the mortgage, rent, electricity or heat bill, let alone the car payment, gas, phone, cable or internet bill.

There are now well over 150 million Americans who feel stress over these things on a consistent basis. Over 60% of Americans now live paycheck to paycheck.

These are all basic things that every person should be able to easily afford in a technologically advanced society such as ours. The reason why we struggle with these things is because the Economic Elite have robbed us all. This amount of suffering in the United States of America is literally a crime against humanity.

II: The Rise of the Economic Elite

“The war against working people should be understood to be a real war…. Specifically in the U.S., which happens to have a highly class-conscious business class…. And they have long seen themselves as fighting a bitter class war, except they don’t want anybody else to know about it.” — Noam Chomsky

As a record number of US citizens are struggling to get by, many of the largest corporations are experiencing record-breaking profits, and CEOs are receiving record-breaking bonuses. How could this be happening; how did we get to this point?

The Economic Elite have escalated their attack on US workers over the past few years; however, this attack began to build intensity in the 1970s. In 1970, CEOs made $25 for every $1 the average worker made. Due to technological advancements, production and profit levels exploded from 1970 – 2000. With the lion’s share of increased profits going to the CEOs, this pay ratio dramatically rose to $90 for CEOs to $1 for the average worker.

As ridiculous as that seems, an in-depth study in 2004 on the explosion of CEO pay revealed that, including stock options and other benefits, CEO pay is more accurately $500 to $1.

Paul Buchheit, from DePaul University, revealed, “From 1980 to 2006 the richest 1% of America tripled their after-tax percentage of our nation’s total income, while the bottom 90% have seen their share drop over 20%.” Robert Freeman added, “Between 2002 and 2006, it was even worse: an astounding three quarters of all the economy’s growth was captured by the top 1%.”

Due to this, the United States already had the highest inequality of wealth in the industrialized world prior to the financial crisis. Since the crisis, which has hit the average worker much harder than CEOs, the gap between the top one percent and the remaining 99% of the US population has grown to a record high. The economic top one percent of the population now owns over 70% of all financial assets, an all-time record.

As mentioned before, just look at the first full year of the crisis when workers lost an average of25 percent off their 401k. During the same time period, the wealth of the 400 richest Americansincreased by $30 billion, bringing their total combined wealth to $1.57 trillion, which is more than the combined net worth of 50% of the US population. Just to make this point clear, 400 people have more wealth than 155 million people combined.

Meanwhile, 2009 was a record-breaking year for Wall Street bonuses, as firms issued $150 billionto their executives. 100% of these bonuses are a direct result of our tax dollars, so if we used this money to create jobs, instead of giving it to a handful of top executives, we could have paid an annual salary of $30,000 to 5 million people.

to read the rest go here: 

http://ampedstatus.org/full-report-the-economic-elite-vs-the-people-of-the-united-states-of-america/

Ron Paul Wins Straw Poll/ Fix Is In !!

I've often said that polls are fixed. Recently I saw where due to Palin not running for President Romney was the favorite. Then why did he place 6th in a recent straw poll & only rec'v 4% (!!!) of the vote ? Cuz the fix is in & this wasn't one of those polls which are controlled ... they are laughing their asses at us being so gullible ... you can tell who the elite want to be president by who rec'vs all the press attention ... Ron Paul ain't one of those ... neither was Kucinich when he ran. 


The other "favorite" Perry came in 4th only rec'ving 8% . Paul rec'vd over 1/3rd of the votes. 

Values voters love Ron Paul.

Republican presidential candidate, Rep. Ron Paul, R-Texas, speaks at the Values Voter Summit in Washington, Saturday, Oct. 8, 2011. (Image Credit: Manuel Balce Ceneta/AP Photo)

The Texas congressman and presidential candidate who remains in the single digits in most national polls emerged as the choice of 37 percent of those who cast ballots at the annual Values Voter Summit in Washington, D.C.

Former Godfather’s Pizza CEO Herman Cain, who has been surging in national presidential primary polls, came in second with 23 percent of the vote, followed by Rick Santorum who garnered 16 percent. Rick Perry and Michele Bachmann tied for fourth — both with 8 percent.

Current GOP front-runner Mitt Romney, who addressed the conference on Saturday, wound up near the bottom of the pack with 4 percent.

Here are the results of the straw poll:

Ron Paul – 37 percent

Herman Cain – 23 percent

Rick Santorum – 16 percent

Rick Perry – 8 percent

Michele Bachmann – 8 percent

Mitt Romney – 4 percent

Newt Gingrich – 3 percent

Jon Huntsman – 0 percent

Undecided – 1 percent

Here are the top four vice presidential choices: Michele Bachmann; Herman Cain; Marco Rubio; and Rick Santorum.

Saturday’s results were very different from last year’s Values Voter straw poll. The support for both Romney and Newt Gingrich declined markedly. Last year, Rep. Mike Pence, R-Ind., won the straw poll and former Arkansas Gov. Mike Huckabee took second place. Paul barely registered in 2010.

As ABC News’ Jason Volack reported, Rep. Paul spoke to the audience of hundreds of social conservatives in Washington earlier today, telling them that war was the greatest threat to the modern family.

And ABC News’ Amy Bingham spoke with several attendees at the annual conference this weekend to take the temperature of the cultural conservative voters. Despite Paul’s straw poll win, Bingham heard lots of support for Cain, but the door is still clearly open for other candidates:

Bruce Gordon of College Grove, Ore., said he supported Cain because he seems “down-to-earth.”

“He came up through hard times,” Gordon said. “His success wasn’t handed to him.”

Mary Lynn Scott from Le Sueur, Minn., said she was also a Cain supporter.

“The biggest problem right now is the economy, and he turned two companies around,” Scott said. “He has a good approach to problem solving, a solid sense of humor, he is a man of his word and he has never been in politics. So those things are all in his favor.”

Scott said that while she did not know if Cain’s 9-9-9 economic plan would solve all of the country’s fiscal problems, she supports him because he has a “real plan” and it is a “good place to start.”

But while Cain may have drawn the largest crowds, there was plenty of support to go around. Kelly Shackelford of Plano, Texas, said he was planning to vote for Texas Gov. Perry because “he has been around long enough and he knows what he’s doing.”

“I wasn’t satisfied with the [GOP] field until Perry entered the race,” Shackelford said.  “Then we finally had someone who was conservative across the board and who had the heft to compete nationally.”

He said he was looking for a candidate who not only shares his views but who also has executive experience, such as a governor.

“We need someone who as taken those values and then actually accomplished something through the political process with them,” Shackelford said.

Perry’s recent decline in the polls is just a symptom of entering the race with so much hype, Shackelford said, adding, “Eventually, that bubble is going to burst.

“I think it’s a matter of just bumps in the road,” he said. “Clearly, he has to do a better job of communicating the long list of conservative things he has accomplished.”