[youtube="W8ha5FhoChI"]Walter Zimmerman Interview 1[/youtube]
[youtube="7w3oPl-iKVY"]Walter Zimmerman Interview 2[/youtube]
[youtube="sG5dKT5GDSc"]Walter Zimmerman Interview 3[/youtube]
[youtube="IFN_PM2FgxQ"]Walter Zimmerman Interview 4[/youtube]
Walter Zimmerman runs a business called Icap (vice president) which
gathers data points for brokerages, houses, banks, etc., and is mainly a consulting/advising firm. He is meeting with some of the richest people in America next week to consult with them, and has been called "the smartest man in America on the economy". He has been warning about the current collapse for years, particularly in the housing market.
Zimmerman calls the current economic crisis a once in a generation super event within a continuous long economic cycle. In history we see that the economy goes through boom and bust cycles, with depressions coming and going like clockwork, then giant events (depressions) occur once in a generation with a major contraction.
*This cycle was outlined by a soviet economist under Stalin who described
capitalism as being like the seasons, ever repeating. This economist studied
socialism and capitalism, and was actually asked by Stalin which
is better; capitalism or socialism. He was executed, in part,
for his answer. He said capitalism was preferable because it
cycles between great periods of growth and slowdowns. In spring and summer the economy grows, then in autumn it begins to slow down, until it hits winter when everything stops. The bigger the boon, the bigger the bust. He said it was a better system because the "winter"(recession/depression) resets the system, but socialism never resets. Socialism attempts to keep propping up its grievances until it hits a cataclysmic collapse where
nothing is left. I know ptgatsby has been talking about
economic cycles like this for quite some time time.
The credit bubble has been collapsing, creating a deflationary contraction.
The bubble burst, because easy money drove commodities, real estate, and equities to unsustainable levels. People then needed to raise cash and pay
off debts leading to a collapse in equity prices, the stock
market, real estate, and commodities. He defines a recession as being
a correction in either real estate, stock market, or commodities, but
not all 3. The combination of all 3 is what makes it greater (a depression).
The credit bubble that burst was the greatest in the history of
mankind. Massive leveraging at the top became unsupportable, with people not being able to deleverage fast enough.
The S&P500 wont get below the 625~585 level this year. He expects a bare
market correction, hitting a bottom by spring with a rebound into the end
of the year. Then the longer term downward trend will resume, with
the S&P going into the 330~350 area over the coming years.
He thinks unemployment will go up to 15~20% at the bottom. Tax
revenues for states are going to plummet. Cash is good during
deflation, opposite of its value during inflation. Housing prices will worsen.
He says to have cash freed up because there will be major buying
opportunities when the economy hits bottom. He gives some investment advice, 401K's included. According to him, deflation will go on for a couple more years before we see any serious inflation. He says that in these cycles inflation is rampant but hyperinflation is rare, though we have seen it
with Argentina, Zimbabwe, and Wymar in Germany. Long term, gold
could be in the $2,000 range.
One of the main aspects to this recession/depression, in his view, is the force of deflation bringing things back down to affordable levels, sustainable, REAL levels. The basis for a sustained recovery will in itself be in prices becoming cheap enough for them to really become affordable and in people rebuilding their savings.
Related to this interview is another aspect to the economic collapse (also mentioned in the interview above). Housing prices. Our housing bubble has been the largest in the history of this country. In 2006 Home values peaked at over $200,000. That is nearly $80,000 above the 70's and 90's boom/peak, roughly $80,00 above ANY of the previous peaks. Now, average prices have fallen below $160,000. That is still well above the previous peaks, well above the mean value (around $100,000), and miles away from the levels of the great depression. Housing prices have to fall, but the government is trying to prop them up. This wont, and cannot last.
[youtube="bRK_YEXzrGA"]Home Values Chart[/youtube]