A Dickens Tale: 2 Economies, 1 Country

Seems like everyone is in a Charles Dickens mood this weekend, as many posts on blogs and financial websites are about 2 economies emerging: Marketwatch mentions about how the manufacturing sector is recovering, but the labor market is not.

Mike Shedlock's terrific Global Economics blog makes a great notation about how 2 types of companies have fared well during the credit bubble: Those who stayed away from debt to hoard cash, and those who just relied on bailouts. Companies that were in the middle that did not either have full cash or relied on taxpayer funds have done the worst.

But there's nothing more symbolic of a market approaching a top than when you start reading stories of people abandoning buy and hold strategies for a heavy trading strategy focusing on risky stocks with so-so fundamentals.

The 50-year-old from Naples, Fla., had limited investment knowledge but attended several seminars before starting to trade in May. So far, York said, she's up an average of 40% a month and is trading full time."It's the best job I've ever had, not just for the enjoyment but from the compensation standpoint," said York, who previously sold telecom equipment. "I've replaced a significant six-figure income."

It's going to hit the fan hard

A scary article from The Market Ticker, As I sit at my car lot with no customers I have time to surf the web and find info like this. Between my personal experiences, and what I see our incompetent government trying to bruch it all under the rug, I can't help but wonder how bad it is really going to get. In order for recovery to begin the bad debts must be cleaned out. This can not end well folks...click on the link to read the whole thing:

Recessions cannot end until the conditions that caused the recession are removed from the economy. This is elementary logic and obvious to anyone with an IQ larger than their shoe size.
For an inventory recession growth returns when enough capacity is destroyed through layoffs and inventory selloffs to bring capacity and demand back into balance. Employers then hire new workers and the economy recovers.
For a credit recession, however, there is a much larger problem: The reason real interest rates went negative is that debt has a carrying cost and consumes free cash flow; so long as the debt taken on in the credit binge remains the cash flow impact also remains.
Default and bankruptcy clears excessive credit (debt) from the system - if it is allowed to occur. But if it is not, then the bad debt remains on the balance sheets somewhere and the cash flow impact remains in the economy. Employment remains weak, capital spending restart attempts falter as demand fails to return and credit quality continues to remain insufficient to support new credit demand.