Higher interest rates negatively affects the housing market leading to slowing economic growth due to trickle down effect.

Higher interest rates negatively affects the economy due to lower Mortgage Equity Withdrawals (MEW).

Slowing economy leads to the need for more foreign capital flows to fund our deficits. This grows the Current Account Deficit leading to lower $usd and higher gold prices.

Doesn't take a rocket scientist, it just takes time...

As I am in aggressive learning mode, or should i say un-learning what i was taught at nyu stern, i find it essential to frequent blogs from all sides of the discussion, ultimately strive for the widest band antennae. and here is interesting commentary from my 'doom and gloom' station, ironically now a professor at nyu stern:

Nouriel Roubini | Oct 27, 2006
Q3 GDP growth dismal at 1.6%; expect further slowdown in Q4 and recession by 2007
Nouriel Roubini | Oct 27, 2006

The first estimate of Q3 GDP growth is a dismal 1.6%, sharply lower than the 5.6% of Q1 and the 2.6% of Q2. In July - when I first predicted a US recession in 2007 - I forecasted that Q3 GDP growth would be 1.5% at the time when the market consensus was 3.1%. Given the onslaught of bad macro news in the fall professional forecasters started to cut their Q3 forecasts from 3.1% to 2.5%, down to 2.2% last week and 2% this morning. They were still wrong and overoptimistic as the actual first estimate came as 1.6%, only an epsilon higher than my July forecast of 1.5% (the same forecasters had gotten Q2 wrong too; my spring forecast for Q2 was 2.5% versus a consensus of 3.2%; the actual figure ended up being 2.6%).

The weakness in Q3 growth is widespread: real residential investment fell at an annualized rate of 17.4%, much worse than the 11.1% drop of Q2; the trade balance was a negative drag on growth as the trade deficit widened sharply in Q3 relative to Q2; inventory accumulation was slightly lower in Q3 than in Q2 thus being a small drag on growth as well; non durable consumption grew only at an annualized rate of 1.6%; and while durable consumption grew faster in Q3 than in Q2 you can expect significant slowdown in durable consumption in Q4 as the glut of autos and housing related durables consumption takes a hit on the economy. Even non-residential investment in structures that was growing at an annualized rate of 20.3% in Q2 slowed down its growth to 14% in Q3: you can expect a much sharper slowdown in such non-residential investment in Q4 and 2007 for reasons discussed below. Real investment in software and equipment – that had fallen in Q2 – recovered in Q3 to a 6.4% growth rates; but further weakness in the economy in Q4 and 2007 will lead to a significant slowdown in such investment in the quarters ahead.

What do these Q3 growth figures imply for Q4 and 2007 GDP growth? Expect today the usual spin with the soft-landing optimists – who were altogether wrong on Q2 growth and even more wrong on Q3 growth – having already started to spin the fairy tale of a Q4 rebound. This Q4 rebound has, so far, no base or data behind it: residential investment will be falling at a faster rate in Q4 than in Q3 given recent data on building permits and housing starts; non-residential investment that was, until now, growing very fast will sharply decelerate in Q4 and much more in 2007: see the lead story in the WSJ today referring to a McGraw Hill Construction study forecasting a rapid fall in construction spending in 2007 (including non residential construction and specifically stores and shopping centers), the first decline of construction spending since 1991. This weakness in residential and non-residential construction will directly affect retail activity where employment has already started to fall. Expect in Q4 and 2007 actual fall in durable consumption (autos, housing related consumption such as furniture and home appliances and other big ticket items) as the housing slowdown, the fall in home prices and the negative wealth effects of falling prices and reset of ARMs take a toll on consumption, especially housing-related durable one. Given the ongoing sharp slowdown in the economy, real investment in software and equipment will be growing less in Q4 and 2007 than in Q3. And both inventories and trade are likely to remain a drag on growth in Q4 as inventory adjustment will continue (with demand growing less than production) while a strong dollar will further widen the trade deficit in spite of the economic slowdown. The first leading indicator of economic activity for October – the Philly, Richmond and Chicago Fed reports – are all consistent with a further economic slowdown in Q4 relative to Q3. I thus keep my forecast that Q4 growth will be between 0% and 1% and that the economy will enter into an outright recession by Q1 of 2007 or, at the latest, Q2.

Wow. Pretty close to what I have been saying. Since it's Roubini I guess I am now firmly in the Sky Is Falling Camp.

Did everyone catch the GDP Deflator? If that wasn't down from 3.3% to 1.8% (miracle of miracles) GDP would be NEGATIVE.

You have GOT to read this Bloomberg story. Bottom line? IT'S ALL GOOD.

http://www.bloomberg.com/apps/news?pid=20601103&sid=awGe5b6_Zfu8&refer=news

Looks like "the band plays on" ...

Musical reference: http://tinyurl.com/ydeztl
(Harry Chapin, "Dance Band on the Titanic")

courtesy of:
http://www.amazon.com/Dance-Band-Titanic-Harry-Chapin/dp/B000002H46

No "correction" programmed until all indices get RSI-7 over 70. Hurry UP $DJT! Seriously, if there is a PPT, right after US elections would be a good time for a "correction" ... "as markets price in Congress swinging from Rep to Dem control" or something like that ;-)

t4k

Basically the US economy is in trouble...
Greenspan blew it up.
They are terrified of another Japan style recession.

1 trillion $ of wealth was been lost in US home values.

Paulson has tried to replace this by manipulating the stock market upward by 1 $ trillion dollars.

I expect the markets to hang in there and oil to be under pressure until the housing market stabilizes. Then their manipulations will end.

Its not just the US.
The Global planners are managing all the national economies with central planning methods.

They want each asset and each market to be where they want it to be - for the sake of the global economy (and to fill their pockets).

Take a look...
Thai Coup - thai market goes up, bhat goes up.
Australian drought - market goes up - don't worry.
UK bombing - market goes up.

The 'old' rules aren't applying anymore.

Even Soros can't beat the S&P

The DOW is up 2000 points this year now.

No one is selling.

Strange times!

WOW!!!!

``The Fed is going to be pleased with the fact that their tightening efforts are bearing fruit with slower growth,'' said Richard DeKaser, chief economist at National City Corp. in Cleveland.

This dude has been sniffing glue or just has lots of stock to distribute. It's laughable that a "chief economist" would say the Fed considers 1.6% GDP growth good.

It's distribution time folks. The slow decent down should start now. Sell side is probably loading up on puts as I type this comment.

Re: "Fed considers 1.6% GDP growth good."

The optimist motto: "...any number above zero( 0) is good"

This market is like the cockroaches in the apartment I had in law school. No matter how much Raid I sprayed, they just kept coming back for more. Dow only down 20!

Anyone who doesn't believe that Econoday has become a sell-side shill can read this quote in their GDP report:

"Today's report is quite favorable for the bond market and if one believes that growth will nudge back up in the fourth quarter should also boost equities. The below expectation GDP growth should favor the Fed lowering interest rates in the not too distant future. However, the numbers should weigh on the dollar with U.S. interest rates easing. Some see today's numbers as very weak. However, they are not really that soft once you look at the final sales number which came in at 2.2 percent. This provides a good starting point for fourth quarter growth to firm a bit. Contrary to some suggesting that the soft landing got harder today, that probably is not the case with the continued moderately healthy growth in demand."

WHO WRITES THIS CRAP?

Just a thought:

Is a recession coming?
Of course it will come!
Everyone knows that.
Like the man who in the summer says it is going to rain.
Is he wrong?
No, as long as he doesn't say WHEN.
So, in economics no one is wrong, if they don´t dare to say WHEN!

Tradesman
"1 trillion $ of wealth was been lost in US home values.
Paulson has tried to replace this by manipulating the stock market upward by 1 $ trillion dollars"

In his own words:

WASHINGTON, Oct 24 (Reuters) - U.S. Treasury Secretary Henry Paulson said on Tuesday that he hoped declines in housing prices had been largely offset for Americans by higher stock prices.

"We had a retail housing market in this country that was growing at an unsustainable rate for a number of years, so we had to make that transition from...unsustainable growth to a more sustainable rate," he said in a radio interview by WTMJ Milwaukee.

"There's been a correction, a significant correction," he said. "I know the individual homeowner is feeling this concern as we have the correction. Hopefully some of that impact has been offset by an equity market that has added a trillion dollars of value and impacted positively peoples' 401K, their savings and other things."

The National Activity Index (CFNAI) from the Federal Reserve Bank of Chicago disclosed the third negative monthly reading in a row.

http://www.chicagofed.org/economic_research_and_data/files/cfnai_october2006.pdf

The Federal Reserve Bank of Richmond also indicated that its October Composite Index was at its lowest level since January.

http://www.richmondfed.org/research/regional_conditions/manufacturing_conditions/index.cfm

The Richmond Fed's survey of the service sector also fell:

http://www.richmondfed.org/research/regional_conditions/service_sector/index.cfm

Contrary indications? Or is the ball just staring to roll?

http://www.themarketspeculator.blogspot.com/