U.S. Economy Thread 12/2/2007

[Classic Daycruiser]

Let me start by saying wow, what a great week in the stock market.
Secondly, Happy Hoildays, and a Merry Christmas
Let me follow-up with a few quotes from last weeks speechs:
Fed Chairman Ben Bernanke said in a speech Thursday at the Charlotte Chamber of Commerce that gross domestic product is slowing "significantly" in the fourth quarter, despite having grown 4.9 percent in the third quarter.
A day earlier, Fed Vice Chairman Donald Kohn said housing is deteriorating at a "very, very rapid" rate, and that "I don't think we have seen the bottom."
And former Treasury Secretary Lawrence Summers, in a somber speech Thursday to bankers at an American Banker/SourceMedia event, said it would be unprecedented, considering the size of the headwinds the economy faces, for expansion to continue. It is quite clear that the substantial majority of foreclosures that will take place in this wave have not yet taken place," he said.
So you think the worse is over....????

[talkinghead]

I think many of the statements regarding foreclosures are being said to setup a government bailout of the banks - the latest talk of rate freezes, etc...
This is less about people staying in their homes and more about bailing out the banks. And who will pay for it - taxpayers, yet again.

[burtandnancy2]

Talking, I agree with you 100%. Along the same lines, I have two portfolios and two brokers. Each say the same thing when I ask about going off to the side during these volatile times; How do you know the market has hit its highs, and look at what you loose if you sell when its low. Guess that philophy works out in the long run...
back to football

[MBlaster]

So you think the worse is over....????


Yes. We are at a bottom. Within the financials, not all will bottom at the same time. The gov't is funding a bail out plan and Ben admitting the Fed must step in by lowering rates and Dubai is stacking chips in Citbanks account. Its plain to see that we are at the turn.
If the fed doesn't cut enough that could be a problem but I still think its time to buy. If you are in stocks use limit orders or trailing stops and you should do well.

[Classic Daycruiser]

I think many of the statements regarding foreclosures are being said to setup a government bailout of the banks - the latest talk of rate freezes, etc...
This is less about people staying in their homes and more about bailing out the banks. And who will pay for it - taxpayers, yet again.
Something weird is happening... I'm just not sure if is going to be something good or bad.
With all the bad comments, I suspect interest rates will be heading down again, but I do not see real estate prices doing anything but going down.
I know most business's are raising prices this year to keep up with the increased cost of materials, but the cost of labor is shrinking when you factor in most business do not have pension plans, and health insurance cost are being picked up more by employees.
My cost of living has also gone up quite a bit as well.
Car insurance is 4% higher
Boat insurance stayed the same.
Home insurance went up 5% higher
Food costs have gone up 20% or more
Electric and water bill up 20%
Gas for car and boat up 100%
Cable/highspeed is up about 10% as well.
Healthcare insurance costs up 11%
Thank god I sold the vette.:jawdrop:
Can you tell I'm a little worried how thing's will look this time next year.
Yup...Something is happening, and I just can't figure it out....

[talkinghead]

1st of all, I think RE markets tend to over correct - as such I do not think we are near the bottom based on historical trends.
I think the following general rule may apply: When rents and the carrying cost of ownership (PITI+HOA,etc...) are close (ownership slightly higher), then we may be at the bottom.
An article in the PE today stated that rentals are now flooding the market in the IE, dragging rents down.
It also stated that there is 2 years of inventory in the market even if no additional houses were listed today. Even the banks aren't lending to each other right now...

[Classic Daycruiser]

1st of all, I think RE markets tend to over correct - as such I do not think we are near the bottom based on historical trends.
I think the following general rule may apply: When rents and the carrying cost of ownership (PITI+HOA,etc...) are close (ownership slightly higher), then we may be at the bottom.
An article in the PE today stated that rentals are now flooding the market in the IE, dragging rents down.
It also stated that there is 2 years of inventory in the market even if no additional houses were listed today. Even the banks aren't lending to each other right now...
Now overlay a graph of wages for that time period. Its the last 25 years that gets me scratching my head:confused:

[BoatPI]

I believe that most of us know to diversify your investments.
I just returned from looking at a few 4-plexes on the market. People always need a safe. clean, nice, place to live. Rent almost always go up yearly, at least in So Cal. Rates are now below 6%. The mutual funds are generating 10-20%. I just do not see a great negative to the economy if you play it down the middle and do not take high risks that can bite you in the a*s.

[Boozer]

I think the agricultural sectors and manufacturing sectors of our economy could become a huge factor in our countries overall financial well being.
The American dollar is at an all time low. This only a bad thing if we don't capitolize on that and beef up our manufacturing and exports 2 fold. A cheaper dollar means we can manufacture things and export them much cheaper then any European country and I'm sure before much longer cheaper then China as well. How great would it be to be able to provide goods internationally with American quality, without jeoparadizing the American quality of living and beating China at the game they've beat us at for so long?
The cost of fuel has sky rocketed. This country needs an agricultural revolution. We can produce our own renewable fuels at a fraction of the cost of foreign crude oil, not to mention give the money to our farmers growing the resources we need for fuel, instead of making the ridiculously rich middle easterners richer and greedier.
We have some amazing oppurtunities available to us if we take advantage of them. unfortunately Americans are lazy and probably wont take advantage of what is available. Instead we'll switch to alternative fuels and have the resources grown in a foreign country, and we'll still continue to outsource manufacturing to China and Taiwan because we're to lazy and stupid to see the great oppurtunities in front of us.

[CARLSON-JET]

I think another factor that has been somewhat ignored in the RE market is the decline of the dollar. Even if you sell your house for $ X... there has been a loss on the value of that money. I also believe inflation is alot higher then what is being reported due to munipulation of the way the statistics are used. In the last 20 years, the formulas used keep being changed to make inflation appear less.

[bonechip]

I agree with boozer, America needs to start producing again.

[mmered8299]

Boozer for Prez!!!!

[3 daytona`s]

The rest of the world converting to the Euro,and if call in the notes held on us:idea: We are paying 11% on some borrowed money =thanks Congress-Senate. Our children will or are in jeprody:mad:

[mickeyfinn]

I think the agricultural sectors and manufacturing sectors of our economy could become a huge factor in our countries overall financial well being.
The American dollar is at an all time low. This only a bad thing if we don't capitolize on that and beef up our manufacturing and exports 2 fold. A cheaper dollar means we can manufacture things and export them much cheaper then any European country and I'm sure before much longer cheaper then China as well. How great would it be to be able to provide goods internationally with American quality, without jeoparadizing the American quality of living and beating China at the game they've beat us at for so long?
The cost of fuel has sky rocketed. This country needs an agricultural revolution. We can produce our own renewable fuels at a fraction of the cost of foreign crude oil, not to mention give the money to our farmers growing the resources we need for fuel, instead of making the ridiculously rich middle easterners richer and greedier.
We have some amazing oppurtunities available to us if we take advantage of them. unfortunately Americans are lazy and probably wont take advantage of what is available. Instead we'll switch to alternative fuels and have the resources grown in a foreign country, and we'll still continue to outsource manufacturing to China and Taiwan because we're to lazy and stupid to see the great oppurtunities in front of us.
I agree with most of this except the renewable fuels part. This happens to be a subject I am very well versed in.
We don't have enogh land to grow 30% of the fuel we need
If we grow what we can we will not have anyone growing food
There is NO currently viable alt fuel that doesn't yield a negativd energy output.
We don't have anywhere near enough water to irrigate renewable (farm products) energy sources without depleting our underground aquifers.
Our current real alternatives are to use nuclear energy to power hydrogen generation facilities (Huge net negative energy, but basically will convert nuclear power to portable hydrogen power)
Shale------This is the real answer. Can be done quickly, produces high quality crude and new harvesting techniques are easy on the landscape.
May not be the best long term solution, but it is the only realistic approach that can work short term. Current estimates are that shale in the US represents the worlds largest ojl reserves. Canadas Tar sand is second and the middle east is third, so get the tree huggers out of the way and we can provide for ourselves.

[burtandnancy2]

MickyF, you are correct sir, but you forget the NIMBY factor. As much as we need new refineries and pipe lines, for shale oil or bio or even Alaskan crude, the NIMBYS and tree huggers will never let them get through. My solution; find out where they all live and brown them out. But thats not PC...

[talkinghead]

Now overlay a graph of wages for that time period. Its the last 25 years that gets me scratching my head:confused:
Wages are a factor, but not the whole picture. We know that many people were given mortgages that they could not afford (stated income, etc...) - this also drove prices higher - the easy money, etc...
People don't need a nice, safe, clean place to live - but that's what most want. Many people live in 'unsafe' areas that are not clean or nice. But, yes I understand what your saying. On the other hand, rent is still largely a factor of supply and demand in a given area.
I'm not sure I see a great negative economy yet, but I also see considerable inflation (food, gas, etc...) on one hand, and deflation on the other (housing, falling dollar).
I think the govies are actually right on this, we muddle ahead for at least the next year with slow growth but perhaps not recession.
I do know this based on my perception: So. Cal. is still a materialistic culture that wants bigger better houses to the point of obsession/mania, and the population is still growing fast.

[BoatPI]

Several you us hit the nail on the head, ENERGY. And oil exploration and new refinerys are key. Now how DO we get the tree huggers out of the way?

[talkinghead]

Several you us hit the nail on the head, ENERGY. And oil exploration and new refinerys are key. Now how DO we get the tree huggers out of the way?
You don't get the tree huggers out of the way - you work with them and try to find the middle ground.
There are some tree huggers you can't work with - but I'm sure many so-called tree huggers are reasonable people.
No, I'm not a tree hugger - we should get oil from Alaska, but do so in a way that does respect the environment - it's the right thing to do. We have a beautiful country and need to keep it that way.

[talkinghead]

On refineries: Plenty of other countries are building refineries - can we buy gasoline directly from these countries? I'm sure they want to sell it to us.

[Boatcop]

I think people are listening to the doom and gloom of the Mainstream Media too much.
Just as a reduction in a proposed budget program, while still higher than the year before, is labled cutting the program. They base their enonomic reporting on the last period. If an economic measure is lower than last week, or last month or last quarter, the economy is tanking. Even though things like GDP is up and unemployment is down.
Step away from the TV and do a little research. In one quick search, I found this: http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
An excerpt:
Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.9 percent in the third quarter of 2007, according to preliminary estimates released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 3.8 percent.
The GDP estimates released today are based on more complete source data than were available for the advance estimates issued last month. In the advance estimates, the increase in real GDP was 3.9 percent.