rimrocker, you don't have much cred when you cherry pick only the negative stories to post here. Sorry. Also, I want everyone to know that rimrocker is a firefighter and in no way qualified to influence anyone's opinion on economics or finance. GOOD DAY
Please. 3Q GDP is the most current data we have. When you're reduced to arguing these details, you've lost the argument.
Thanks for that endorsement. And by the way, I never see you trying to influence or give advice... all you do is repeat the GOP talking points of the day. Do you really make work decisions about investments based on what you post here? The stories I post are the ones that affect the middle and lower classes, not necessarily the "investor" class. Fact is, more and more experts are predicting at least a slow growth if not a recession in the near future driven by the housing sector, energy prices, and stagnant wages. Argue all you want from your perspective, but those things affect people economically and psychologically. To wit... Nothing that people are seeing or experiencing gives them much to be confident about. They're getting nickel and dimed to death by fees and interest while their wages are stagnating, health and energy costs are going up and their equity is going down... all the while trying to give their kids the best neighborhoods possible for schools and trying to plan for college costs that also keep going up. I don't have a degree in Finance (and I am a cautious investor), but I've lived through recessions, energy crises, and stagflation. Psychology is a big part of it and I know from my work in disaster response that people have a hard time imagining anything greater than the worst that's ever happened to them. I suspect (and a bunch of experts are predicting) the coming slowdown/recession will be much worse than anything experienced by those who entered the workforce after 1985 or so. I assume that includes you. Compounding the issue is an administration that is philosophically opposed to "altering market forces" unless they happen to benefit a certain class.
Simply of a case of a few inflated housing markets pulling down the averages for the rest of the country. Another link using the same data.
Except this time, the real estate problems are not confined to the local area. With the reselling and packaging of mortgages, it has a national effect. And the current numbers are the beginning, not the end. Not to mention that if you follow the links, you see increases in towns like Reading, Bismarck, Akron, Binghamton, and Beaumont. The big cities that increased a substantial amount were San Fran/San Jose, Salt Lake, and Charlotte. Meanwhile, some of the cities that were down substantially include Las Vegas, Sacramento/Stockton, Miami, Phoenix, and Detroit. Only two states, North Dakota and Vermont, showed an increase. Biggest declines were in AZ, Nevada, and Florida. Which group of cities/states has the greater impact on the national economy?
Other than Detroit, which is being left for dead, the rest of those cities were part of the housing bubble. Corrections are painful sometime, but any intelligent person could have seen them coming.
He pushed a bunch of initiatives through early in his term to promote homeownership, and people who couldn't afford them bought homes with bad mortgages.
A lot of intelligent people were really stupid... though they were smart enough to take advantage of other's ignorance.
No, actually we have plenty more useful data to judge the state of the economy now than Q3 GDP. We have estimates of 4th Q GDP. We have consumer confidence reports. We have stock & bond market indicators. We have productivity measures. We have manufacturing data. We have housing starts & price indicators. These are not "details". The fact that you have to revert to looking 3-6 months ago to discuss where the economy is now suggests you either have no clue as to what you're talkin about, or (as is normally the case), you just try to make up arguments as you go to justify whatever position you'd like to believe.
Intelligent people drive finance - why did they create this mess? Why are major investment banks in a financial mess and having to rely on the Fed for help? Are there no intelligent people at any of these places? Why is it that "anyone could have seen this coming" is always said after the fact?
Domino Theory at work... So, once again we see the risk taken out of the private sector and put on the backs of taxpayers... when the FHLBs do get in trouble, we'll have to bail them out.
‘Crunch’ Time for the GOP Robert J. Samuelson A slowing economy is already a burden that Republicans will carry into the election. A harsher credit 'crunch' could be fatal. Nov 26, 2007 Issue Don't believe all the hype about the "credit crunch." Not yet, anyway. It's supposedly suffocating the economy. Big banks and investment houses have suffered multibillion-dollar losses on "subprime" mortgages and related securities; CEOs have departed. But outside of housing —where lending has collapsed—the effects on consumers and businesses have so far been modest. What we should be wondering is whether all this is the first act of a three-act drama, or whether the worst is past. If it's act one, the crunch isn't just about economics. It could decide the next president. People vote their pocketbooks, as the old saying goes. Up to a point, this is unfortunate, because politicians of both parties usually get too much praise or blame for the state of the economy, when their influence on its behavior is often negligible. Voters ought to cast their ballots on issues where what politicians do, or don't do, matters. But politics isn't always rational or fair, and a slowing economy is already a burden that—along with Iraq— Republicans will carry into the election. A harsher credit crunch could be fatal. Consider the latest economic forecast from Global Insight, a well-known advisory firm. Though not yet predicting a recession, it sketches an economy that won't feel good for much of the 2008 election cycle. To wit: • Housing's slide continues. New home starts fall to 1 million, down from 2.1 million in 2005. By early 2009, home prices decline a cumulative 11 percent from their peak. On a median-priced home of $220,000, the loss is $24,000. • Car and light-truck sales dip to 15.7 million, the lowest since 1998; they were 16.9 million as recently as 2005. • Unemployment averages 5 percent, up from 4.6 percent this year. • Pretax corporate profits decline 2.1 percent, the first decrease since 2001. Let it be said: this economy—if it materializes—isn't a calamity, but neither is it much to brag about. And Global Insight thinks there's a 35 percent chance that the predicted slowdown will turn into a recession. Two threats loom. One is oil. The forecast assumes that prices will fall from about $90 a barrel now to $76 in 2008. Every $10 above that is reckoned to raise gasoline prices 19 cents a gallon and cut employment by 100,000. The second threat is an aggravated credit crunch. What we call "crunch" is merely a new label for the old credit cycle. In a strong economy, borrowers and lenders feel optimistic. People think they can handle more debt. Lenders relax credit standards. Sooner or later, the process reverses. Heavy debt payments oppress borrowers. Lenders react to rising delinquencies by tightening lending. Housing's recent boom and bust adheres perfectly to this script. But elsewhere, the credit crunch's effects are muted. Other consumer debt (credit cards, auto loans, personal loans) is growing at about a 5 percent annual rate, says Susan Sterne of Economic Analysis Associates. Although corporate bond issuance has declined, the main consequence seems to have been a drop of mergers, acquisitions and private-equity buyouts. These have relied heavily on bonds for financing. Business investment in new machinery, software and buildings seems barely affected so far. Lending hasn't collapsed in part because the subprime losses, though large in billions, are still small compared with the financial system's total capital. Brian Bethune of Global Insight figures that American investors have so far lost $50 billion. By contrast, stockholders' equity in U.S. banks alone exceeds $1 trillion. Still, the crunch is the first major crisis for a new financial system that has taken shape slowly since 1980. Loans that were once made and held by banks are now increasingly "securitized." That is, they're bundled into bondlike financial instruments and resold to other investors (pension funds, mutual funds, insurance companies, hedge funds, other banks). Two major problems have emerged. First, because banks and other loan "originators" didn't keep all the loans they made—and earned fees for making the loans—they got careless and greedy. They relaxed credit standards; weak borrowers got mortgages or were persuaded unwisely to refinance existing mortgages for higher amounts. That triggered the surge in mortgage defaults, up about 75 percent since 2005, says Moody's Economy.com. Second, some of the securities into which the mortgages were packaged were so complex that the people selling and buying them didn't understand, with hindsight anyway, what they were doing. As a result, it's hard to determine the securities' value. Given that uncertainty, write-downs of the securities' worth have often exceeded what the mortgage defaults alone would justify. The specter of the subprime debacle is that it's just a start. Huge amounts of auto loans, credit-card debt, commercial mortgages and equipment leases have also been securitized. If similar problems emerged, it would shake confidence in the securitization model and, by magnifying investors' losses, threaten to turn the credit crunch from a slogan into a reality. This broader crisis, though a long shot, can't be excluded. All of which brings us back to politics. Global Insight has one of many computer models that calibrate voting behavior with the economy's performance. The model has picked the winner of the popular vote in 13 of the last 15 presidential elections (it missed 1968 and 1976). Right now, the Republican and Democratic candidates are, putting Iraq aside, dead even. A deeper credit crunch would swing the advantage to the Democrat. The irony is that, while all the candidates are fighting frantically for their parties' nomination, the nation's financial markets may be quietly determining the ultimate victor. © Newsweek, Inc.
Two reasons: 1. Wall Street tends to not care what will happen after the end of this quarter. Publicly traded companies are notorious for trading long term financial health for profits this quarter. 2. As just posted by rimrocker, apparently we think we need to use taxpayer money to bail out private companies these days. Unless a company is in an evil industry like oil or tobacco, there's no disincentive to taking dumb business risks.
Except that many of these CEOs are now on the hotseat or have already been fired. And many of the employees will get much smaller - or no - bonuses this year. Many of these loan originators are teetering on bankruptcy & many of the big financials are down 20-50% - that means all of the executives that own stock lost a ton. I accept that their goal is maximizing their personal income, but this didn't do it.
