Where is the US economy headed?

okie wrote: I wouldn't say I get a bang out of it, but I just find it interesting as an observation of human nature. I realize humans are not perfect, and I also think I do some of the same stuff that I am talking about here. I am one of the worst to buy candy bars and junk in convenience stores, which is a total waste, and while I don't like $4.00 gasoline, I try not to complain and I try to place things into the proper perspective.

Precisely! We all have weaknesses; it's a matter of degree. Some people are unable to control their eating or drinking; it's a disease like small pox; they have no control. People do not choose to weigh 500 pounds; it's a disease called over-eating. It took me three tries to quit smoking; it's an addiction that many cannot overcome no matter how often they try to quit.

My weaknesses are many - like buying candy and ice cream, but I try to moderate the consumption as best I can. I'm not overweight, so I must have the right kind of metabolism and exercise regimen to keep it under control. I still take meds for high blood pressure, high cholesterol, and osteoporosis.

It's because I'm lucky enough to have Medicare, and I have a great doctor who also takes good care of me.

There are many variables of good and bad in our lives. Trying to blame any individual for buying the wrong things is an exercise in futility.

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okie wrote:

You compare heroin to gasoline?

And why not? An addictive substance which is really not necessary for life.

Quote:

There is a goodness of heart involved, cyclops, if the product is useful. If you have never experienced this with anyone that has sold you something or provided you a service, I would say you are a sourpuss deluxe. Profit does motivate, but profit is nothing more than a reward, which we all seek to live by. Our lives exist by trading our skills and expertise. If you are so egotistic as to think you are above all of that in life, I feel sorry for you. I happen to get a high degree of satisfaction out of my work, providing a service or product to people and the companies I have worked for, and I think alot of people do the same.

It is the people after the almighty dollar alone that will usually fail in our system. You should instead care about your work and service you provide, and take pride in it, and care about the people you work for.

Adjusting lifestyle adjusts demand, which adjusts supply, which all goes to serve the people. But don't pretend your lifestyle uses no hydrocarbons. I don't think you are than naive, at least I hope not, so I would hope you are still grateful for oil companies doing a great job.

I just don't see much 'goodness of the heart' these days with the oil companies. They could be voluntarily reducing their profits in order to provide some relief - and still be making billions in profit each quarter. None of that has happened.

Who said my lifestyle uses no hydrocarbons? Not I. But, I will say; if there was a crunch, I am better prepared to deal with it then most.

Cycloptichorn

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I know this one is somewhat off topic, but this was sent to me by a travel companion to Central Asia last month. Worth the share.

http://producten.hema.nl/

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Dow closes the day -350, the second worst day of the year.

The Dow is off 2k since the start of the year, or almost 15%.

Wonder if the conservatives will take credit for this part of the economy that they've been managing under Bush? I hear a lot about 'record job creation' and 'strong growth.' Not so much about the failures, tho.

Cycloptichorn

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Good evening. Yesterday, American Airlines announced some pretty severe cutbacks in service, domestically and internationally, including flights involving their hubs in Chicago and Dallas.
This morning on the local NPR station was a story (which I could only listen to with one ear because I was with someone) suggesting that the entire hub and spoke business plan that the airlines have used for years may be obsolete in the current economic environment. Five airports in Virginia, including my 100,000 population Charlottesville, could lose all airline service as carriers merge or go belly up. The spokes in the hub and spoke system are short haul carriers; labor and fuel intensive and are losing a lot of money.
That would be a big blow to a white-collar city like Cville, where a lot of people fly a lot.
But, I think, it may be a logical thing to have happen. Richmond's airport is an hour and a bit away as is Dulles. Reagan-National is slightly longer. If there was reliable, scheduled and comfortable ground transport, that could work in this region. It would probably not work everywhere though, would it? -rjb-

PS Citigroup set to write-off another $9B. Never ends, does it?

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i recall that during the winter some old-time wall streeters said on MSNBC that they expected "a lot more trouble" in early 2009 . apparently that is when a lot more 5 year-renewable mortgages with "teaser rates" come up for renewal .
they appeared on kudlow and company and were , of course , laughed at by ol' larry ... ...
may they be right after all ?
hbg

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hbg, My crystal ball tells me that this subprime mortgage problem is just beginning, and we won't see any improvement in home values for at least 5 to 10 years - closer to ten - even though demand for housing continues to increase with more families trying to buy homes.

Some speculators have begun to buy, but I think it's still too early for that.

As the housing market continues its downward trend, consumer spending also takes a beating.

I don't know about you, but we've been in a recession for several months now with fuel and food prices increasing at double-digit rates.

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Still way too early to start buying. Way too early.

If you want a good look at what the bleeding edge of this subprime problem is like, check this out:

www.irvinehousingblog.com

Cycloptichorn

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c. i. :
since we've just come out of a recession - well , sort of - with the can$ reaching parity with the U.S.$ on some days , we think we've won the jackpot :wink:
when we cross the border to watertown there are now plenty of stores and restaurants that gladly accept the can$ at par .

i'll never forget the embaressment some years ago - when newspapers still cost a dime . we were visiting NYC and i picked up a newspaper and dropped a CANADIAN dime Shocked

(BY MISTAKE !!!) on the seller's plate . i thought he was going to have me arrested .
when we cross the border now , we have two change purses and carefully sort the U.S. from the can coins . :wink:
hbg

ps we have actually noticed that some imported fruits and vegetables have dropped in price because of the stronger can $ .

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Quote:

This Recession, It's Just Beginning

By Steven Pearlstein
Friday, June 27, 2008; Page D01

So much for that second-half rebound.

Truth be told, that was always more of a wish than a serious forecast, happy talk from the Fed and Wall Street desperate to get things back to normal.

It ain't gonna happen. Not this summer. Not this fall. Not even next winter.

This thing's going down, fast and hard........

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/26/AR2008062604030.html?hpid=topnews

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It's really painful watching the market lose over 350 points in one day, but I'm afraid this is only the beginning. My forecast is for the DOW to close in on 9,000 in a few months from now when the pain of the higher cost of fuel and food stretches more families out of their homes. There's nowhere else to turn when the equity in their homes have disappeared, and they're paying mortgage on a home that's worth a lot less.

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Just my own curiosity but, as a percentage of househld income, how much is gasoline today compared to say 1990? Please ponder this question as i think it's very relevant.

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cicerone imposter wrote:

It's really painful watching the market lose over 350 points in one day, but I'm afraid this is only the beginning. My forecast is for the DOW to close in on 9,000 in a few months from now when the pain of the higher cost of fuel and food stretches more families out of their homes. There's nowhere else to turn when the equity in their homes have disappeared, and they're paying mortgage on a home that's worth a lot less.

The dow losing a few thousand is no big deal, it can bounce back rapidly. However, the housing market bubble busting will lead to the current trickle of individuals walking away from mortgages becoming a flood. We are looking at the likelihood of wave after wave of bad debt, commercial, real estate, and business. The closest example that comes to my mind is the Japanese banking crisis of the late nineties, which they have yet to recover from by the way.

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We all spent our stimulus money on gas, wether we intended to or not:

Stimulus checks spent on gas

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The market "can" bounce back rapidly - when the economic environment is not stressed as it is now. Millions of families are losing their homes and cars, and food and fuel costs are escalating at unprecedented levels - all over the world. All this while the US dollar loses value over most trading partner currencies.

History is not a good indicator of how our stock market will perform; today's economy doesn't resemble anything like the past.

Some people are already talking about $7 a gallon gasoline. How many can afford to pay those prices for gasoline and everything else that's supported by transportation? As the US dollar continues its downward spiral, not only gasoline becomes more expensive for us; it's everything else that depends on transportation to get their products to market. Wages will not keep up with inflation; our economy will constrict until consumer and government deficits are reduced, and I don't see that happening any time soon.

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cicerone imposter wrote:

Some people are already talking about $7 a gallon gasoline. How many can afford to pay those prices for gasoline and everything else that's supported by transportation? As the US dollar continues its downward spiral, not only gasoline becomes more expensive for us; it's everything else that depends on transportation to get their products to market. Wages will not keep up with inflation; our economy will constrict until consumer and government deficits are reduced, and I don't see that happening any time soon.

Ya, at the moment closing American Factories and sending them to China does not look like it was such a hot idea. Not only did we lose the jobs, but now we have to pay to haul the crap from there to here. You gotta hand it to those IVY league MBA schmucks who have been running our economy, they plan real good.

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dyslexia wrote:

Just my own curiosity but, as a percentage of househld income, how much is gasoline today compared to say 1990? Please ponder this question as i think it's very relevant.

Gas to drive your car/truck is not that bad on the historical, but everything you buy has a much longer supply chain than ever in history and the fuel price increases run up all of those costs. Pouring corn into ethanol increases your food bill about 20%. Electricity deregulation has allowed the speculators to take a bunch of money out of your wallet, electricity costs are up something like 100% over five years. Over the last twenty years most of us have either bought massive open floor plan homes or taken a lot of the walls out of our homes so we can't close down part of the house in the dead of winter or when the AC is going in the summer like we did during the last energy price spike during the 70's. We moved further away from the cities and our jobs because we wanted land and more house for the money, now we have to drive many miles a day out of necessity, and for damn sure we don't have a public transit option.

It all adds up.

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I agree with the forecast that the US dollar will continue its loss of value.

Oil near $143 on view dollar will keep falling

By JOHN WILEN, AP Business Writer 42 minutes ago

NEW YORK - Oil futures climbed to a new record near $143 a barrel Friday as the dollar weakened against the euro, confirming expectations that the falling greenback, a major factor in crude's stratospheric rise, will extend its decline and add to oil's appeal.

Retail gas prices inched lower overnight, but are likely to resume their own trek into record territory now that oil futures have broken out of the trading range where they had been for nearly 3 weeks.

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hawkeye10 wrote:

(T)he housing market bubble busting will lead to the current trickle of individuals walking away from mortgages becoming a flood. We are looking at the likelihood of wave after wave of bad debt, commercial, real estate, and business.

Gleaned from a Dow Jones article this afternoon: According to the Fitch Ratings firm, the deterioration in credit card debt is "...accelerating faster than many had expected."
Some numbers for yall:
1) Total credit card debt in April was $957Billion vs $888Billion a year earlier (a 7.7% increase);
2) Borrowers paid off 19.8% of their outstanding balance in May vs 20.7% a year ago. That may not seem like a big change in % but it does mean that credit card holders are getting deeper in debt by (if I have the decimal in the right place) $860Million. I am also simply stunned that so many people have to resort to high-interest rate credit cards. Many of us use credit cards as a convenient alternative to carrying cash, not as a loan source;
3) A little Accounting 101 music, please. Anyone who lends money is expected to set up a Loan Loss Reserve. What % of loans gets put into the reserve is pretty arbitrary and (as this former CPA can attest to) is an easy way to manipulate earnings. Earnings not meeting expections? Cut the % added to the loan reserve. Earnings too high (yes, earnings can be too high)? Raise the % expected.
I suspect that banks, faced with big losses in other areas, have probably low-balled the anticipated losses on credit cards;
4) Back to the Dow Jones article, 7% of the NUMBER of credit card holders will be in default by the end of the year vs 6.4% in May. That is a 10% increase. I think, but can't prove, that the folks defaulting are not on the hook for, say, $200 but rather $20,000.

Did your eyes glaze over?

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My eyes started glazing when the numbers of defaults on the mortgage loans doubled and tripled, and in some places over 50 percent of homeowners lost value in their main source of equity - their castle.

What is painful to realize is those young families with children having to move out of their homes, because they couldn't keep up with the payments.

The future doesn't look too bright for middle-Americans.

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Where is the US economy headed?

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