PROOF IS IN THE PUDDING: RECESSION IS HERE

[Guest muddy]

Hey Fellas: There was a lively discussion this summer in this forum, about the possibility of an upcoming recession. I was in the middle of my first ( AND ONLY) economics course iin college, and had just finished a paper, comparing the recession of the 70's with current conditions. I got involve3d with the discussion on the board, and there were rather severe rebuttals to my observations, civil but severe :

So just to come to speed on this. I made the point that several factors were lining up and that post depression, the recession of the 70's was the most severe and we had the same dominos falling

HOUSING MARKET: NEW HOME ORDERS : First double digit lowering of new home orders in decades: I was told that the housing market was strong and I was wrong; THE TOP FIVE BUILDERS ARE more that 13% off and that number will rise as the SUB PRIME MESS get's worse before getting better

BANKING WOES: The subprime mess: As A Man who should know, Redliner Robert , that there are more readjustments in the wind, so we have not seen the worst of it. The smart money pulling out of the market, is not buying gold now, they were buying oil futures, whcih is the real driving force for some of the high oil prices; Big money using oil futures as a hedge against inflation.

Retail Sales off: They were horrible last year and are 4 % off from predictions currently; Main Reason Consumer lack faith in the economy and thier credit power has been pushed to the limit; Consumer credit was a large part of our economic growth for a while.

Devalued Stock Market: The worst January ever, take a lokk we have been loosing percentage points of value sine the beggining of the year

LAYOFFS: Citi poised to lay off 20,000, many retailers expected to do the same. When the first quater Auto figures come out; Detroit is facing a crisis like Bethelem did when the Mills shut down in the 70's

I was told by one of the knowledgable members here to' Watch what those professors teach you in college.Tere was no recessionn here

Well a lot of banks, and 401K's are trlling thier clients to get ready and maybe move money into areas that weather RECESSIONS better.My Paper taught me that since the beginings of our economy, that there is almost a natural built in cycle of growth and recession. Many brilliant economists have helped keep us from the outright expansion abd then bust of post depression times, but there is still an economic ebb and floe. The Fed can manipulate the Prime Rate so much to stave off inflation, but inflation and recession are inevitable.

PS The head of the Fed and The Pres are having meeting today with congress>>>TOPIC: how to deal with the recession

[Hawgin]

Muddy-

Here are some thoughts from some of the world's leading economic experts. I'm not saying you're wrong, and I'm not saying that a recession is not possible, but as someone who works in financial services industry, I think we are "crying wolf" just a little bit to early on this one. We are going through some economic downturns, but we're not in a recession just yet. When you go through a period of all time high economic growths, new home sells, etc, eventually you only have one direction you can go.

"Wachovia's chief economist John Silvia says many of the indicators out just today point to a contrary conclusion:

JOHN SILVIA:"Personal income is growing around 7 percent. Consumer spending up around 5 percent. You're looking at factory orders, shipments, all growing at 8 to 10 percent growth. I mean, that's not the scenario where you have recession."

Silvia says he's not ruling out a recession, but wouldn't put the odds at any more than 1-in-20 in the coming six months."

"Greenspan, who has become a Federal Reserve chairman emeritus of sorts, might be more objective now that he is out of his federal role. He told the Wall Street Journal yesterday that he thought the probability of a recession is "slightly more than a third."

"You're right; we're not in an official recession, which occurs when GPD growth is negative for two or more quarters in a row.

In a period of slowing economic growth, dynamics may occur to make us feel like we're in a recession business growth is sluggish, businesses stop expanding, unemployment goes up and employment goes down, and housing prices decline. Does this sound familiar? Depending on where you live in the county, you may be experiencing all or many of these things, but it doesn't mean we've entered a recession.

Recessions don't just happen overnight; generally, a recession is preceded by several quarters of slowing growth."

[Guest muddy]

Hey Hawgin: I am in awe of Greenspan, when i watch him on TV I have to stay by a dictonary. There are so many varied views to this, and that discussion was one of the more thought provking , non_fishing topics we ever had here, and it sttayed informative and I learned a lot form other fellas here. It seems that many are thinking and planning for recession now, and I am curious about what happens. Our professor, a former CEO Advisor  made a strong point that he believed that there will always be recessive points in our economy and ultimately can't be stopped. He actually was making the point at the end that there are some advantages to be had in recessive times, but i had my final grade, and it was summer DIDNT PAY ATTENTION AND WENT FISHING

[slomoe]

I never knew the impact that the failing housing market would have until now. We have recently been informed that our office is in a "vacancy freeze" which means we are not aloud to hire any new employees to fill the vacancies we have.

This is due to the county's spending vs. its income which is mostly from real estate taxes.

Funny thing is, we found out about our 250 million dollar deficit AFTER elections, as opposed to the 50 million dollar deficit BEFORE the elections.  

[Tin]

In a period of slowing economic growth, dynamics may occur to make us feel like we're in a recession business growth is sluggish, businesses stop expanding, unemployment goes up and employment goes down, and housing prices decline. Does this sound familiar? Depending on where you live in the county, you may be experiencing all or many of these things, but it doesn't mean we've entered a recession.

Recessions don't just happen overnight; generally, a recession is preceded by several quarters of slowing growth."

Ok I'am more of a History and Physics guy so.... is this an event we have to let "run its course"? And, do periods of slowing economic growth always lead to recessions?

[Guest muddy]

No, but when certain events start to align: Major Industry woes, low grow rate,lay offs,inflation it can and usally will put us in a depression. If history is correct the last 3 recessions had all the current markers in a row before anyone would say WE are in a recession, especially in DC where those bandits deny everything, on both sides of the floor!

[Tin]

Thanks mudster,

Funny, history always repeats itself, but most don't take the time and try to learn something from it. :

[roadwarrior]

Recession:

A period of economic decline.

Specifically, a decline in GDP for two or more consecutive quarters.

Recessionary periods are determined AFTER THE FACT. We could be entering a recession, but we have NOT been in one.

In everyday use:

A recession is when your neighbor loses his job.

A depression is when you lose yours!

  :

[Hawgin]

I agree that those in Washington, or any political arena are going to deny the word recesssion for as long as possible, and in my opinion for good reason. It's like anything else, if Greenspan(or any one else that people respect) starts talking recession it sends out a widespread panic that makes the situation worse than it needs to be. For a large percentage of people, by the time they really realize we are in a recessive state, then we've already start the climb back out of it. I don't think there is much we can do to stave off a recession if it comes because the majority of the public is ignorantly unaware of anything outside of their little sphere. Economies, and markets are always going to go through negative corrections, it's just the "nature of the beast" so to speak. As long as people don't panic, and make a few changes in their spending habits it can be weathered pretty easily.

To put this in fishing terms, instead of dropping $300 on a new Loomis GLX, spend $200 on a new Fenwick Techna AV, and instead of a buying a Stella settle for a Symetre and you will hardly notice the financial crunch on your wallet.

[Jake.]

I promise I will spend as much money as I possibly can on fishing gear to keep the economy out of recission.  

[Guest muddy]

I promise I will spend as much money as I possibly can on fishing gear to keep the economy out of recission.

A TRUE PATRIOT

[Redlinerobert]

Good observations Muddy and RW. It is true that every major builder has posted record losses, and yes I am of the opinion that the market will get worse. The subprime debaucle was the catalyst that helped fuel the downward spiral. Many felt that it would be "isloated" to the housing market. BS. Credit from that industry is tied to other industries and as a result of the defaults we are up to 170+ BANKS that have gone belly up.  I read a stastitic that on a global level there is now over 3 TRILLION less available for lending.

Considering that the biggest year in the mortgage industry was 2005, The largest number of mortgages are still going to adjust. When they do adjust, a whole new supply of preforeclosures, short sales, and foreclosures will undoubtedly hit the market.

Hang on to your shorts buys, the ugiest part of this ride has yet to arrive.

[SPEEDBEAD.]

I am glad to not be part of the "sub-prime" lending community.

Got the fixed rate mortgage from the get-go and never looked back.

My office is quite busy right now, which is not a good indication for the current status of the area.

Wayne

[mattm]

What I can't believe is that Countrywide is coming back into the market, and Bank of America is lending them money to do it.

[BassChaser57]

So many things come to mind on this matter.

1. The international news have been on a daily basis calling the U.S. Economy in recession for over 6 months.

2. How can we send $3 per gallon of gas to the Middle East and our consumable dollars to China and hope to keep America financially strong.

3. Our country was made strong on innovation and the industrial revolution. Now about all we have left are service industries and financial institutions. We do not make anything anymore.

If I mow your lawn for dollars and you wash my car for dollars, have we made any money--of course not, that my friend is our service economy.

4. The housing and auto industries are only two entire industries that are tanking with all the trickle down effects.

5. Unemployment in on the rise.

6. Our education system is broken with over 40% of our kids never finishing high school which limits future potential.

7. Military spending and government entitlement programs (before the war) were almost 90% of the Federal Budget.

8. The stock market and the international dollar exchange rates are falling to the floor faster than a prom dress.

9.. Our economy is just starting to show the pains of personal and government overspending, over leveraging, over population, under education, and lack of industry. The economy will have to get much weaker, no way around it. There are no economic indicators that indicate a strong growing economy in the near future. This is a sad but true situation we face. I am glad I am not "King" as it has become so out of control I am not sure how to get the country back on track short of finding an alternative fuel souce.

[Micro]

I watched a clip on CNN today that illustrated perfectly the reason for the subprime mess.

There was a young woman in what appeared to be her 40's living in a 4 bedroom house (a very nice house) with manicured grounds and a backyard in-ground pool in a Las Vegas suburb.  She was lamenting the fact that she and her 3 kids and disabled mother were going to be foreclosed upon.  She was now unable to aford the house on her part-time salary.  She hoped the government would do something.  

Man, how does a woman responsible for 3 kids and a disabled mother on a part-time salary even get into a house like that?  

[Redlinerobert]

I watched a clip on CNN today that illustrated perfectly the reason for the subprime mess.

There was a young woman in what appeared to be her 40's living in a 4 bedroom house (a very nice house) with manicured grounds and a backyard in-ground pool in a Las Vegas suburb. She was lamenting the fact that she and her 3 kids and disabled mother were going to be foreclosed upon. She was now unable to aford the house on her part-time salary. She hoped the government would do something.

Man, how does a woman responsible for 3 kids and a disabled mother on a part-time salary even get into a house like that?

Easy.  Back in o5 when she probably got her loan, two words: Stated Income.  >

Many agents took advantage of the programs that were meant to be used for people that could not prove the income they made.  It was programs like this that helped fuel the subprime meltdown.  There were too many "used car salesman" that entered the mortage industry and wrecked havoc.  Sad that I was competing for business against knuckleheads that had no financial background whatsoever.  I remember dozens upon dozens of indifiduals that would come into my office wanting to get prequalified for a loan.  When I would tell them sorry, you dont qualify, they'd get upset.  They simply did not understand that THEY COULD NOT AFFORD THE HOUSE THEY WANTED TO BUY.  Sooo, they'd go to the guy down the street that would tell them what they want to hear, give them the loan that they could not afford, and not think twice about what would happen to the poor client 25 months down the road when the loan would adjust.  He made his $10k commision, they would get their house, if for only a short amount of time, and for that short amount of time, life was peachy.  Now that their pament has adjusted or is going to adjust UP by $1,000 or more and they cant afford the new payment AND are upside down on value to loan amount, they come crying to me for help.  And I can't.  They've lost their life savings, have no one to turn to, the original guy that gave them their loan closed his shop and went back to selling used cars.  Pathetic.  Just pathetic....

[cart7t]

I watched a clip on CNN today that illustrated perfectly the reason for the subprime mess.

There was a young woman in what appeared to be her 40's living in a 4 bedroom house (a very nice house) with manicured grounds and a backyard in-ground pool in a Las Vegas suburb.  She was lamenting the fact that she and her 3 kids and disabled mother were going to be foreclosed upon.  She was now unable to aford the house on her part-time salary.  She hoped the government would do something.  

Man, how does a woman responsible for 3 kids and a disabled mother on a part-time salary even get into a house like that?  

Easy.  Back in o5 when she probably got her loan, two words: Stated Income.  >

Many agents took advantage of the programs that were meant to be used for people that could not prove the income they made.  It was programs like this that helped fuel the subprime meltdown.  There were too many "used car salesman" that entered the mortage industry and wrecked havoc.  Sad that I was competing for business against knuckleheads that had no financial background whatsoever.  I remember dozens upon dozens of indifiduals that would come into my office wanting to get prequalified for a loan.  When I would tell them sorry, you dont qualify, they'd get upset.  They simply did not understand that THEY COULD NOT AFFORD THE HOUSE THEY WANTED TO BUY.  Sooo, they'd go to the guy down the street that would tell them what they want to hear, give them the loan that they could not afford, and not think twice about what would happen to the poor client 25 months down the road when the loan would adjust.  He made his $10k commision, they would get their house, if for only a short amount of time, and for that short amount of time, life was peachy.  Now that their pament has adjusted or is going to adjust UP by $1,000 or more and they cant afford the new payment AND are upside down on value to loan amount, they come crying to me for help.  And I can't.  They've lost their life savings, have no one to turn to, the original guy that gave them their loan closed his shop and went back to selling used cars.  Pathetic.  Just pathetic....

Which begs the question.  How much of this near past home building/buying boom that's now crashing was created by the creative lending of the these shysters?

2nd question.  What has the industry done to stop this?  As someone who did a refi a few years ago, I can't begin to tell you about all the "lenders" that came crawling out from under rocks when they got a whiff of our desire to refinance.  Many of them trying to trump the competition with some of the most ridiculous and dangerous loans I've ever heard of.  It would seem to me the banking/money lending industry needs to have learned something of this and begin regulating itself better.  To think guys could go around and flagrantly sell these sub-prime loans for personal gain,  which are now taking the economy down, is near criminal.  

[Brian_Reeves]

When it comes to money, I am the exact opposite of a patriot.  I have all of my life's savings and long term investments in Euros right now along with 2.5million Iraqi Dinar in my safety deposit box.  So if America's economy goes down the President's crapper and if Iraq's economy comes back, I'll be doin alright.

A lot of the problem is the enormous amount of wasted spending going into the 'war.'  A pullout is going to become more necessary is Bush keeps wanting to blow 200billion at a time.  There is no way in earth that is a justified amount.  If it were justified, then we would have seen some of it on my end.  With the exception of the new MRAP's, weren't getting ANYTHING new in Iraq.  Body armor, personal weapons, vehicles...nadda.  Our Bradleys that were blown to bits were replaced by 15 year old pieces of junk from the Kuwait draw yard.  I'd love to know where that 200billion is going.

I really and honestly believe that Congress and the White House should be forced to print the taxpayers a reciept online.  Someone has to be able to keep these dolts accountable

[roadwarrior]

What I can't believe is that Countrywide is coming back into the market, and Bank of America is lending them money to do it.

Countrywide was on the brink of failure last week.

Bank America had already made a substantial investment

in CFC late last year and agreed to buy the company.

[SPEEDBEAD.]

Texan, I am surprised that one of the media outlets hasn't pushed an itemized spending request under the "Right to Know" law....

If they can make a big issue over finding out how much Joe Paterno makes at PSU b/c he is a state employee, why couldnt they do the same thing requesting the information that every tax paying American is ponying up for?

Wayne

[roadwarrior]

Our country was made strong on innovation and the industrial revolution. Now about all we have left are service industries and financial institutions. We do not make anything anymore.

Actually, the United States is still the #1 manufacturing country in the

world, "producing goods" is simply a lower pecentage of overall

economic activity.

http://online.wsj.com/article/SB118636103261088840.html

The current period of prosperity has been one of the longest in modern history.

The last officially recognized "recession" was 3/01-11/01.

http://en.wikipedia.org/wiki/Clinton_Recession

8-)

[BassChaser57]

Thanks for the link RW.

It was read carefully and I mostly agree with the article. No doubt the U.S. agriculture industry is in great shape.  John Deere and Catterpillar are doing well. Boeing is also way behind in building jets and I totally agree the ports are in full swing. There are bright spots and we still have a fantasitc country, we just have a few warts starting to show. I see firsthand the trade imbalance with VERY light loads from the U.S. westbound to Asia for all cargo air carriers and full to the last Kilo Eastbound. The biggest chess play for all U.S. cargo airlines is to figure out how to get airplanes to Asia and getting someone else to pay $10,000 per hour for the fuel. For the last 6 years it has been the U.S. Military chartering the jets to Kuwait and then they pay 75% to reposition. We keep going eastbound across India and into China, Korea, or Japan for the "backhaul." I also see seaports in Shanghi and Hong Kong with every outgoing ship loaded to the max with inbound ships riding high like a cork. From the air I see ships inbound to the U.S. fully loaded riding low and the westbound very high in the water. This of course is not a scientific research method but it what I have dealt with for many years. It seems like a one way trip out of the U.S. for our dollars.

8-)

[Guest avid]

Recession sucks, but it is inevitable.

The business cycle demands periodic slowdowns.

From the "big picture" stand point they can be good.

Weaker companies fail,  high risk finance humbles the speculative,

fraudulent activities come to light, and so on.

It would be great if we could all enjoy peace and prosperity but it don't work that way in my neighborhood.  

avid has spoken  

[FishingBuds]

Recession sucks, but it is inevitable.

The business cycle demands periodic slowdowns.

From the "big picture" stand point they can be good.

Weaker companies fail, high risk finance humbles the speculative,

fraudulent activities come to light, and so on.

It would be great if we could all enjoy peace and prosperity but it don't work that way in my neighborhood.

avid has spoken

Agree

Aint Texan its a point you made but, don't forget how much billions USA gives out to other country's that claim to be our friends. I know the old motto "keep your friends close but, your enemies closer" but Shish!! could you amagine using that for health care or free college in the good ol'USA instead:-?

Don't forget Chapter 7's-And the credit purchasing we are taught-grandmaw would be turning over in her grave if she knew about that.

You know a new married couple say in the early 20's with credit can build a material wealth instantly the same as mom & dad has that took them a life time to build. Differance is mom & dad usually own it all close to free and clear, and said young married couple are paying out that poop shoot for loans.

We are not taught anymore how to save or buy wisley. Look at the depression, it taught them to save.