Forum Replies Created
-
AuthorPosts
-
powayseller
Participantsjk, thanks but I know what M3 is… I’m not *that* confused, 🙂
ParticipantGood work PC. Examples like are powerful. I can just picture some people thinking that this couldn’t possibly happen to a single family home in Encinitas or North Poway. Do you have more examples of supposed “superior properties”?
November 23, 2006 at 9:11 PM in reply to: Any housing downturn will be limited to San Diego & Sacramento? #40581ParticipantDataquick data shows prices and sales are dropping already in LA.
Participantqcomer, Roubini stated several times that the stock market will keep rallying through the end of the year. Roubini did not say the stock market would fall now. I don’t know why people keep changing his words.
He calls it a sucker’s rally, because it’s based on a false hope that the economy will have a soft landing, and that the Fed will lower interest rates to prevent a recession. But he says, just like in 2000-2001, when GDP fell in 3 consecutive quarters before the recession, and a Fed rate cut did not prevent a recession, it will not prevent it this time either. So many people on his blog slam him because the recession is not here, but his prediction is for the recession in Q1 or Q2 2007, and for the stock market to fall sometime after the end of 2006.
ParticipantAs a patient, Palomar is superior to Kaiser.
ParticipantThe government creates the money by auctioning Treasuries, and they use that money to run the government, right? So they are spending the money they are creating.
If we use the true inflation figure, based on what people actually buy, maybe CPI is close to 10%.
ParticipantI didn’t say I believe S&P will drop to 600. I think a 30% drop from the peak is realistic.
ParticipantThe market is likely to go up through the end of the year, according to Roubini.
ParticipantAN, no one suggested you stay quiet. You make very good points. Yet, none have convinced me that we will escape an economic downturn. To me, the recession for next quarter is a sure thing. Many of us on this board will be unemployed next year.
ParticipantA recession is 2 quarters of negative real GDP growth, i.e. a declining rate of domestic production of goods and services. We’ve already seen a strong decline in domestic production of housing and cars, and the ripple will soon spread to other sectors. I don’t know anything about the dollar or liquidity in a recession, or if there is a pattern. Commodity prices and oil prices drop in a recession, due to lower demand.
I think this quarter’s GDP growth will be 0 or negative, so we could actually be in the recession already. Unemployment peaks 1 – 2 quarters after a recession starts, and I expect a lot of construction and related layoffs in the next 3 quarters. Once current housing projects are complete, most of those workers will be laid off. We will have 800K laid-off construction workers in the US according to an estimate I read. It could be even more.
I don’t know how we got ourselves into a situation where we are so dependent on housing to keep our economy strong. It seems absurd that a great country like this, with the best financial and military systems in the world, derives its greatest productivity from building houses. You would think our productivity comes from exporting our technological advances in drugs, robotics, health care, alternative energy systems, educational methods, water treatment systems and other infrastructure products, mobile communication, and film making to developing and advanced nations. Why are we dependent on buying and selling homes to each other? Has it always been that way?
ParticipantTHe other wars were a greater % of GDP.
“The sort of numbers mentioned in US discussions as to the military costs of the war are less than US$100 billion, that is less than 1% of GDP compared with 12% or 15% of GDP for the Korean and Vietnamese wars. ” – abc.net“The second world war called for total mobilisation, requiring a country’s total resources, and that is what wiped out unemployment. …Most analysts put the total costs of the war at less than 0.1% of GDP, the highest at 0.2% of GDP. Much of that, moreover, includes the usage of munitions that already exist, implying that little or no stimulus will be provided to today’s economy. ” – The Guardian
Housing is now a hug epart of our economy. “…unlike the previous periods, housing is now the main engine of the economy. This is especially true when the substantial contribution of equity extraction to consumer spending is included.” A housing bust is therefore more serious than ever.
This is Roubini’s “Housing Free Fall Turning Into Meltdown … 2007 Recession Ahead”. Roubini has written about a housing-led recession since last spring. Have you read his work? It all comes down to the economic contribution made by housing and MEW, and the effect on GDP when residential investment falls. The data is all there.
Economists don’t question whether housing downturns lead to recessions. It is generally accepted as fact. The disagreement hinges on how bad this downturn will be, and whether it’s a hard or soft landing.
AN, I recommend you read Roubini’s well written blog, and then decide for yourself about the case of a recession. If you disagree with any of Roubini’s points, it would be interesting to hear.
ParticipantAN, I don’t get your point. The Census Bureau is tracking the auto sales, and they are down 2.4% in June’s report. So the new car sales decline is an indicator of consumer spending decline. However, I see your point that it does not mean GDP will decline since cars can still be manufactured abroad. But we do have a recession in the auto states already, as unemployment is very high and home prices are depressed and foreclosures rising (not from ARM resets but from unemployment).
The biggest indicators of recession are the inverted yield curve and the decline in housing permits. This housing decline already brought down GDP to 1.6% in Q3 and will depress it even further in Q4.
So AN the burden of proof is on you to show why the big drop in housing permits/starts will not bring a further decline in GDP. I see this latest drop in permits as an indication that permits and starts are continuing their downward spiral, further depressing residential investment, a very important contributor of GDP. In Q3, res. inv. was down 17%, and was the main reason for the GDP decline. Also you have to prove why this time the inverted yield curve is not indicating a recession. The bond market is expecting a recession, although the stock market is not. This happened in the last recession, as the stock market rallied right into the recession. Have you read Roubini’s commentary, and what do you disagree with?
My burden of proof will be to research why the Iraq war is not stimulating the economy, as the Korean and Vietnam wars did.
My comment about being prepared for recession was meant to show that we don’t have to be worried about a recession. If it comes, we can be ready. If we have a job that is sure to be eliminated, we can change jobs or sell our house or move to another city. We can shift our investments. Sometimes I’m not sure if people disagree on the recession because they truly believe it is impossible, or because they are in denial because a recession would cause them financial harm. I wonder why a recession is so hard to believe,because they are normal part of the business cycle. Saying we cannot have a recession is like saying we cannot have rain. I don’t get it….
ParticipantAre you saying that the past recessions attributed to declining car sales were due to layoffs among the Big 3, and that this time those employees will be rehired by foreign auto makers?
However, the decline in new car sales is for all new cars, even foreign cars, and it shows that consumer spending is slowing. So the important point about this is that consumer spending is slowing, beginning with the big ticket items like houses and cars, and now we hear Home Depot’s sales are down 5% and they see a slump for all of 2007 at least, Walmart’s sales are down, and the unemployment in housing industries is expected to go high and ripple through the economy. (Majority of new jobs created in the last few years are housing related).
lindismith got an early start on preparing her company for the recession, and has increased her sales because of it. My family is living with the recession in mind, as far as our spending, investing, and jobs are concerned.
If you think this housing bust will not cause a recession, then the burden of proof is on you. How can the economy keep growing in the face of the housing bust? Q3 GDP was 1.6%, and that was when housing starts were still going strong. Now they have declined big time, and almost certainly GDP will be 0 or negative in Q4, as the lower housing permits and starts are reflected in even lower residential investment in Q4. This will ripple through to retails, high tech companies, manufacturers of all sorts.
I am not sure if the rest of the world will decouple from the US recession. It could go either way.
ParticipantThat WSJ article has so many errors, it would take me 30 minutes to address them all. I’ll tackle just the first error in paragraph 1, that the worst is over. Housing starts are dropping at a greater percentage every month, and there is no indication that trend is reversing. Next, the OFHEO index tracks the NAR resales very closely, so Calculated Risk (and I) expect the OFHEO Q3 index (to be released in about one week) to be a very sharp drop. I used to have fun debunking other people’s arguments, but it’s not so much fun anymore and it’s time consuming.
Finally, whenever I read anything that economists say, I basically ignore it, because they are lousy forecasters.
Roubini: “in March 2001 in a survey 95% of US economic forecasters predicted that there would not be a recession in 2001; 95% of them! Too bad that the recession had already started exactly in March of that year!. So, even as late as March of 2001 when it was totally obvious that the economy was spinning into a recession 96% of all forecasters were still living in the delusional dream that the US would avoid a recession. This even after the tech and investment bubble had totally busted in 2000; even after the 2000 Chrismas sales were a disaster and growth was already crawling down to zero by the end of 2000; this even after the Fed went into a panic mode on January 2nd 2001 and cut the Fed Funds rate in between FOMC meetings because of the collapse of Chrismas sales and the collapse of the NASDAQ that day
was clearly signaling a coming recession. There was systematic delusional bullish bias among forecasters, among investors and in the Fed.The failure of professional forecasters in predicting recessions – there are always way overoptimistic and systematically miss the turn downward of the business cycle – is well known and documented in scholarly studies. Prakash
Loungani – who has written several research papers on this systematic bias – summarized the results of his 2001 paper on this forecasting bias with the following scathing remarks: “The record of failure to predict recessions is
virtually unblemished”. That sums it all. Why this ystematic failure? Because there are systematic biases and financial conflicts of interests in the economic forecasting business.”” -
AuthorPosts
