# Economic Recovery

by Phrak
Tags: economic, recovery
 Admin P: 21,628 July, Aug, Sep are 3Q.
PF Gold
P: 3,021
 Quote by Astronuc July, Aug, Sep are 3Q.
Yes, and for which we don't get the official numbers until October.
http://www.bea.gov/newsreleases/news...t_national.htm

We do have predictions at this time, varying from 2 to 4% annualized in 3Q.
http://online.wsj.com/article/SB125137361057563285.html
P: 21,628
Clunkers aid Ford, Toyota sales; GM, Chrysler fall
http://news.yahoo.com/s/ap/20090901/.../us_auto_sales

 DETROIT – The Cash for Clunkers program boosted sales at Ford, Toyota and Honda in August as consumers snapped up their fuel-efficient offerings, but rivals Chrysler Group LLC and General Motors Co. withstood another month of falling sales. The program, which ended on Aug. 24, drew hordes of buyers into quiet showrooms by offering up to $4,500 toward new, more fuel-efficient cars and trucks. The hefty rebates gave automakers and dealers a much-needed lift, spurring 690,114 new sales, many of them during August, at a taxpayer cost of$2.88 billion. Other automakers are expected to release U.S. sales figures later Tuesday. Combined, the results are likely to mark the first year-over-year monthly sales gain since October 2007. . . . .
P: 1,123
 Quote by Astronuc Clunkers aid Ford, Toyota sales; GM, Chrysler fall http://news.yahoo.com/s/ap/20090901/.../us_auto_sales
Chrysler and GM didn't have an inventory of eligible vehicles???

"Meanwhile, low supplies of fuel-efficient vehicles at Chrysler kept the automaker from benefiting more from the clunkers program, whose rebates encouraged customers to buy gas sippers in exchange for guzzlers with gas mileage of 18 mpg or less.

Chrysler sales fell 15 percent to 93,222 units. That was less than the combined sales of Hyundai Motor America and affiliate Kia Motors America, whose smaller sedans helped boost sales to a combined 100,665 for August.

Going into August, five of Chrysler's most efficient vehicles were already at low inventory levels. Those vehicles — the Dodge Caliber, the Chrysler Sebring, the Jeep Patriot, the Jeep Compass and the Dodge Avenger — all qualified as Cash for Clunkers purchases.

To make up for the shortfalls, Chrysler is boosting production by 50,000 vehicles of most of its vehicles through the end of the year.

At General Motors Co., sales fell 20 percent to 245,550. GM said its inventory levels hit an all-time low of 379,000 during August."

Every assistant manager at McDonald's knows enough to order more fries when fries are on sale. First year business students know better - who's running these companies?
Mentor
P: 21,999
 Quote by Astronuc Clunkers aid Ford, Toyota sales; GM, Chrysler fall http://news.yahoo.com/s/ap/20090901/.../us_auto_sales
It appears to me that that article is poorly written in a way that misleads people about what the data shows. They appear* to be comparing August '09 sales to August '08 sales, not to July '09 sales. So the statement in the title implies that GM and Chrysler weren't helped by the CARS program, but the data does not say one way or another whether that is true.

*I say "appear" because they only mention the timeframe once, attached to one set of data.
Mentor
P: 21,999
 Quote by Astronuc The 'Cash for Clunkers' is a major reason for the growth being positive this quarter. Take that away, and the GDP would be slightly negative. That's what I was meaning by 'big boost'.
We have no data to support that assertion. All we know for sure is that the "big boost" for Q3 can only be 0.44%. So if gdp growth comes in between 0 and +0.44%, the boost from CARS will account for that. I don't consider a .44% swing to be very "big", though, considering that the last three quarters were -6.3%, -5.7% and -1%.
 I believe that the spending by those who receive their 'cash for clunkers' is measured not only in the money spent on the cars and the reduction in inventory, but one must consider the other spending that it stimulated.
I'm not following - what other spending would it stimulate? It seems to me that CARS spending would inhibit other spending. The most obvious placee where spending is inhibited is in gas spending and maintenance spending, but also if someone is buy a car, they have less money to spend on other things.
 If the government spent about $3000/car ($ 3 billion = 1 million new cars), and people went out and bought brand new models at ~$20K, then that's about$20 billion, which may have induced another $20 billion or so to replace inventory.... You're just double-counting. The car that last month the dealership couldn't get off the lot was gotten off the lot by CARS and is now replaced with a car that next month they won't get off the lot. Building a car and shipping it to a dealership isn't adding money to the economy, it is a pure liability by the car company until it is sold. You can only add the cost of a sold good to the GDP once.  ...service debt, . . . Debt service is money removed from the economy, not added to it. It is money that consumers won't have to spend on other things. PF Gold P: 1,369  Quote by Astronuc The point is not to panic but take advantage of opportunity. But I lost$40 in the market today! OMG! OMG!

But then again, my risk management commodities broker acquaintance says;"Ommmmm..... Stay cool. In 5 years, I predict, you'll have doubled your post inflation adjusted investment."

Though I don't know if I should trust him. He's 32.
PF Gold
P: 1,369
 Quote by Astronuc The mob wants their piece of the action, too.
And the Swiss.....

 Swiss battery maker ReVolt picks Oregon as US base (AP) – Sept 1, 2009 A Swiss company developing zinc batteries for electric cars has chosen Portland, Ore., as its U.S. headquarters and manufacturing center. ReVolt Technology also announced Tuesday it's applying for $30 million in research grants from the U.S. Department of Energy to answer the government's call for technology that drives energy independence. Well, at least we get 250 jobs out of the deal. hmmm....$30M/250 = $120,000 each Assuming$120k/3 yrs = $40k/yr. I guess it adds up. Sure hope the batteries end up working. That would be a boom to our economy.  P: 1,123 A real estate overview. http://realestate.aol.com/article/fi...00DYNLprim0001 "4 Signs Your Home Is About to Lose Value Consumer Action by AnnaMaria Andriotis, SmartMoney Despite signs that the real estate market is bottoming out, millions of homeowners are likely to find themselves in worse shape within the next two years. Nearly half of the nation's 52 million mortgage borrowers will have negative equity by the end of the first quarter of 2011, up from the 14 million at the end of this year's first quarter, according to estimates in an Aug. 5 report by Deutsche Bank. With so many borrowers underwater -- or owing more on their home than it's worth -- the risk is high that they'll default and their homes will go into foreclosure, says Mark Zandi, the chief economist at Moody's Economy.com. (Moody's Economy.com estimates that 17.5 million mortgage borrowers will be underwater by early 2010.) More From SmartMoney Negative equity is the product of several factors. The most significant weight is the broad and persistent decline in home values. A Zillow.com index of home values fell 12.1% year-over-year during the second quarter, resulting in a total drop of 22.3% since the market peaked in mid-2006, according to an Aug. 11 report by the online real estate marketplace. Many buyers who bought their home around the peak with a 20% down payment have lost that dollar amount. "The continued decline of U.S. home prices will contribute to rapidly rising rates of negative equity," Karen Weaver, a Deutsche Bank research analyst, wrote in the report. "The most obvious implication is for mortgage defaults." Current homeowners, or those shopping for a home and who are concerned that they'll end up underwater, should consider how long they expect to live in their house. Being underwater doesn't affect homeowners unless they plan to sell, Zandi says. Individuals who are staying put for at least the next five to seven years will likely recoup the lost value of their home, says Amy Bohutinsky, a Zillow.com spokeswoman. In addition, homeowners should refrain from borrowing against their mortgage, she says. Those who find themselves underwater can turn to the federal Making Home Affordable plan, which can help you refinance or do a loan modification. You'll have to meet the eligibility requirements listed here. Whether you're at risk for falling behind may have more to do with the economy and your neighborhood than your job, your credit or your income. Here are four warning signs that you're heading underwater. Foreclosures in your neighborhood The quickest way to end up underwater is to live in a neighborhood that's plagued by foreclosures. When one home on your block goes into foreclosure, your home's value drops by 1%, Zandi says. But that isn't a one-to-one relationship. If two homes on a block go into foreclosure, your home's value will drop by more than 2%. As homes go into foreclosure, they create a domino effect, lowering home values throughout a neighborhood in a cascade beyond homeowners' control. (For more on factors that reduce a home's value, read our story.) Homes lingering on the market When "For Sale" signs linger in a neighborhood for three or more months, that may mean buyers and sellers can't agree on a price. In that environment, homes are unlikely to sell unless the seller lowers their asking price. "The time on the market is always a good barometer of demand for homes and for the price homes are transacting at," Zandi says. "The longer it appears that neighbors are taking to sell their home the more likely it is they're not getting the price they want and that prices are falling." Compare the time it took for homes to sell in your neighborhood three years ago vs. today; if it's taking weeks or months longer to sell, the prices homes can fetch are dropping, Zandi says. Increasing unemployment In most cases, the cities where homes have lost the most value during the past year also possess the highest unemployment rates. Homes in Merced, Calif., have lost 40.2% of their value year-over-year, the biggest loss of home values in the nation, according to Zillow.com. The city's unemployment rate is the fifth-worst among 372 metropolitan areas at 17.6%, according to June data from the Labor Department. El Centro, Calif., where home values plunged 37.6% year-over-year (the second-biggest drop in the country), has the worst unemployment rate at 27.5%. Individuals living in areas battered by high unemployment are likely to see their home values drop further, especially if they live in areas dependent on dwindling industries -- like Central Valley, Calif., and the mortgage lending business or Detroit and the auto industry, Zandi says. Homes in disrepair Dented siding, peeling paint and broken porches could be signs that neighbors are having trouble making ends meet and can no longer pay to take care of their home, Zandi says. Or they may have gotten an appraisal and discovered their homes have dropped in value and are no longer worth the cost of repairs. Inevitably, as the condition of homes in your neighborhood worsens, home values are likely to drop. "The mere fact that they're not investing in their homes will affect you too," Zandi says. -------------------------------------------------------------------------------- What Underwater Borrowers Have Common Risky mortgages Some 77% of option-ARM borrowers and 50% of subprime mortgage borrowers were estimated to be underwater as of the first quarter of 2009, according to the Deutsche Bank report. With option-ARMs, borrowers could make minimum monthly payments that didn't even cover the loan's interest. As the market declined, these balances grew over time. With subprime mortgages, borrowers often had poor credit scores and little documentation of their financial situation. In both cases, borrowers often ended up with a large motgage relative to the house's price. Date of purchase Individuals who bought their home between 2003 and 2008 are at risk of being underwater because they bought while prices were rising, Zandi says. The risk is greater for those who bought between 2005 and 2006, as the market approached its peak. Excessive borrowing Many individuals borrowed against their home when it appreciated in value during the bubble by taking out a second mortgage or tapping into a home equity line of credit or home equity loan. This borrowing left their home with less equity to weather the drop in home values. Home's location The areas that have been hit the hardest by plunging home values include the "sand states" of Arizona, California, Florida and Nevada because they brought the most speculation, easy credit and overbuilding during the bubble, Zandi says. Also hurt: the states where unemployment is especially high and manufacturing jobs have been eliminated like Michigan, Ohio and Indiana, Zandi says." Admin P: 21,628 How this for recovery? Where the Players Landed One year after the worst week of the financial crisis, some of the most famous names on Wall Street are still looking for jobs or fighting lawsuits http://www.nytimes.com/interactive/2...-they-now.html Richard S. Fuld Jr.  NOWMany of his friends told him to sit it out and let the storm pass. Others told him to get back in and fight. He took the latter’s advice and last spring founded a corporate advising firm, Matrix Advisors, where he has a staff of three: his two assistants from Lehman and a junior associate. Friends and former colleagues say he has been “devastated” by Lehman’s failure. He and other former senior executives of the firm are the target of numerous lawsuits that claim they misled investors about its financial condition. He has denied the allegations. During downtime, he commutes to vacation homes in Florida and Idaho. Friends say he plays golf and likes to hike up the mountain behind his house in Idaho. Charles O. Prince III  THEN - He resigned from Citigroup in November 2007 shortly after the bank announced the first of more than$28 billion in losses over the last two years. Citigroup’s board handed him about a \$12 million bonus on his way out the door. NOW - He put his Greenwich, Conn., home on the market and spends much of his time in Palm Beach, Fla. (C. Michael Armstrong, the former head of Citigroup’s audit and risk committee, is a golfing buddy there.) Since last fall, he has been dispensing global business and investment advice at Albright Stonebridge, a Washington consulting firm. Mr. Prince and his longtime boss, Sanford I. Weill, have not spoken in more than a year.

One of the good guys

Nouriel Roubini
 THEN - Early last year, Mr. Roubini, a professor at New York University’s Stern School of Business, was a relatively obscure academic who was making predictions few people believed: financial catastrophe, including a number of large institutions going bust within a couple years. NOW - He is celebrated as The Man Who Was Right and has become a prominent — and listened to — voice in the public debate on economic policy. “I was too optimistic,” he says now. “It took seven months for Wall Street as we know it to disappear.” On the economy, he thinks the end to the global recession is close, though it is not here yet. “The most important question now is the shape of the recovery — whether it is rapid and V-shaped or more anemic.” The latter, he said, “is the argument I am making.”
 P: 1,123 Personally, I still have more confidence in Wall Street than the foreign exchanges.
P: 21,628
Here's an interesting perspective on Wall Street practices.

Economic View
Flaw in Free Markets: Humans
http://www.nytimes.com/2009/09/13/bu...my/13view.html
By ROBERT H. FRANK
 THERE is broad agreement that Alan Greenspan, the former Fed chairman, was wrong to have believed that market forces alone would insulate society from excessive financial risk. But Mr. Greenspan was wrong for reasons very different from those offered by his most vocal critics. Those critics fault Mr. Greenspan for having overestimated the strength of competitive forces, a point he essentially conceded in Congressional testimony last fall. But the financial crisis was not caused by a shortfall in competition. On the contrary, it was fueled by competition’s growing strength. Adam Smith’s theory of the invisible hand, which says that market forces harness self-serving behavior for the common good, assumes that markets are competitive, and most markets have in fact become more competitive over time. Today, if an opportunity exists anywhere in the world, information-age entrepreneurs can seize it more quickly than ever. The invisible hand, however, requires not just strong competition but also two other preconditions. The economic models that spawned Mr. Greenspan’s former optimism simply assume those conditions, despite compelling evidence of their absence. First, those models assume that rewards depend only on absolute performance, but in the real world, payoffs are often tightly linked to relative performance. When a valuable new piece of information becomes available to the investment community, for example, the lion’s share of the gain goes to whoever trades on it first. For an individual firm like Goldman Sachs, it is thus completely rational to invest millions of dollars in computer systems that can execute stock trades even a few seconds faster than others. But rivals inevitably respond with similar investments. Taken together, these expenditures are wasteful in the same way that military arms races are. A second problematic assumption of standard economic models is that people are properly attentive to all relevant costs and benefits, even those that are uncertain, or that occur in the distant future. In fact, most people focus on penalties and rewards that are both immediate and certain. Delayed or uncertain payoffs often get short shrift. . . . .
I believe the regulators are looking into high speed trading, where apparently certain select clients get preferential treatment.
P: 1,123
 Quote by Astronuc I believe the regulators are looking into high speed trading, where apparently certain select clients get preferential treatment.
Think of a time when your broker put you on hold to see if he could buy/sell at the price you specified - rest assured (someone) made money during that pause and as long as you made the trade you didn't care.

The "select clients" are often pension funds and large institutional investors (401K's and retirement funds) - be careful what you wish for.
PF Gold
P: 3,021
 Quote by Astronuc [...]One of the good guys Nouriel Roubini
Roubini was right about 2008, but he also had been a doomsayer for a long time before that - 5-10 years of dire predictions if I recall. I don't say that he was merely a broken clock - right sooner or later, but neither would I grant him any clairvoyance.
 P: 1,123 The next 10 Bubbles? http://finance.yahoo.com/tech-ticker/article/325783/Ten-Bubbles-in-the-Making?tickers=^gspc,^dji,xlf
PF Gold
P: 1,369
 Quote by mheslep Roubini was right about 2008, but he also had been a doomsayer for a long time before that - 5-10 years of dire predictions if I recall. I don't say that he was merely a broken clock - right sooner or later, but neither would I grant him any clairvoyance.
Ummmm..... If I'd been aware of the market before last December, I'd have probably made the same prediction for those 10 years.

DJIA

But this is all in hindsight.

There must have been some logic somewhere, in someones mind, that those growth level numbers were, um, logical.
PF Gold
P: 3,021
 Quote by OmCheeto Ummmm..... If I'd been aware of the market before last December, I'd have probably made the same prediction for those 10 years. DJIA But this is all in hindsight. There must have been some logic somewhere, in someones mind, that those growth level numbers were, um, logical.
Most of those gains in the DJIA were justifiable. Sure, knock of a few percent of bubble off the top of DJ for some make believe financial stocks if you like, but aside from those there were real earnings to back up those prices and now based on those same earnings the DJ is coming back. It was the housing prices that had the bubble, and accordingly the housing prices are not going to bounce back - to anywhere near the degree the DJ has.

 Mentor P: 4,499 Cheeto, it's called exponential growth. For example, if you saw the stock market changing like this: Would you bail because it spiked up, and you expect it to crash? Well, actually it was only growing exponentially, which is what you expect the stock market to do. Looking at the graph, it looks pretty close to exponential growth, so while yes, in fact, most people thought it was probably going to drop a bit, the rate and magnitude of the drop was beyond prediction just by looking at your picture

 Related Discussions General Engineering 20 Current Events 7 Chemistry 10 Earth 0