Thursday, January 24, 2008

Home Sales Record First Drop On Record

The median price for a homes dropped 1.3 percent to $219,000 in 2007, while total home sales plunged by 13 percent for the year.
Prices of homes sold in December registered the biggest year-over-year decline on record, according to a report from an industry trade group, and 2007 is the first year on record that has seen a drop.

The National Association of Realtors (NAR) said on Thursday that the median price of homes sold in December fell nearly 6 percent from a year earlier to $208,400. The three biggest declines in prices ever recorded have now come in the last four months.

In addition to the December price decline, NAR reported the median price for all homes sold in 2007 fell 1.3 percent to $218,900, the first time that the annual price reading has shown a decline since the group started tracking that measure in 1968.
Now that we have definitive proof that the housing market has collapsed, what next for beleaguered homeowners? The problem is that this will effect all aspects of the economy. Do you think they will be building homes in Florida with foreclosures on every block? Do you think homeowners will be remodeling when their homes are declining in value?

What about those that lose their jobs as a result of this mess? How many of them will wind up in foreclosure? Do you understand now why this is bringing down the economy?

Tuesday, January 22, 2008

Will The Cure Be Worse Than The Disease?

Is the cure just for Wall St. with the little guy left holding the bag down the road?
The wobbly economy is overtaking Iraq as the issue weighing most heavily on the minds of America's voters. And Washington has noticed. The White House and Congress are almost certain to enact some kind of stimulus package. But like all such temporary, feel-good measures, it will generate a quick blip in growth that will quickly evaporate. In reality only one player has the power to do anything swift and decisive: the Federal Reserve. And its chairman, Ben Bernanke, has already made his intentions abundantly clear. Unfortunately, the cure he's prescribing may be worse than the disease.
When I read this I was not surprised. How can we regain fiscal health with an employment market that has basically stopped creating high paying jobs. The Bush Administration touts their record of steady job growth but what is the quality of the jobs they have created? The service sector is growing but we all know that those jobs pay much less than the manufacturing jobs that they are replacing.

Wall St. artificially pushed up the price of homes with the subprime mortgage mess and that helped boost profits on Wall St. Those disastrous unregulated decisions have left us with an economy in peril and a Federal Reserve with few options.
Bernanke is setting the stage for an even bigger recession down the road. Just as the ultra-low rates of the early 2000s created many of the problems we're experiencing today, pumping money into the system would probably stoke inflation, forcing the Fed to hike rates sharply in the near future. "It's better to take a small recession and kill inflation immediately instead of facing high inflation and a really big recession later," says Carnegie Mellon economist Allan Meltzer.
So will the cure kill the economy down the road? Only time will tell but anything touched by the Bush administration turns to shit and the economy has little chance of escaping this reverse midas touch. The next President will be left with a colossal mess on more fronts than can be printed in one short blog. Will the American people be smart enough to understand that this was done by the Bush administration and not lay blame on our next President? Since they elected this intellectual midget twice that seems unlikely and because of that the next President will be forced to choose between popularity and very hard decisions. There are no good options left in the United States after Bush.

Monday, January 21, 2008

World Markets Tank

The chickens have come home to roost. Unfortunately those that created the mess are laughing all the way to the bank.
Stocks fell sharply worldwide Monday following declines on Wall Street last week amid investor pessimism over the U.S. government's stimulus plan to prevent a recession.

U.S. markets were closed for Martin Luther King Jr. Day, but were primed to open Tuesday's session with steep declines, according to futures trading.

Futures don't correlate exactly to the underlying indexes, but are nonetheless a good indicator of stock index direction. As of 11:30 a.m. ET, March contracts on the Dow Jones industrial average, the S&P 500 and the Nasdaq composite all pointed to declines of over 4 percent at Tuesday's open.

The downbeat mood from last week's U.S. market declines isn't limited to the United States, with markets in Europe, Asia and the Americas tumbling Monday.

Britain's benchmark FTSE-100 slumped 5.5 percent to 5,578.20, France's CAC-40 Index tumbled 6.8 percent to 4,744.15, and Germany's blue-chip DAX 30 plunged 7.2 percent to 6,790.19.

In Asia, India's benchmark stock index tumbled 7.4 percent, while Hong Kong's blue-chip Hang Seng index plummeted 5.5 percent to 23,818.86, its biggest percentage drop since the Sept. 11, 2001, terror attacks.

Canadian stocks fell as well, with the S&P/TSX composite index on the Toronto Stock Exchange down 4 percent in early afternoon trading. In Brazil, stocks plunged 6.9 percent on the main index of Sao Paulo's Bovespa exchange.

Investors dumped shares because they were skeptical that an economic stimulus plan President Bush announced Friday would shore up the economy that has been battered by problems in its housing and credit markets. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.
Why would the world be skeptical about the ideas put forth by President Bush? Could it be that they realize that he is an intellectual midget that has destroyed our country and that due to the lack of oversight by a Republican Congress, our economic problems threaten to hurt millions around the world. This is the legacy of the trickle down theory. The rich have gathered an even greater share of the worlds wealth while those in the middle have struggled to keep their heads above water. Those at the bottom are drowning.

How can anyone look at what has happened in the financial markets and not demand more regulation? This idea that industry will police itself has lead to our current mess. Citibank, Merrill Lynch and Countrywide Mortgage have all paid executives that created this mess millions while their employees have lost their jobs.
Is this what we want for our country?

Most middle class Americans are seeing drastic reductions in their 401(k) accounts while also seeing the value of their homes plummet. In almost all cases these are the two largest assets for most families. How could we possibly avoid a recession with statistics like that? If we elect another Republican who believes in these types of economic principles we may very well wake up one day and be bankrupt. If you think that can never happen here then you are sadly mistaken.