Maybe That Talk of Recession Was Overblown?
March 25th, 2008 at 02:08am Mark Noonan
I suspect it was:
NEW YORK, March 24 (Reuters) - U.S. stocks jumped on Monday after a raised buyout offer for Bear Stearns Cos Inc suggested that financial stocks may have reached bottom, especially in light of fresh data that fueled hopes for a turnaround in housing.
Stocks rang up big gains for a second straight session after JPMorgan Chase & Co lifted its offer for Bear Stearns to $10 a share from $2, helping alleviate concerns that other investment banking shares could tumble. JPMorgan’s move also relieved worry that a prolonged fight with disgruntled shareholders could have derailed the deal…
…A surprising increase in sales of pre-owned homes last month fueled optimism that the worst of the housing slump may have passed. That ignited a rally in home building shares.
“More write-downs are expected in the financial space, but people are starting to see a light at the end of the tunnel and they suspect that it’s not an oncoming train,” said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. “At $2 a share for Bear Stearns, the question was: ‘What were the rest of the financials worth?’”
In my judgement, the only people who know less about economics than capitalists are socialists, who de-facto know nothing about the subject. Only a capitalist and a socialist could possibly be surpised by a rise in pre-owned home sales…with prices dropping like a rock, the natural result is to bring into the market people who wanted a home, but couldn’t afford them when the prices were rocketing upwards. There is still a lot of slack in the market - here in Vegas we have a huge supply of foreclosed homes to go through - but I judged January/February as the bottom out/turn around of the housing market. Now, I won’t get my 100k in lost equity back for a few years, but I think we’ll start to see a gradual unpward trend in home sales and prices - with a resultant modest increase in home construction. As a general rule, I don’t believe in the “boom and bust” cycle of economics - except in homes sales, which seem to generate economic idiocy on an average of once every 20 years.
Be that as it may, our economy is fundamentally strong, and the only thing which could knock us back is a tax increase and/or massive spending increases…which, of course, are promised by Democrats, who are thus promising to kill the economy if elected. Keep that in mind as November approaches.
Entry Filed under: Campaign 2008, Economy
37 Comments
1. Carlton Pryor, Lead Economist, TED-OG | March 25th, 2008 at 5:36 am
And maybe this is just one bit of data in a mountain that is needed to reflect the image of a recession in which an economy is engaged. The current US recession began on 17 August 2007 and likely will end in the early second quarter of next year.
I find people who look for “daily good news” about economics just as silly as those who get their knickers in a twist about a two percent drop in the DJIA. if you want to know what this was just look at the fourth quarter foreclosure numbers and compare them to housing starts in January and February. It’s second year macroeconomics, –plain and simple.
2. Typical White Person | March 25th, 2008 at 5:57 am
All this recession fearmongering by the drive-by media and their lemmings is election-year scare tactics. The left does it every two years; it’s how they hide their true agenda…
3. Magnum Serpentine | March 25th, 2008 at 5:59 am
Your right Mark, the talk of a Recession is not the correct term for it, its called
Depression.
Tens of millions have lost their homes, and if you don’t think this effects people, why not go out and visit the tent cities that are popping up
4. Right Wing News&hellip | March 25th, 2008 at 6:18 am
My Favorite 40 Bloggers For 2008 (Version 1.0)
It’s time for me to rank my favorite blogs for the 1st quarter of 2007. Do keep in mind that as the quarter has progressed, some blogs have, of course, moved up and others have dropped, based on how often…
5. Diane Tomlinson | March 25th, 2008 at 6:23 am
Matter of fact I’m working on a Bushvilles article at our site even as I speak. It’s a bit worse than you think but I’ll leave who’s to blame for this mess up to the reader.
6. js | March 25th, 2008 at 6:42 am
I guess recession and depression dont phanse DT.
She just attacks religion for sport!!
7. js | March 25th, 2008 at 6:46 am
The housing prices are still dropping. On top of that, the cost of both fuel and food are skyrocketing. Everything else will follow, two reasons. Increased costs of transportation and corporate greed.
Did you ever see a better excuse for the price of food to skyrocket? Trust me, even percentage wise, the farmers still do not get that much for thier product. In the end, the huge corporations slice, dice, puree, and process our food to death, and take 3 to 4 times more of our money than the old mom and pop stores used too. Profit rules thier hearts and heads, at our expense.
They really need to go back to the old ways. Its much better for the economy.
8. Diane Tomlinson | March 25th, 2008 at 7:05 am
Well js since there is no economic slowdown where I live I have no dog in that fight, or better the dog that I have doesn’t have to live in a tent city. But no I don’t think the “old ways” are a solution to anything what is most needed are some new ways to ensure that these economic bubbles [the greentech bubble is only 5 years away!] don’t get out of control.
On the topic of religion if you guys would stop giving me ammunition I would stop firing I promise. But you know you can’t do that because right wing Christian politics needs the enemies of homosexuality, abortion, free market capitalism, liberal education, minority rights, Latino immigration and of ciurse the Constitution to exist. Liberals, on the other hand can deal with matters of infrastructure, give gays and lesbians the right to marry, ensure a woman’s right to end her pregnancy if she wishes, assure that those who wish to come to America to become citizens or to work can and do, and assure that children get the hi tech education they will need to compete in the global marketplace in the 21st century. And after we wipe out hands on our apron and have a nice cool drink of water we can look around for the next challenges. The political left has an infinite agenda the political right is hidebound by “problems” it has to “solve” but the real question will be like on the US economy: what next?
Hey Noonan,
This is OT but why haven’t you massaged the golden egg of schadenfreude and posted about the travails of the mayor of Detroit? it’s ecveryting you need to drive your point home. Kilpatrick is black, a Democrat, a liar and an adulterer. Dude you are getting slow. ;)
9. js | March 25th, 2008 at 7:10 am
If things were so great, you really would not need to post here.
I guess religion has a way of attracking radical hate, eh?
Denial is a state of ignorance, but that doesnt change the truth.
10. Diane Tomlinson | March 25th, 2008 at 7:32 am
9. js | March 25th, 2008 at 7:10 am
If things were so great, you really would not need to post here.
I guess religion has a way of attracking radical hate, eh?
Denial is a state of ignorance, but that doesnt change the truth.
Hello? Is this thing on?
The only word in that whole post that made me frown was “radical.” Yep more code from my blue eyed tribe. The Afterlife and all its enlightenments are so very refreshing. One great thing is I don’t have to go around with that big white chip on my shoulder. Radical means to you anything that threatens white American Christianity as practiced for the purpose of controlling the masses and assuring conservative political ideology regarding sex and death prevail in the public sphere.
[crosses big blue eyes, sticks out tongue]
How ’bout them apples?
Things are pretty great though there were no bear claws in the pastry cart this morning which always leaves me with the great struggle between a simple blueberry muffin and tea or a big ol honkin’ bacon and eggs breakfast with a couple wheat cakes on the side and small but tasty bowl of fresh fruit.
I chose the latter of course and added both coffee and oj. But I ate hours ago and fully in the throes of energetic digestion I come across you young man. Sigh.
What you miss are some simple facts.
1) Everybody isn’t a Christian
2) Everybody doesn’t want to be YOUR brand of Christian
3) The world isn’t yours to control with [you guessed it] Christianity
4) There are people that will mess up your hair and call you names [or worse] for trying to change their minds about THEIR religion
5) There are people who just cannot be convinced that there is an Eternal Judgment
6) People of any religion who think they can be saved and not go to Hell just by getting weepy and saying they are sorry are in for a horrible surprise
7) See number 3
8 Lots of Americans live their lives everyday and pray and ask for help from the Almighty and you never know it. I like those people I call them the Faithful. Note the strong capital F.
9) There are many people who are mad at the world because it contains secular pleasures that offend them and use their religion as a brickbat instead of just turning the other cheek.
10) Most Americans just want more money, more sex and better food enjoyed in a house that’s a little larger and a little better furnished. You realize that’s the foundation of all of Joel Osteen and Paula White’s teachings except for the, “send me your money because the Almighty says so” part.
11) You can get that stuff in 10 with education and hard work just like in the good old days but it takes a progressive government to assure that all have an equal chance at it.
12) See number 3.
Now you can listen, or you can continue to wade in that river in Egypt yourself.
11. js | March 25th, 2008 at 7:46 am
nothing unique there
so much for your canned rebuttal, i was right from the start.
Denial is a state of ignorance, but that doesnt change the truth.
12. Diane Tomlinson | March 25th, 2008 at 7:49 am
Huh?
Canned?
Do you even care to engage in civilzed debate?
I’m askin you what do you know man? You sound like one of those nuts in Jonestown they “believed” too but in something that was very false and very deadly.
13. Pain | March 25th, 2008 at 7:50 am
We thought this was to be about the US recession.
14. Christian Wright | March 25th, 2008 at 7:55 am
Only rich people care about stocks.
The middle-class and poor are losing their homes.
Rich people live off dividends. It is the middle-class that is the heart of the economy and we are suffering.
15. lilly06 | March 25th, 2008 at 8:29 am
The US economy is experiencing a recession now and in the near future for the following reasons:
The sub prime crisis has wiped off the value of many large corporations in America. Those companies will be reporting their financial performances this year and as you know the financial markets is mostly speculations so there will be a downward turn which will have a further adverse effect on house prices.
In addition, alot of corporations are reporting low profits and that will usually come with people being laid off. Unemployment results in people not being able to pay their mortgages and defaults on those mortagages. This will also have an adverse effect on the economy because these properties will be sold on in auction most likely at less than their market value so that the bank can at least retrieve most of the capital.
Although a weaker dollar will result in increased exports, foreign investment in American stock and American debt instruments will decrease as result of the depreciating dollar. You should know that most central banks billions of dollar reserves and dumping the dollar onto the market will further depreciate its value and will result in further depreciation of stock value.
A depreciation of stock value as I mentioned results in lower reported profits.
The economy is not strong Mark, it will pick up in a 2-3 years for now the US economy is going through a recession. Denial of this fact could be detrimental as it means that appropriate actions will not be taken to rectify the problem and the same mistakes will be made again.
16. js | March 25th, 2008 at 8:50 am
12. Diane Tomlinson |
Huh?
Canned?
Do you even care to engage in civilzed debate
—————————————
Civil? You call lies and gossip civil debate? Pull the other leg, it jingles.
Only an idiot could believe what you posted, then again, like I said, nothing unique there, its a reflection of a rebellious attitude gone haywire. You think you have something on the ball, but in reality, your a scared little girl striking out at society and religion. You are not fooling anyone.
17. Joe | March 25th, 2008 at 8:51 am
A post like this one of Mark’s is precisely why I come here for my daily dose of humor.
Yep….. just about every economist is saying we are either in a recession or teetering on the edge of one. But nope…… Mark Noonan right here at Blogs for Victory and all his followers know better. There is no recession!
At least until the day Bush leaves office. Then if it is “HillBama” it will be a full blown recession and all their fault. If it is McCain, it will still just a slow economy.
Mark, those great numbers on the housing sales. Did you read the rest of the articles?
So yes… the number of units sold jumped. Perhaps that is because people are getting whatever they can get for their houses since they can’t afford them anymore? Did you think about that? It is a nice time to buy if you are just getting into the housing market. Low rates and the prices are plumetting. All those foreclosed homes that are now available also helps the number of units sold.
So master economists on this site. Keep claiming there is no recession. There really isn’t a recession for those with means. This is just a small speed bump.
Meanwhile everyone else in the country understands what is going on and are feeling the pinch coming from all directions on a daily basis.
18. Rich | March 25th, 2008 at 8:59 am
“Only rich people care about stocks.
The middle-class and poor are losing their homes.”
Spoken like a true moron. First of all, plenty of people own stocks. Second of all, how many poor people own houses? Poor people rent by and large. Guess you don’t know any poor people. Since when is it the government’s job to pay our mortgages?
19. lilly06 | March 25th, 2008 at 9:00 am
Thanks Joe, glad to know that some of us live in the real world…lol
20. Joe | March 25th, 2008 at 9:04 am
Rich,
that is a lie. You can own a house and not be able to afford stocks. I know PLENTY of people in that boat. They said “The middle-class and poor are losing their homes“. You turned that around to only talk about poor people.
I am very much in the middle of the middle class. I can afford a home. I have a 401k so I guess you can say I own stocks, but I certainly can not afford to play in the stock market on my own.
I guess you don’t know any poor people either. I know some that own and are very much struggling to keep up with the payments at this point. Many “poor” people understand taht the way to raise you own standing in the economy is by owning property. They did what they could to buy. Now with gas and food prices so high, they are very much struggling to keep those houses.
21. Right Wing News&hellip | March 25th, 2008 at 9:05 am
My Favorite 40 Bloggers For 2008 (Version 1.0)
It’s time for me to rank my favorite blogs for the 1st quarter of 2008. Do keep in mind that as the quarter has progressed, some blogs have, of course, moved up and others have dropped, based on how often…
22. js | March 25th, 2008 at 9:10 am
Housing is still going to drop pricewise. Its the rest of the economy that is in recession. The cause of it is mostly the increase in fuel costs, driving down productivity and profit. Lower profits are bad for stocks. Combine that with bankrupt banks and cash flush real estate brokerages, and all kinds of things can happen.
The truth is, relying on the real estate industry isnt such a good thing. They will make self serving statements to bolster thier cause. After all, it was them in the driving seat of this huge real estate bubble thats costing so many Americans thier homes. The Real Estate industies astute ability to find appraisors capable of increasing the value of homes on nothing but speculation is like robbing people.
So the balance of the economy has been shifted, it has to right itself.
23. anarchist | March 25th, 2008 at 11:11 am
Not just the subprime mortgage market, but the entire mortgage market has crashed. The municipal bond market has crashed(considered extremely safe), there’s been a run on a major investment bank, hundreds of billions of dollars of AAA securities have turned into junk bonds, and most major comercial banks have written off 10’s to 100’s of billions of dollars.
Especially keep watching the bond insurers, who have 2 trillion dollars of insurance leveraged on about 10 billion dollars(there’s no typos).
All this in spite of over 200 billion dollars in fed debt swaps and reducing the federal funds rate from 5.25% to 2.25%
Now considering that everything that’s crashing is dependant on credit creation, maybe the government/fed should quit trying to grow the economy through endless credit expansion. Considering John 0% interest rates McCain is completely nut’s about this, and democrats are completely hopeless about anything to do with economics, obviously there’s no political solution.
Don’t hold too much of your retirement in dollars, or stocks, or municipal bonds for the next couple of years. Comodities are the way to go.
With the fed creating a net of $20 - $40 billion in checkbook money everyday, I expect $5 dollar a gallon gas in about 5 years.
24. NeoClown | March 25th, 2008 at 12:52 pm
White House Memo: 3/25/08
Subject: State of the Economy
Please refer to current economic conditions as either a “tough period, or rough patch.”
NEW YORK (AFP) - President George W. Bush acknowledged Friday that the US economy was going through a tough period.
WASHINGTON (Reuters) - U.S. Vice President Dick Cheney said on Wednesday that the economy is going through a “rough patch.”
25. SteaM | March 25th, 2008 at 1:11 pm
Two words:
Peak Oil.
This is what was projected to happen. This is what is happening. The cost of cuel goes up so then does everything else. People starve. Resource wars are fought. It doesn’t have to happen this way but it looks like it already has started. People could change their ways but it’ll take learning a lesson the hard way first. Humans are beginning to feel the affects of having reached the peak. Now they must feel the affects for a while before they can admit that theirs a problem. Once they admit this they must adapt and change. If they do not change they are in trouble. Most will die in the end. Climate change is also a big player in this. It’s not just our economy that is in trouble. It’s not just us that are feeling the affects of peak oil and climate change on our food supplies, water supplies, housing, environment, and costs of energy/fuel.
money.cnn.com/2008/03/25/news/economy/consumer_confidence.ap/index.htm?cnn=yes
Food prices rising across the world…
cnn.com/2008/WORLD/americas/03/24/food.ap/index.html?eref=rss_topstories
26. Rana Quijotesca | March 25th, 2008 at 2:13 pm
Mark… you implied that you are not a capitalist in the 2nd sentence of your post (either that or you admit that you don’t know much about economics–in which case I’m wondering why you are writing about it). If you’re not a Capitalist, then what are you? My guess is a blind Reaganonmics Parrot…
27. Maybe That Talk of Recess&hellip | March 25th, 2008 at 3:30 pm
[...] Maybe That Talk of Recession Was Overblown? I suspect it was: NEW YORK, March 24 (Reuters) - U.S. stocks jumped on Monday after a raised buyout offer for Bear Stearns Cos Inc suggested that financial stocks may have reached bottom, especially in light of fresh data that fueled hopes for a turnaround in housing. Stocks rang up big gains for a second straight session after JPMorgan Chase & Co lifted its offer for Bear Stearns to $10 a share from $2, helping alleviate concerns that other investment banking shares could tumble. JPMorga [...]
28. FmrMarine | March 25th, 2008 at 5:57 pm
Recession
Two consecutive quarters of decline in real GDP is commonly taken to be a recession. The National Bureau of Economic Research, a private organization, effectively decides when recessions occur.
IT HASNT HAPPENED !
Another contributor is that some lenders tried to maintain business in a slower market. To do that, some relaxed their underwriting standards, approving more marginal borrowers for loans.
Interest rates were also higher for the year, putting additional strain on borrowers. Doug Duncan, chief economist for the Mortgage Bankers Association, estimates that $500 billion to $800 billion in loans outstanding went to borrowers who may face difficulties.
“Some of that,” Duncan says, “would go into foreclosure.”
BINGO !!!!!!!!!!
29. Diane Tomlinson | March 25th, 2008 at 6:17 pm
The United States has already slipped into a deep recession that could be the most serious since World War II, said Martin Feldstein, president of the Cambridge group that is considered the official word on economic cycles.
more stories like this”The situation is bad, it’s getting worse, and the risks are that the situation could be very bad,” Feldstein said in a speech yesterday at a financial industry conference in Boca Raton, Fla.
JPMorgan and the Federal Reserve rescue Bear Stearns. B5.
Feldstein, president of the National Bureau of Economic Research and a professor of economics at Harvard University, said the chief causes of the shrinking economy are sinking housing prices, months of job losses, and turmoil in the financial markets.
The National Bureau of Economic Research is the official arbiter of when recessions begin, and it could still be months before the organization makes that determination. If it does, that would mark a formal end of six years of economic expansion.–The Boston Globe, 15 March 2008.
For econonerds like my good friend Carl Pryor officially no the US economy is not in a recessionary cycle. For those same people like Feldstein all the indicators are there and the middle class consumption and confidence data all point toward it. Pryor gave me the best quote today, “Recessions aren’t political to consumers only to politicians.”
30. Dasein Libsbane | March 25th, 2008 at 6:41 pm
Marine,
The “two consecutive quarters” rule is just a suggestion; we have entered a recession when it’s declared we are in recession. The GDP dipped into negative in 2000, yet most economists peg the beginning of the recession as spring 2001 even though the GDP was moving into pretty stable territory by then. Some economists are declaring we are currently in one or will shortly be in one. I personally disagree. Unlike the fake economist listed in the first comment, (macroeconomics has to do with the economy as a whole not the individual economics of the consumer) or his alter-ego, Diane (yeah, right their two different people) I actually understand and read this stuff and live this stuff.
The unemployment numbers and inventory numbers are indicative of a strong economy. Also, the equities market and exchange rate can influence the output of the economy but not dictate it. Tomorrows durable goods results will be a good indictor, but the commodities market is just as risky than the securities or equities markets.
Unlike previous recession threats, the Fed hasn’t engaged in printing money, (no matter how you try and spin it, Anna it hasn’t happened) inflation is rising but well below the level of concern, 10-Year Treasury notes are consistently solid but low yield as they have been since the recovery began in 2003.
For those not taken in by anna’s “checkbook money” explanation; the fact about monetizing debt is that it a) is collateralized and b) must be paid back like any other loan. In order for the Fed to monetize they must first have value with which to fund the loans. This is common practice among banks, has been for years and no one has ever accused banks of “printing money” before. You are aware of the genesis of the word sophomore, right?
31. Dasein Libsbane | March 25th, 2008 at 6:58 pm
A coworker of mine explains it this way (and he’s never been wrong); The economy has “become enveloped in an ever widening and deepening credit recession, as distinguished from an economic recession, that is working to constrict borrowing to all but the most credit-worthy borrowers.” David Shulman, UCLA Anderson Forecast senior economist.
32. FmrMarine | March 25th, 2008 at 7:03 pm
Seems to have all come about since the rats took over BOTH houses……..IMAGINE that!
33. Dasein Libsbane | March 25th, 2008 at 7:18 pm
Marine,
Sadly, the leftistas have been bemoaning the economy for years now, and when the economy slows down as a natural cycle, no one cares about their silly hyperventilating. The wife and I are buying another house (this will make three) for an investment while prices are low. Renters are easy to find near the University, and California real estate is never a bad investment. Our daughter is going to move into house #4 and with two room-mates the only thing I’m out is property tax.
Ain’t if great when we don’t listen to liberals?
34. anarchist | March 25th, 2008 at 7:19 pm
The fed’s not printing “standard money”, however it’s creating fiduciary media, which is money. Are you really saying that the M1 monetary aggregate, which includes checks, is too broad of a definition of the money supply? Where are you reading this stuff? What mainstream economist is saying M1 isn’t money?
No one has ever accused banks of printing money? Ever read anything beyond basic ecomics books. Here are some good free recomendations.
Capitalism by Carl Reisman
http://www.mises.org/books/capitalism.pdf
(just read the parts on money and banking)
Money, Bank Credit and Economic Cycles by Jesus Huerta de Soto
http://www.mises.org/books/desoto.pdf
(like the best single book on the subject, with history and everything)
The Theory of Money and Credit by Ludwig von Mises
http://www.mises.org/books/Theory_Money_Credit/Contents.aspx
And I won’t even bother linking to anything by Rothbard, even though he’s really one of the authorities, because his works tend to be tainted by political positions. Although he’s got many excellent books on the subject.
And there’s tons and tons more…
And the fact is that debt monetization is collateralized on future taxes(government debt), not any sort of asset. Also fiat money inflation doesn’t need to be paid back like a normal loan, only expanded until the invietable crash. In fact it’s extremely rare for any country to ever engage in net money destruction. Would you like me to give you like 100 historical examples?
35. Dasein Libsbane | March 25th, 2008 at 7:55 pm
Anna,
Slow down, you’re going to have a heart attack.
No one said M1 isn’t money, no one claimed anything about “standard money” so I don’t know why you’re quoting that.
You have alternately referred to the Fed capitalizing loans as “fiduciary media” and “checkbook money” as well as many other euphemisms that don’t really apply to the subject.
The Fed has underwritten the loan to purchase Bear Stearns by agreeing to monetize the debt. On the balance sheet, predictable proceeds are most assuredly an asset. Using this asset is exactly how banks have monetized loans for many many years. State chartered banks, and Federally charted savings institutions must declare the predictable assets on the balance sheet to monetize futures. You’ve mistakenly attributed fiduciary media to increasing the money supply; the difference being that (as always) fiduciary media is always used for investment purposes and as a guarantor of fluidity in the long term i.e. trading capital to guarantee a loan. What you are confusing is the multiplicity nature of fiduciary media which, if not properly accounted can result in inflation of long-term assets (See: Arthur Anderson).
You’ve pulled a quote without understanding its meaning; “ fiat money inflation doesn’t need to be paid back like a normal loan,” Fiat gets its value precisely because it is demanded as payment of taxes. In this case, fiat doesn’t apply when speaking loaning or trading capital from government anticipated revenue in the form of taxation, because the valuation of the money is implied by the trading value of that money, not the arbitrary marketing of it’s value. The inflation value isn’t “paid back” per se, but the terms of the note specifically identify the cost of the loan.
Lastly, “future taxes” is not “government debt (liability)” it is an asset to the government and a liability to the taxpayer.
This has been fun, but time to close and submit my reconciliations. We’ll continue this later.
36. Mark Noonan | March 26th, 2008 at 3:07 am
Rana,
Well, if there’s anything I subscribe to these days on matter of economics, it would be best approximated by the attitudes of distributivism.
37. SteaM | March 26th, 2008 at 12:23 pm
Ok, so everyone ignored my “peak oil” rant.
But, does anyone agree that rising fuel costs are part of the problem with the economy? Does anyone see these fuel costs going back down to pre-2001 prices? Also, do you think it’s sustainable regarding the economy for us to rely on fossil fuels which are becoming more expensive to acquire?