# The American economy: keeping track of US economic developments.



## Duplex

What ever happens to the Irish economy in the coming months/years will happen for a reason, and that reason is the state of the American economy.  I've started this thread to try and keep track on developments in US economic developments that may impact Ireland. 

This article provides a reasoned explanation for the recent actions of the Federal Reserve and the reaction of the money markets.  


http://www.lewrockwell.com/north/north471.html


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## room305

*Re: The American Economy*

Interesting article. So the assumption is that just as the American economy grinds to a halt with a sickening thud, Bernanke will crank up the printing presses and try tp get the American consumer into overdrive again? Even if this comes at the expense of rampant inflation?

It might prevent a housing crash but it could well be the end of the U.S. dollar.

Given Bernanke's dovish actions this month (pausing despite increasing inflation - which a slowing economy will do little to stop) I am inclined to agree.

I think we will see stagflation. I cannot see how any other outcome is possible.


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## edo

*Re: The American Economy*

Good Article Duplex

Yeah it kinda ties in with What Bernanke was saying before he became the Fed Chairman - that there is a glut of savings in the World Economy at the mo - Well it sure isnt in the states - except among the very very well off and the Republicans ongoing policy over the last decade hasn't given them much of an incentive to spend it. I cant see the Fed , or any central Bank, for that matter allowing inflation to get much higher than 5-7% or so as the rich hate is as it devalues their holdings and the rich, as we know, control our world - the sop to democracy aside.

I think We are entering uncharted territory here - or maybe we have been here before in the first decades of the last century but there is nobody around who remembers. The concentration of so much wealth in the hands of so few was sooner or later going to have an effect. the Average Joe living in American Suburbia has had it hard for decades now. The average wage has been stagnant in real terms since the mid 70's - it now takes 2,3 or 4 jobs to bring in the same standard of living that the US industrial Wage provided then. The major difference between then and now has been the massive expansion of credit which has temporarily masked over this growing inequality and kept wage inflation in check. But how much credit can the average american take on board? 

This is a big big question - and not just the American , but the World economy as currently configured is riding on this. Europe is slowly and I mean slowly coming into some form ,but, apart from the credit crazy paddys , Europeans just don't have the same consumeristic passion for the latest fad and are quite conservative economically . Likewise for all the hoohaa over China it will be a long long time before Chinese consumers have anything approaching the US level of consumption on a mass scale (maybe thats a blessing in disguise )

So What do you think Folks? I have a feeling that in the short to medium term Mr Bernanke in Washington as opposed to Mr Trichet in Frankfurt will make decisions that have far more reaching effects on little Irelands economy


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## Duplex

That period of stagflation is probably here now. 

North makes the point in the article that yield curve inversion should never be ignored as a predictive indicator of recession in the US. This chart makes for interesting viewing.


[broken link removed]

edo I don't know why Bush/The Fed/Corporatist government in the States accrue deficits, inflate, consume and generally behave like its the last hurrah apart maybe because it is. 

I see the war in Iraq as an attempt to secure scarce oil supplies; the US retains global reach militarily (its paid a lot of money to do so)  it might as well use it I suppose. I think the impact of globalisation has come as more of a shock to the US than they would care to admit especially the rapid emergence of China as a fierce competitor. 

Inflate or die? but inflate what?, manufacturing industry that continues to contract? Like you mention incomes growth is static in the US in real terms and has no pricing power.  Rock and a hard palce.


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## SLAPPY

*Re: The American Economy*

The ugly side of the property market has definitely gone mainstream in the U.S.      I think even the most bullish property specuvestors are waiting on the sidelines for values to drop further.

Worst U.S. housing oversupply in 40 years according to one builder.

http://money.cnn.com/2006/08/09/news/companies/toll_brothers/index.htm

Florida foreclosures up 34%.

http://www.palmbeachpost.com/localn...s/epaper/2006/08/09/s1a_foreclosure_0809.html


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## Bedsit

*Re: The American Economy*

Guys and Girls,

Since I have been following this forum there have been lots of great articles and comments which have helped to enlighten many of us. Is it possible for some to somehow collect these important posts in one place? As one can see from the other threads the number of posts and views are growing at an exponential rate. It will be difficult for someone tuning into the debate say in a couple of months to read through the entire thread. Just a thought.


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## Duplex

*Re: The American Economy*

The worst hit areas of the US slowdown so far seem to be Florida, Nevada and New Mexico.  I notice Daft have linked up with an American web site selling Florida condos which might reflect on the difficulty developers are having shifting these things.



> Bonita Springs-based WCI Communities said Wednesday that orders for its condominium towers have screeched almost to a halt — and businessmen across Lee County said the residential construction industry as a whole is slowing dramatically.
> We are backing down on the tower business, we can't offer the incentives or financially motivate people" to buy, said Jerry Starkey, president and CEO, in a conference call Wednesday on the publicly traded luxury home builder's second-quarter earnings.
> For the three months ending June 30, WCI reported a 69.9 percent decrease in net income from the same period last year. Revenues were down 21.1 percent to $529.4 million.   Total new orders were down 62.4 percent to $238.4 million, but towers were down 82.6 percent to $57 million — and the number of units ordered fell 88.8 percent to 36.
> "The sellers of property are in denial right now that they're not going to lose money on their deals, and they will. The main thrust is the speculators: They have completely disappeared off the face of the Earth."
> Condominiums will be the worst hit, as they were in the last downturn in the early '90s, Bonkowski predicted.


 
[broken link removed]


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## edo

*Re: The American Economy*

That is really interesting Duplex 

I must keep a closer eye on that kind of thing - As you probably have seen from my previous posts Im pretty much a macro econ , long term overall picture person - but that post was really interesting. 

I have a mate of mine who went back to the States 2 years ago - hes a yank - He had been over in here for about 8 years or so - it was time to stop arsing around Europe, go home and get a real life - He did and caught the property bug the moment he went back to San Francisco - spent a half a mill on a 2 bedroom fixer-upper in the Oaklands hills.

I visted him this time last year - fixer upper would be the operative word - man if you ran a truck into the back of it - it would completely collapse and you'd be lucky to get 100 bucks off a scrap merchant for the woodworm eaten remains. But He was convinced that if he did it up and made it a bit respectable he would get his capital plus 50% for it in 2 years. To be honest I was stunned - the location isnt great - yeah sure its got a great view over the bay ,perched as it was precariously on the side of a steep hill - good handbrake on car essential - if not 100% guarantee of at least one homicide within 5 minutes - but it was at least 40 minutes with no traffic to the centre of Oakland - a good hour and half to 2 to San Fran. In previous years this would have been , how shall I put it , on the wrong side of the tracks. You would have got this house for about 50-60 grand in 1995/96 when I lived in the area - yet he had paid 500,000 dollars for same in 2005 and its 2 miles from the San Andreas Fault and The next big one is overdue - Property Fever! - that glint in the eye - fully convinced this was the start of the empire. That said he's gone very quiet recently - must give him a buzz to see how things are going - if Duplex's post is replicating itself all over the lower 48 he could be back writing software manuals sooner than he thinks.

Because salary and wage stagnation is so widespread in the States at the mo and so many people got burned during the Dotcom meltdown they all rushed to throw their money into property with high and unrealistic hopes - kinda like gambling really at the end of the day - and as everybody knows - the house (xuse the pun) always wins - in this case the Banks,financial institutions and large developers.

I'll definitely be keeping an eye on this one for the next while - I've got a feeling this could be a rough one - seeing as US employment figures always underestimate unemployment figures - once your benefit runs out (which is anything from 6 months to 2 years) unless you rejoin the workforce , in the eyes of staticians you just disappear - I would say US rates are closer to 12% - interesting that - In Europe because of the welfare state you never "disappear"(well actually you can - but the option is there) you either go from one to other until retirement age - Maybe M Harney should stop lecturing the Germans and the French about the benefits of US style Capitalism.

The Fed and The Gov are between a rock and hard place on this - The US is as exposed as Ireland to the reprocussions of property slowdown/crash - seeing as they are normally a year or two ahead of us - are we getting a sneak preview?


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## Persius

*Re: The American Economy*

I posted this in another thread, but it's probably more relevant here.

As we all know, one of the main reasons that Ireland attracted so many US multinationals is due to our low corporate tax regime. They set up office here, declare that they produced X Euro of revenue in Ireland and then pay pretty low tax on this sum of X Euro. I'm sure most people would also imagine that much of the X Euro of revenue declared in Ireland is actually generated in other countries with higher tax rates. Sometimes, especially in software, it's hard to quantify exactly in what location the "value was added" to the products which ultimatly produce the X Euro of revenue.

The US authorities could seriously start forcing these companies to prove that all the revenue they declare in Ireland is actually made in Ireland (and I'm pretty sure it isn't), or at least that the value added to the product/service is taking place in Ireland. They would have to show that they are not just using Ireland to avoid paying their fair share of US corporate tax. Such a scenario is more likely if US tax revenue intakes fall due to a recession there. If the multinationals were forced to admit that some of their revenue should actually be taxed in the US (or any third jurisdiction), then we will have lost one of our key competitive advantages in attracting and keeping these companies. 

I gather the US authorities have been looking at a few companies already. Even if they found that there was no US revenue there, they may find that some of the revenue was actually generated in other European countries. I'm sure the German/French/UK tax authorites may then take an interest.


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## edo

*Re: The American Economy*

*Very Good Article in the New Yotk times today on the topic of the economys future direction and the Feds choices:*


*http://www.nytimes.com/2006/08/11/business/11econ.html?pagewanted=1&th&emc=th*


*Note-Don't reproduce entire articles*


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## Duplex

*Re: The American Economy*

I think the Greenspan legacy will come under scrutiny again in the coming years. He certainly retired at the right time. I feel sorry for Bernanke he has inherited a utter shambles. 

http://bethemedia.typepad.com/photos/uncategorized/deficits.jpg


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## JohnBoy

*Re: The American Economy*

i have to agree. With the benefit of hindsight, I think that we will look back upon the second half of Greenspan's tenure as a series of missed opportunities and poor decisions.


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## tyoung

*Re: The American Economy*

Isn't a US slowdown part of the playbook for a soft landing in Ireland? Doesn't it go something like this. The US slows down(not a recession mind): US rates have peaked and are now set to decline; This leads to a decline in the dollar: Softening US demand leads to a decline in oil and other commodities: Previous two lead to a decline in euro inflation rates: 
Result euro rate rises slow and top out around 4 to 4.5% next year.
result much fabled "soft landing"  happens in late  07!
 I'm not saying I think it will happen that way, but isn't that the idea?
  With all that floating rate debt around THE SINGLE MOST IMPORTANT NUMBER for the Irish economy is the shorterm rate set by the ECB. If W2W's prediction of 8% by 08 were to occur? Jeez!
  From an Irish standpoint the worst thing that could happen would be that the Fed is wrong and US growth continues strong! Then, in the face of rising oil and inflation, the Fed would be forced to acknowledge it's mistake and raise rates much higher. Then ECB rates could go much higher.
regards


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## Duplex

*Re: The American Economy*



tyoung said:


> Isn't a US slowdown part of the playbook for a soft landing in Ireland? Doesn't it go something like this. The US slows down(not a recession mind): US rates have peaked and are now set to decline; This leads to a decline in the dollar: Softening US demand leads to a decline in oil and other commodities: Previous two lead to a decline in euro inflation rates:
> Result euro rate rises slow and top out around 4 to 4.5% next year.
> result much fabled "soft landing" happens in late 07!
> I'm not saying I think it will happen that way, but isn't that the idea?
> With all that floating rate debt around THE SINGLE MOST IMPORTANT NUMBER for the Irish economy is the shorterm rate set by the ECB. If W2W's prediction of 8% by 08 were to occur? Jeez!
> From an Irish standpoint the worst thing that could happen would be that the Fed is wrong and US growth continues strong! Then, in the face of rising oil and inflation, the Fed would be forced to acknowledge it's mistake and raise rates much higher. Then ECB rates could go much higher.
> regards


 
I think the soft landing scenario is dependent on a soft landing for the US housing market.  The problem is that many Americans have used mortgage equity release to finance their lives since 'emergency' rates were introduced post 9/11, that particular option is disappearing now that HPI has slowed to a stop.   Another issue is Japanese, Chinese and Saudi apatite for dollar debt, I read somewhere that the latest offering of 30 year 'T' bills wasn't exactly wolfed down.  Whatever happens its the biggest story in town by a long shot and no one in the Irish media is talking about it. 

The next shocker might be the $1.5 trillion reset in variable rate and discount rate mortgages that will happen over the next twelve months.  

Maybe economic cycles are real?


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## tyoung

*Re: The American Economy*

Morgan Stanley's Global Economic Forum is a brilliant (and free) resource. Lots of differing opinions. Today Andy Xie suggests that The Fed have got it wrong.  Inflationary pressures are much stronger than current consensus so interest rates will have to go much higher than forcast. 
 That could be much worse than even a US recession for an interest rate sensitive Irish economy.
Regards
PS can't post link because of pisspoor computer skills


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## bearishbull

*Re: The American Economy*



edo said:


> *Very Good Article in the New Yotk times today on the topic of the economys future direction and the Feds choices:*
> 
> 
> *http://www.nytimes.com/2006/08/11/business/11econ.html?pagewanted=1&th&emc=th*
> 
> 
> *Note-Don't reproduce entire articles*


The article says theres only a small chance of soft landing as soft landings are rare and monetary control is needed to achieve one, oh wait, we dont have monetary control anymore!


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## ivuernis

*Re: The American Economy*

Bearish Wall Street analysts predict a fall of up to 20pc
http://www.telegraph.co.uk/money/ma...4AVCBQUIV0?xml=/money/2006/08/14/cnwall14.xml


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## Bedsit

*Re: The American Economy*

Economic Cycle Research Institute - ECRI

Below is a recent article from ECRI which states that its Future Inflation Gauge for the US is rising. If I am not mistaken these guys were one of the first to predict the last US recession.


http://www.businesscycle.com/showstory.php?storyID=1021


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## Duplex

*Re: The American Economy*

This is a short account of the slowdown in the US housing market. Condo(apartment) prices are falling at a 9% annualised rate, new build prices have fallen by 20% year on year.  The article suggests that the Fed may start to cut rates soon to head off the bursting bubble, what this will do to the dollar and long term rates is not mentioned.  






http://www.projo.com/business/content/projo_20060814_dimart14.1f8160f.html


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## edo

*Re: The American Economy*

On the day that Americans collectively owe more than they earn for the first time since that year of imfamy 1929:

A few interesting articles for your perusal:

http://www.msnbc.msn.com/id/14251743/site/newsweek/

http://www.msnbc.msn.com/id/14366431/site/newsweek/

http://www.msnbc.msn.com/id/14251360/site/newsweek/


Later


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## Guest107

*Re: The American Economy*

From the top one 



> *In 2003, homeowners took out an estimated $332 billion in new sub-prime mortgages—the higher interest loans offered to those who don't qualify for prime rate loans.* By last year, that amount had more than *doubled to $665 billion,* according to Freddie Mac. Now, rising rates mean those least able to afford it are the most likely to be affected.



2 thirds of a trillion in dogy homeloans alone. Phew !

Our sub prime lending here has doubled in that time. 

Many sub primers are building workers who sub contract their labour so its a vicious circle.


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## edo

*Re: The American Economy*

Hi there

looks like tough times ahead for the real estate sector  in  the US

A few more interesting and provocative articles I glanced thru today - the overall sentiment is getting uglier by the day - big big change from this time last year. 

http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/WhenHomeownersAreDesperateToSell.aspx


http://articles.moneycentral.msn.com/Investing/CNBC/Dispatch/060823markets.aspx?GT1=8404

http://articles.moneycentral.msn.co...cles/FaceItTheHousingBustIsHere.aspx?GT1=8472

Could there be interesting times ahead for ourselves?


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## Bedsit

*Re: The American Economy*

*Housing slump deepens in July (Herald Tribune)*

"The report from the Florida Association of Realtors showed that the market was among the weakest in the state and that July was the worst month for Sarasota home sellers this year. The fall in the median price to $301,100 from $338,100 a year ago was the largest percentage drop of any Florida metropolitan area. The decline in the number of sales was the second-worst in the state."

http://www.heraldtribune.com/apps/pbcs.dll/article?AID=/20060824/BUSINESS/608240352/1007


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## Duplex

*Re: The American Economy*

The US housing market is in free fall according to this report.  Its extraordinary how quickly sentiment has changed.

[broken link removed]


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## Bedsit

*Re: The American Economy*

I loved this quote from the following Businessweek article:

"The option ARM is "like the neutron bomb," says George McCarthy, a housing economist at New York's Ford Foundation. "It's going to kill all the people but leave the houses standing."

http://www.businessweek.com/magazine/content/06_37/b4000001.htm


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## BigM

*Re: The American Economy*

Figures just out - US Pending Sales fell 7% in July. Biggest ever drop...


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## Duplex

*Re: The American Economy*

I think another poster mentioned the casual way the US media report their nascent housing crash.  It seems to me that the almost religious fervour that has accompanied out own bubble was absent in the US.  Possibly a reflection of their own history of economic boom and bust.  To find a similar mindset to that which exists in Ireland today, you might have to return to the late 1920's America before the Wall Street Crash.


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## Maine

*Re: The American economy*

Toll Brothers are a "luxury housebuilder" in US yet their average prices at the top of the cycle are US$650k. Thats about Euro 500k so its easy to understand how the fervour has not quite reached our own great heights.


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## Duplex

*Re: The American economy*

Asset deflation comes a knocking. 

The writer seems confident that the Fed will be powerless to micro manage the unwinding of the US housing bubble. I suppose if they try and reflate again in an economy which has a negative savings rate and rising defaults it will just add to the mess and push up long term rates anyway. The US housing market is the leading indicator in my opinion, more specifically markets on the east and west coast the nexus of the bubble, the proverbial canary in the coalmine.



> You should probably get accustomed to the following, coming-soon-to-the-business-section-of-your-local-newspaper phraseology: Oversupply, excess inventory, "hard landing," foreclosures, "upside-down" mortgages, contract cancellations, "fire-sales," bankruptcies, foreclosures, bank failures, credit crunch, credit contraction, bank crisis, Fannie Mae crisis, liquidity crisis, real estate deflation, asset deflation, price deflation, foreclosures, meltdown. Real estate values will fall from peak values somewhere in the range of 50% to 90%, depending on area, location, property type, "intrinsic value" and scarcity.


 

[broken link removed]


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## Duplex

*Re: The American economy*

Professor Paul Krugman of Princeton University on the US housing market.
(Bloomberg TV) 
http://www.youtube.com/watch?v=qo4ExWEAl_k


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## Duplex

*Re: The American economy*

Another article suggesting that the US housing bubble is a busted flush.  I follow developments in the US quite closely because I believe that the American market is a leading indicator for our own.   
http://www.nysun.com/article/39480


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## SLAPPY

*Re: The American economy*



Duplex said:


> Another article suggesting that the US housing bubble is a busted flush. I follow developments in the US quite closely because I believe that the American market is a leading indicator for our own.
> 
> 
> 
> http://www.nysun.com/article/39480


 

Absolutely agree with you Dubplex.   I split my time between Dublin and Florida and keep close tabs on both property markets.   The American bubble popped in the spring of '06 and I think things are starting to turn the corner in Ireland.    I can't believe how quickly things took a nose dive in the Florida market, despite the fact that the economy is booming and over 1,000 people move there each day.   In my area of Florida, property values have dropped 10-15% from what people thought their houses were worth last spring.  Other areas are worse.   Specuvestors stopped buying and the FTB's are all waiting on the sidelines for things to drop even more.  One of the biggest builders in the country, WCI, posted profits that were 93% less than last year - and massive layoffs will soon follow.  I still think property values have a long way to drop before they make fundamental financial sense again and people start buying.    A nasty recession is just around the corner, so arrange your investments accordingly.   

 I'm even more worried about the Ireland market.    Everyone that I know in Dublin has a 2nd or 3rd "investment house" and when values start to drop they will all go running for the doors and we will be flooded with a million homes for sale.    I think things have gone way to far for any government intervention to soften the fall.  Lets just hope it happens quickly and we can all go on with our lives.


Here's a great blog site from a guy who has worked in the lending industry and has some very intelligent posts on the current situation:

http://www.housingbubblecasualty.com/

I love his most recent post "Do you own your house or does your house own you?"

"Like I have said countless times before, 2007 is going to be the year of reckoning. We are going to find out who owns their house, and whose house OWNS them. I bet there will be thousands of home ‘owners’ who will wish they could give a landlord 30 days notice and get on with their lives. But instead, they will be trying to sell an ‘asset’ they over-paid for, in a market where every other person getting OWNED by their house is trying to sell as well. The same people competed with each other to buy these properties with creative financing…and when the tide really turns, they will all be scrambling for the door."


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## kerrybull

*Re: The American economy*

I really enjoy the thoughts on this thread. There is a book out now the "wages of destruction" it is an excellent economic history of Nazi Germany.

Boring I can assure you not.

Anyway there is very real danger of history again repeating itself and the issue of inflation is more important and more dangerous to governments than most people may imagine.


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## Duplex

*Re: The American economy*

More on the possibility of a hard landing for the US economy next year. 
http://www.rgemonitor.com/blog/roubini/147839


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## Duplex

*Re: The American economy*

The Chinese and Vietnamese increasing their minimum wage by 20%  ?.  The timing is interesting, if these reports can be relied upon.  The Fed had their hearts set on dropping rates and now those darn orientals start exporting inflation as opposed to the usual deflation.   
[broken link removed]


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## Duplex

*Re: The American economy*

Voodoo Debt, a look into the murky world of Mortgage Backed Securities. The author thinks that buyers of the more toxic securities are getting a little cautious. 



> In the marketplace, there are indices known as ABX.HE. They are a synthetic version of assets backed by U.S. home loans. They are subdivided into "tranches," or sections, that are grouped by their relative risk. Two weeks ago, a friend alerted me to the rather large trade that went through in a particular tranche of one of these indices. (It happened to be the BBB- tranche, which is the riskiest.) When the trade took place, it knocked the bid price a bit lower. It has continued to drift and now is off about 1.5%.


http://articles.moneycentral.msn.co...ronicles/VoodooDebtAndTheComingRecession.aspx


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## Duplex

*Re: The American economy*

Ireland's reliance on the US as an export market. 
[broken link removed]
 Compare that figure to Germany.


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## kerrybull

*Re: The American economy*

I had to laugh when I heard an Irish economist saying that a US recession would be good for Ireland as it would act as a barrier to higher European interest rates. While that may be correct with regard to the issue of interest rates, there is no economy in Europe that is so dependent on the US. What happens in the States over the next 12 months will determine much of our own future.


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## room305

*Re: The American economy*

Even at that, it will only act as a barrier if we get a deflationary recession. Given that the liquidity taps have been gushing for the past few years and we are emerging from a very low interest rate environment this is unlikely.

Irish people should be concerned that we will get the double whammy of low growth and high inflation aka stagflation.


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## Maine

*Re: The American economy*

The speed at which the brakes are coming on in US is shocking  - witness the downward revisions today.  This is looking like a fast down step to a far lower level of growth.


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## Remix

*Re: The American economy*

Another nail in the coffin of the US housing market as the bubble-juice flow is restricted ?

Federal regulators to curb "Lenders gone wild" and move against exotic mortgages.

link


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## room305

*Re: The American economy*



Maine said:


> The speed at which the brakes are coming on in US is shocking  - witness the downward revisions today.  This is looking like a fast down step to a far lower level of growth.



Yet U.S. stocks are booming and the Dow is within spitting distance of its all-time high - 11,750pts on Jan. 14, 2000. 

What a strange place the markets are.


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## whathome

*Re: The American economy*



room305 said:


> Yet U.S. stocks are booming and the Dow is within spitting distance of its all-time high - 11,750pts on Jan. 14, 2000.
> 
> What a strange place the markets are.


 
Many Dow components are defensive stocks which would gain attention in a flight to quality. Dow companies also trade internationally so a weaker dollar will help their earnings. Income from higher valued foreign currency shows up well in earnings against dollar expenditure. I'm over and back to the US quite a bit and apart from housing, I see little sign of a consumer slowdown....yet.


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## Duplex

*Re: The American economy*

The air is thick with aeronautical analogies today, what with soft landings etc. 

*Growth in U.S. Slows to `Stall Speed,' Raising Recession Risk *
*By Rich Miller*



> Oct. 2 (Bloomberg) -- The U.S. economy has slowed more dramatically than most economists expected just a few weeks ago, leaving it more vulnerable to a recession.
> 
> Forecasters at Goldman Sachs Group Inc. and AllianceBernstein Holding LP in New York have cut their growth estimates for the just-ended third quarter to an annual rate of 2 percent or less. They don't foresee much, if any, improvement in the fourth quarter: Auto-production cuts and slumping home sales are likely to overwhelm any boost the economy gets from lower gasoline prices, they say.
> 
> ``We're decelerating fairly significantly,'' says Peter Hooper, a former Federal Reserve official who's now chief economist at Deutsche Bank Securities Inc. in New York. He sees annual growth below 2 percent in the second half. The economy expanded at a 2.6 percent rate in the second quarter and 5.6 percent in the first.
> 
> ``The one-two punch of a slowing housing market and the large announced auto-production cuts by GM, Ford and Chrysler is really going to slow the economy,'' says Mark Vitner, a senior economist at Wachovia Corp in Charlotte, North Carolina. ``It's going to be a bit of a rough landing.''


 
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahY7_Y5RkMVk&refer=home


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## StoppedClock

*Re: The American economy*

Just picked this up over on HPC (C) Realistbear

http://uk.biz.yahoo.com/061003/323/gntzj.html

Tuesday October 3, 11:40 PM


Forecast sees housing prices falling​ 

WASHINGTON (AFX) - Housing prices, slumping after a five-year boom, are projected to decline in more than 100 of the nation's metropolitan areas, with the Northeast, Florida and California among the areas hardest hit.​ 

The forecast by Moody's Economy.com, a private research firm, presents one of the *starkest views yet of the housing slowdown that has been gathering force in recent months......./*​ 

The West Chester, Pa., forecasting firm projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the *first decline for an entire year in home prices since the Great Depression of the 1930s.*​ 

The forecast is included in a 195-page report, 'Housing at the Tipping Point,' which The Associated Press obtained before its general release on Wednesday.​ 
When the Great Depression began on Wall Street on that dreadful day in 1929 they were saying "it won't happen here" or "it's different this time." Spain is wobbling, Ireland have just had their third month in a row of slowing prices, OZ is in trouble.......................


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## edo

*Re: The American economy*

this mornings guardian
The property downturn in the states is now nationwide  - no areas will be spared - folks getting very worried over there
http://www.guardian.co.uk/usa/story/0,,1887851,00.html


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## Duplex

*Re: The American economy*

Liam Halligan economics editor of the Sunday Telegraph writing in the New Statesman.  [broken link removed]


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## whathome

*Re: The American economy*

I can't make up my mind on a US recession, data has been conflicting in recent weeks. Consumers are still spending:

http://www.marketwatch.com/News/Sto...443E-4C28-93B6-55964CF3C42F}&siteid=mktw&dist=



> With few notable exceptions, retailers turned in better-than-expected same-store sales results as consumers shopped for fleece, sweaters and leggings, monthly sales reports showed Thursday.
> By a margin of roughly 3-to-1, more retailers outpaced forecasts than missed, reached by analysts reporting to Thomson Financial.


----------



## Duplex

*Re: The American economy*



whathome said:


> I can't make up my mind on a US recession, data has been conflicting in recent weeks. Consumers are still spending:
> 
> http://www.marketwatch.com/News/Sto...43E-4C28-93B6-55964CF3C42F}&siteid=mktw&dist=


 

I was pretty certain that The Fed would start cutting rates next year in response to a slowing economy.  But it seems that the inflationary cat is out of the bag.  

http://www.theage.com.au/news/Busin...-interest-rates/2006/10/07/1159641559916.html


OPEC look like they will cut back production to defend the price of oil so the prospects of sub $50 a barrel are remote.   The price of US 5 and 10 year T bills have fallen, so the money markets may be absorbing the fact that the inflation monster is far from slain.


----------



## walk2dewater

*Re: The American economy*

At the core of my view [stagflation, then disinflation/selected deflation] is the fact that you cannot hold interest rates real negative, as Fed and ECB did and for as long as they did, without payback. And that payback is inflation. And I mean serious inflation, the sort that dissolves wealth and that requires v high real rates in order to tame [a la Volcker late 70s]. When I filter through the noise, some of which fits my thesis, some doesnt, I still see this as an inescapable outcome. Higher real rates everywhere and consequences of, colours all my investment decisions.

In the US all that liquidity is still in the system, sloshing around. The hot money is leaving real estate and pushing up the dow IMO. My pharma/health stocks are going nuts all of sudden, wonder why?


----------



## Duplex

*Re: The American economy*



walk2dewater said:


> At the core of my view [stagflation, then disinflation/selected deflation] is the fact that you cannot hold interest rates real negative, as Fed and ECB did and for as long as they did, without payback. And that payback is inflation. And I mean serious inflation, the sort that dissolves real wealth and that requires v high real rates in order to tame [a la Volcker late 70s]. When I filter through the noise, some of which fits my thesis, some doesnt, I still see this as an inescapable outcome. Higher real rates everywhere and consequences of, colours all my investment decisions.
> 
> In the US all that liquidity is still in the system, sloshing around. The hot money is leaving real estate and pushing up the dow IMO. My pharma/health stocks are going nuts all of sudden, wonder why?


 

Its astonishing that the liquidity splurge in the west has not caused rampant double digit inflation already.  Sure China and India have had a deflationary effect, capping wage growth, but money supply running above target in the US, EU and UK, you would expect inflation to pick up at some stage (house bubbles excepted).


----------



## whathome

*Re: The American economy*



walk2dewater said:


> The hot money is leaving real estate and pushing up the dow IMO. My pharma/health stocks are going nuts all of sudden, wonder why?


 
I think you're right, the stock market and large caps in particular are the in-thing now that property is becoming a dirty word.


----------



## Duplex

*Re: The American economy*

The US trade deficit still growing, faster than expect it appears. 
[broken link removed]


----------



## room305

*Re: The American economy*



whathome said:


> I think you're right, the stock market and large caps in particular are the in-thing now that property is becoming a dirty word.



With the Dow breaking its nominal all-time high, the next bubble could be large caps.

How long before banks start offering leveraged investment in the stock market? 

With real negative interest rates and capital guaranteed funds it is easy to imagine Paddy investor ploughing his easy property money into large caps.

What a truly horrible time this is for someone wishing to invest, everywhere you turn another bubble is forming. As W2DW points out, there has to be a payback for this global liquidity splurge. Either the CBs move rates to above the "actual" rate of inflation to curb the madness or they let things continue on towards hyper-inflation and eventual deflation.


----------



## whathome

*Re: The American economy*



room305 said:


> What a truly horrible time this is for someone wishing to invest, everywhere you turn another bubble is forming.


 
If you ignore the Dow headlines and search for individual companies, there are opportunities to buy shares at reasonable value, even one or two in the Irish market IMO.

Bad news about the US economy doesn't stop me buying undervalued companies


----------



## Duplex

*Re: The American economy*

The US bond market is pricing in a cut in US rates next year as the bursting housing bubble and debt saturation hit the American consumer (I was going to say economy but consumer is more accurate) but the DOW is at at 52 week high?    I'll find the link but the correlation between Dow highs and interest rate cuts is interesting.  Its happened before in 1981, 1989 could be a precursor?


----------



## room305

*Re: The American economy*



Duplex said:


> The US bond market is pricing in a cut in US rates next year as the bursting housing bubble and debt saturation hit the American consumer (I was going to say economy but consumer is more accurate) but the DOW is at at 52 week high?    I'll find the link but the correlation between Dow highs and interest rate cuts is interesting.  Its happened before in 1981, 1989 could be a precursor?



The Dow is at an all-time (non-inflation adjusted) high.

I would say that stocks are pricing in that rate cut as well. That said, the bond market seemed to get ahead of itself and pared back recently. The rate cut seems less nailed on now.

The stock market doesn't seem to be listening though.


----------



## Duplex

*Re: The American economy*

Well here's that chart any ways.  Whatever happens (my bet is a US recession) its goin to happen.  


http://bigpicture.typepad.com/comments/2006/10/when_does_the_f.html#comments


----------



## whathome

*Re: The American economy*



Duplex said:


> Well here's that chart any ways. Whatever happens (my bet is a US recession) its goin to happen.
> 
> 
> http://bigpicture.typepad.com/comments/2006/10/when_does_the_f.html#comments


 
A quick aside on charts...
Just adding this here in case the chart above gives people the impression that the Dow is at a cliff edge. That chart is on a linear scale so it's not representative of long-term proportional growth. Linear charts are fine for short term comparison but logarithmic charts work better for longer term assessment. 

Dow Jones Industrial Average (*logarithmic*) from 1970:
[broken link removed]=

So to make it look scary ... just use linear starting from a period of stagnation (1970)
Dow Jones Industrial Average (*linear*) from 1970:
[broken link removed]=

Here's the graph from 1928 to 2006 in *logarithmic* scale - which isn't nearly as scary looking and more representative IMO:
[broken link removed]=


----------



## Maine

*Re: The American economy*

extracts from Davys daily report

Shows that soft landing will still hit the US construction sector, this company is also writing down its land bank by $50m

"Centex, the number-four US homebuilder, reported Q2 results after the bell last night (October 12th). Net orders fell 28% year-on-year, reflecting a record level of home sales contract cancellations."

"The company cites buyers inability to sell their existing homes as a key issue driving cancellations. Management now expects Q2 earnings in the range 65 to75c a share. In July, the company forecast Q2 earnings per share of $1.40."


----------



## hmmm

*Re: The American economy*

Something very interesting going on in the US the past few days, as Fed members have been consistently hinting that the next interest rate move will not be down - accordingly interest rate futures have seen yields jump. They have been talking about the balance of risks making them more concerned about inflation rather than growth. Consumer confidence is rebounding too, even whilst the housing market is tanking.

The question is whether or not the housing market will take the rest of the economy with it. If it doesn't, mortgage holders who are already squeezed are going to be rightly screwed by a strengthening consumer recovery leading to even higher Fed interest rates.


----------



## Sidewinder

*Re: The American economy*

But if Americans don't have any savings, and the house crash ends MEWing, and interest rates have gone up on existing debt....then how exactly are consumers going to be able to continue spending in the way they have been for the last 3-4 years?

The numbers just don't add up.


----------



## room305

*Re: The American economy*



Sidewinder said:


> But if Americans don't have any savings, and the house crash ends MEWing, and interest rates have gone up on existing debt....then how exactly are consumers going to be able to continue spending in the way they have been for the last 3-4 years?
> 
> The numbers just don't add up.



I don't think the US consumer can take on much more debt no matter what way interest rates go. Real wages aren't increasing and they have no savings so logically the only way they can repay that debt is by cutting back on spending.

Apart from the near $70bn trade deficit, there is another monstrous imbalance between record corporate profits for US companies and record debt levels for US consumers.

Something has got to give.


----------



## Duplex

*Re: The American economy*

US inflation is back on the agenda again. 



> A report the next day will show consumer prices excluding food and energy increased 2.9 percent over the 12 months to September, the fastest in more than a decade, according to a separate survey of 16 economists.


 
http://www.bloomberg.com/apps/news?pid=20601103&sid=akvabH3AbMlY&refer=us


----------



## sunrock

*Re: The American economy*

as explained previously by joe sod  u. s. will inflate to ease their foreign debt etc in case of any hint of deflation
luckily for u.s. their debt is in dollars so they dont have to sell anything_just get the printing presses going
their trump card is control of oil  which is why oil is sold in dollars
as long as they retain this control they can manage to unwind alot of their  deficits etc
oil is the most important commodity and the u.s. with their presence/influence with middle east producers retain their power
of course they will be a recession in the u.s. and many people will suffer but thats just part of the medicene for ordinary americans
and of course we share in the americans fate
now ireland has lost control of interest rates and of printing press so in a downturn taxes will rise and also high unemployment
it will be like the 80s when our gov had a big foreign debt that had to be serviced and we will have to wait until we are buoyed up by events elsewhere


----------



## turnips

*Re: The American economy*

So is this good news for property buyers in the States? Will rental market be stronger as Americans will be unwilling to purchase?


----------



## Duplex

*Re: The American economy*

A report from a real estate agent at the coalface in Florida. His analysis of the market is sought by the Banks, Builders and Hedge Funds.  Mike Morgan is refreshingly candid in his assessment, no punches pulled, no siree Bob.   What strikes me about Morgan’s account of the market in Florida is the disbelief by the lenders and builders, that the market has turned so badly so quickly. 



> "My recent update on what we're seeing in the housing market generated a couple dozen calls from some very large financial institutions, REITs, hedge fund mangers, public builders, and a variety of financial experts. Those callers are not just callers from the U.S., but from Germany, Australia, and the U.K. I have had so many calls that I found myself on the phone 8-10 hours a day discussing the housing industry. I learned as much as I shared, if not more. So here's a little bit of what I heard.
> 
> "The Street is scared -- scared to death that we are in for a housing crash that will rock our economy to its knees. Even Cramer attempted to reconcile his bullish position on his Tuesday night broadcast when he said he did not believe we have seen the worst of the housing market, but he does believe we have seen the worst for the builders' stocks. Duh? What he and many others don't realize is that the housing industry will not recover in 2007.
> 
> "Maybe he's setting up for a flip-flop, or maybe he, like many others, simply doesn't understand the dynamics. And how could anyone understand the dynamics unless they were on the front line? How can you evaluate a market like this from the comfort of a cushy Manhattan office? No way. No how.
> 
> "So let me tell you, simplistically, what we see and hear on the front lines. On the street we are dealing with builders and sellers every single day. And both groups are trying to leap-frog the other on the way down. That means lower margins or no margins for the builders. And that means the banks that have financed the millions of homes flippers bought, as well as the ATM cash drawn down with ARMs, will wind up owning a lot of property they cannot sell. Sure, most banks sell their paper. OK, so the guys like Fannie Mae will own hundreds of thousands of homes they can't sell. The result is the same. Massive amounts of inventory flooding the market at foreclosure sales. And prices drop further.


 [broken link removed]


----------



## room305

*Re: The American economy*



turnips said:


> So is this good news for property buyers in the States? Will rental market be stronger as Americans will be unwilling to purchase?



Dear God no man. Prices are in freefall. Do you own property in the US?


----------



## turnips

*Re: The American economy*

No thank God!
But have been seriously looking at it....
or was...


----------



## Foxtrot

*Re: The American economy*



room305 said:


> Dear God no man. Prices are in freefall. Do you own property in the US?



I just bought property in the States at a deeply discounted price. I had already been researching this purchase when the property market slumped. As I plan to keep it for 10+ years and already have a long term tenant, it was a terrific bargain. The level of debt, type of martgage, and length of time a person plans on holding the property make a huge difference. Condo flippers are getting the short end of the stick because they didn't do sufficient research and only wanted to make a quick buck. I've got little sympathy.


----------



## room305

*Re: The American economy*



Foxtrot said:


> I just bought property in the States at a deeply discounted price. I had already been researching this purchase when the property market slumped. As I plan to keep it for 10+ years and already have a long term tenant, it was a terrific bargain. The level of debt, type of martgage, and length of time a person plans on holding the property make a huge difference. Condo flippers are getting the short end of the stick because they didn't do sufficient research and only wanted to make a quick buck. I've got little sympathy.



I would suggest that there will be better bargains to be had next year (as all those ARMs start resetting) but everyone has to do their own homework.


----------



## Maine

*Re: The American economy*



room305 said:


> I would suggest that there will be better bargains to be had next year (as all those ARMs start resetting) but everyone has to do their own homework.


 
*Extract from Davys* 

"Top-ten US homebuilder MDC holdings reported a 60% fall in net income in its Q3 results on October 24th. Earnings per share fell 60% year-on-year (yoy) to $1.06, well short of the consensus target of $1.38. The company wrote off $29.4m in land impairments and project costs.New orders were off 40% yoy while the company cancellation rate soared to 48%"

Also "Dallas based Centex reported Q2 results after the bell last night (October 24th). Earnings per share fell 71% to $0.70 from $2.39 in Q2 2005"

Still think we may see a soft landing in US but clearly the contruction industry is taking a pounding.


----------



## Duplex

*Re: The American economy*

The September numbers are out for existing home sales. “Sales of existing homes fell for a sixth straight month in September and *the median sales price dropped on an annual basis by the largest amount on record,* further documenting a lukewarm housing market.”

“The National Association of Realtors reported that sales of previously owned homes fell by 1.9 percent in September to a seasonally adjusted sales pace of 6.18 million units, the slowest sales rate since January 2004.”

*“The median price of a single-family home fell to $219,800 last month, a drop of 2.5 percent from the price in September 2005. That was the biggest year-over-year price decline in records going back nearly four decades.* Sales of condominiums fell by 3.2 percent. Condominium prices fell by 3.2 percent”


----------



## Howitzer

*Re: The American economy*

As a slight aside does anyone know why the median price is always quoted by American sources in relation to house prices, as opposed to the average? I somewhat assumed it was down to a greater disparity between the top (Beverly hills mansion) and bottom (trailer park) of their housing market, so the median value is the one which is a truer reflection of what the majority of people actually buy.

Whenever you quote American prices on AAM and use median you get shot down as being a buffoon with no mathmatical knowledge whereas in fact this is the value used by American commentators.


----------



## Duplex

*Re: The American economy*

Der Spiegel’s take on the American economy and the dollar. 


> PLAYING WITH FIRE
> 
> America and the Dollar Illusion
> 
> The dollar is still the world's reserve currency, even though it hasn't deserved this status for a long time. The devaluation of the dollar can't be stopped -- it can only be deferred. The result could be a world economic crisis.
> The two things investors crave most are high yields and high security. Since you can never have both at the same time, the moods of investors are like an emotional roller coaster. They shift constantly from fear to greed and back -- although major investors, like corporations and states, clearly prefer security over fancy returns. Their fear is stronger than their greed. They'll freely relinquish the really fat profits as long as the stability of their billions is guaranteed. They're afraid of political unrest, they loathe overly dramatic changes in currency value and the mere thought of creeping inflation sends them into a state of panic.


 http://www.spiegel.de/international/0,1518,440054,00.html


----------



## Bedsit

*Re: The American economy*

Who wants to be a trillionaire? (Economist)

A really good article in this week's Economist magazine on the dilemma facing China and to some extent the rest of the world


----------



## demoivre

*Re: The American economy*

Howitzer said "As a slight aside does anyone know why the median price is always quoted by American sources in relation to house prices, as opposed to the average? I somewhat assumed it was down to a greater disparity between the top (Beverly hills mansion) and bottom (trailer park) of their housing market, so the median value is the one which is a truer reflection of what the majority of people actually buy."  

The median *is* a  measure of average as is the arithmetic mean ( the one used by most people ), mode , geometric mean and harmonic mean. Since an average describes central tendency then the nature and distribution of the data, along with any further statistics being calculated, will, to a large extent, dictate which average one uses. The median is often used where there are extreme values in a distrubution since the median is essentially the value of the central item in an ordered array and so is uninfluenced by those values. The arithmetic mean and median for the numbers 1,2,3,4,5 is 3. For the numbers 1,2,3,4,500 the arithmetic mean is 102 and the median is still 3.

Howitzer said "Whenever you quote American prices on AAM and use median you get shot down as being a buffoon with no mathmatical knowledge whereas in fact this is the value used by American commentators. "

A little knowledge is often a dangerous thing.


----------



## Maine

*Re: The American economy*



Howitzer said:


> As a slight aside does anyone know why the median price is always quoted by American sources in relation to house prices, as opposed to the average? I somewhat assumed it was down to a greater disparity between the top (Beverly hills mansion) and bottom (trailer park) of their housing market, so the median value is the one which is a truer reflection of what the majority of people actually buy.
> 
> Whenever you quote American prices on AAM and use median you get shot down as being a buffoon with no mathmatical knowledge whereas in fact this is the value used by American commentators.


 
The easiest example of this I have seen is the following. Suppose Bill Gates walked into a bar with a hundred people. Then the average wealth for a person in the bar would be a multimillionaire. 

This tells you little about most peoples wealth in the bar


----------



## Duplex

The Sacramento Bee. “To some readers, reporter Jim Wasserman is a home wrecker. That’s what happens when you chronicle the downturn in what was previously the hottest thing going: the go-go residential real estate market.”

“The market has tanked. Prices continue to slide, inventories of homes for sale are at or near record levels and new home construction has stalled. The industry, from real estate agents and developers to home sellers and mortgage lenders, is spooked.”

“‘I’m trying to sell my home and your articles are not helping (us) sellers,’ one woman said in an e-mail. ‘Thanks for eating away a large portion of my equity!!!’”

“One new home builder told Wasserman that buyers have come into his company’s sales offices, newspaper in hand, and cancelled their purchase contracts, pointing to a Wasserman story about the housing slump.”
“Wasserman and editor Wayne Davis find it amusing that at the height of the housing boom, no one called to complain about the coverage. ‘Those people who blame us today,’ said Davis, ‘they didn’t call a year and a half ago to tell us we were driving up the market.’”


----------



## SLAPPY

Just got back from Florida.   Take a look at the article on the front page of the business section of the Palm Beach paper

http://www.palmbeachpost.com/business/content/business/epaper/2006/11/05/a1f_newhomes_1105.html

"The current downturn should last two to five years," housing analyst Jack McCabe says.

"Prices for new single-family homes will come down another 20 percent to 25 percent, McCabe estimates. Seiders estimates the figure at 30 percent in South Florida."

With articles like this getting more mainstream, the sentiment is getting extremely bearish towards property over there.  2007 will be a boodbath for specuvestors who bought late in the game.


----------



## Duplex

An interesting development in the US housing market in respect of vacancies. The fall in vacancies of rental and owner properties has reversed as prices continue to fall in the sales market, suggesting that disappointed vendors are reverting to the rental market. However rental values remain subdued due to a plentiful supply and low incomes growth. 



> On top of that, the national housing vacancy rate is surging. The homeonwer vacancy rate hit 2.5% in Q3, the highest level ever. And the rental vacancy rate climbed to 9.9%, up from 9.6% in Q2 and 9.5% in Q1. As more stuck flippers realize they can't sell, and start trying to rent instead, you can bet MORE rental supply is going to hit the market.


 

http://interestrateroundup.blogspot.com/


----------



## Duplex

You know things must be bad in the US when Oprah does a show on the US housing bubble. 


http://www.youtube.com/watch?v=LJYxUCgHGFw&mode=related&search=


----------



## walk2dewater

*Re: The American economy*



Bedsit said:


> Who wants to be a trillionaire? (Economist)
> 
> A really good article in this week's Economist magazine on the dilemma facing China and to some extent the rest of the world


 
Great article!


----------



## Duplex

*Re: The American economy*



walk2dewater said:


> Great article!


 
Still cant figure why the Chinese buy so much funny money dollar debt.  It could be a long run strategic play to run down the industrial infrastructure of the capitalist running dogs, while building up their own  Or maybe in a totalitarian dictatorship policies that benefit the select few party members are pursued. without too much concern for China's greater good.   Inscrutable; very apt description.


----------



## room305

*Re: The American economy*



Duplex said:


> Still cant figure why the Chinese buy so much funny money dollar debt.



Almost impossible to know for sure and maybe a host of factors. At the moment China are providing a Harvey Norman-type finance deal to the U.S. - they're literally loaning them the money to buy their products. As for how long this strange dance will last, who knows? The U.S. is becoming less and less important as a Chinese customer and maybe in a few years the U.S. will find that the preferential finance deals they currently enjoy are no longer available. China will stop buying dollars, mortgaged-backed securities and treasury notes and maybe freely float the Yuan on the open market. The hope for the U.S. now must be that China has accumulated so many dollars that they too now need to prevent a dollar collapse or serious devaluation, so we're probably looking at a gradual unwinding rather than simply dumping that trillion on the open market. This will suit Bernanke too, a keen student of the 1930's depression and who has frequently postulated that the strength of the (then gold-backed) dollar made it especially hard to combat deflation.


----------



## sunrock

Probably china is governed for the benefit of the ruling elite.
In a country of a billion +,the ruling elite must number at least a million,who are probably doing very well out of the present arrangement.
I M  sure that the u.s. and china have done secret deals at a high level.
Even though china has a trillion in the bank,its workers receive very little money in dollar terms.
Contrary to the article in the economist ,I believe that its not such a big problem to spend this money in a country where much improvement in infrastructure and services is needed.
And it surely is very nice if the u.s. can repay all the dollar debt for the billions of hours of chinese labour by cranking out the printing presses.
Is the same arrangement present between china and e.u._that china loan us the money to buy their goods?
Anyway isn t it very nice of the chinese to sell us all those cheap goodies to increase our standard of living.
Finally is it possible that this trading arrangement between china and the west could continue indefinetly.


----------



## cik

Yes, the figures look big, but how many years of Chinas oil supply does USD 1 trillion buy?
3 or 4 years worth I think?
when you throw in copper and steel consumption the bank balance doesnt look like such a mountain anymore.

The Chinese probably understand that the US is facing the chance of a recession, when that happens US consumers will no longer be buying so much from China and the dollar mountain stops growing so fast...then what does China do?

It probably uses this as ammo to fight the recession that it has caught from the US...


----------



## baby_tooth

china buy dollars to keep the yuan low, its gives them a competitive advantage via fx rates...or put it another way, they prop up the dollar as they need the dollar to buy alot of their goods.
strong dollar, easy for us to buy more of chinas goods.....weak dollar, yanks can't buy as much chineese goods and chineese economy slows down.

Ok, china holds alot of dollar, which will cost them alot, but it's worth it as it keeps there economy super-hign and allows them to push the steady state of capital higher along the curve to a more productive equilibrium point.


----------



## baby_tooth

sunrock said:


> Probably china is governed for the benefit of the Finally is it possible that this trading arrangement between china and the west could continue indefinetly.


 

No,

everything must come to equilibrium....
Only two ways of this.

from productivity side

or 

from purchasing power parity side....ie: fx rates.

dollar to drop, relative to the yuan....if yuan free floats, chinnese economy will stall....china will slow rapidly and the government there will most likely fall.....alot of hungrier mouths then.


----------



## kerrybull

The Dollar faces other dangers as well. The Iranians are looking to develop a Euro burse for their oil exports. The fact that China will need to buy oil from Iran in Euros along with every other country could have a major impact on the long term value of the dollar.

I spend one week a month in Saudi and our own media plays very little attention to what is happening in Iran other than the usual topic of weapons of mass destruction.

If the Iranians do create a Euro burse, then the world that we live in may well change, faster that any of us expect.


----------



## Hibernicatio

kerrybull said:


> The Dollar faces other dangers as well. The Iranians are looking to develop a Euro burse for their oil exports. The fact that China will need to buy oil from Iran in Euros along with every other country could have a major impact on the long term value of the dollar.
> 
> I spend one week a month in Saudi and our own media plays very little attention to what is happening in Iran other than the usual topic of weapons of mass destruction.
> 
> If the Iranians do create a Euro burse, then the world that we live in may well change, faster that any of us expect.



Was that not also imminent in Iraq before GW et al decided to send the troops in.  I dont recall exactly but I think it was one of the reasons (apart from the actual oil itself) that it was put in motion so quick.


----------



## Duplex

Well if you want a comprehensive assessment of what may happen to the US economy over the next few years have a read of this.  


http://www.fxstreet.com/fundamental/analysis-reports/the-coming-collapse-in-housing/2006-11-23.html


----------



## sunrock

Hibernicatio said:


> Was that not also imminent in Iraq before GW et al decided to send the troops in. I dont recall exactly but I think it was one of the reasons (apart from the actual oil itself) that it was put in motion so quick.


 
Very good point!
Iraq was invaded because it had a nuclear weapon programme,oil,corrupt leaders and it threatened to sell its oil in currencies other than the dollar   _take your pick of the above reasons_could definitely apply to iran.
Oil is sold in dollars. Any country that decided to sell its oil in euros or whatever would draw down the wrath of uncle sam.
This would be a much more serious threat to the u.s. than a nuclear weapons programme.
Its no co incidence that all middle east countries sell their oil in dollars.
If they demanded gold instead i d imagine that the u.s. would go berserk and threaten war.
Now that the shia and sunni are involved in a civil war.
, an attack on iran by u.s. forces if they go ahead with an alternative bourse would be a definite possibility.


----------



## SLAPPY

Heres what happens when the property market turns sour.

http://www.palmbeachpost.com/business/content/business/epaper/2006/11/19/a1f_flemingway_1119.html

American home builder Lennar slashed prices on remaining inventory of $500,000 homes selling them for $250,000.      How would you feel if you bought one of these places for $500,000 a few months ago?    Prices are in a complete freefall at the moment with no bottom in sight.


----------



## kerrybull

The issue of a possible Dollar slide should be of major concern to everyone in Ireland.

For property Bulls they might find some short term solace in the fact that the ECB may well have to look at it's strategy for 2007 if the Dollar trades between $1.30-$1.40. We may see 3.50% or at most 3.75% as the medium term ceiling.

However, of all European economies we are the most vulnerable to the consequences of any major Dollar slide.

The fate of the Dollar may well be the fate of the Pope's children.


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## Duplex

Dollar weakness is causing concern in France as the Airbus order book is dollar dominated. Talk of currency controls in the wind. http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=M3&xml=/money/2006/11/27/ccview27.xml


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## edo

This from this mornings guardian

http://business.guardian.co.uk/economicdispatch/story/0,,1958911,00.html

Interesting times ahead for us all it would seem


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## phoenix_n

Posted this in another thread but relevant here

Before the open, the Commerce Department reported orders for durable goods suffered their biggest fall since July 2000, suggesting the market for big-ticket manufacturing items was declining.


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## SLAPPY

Median U.S. house price posts biggest loss on record today, dropping 3.5% from October 2005.    Also a new record for existing homes for sale, 3.9 million.     Even the most bullish "experts" are calling for a dismal 2007 with further drops.   I think I read in another article that this is the first time since the great depression that the national median house price has fallen.   Hmmm...

http://money.cnn.com/2006/11/28/news/economy/homesales/index.htm?postversion=2006112810


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## SLAPPY

Not alot of good news coming accross the internet today.   More doom and gloom from South Florida.   Home values down 12% from last year in Palm Beach and big developments going bust in Miami.   But that can never happen to us, becuase we're in for a soft landing and prices will continue to go up forever and all our houses will be worth million in five years......right?


http://www.palmbeachpost.com/business/content/business/epaper/2006/11/28/1128housing.html


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## sunrock

It looks like the dollar will keep sliding.
What will this mean for ireland?
I presume that the price for oil and commodities won`t change much in euros, as the price of these in dollars will rise even as the dollar falls.
What about the american companies in ireland_will these be effected?
IF  imports into the u.s. are more expensive,i presume the americans will just buy less. The world`s  exporters will then have to redirect their goodies to countrries with strong currencies or at least plenty of money.
If countries like china and india want to produce cheap goods for our benefit,then no one can stop them.


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## room305

sunrock said:


> What about the american companies in ireland_will these be effected?



It'll be good for American multinationals based here selling to the euro market as they report their euro profits in dollars.


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## Duplex

Keep on trucking? 



http://bigpicture.typepad.com/comments/economy/index.html


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## phoenix_n

The slump in the US housing market is featured in reuters today.
http://today.reuters.com/news/home.aspx


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## SLAPPY

Seems to be no end to the bad news for American property.   Alot of people are asking "has it hit the bottom yet?" and are looking to jump back in for the classic dea cat bounce scenerio.  This property bust will play out like a bad melodrama over several years BUT, one thing is 100% certain. When the bottom does arrive there is no need for ANYONE to rush in. You’ll know when the bottom is in. Take your time if you are looking to buy ’cause property prices ain’t gonna go nowhere for a long, long time.

Owch, those Hawaii vacation homes just fell 18%


Beautiful San Diego, now 6.9% cheaper
http://www.signonsandiego.com/news/business/20061213-1141-bn13housing.html

Foreclosures, foreclosures, foreclosures..somebody hep me!
http://www.usatoday.com/money/economy/housing/2006-12-13-mortgagedelinquencies_x.htm

Something new, a "buy vs. rent"  debate..never thought I would see the day.
[broken link removed]

Big builders are "taking big bath"
http://biz.yahoo.com/ap/061215/all_business.html?.v=1


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## Duplex

It seems that the US consumer is starting to feel the effects of the bursting housing bubble. 





> Now, however, it's quite clear that the consumer is being affected -- whether one looks at the sales data from Wal-Mart and other retailers, or at the Liscio Report's data on state sales-tax receipts. To quote from Liscio's latest survey: "The weakening consumption trend is now established, and the majority of our tax contacts expressed real concern about a slowing in sales-tax collections. It now appears clear that consumers are not spending the billions of dollars they have saved on gas in recent months."


 
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/NoMoreBubbles.aspx?wa=wsignin1.0


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## Duplex

President Bush in his address to the American people has asked them to steel themselves for the continuing war on terror which he seems to believe will continue for a generation or more.  But much more interesting than the call to arms is his request that Americans 'go shopping more'.  Given that the American people have a negative savings rate and are heavily indebted this is possibly a call beyond the call of duty.   PS what would Americans go and buy anyway?  Chinese, Japanese etc. made consumer goods, how does this help the American economy


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## conor_mc

http://www.rte.ie/business/2007/0322/usa.html



> *Measure of US economic activity falls*
> 
> Thursday, 22 March 2007 15:06
> A key measure of future US economic activity turned sharply lower in February, reflecting  turmoil in the housing and manufacturing sectors, a leading business research group said.
> The Conference  Board's index of leading economic indicators fell 0.5% following a revised 0.3% decline  in January.
> However, Conference Board economist Ken Goldstein said the overall economic outlook remains positive despite the weak figure.
> The index  is meant to gauge economic activity in the coming six to nine  months.
> 
> 'The housing and manufacturing sectors are clearly going through a correction, but the consumer sector appears to be holding up,' he said.
> The index was below the average Wall Street forecast of a 0.3% decline and the latest in a string of weaker-than-expected economic reports.


 
It's starting to look like the US consumer is the only thing propping up the US economy.


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## room305

conor_mc said:


> It's starting to look like the US c...ive savings rate, how long can this continue?


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