I am sure I’m beginning to sound like a broken record, but there will be no “recovery” with the way things are going. I believe we’re entering a “lost” period, much like what Japan experienced not long ago.
Housing is still far overvalued; the U.S. median income is around $40,000/yearly (depending on whom you ask). This means that for housing to be affordable again (by historical standards), the median home should go for around $120,000. Until that happens, people will continue to spend a disproportionately large amount of their incomes on housing, which cuts into the amount available for discretionary spending.
The prices of a great many other things are also built on the expectations of “the bubble years.” We’re either going to need to see more deflation or wages are going to have to come up substantially. Since modern-day corporations will fight against the latter possibility tooth and nail, it seems that continued deflation is the more likely possibility. If our government allows Chrysler and GM to fail, the length of this will be even worse. We’ve got to stop pretending that it’s OK for us to ship all manufacturing and production activity to lower wage countries. A country that produces nothing will stagnate.
NO WAY !!!!!! ALl I can say is this is out of control. Unions demanding $70 a hour for workers who are working or laid off!! Its an oxymoron analogy going on here. IT should be no work, no pay -and American’s aren’t buying their cars as they did in the 50’s – so get with the times GM – and I am so livid at the idea of tax money going to Chrysler –its beyond belief. This is why no matter how much money they give to these idiots — they can’t save a sinking ship. And the UAW just ought to be all ashamed of themselves. Take Take take — now you want the taxpayer to give you more? Again I say NO WAY!!!!!!!!!!
I have been reading alot about stimulus packages, bailouts, and yet mortgage holders and buseness’ continue to fall. I read about rebound in 2009 and recovery in 2010. I see our Gov’t pouring money down the drain as mortgage lenders, banks, etc. figure out how to route these dollars into severance packages. What I do not see is anyone in Wash. or across this country looking at 2010 and asking what is going to happen when the bottom part of the iceberg (interest only mortgage loans) becomes visible. I suggest everyone relook their remaining assests and don’t expect anything good any time soon. I hope I am wrong!
In a way, we’ve been in recovery since the high wore off. Recovery’s not a pretty sight, however, when you’re addicted to easy credit. Americans have shifted gears, and started to suddenly turn frugal, after decades of profligacy.
If the current shift in behavior holds up, Americans are going to substantially pay down their consumer debt before they start spending their full income again. We might even end up with a savings rate above 1%. This is all going to take quite a bit of time, so I’d be surprised if consumer spending ticks up much before the end of 2009.
I agree with some of the other posters that “recovery” won’t mean a return to negative savings rates and maxed-out credit lines. We’ve had a hard lesson that there’s no such thing as free money. Not all, but some, will take the lesson to heart, and won’t go back to overspending any time soon.
All this creates an atmosphere in which consumers will be spending less of their income and less per capita, long term. Companies that have been accustomed to promising shareholders 10%+ annual ROI will struggle to deliver 5% for quite a while.
Recovery will come when corporate management takes a huge haircut, accepts reduced margins, and raises working-class incomes to help drive demand for their products.
Henry Ford recognized that, in order to create a market for his expensive horseless carriages, he had to pay the workers in his own plants well enough that they could buy his cars, establishing the symbiotic relationship between producers and wage earners that is the heart of the consumer economy. Globalization, and the opportunities it provides to exploit global poverty, have undercut this relationship, and have thus undercut the viability of the consumer economic model. If we ever want to bring back a robust consumer economy, we have to support balance between the interests of management and the interests of the working class.
We have to turn our backs on the laissez-faire oil economy of the past. Laissez-faire never works, and the oil economy hasn’t been viable for quite a while.
We need to be leaders, because when you follow the herd, there’s no sweet grazing and the scenery never changes. There are huge opportunities in conservation and waste-heat recovery, as well as green power sources. Through conservation, we can free up more than enough electric power to support electrified personal transportation, and can eliminate the need to import oil.
Recovery clearly doesn’t mean a return to the 20th-century status quo. Whether the future will be a bright one, or a washed-out imitation of the past, remains to be seen. The reason I’m optimistic is that I know Americans have the capacity to be smart and resourceful, when they’re not being fat, dumb, and overly-entitled.
Humpty Dumpty sat on a wall
Humpty Dumpty had a great fall
All the King’s horses
And all the King’s men
Couldn’t put Humpty together again.
What recovery ?
We (the people) are tired of you Wall Street people barking orders at us and at Our government. We don’t have to do anything you tell us to do. We’re not letting you have our Social Security money.
Oops. Forgot to clarify – we the people are the ones who have no debt, other than our utility bills, our food, our insurance, our … which we can’t pay if we lose our job, so we aren’t doing any frivolous spending.
We aren’t going to help recover the economy because we – the baby boomers – don’t need any more junk in our houses, don’t want to take on debt. We have become our parents. We have become our grandparents – who lived during the Great Depression. Now it’s our turn, and our adult children’s turn.
And we are going to do what they did during the Great Depression – ignore Wall Street. We are taking our money out of stocks and mutual funds, where the valuations could fall, and putting the money into Treasuries, where the principal is protected – “Never Touch Principal” – and you weasels can’t get your hands on it.
We make the rules this time – you never thought there would be a run on mutual funds, did you ? Or on money market funds ? Or on hedge funds ? It’s our money, we wanted it back.
It will take several years to get rid of the weasels – the President-elect has selected weasels to help him, so while they rearrange the deck chairs on the Titanic that is the financial industry, the problems will remain and we will just have to sit this out.
I am afraid that in minds of most, the use of the word “Recovery” implies that some bit of magic will happen and we will see the markets return to pre-2005 conditions. I do not believe that we will ever see broad-based prosperity like that ever again. There is suimply too much debt and we have fallen too far in terms of education, manufacturing capacity and access to investment capital. The markets have deteriorated and eventually, some sort of new stability will emerge. I regret that our new circumstance will feature an even wider gap between the rich and poor within America and our position in the world will be diminished as well. The looming 2010′ish hyperinflation will ensure that the American Dream is officially dead and a new World Order is something that we will all have to adapt to.
There will not be a recovery until there are proper laws to protect the little, long term invester.
I’m not crazy.
There is no way I am going to put money into shares and try to compete with the sharks.
US and international accounting standards must be aligned. There must be an international crackdown on dodgy banking practices through precise, careful accounting standards and not through the blunderbuss of legislation; tight regulation needs to extend to all financial institutions – not just banks, but lending trusts and hedge funds as well; and there needs to be full disclosure of all credit instruments, including credit default swaps and other derivatives.
Rebound is a strong word. We may see periods of modest growth spattered over the next ten quarters. We will not “rebound” from here; the rebound will come once we’ve drifted to a much lower level. I would not be surprised if GDP is 10% lower in a year or two.
The market; that’s another story. Like Dryships people will likely chase into a rally here or there. We’ll probably see the Dow hit between 9500 and 10000 in the next four to eight weeks over optimism of the new regime change and the ensuing stimulus package. That level will be a great place to head for the exits and buy a short ETF on just about anything and enjoy. The stimulus will not stem the tide.
P.S. word is Blagojevich is selling his governorship on ebay!
The recovery will start in the second half or at the end of 2009. Things are not really that bad, and a lot of this ‘crisis’ is being overblown. A fractional percent drop in GDP and the stock markets drop 50% ? C’mon.
By that time, GDP will have dropped 1 or 2% peak to trough, and employment will have done about the same. Keep in mind that our work force is about 200 million people, so losing 2 million jobs is only 1%. If we lose another 1%, it will still be painful, but it won’t last forever. Home prices will drop a bit more until the median household can afford the median house, and then the prices will flatten out.
So, get real and focus on the basics: food, clothing, and shelter. Everything else is just stuff.
This recession will have ended by Q3 of 2009. We are already a year in and people are sick and tired of the headlines. We have learned our credit lessons, Wall Street will be regulated under Obama, our auto industry will be put on a path of innovation and competitiveness. And Americans, God bless us all, will soon let their frustration get the better of them and start spending again. This recession like any other, remains a symptom of confidence and the lack thereof. There are millions and millions of Americans just waiting in the wings ready to spend again. Yes, many economists are claiming there is no reason for us to emerge, we are in a ‘negative feedback loop’, etc etc. But. Economists’ models do not incorporate mass-frustration, the kind that is already building here in the US. When people finally say they have had enough of the media telling them what to do they’ll go enjoy a nice steak at the local eatery and whoosh, we’re off again.
how big was the housing bubble??? as long as there is an unwillingness to let the bubble deflate as much as is needed, the longer the trickle down effect will take. how much was built on unrealistic value? billions, trillions??? it seems to me there is a lot of waiting- waiting for a miracle to occur while money is handed down for ops costs. housing losses control the credit freeze–and there are still lots of losses to be reported- more arm resets etc. the fix on credit defaults is as quiet as the billions made on them. politicians are playing the blame game which is simply a mask to hide that they’re really playing us. they are the ceo’s essentially.
We will get a recovery after the big ole asteroid hits, and we have to rebuild everything… Also, as I’m unemployed, I’ve taken up selling asteroid protection umbrellas for $5.95 each on ebay… 
I have delayed my plans to sell my condo in Boston for another year. I will continue to drive my used volkswagen, and I have been told to “get my resume” in order, due to the looming budget cuts.
Recovery? At least another year away…2010 is looking pretty good right now.
close to recovery? we are not even close. I think the government is going about this all wrong. The middle class has been neglected for years, the mortgage mess, popping of the housing bubble has all leaed us to this. All the government is doing now is letting the big shot ceo’s and other higher ups still make their huge paychecks, but guess wut, they aren’t sharing. Not like thats a surprise, they’ve been making it the last eight years and weren’t sharing it with their workers. Well, we need to bail out the middle class so that they can pay their mortgages and start spending again. then our economy will recover. when will that be? god only knows.
It will take the global and world economy a bit longer to recover then it takes us to “get” that borrowing is not the same thing as growth. Time for us to really understand that the only thing that makes for a “real” economy is producing something useful. A stay-at-home-wife does more actual good for an economy every time she does her laundry then a wall street whiz kid who “made” 100 mil.
As a side note, I don’t think any stock movements that are accompanied by a sudden large change in volume actually reflect anything about the market. If shipping stocks held mostly steady with volume, and then started to climb at a mathematically believable pace, THEN I would find it interesting.
As long as we have dirtbags like Rod Blagojevich in high places we will never recover. Our country is ran by dirty crooks who have finally bled us dry. It is too easy to take advantage of power. CEO’s are earning millions while bankrupting America, hugh companies are posting losses when they should have profits. Where is the money?
It’s in someone’s pocket and it damn sure ain’t Joe Taxpayer.
Recovery isn’t even on the radar right now, and it’s not because of the frozen credit markets, or the price of housing, or anything of the sort. We can’t have a real and sustained economic recovery until we get rid of our inept rulers.
My education consisted mostly of hard science courses (Math and Physics). I have a friend with a similar background who chose to go for an MBA. He was appalled at the mental indigence he was confronted to in business school. He chose to pretend he believed in the malarkey of Reaganomics long enough for his professors to give him that diploma. But how many of his classmates didn’t have to fake it and truly believed that free trade and deregulation would get us to Dow 36,000 in the next ten years? Those people were in charge before the debacle and to a large extend helped cause it. But just because their world collapsed doesn’t mean they’re ready to see the light. They rationalize that it wasn’t really their misguided ideals that lead us down this road. No, “it was Clinton” or “the Community Reinvestment Act did it”. Any recovery will be short lived because those people are ready to do it all over again.
Combining the effects of job loss (lack of personal purchasing power) and lack of loans (further lack of purchasing power) combined with a potential liquidity trap (desire to hoard money rather than spend it) and it seems pretty clear that nobody is going to buy houses or cars any time soon.
If nobody buys houses or cars, there isn’t a whole lot that can happen to pull us out of this recession in the short term. Even the “experts” that were predicting a short recession are now admitting the recovery may not start until 2010 and even then it may be very very weak.
I don’t think we’re anywhere near the end of this recession. Any play on a recovery is premature.
The economic causes of this recession still exist. There’s still excessive leverage and banks aren’t lending. Businesses are responding by hoarding their cash. Consumers are hoarding their cash. The stimulus plans are still 6 months, or more, away from actually delivering any liquidity into the economy.
We just haven’t hit rock bottom, yet. When the last dot-com-esque day traders stop running up shares like this, we’ll know we’ve hit bottom. There has to be a feeling that all hope is lost.
Even then, I don’t expect stocks to return to their sky-high PE ratios. Just like the almost certain expectation of higher gas prices causing the continued demand for small cars, there’s going to be a similar lingering psychology of viewing the stock market as risky.
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Its mainly the mortgage lenders fault. They are greed. Check my site http://www.refinancingcondo.com