Economic weakness will continue through this year, though the recession's intensity could ease over the next few months, the Conference Board said Thursday.The way I see it, a weak recovery is ideal. The economy as a whole stops tanking, but the economy is weak enough that housing prices are likely to continue declining.
For the second consecutive month, the index of leading economic indicators rose, gaining 0.4% in January, following a downwardly revised 0.2% in December.
"The second half of 2009 may see a period of anemic growth," said Ken Goldstein, economist at the Conference Board. "In fact, a return to robust growth may not occur until well into 2010, even if the long climb starts a few months from now."
The recent gains are due, in part, to the Federal Reserve's huge injections of cash into the money supply. Despite the rise in January, widespread weakness remains as the troubled job and housing markets continue to take their toll.
Some of the index's estimates may be too optimistic, and could be downwardly revised, wrote Ian Shepherdson, chief U.S. economist with High Frequency Economics, in a research note.
"In short, we see no real improvement here despite the rise in the headline," Shepherdson wrote.
Friday, February 20, 2009
Leading economic indicators suggest possible (weak) recovery ahead
Finally, some good news for the economy:
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Regarding a weak recovery or any recovery:
ReplyDelete"We may end up in two years time with another price spike when demand comes back because of a drop in investments." (in oil exploration) "It cannot stay this way."
--OPEC President Chakib Khelil
"James said...
ReplyDeleteThe way I see it, a weak recovery is ideal. The economy as a whole stops tanking, but the economy is weak enough that housing prices are likely to continue declining."
I agree. I want to see increased affordability due to the maintained mortgage market tightness, continuing resets, generally the easing of air out of the bubble.
I DO NOT want to see increased affordability due to the fact that many of us do not have jobs and simply cant pay for anything.
Either way, we get affordability. I just want the type that will reward the prudent and keep the losses concentrated in the overleveraged.
At this point a lot of people will be happy with any recovery!
ReplyDeleteI don't think there is any chance we are going to see a recovery as early as this year. Things aren't just getting worse, they are still picking up speed.
ReplyDeleteThis is just a case of people saying what they wish was true, a lot like the housing pumpers.
"This is just a case of people saying what they wish was true, a lot like the housing pumpers."
ReplyDeleteThis is a sentiment I see on this blog regularly.
Its as if being pessimistic about the ENTIRETY of the economy AND owning a home are mutually exclusive things; as if pessimism is the exclusive domain of renters.
We're all f#cked. It is just a matter of what you do for a living, how you've allocated your assets, and yes, where you live and how you keep warm at night.
This isn't renting vs. buying. This is much larger than that.
"This is a sentiment I see on this blog regularly."
ReplyDeleteIts the problem with all blogs - they attract permadoomers and repel those who have even a more moderate view of things.
Case in point, James points out we might have glimmers of a easing of the severity in the downturn...yet even this very tempered, well reasoned statement is shouted down from the gallows - NO YOU ARE WRONG ITS JUST GETTING WORSE - END OF DISCUSSION.
Thank god the general population isnt like this. It makes no sense to be a pollyanna, but make no mistake one day it will turn around, be it one month or one hundred years from now, it will happen.
As such, I appreciate James trying to tip us off as to what MAY be something to watch for.
Maybe it is "larger than that" -- but I still want to see homes prices go back to 1997 levels, and watch those who bought Mcmansions at the peak decimated.
ReplyDelete"Maybe it is "larger than that" -- but I still want to see homes prices go back to 1997 levels, and watch those who bought Mcmansions at the peak decimated."
ReplyDeleteI would like that too - but not at the expense of my job, my 201K, the remaing shambles of 21st century society.
Its a bitter reality to face, but the fact of the matter is we are all crabs in a bucket. If the McMansion owners all go down, they take the rest of us down with them.
Regarding the permadoomers - I saw this today on Calculated Risk:
ReplyDelete"Corporate bond trading in the U.S. is rising to the highest level in two years, adding to evidence that credit markets are thawing even with stocks off to their worst start since the 1920s."
This provokes nothing but pure anger and venom from the permadoomers. The fail to recognize that this is just one potentially good data point, in an overwhelming ocean of bad news. Intstead they shout from the gallows - NO!!! WRONG!!! CALCULATED RISK IS AN IDIOT POLLYANNA!!!
Look - I understand prices arent low enough for you to buy your dream home yet - I get it. Still, you need to recognize that the economy does not move on your timetable. It may be over tomorrow or 100 years from tomororrow. It may be you get the sweetest ped-a-terre overlooking the potomac, or it may be you really were priced out and have to settle for a TH in manassas.
If you have something valuable to contribute, fair enough. However if your only point is to say NO ITS NOT OVER BECAUSE PRICES ARENT CHEAP ENOUGH FOR ME, please dont kill the messenger.
In that regard, I better put on my flame retardent jacket for the predictable response to my comment...
Permadoomer?
ReplyDeleteNah, just observing the obvious. Seeing the bubble wasn't hard, you just had to know how to open your eyes, and know how to think.
Now people are already trying to say things are going to turn around even though we have barely started into this recession. Once again, it doesn't take a real deep thinker to see that no recovery is on the horizon.
I am not a permadoomer in spite of what some might think from my following stateemnt-
ReplyDeleteThe experts predict a turnaround by the end of 2009 or 2010, but these are the same geniuses who FAILED to see the housing bubble bursting OR failed to see the housing and stock markets tanking.
I know there will be light at the end of the tunnel someday, but today isn't the day. Neither is tomorrow or next year unfortunately.
The NAR and its economists predicted housing would stop falling in price last year and the year before that.
What do you suppose those wrong guesses do to the public's faith in their economic predictions?
The economists stated we were not in a recession-until they admitted that we were in one and there had been one going on for a year.
What do you supposee that does to the public's faith in economist's predictions?
Considering meteorologists have a better track record of predicting the weather than economists have in predicting what the economy will do in the future, is it any wonder so many become permadoomers?
Exactly, they were wrong all the way down and now they want people to believe their latest prediction.
ReplyDeleteIt isn't that different from lance. He made a fool of himself for years making hilarious predictions that all proved 100% wrong. Now, here he is trying to get people to take him seriously when he can't even bring himself to admit he was wrong all that time.
The world economy didn't begin to really collapse until last fall, not even 6 months ago. Now they are predicting a turn around? Less than a year later? Sorry, but things are not going to be that quick and easy. Major recessions don't play out in a matter of a few months.
"Anon said...
ReplyDeleteeven though we have barely started into this recession."
"Another anon said...
I know there will be light at the end of the tunnel someday, but today isn't the day. Neither is tomorrow or next year unfortunately."
"Another anon said...
Sorry, but things are not going to be that quick and easy. Major recessions don't play out in a matter of a few months."
All 3 statement were made on Jan 20, 2009. Very similar statements will be made Jan 20, 2010, 2011, 2211, whenever. Yet one day they will be wrong.
They will be wrong even though the poster said it with as much conviction as those posters did today.
In fact, its possible (unlikely but possible) that 10 years from now we will look back on Jan 20, 2009, and say that is the day the recovery started in earnest.
Understand, the experts got it wrong on the way down, anonymous bloggers will get it wrong on the way back up too.
Who cares who gets what wrong? As of right now, things are tanking....how about you go out and buy some stocks or a house if your rose colored glasses see things coming up. I got an idea, why don't you buy yourself a $500K home in Montgomery county and I will rent it from you for $1,000 a month!
ReplyDeleteFrom Anonymous
ReplyDeleteFebruary 20, 2009 6:11 PM
In fact, its possible (unlikely but possible) that 10 years from now we will look back on
Jan 20, 2009,
and say that is the day the recovery started in earnest.
...Hate to break it to you, but today is FEBRUARY 20, 2009.
Talk about getting things wrong....
And speaking of getting things wrong...
ReplyDelete"All 3 statement were made on Jan 20, 2009."
Nope, all three were made on February 20, 2009.
Could Lance have signed off from his account and is now posting as an Anon?
Interesting Post article which states succintly the point I've been trying to get across:
ReplyDelete...
But even if the stimulus is a magnificent success, the money still has to be paid back. The plan of record apparently is that we keep borrowing, spending and stimulating, faster and faster, until suddenly, on some signal from heaven or Timothy Geithner, we all stop spending and start saving in recordbreaking amounts. Oh sure, that will work.
There is another way. If it's not the actual, secret plan, it will be an overwhelming temptation: Don't pay the money back. So far, even as one piggy bank after another astounds us with its emptiness, there have been only the faintest whispers about the possibility of an actual default by the U.S. government. Somewhat louder whispers can be heard, though, about the gradual default known as inflation. Just three or four years of currency erosion at, say, 10 percent a year would slice the real value of our debt -- public and private, U.S. bonds and jumbo mortgages -- in half.
Anyone who regards the prospect of double-digit inflation with insouciance is either too young to have lived through it the last time (the late 1970s) or too old to remember. Among other problems, inflation works only as a surprise or betrayal. It can never be part of any public, official plan. Plan for 10 percent inflation, and you'll get 20. Plan for 20 and you'll need a wheelbarrow to pay for your morning Starbucks. But if that's not the plan, what is?
Upside-Down Economics
By Michael Kinsley
Friday, February 20, 2009; Page A23
"Interesting Post article which states succintly the point I've been trying to get across:"
ReplyDeleteLOL, you don't have a point lance, we all know that.
You are here to pump real estate and try to find any way you can to convince people to buy.
Remember, prices won't fall in the DC area, the bottom was back in 2007, there is no such thing as a bubble, buy now or be priced out forever, etc etc
I wish lance would try to talk about economics more. Always good for a chuckle.
ReplyDeletePermadoomer here, and it's served me. My 401(k) has been in interest paying funds for the last year. My close-in place has held value. I'm working.
ReplyDeleteForward from here? Who knows. I expect close-in RE to rise in value. I did cash out (a fractional share) one RE investment last year and bought into another as a silent partner.
I'll shift my savings back to equities when the time is right. I'm tracking equities in a simulated account and they have done poorly, that tells me to stay on the side lines.
"I'm tracking equities in a simulated account and they have done poorly, that tells me to stay on the side lines."
ReplyDeleteYeah Im doing the same thing with real estate. Im tracking, its doing poorly, it tells me to stay on the sidelines.
As long as people like me sit on the sidelines, causing banks and a**holes to lose their over priced homes, dont expect much of a recovery.
"Inflation will reduce our debts by decreasing the buying power of tomorrows dollars"-so goes Lance's arguement.
ReplyDeleteProblem is, Who is going to buy Government securities to keep Uncle Sam going unless the interest rates on said securities go up?
If inflation is increasing and the newly issued US Governemnt Securities are paying less than the rate of inflation, those securities will have few, if any, bidders.
The US will either have to raise the interest rates or monetize the debt, both of which spell big trouble for the US Government.
Another problem to consider-most foreign nations and foreigners are either broke, going broke, or scared of going broke. If inflation does kick in and US Government Securities are paying less than the rate of inflation, foreigners (individuals and governments) will not buy US Securities.
Smart investors demand a return of their money to equal the rate of inflation plus 2% at least, otherwise they are just "throwing their money away" on their investment.
Suppose the US does allow inflation to reach 10% or more to reduce the debt, do you think that idividuals and governments around the world will accept low interest rates for more than a few months?
If these individuals and governments get angry or scared enough over US Inflation, they will dump their US Government Securities on the open market for anything they price they get for them to recoup some of their adjusted for inflation losses.
If that happens, goodbye US Dollar, goodye US, hello United States of Wiemarica.
uh ... anon 11:33 ... you missed the whole point, interest rates, including mortgage rates WILL go up ... just like in the late 70s. i.e., like you said, inflation + at least 2% will equal interest rates.
ReplyDeleteand oh ... I forgot to mention. Those of you who have been so kind as "to wait it out", will be paying those higher interest rates. But at least house prices won't be rising as quickly as they were previously.
ReplyDeleteLance, this is a case where, shockingly enough, you are partially right.
ReplyDeleteIt is almost a certainty that inflation will spike before this mess is over. The free money policies being employed to combat the recession will see to that.
However, we are currently in a deflationary cycle that will last for the foreseeable future.
So yes, keep calling for a spike in inflation, you have already been doing so for at least three years so why stop now? Eventually you will be right, but that doesn't mean now is the time to buy.
(Just like it wasn't the time to buy the last three years you claimed it was...)
High interest rates=fewer houses sell
ReplyDeleteFewer houses sell=lower selling prices
Buy a house with a lower price and a 20% down payment (saved up during the housing bubble) with a high interest rate
+ refinance to a lower interest rate when rates go down (like they always do throughout the history of fighting inflation with high interest rates)
= lower price for the house over the long term.
Prices, just like interest rates, fluctuate. Those who are smart enough to figure this out end up the winners in the long run.
"High interest rates=fewer houses sell
ReplyDeleteFewer houses sell=lower selling prices"
This is also true, regardless of what happens with inflation or interest rates housing will return to fundamentals.
The end result isn't in question, what is unclear is exactly how we will get there. In the hyper-inflation scenario a debtor is favored.
In the near term such a scenario does not appear likely.