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« Things to do in Greensboro | Main | Collective impotence »

Apr 25, 2010

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Andrew Brod

Ed, my only disagreement is with your first two grafs, which show that you don't know squat about recessions. The distinction you're not making is between level and direction. Being in an expansion (as virtually all economists believe we are now) doesn't mean that the economy is in good shape. It just means that it's getting better. I presume you see the difference.

Most of us were better off in February 2008 than now in April 2010, even though we were in recession then and we aren't now. But in early 2008 we were still near the peak, whereas now we're just barely out of the trough. There's no paradox.

Of course you're free to dislike the recession/expansion taxonomy. But economists never said that it captures everything.

cheripickr

"you don't know squat about recessions."

That's not a very nice thing to say to someone who's made a 25 year career out of business journalism.

Marshall

Do you really think the current administration will do anything to change the habits of the big financials? If so, why did they not create "change" when they were giving billions to save them? My guess is that we are hearing lip service so that we will vote to re-elect as there has not been the time for "real change". (still trying to manage the prior Bush fires) I do want change...heck...I just want the government to enforce the laws that already exist. Sarcasm alert---Sarbanes who? sure did make a difference since Enron...pure stink.

Nice optimistic article though and I agree with your long range outlook that history shows that America prevails.

Fred Gregory

Optimism is good but Saturday the N&R had an above the fold story with large bold fonts..

Jobless rate down across N.C.

The realities contained in the story, however, don't come anywhere close to matching the cheery headline and to borrow a phrase it is way more than " irrational ". Just sayin' .

Ed Cone

Reader DD emails:

You made a point in your article today with which I completely agree, but (until now) haven't seen or heard in the media. You said that you expect a great unleashing of entrepreneurialism once people have the freedom to leave their 8-to-5 jobs and pursue their own dreams without fear of losing their health insurance. My own anecdotal evidence supports this view...

...Americans have been living in constant fear of losing their health care, and I look forward to the day when that dark curtain is lifted and the true creative spirit of our people is unleashed.

Reader MC writes:

Thank you for the honest observation about the Vornado Reality Trust being willing to default unless its loans on the Merchandise Mart Property can be renegotiated.

This is the type of knowledge which the High Point Enterprise sits on with a vow that no bad news about major businesses in High Point shall ever reach the light of day.

I am still wondering exactly how the High Point Medical Center (624 Quaker Lane) came to fail to repay its loans. One doctor with offices there learned of the situation when he received notice from High Point Bank to begin making rent payments to them rather than to the old management.

This is a complex of at least four major medical office buildings to which almost everyone in High Point and the surrounding community has received medical care at one time or another. So why did it go bankrupt?

AB, I kid because I love, and I love to comment on the disconnect between the (semi)formal definition of a recession and the word on the street.

Marshall

Ed,

Healthcare/hellcare and starting a business...come on...that is a stretch.

I guess once the individual can manage healthcare the banks are standing in line to loan the funds for a start up...right? right?

beelzebubba

Some smartass once said that a journalist is as close to an event as a crablouse is to childbirth. It takes some courage to put your name on your own ideas.

Economists are in a bad spot. if one has a confliciting idea with the existing model on how to make the guesswork predictive they can be called on the carpet, regarded as a kook, marginalized and guaranteed a stagnant career. No one in finance or economics can make a prediction until they know what unnatural act the Fed is going to perform. Then they are stuck with prediciting what the herd in the dark is going to do when the laser light is shined in their eyes as they wait for the man behind the curtain to pull just the right lever just the right way and put smoldering heap of metal and corpses back on the track to reinflated bubbleland.

According to the Bureau of Labor Statistics 26 million workers have exhausted their savings. According to the WSJ, banks posted the sharpest decline in lending since 1942.

Nov 9 2009 suicide attack at Ft Hood.

Feb 18 2010 suicide attack on IRS in Austin.

March 4 2010 suicide attack on the Pentagon.

March 7 2010 Ipsos-McClatchy Poll, 80% say federal government does not work.

I'm glad the recession is finally over.

Jim Caserta

AB's point deserves some mention. There is not getting any worse, improving from a terrible situation but still in bad shape, and in good shape. We are still in case #2 and it is going to be a long ramp up. One good sign is that there were nearly 2x as many building permits in Forsyth cty in Feb 2010 as in Feb 2009, and that is with the iciest winter in the 7 years I've been in NC (permits were still way down from 2006, but we may never see those numbers again). I also looked at NC vs. FL, and there were more permits in 2009 in NC than in FL. Maybe that is not a big stat to most, but the degree to which construction has permeated FL's economy, makes it a huge issue there. The reason is that NC does not have the overhang of housing that FL does. There aren't as many vacant buildings, and FL's population growth has slowed considerably.

The savings situation is bad...but you need to look at it the way AB would. Our personal savings rate is actually much higher than it has been in the past few years. Part of the slowdown in RE sales nationwide is actual loan underwriting. I asked my wife if she would ever consider lying on a loan app about our income (pure speculation). She replied that it shouldn't matter because they check it and your documentation. I had to laugh and explain a ninja (no-income, no-job, no-assets) loan. Appraisers are getting tougher, and more accurate. I told my brother about no-down payment loans and he instantly said they were a terrible idea (he doesn't pay attention to that type of stuff yet, and no one asked him during the bubble). Imagine a lender/broker saying, "I got these people loans with no income verification, no down payment, and a near forged appraisal". Now imagine he said that to his 10 year old son. What kind of response would that get? Building growth on lies is unsustainable, and a lot of mortgages were written on lies.

Foreclosures are still high in FL, but prices to a large degree have stabilized. Toxic assets are still dying. I think a lot of people in FL are going to have to reacquaint themselves with the profession of caring for retirees. That is probably going to be the only demographic group moving to FL. There are plenty of hi-rise condos for them to move to, or smaller-type ranches. I don't know who's going to move the McMansions.

How fast a region gets out of their downturn is inversely proportional to how deep their hole gets. FL's ue rate will continue to rise after NC's starts falling. The more manufacturing based recession had a deeper and longer impact on NC than FL, and this real-estate based recession will have a bigger impact on FL than NC.

Mobility is a key issue. In the regions that will be hit hardest, you'd expect to leave to go somewhere else. However, the hardest hit areas are the ones with the most excess housing (general RE), which will only make the housing/real-estate issue worse in those regions.

Near 10% unemployment is not good, but it seems like things are not getting worse. We should also consider the general economic mood last spring. It's not a good indicator of the economy, but it is one of economic mood, but the dow was hovering below the 8k range last spring, and has bounced pretty well. 11k may be a little high, but the outlook is generally better than it was a year ago.

Banks are making money the old-fashioned way. Many people are still making mortgage payments and with banks' cost of borrowing (our deposit rate) near zero, they are making a bigger margin on their performing loans than

Jim Caserta

they were a couple years ago when prevailing deposit rates were much higher, even relative to mortgage rates, and especially relative to some of the teaser rates that people got at the peak of the bubble.

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