Posted on 04/28/2007 2:32:45 PM PDT by Sleeping Beauty
The worst economic growth in four years is raising concern that troubles in the U.S. housing market will spread and throw the country into a recession before the year is out.
Nationwide, the economy practically crawled at a 1.3 percent pace in the opening quarter of 2007, the Commerce Department said. That was even weaker than the sluggish 2.5 percent rate in the closing quarter of last year.
The main culprit in the slowdown was the housing slump, which made some businesses act cautiously. The bloated trade deficit also played a role.
Consumers largely carried the economy in the first quarter. But will they stay resilient in light of the troubled housing market, fallout from risky mortgages and rising energy prices?
"The No. 1 question is can the consumer continue to play Atlas while the housing market crumbles around him?" said Richard Yamarone, economist at Argus Research.
Sharpening that question was a private report released Friday that showed that confidence among U.S. consumers dropped to a seven-month low in April as concerns about fuel prices, inflation and home values intensified.
The Reuters/University of Michigan's final index of sentiment declined to 87.1 this month, from 88.4 in March.
A drop in confidence at the start of the second quarter raises concerns that consumer spending, which accounts for more than two-thirds of the economy, will cool in coming months. Less spending would make the economy more vulnerable to the declines in housing and business investment that undermined growth last quarter.
(Excerpt) Read more at seattlepi.nwsource.com ...
Do you know why the Dow reached 13,000 while the economy is faltering?
What's your theory?
In the meantime, in this worst economy of the past 2 weeks, jobs are at an all-time high, unemployment is lower than it was during the 1990’s, and both the DOW and S&P are at record highs.
OOOOOPs! Bush's fault??
I would attack the paper and the writers.........if they were credible. I’ve lived in Seattle long enough to know you don’t take the PI with a grain of salt....you take it with a salt lick.
Why should we!?! This economy is extremely healthy and has outperformed itself tremendously well....Considering we it has managed through the largest attack on this nation homeland, the largest natural disaster in this nation's history, a WOT going on 6 years, and through that artificially high energy prices to boot.
The economy today is robust. One moderating Qtr (or two) does not cause reason for concern whatsoever!
Though of course the MSM have done nothing but spin negative about this economy for the past 5 years. That you buy into it is foolishness.
Of course in 2000 when we had a quarter of NEGATIVE growth (-.5) and another quarter of 0% growth.....the MSM touted the U.S. economy then as the most robust in history while trying to get Al Gore elected.
Ping
There is a lot of money not being spent.
Good. I’m working way to hard and it’s time to take a break.
Were truth to be spoken it's only because an empoison kleptocrat Democrat is not in the Oval Office.
The Seattle PI is the lickspitle to the DNC.
They are preparing for an all-out assault just-in-time to "talk" the economy into a depression for the '08 campaign.
Who knows better? Wall Street or the paper pundit's? Warren Buffet made his billions by knowing. Yes he speculated but when you put up your hard earned cash and you win ...well you've proven you know what you're doin"
When you're in the news room and your speculation is just a guess then we can ignore you.
Walter Williams is one of my heros 'cause he knows what he's talkin about!!!
Not my theory but when operating near its peak, the Stock Market generally operates on the Greater Fool Theory:
It goes like this - you buy something at a high price, but paying too much is okay because you figure you can find a fool greater than you to buy it later.
There is a lot of money not being spent.
Excellent!
I have one theory about that. For the past 5 years or so, just about everybody refinanced their homes and spent that money on all kinds of stuff. It was a consumer boom.
We know they didn't put it in the bank, because there's a negative savings rate in the US.
As interest rates went back up again (13 consecutive times) home prices stabilized and homes were no longer ATM machines. What's worst, monthly payments on those refis went up, so there's some consumer belt tightening going on.
But does anyone have a theory of why the Dow went up?
Money could flow to consumer goods, or money could flow into the stock market. I don't necessarily see "consumer belt-tightening". I see happy people investing in the future of our strong economy.
It goes like this - you buy something at a high price, but paying too much is okay because you figure you can find a fool greater than you to buy it later. Heh, Riodacat. For sure there's a lot of that going on.
I promise I'll give my theory later (and ping you) but here's a hint:
The Dow was dragged up by a handful of companies. Those companies also dragged up the sectors that they are in, which helped. But there is something that all these high-performance companies have in common that's driving the Dow.
No theory here.
I’m spending money almost as fast as my wife is. Got to do our bit, ya’ know.
Some more ammo, hi-cap magazines for the AR, a few odds and ends.
:-)
Again, because the U.S. economy is very healthy. Productivity is up, wages are up, after taxes income is up, unemployment is ridiculously low, interest rates are low (30yr, just went down).....Price to earning ratios are better today than during anytime in the last 10 years...
Just a few of the reasons.....And oh yeah, we are going into our 6 straight year of economic growth (of each and every qtr).
Straw hat selling season.
Companies performance has NO direct effect on stock price. Price moves are market-forces.
From a technical investing viewpoint, that is correct.
From a fundamental investing viewpoint, certain companies increased their earnings this quarter by as much as 88% profit. That's a lot! That pulls money into the market, as well.
So, why the historic record-breaking profits in the middle of very sluggish economic growth -- according to our own Commerce Department?
It simply isn’t sluggish.
“What’s your theory?’
The DOW is -take your pick- a leading or a trailing indicator.
Low unemployment and low inflation are good. The economy is supposed to be slowing if we’re going to have a ‘soft landing.’ Looks to me like everything’s as expected.
Like a locomotive pulling a 150-car train, no matter how hard the brakes are applied, the rate of decrease in the economy will be practically imperceptible at first.
There will be jolts as the slack between the various connection points is taken up, but the sheer inertia of stopping some $13 trillion of national income takes a little while to show real effects.
But we hear the whistle blasting, and still there those who want to cut out around the crossing gates.
Well, not quite. This quarter's growth is not shown on the chart below, but if it were, it would be lower that the very first bar on the chart.
Overall, the chart is trending flat and slightly down. (I draw trend lines for a living, and that's what my eye tells me.)
yes....people were making quick profits for a while while speculating in the housing market, and yes, people got cheap, cheap loans that they probably didn't deserve, but the main housing market is very stable and that is just my opinion.....
Hi Sleeping Beauty,
“We know they didn’t put it in the bank, because there’s a negative savings rate in the US.”
The government uses faulty and incomplete information in computing the savings rate. Did you put money in your 401k? Not included. You paid less taxes, and saved money, but it’s not shown in the “savings rate.” Some googling will find articles on this. That’s just one example. Did you pay off some debt? Not shown as savings, even though it saves you money.
The stock market is going up because 2/3 of the companies reporting earnings are reporting higher earnings than were expected. Stocks are valued by estimating the future earnings of companies. Companies are making good profits, so their stocks are being valued higher. This also bodes well for the employment rate.
The Fed has slowed the economy (on purpose) by raising short term interest rates to slow inflation and let the air out of the real estate boom gently. They usually blow it in this situation by squeezing too hard, but so far, they have pulled it off this time (so far).
The economic cycle still exists, so a recession is coming, just a matter of when not if.
The largest driver of the economy is employment, and we have high employment. In fact, we have a labor shortage in many parts of the country.
Soft landings are hard to pull off, we did manage one in 1995, but there are too many variables to guarantee this landing will be soft.
Point being we have seen positive economic growth (above 0%) for each and every Qtr since the third Qtr of 01 (which is the same Qtr the GWB tax cuts were passed if I am remembering correctly).
I'll take that trend every year of my life.
Exactly right - The whole "we aren't saving as past generations did" is complete BS. Nor did past generations have as much FICA stolen from them....which directly helped to help their savings rates....
Low unemployment and low inflation are good. The economy is supposed to be slowing if we’re going to have a ‘soft landing.’ Looks to me like everything’s as expected.
Well, I like that idea.
As for inflation -- those numbers change because there are so many ways of looking at it. Food and fuel are going up at an alarming rate. Some inflation indices cut those out of the numbers. (For no good reason, as far as I can tell, except to make the numbers look good.)
The Americans have no savings, so they live on borrowing. Interest rates are very high on consumer credit, and growing higher each month.
Even the Federal Reserve can't calculate inflation very well.
The money that used to go into real estate speculation is going into the stock market — as the place where one can make money.
That scenario plays out fairly regularly. At the height of tangible asset price rises at the beginning of the ‘80s, money shifted from hard (tangible) assets to intangible assets (financial instruments) — which began the great bull market of the ‘80s. At that time, real estate prices peaked (along with commodities) — and pretty nearly continued to fall until the beginning of this century.
Rather than real estate (tangible assets) “going up all the time,” it tends to stay the same or decline most of the time but spurt up dramatically for a few years, but of course, cannot continue at those speculative rates for long. Then money starts shifting (rotating) into something else.
Initially, there is disbelief that this is happening because it isn’t heading straight up, and a “sure thing,” which is the phase it enters before it begins to “correct.” Because of these shifts, there are disruptions, dislocations and uncertainties until pretty nearly everybody realizes what is happening — and then the newspapers will write about it as though they created the idea, at which time, things are about to change again.
Simply look at the value of the dollar compared to commodities! It is called inflation (no, not the "Hedonically Adjusted" BLS version..., real life!
Even if you use "Official Consumer Price Index" adjusted data, DOW 13000 is not that spectacular! I will not even address the FACT that taxation of "Capital Gains" totally ignores the impact of inflation!
Don't get me wrong..., dip your toe in and GET OUT while you are ahead and, more importantly, diversify..., diversify..., diversify!
Don't get nailed with the "Dotcom Boom" mentality of the last punctured economic balloon!
I can assure you, your personal economic wellbeing should never be sacrificed due to your political allegiance!
Well, that is the trick question in this thread. The earnings of certain sector leaders are historically high -- outrageously high.
Everything the government has been doing should have resulted in more modest profits, if any. God knows, the consumer isn't fueling this growth.
So ..... ?
It is probably a good time to build the beach house.
Okay, I got you.
I wasn't even considering negative growth. When was the last time we saw that? (I won't pretend to be up on that data.)
If only stocks from American companies, not International ones, were sold on the Dow and buying was restricted American residents then the market would be a viable indicator of our economy.
As it is now, companies with their headquarters in the US who do more business overseas than they do here have their stock bought and sold on the Dow. Investors worldwide buy International stock on the Dow.
That’s my theory?
Well, yes, Mike -- you have a strong working knowledge of this. But let's not overlook the fact that since 2003, our economy has been completely fueled by consumers who took the equity out of their homes (homes they are still living in and now struggling to repay) -- and used that money to shop, shop, shop, shop.
They aren't real estate speculators. And they don't have any more equity to pull out and put into the stock market. You're talking about the big money players. But, still, this isn't the answer about why the Dow has been on a meteoric rise for the past quarter.
As it is now, companies with their headquarters in the US who do more business overseas than they do here have their stock bought and sold on the Dow. Investors worldwide buy International stock on the Dow.
That’s my theory?
You're hot hot hot! You're || <--- this close to being the grand prize winner.
As it is now, companies with their headquarters in the US who do more business overseas than they do here have their stock bought and sold on the Dow. Investors worldwide buy International stock on the Dow.
That’s my theory?
You're hot hot hot! You're || <--- this close to being the grand prize winner.
Here’s the grand prize winner:
Man Made Global Warming.......(/lib spin)
who the hell puts their money in a bank??? i put mine into the stock market!!! if you want to call that negative saving, so be it.
Because we have a fiat economy (the Feds stopped telling the world how much money we print in March 2006, for the first time since 1914);
Because our national spending deficit has reached such a high level of GDP that it has set off international monetary alarms;
Because Iran has started selling oil denominated in Euros and other currencies (bypassing the dollar as the international reserve currency) and may soon insist that the US exchange into Euros before we can buy oil;
And because China, Europe, Russia, and South America backs Iran on this, gleefully, I might add;
Because the US must borrow $10 million each and every day from China to keep our government running
Because the Feds are going to be forced soon to start lowering interest rates, which will further devalue the dollar in the global money market --
-- The dollar has crashed against 13 out of 16 of the world's leading currencies over the past 90 days.
Now let's bring this down to the Dow going up to 13,000 and rising. Most of the companies leading their sectors are making the profits from the rapidly weakening dollar.
Take Apple for instance. In January, they sell 50,000 i-pods in Europe. They accept payment in March in Euros. They exchange the back into dollars -- and they end up with 30 percent more money than they expected! Conversely, When Apple receives an order for i-pods payable immediately -- the order tends to be MUCH higher than Apple expected -- because in the country buying, i-pods are now cheaper than a couple of CDs.
Ipso facto -- outrageously explosive 1st quarter profit reports -- driving the stock market to record highs.
Have at it...
No. That counts as savings. But when we put you into a pool with the rest of America -- and add the pluses and minuses together -- the final number is a minus. In most other countries, including Mexico, it's a plus.
My theory is that if this were a democrat president Wall Street would be paved with confetti and there would be suggestions about allowing a third term.
“The earnings of certain sector leaders are historically high — outrageously high.”
I don’t know exactly who you are referring to, but I’d love to see some names. I don’t understand the concept of “outrageous earnings.” We are Capitalists, the more lawful profit earned, the better.
Earnings in general are not as high as last year, we are dropping below double-digit earnings growth for the first time in a while. The FED is having an effect. If a company can still make higher profits in these conditions, more power to them. If you can make more money this year than last, good for you too! I hope you make “outrageous money!”
The only thing the FED is still worried about: Inflation remains above their preferred target.
I have to go out for a while, so I will probably miss the rest of the conversation. I’l check in later to see what other comments come in. It’s a good subject.
Thanks SaxxonWoods.
I mean’t outrageous in a good way. I should have said “awesome.” Like Apple’s 88 percent.
Hope to see you around on other economic threads. You know your stuff.
Getting rid of SarbOx would probably give the economy a shot in the arm.
Suggest you remember that the decline started in the first quarter of 2007. Do you remember when the DemoCRAPS took over the house and senate? H’mmm, do you suppose the public is wary of the “new” leader of the USA?
Well, inside the US -- the stock market has been doing great since the Dems took over and the WSJ has been very bullish for the past three months. People in the stock market are making BIG money since the Dems got in.
See what I saying? It doesn't really spin very well as a Dem or GOP achievement.
I don't really think politics are involved. This is much more about monetary policy. And, this is a trailing indicator many years in the making.
For folks with large equity holdings, it's a very good thing. For the middle class, it's a risky time because our imports are going to cost a lot more. Most of the stuff in Wal-Mart is an import, for example.
What's SarbOx?
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