Thread: The strongest economy in the world

Mortgage concerns hit US markets

Traders are trying to work out if the current problems will continue

US shares have tumbled amid fears that problems in the mortgage market may prompt a global credit crunch. The main Dow Jones index fell 387.18 points, or 2.8%, to 13,270.68. The S&P shed 3% and the Nasdaq lost 2.2%.
European indexes had slumped earlier after BNP Paribas froze three funds saying the market for some of the assets they contained had disappeared.
At the same time, the European Central Bank said it was pumping money into the banking market to boost liquidity.
There also were reports that the US Federal Reserve was doing something similar to ensure that there was enough cash available for banks to use.
Analysts said that the markets would remain volatile in the near future.
"Markets are taking this latest news seriously with the risk appetite on the back foot," said David Corbell, analyst at IFR Markets.
Spreading out
The latest trigger for the slump was the announcement by BNP Paribas that it was suspending the three investment funds worth 2bn euros (£1.35bn) because of problems with the US sub-prime mortgage sector.
Sub-prime lenders offer loans to consumers with a poor credit history.
You're looking at the foundation of a marketplace that has imploded somewhat


Steve Goldman, Weeden & Co


In recent months, the number of loan defaults has increased because of higher interest rates, raising concerns that the wobble in the housing market will affect other parts of the economy and then start hurting other nations.
The worry is that should banks make losses then it would hurt their earnings and their profitability making them less willing to fund the takeovers and buyouts that have underpinned much of the stock markets' recent gains.
The recent collapse of American Home Mortgage, the 10th largest lender in the US, has intensified those concerns.
"You're looking at the foundation of a marketplace that has imploded somewhat," said Steve Goldman, an analyst at Weeden & Co.
Tighter times
At the same time, banks have suddenly started charging significantly more for the money they lend to each other, signalling that they are looking to limit their risks, analysts said.
In response, the European Central Bank (ECB) said on Thursday that it had pumped 95bn euros into the eurozone banking market to allay fears about a credit crunch and lack of liquidity.

The conditions for the marketplace working through these issues are good


President George W Bush


The move represented the ECB's single largest intervention in the banking sector since the immediate aftermath of the 9/11 attacks on the US in 2001.
Calling it a "fine-tuning operation", the ECB made the money in the form of loans, an offer taken up by 49 banks and other financial institutions.
In the US, the Federal Reserve, also was reported to have taken similar action, pumping about $24bn (£12bn) into the US banking system.
Analysts said that a credit crunch - when it becomes harder for banks, companies and consumers to get access to loans and cash to run their operations - was a serious occurrence that could lead to a recession.
Soothing words?
The declines in the US markets came despite attempts by President George W Bush to calm market fears.
Speaking after a meeting with his top economic advisers, President Bush acknowledged there had been "disquiet" on Wall Street over the housing slump.
But President Bush said he believed the markets were set for a "soft landing".
President Bush said he expected the markets to focus increasingly on the underlying health of the global economy and robust US prospects.
"The underpinnings of our economy are strong," he said, adding that second-quarter growth had been strong, while both inflation and unemployment remained low.
"So the conditions for the marketplace working through these issues are good. My hope is that the market, if it functions normally, will be able to yield a soft landing."

BBC NEWS | Business | Mortgage concerns hit US markets

BBC

Last Updated: Monday, 6 August 2007, 23:12 GMT 00:12 UK
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US lender on brink of bankruptcy

American Home says it was the tenth biggest retail mortgage lender

US lender American Home Mortgage has filed for bankruptcy, after laying off the majority of its staff last week. The demise of one of the country's largest independent home loan providers is the latest case of a business suffering from the US housing slump.
Despite these worries, Wall Street rallied on Monday with leading share indices closing up sharply.
The benchmark Dow Jones industrial average closed up 286.87 points, or 2.1%, at 13,468.78.
Market volatility
The strong gains reflected continued volatility on the markets, the Dow Jones having fallen by a similar amount on Friday.
American Home Mortgage's woes are the lastest to afflict the mortgage investment market.
Earlier this year the firm had over seven thousand employees, but by Friday only 750 staff remained.
Repeated interest rate rises have pushed up loan repayments, leading to a rise in defaults and hitting mortgage lenders hard.
While the sub-prime market - the sector that caters for the riskiest borrowers - has been the most obvious to suffer from defaults, it is not alone.
American Home Mortgage offered loans that were categorised between prime and sub-prime.
It also provided the less common mortgage with adjustable interest rates. Most US mortgages have fixed rates.
As the firm files Chapter 11 proceedings - the US process to seek bankruptcy protection - Deutsche Bank, Wilmington Trust and JP Morgan Chase are American Home Mortgage's three largest creditors.

BBC NEWS | Business | US lender on brink of bankruptcy

Creating jobs by devaluing the Dollar isn't good long-term economics. I recall Sterling being just 1.4 to the $ 1 just few years ago, now it is above $ 2.00 For those who don't understand the implications of this, it makes exports cheaper and imports more expensive, so yes it will create more American jobs, but where does this policy end? Will GWB be prepared to allow the Dollar to become worthless?

Ultimately GWB has turned the whole country into a garage sale. American businesses and other assets which once cost, say, GBP 10,million to buy can now be bought for GBP 7, million with this devaluation. When enough American business has been bought up on the cheap it will be in the interests of the foreign owners to revaulue the currency and let the American people suffer. It will be painful to watch but Treasury bonds might be a good investment just before Hilary takes office next year.

and wasn't it just a few months ago that GWB was touting the 'ownership economy'....why weren't his advisors aware that these 'owners' were in no position to 'own' a mortgage?

or were they, and they just didn't care because it made a good slogan?

GWB has turned the worlds biggest creditor nation, under Clinton, into the worlds biggest debtor.
He has presided over a period of unprecedented USD weakness.
Corporate & political corruption scandals thrown in for good measure.
Lost more senior administration people than anyone I can remember.
Small matter of a Lost War.
America's stock has diminished, worldwide.

I obviously underestimated the power of the Presidency.

Now here's the Rub- the people that stick up for him call themselves Conservative.

Originally Posted by sabang

Now here's the Rub- the people that stick up for him call themselves Conservative

And have no sense of irony in professing a fear of a over-spending welfare state under a Democrat Govt.

there are two ways to run the US govt....with taxes or debt.

republicans prefer to pass along the cost to their children.

Average Incomes Fell for Most in 2000-5

By DAVID CAY JOHNSTON
Published: August 21, 2007
Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.


While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.
The combined income of all Americans in 2005 was slightly larger than it was in 2000, but because more people were dividing up the national income pie, the average remained smaller. Total adjusted gross income in 2005 was $7.43 trillion, up 3.1 percent from 2000 and 5.8 percent from 2004.

Total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.

Link and Entire: http://www.nytimes.com/2007/08/21/bu...in&oref=slogin

Things are looking up. More hiring in the West. Check out these plumb positions.

Want a job? Go West, where ads unanswered

Record low unemployment has created tough conditions for businesses

Ellen Wznick / AP file
John Francis, who owns the McDonald’s in Sidney, Mont., said he tried advertising in the local newspaper and even offered up to $10 an hour to compete with higher-paying oil field jobs. Yet the only calls were from other business owners upset they would have to raise wages, too.


Updated: 3:27 p.m. PT Aug 24, 2007




HELENA, Mont. - The owner of a fast food joint in Montana’s booming oil patch found himself outsourcing the drive-thru window to a Texas telemarketing firm, not because it’s cheaper but because he can’t find workers.


Record low unemployment across parts of the West has created tough working conditions for business owners, who in places are being forced to boost wages or be creative to fill their jobs.


John Francis, who owns the McDonald’s in Sidney, Mont., said he tried advertising in the local newspaper and even offered up to $10 an hour to compete with higher-paying oil field jobs. Yet the only calls were from other business owners upset they would have to raise wages, too. Of course, Francis’ current employees also wanted a pay hike

Entire & Link: Want a job? Go West, where ads unanswered - Stocks & Economy - MSNBC.com

The new currency when the dollar collapses:

House rich, cash poor. I'll pass, thanks.

“Houses out here are almost like a 401k,” said Talbot, the first-time home buyer from suburban San Diego. “It grows and grows until you get older and you need it. It grows and grows until you get older and you need it.“But a year or so ago, all that changed,” she said.

Link: As housing prices soared, incomes hovered - Real Estate - MSNBC.com

The excerpt below is from a question and answer report. The younger generations may have more challenges, as debt is a socially engineered phenomenon. It's interesting why American students (and the public in general) is so passive and accepting.

Q: Why are things so bad, financially?

A: Largely because the cost of college has gone up so much. Tuition inflation has been running three times the rate of regular inflation for years now. Add to that the fact that only 40 percent of kids are able to get through college in four years (the five- and six-year plans are much more expensive). Then add that parents are trying to pay for their own retirements simultaneously, and you start to understand why kids are emerging from school with an average of $19,000 in student loan debt and another $3,000 to $4,000 in credit card debt —and why 65 percent end up moving back home to live with their parents.

Entire: Freshman finance: 7 money managing tips - Money Matters - MSNBC.com

Dollar's retreat raises fear of collapse


Dollar's retreat raises fear of collapse - International Herald Tribune

Strongest economy in the world.



Where is that Navy man now?

Sufficiency Economy Sufficiency Economy Sufficiency Economy Sufficiency Economy Sufficiency Economy Sufficiency Economy Sufficiency Economy

Thats the answer......

Lot's of discussion about wages, housing and general cost of living.

Here's an article about the rising cost of car ownership and how many are overspending on cars and relying on high debt and long-term loans just to drive.

If you're constantly broke and can't figure out why, the answer may be sitting in your driveway.
Americans are spending more on their vehicles than ever before -- more than $8,000 a year on average -- and it's driving some to the breaking point.

Credit counselor Bill Thompson of Jacksonville, Fla., estimates that one out of every four clients his agency sees has overspent -- sometimes dramatically -- on a car.
"They may be spending 15% to 20% of their (take-home) pay on just the car payment," said Thompson, who supervises credit counseling for the nonprofit Family Foundations, "and that doesn't include insurance, gas, maintenance and all the other costs of owning a vehicle.

And sometimes there's more than one whopping payment. Sandra McGeary, a counselor at Consumer Credit Counseling Services of Western Pennsylvania, says she regularly sees middle-class families struggling with two payments in the $400 to $500 range. The burdens are so big that it doesn't take a major disaster, like a job loss, to send them over the edge.
"This fall they started coming in saying, 'We were doing so well. We don't know what happened,' " McGeary said. "I'll ask, 'Where did you cut back in your budget when gas prices went up?' and they'll usually say, 'What budget?' . . . A lot of times they don't know how much they can really afford, and they didn't cut back elsewhere" when their transportation expenses rose.

Once they've bought, they're stuck.

Once you've committed to a car payment, though, your options are few, particularly if your loan is greater than the car's value. Whether you drive it or not, you've got to make the payments, and you've got to insure it.

We're prolonging the agony

The signs of vehicular overspending are everywhere:

• Average transportation spending grew more than 12% between 1999 and 2005, according to the U.S. Bureau of Labor Statistics, at a time when median income growth was basically flat. Even when adjusted for inflation, we're spending more: 8.3% more in 2005 than in 1995, with people in the lowest and highest income brackets accelerating their spending the most. <LI style="PADDING-RIGHT: 0in; MARGIN-TOP: 0in; PADDING-LEFT: 0in; FONT-SIZE: 10pt; MARGIN-BOTTOM: 12pt">More than 80% of car loans are for terms longer than four years (which, a couple of decades ago, was considered a long loan). The average loan term has grown from just under four years and seven months in 1990 to over five years and four months in 2006. Longer loan terms mean that people build equity in their car more slowly, which in turn means that borrowers will be "upside down" on their vehicles -- owing more than they're worth -- for three years or more on the typical purchase. <LI style="PADDING-RIGHT: 0in; MARGIN-TOP: 0in; PADDING-LEFT: 0in; FONT-SIZE: 10pt; MARGIN-BOTTOM: 12pt">One out of four -- 25.6% -- of cars that are financed include debt rolled over from a previous vehicle, according to vehicle research site Edmunds.com. By the end of last year, the average amount of negative equity in these deals was more than $4,000.
• Rolling debt from one car to another is, in case you didn't know, a terrible idea. You'll pay higher interest rates because so much of what you owe isn't secured by the car itself.

And being "upside down" can really leave you up a creek if the car is totaled or stolen. You can protect yourself somewhat with so-called gap insurance, which covers the difference between what you owe and what you get from your insurer, but that's another hit on your wallet.

Entire: The real reason you're broke - MSN Money

This article focuses on a dental student and a law student, but the costs have increased 100&#37; for everybody. Even State Unies. The U.S. government's solution: raise the lending cap. Just let them borrow more money. When the ceiling in reached, these students can borrow from privates institutions. Once a person gets into that much debt as such a young age, they'll never get out of it.

Tuition zooms; so do fears over student loans

By Marcy Gordon
The Associated Press



BOB CHILD / AP
Dentist Paul-Henry Zottola, in Rocky Hill, Conn., is paying $1,600 a month on a student loan as well as the payments on his mortgage and a loan he took out to start his practice.


The near-doubling in the cost of a college degree the past decade has produced an explosion in high-priced student loans that could haunt the U.S. economy for years.



While scholarships, grant money and government-backed student loans — whose interest rates are capped — have eased the burden for some, many families and individual students have turned to private loans, which carry fees and interest rates that are often variable and up to 20 percent.
More people in the next generation of workers will be so debt-burdened they will have to delay home purchases, limit vacations, even eat out less to pay loans off on time.


Kristin Cole, 30, who graduated from Michigan State University's law school and lives in Grand Rapids, Mich., owes $150,000 in private and government-backed student loans. Her monthly payment of $660, which consumes a quarter of her take-home pay, will jump to $800 in a year or so, confronting her with stark financial choices.


"I could never buy a house. I can't travel; I can't do anything," said Cole, a legal-aid worker. "I feel like a prisoner."


Parents are still the primary source of money for many students, but the dynamics were radically altered in recent years as tuition costs soared and sources of readily available and more costly private financing made higher education seemingly available to anyone willing to sign a loan application.
Students with no credit history and no relatives to co-sign loans (or co-signing parents with tarnished credit) were willing to bet that high-priced loans were a trade-off for a shot at the American dream. But high-paying jobs are proving elusive for many graduates.


"This is literally a new form of indenture ... something that every American parent should be scared of," said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers.

Entire: Business & Technology | Tuition zooms; so do fears over student loans | Seattle Times Newspaper

Nobody really knows what, if anything, will happen with the American financial markets. Here is a snippet from an article about "Black Monday" which happened on October 19, 1987. The U.S. financials dropped 23&#37; in one day. I still believe in the regression (ROM) in general however. Some similarities of conditions in 87 and today. At the bottom there is a link to this chart and the entire article.

Chart not working. Oops.

See link if you care. Apologies:

Could the Crash of '87 happen again? - Eye on the Economy - MSNBC.com

this should probably be in the 'funny pics' thread, but it isn't a cartoon or a photoshopped image.....it's genuine.



looks like everyone's having a good laugh.

http://www.nytimes.com/2007/10/16/wa...on/16bush.html

earl took the time to give me a red for the above post, but didn't respond to it here on the thread.

why's that earl?

and while i have your attention, what are your thoughts on bush standing in front of sign that says 'fiscal responsibility'?

Treasury Secretary issues a warning.

Paulson warns of damage to come

By Ben White in New York and Eoin Callan in Washington
Published: October 16 2007 19:32 | Last updated: October 17 2007 00:43

Hank Paulson, the US Treasury Secretary, warned on Tuesday that the downturn in the nation’s mortgage market would burden the economy “for some time” as several big banks, the largest homebuilder and a major construction equipment maker all highlighted the growing impact of the housing decline.


Mr Paulson’s grim remarks came as James Owens, CEO of Caterpillar, the equipment maker, called the current housing decline the worst since the second world war. DR Horton, the largest US homebuilder, said nearly half its orders were cancelled in the last quarter.


Taken together with discouraging bank earnings, the housing news helped push stocks lower and bond prices higher as investors worried about the possibility of a US economic slowdown.[/quote]


Entire: FT.com / World - Paulson warns of damage to come

This may be an exaggeration, but U.S. Auto-Loan dilinquincies were at a record high recently. subprime, Alt-A + auto loand + almost $1 trillion in credit card debt, higher gas prices eating into consumer spending to pay bills and feed 70&#37; of the economy.

This may be a recipe for the perfect financial storm. We'll have to wait and see.

The $915B bomb in consumers' wallets

Americans have record credit-card debt and banks are starting to sweat an uptick in default rates, reports Fortune's Peter Gumbel. Why some fear this could be the next subprime.


By Peter Gumbel, Fortune
October 30 2007: 1:15 PM EDT

(Fortune Magazine) -- This past summer's subprime meltdown involved about $900 billion in now-suspect securitized debt, reckless lending, and consumers who buckled under the weight of loans they couldn't afford. Now another link in the consumer debt chain - credit cards - is starting to show signs of strain. And the fear that the $915 billion in U.S. credit card debt (an uncannily similar figure) may blow up has major financial institutions like Citigroup, American Express, and Bank of America strapping on their Kevlar vests.
Last month, as banks reported their worst quarterly results since 2001, concerns about rising credit card delinquencies began to make their way onto earnings announcements alongside mentions of subprime woes


First Citigroup (Charts, Fortune 500), reporting a 57% decline in earnings, cited higher consumer credit costs and said it would put aside $2.24 billion in loan-loss reserves to cover future defaults.

Link: The $915 credit-card bomb in consumers' wallets - Oct. 30, 2007

Originally Posted by Milkman

This may be a recipe for the perfect financial storm.

agreed. but didn't you think it would have happened by now? jesus christ, oil is nearly $100/barrel and hundreds of thousands of familes are being thrown out of their houses.

Originally Posted by raycarey

Originally Posted by Milkman

This may be a recipe for the perfect financial storm.

agreed. but didn't you think it would have happened by now? jesus christ, oil is nearly $100/barrel and hundreds of thousands of familes are being thrown out of their houses.

The final effects of the subprime have not occurred yet. There will be more ARMs re-adjusting upward in 2008. Higher gas prices, if they stay high and/or increase will eat into disposable income that could be used to: 1) pay off consumer debts, and 2) buy things.

I think the next 2 years will be the window of time to see what, if anything, happens.