Bottom Hunting: The New Economic Pastime

People Be Happy.

Let's just go back to the good old day's. Just about say; 1900 to 1910. Hey; if you don't do right, we'll hang you, shoot you, e.t.c. We need to get rid of a lot of lawyers, not so many police, get rid of all these law's; that are to protect us; from us ,and let us decrease the surface population, by we the smart people, and them the dumb people, the dishonest . Surely we'd lose, one third, to one half right there. I couldn't of said it better myself.

george mcgillacottie of TX @ Feb 10, 2009 03:05:24 AM

website worth viewing

Everyone needs to google Zeitgeist.com and watch the two critical documentaries about our economy and our deeply embedded views that keep us paralyzed.

Linda of CT @ Feb 09, 2009 12:47:33 PM

How Will I Know When It’s Time to Buy?

Housing prices in the Phoenix area have already fallen around 30% from the peak and local real estate experts expect to see the local housing market bottom out this year. But what does that mean for you? How will you know when the market’s bottomed out and it’s the perfect time to buy? There are a couple of strategies you could use:

1) You could wait until prices have been rising again (consistently) -- an as-sure-as-you’ll-get sign that the market’s in recovery. Take care with this strategy -- as you can see from the graphs I’ve posted, housing prices have risen some months even during an overall trend of declining prices. If prices rise consistently for three months or so, it may be a good sign that the downward trend has reversed.

2) Buy when you are ready. Prices may decline more from today’s levels. But because they’re already off around 30% from the peak, you can sleep well knowing that you got a good deal on a home -- even if the price declines a bit more until the market begins its recovery. For signs that you are ready to buy a home, check out last month’s blog post “Now May Be the Time to Buy — Here’s How to Do It.”

3) Buy now because mortgage rates are low. Rates on 30-year fixed mortgages still remain at historic lows. And experts agree that once housing prices begin to rise, so will mortgage rates. So getting in now -- at a low interest rate -- could be a good strategy even if the value of the home you buy declines a bit before the market recovers.

For more, visit www.myphoenixmlsblog.com

MyPhoenixMLS.com of AZ @ Feb 04, 2009 12:57:20 PM

Morons

None of the people who looked at unemployment numbers in the comment section above have even taken into account the U6 figures. This tells me that if their IQ's were one point lower they would be rocks. My best guess would be that they don't even know what those numbers are. I would assume by their comments that they think that more bailout money into the system is a good thing in a deflationary time. They also fail to recognise that every country that has done that has gone into a hyper-inflationary depression where their currency failed. You would think that jacksmith of Texas would have maybe heard something of what Ron Paul has been talking about for the last decade. He does seem a little tipsy on the Barry juice. Barry Soetoro (aka Barack Obama). If you made your financial moves when this recession started in the fall of 2007 you may be sitting alright. To think that B.O. is going to make a difference now is a little late. Hey the impact of every interest move is realized in the economy 18-24 months after the fact. Let's see, treasury bonds are at 0% now. Does that sound like a good investment for those nations that are buying them? Not if our credit rating falls.

Jeff of WI @ Jan 29, 2009 06:19:20 AM

Bottom Hunting

I am not an economist, just an observer of the economy, people, and markets. I think we just hit the bottom. House prices are approaching reasonable or below in all markets except in the extreme places like LA or NYC, and they will slide more before stopping. Houses are starting to sell again, especially repos and fixer uppers. Neighborhoods are welcoming newcomers. People are starting to sensibly shop again. No one I know panicked and sold off or cashed in their retirement or investments. Most corporate executives are responsible, and many banks are doing OK.

This was a long needed correction to greed and stupidity, and it has occurred. Look now for a return to slow and SUSTAINABLE growth fueled by productivity and innovation, not rampant speculation.

Independent of AZ @ Jan 28, 2009 16:16:06 PM

No Bottoms this Year

As grim as your assessment is, it's not very realistic.

1)Unemployment

The most realistic long range forecast I have seen was realeased by the Levi Economic Institute of Bard College:

http://www.levy.org/pubs/sa_dec_08.pdf

Without a stimulus they predict that the GDP will trough in the first quarter of 2010. With a stimulus it will trough in the third quarter of 2009. Without a stimulus unemployment will peak at 10.3% in late 2010. With a stimulus unemployment will peak at 9.1% in late 2010. In the last two recessions unemployment peaked 5 and 7 quarters after the trough in GDP. If that happens this time then even with a stimulus don't expect a peak in unemployment before the fourth quarter of 2010, and it may not even occur before the second quarter of 2011. With no stimulus add two more quarters to each.

2) Housing

For accurate national information I recommend Robert Shiller:

http://www.irrationalexuberance.com/

Real housing prices have fallen 29% from their peak in 2006 but still are 45% above their average from 1890 through 1997. Given that the totla residential housing stock was worth about $27 trillion in 2006, housing owners have lost about $8 trillion in real terms in the last two and a half years. They will have to fall 30% from their current value to get to the secular average. If they do, the total lost housing equity will be nearly $14 trillion. At the rate they are falling that will take until the fourth quarter of 2010. However, in the last mini housing bubble in the late 1980's housing prices fell sharply until unemployment peaked in 1991 and then continued to fall slowly for another 6 years after that.Historically, there have been cases of national housing prices falling for decades. Real housing prices in the United States fell about 50% from 1894 to 1921. Residential urban land prices have fallen every year in Japan since 1990 for a total of about 40%. In Amsterdam housing prices fell 80% from 1734 until 1816, an 82 year bear market. In short expect the free fall to continue for 2 years, but the bottom could be decades away. The upside is that housing will be much more affordable in the future.

3)Consumer Confidence

As you said, consumer confidence tracks unemployment so don't expect it to bottom out until late 2010 at the earliest.

4)Stock Market

The stock market is a lagging indicator. In the last recession it bottomed out 11 months after the end of the recession. Furthermore, this is not a typical recession. Kenneth Rogoff released a paper recently analyzing financial cises worldwide:

http://www.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf

The reason why I am citing this paper is because one of it's findings was that stock markets bottomed on average 1.5 years after the trough in GDP. If this is average don't expect the bottom in the stock market to occur until the first quarter of 2011 with a stimulus, or the third quarter without.

In short, nothing will bottom this year.

Mark A. Sadowski of DE @ Jan 28, 2009 12:12:43 PM