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[NickF1011]

Auto manufacturers will be heavily affected by this recession, especially ones that are unprofitable.

 

During the last recession, in 2001, there was a big budget surplus, which made it really easy for extra government spending to boost economic growth and consumers were not as heavily in debt and credit was more freely available.

 

Consumers are two-thirds of total U.S. economic output and they spent the USA out of the 2001 recession.

 

This time around the consumer is in debt up to his eyeballs, there is a credit crunch due to the Wall Street thieves, there is no more home equity bank, gasoline is $3 a gallon as well as heating oil, and there have been no gains in real income, so the consumer will not be spending the US out of this recession.

 

This recession is going to be more severe and long-lasting than the last one, so buckle up.

 

Thanks for the warning, Mr. Wall Street. I'll start stuffing money under my mattress tonight.

[RichardJensen]

If you REALLY REALLY want to torture yourself sometime, try to find a video store that still rents it.

Bet they've got it here:

 

http://www.siouxfallsdvdstore.com/

 

 

Used to be a paint store. The word "FUN" is made up out of the "P" in "Paint" with the loop cut off for an "F", the "D" in "Diamond Vogel", as well as the ascenders in the "d" and "l", for a "U", and the "N" is from "PAINT".

 

This is the inside

 

http://www.siouxfallsdvdstore.com/video8.html

 

And trust me, that camera is not distorting things that much. The place is full of plants, and a friendly black cat who is permanently gray thanks to the quantity of dust there.

 

Do I go there?

 

Yes. It's the only store in town with Antonioni movies, "2001", as well as such classics as "Support Your Local Sheriff".

[mlhm5]

I'm with you up to a point...

 

Real estate values, however, should eventually trend upwards again. I mean, it's not like people will stop wanting to live on the coasts, closer to work/good schools, etc.

 

We may never again see the kind of "milk the cow till its dry" run on home equity that we did the first half of this decade, but we will see homes continue to provide equity to home owners.

 

Also, cars will continue to wear out, and if manufacturers like Ford improve their focus on leases, they should be able to weather this downturn. IIRC, Ford (among other things it lost in the early 00s) lost its focus on leasing, and ended up becoming a marginal player there before the Fusion, etc. I could try and dig up an article about that, but the search terms generate so much crap that it's hardly worth it.

 

 

If you bought real estate from late 2004 - 2007, and a lot of people did. In fact many people took a second mortgage and bought a investment property. Well with housing prices dipping up to 20+% in some areas, those properties are under water, foreclosed, or unsellable.

 

These properties may take years to sell which means the home equity bank is closed and the consumer is in debt up to his eyeballs.

 

If anyone of those people needs a replacement vehicle, IMO they will be looking to buy used not new.

[RichardJensen]

This recession is going to be more severe and long-lasting than the last one, so buckle up.

Yeah. And Brady is not going to get sacked either.

 

You see what you want to see.

 

Consumer debt will hamper the speed of the RECOVERY, it should not affect the LENGTH of the recession.

 

I wonder, do you even know what a recession is?

[NickF1011]

If you bought real estate from late 2004 - 2007, and a lot of people did. In fact many people took a second mortgage and bought a investment property. Well with housing prices dipping up to 20+% in some areas, those properties are under water, foreclosed, or unsellable.

 

These properties may take years to sell which means the home equity bank is closed and the consumer is in debt up to his eyeballs.

 

If anyone of those people needs a replacement vehicle, IMO they will be looking to buy used not new.

 

Hmmm...I bought a house last year. Of course, housing market here isn't quite what it is in some other places in the country. I could probably already sell at a profit if I wanted to.

[RichardJensen]

Well with housing prices dipping up to 20+% in some areas, those properties are under water, foreclosed, or unsellable.

Presently under water, foreclosed, etc....

 

Your failure to understand the impact debt has on GROWTH vs. an actual DECLINE IN GDP suggests that you should spend more time learning about economics, and less time quoting the harpies that you agree with.

 

Furthermore, the housing boom in Cali was born from the housing slump there in the early 90s.

 

As long as, macroeconomically, things are sound, industry specific issues (e.g. housing, or in the early 90s, defense) tend to sort themselves out over time.

[mlhm5]

Economists expect it to last for two quarters with slow growth for about 6 months to a year after that.

 

No one is forecasting that we will not have a recession and there is no consensus that it will last only two quarters. Just take a look at the consumer. He is tapped out and cannot spend the US out of this recession. The home equity bank is closed.

 

(Associated Press) - U.S. personal bankruptcy filings jumped 40 percent in 2007 due to rising mortgage payments, job losses and other financial pressures.

 

"Concern is mounting in the United States that Americans are struggling to keep up on their car loan payments, forcing big lenders to hire more collectors and putting more pressure on automakers already hurt by sagging sales."

 

NEW YORK (CNNMoney.com) -- Mortgage payments are set to jump. Home prices have plunged. "I'm outta here."

 

Homeowners are abandoning their homes and, more importantly, their mortgages, rather than trying to keep up with rising payments on deteriorating assets. So many people are handing their keys back to lenders that a new term has been coined for it: jingle mail.

[suv_guy_19]

Just take a look at the consumer.

 

Well there's your problem....if there's only one consumer....

[mlhm5]

Presently under water, foreclosed, etc....

 

Your failure to understand the impact debt has on GROWTH vs. an actual DECLINE IN GDP suggests that you should spend more time learning about economics, and less time quoting the harpies that you agree with.

 

Furthermore, the housing boom in Cali was born from the housing slump there in the early 90s.

 

As long as, macroeconomically, things are sound, industry specific issues (e.g. housing, or in the early 90s, defense) tend to sort themselves out over time.

 

Are you reading the news? Do you think we have strong fundamentals? Aside from a house of cards built on a mountain of debt, everything is fine.

 

- NEW YORK (Thomson Financial) - The ISM composite non-manufacturing index data came in well below even the most pessimistic expectations

 

The 44.6 print in January, if sustained through the quarter, implies a 0.3% quarter-over-quarter decline in annualized GDP growth in the first quarter,' King wrote. 'The business activity index print of 41.9 implies a 1.0% decline in GDP in 1Q.'"

 

The GDP is down 1% for the 1Q 2008 if it stays at this level so call it down 0.7% for Q1.

Edited February 6, 2008 by mlhm5

[RichardJensen]

No one is forecasting that we will not have a recession and there is no consensus that it will last only two quarters. Just take a look at the consumer. He is tapped out and cannot spend the US out of this recession. The home equity bank is closed.

Welcome to Economics 101:

 

Recession: A period of no GDP growth, or declining GDP.

 

Recovery: The period following a recession when GDP growth returns to historic norms.

 

What, we may ask, fuels GDP growth?

 

Among other things, population growth, increases in productivity, and replacement of less profitable industries with more profitable ones.

 

Consumer spending, while the primary driver of the US economy, is =NOT= the primary driver in GDP.

 

GDP measures the =production= of marketable goods and services.

 

Consumer spending is disposable income which is spent, rather than saved. This includes money spent on debt service.

 

WHAT THIS MEANS TO YOU:

 

GDP growth indirectly increases spending. Period.

 

The rate at which GDP growth increases spending depends on a number of factors, however, it remains a general rule that GDP growth will increase spending by economic participants (businesses and individuals).

[RichardJensen]

Are you reading the news?

Have you ever taken an Econ course?

 

If so, your professor would be very disappointed in you.

 

Without taking too much credit for elucidating economic principles, READ MY PREVIOUS POST, and then try and divorce yourself from this ludicrously inaccurate media harpy fueled direct relationship between GDP and consumer spending.

[Deanh]

Welcome to Economics 101:

 

Recession: A period of no GDP growth, or declining GDP.

 

Recovery: The period following a recession when GDP growth returns to historic norms.

 

What, we may ask, fuels GDP growth?

 

Among other things, population growth, increases in productivity, and replacement of less profitable industries with more profitable ones.

 

Consumer spending, while the primary driver of the US economy, is =NOT= the primary driver in GDP.

 

GDP measures the =production= of marketable goods and services.

 

Consumer spending is disposable income which is spent, rather than saved. This includes money spent on debt service.

 

WHAT THIS MEANS TO YOU:

 

GDP growth indirectly increases spending. Period.

 

The rate at which GDP growth increases spending depends on a number of factors, however, it remains a general rule that GDP growth will increase spending by economic participants (businesses and individuals).

recession or no recession...this is the worst i have seen sales in 20 years....which does include the actual recession we went thru....

[NickB]

Presently under water, foreclosed, etc....

 

Your failure to understand the impact debt has on GROWTH vs. an actual DECLINE IN GDP suggests that you should spend more time learning about economics, and less time quoting the harpies that you agree with.

 

Furthermore, the housing boom in Cali was born from the housing slump there in the early 90s.

 

As long as, macroeconomically, things are sound, industry specific issues (e.g. housing, or in the early 90s, defense) tend to sort themselves out over time.

 

Let's hope so, but living in California and seeing what it going on here makes me want to side with chicken little. Home prices are still way beyond reach of the average middle class family. When a 2 earner income family purchases a $500,000 dinky condo with a $300/month HOA fee and a 1 hour commute to work each way, I just don't see where they extra $300.00/month for a new car payment fits in. Almost everyone I know is paying more in gas each month than they would on a Mercedes lease payment. They are also starting to sock money away for maintenance in lieu of trading up to a new car, which is exactly what I've been doing. Granted this is all anecdotal, and economists probably have it right, but it's just so hard to ignore what you see with your own eyes every single day. Some how I just don't see this as lasting only one or two quarters.

[NickF1011]

Well there's your problem....if there's only one consumer....

 

No kidding. I've spent more money in the past year than I spent the rest of my life put together more than likely, and that's without tapping one dime into my home equity.

[mlhm5]

The GDP is declining. Don't you read the papers? Who do you think drives the GDP? The consumer does or did.

 

My guess it will decline 3+ per cent from 4Q 07 to 4Q 08.

 

Get ready for another 1 per cent federal funds rate again, the Fed will cut the present rate by another 200 basis points and don’t bet on that move to save declining corporate profits or tumbling stock prices.

Edited February 6, 2008 by mlhm5

[RichardJensen]

Do you think we have strong fundamentals?

Yes.

 

The US banking industry is far more sound than it was in the early 90s recession (we have had no S&L scandal).

 

Equity ownership is more widespread than ever before. Corporate transparency is better than it was in 2001/2002 and the early 90s (compare the accounting and investment bank "pump and dump" shenanigans of 2001/2002, or the junk bond scandals that led into the 90s recession)

 

Service industries are, for the most part, more recession proof than manufacturing.

 

The dollar is not overvalued vs. foreign currency, unlike the early 90s recession and the 2001/2002 recession.

 

The US labor force is definitively more flexible than the early 90s, and more productive.

 

=====

 

See, unlike you, I don't make it a habit to believe every harpy that screeches bad news from the pages of a magazine or the internet.

[NickF1011]

The GDP is declining. Don't you read the papers?

 

Hmm...the last reported GDP number for Q4 2007 was an INCREASE of 0.6%, with 2.2% growth for 2007 as a whole. Hmm...increases don't look like declines to me. Q1 08 GDP may be a different story, but those numbers won't be out for another couple of months.

[RichardJensen]

recession or no recession...this is the worst i have seen sales in 20 years....which does include the actual recession we went thru....

Of course, Ford had a bigger chunk of the market back then too.

[grbeck]

recession or no recession...this is the worst i have seen sales in 20 years....which does include the actual recession we went thru....

 

How much of this is because people just don't need a new vehicle? When I was a kid in the 1970s, if a vehicle reached 100,000 miles, it was definitely time for a new car. Some of the smaller American and European cars were worn out before that milestone.

 

Many vehicles started to rust after 4-5 years, and interiors often showed serious sun damage during that timeframe (that rich Corinthian leather wasn't all that durable).

 

Today people expect cars to last for 150-200,000 miles, and rust just isn't the problem it used to be.

 

We could afford a new car, but really don't need one, so we aren't buying...plus, I must say that, having been to both the Philadelphia and Washington, D.C., auto shows, I didn't see anything that really made me want to trade. I like not having a car payment. Guess that isn't helping the economy much...

Edited February 6, 2008 by grbeck

[Deanh]

Of course, Ford had a bigger chunk of the market back then too.

for sure....but my phone continued to ring...people are wary of spending right now, and the home equity that supplied the down paymen is now no longer a consideration....

[Deanh]

How much of this is because people just don't need a new vehicle? When I was a kid in the 1970s, if a vehicle reached 100,000 miles, it was definitely time for a new car. Some of the smaller American and European cars were worn out before that milestone.

 

Many vehicles started to rust after 4-5 years, and interiors often showed serious sun damage during that timeframe (that rich Corinthian leather wasn't all that durable).

 

Today people expect cars to last for 150-200,000 miles, and rust just isn't the problem it used to be.

 

We could afford a new car, but really don't need one, so we aren't buying...plus, I must say that, having been to both the Philadelphia and Washington, D.C., auto shows, I didn't see anything that really made me want to trade. I like not having a car payment. Guess that isn't helping the economy much...

not sure i agree...99% of trade ins have less than 60k on the clock....

[NickF1011]

How much of this is because people just don't need a new vehicle? When I was a kid in the 1970s, if a vehicle reached 100,000 miles, it was definitely time for a new car. Some of the smaller American and European cars were worn out before that milestone.

 

Many vehicles started to rust after 4-5 years, and interiors often showed serious sun damage during that timeframe (that rich Corinthian leather wasn't all that durable).

 

Today people expect cars to last for 150-200,000 miles, and rust just isn't the problem it used to be.

 

Well, the other side to that is that people are driving a lot more now than they were in the 1970's. I'll probably have 100,000 miles on my '04 Mazda6 within the next 12 months.

[RichardJensen]

Who do you think drives the GDP?

 

Get ready for another 1 per cent federal funds rate again, the Fed will cut the present rate by another 200 basis points and don’t bet on that move to save declining corporate profits or tumbling stock prices.

1) You have, once again, justified this pic:

 

 

CONSUMERS DO NOT DRIVE THE GDP.

 

GDP is the sum of goods PRODUCED NOT CONSUMED by a country.

 

What does the P stand for?

 

PRODUCT

 

It is driven by all the factors I listed already.

 

Growth in:

• workforce population
  
• worker productivity
  
• profit margin
  

DO YOU SEE CONSUMER SPENDING ANYWHERE IN THAT LIST???????????????????????

 

To the extent that GDP growth is used to fund CONSUMER DEBT SERVICE, CONSUMER DEBT will reduce DEMAND for goods and services, thus INDIRECTLY impacting GDP GROWTH.

 

2) Interest rate reductions will make it possible for consumers with good credit to reduce debt service costs. INCREASING DISPOSABLE INCOME.

 

=======

 

This will be my last response to you until you start making sense.

Edited February 6, 2008 by RichardJensen

[NickF1011]

2) Interest rate reductions will make it possible for consumers with good credit to reduce debt service costs. INCREASING DISPOSABLE INCOME.

 

Darn tootin'!! My credit is excellent. Fortunately though, I have no need to use any of it. Only thing I "owe" money on is my mortgage.

[grbeck]

not sure i agree...99% of trade ins have less than 60k on the clock....

 

 

Just out of curiosity...what percentage would you estimate are upside-down on the loan? And is this problem increasing or decreasing?

Edited February 6, 2008 by grbeck