The Dreaded 'R' Word - Recession

On this day in history...

Benjamin Franklin wrote "There never was a good war or bad peace" in 1773.

Alexander Hamilton appointed 1st Secretary of Treasury in 1789.

Stephen Foster's song, "Oh! Susanna" was first performed at a saloon in Pittsburgh, Pennsylvania on September 11, 1847.

1st newspaper cartoon strip was printed in 1875.

1st commercially successful electric bus line opened in Hollywood in 1910.

Spain left the League of Nation due to Germany joining in 1926.

Boulder Dam was dedicated by President Franklin D. Roosevelt in 1936.

Jewish ghettos of Minsk & Lida Belorussia were liquidated in 1943.

1st mobile long-distance car-to-car telephone conversation in 1946.

The twin towers of the World Trade Center in New York City disintegrated after being hit by 2 commercial airliners hijacked by Al Qaeda terrorists in 2001 killing 2793 and unfortunately more due to health risks that occurred from this disaster.

I was originally not going to put this one in because we all should be so firmly aware of it, but an article in yesterday's USA Today entitled, "Is 9/11 Becoming Just Another Calendar Date?" brought back feelings that I had last year in wondering the same.

In December 2001, this date was also proclaimed Patriot's Day by the US Congress.


The Dreaded 'R' Word - Recession

Even the Fed appears to be concerned about the reality of an economic slowdown. It has to. The jobs report showed that August was the first monthly drop in four years. This almost solidified the fact that the Fed will reduce the rate by at the least of 1/4%. It really needs to be at least 1/2%, but...

The mortgage debacle and real estate slowdown are affecting other industries. There have been widespread slowdowns in many industries due to what's happening in these industries. The fallout is there. There have already been cuts with companies providing home siding, nevermind that of the construction industry itself. Kohler, a major plumbing supplier, is cutting back and therefore eliminating jobs. And there are more job losses to come from this. Unfortunately, there has to be. We are already seeing cuts in the automotive, furniture and wood products & semiconductor industries. We've even heard of Home Depot & Lowe's posting lower than expected earnings. You'd have to be blind to not notice that many of these are a direct reflection on what's going on in the real estate world.

So we have unemployment up and consumer confidence down. There is turbulence in the world financial markets because of such. You don't think that this could push the economy toward a recession!

Let's look at the big picture. Many have used the equity in their home for continued consumer spending. This market is tapped with lower home prices & higher interest rates equating to lower household wealth, people will have to reduce spending. We are seeing that with the retail reports.

I hope that we do not head into a recession. Granted, I don't know if the Fed has the ability to stop it. But then again the market can change around quickly. Time will tell. Wish I had a crystal ball, but...

Til next time...Marc It Sold!

The Fed Rate Cut

On this day in history...

The Spanish expedition established the first permanent European settlement in North America, St. Augustine, in 1565.

The Dutch surrendered New Amsterdam to the British, who renamed it New York, in 1664.

NY Athletic Club formed in 1868.

1st appearance of " The Pledge of Allegiance" was published in The Youth's Companion in 1892 to commemorate the 400 anniversary of Columbus' discovery of America.

Gaeston, Texas was struck by a hurricane that killed an estimated 8000 people in 1900.

The comic strip "Blondie," created by Chic Young, was first published in 1930.

A peace treaty with Japan was signed by 49 nations in San Francisco in 1951.

President Gerald Ford granted an unconditional pardon to former President Richard Nixon in 1974.

Today is International Literacy Day, which was designated by UNESCO in 1965.

Today is also the second annual International Angel Day, which is dedicated to children.


The Fed Rate Cut

Well, even though, the Fed stated that the real estate market and mortgage debacle are not directly related to the overall health of our general economy. They must take note of the recent jobs report. With more and more layoffs and foreclosures, they is almost no way that they can get away without a rate cut. I think that almost everyone would agree that this is certain. But now the question comes into play of how much of a rate cut. Many feel that it should be 100 basis points (1%). I doubt if the Fed will go to that extent. I'm pretty sure that they would rather due only a 1/4% cut, but this is not enough. It has to be at least a 1/2% cut to be of any value at this point in time. We'll see when they meet on the 18th.

To further enforce this feeling, Countrywide announced that it was cutting its workforce by 12,000 jobs, which is approximately 20% of its work force. Even IndyMac, which actually noted a profit recently, is cutting its workforce by 1,000, which is approximately 10% of its employees. But this extends way beyond just the mortgage and real estate industries. Office Depot it cutting back on store openings. They only plan on opening 100 stores, down from 150 of earlier this year.

This is affecting us all. It is unfortunate that Congress and the government can not agree on how to handle this situation. I am not proposing helping out the lenders, for they helped create this situation that we are all facing, but something needs to be done to reduce the foreclosures that are on the horizon and I think that there are more there than most can imagine.

Til next time...Marc It Sold!