The Economy, it's gunna get worse

[Drew]

Let me preface this by saying, no, I am not an economist. But secondly, what you hear on TV is often group think or worse ; deception.

Why worse and not better...because it looks like it is getting "better"

1. The housing market will get worse.
A. Contrary to the last 3 months of data, the housing market is just in a blip right now, where there are less forclosed properties to drag down prices. This is primarily due to the dip in "Mortgage Resets". What is that? Mortgages where there is a "teaser" rate that is low, then the REAL rate kicks in. A year ago, there was a huge spike in the number of resets, and this caused many to not be able to afford the new payment and they got behind and went under. Right now we are in the end of a 3 month drop to the lowest number of resets in mortgages. The number of resets starts to go back up right now, and will EXCEED the number of resets from last year by 15%. This peak will be in 2011 but it will be going up all thru next year...
This means getting worse for a year and a half then catastophy in the second half of 2011.

2. The stock market is most likely in a 'group think' bubble. People NEED to have the market go up because 90% of Americans money for retirement in in the market or needs the market to go up for them to make money. But the businesses that are represented in the market are not doing better. The stock prices are going up because people want them too.

3. Money will flow OUT of the market to fund baby boomers retirements. What money is in the market will HAVE to come out as 75 million Americans started retiring 2 years ago and will continue retiring for the next 20 years. The money they will need to live on in in the market and they will HAVE to take it out. That is the law.
A. The reason the market kicked ass for so long is partly because baby boomers were funding it via 401k's etc for the last 30 years. NOT because the companies were all doing so well. Basically, more demand than supply. This influx of money is over...so the market would start to go down even if the economy wasn't screwed.

4. Taxes are going to go up. Sales tax in L.A. is now 10%. And they are still broke. Unless there is a complete revamp of the tax code to eliminate the BILLIONS of dollars wasted trying to comply with our super complex codes...The only way to fund the debt Obama has created and fund the debt that FDR created in the Social Security plan is thru taxes. Lots more of them. Stalling the economy. (NO ONE, Dem or Republican can fix this right now so it isn't political)

5. THIS IS HUGE! Money supply to the average person. YOUR CUSTOMERS.
A lot of your customers, and most likely yourselves, have or had plenty of credit via credit cards. But the Banks are slashing credit limits on their customers.
It works like this. Person has a 10k limit on a card and an 8k ballance. Knowing this is a high ballance and hurting their credit; and unable to re fi a house to pay it off, the customers save money (not spend it) to pay down the card. Needing to be at 50% of limit for their credit score to go up. They pay off 3k to bring down the ballance to 50%. Then a week later, the bank SLASHES their limit to 5k.
This does two HORRIBLE things. It means that they can't spend ANY MONEY on that card cause they are still "at their limit" so they couldn't spend money in the economy or your store while they saved the 3k to pay this , and they still can't spend money at your store now cause the card is still maxed.
And SECONDLY, their credit score is still PHUKED. Because rather than be at just 50% of their max, they are still at 100% and deemed a bad risk. So paying off the card didn't help them at all really but took 3k out of the economy and they still have bad credit.

If the banks continue to do this as they have, the economy will STALL completely as our economy runs on customers spending money. Just like your store does.

The market will make people feel broke and make older people really broke.

The mortgage resets affect tons of people with artificially low mortgages right now, and they will have NO MONEY to spend when the monthly payments double over the next 18 months.

Think about all this.

[perfecttan01]

Originally Posted by Drew

Let me preface this by saying, no, I am not an economist. But secondly, what you hear on TV is often group think or worse ; deception.

Why worse and not better...because it looks like it is getting "better"

1. The housing market will get worse.
A. Contrary to the last 3 months of data, the housing market is just in a blip right now, where there are less forclosed properties to drag down prices. This is primarily due to the dip in "Mortgage Resets". What is that? Mortgages where there is a "teaser" rate that is low, then the REAL rate kicks in. A year ago, there was a huge spike in the number of resets, and this caused many to not be able to afford the new payment and they got behind and went under. Right now we are in the end of a 3 month drop to the lowest number of resets in mortgages. The number of resets starts to go back up right now, and will EXCEED the number of resets from last year by 15%. This peak will be in 2011 but it will be going up all thru next year...
This means getting worse for a year and a half then catastophy in the second half of 2011.

2. The stock market is most likely in a 'group think' bubble. People NEED to have the market go up because 90% of Americans money for retirement in in the market or needs the market to go up for them to make money. But the businesses that are represented in the market are not doing better. The stock prices are going up because people want them too.

3. Money will flow OUT of the market to fund baby boomers retirements. What money is in the market will HAVE to come out as 75 million Americans started retiring 2 years ago and will continue retiring for the next 20 years. The money they will need to live on in in the market and they will HAVE to take it out. That is the law.
A. The reason the market kicked ass for so long is partly because baby boomers were funding it via 401k's etc for the last 30 years. NOT because the companies were all doing so well. Basically, more demand than supply. This influx of money is over...so the market would start to go down even if the economy wasn't screwed.

4. Taxes are going to go up. Sales tax in L.A. is now 10%. And they are still broke. Unless there is a complete revamp of the tax code to eliminate the BILLIONS of dollars wasted trying to comply with our super complex codes...The only way to fund the debt Obama has created and fund the debt that FDR created in the Social Security plan is thru taxes. Lots more of them. Stalling the economy. (NO ONE, Dem or Republican can fix this right now so it isn't political)

5. THIS IS HUGE! Money supply to the average person. YOUR CUSTOMERS.
A lot of your customers, and most likely yourselves, have or had plenty of credit via credit cards. But the Banks are slashing credit limits on their customers.
It works like this. Person has a 10k limit on a card and an 8k ballance. Knowing this is a high ballance and hurting their credit; and unable to re fi a house to pay it off, the customers save money (not spend it) to pay down the card. Needing to be at 50% of limit for their credit score to go up. They pay off 3k to bring down the ballance to 50%. Then a week later, the bank SLASHES their limit to 5k.
This does two HORRIBLE things. It means that they can't spend ANY MONEY on that card cause they are still "at their limit" so they couldn't spend money in the economy or your store while they saved the 3k to pay this , and they still can't spend money at your store now cause the card is still maxed.
And SECONDLY, their credit score is still PHUKED. Because rather than be at just 50% of their max, they are still at 100% and deemed a bad risk. So paying off the card didn't help them at all really but took 3k out of the economy and they still have bad credit.

If the banks continue to do this as they have, the economy will STALL completely as our economy runs on customers spending money. Just like your store does.

Think about all this.

Great post, absolute facts, sad truth.

[raiseprices]

Yes I agree completely. hold on tight, its going to be a rough ride. Next stop- higher interest rates. The house of cards is starting to shake. I hope this doesnt happen, but, there I go again, saying hope.

[raiseprices]

2. The stock market is most likely in a 'group think' bubble. People NEED to have the market go up because 90% of Americans money for retirement in in the market or needs the market to go up for them to make money. But the businesses that are represented in the market are not doing better. The stock prices are going up because people want them too.


great post.

[raiseprices]

i think the sales tax in Chicago is 10% also. htf do people put up with that?

[Ziti]

Good post DrewDawg!

I was just talking to a very very good business man a couple of days ago. He told me to get the phuck out and stop spinning my wheels cause 2010 is gonna be worse than what we've seen so far (all business, basicly).

[perfecttan01]

One example: when the great healthcare bill passes, if I have to insure employees that means I have to cut employees.
I am sure that most small business owners have the same mindset.
Result,,,more unemployment.

Smart guys we have in the Big House.

[raiseprices]

Ok, now let me get this straight. If the gov passes free health care what happens. Do we all get free healthcare? why would i have to pay for employees if they get it from gov?

[engfant]

The only thing driving up the Dow to 10K is cause businesses are laying off and showing a less sucky bottom line than last year when they had more employees. That's not a good thing. Expect the dow to dump back into the 8s in the very near future.

Until this country is building something of value then there is no recovery. Everything is bad for you. Once people realized they can become a millionaire just by dumping hot coffee on themselves and suing over it being too hot the end of any reason to work hard came to an end.

[DB9276]

FREE- not a chance.

Small business owners pay for it, higher taxes, unnecessary govt. programs will be cut. Not adding one more dime to the deficit!

I think it went something like that.

[perfecttan01]

Originally Posted by DB9276

FREE- not a chance.

Small business owners pay for it, higher taxes, unnecessary govt. programs will be cut. Not adding one more dime to the deficit!

I think it went something like that.

Your right on it.

[CROVINE1]

What a mess!!!

[engfant]

You had a squirter in the pants did ya?

[tan898]

Very good post Drew.

[luckycmm1]

"The only way to fund the debt Obama has created"

You mean inherited.

Two wars, tax cuts for the wealthy and gov't bailouts started with W.

[UV MAN]

Yes, the market will retest its previous lows. Remember the BIG MONEY is not even in the stock market right now. Most hedge funds are on the side lines. I feel this Winter will be much worse then last. I sure hope I am wrong but really doubt it.

I think we will level out in Spring of 2010 BUT we will stay flat for a good 4-5 years until this mess works itself out. Anybody hoping for a V economy recovery is just foolish. We will be in this mess for years to come. Most of the Market movement right now is just FLUFF. At some point these Companies have to show profit and increased earnings. It is just not there to support the run up.

Good post Drew and I WISH you were wrong but......

[raiseprices]

"The only way to fund the debt Obama has created"

You mean inherited.

Two wars, tax cuts for the wealthy and gov't bailouts started with W


so then what did obama do? decrease the deficit?

[Ezliving_Jim]

Originally Posted by luckycmm1

"The only way to fund the debt Obama has created"

You mean inherited.

Two wars, tax cuts for the wealthy and gov't bailouts started with W.

[DB9276]

Originally Posted by raiseprices

so then what did obama do? decrease the deficit?

DB9276 FREE- not a chance.

Small business owners pay for it, higher taxes, unnecessary govt. programs will be cut. Not adding one more dime to the deficit!

I think it went something like that.

Watch this:
YouTube - In Full: Obama Health Care Address

[perfecttan01]

Originally Posted by raiseprices

Ok, now let me get this straight. If the gov passes free health care what happens. Do we all get free healthcare? why would i have to pay for employees if they get it from gov?

We would be required to insure our employees or get fined.
Supposedly we would get some type of tax credit for it, but I doubt it would be enough to be beneficial.