Recovery is all about demand. I was taught long ago that three conditions must be met before there is true demand. If you do not meet all three, you do not have true demand
Demand means that a person:
Has the desire to buy a good or service or investment.
Has the cash to buy a good, service, or investment.
Has the willingness to part with that cash to buy that good, or service, or investment.
Last Saturday [01/07/09]
Ben Stein made the rounds of several Business & News Shows. He said that he was seeing signs that the economy was possibly in the beginning stages of recovery. He was largely ignored because fear, gloom and doom are "in" and optimism is "out" right now.
The Mainstream Media is still largely in the tank for Obama. Don't expect that to change. Even Fox News Channel has been bending over backward to give President Obama the benefit of the doubt.
We are being manipulated, dare I say brainwashed, to think the worst and accept a bad deal.
Here are the Positives:
To be sure, inventories need to be low enough before demand will pick up. Prices are falling, hence the rise in retail sales. Gasoline prices have been climbing, but Wal-Mart, Dollar Store, and other discount outlet sales are rising. This would not happen if consumers were not spending.
Real estate sales are beginning to pick up. Distressed and foreclosure sales are rising dramatically especially in CA, NV, and AZ. This is a sign that the bottom may be near in that sector. House prices will fall until the value meets demand.
Employment figures will pick up when demand spurs production of consumer goods and services. Employment typically lags recovery ... each recession is different ... by 6-9 months? ... take your best guess. Employers do not hire until factory orders require increasing inventories.
Stock Markets will begin to rise, unemployment figures will bottom out, when employer, investor and consumer confidence return.
Here are the negatives:
The Obama Stimulus will do nothing to spur production of goods and services. Show me the cash. Obama does not have the cash. Printing money by the Federal Reserve does not count.
The Obama Stimulus has frightened the Financial and Commodity markets. The Stock markets around the world and in the US are clearly rejecting Obama's plan. They have no confidence. There is no demand for this Stimulus Bill.
Infrastructure and Green Project expenditures will benefit a pitifully small sector of the employment market. The massive spending on "make work" and "pork" projects will not benefit American workers in the aggregate. Americans did not wish to part with this cash for pork projects.
The Obama Stimulus Package does not meet the conditions for true demand. It therefore cannot claim credit for any recovery.
Economic Headlines [02/12/08]: Gloom and Doom or Recovery?
WASHINGTON (AP): Higher Retail Sales
"Sales at U.S. retailers unexpectedly halted a record six-month slide in January, an advance that may not be sustained as job losses climb.
The 1 percent increase followed a 3 percent drop the prior month, the Commerce Department said today in Washington. Excluding cars, the gain was 0.9 percent. Last month's rise reflected higher gasoline prices and more spending on items including clothing and food.
The number of Americans requesting first-time unemployment benefits dropped slightly last week, but remained near a 26-year high as companies lay off thousands of workers amid a deepening recession. The Commerce Department said the number of initial jobless benefit claims dropped to a seasonally adjusted 623,000, from an upwardly revised figure of 631,000 the previous week
The latest tally still was above analysts' expectations of 610,00 claims.
The 631,000 figure was the highest number since October 1982, when the economy was emerging from a steep recession, though the labor force has grown by about half since then."
COLUMBUS, Ohio (AP): Lower Oil Prices
"Oil prices slid closer to a new multiyear low Thursday because of growing doubts that the $789 billion stimulus package will reinvigorate the U.S. economy and demand for energy.
Light, sweet crude for March delivery fell 59 cents to $35.35 a barrel on the New York Mercantile Exchange. The contract has closed lower every day this week and on Thursday, dipped as low as $34.26."
WASHINGTON (AP): Wholesale Inventories Dropping
"The December cut in inventories on shelves and back lots followed a plunge in November that was revised higher to 1.1 percent from 0.7 percent.
On Tuesday, the Commerce Department reported that wholesale inventories -- goods held by distributors that generally buy from manufacturers and sell to retailers -- fell 1.4 percent in December, the biggest amount in nearly 17 years and nearly double analysts' expectations.
Wholesale inventories make up about 25 percent of all business stockpiles; factories hold another third and the rest is held by retailers.
Sales at the wholesale level dropped 3.6 percent in December, slightly steeper than analysts' expectations, but less than November's record 7.3 percent drop.
Because sales are falling even faster than the sharp cut in inventories, it is taking longer for distributors to clear out excess stockpiles."
Feb. 12 (Bloomberg): Stocks react to Stimulus world wide
"U.S. stocks tumbled, extending a global slide in equities, as jobless claims climbed to a record and investors speculated government measures will fail to revive the world's economy. "
NEW YORK (Reuters): Housing Report
"Prices of existing U.S. single-family homes dropped a record 12.4 percent in the fourth quarter from a year earlier to the lowest level since 2003, the National Association of Realtors said on Thursday.
The NAR said distressed sales, which includes foreclosures, accounted for 45 percent of transactions in that quarter, dragging down the national median price of existing single-family homes to $180,100.
The median is where half sold for more and half sold for less, and it was the lowest since the second quarter of 2003 when it was $177,900.
At the same time, existing-home sales rose in only six states from the fourth quarter of 2007, the NAR said.
In the fourth quarter, prices for single-family homes declined in 134 out of 153 metropolitan statistical areas from the same period in 2007, pulled down by active sales at the lower end that were driven by foreclosures, the NAR said.
The NAR said one metropolitan area was unchanged and 18 metropolitan areas reported price gains. The NAR's data on metro area home prices dates back to 1979.
NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said homes and neighborhoods minimally impacted by foreclosures have moderate prices changes.
"Distressed home sales have risen from about 38 percent of transactions in the third quarter, meaning people are responding to discounted prices and are slowly absorbing the excess inventory," he said in a statement.
"Buyers clearly see value in today's pricing," he said."
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