Thursday, July 31, 2008

The stock market hickuped yesterday

I've never claimed to be an economic guru but it doesn't take a genious to figure what's happening. We're in a real mess at present. Let's give a summary.
Banks and brokers gave away the store to get a signature on contracts hence raking in the commissions and making annual reports look like the sky was the limit. Rules were tweeked or flat out ignored to seek that end result. It didn't take long for those who could not afford those loans to default. The grand and overblown scheme just started to unravel in spring of 07 but the banks and brokers were able to ward off any attention to the matter until late in 07 till about Jan. 08. Then the house of cards started falling and the impact was felt around the world. In it's true day late and dollar short manner our government took to providing an economic stimilus package to try and get things going but it was too little too late. By the time checks reached main street America, people were already walking away from their home and beginning to live on credit cards. Those not living pay check to pay check were fearful of being laid off and merely slipped that money into a savings account.
So where are we now in terms of jobs and employment? With housing down construction jobs have been hammered (pardon the pun). With gas prices up SUVs and trucks ( the highest profit items) sit collecting dust at dealers. I get at least one letter a week from dealers asking that I trade in the family car and buy an SUV. They'll even throw in cheap gas. Note that with gas prices up and SUV sales down the car makers have no choice but to lay off workers and close factories. It will take one to two years to retool plants to produce smaller more economical cars. Good luck trying to snag a Prius, Honda hybred or other econobox car. You'll find at least a six month waiting list.
Then there's the airline industry. Fuel prices have slammed them. They have no choice but to cut back on unprofitable routes, shrink staffs and eliminate older ageing aircraft. Losses just last year were put at $1 billion. They've been holding their prices while adding fees to make up a bit of the difference but that will soon change and when it does I'd bet that airlines will be putting a hold on those orders for new aircraft. The machinists who build the aircraft are racing to get wage increases before the work runs out. There's two possibilities here. Either the company heads let the union go on strike thereby putting the orders on hold. (Oh and the company gets a good percent of the price even before the plane is built) Or the company ramps up production to get as many planes out the door before the orders are put on hold by the airlines. Either way it won't be a great 2009 for the aircraft builders. Then the lay offs will start. Each aircraft worker supports at least two other jobs in the economy.
With the election comming in the next few months I'm just wondering if the Shrub will thrown one more monkeywrench in the scheme of things. Remember he was the one who when leaving the Texas governors mansion said about the sad state of Texas "That's the next guy's problem." He also was just short of flipping them off at the G8 summit.


BBC said...

Don't get me started about the stock market, it's all greed driven and one of the problems with this world.

I've never lost a penny on it, I'm not stupid enough to play it, I know better ways to make money.

Got by just fine for 65 years now but my universe doesn't revolve around money.

GJG said...

Looks like all the chickens are coming home to roost, those living beyond there means bought the old sure ya can afford it buddy, people who had to have the biggest, flashiest car, nothing down, you can afford it buddy, all the politicians telling ya, hey if your poor just ask for more vote for me bubba. I agree with ya Demeur, this could be another major depression like back in the early thirties, brother can ya spare a dime ----I didn't see your suggestions on how to solve it however? ya think Obama, the "Rock Star",and President wannabee, has a good economic program to offer us? (the current congress sure is running in circles)

Gary (aka old Dude)

Anonymous said...

We have always lived beneath our means while friends had the big homes and fancy cars. Well, they STILL have them, they are practically paid for by now (I assume) and I'm still living below my means. What did I do during my life? I saved and did without, hoping my retirement would be enjoyable. Here I am....and there went my I'm no longer living below my means. I'm just trying to not outlive my nestegg.

BBC said...

Sure you can beat your fish, if you put them in shallow water. But why would you want to?

I don't worry about all that so called nest egg crap, I've always gotten along just fine and will continue to do so.

Demeur said...

Gary the current repubs want to keep the status quo based on oil. You know we can't do that very much longer. The ideas are there but keep getting nixed by earmarks and the refusal of congress to stop companies from laundering their profits through the Caymen Islands thereby avoiding taxes.
Dana with the present state of affairs you won't have to worry about a nest egg. We're about to be hit with inflation like you haven't seen. We'll all need to find jobs if you aren't working and an extra part time job if you are working just to make ends meet. The ends will be moving very soon.
Billy you could probably survive on a pound of rice and a case of beer and think nothing of it. Okay what's your secret? A rich uncle, winning lottery ticket or what?

Wayne said...

Yup, scared me silly with that one. Like little dominoes, the house of cards that was built is tumbling down.

Makes me wonder what it will do to our social landscape in the coming months/years.

bbc, I'm really glad to hear that! I've considered things the same way, although I've lost a few pennies in the market, by no means would I ever put what I couldn't afford to lose (or wouldn't mind losing).

Right now I'm sitting on a penny stock that I threw $100 dollars at, and Sirius radio, a few hundred. Just sitting. Yawn...

Great post demeur!

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