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Economic News/Discussion

Discussion in 'Political Discussion' started by PatriotsReign, Jul 24, 2008.

  1. PatriotsReign

    PatriotsReign Rookie

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    I was reading in yesterday's Globe that some airlines posted above expectations and saw the Dow go up 500 points. It said because the hurricane in TX missed oil refineries. My first thought was "are you joking?"...are we that reactionary? So this means...what? That oil will remain unaffected and therefor, nothing will change. That folks, is not "Good news"

    I think there is far too much weight being placed upon the price of oil. Even if oil never went above $100/barrell, we would be in horrific economic times. Oil is not the cause of inflation, the troubled financial sector or the depression that exists in the housing market.

    The net/net is "lower oil prices can't pull us out of this economic downturn". The inflation we're experiencing is due more to long-term deficit spending, a feeble US dollar & increasing money supply than rising oil prices.

    I think we need to be more prudent and stop reacting to minor good news as if "It's Over!"....after all, we've barely started this economic down-turn. I don't understand why investors react the way they do to a bit of (temporary) good news and drive the Dow up 500 points.

    Maybe someone more experienced with Wall Street can help me out.
    Last edited: Jul 24, 2008
  2. BelichickFan

    BelichickFan B.O. = Fugazi PatsFans.com Supporter

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    #24 Jersey

    Stock prices are largely speculation themselves. If Trader A thinks Traders B and C are going to buy Stock Z then Trader A will likely buy Stock Z even if he thinks it's too high; with a view to selling it at a higher price with Traders B and C have bought. It's not about what they think should happen, it's about what they think will happen. That's why the bottom is usually at what the call capitulation, when everyone gives up. Everyone thinks no-one is buying so they sell even if the market is oversold because they think everyone will keep sending it down further and they can buy even lower. Eventually when everyone gives up there are no sellers left. It's the same at the highs too.

    I don't agree on the "horrific economic times" either but that's kind of another subject.
    Last edited: Jul 24, 2008
  3. PatriotsReign

    PatriotsReign Rookie

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    Good explanation BF...that makes a lot of sense. The thread topic is "economic discussion", so if you don't think we're in "horrific economic times", I'd love to hear your rationale.

    Don't you agree that oil is not the major factor driving this down-turn? Its obvious we were due for a major correction for a long time. The artificially inflated housing sector just delayed it a few years.
  4. BelichickFan

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    #24 Jersey

    It depends what you mean by "horrific" I guess ;)

    I still consider it a slowdown and nothing more.

    Regarding the general issues :

    Oil and food prices are clearly a big part of what's hurting everyday people so they are the main "new" problem IMO. When I say "new", stuff like the deficit is a problem but it was back when the economy was booming too.

    Jobs - they're down but not to a "horrific" level. Employment and pay levels are fine - not good but not worse than normal for an economic slowdown.

    Housing - the biggie. This will take a while but, unless the government iterferes, will self correct. The problem was stupid people and stupid banks doing loans that had no business being made. The people who couldn't afford the houses will (should unless the government interferes) lose them. As they should. I know - cold hearted me. The point is they could never afford them and with better loan standards never would have been able to "buy" them. So I don't look at those people as losing their homes, just losing the mirage that it was ever their home in the first place. Others who have lost equity - so be it. San Diego has had a big downturn and my parents and sister have both lost a lot of paper money - but they're still up overall as are most people. The ones that aren't are the ones I already described and the ones who bought at the top. Too bad for them (no sarcasm intended) but they aren't "most" people.

    Anyway, the jobs situation is in a normal cycle. Gas, food and housing put us currently in a little abnormal situation. Gas and food hopefully will return to normal - if this is the new normal people can just make lifestyle adjustments which most can reagarding gas and food. Housing actually worries me the most because I fear the government will try to keep people in their houses and artificially prop up the value which will continue to stut out better, younger buyers.
  5. patsfan13

    patsfan13 Hall of Fame Poster PatsFans.com Supporter

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    You have just seen an example of why IF we were to move ahead agressivly to develop our own energy resources we would see an immeadate impact on oil prices even though supplies would take ~3yrs to hit the market...
  6. MrBigglesWorth

    MrBigglesWorth Rookie

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    I thought it absurd that since Bush says he is supporting off shore drilling though it may happen or not, the oil prices have gone down.

    I do think there are many factors.

    1. Oil- it drives everything from transportation, delivery, etc. And China largley sibsidizing oil for their own country which they reversed on I figured would drive the cost down a but but hasn't seem to have done. Iran's threats which I think are hving the effects of yelling "bomb" in an airport are due cause to drive up costs. Traders are also making a ton of money and this article states it

    http://money.cnn.com/2008/07/24/markets/cftc/index.htm?cnn=yes

    2. The credit and mortgage era is finally catching up. if I spend my savings and have nothing left and it's time to pay the bills, I guess it's time to start saving money or I go broke and lose what I have or have to sell what I have to pay for the bare essentials.

    3. The economy has ebbs and flows and it still baffles me why we need the FED and why we pay interest as a gov't to the FED when we could print our own money.

    In the end I believe there are super rich elite behind the scene making a ton of money and controlling society.

    We've been brainwashed about needing good credit and credit is good. As long as we have our entertainment we're fine. Give the people what they want(ie. Roman Collesium and gladiators = football and sports). As long as we have those creature comforts along with food, heat, and toys the majority of the american public doesn't really care as everything erodes around us.

    Essentially the country has been spread too thin on resources while 1% is making tons of money and I often think we are teetering on the edge of collapse.
  7. PatriotsReign

    PatriotsReign Rookie

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    I think I've mentioned that I'm a market analyst at my company. So a lot of what I do is look at various trends and "indicators". I also ask around at different stores, retail outlets I shop at and especially restaurants. At each one of these, the employees are saying thingsa are REALLY bad. I was in a Bob's store the other day and the manager said it's the worst she's seen it in the 10 years she's worked there and said managements is very concerned.

    Every restaurant I go to (I eat out a lot) tells me things are way off. The thing with economics is it's all connected...people cut back on spending, companies cut back on inventories and "eventually", jobs are lost. Job cuts/unemployment are typically the final straw heading into recession.

    As an example;

    People cut back on eating out and this happens;
    Declining liquor sales
    Declining meat sales
    Fewer dollars in their employees pockets
    Less spent on "consumption" at retail outlets

    Mulitiply this times the total number of restaurants and their employees nationally and you have a big impact on the economy. And that's just the restaurant business.

    Retailers are getting more aggressive with their price discounts which means there are fewer dollars to compete for. Eventually, one, two, three retailers lay people off or shut down all together and the cycles starts all over again....less spending, less demand, etc, etc.

    Let's not forget that housing is one of the largest industries in the country. The ripple effects of that sector are just beginning to be felt. Look at the number of Home Depot commercials. There are fewer dollars going to builders, carpenters, plumbers, suppliers, real estate agents...and I could increase this list of those being affected ten-fold. ALL of these people are spending less, which is lowering demand for major consumable goods (stoves, refridgerators, washers & dryers, etc.)

    Just my opinion, but I think this is going to be worse than you think. Of course I know I could be wrong...we'll just have to see.

    The good thing is recessions/corrections are good for the economy. They are stabilizing and restore confidence.
    Last edited: Jul 24, 2008
  8. PatriotsReign

    PatriotsReign Rookie

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    I can say with certainty that it's a lot worse than the media is willing to discuss. We'll just have to wait and see.
  9. MrBigglesWorth

    MrBigglesWorth Rookie

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    I agree things are bad, and will get worst, especially when that home ehating bill arrives. I've already started upgrading and insulating. Luckily I have natural gas which was higher 4-5 yrs ago.

    I'd have to say that people are still taking vacations but are staying closer to home. Everything has but back, but far from a dead standstill which shows you how out of control spending was prior to this.

    It was like everyone was on a shopping spree getting ARM mortages and home equity loans because they didn't like their kitchen or refinanced their house then took that money and bought an RV, pool, hot tub, boat, 4 wheel, you name it.

    I really have little sympathy for those who did that then and are literally paying the price now. They lived the life then and didn't save for the rainy day.
  10. MrBigglesWorth

    MrBigglesWorth Rookie

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    I also think we live in a lazy society where people will pay for people to clean their houses(probably not many of us), mow our lawn, paint a room in our house when we could do it.

    Every society has deadweight, non contributors, but maybe we've racked up too many.
  11. PatriotsReign

    PatriotsReign Rookie

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    Some people work too many hours to take care of things at home...sad.
  12. MrBigglesWorth

    MrBigglesWorth Rookie

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    or maybe they don't want to be home.... I've seen this a few times... very sad
  13. atomdomb

    atomdomb Rookie

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    i have a hunch that gdp for the second quarter will come in around 3-3.5%. i know this number sounds unrealistic but as i said it's just a hunch. i hope most of the mortgage mess has worked itself out of the economy but now we have to face winter. oil is falling over the last 10 days and i hope it will continue. unemployment is still at reasonable levels. the stock market has been fairly resilient considering the crash in the financial sector. americans needed a wake up call and maybe we got it. i still see alot of waste going on so maybe we didn't.
  14. Real World

    Real World Moderator Staff Member

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    Oil is a huge factor in the global, and US economy. Oil isn't just used to fuel cars (gasoline), it's used in the manufacture, and processing, of just about everything. Beyond being an actual chemical component of a good, consider it's effects on transportation costs for one. Everyone feels that cost. Consider the fuel used on farms, to harvest foods. Air travel, mail delivery, shipping, generators for electricity, construction equipment, etc. Oil is everywhere, so when it spikes to $140 a barrell for a prolonged period of time, it can cripple economies. At the very least, it can have a very noticable, and adverse effect.

    As an aside, I've been reading some articles that quoted some economists saying the GDP might come in as high as 2.4% for the second quarter. I admittedly had to do a double take when I read it in Bloomberg. I'd be shocked if it came in that high. I'd expect 1-1.5% to be a more likely high point, if that. I'm curious to see what the numbers are next week.
  15. MrBigglesWorth

    MrBigglesWorth Rookie

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    hard to tell since government still throws around cash in billions of dollars like the well has no bottom.

    until government spending comes under control that is half the problem
  16. patsfan13

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    Good post, well said. Energy cost affect EVERYTHING.
  17. MrBigglesWorth

    MrBigglesWorth Rookie

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    so does credit to an extent
  18. PatriotsReign

    PatriotsReign Rookie

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    Oil definately touches everything we buy...without exception. But keep in mind that the highest rate of inflation we have ever experienced was in the late 70's and early 80's and was around 9-10% annually and oil really wasn't a factor in that inflation. Yes, we had our first "energy crisis" but the inflation wasn't due to the cost of oil.

    I contend that we are heading into heavy inflationary times and would be regardless of oil. Is oil a large contributor this time? Yes, absolutely.

    BUT....Long-term deficit spending ALWAYS results in inflation and that is because it increases the money supply. Inflation is the result of too much money in the hands of too many people and production can't keep up. It also results in the growing demand for raw materials which drives their prices up and that in turn is passed on to consumers.

    Our government has run a poor ship financially. Banks and other lenders have done the same. It's too late now for this to quickly correct itself. There is a very large correction that needs to take place.

    Now, where I could be wrong is that I'm not considering foreign demand for US goods due to the weak dollar. But for that to sustain itself, the world economy needs to remain fairly healthy.

    Whatever the GDP is for Q2, I think we'll just be whistling in the dark if we get optimistic. There is no rationale for sustained demand in the country. Watch major retailer's financial reports. Look at Macy's, JC Penney, Circuit City & Sears because everything depends on consumer spending, not manufacturing. It only makes sense that spending drives manufacturing and not the other way around.
  19. MrBigglesWorth

    MrBigglesWorth Rookie

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    www.telegram.com
    Last edited: Jul 24, 2008
  20. PatriotsReign

    PatriotsReign Rookie

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    But if the economy is "in balance" then it wouldn't result in recession or as much inflation as we're heading for. I don't think the current rate of inflation will stop anytime soon. Not until we bottom-out.

    Timing is everything and the timing of the rise in oil is the straw that broke the camel's back. But it should result in a new sector of alternative fuels and a few years from now, that will be awesome news for our economy.

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