Gravy train express going local?

General Questions
#1

Anybody else gettin’ the feeling that the U.S. economy might be starting to wobble a bit? I know that I don’t really know enough to put together my own comprehensive analysis, but I’ve noted some worrisome details of late.

Wednesday of last week, my partner and opened a securities account and the broker managed to talk us out of pursuing the kind of wild idea we had, so we retreated to study a bit. I’m glad we did; that would’ve been about the worst time to buy anything, blue chip or speculative, as everything seems to have been sliding since. And the Internet stocks are taking a beating in the press.

Two weeks ago I heard an unemployment figure for my area of 5.3%; that seems high for a city that’s supposedly booming.

I spent an evening this week w/the president of a heavy equipment leasing outfit and a commercial insurance exec. The tractor guy, who told me six months ago that it was hard to imagine business being any better, said that just this week they’ve decided to defer any capital expenditures as they’re detecting a leveling off of activity. I’m not really sure I understood what the insurance guy was telling me, but it seemed to be along the lines of insurance companies attracting investment when the stock market tanks, and that is what they are anticipating.

For about 3 years now there’s been a building boom going on around here w/the residential effort being the building of 3-4 townhomes where a single-family dwelling had been. It had seemed that most of these sported a sold sign while abuilding and occupants upon completion. Lately I’ve noticed a few finished and unsold units. A half-block project two blocks up my street has apparently stalled for about a month now.

Energy prices have been climbing since February and are as high as they’ve been for a few years; that usually has a braking effect on parts of the economy. And I’m hearing on the news that the Fed is getting antsy about inflation and might just get around to raising interest rates.

I read the following this morning in today’s Independent:

Oh yeah, we’ve got this drought going on as well.

How about it, economists? I realize a lot of the above is anecdotal, but is it all really just normal hiccoughs and burps of a chugging economy, or are we looking at a slowdown?

#2

That brings up a good question, how do we measure the economy? GNP and PCI seem like good measures but anybody who says the DOW is risking grave injury. How can just 30 stocks truly illustrate the direction of the economy?

“The first thing a man will do for his ideals is lie.”

–Joseph A. Schempeter

#3

I never thought our economy was all that great to begin with. I offer as evidence the following phenomenon which I do not think are indicative of a booming economy:

  1. The growing amount of loan consolidators.
  2. The staggering success of places that will loan you money for a post-dated check.

Seems to me our booming economy is based upon living by credit, and even someone like myself who swore never to get into that situation finds himself in debt several thousand dollars without even feeling it.

And I see many people, including people making good money, who are living paycheck-to-paycheck. I mean, could you see an episode of Leave It To beaver which had Ward going down to the Checkfast on the corner to get a few bucks to make it to payday? Or any decade where this kind of service would be exploding like it is, except for maybe the Great Depression?

I am not an economist by any stretch of the imagination. But I see the above trends, and I cannot help but think that our wonderful economy is nothing but a Wizard of Oz-like facade. It looks much more impressive than it really is, but soon, it will be exposed for the crock that it really was all along and I cannot help but fear the fall-out will be devastating…

Brian O’Neill
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#4

Satan’s right. It is all a bunch of crock. Everyone at work thinks I’m nuts for keeping all of my 401K in FDIC accounts that get 6 1/2%. Well fine, I may be crazy, but I sleep good at night. My question is what’s going to happen to all of this wealth we’re enjoying when us boomers start pulling all of our retirement dollars OUT of the stock market?

#5

It doesn’t look too bad yet, on an everyday basis. Europe looks quite stagnant. But they have benefits, so nobody worries too much yet for the next few years. Retirement may be a different deal for them too, compared to people retiring now.

#6

While there are some parts of the USA doing better than others, and some parts of the world doing worse than others, I think the whole picture has to be taken into account. Remember, not the entire USA is going through a drought. Where I live, houses are sold well before they break ground, and few already built stay on the market if priced within reason.

 On the other hand, when I first moved here, things were booming elsewhere and this place was undergoing some serious problems.

Look at the total picture, folks.

 Right now, I am watching the stock market, but am not quite ready to give up on 3 for 1 splits in favor of 6-1/2%. Each person has to make their own decision, however, so whatever floats your boat is your own best choice.

 I have no current complaints, but keep a close eye on income and expenses...just to be on the safe side.

“There will always be somebody who’s never read a book who’ll know twice what you know.” - D.Duchovny

#7

Hmmm…, seems to be running about 50/50, but none of those (don’t mean to insult any of the previous posters - I’m in the same class as far as economics goes) bearing worldly MBA-like knowledge have checked in yet.

#8

Since the NAPM numbers came out last week the bond market, usually a better indicator of interest rates and the state of the (mostly US) economy, has priced in another short-term rate hike and is waiting for word from the next Fed meeting on Aug 24th. Sentiment is up, factory orders are up, jobless claims are down, average hourly earnings are up, non-farm payrolls are up and domestic vehicle sales are up. The European economy, particlarly in Germany and Italy, is looking up too. The US economy is in fine shape as far as can be measured, though there are as many interpretations of these numbers as there are economists. The boom in lending to the less well-off people (sub-prime lending) is mainly because that is one of the few lending markets that is not completely saturated; the rumour about the collapse of another hedge-fund that made the rounds last week seems to have been exactly that, a rumour.

The Fed is looking at hiking rates again because the economy is doing rather too well, not because it is slowing down. They would have done something similar last year, but the knock-on effects particularly in the emerging markets would have caused more problems, ultimately also in the US, than they would have solved.

The underlying question which nobody can answer is for how long this growth can go on, what happens if/ when it ends, and what the hell is happening in the stock market. How much of the growth is dependant on equities, what would happen if the market tanked? I don’t believe that the Dow is a good indicator of the state of the economy for the reasons others have listed above, keeping an eye on what Greenspan does is probably more reliable.

It only hurts when I laugh.

#9

another part of the worry you have to realize is becse of the dreaded “Y2k” the sky is falling attitude. Many people have started liquidating their assets “just in case” and in the mean time they are hurting the rest of the economy.

To deal with men by force is as impractical as to deal with nature by persuasion.

#10

I heard about an increase in the money supply. But I checked my checking account, and there’s still the same amount of money in it. :frowning: