Economy improving?

[cgallery]

The commercial real estate market crash is still coming up.

This is interesting, and I think a lot of people are unaware of the fact that commercial real estate is refinanced every three to five years.

And commercial RE values have plummeted right along w/ residential.

Many have predicted that banks won't refinance many of these commercial properties, especially those that have taken large hits in market value.

But what is the alternative? A default, and the bank now owns a shopping mall or office building.

I have a feeling they're gonna write the paper. Doesn't mean they won't try to bend borrowers over (they will). But if I owned a shopping mall, my negotiating tactic would be: "Finance it or own it."

And if the cash flow wasn't there, I may just tell them, "you can go ahead and take it."

[docrowan]

Read an article in one of my trade magazines that had a great quote -

If you fall into a 10 foot deep hole and take a step up, you're still in a 9 foot hole.

[tseavoy]

I guess good news is that inflation is not happening -- my social security check will not increase due to increase in cost of living, even though we know food and fuel are still very volatile. Our 401 has been transferred to CD's which are not paying much, but at our age, we can't afford to gamble. In my home area in Upper Michigan (yes I am a Yooper, at least formerly) the county has the highest unemployment rate in the state. Terex pulled out, leaving 90 more unemployed.

I just don't know.

Tom on Marrowstone

[alpha]

You will know when the economy is improving simply by looking at 2 factors. One is consumer confidence, or when people start buying products at a higher rate than they were buying products. The second is when businesses start investing in their business again.

Companies lay off employees when their sales fall off. They hire when they have a demand for more products they can make. That is why employment is a trailing indicator.

Since more people are being laid off than being hired every week that would indicate to me that sales have not improved thus the economy continues in a downward spiral.

[drillman88]

Our work has flucuated pretty wildly at times because our customers are spending money when they absolutly have to. We have been steady lately but the customers are demanding unrealistic turn arounds due to putting the work off for so long. They are in dire straits by the time we get the job.

New home construction is at a standstill here and there are 5-6 homes for sale in my hood that have been on the market for 6-12 months. They generally sell in 1-3 months because of the location and condition of the houses.

Until the housing/real estate markets return our local economy is really going to sag.

[Charlie]

Deleted by me.

[woodturner]

Plants are still closeing, jobs are hard to find, and if you do find one you'll find yourself working for 1990 wages.

That tends to be a very localized situation. In much of the country, jobs are going unfilled because they cannot find workers. We have an open position that pays very well which we have been unable to fill for a year. We have even doubled the salary to try to attract candidates, with no luck. It's a fairly standard electrical engineering position in Pittsburgh - lots of potential candidates, but they are all working and don't seem to want to change jobs (probably because they have heard the economy is bad). If there are any EEs with embedded experience that want to make silicon valley salaries in a low cost of living area, PM me.

For the most part, the midwest is doing pretty well. But then the midwest was more conservative and didn't have as much of the massive home speculation and other issues that disrupted the economies in some areas.

[Charlie]

Deleted by me.

[dbhost]

...Wages have been very stagnant for a very long time for most people without a colledge education, skilled or not.

Even with a college education, wages are stagnant, and jobs are few and far between.

I know Texas is one of the few states weathering this economic down turn reasonably well, but that simply means we aren't taking as much of a beating as many of the other states... Those that are out of work are just that, out of work. There's no jobs to be had. Best thing you can do is hang out your own shingle and have a go at it. But finding the work / sales is really tough when everyone is broke...

[woodturner]

Even with a college education, wages are stagnant, and jobs are few and far between.

Guess it depends on the location and profession - here in the midwest, salaries are up 20% or so in the last year in many professions and trades, and often jobs are not getting filled because there are not enough workers to fill the available positions.

[master53yoda]

i use trend following and elliot waves in my approach to the market. if you look at the attached chart it shows that the market bottom should be about 500 which is 250 lower then we have seen to date. I see another bounce coming in the next year or so and then a final drop to the 500 level in about 2013 to 15 and then the start of another true bull market. One of the things that make this so hard right now is that the economy in the 90s went up to far to fast and the correction that we are feeling now is just that much worse.

just my 2 cents

[JR]

i use trend following and elliot waves in my approach to the market.

I presume you're refering to the S&P 500, a different animal from the "economy", no?

[master53yoda]

I feel that the economy and the market follow each other and the market is and indicator of the economy

[JR]

I feel that the economy and the market follow each other and the market is and indicator of the economy

Fair enough, just trying to be clear.

In any case, your prediction has fairly dire implications. It means that S&P 500 earnings would have fallen to half their current levels. Given the to-the-bone cutbacks those companies have already made, a level of 500 on that index would necesitate severed limbs. Ouch.

JR

[Alex Franke]

if you look at the attached chart it shows that the market bottom should be about 500 which is 250 lower then we have seen to date.

Here's my glass-is-half-full and my his-cup-runneth-over version of your chart.