My Gut Feeling On The Economy

I’m catching up from the holidays and from helping family and friends so the blog entry is late ^__^ I don’t share my thoughts and opinions on the economy online because I’m always wrong :P Today, I break my rule and share my gut feeling on the economy.

The San Jose Mercury News Business section reported the major indexes were down in 2008 on Jan 1, 2009. Dow -34%, NASDAQ -41%, and S&P 500 -39%. Silicon Valley stocks Google -56%, Intel -46%, HP -28%, and Cisco -40%. 2008 was the worse year for the Dow since 1931. I know the Mercury News does a poor job covering business, but the facts are true ;)

I remember Mar 16, 2008 when JPMorgan Chase purchased Bear Stearns. The next day I read online articles on the purchase at work. I said to myself, “We are really in a recession now.” In Jan 2008, I watched a 60 Minutes segment on the real estate foreclosures in Stockton, CA. I said to myself, “Uh, oh, it’s the beginning of the recession.”

The recession officially started in Dec 2007. I knew the recession was going to happen in Mar 2006 when the real estate market was too high, and there was no reason to explain the inflated home prices. If someone asked me why the prices were too high, my answer was “there is no good reason why.” The prices kept going up and up and up. It just didn’t make sense to me. If someone asked me if it was a good time to buy a house between 2006-2007, my answer was “wait.”

The optimistic people say the recovery begins in late 2009. The pessimistic people say the recovery begins in 2010 the earliest. I believe the recovery begins in late 2010 at the earliest. More companies laying off, and I anticipate many companies announce more than one round of layoffs. Home prices continue to drop. Spending decreases for goods and services. Governments are cutting back and laying off. The cutbacks and lower revenues are just getting started.

It’s going to take time to recover. The current recession is nothing like the 1990 and 2002 recessions. They were brief and weak. The government can do little to jump start the economy. The current recession is global. The US stimulus packages are just a drop in the bucket to revive the economy. I predict President-elect Barack Obama raises taxes in 2010. He must because the government desperately needs money. He’s not going to raise taxes in 2009 for political reasons.

Remembering 2008:

*President Bush authorized tax rebate checks.
*July 11: Crude oil all time high $147.27 a barrel.
*Sept 7: Government took over Fannie Mae and Freddie Mac.
*Sept 14: Lehman Brothers bankrupt. Bank of America bought Merrill Lynch.
*Sept 16: Government took over American International Group (AIG).
*Sept 25: Federal Deposit Insurance Corporation (FDIC) sells Washington Mutual to JPMorgan Chase.
*Oct 12: Wells Fargo purchased Wachovia.
*Nov 23: Citigroup received extra $20 billion from the government.
*Dec 11: Senate opposed $14 billion loan to Detroit automakers.
*Dec 29: Dow closed at 8,776

Source: Mercury News

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