Job Losses

http://biz.yahoo.com/ap/080307/economy.html

WASHINGTON (AP) -- Employers slashed 63,000 jobs in February, the most in five years and the starkest sign yet that the country is heading dangerously toward recession or is in one already.

Oil is up a penny as I type. If the Fed doesn't stop the weak dollar policy, it will break the economy when oil goes over $120/bbl. Our trade deficit is what is breaking the back of the economy and oil is 2/3rds of that. Since we wouldn't impliment oil conservation policies, the "invisible hand" is doing it for us. The only car companies to do well are those that offer really fuel efficient vehicles: Honda 'Fit' sales leaped up last month.

We're in a recession. The time to pretend it isn't happening is over. Home prices haven't even dropped to the level of previous peaks when normalized for wages or rents. With job losses, that means J6P will move back in with mom and dad.

There will be quite the buying opportunity in a few years. But the investment emotions have to run their course. We won't even see the peak national discounting until 2009 when we get into capitualation.

I'm amused how the Realtors (tm) are starting to use reverse phycology. "The market has dropped so much you have to buy before it rebounds." Guess what, that 'rebound' isn't scheduled until 2012 to 2014 and will take until ~2017 to return to peak bubble prices. In too many areas, buyers just cannot qualify to buy a home with other people's money, so it doesn't matter what the used home salespeople say. Prices will correct to what the local economies can support. We built up far too many salespeople after 9/11 and now its time to purge those jobs out of the system.

When it gets cheaper to buy than rent, its ok to buy. Just understand you're locked in place until ~2015. Can you afford to wait that long? The longer you wait to buy, the shorter the time you will be locked in. For example, someone who buys in 2011 will probably be able to get out by 2013.

But I'm not as gloomy as others. I see companies moving jobs to economies that will continue to grow through even the worst downturn. e.g., Bangalore. I'm talking US citizens to manage new R&D centers. A quick way to see how quickly a region can grow as look at its transportation surplus. Bangalore and Hyderabad get brand new airports this month. Very few US cities are expanding: DEN, IAD, IAH, and a bunch of the Florida airports are our major growth. Very few of our cities are building rail or modern bus terminals. So we're going to be stuck. Cest la vie.

Got Popcorn?
Neil