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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: anachronist who wrote (51591)	1/26/2006 4:15:40 PM
From: GraceZ	Read Replies (3) \| Respond to of 110194

I could have used actual figures from the GDP and the various other macro measures, but every time I bring these up on a thread like this people don't believe them. They only want to believe the macro measures that support their prejudice. I didn't say my corporate customers were reducing expenditures, I said they were being very cautious about expenses. They've been running lean and mean for the last five years! This is not a negative, it's a strong positive. It means that business doesn't have the type of excess that is typical of other cyclical peaks I've lived through. When I mentioned the stock market performance it was in regard to sentiment about the economy. Usually a market that has been rising for three years makes people feel more positive about the economy. RE will revert to the mean trend in locations where it has risen above it, as it did in rising in the first half of this decade. RE prices were flat for the better part of a decade in the 90s. Some of the rise from 2000 is just reversion to the mean and an adjustment to historically low interest rates. In some markets this rapid adjustment got speculation going. Putting speculators out of biz won't be bad for the economy, they create little, so little is lost when they go. I've given piles of evidence showing that RE hasn't been feeding the economy, the economy is feeding RE. If people stop throwing their savings into RE and start putting it into small businesses and other productive assets it will be a plus for the economy. Might people feel poorer if they no longer see their house rise year after year? Maybe, but the majority of homeowners are in pretty good shape because they have jobs and they've been able to restructure their debts to lower interest fixed rates. Macroeconomics 101. Recessions occur when business expands to the point where you can't supply at any cost, your revs are growing but your expenses are growing faster because you can't hire the people with the skills that are needed and obtain the raw materials you need at any price. You wind up bidding up inputs against everyone else. Rising interest rates will precipitate a recession because it becomes too expensive for business to factor inventory at the higher rates. They stop deploying risk capital because it becomes too risky in a high rate environment. We are no where near these conditions. You have to have something to recess from to go into recession. This is an expansion with the least amount of excess that I've ever experienced. C&I has been rising steadily since it bottomed in 2004 after a long decline. This is a sign that businesses are feeling reasonably secure in their near term prospects. economagic.com The demand management school of economics would have you believe it is a drop off in consumer demand that causes recessions. A drop in consumer demand is never the source of recession, it is the consequence of it.