Morgan Stanley issues: "Full US Recession alert"

[Thorgrim]

6speed isn't there another international standard using multiple factors to determine a recession, besides the old two-negative-quarters test

[6SpeedTA95]

Originally Posted by Thorgrim

6speed isn't there another international standard using multiple factors to determine a recession, besides the old two-negative-quarters test

EXCELLENT question!

The very definition of economic recession is a contraction which would mean negative GDP growth. A lot of economist dont necessarily like this definition and there's some merit to their argument. They say you must take into account GDP, Consumer Confidence and unemployment. Honestly I think there's some merit to that argument. Some economist advocate that the definition of recession by looking at wholesale prices, consumer confidence, unemployment etc...they define recession as the point were business activity has reached its peak and starts to fall.

Realistically the answer lies somewhere in the middle. By using the latter we'd have many many MANY recessions that may last a year or so but incomes may continue to grow, unemployment may stay constant. You could have GDP growth two years in a row of 4 and 4.5% respectively then have another year of 3.5% and that could be considered recessionary. Which is pretty ridiculous.
The problem with the older standard of negative GDP growth is in the older days it could easily mask a recession that was less than a year long. You could have 3 slightly down quarters and a flaming 4th quarter and it would be viewed as a good year, which obviously isn't correct.

So while the standard and traditional definition is one of negative GDP growth you could have very slight GDP growth over the course of a year or even two years or more and could indeed be in a recession if other indicators didn't soon follow GDP growth. But in defense of the old standard it is VERY difficult if not impossible to argue that a recession is strong or substantial without negative GDP.


So basically Thorg its kind of a trick question. Different economist tend to argue differently at various points (usually to make political points) I can remember numerous conservatives and some in the house talking about a recession under clinton (in 96 and again during the fiscal crisis of 97). The problem was obviously they were only grabbing two or three negative pieces of data and trying to argue recession. Fact is there was no recession, not even close from 1993 to 2000. Others have argued that the economy is in poor health since 2002 which just isn't the case. We're definately in the midst of a slow down now, could it turn recessionary? Yeah possibly but at this point it seems a bit unlikely that it will be anything more than a 2 quarter issue at which point economic expansion should resume with indicators following closely.

The big factor here is how does the housing market react this year? That will be a key factor in if/when/how long any recession may last.

[Thorgrim]

Originally Posted by 6SpeedTA95

The big factor here is how does the housing market react this year? That will be a key factor in if/when/how long any recession may last.

Everytime I read a news article or flip on a news station I hear an economist say 2008 will be a rough year for housing AND credit

[6SpeedTA95]

Originally Posted by Thorgrim

Everytime I read a news article or flip on a news station I hear an economist say 2008 will be a rough year for housing AND credit

Yeah and I think most would agree. But housing can be bad and the economy overall pretty good. The question is what kind of housing deprecation will we see? What kind of refinancing options will we see? What type of forclosure rates will we see?

All this stuff is a big question mark right now. But I've gotta say one thing that the president, republicans AND DEMOCRATS did was sign that housing relief bill recently. I'm not a big proponent of government intervention but since it was government that in large part led to this housing problem having them at least help fix it is OK with me. That should help ease the pain and a rate cut would be good. The big problem is too much of a rate cut puts us in a situation where we are delaying the inevetible. The key is cutting rates to spur growth and STABALIZE housing. Then ratchet rates back up SLOWLY to keep housing flat or close to it over the next few years.

[Ardentfrost]

No doubt. The earliest predictions I've heard on the housing market starting to gain back some ground is late this year. And until foreclosure rates slow, the credit market is in the same boat.

I'm glad I'm ready to buy a house now. I've already been approved at a rate that I thought was long past, and the housing prices have dropped considerably. So at least I get some benefits from all this.

But I don't agree with 6speed when he insinuates our economy is so reliant on those two industries. We have plenty of other industries that are doing fine that will float us while those struggle. Recession? I would say so, but nothing like what doom and gloomers are talking about

[6SpeedTA95]

Originally Posted by Ardentfrost

No doubt. The earliest predictions I've heard on the housing market starting to gain back some ground is late this year. And until foreclosure rates slow, the credit market is in the same boat.

I'm glad I'm ready to buy a house now. I've already been approved at a rate that I thought was long past, and the housing prices have dropped considerably. So at least I get some benefits from all this.

But I don't agree with 6speed when he insinuates our economy is so reliant on those two industries. We have plenty of other industries that are doing fine that will float us while those struggle. Recession? I would say so, but nothing like what doom and gloomers are talking about

What state do you live?

[Ardentfrost]

Georgia. We've been really late to the troubles of other places in the nation. But recently it's really started to show with lots of houses on the market and people doing anything they can to get rid of them.

[6SpeedTA95]

Originally Posted by Ardentfrost

Georgia. We've been really late to the troubles of other places in the nation. But recently it's really started to show with lots of houses on the market and people doing anything they can to get rid of them.

Yeah, good thing is your bubble wasn't nearly as bad. So you may ride things out another quarter and then look at getting in.

[Ardentfrost]

we're buying by March (that's when our lease runs out)

[6SpeedTA95]

Originally Posted by Ardentfrost

we're buying by March (that's when our lease runs out)

Timing should be pretty good. I would expect you to bottom in march or april and if not I would expect you to be within 5 to 8% of the bottom

[Ardentfrost]

I plan to get the seller to pay closing costs after knocking off some % off the asking price We'll see how it goes.

[6SpeedTA95]

Originally Posted by Ardentfrost

I plan to get the seller to pay closing costs after knocking off some % off the asking price We'll see how it goes.

Yeah that'll depend completely on the property in question. What I will tell you, having been through the home purchase ordeal once already....do NOT get in a hurry. It is easy EASY ...very EASY to do. Do not get in a hurry. You may want to buy the first house you look at (look at more than one) or it may be the 200th house. But be patient and do not get frustrated even if you cant come to terms on one or two homes.

We had three jerked out from under us by higher bids. We also couldn't find a good price compromise on a couple others.

Also keep in mind if you're not flipping houses and you plan to live there for 5+ years, get what you want not necessarily what you get the best deal on.

[six6ftr]

Ardent, I think you can get away with a steal in our metro area. I currently live in a large subdivision with almost 200 homes and on my one block there are 7 houses on the market not too mention many more through out the subdivision.

Just wait it out like you are planning and then take your time and look. I talked to my wife who is a real estate agent (as you know) and she says that right now, a lot of sellers have gotten themselves in a bind by purchasing a new home before selling the old one and now are willing to do pretty much anything just to get rid of that extra payment.

[IminWonderland]

Originally Posted by 6SpeedTA95

Ahhh in that case yes, we're definately in the midst of a slowdown. However, there's been numerous analyst including many at morgan stanley that think we'll see a very VERY mild recession.

There's articles saying we'll have a substantial recession and articles saying we'll have a very minor recession.

Personally I think we'll teeter on the edge of recession with perhaps a single quarter of negative GDP growth (2 quarters makes it an official recession and this could happen).

I also think that the election can play a huge part in how badly we recess.

[Ardentfrost]

Originally Posted by IminWonderland

I also think that the election can play a huge part in how badly we recess.

Especially since there's a possibility of a big jump in CGT. People can pull out now and get hit by a 15% tax, or possibly get hit by a 25% tax later. If they wait, they need a better-than-10% jump in their stock worth, and with speculation being that people will pull out, the chance to get the 10% jump before wanting to pull out after-the-fact is low.

So, that has real potential to cause problems.

[bheld]

Originally Posted by Ardentfrost

Especially since there's a possibility of a big jump in CGT. People can pull out now and get hit by a 15% tax, or possibly get hit by a 25% tax later. If they wait, they need a better-than-10% jump in their stock worth, and with speculation being that people will pull out, the chance to get the 10% jump before wanting to pull out after-the-fact is low.

So, that has real potential to cause problems.

That's been priced in since the cut itself. That's where the much-ballyhooed bump in tax revenues come from after a cut. This situation was caused by an irresponsible fiscal policy in the first place and as such the effects of the return to normalcy should be placed squarely on the Bush administration. It will be spun seven ways from sunday by the right-wing though.

[Ardentfrost]

considering once upon a time there was no CGT, it's difficult to claim normalcy. I think the attempt was that once the spurred market was shown post-tax cut, it would become permanent. It certainly shows that raising taxes does destimulate growth (or, at least it will). That's something economists know to be true, but some people just don't care about.

Anyhow, I'm not surprised to find you blaming the ones who lowered the taxes... it's one of the only things I agree with them on, but then, they're morons on the subject anyway because they lower taxes and increase spending, which is about as retarded as you can get.

[bheld]

I'd love to get rid of the CGT too and tax it all as income. Either way, the issue isn't going to make or break the economy.

[Ardentfrost]

Originally Posted by bheld

I'd love to get rid of the CGT too and tax it all as income. Either way, the issue isn't going to make or break the economy.

No, it won't, it'll be one factor of many that breaks the economy

Naw, I'm not going to say it'll fuck everything over, but we're in a tough time right now b/c of other bullshit, and that could potentially (if it happens) add to the overall problem.

[IminWonderland]

If Orange County was one of the areas th