Marketwatch has an article that highlights some things going on with California’s economy that suggest the state may be in recession.
“California seems to be sliding into recession,” wrote Jan Hatzius, chief economist for Goldman Sachs, in a research note earlier this week. Hatzius based his appraisal on the sharp increase in the unemployment rate in the state from 4.7% in November 2006 to 5.6% in September 2007.
How many of those newly unemployed recently lost jobs that were related to housing? That includes mortgage lending, real estate appraisal, real estate agents, and construction. Of those newly unemployed, how many have massive mortgages themselves and instead of saving any profit they earned over the past few years spent it on shiny toys and lavish vacations?
“California is in for at least another year of economic doldrums,” said UCLA economist Ryan Ratcliff in his latest forecast published in September. But California will not sink into a recession unless a second source of weakness develops, or the housing market worsens more than expected, Ratcliff said.
Ah, here we have another economic expert predicting that things will turn around in a year. Pay attention to the last part of what he said - the part about everything being OK as long as the housing market doesn’t worsen more than expected. How much more of a downturn is expected? With mortgage lending standards tightening every day, major banks writing off massive amounts in losses, and home [asking] prices still astronomically higher than what typical buyers can support, it’s difficult to see how things can get get better any time soon.
The state of California isn’t taking any chances. Gov. Arnold Schwarzenegger has ordered state agencies to plan for a 10% cutback in their budgets for next year, figuring that tax receipts could fall significantly along with home prices.
Again, real estate seems to be the problem again. With lower transaction prices, and current owners likely to argue for lower value assessments, the state is expecting lower tax revenue and is acting to reduce budgets to avoid problems. Is 10% enough to be safe?
A few years ago and up until a few months ago, this was predicted by many bloggers and independent authors, yet they were dismissed by the experts as being overly negative doom-and-gloomers. Did they know something the experts did not? Key fundamentals were ignored and instead the Kool-Aid was going around.
My Latest Rant - Enjoy!
Seems like the punch bowl is drying up and people are beginning to see the hard truth. California is due to see some sort of downturn. It is impossible to continue on the path of dramatic growth. With all the current factors affecting our nation’s financial matters, it is hard to be optimistic. I’ll try to name a few issues pointing to massive recession nationwide: the mortgage mess, overvalued home prices, collusion between real estate agents and lenders, large scale cutbacks at large financial institutions, Low unemployment(***HUGE number of low paying jobs***), gas prices, electric bills, weak dollar, increasing prices of imported goods, near record high Stock Indexes, health care costs, social security drying up soon.
That is just a few. I’ve said it before, recession is imminent. History does repeat itself, especially in the stock market. Over time, especially following record high-points, declines in major indexes follow.
I wish I had the answers to begin to correct these issues, but there is no easy solution.
I can provide my opinion, though. The USA became so powerful due to the hard work of proud citizens. The people were the key asset. Today we are outsourcing that key asset. We MUST put in place systems to promote education above everything else. Keep the technology here, keep the jobs here, and export the knowledge. It’s a win, win, win. (I learned that in sales) The current path is dismal. There are many children left behind. We NEED intellectuals in positions of power. Just think if more Americans were educated, there would be far fewer social problems. I believe that the current situation (mortgage mess) is due to stupid people not knowing enough to read the fine print; people that are extremely impulsive and so easily persuaded to get the best deal without first examining the consequences of their actions. (Just look at our voting system. Millions Of uneducated and uninformed people voting. Idiots that are more concerned about abortions than international relations. I’ll stop there) Of course, in an ideal world, the education solution would work and everyone would be happy. Unfortunately, war, terrorism, taxes, and poverty are unavoidable. Sooner or later, things will get worse.
The only sure bet is Google. They refuse to split shares and continue to make strategic acquisitions. I am predicting Google to soar above $1000 next year. Put that on record.