Yahoo has two articles today that tell how employers added jobs last month, but consumer confidence remains at a two year low.

Analysts said continued gains in hiring showed the economy was not at immediate risk of crumbling onto recession despite strains from a weak housing sector and credit tightness. But a later report showed consumers’ moods grew darker in December.

Come on, America! This is December, the shopping season! Why do you have to be so negative? Have you no faith in our strong economy. Wall Street and Washington are working together to ensure that there is enough credit to go around for everyone.

“There’s a great deal of angst out there,” said economist Ken Mayland, president of ClearView Economics. “There is a great deal of fear and foreboding.”

Economists said a host of factors were to blame for the still gloomy mind-set of consumers. The collapse of the housing market, which has dragged down home values, has made people feel less wealthy. Home foreclosures have shot up to record highs. Harder-to-get credit has made it difficult for some to make big-ticket purchases. High energy prices are squeezing wallets and pocketbooks. And, Wall Street’s gyrations have made some worry about the value of their nest eggs.

Those gloomy consumers need to get out to a mall, that will make them feel better. Just like the rise of the housing bubble made consumers feel and spend as if they were wealthy (even though they really weren’t), the collapse of the bubble (which is still collapsing) is causing people to feel less wealthy. Are consumers starting to see that wealth is more closely tied to their savings or investment account than some imaginary number given by a home appraiser?

The high energy prices that we’re currently paying are insignificant compared to the value of all the home equity extractions that have taken place over the past few years. Despite that, there seems to be some psychological effect that high oil prices have on consumers.

Economy | 1 Comment »

We’ve been drinking a lot of Kool-Aid here lately, trying to cope with everything that’s going on in the financial and real-estate world. Whether you’re a regular reader here or not, you’re probably aware by now that there’s talk in the White House about freezing adjustable interest rates to help save the ailing subprime borrowers who are stuck with ever-rising mortgage payments. We don’t know where to begin on that one, but fortunately there are a lot of other websites that go into great detail dissecting those plans (see the links at the bottom right of this site).

We’re going to do the unthinkable today and have our main post reference another blog. Perhaps we’re just lazy or just too exhausted from watching the financial mess unravel, but either way this post hits home. Over at “The Big Picture” there’s a great summary of a New York Magazine article about high end inflation.

KILOWATT HOUR OF ELECTRICITY
2003: $0.136
Percent increase: 28%
Today: $0.175

TAXI FARE FROM JFK TO MANHATTAN
2003: $35
Percent increase: 29%
Today: $45

We don’t want to spoil it and take credit for someone else’s post, but jump on over and see the whole thing for yourself. Everything has gotten more expensive in the past FOUR YEARS. Wall Street wages have significantly outpaced inflation, but what about the wages of regular working people? Not just minimum wage or blue-collar workers, but working professionals (who aren’t in the financial services industry).

We didn’t know how much the average Wall Street worker earned, but now that we do, that answers many questions about life in Manhattan. One thing we’ve noticed is that most people we’ve spoken to who work in the finance industry work well in excess of 80 hours a week and don’t have a whole lot of free time to enjoy their money. However, if you make $800,000 a year you can easily retire by the time you hit 40, assuming you don’t get wrapped up in a lifestyle that involves spending $800,000 per year.

What’s going to happen now that people are starting to make calls on all the bad debt that created the real estate bubble? Will it be enough to unravel the schemes on Wall Street and send everything back into harmony and balance?

Note: working in financial industry or real estate during a hyperinflating bubble may lead to profit! Remember this during the next round, if we can ever recover from this in our lifetime and can get to the next round

Kool-Aid | No Comments »

Bloomberg.com is reporting that the Federal Reserve may couple a rate cut with additional measures to increase credit.

Federal Reserve officials, who are forecast to lower their main interest rate next week, are signaling that they are looking for additional ways to increase credit to companies and consumers.

“The Fed has to re-liquefy the markets to reduce the risk of a financial accident,” said Lou Crandall, who used to work at the New York Fed and is now chief economist at Wrightson ICAP LLC, a Jersey City, New Jersey-based research firm that focuses on government debt.

Banks are panicking. Credit isn’t available like it used to be because banks, lenders, investors, and everyone involved are trying to cover their positions and price the risk accordingly. The subprime mess is only the tip of the iceberg. There’s been a lot of talk about bad debt related to subprime mortgages dragging the markets down and causing CDOs to collapse, however we still haven’t heard too much about problems with regular mortgages made to borrowers with good credit.

Stay tuned for more! Until then, keep drinking and believing!

Financial Market, Economy | No Comments »

Bloomberg.com reports that Abby Joseph Cohen, a Goldman Sachs strategist, predicts the Standard & Poor’s 500 Index will rise 14 percent by the end of next year.

Cohen, 55, says the S&P 500 will climb to a record 1,675, extending the longest stretch of annual gains since the 1980s. She joins strategists at Citigroup Inc., Bear Stearns Cos. and Strategas Research Partners LLC in forecasting the benchmark will at least reach that level in 2008.

“U.S. stocks will offer moderate gains and will dramatically outperform bonds over a 12-month horizon,” New York-based Cohen wrote in a report today. “Recession will likely be avoided, due to strength in exports and capital spending by corporations and governments, and thanks to a vigilant and flexible Federal Reserve.”

How appropriate for a site called “Drinking Is Believing.” She does, however, provide some supporting arguments for her prediction:

Pressure on earnings stemming from more then $60 billion in losses from subprime loans may be offset by a weaker dollar, strong U.S. labor productivity and healthy corporate balance sheets, the strategist wrote.

Looking at what’s going on with the markets, it’s difficult to see how things will get better any time soon, however the market isn’t always motivated by factual data. Human emotion is the driving force.

Financial Market, Stock Market | No Comments »