Archive for the 'Economics' Category


The Sub-Prime Crash

It was inevitable. People are flipping out. They’re begging for a rate-cut, but truth be told, we’re in a damned-if-you-do, damned-if-you-don’t situation. Things are going to get worse before they get better, but take heart, they will get better.

1) The housing market crash is going to pull the rug out from under many lenders. The ARM has jumped and the number of foreclosures has increased. The recent half-point interest rate cut will save some people from going belly-up, but the trade-off is a weakening dollar. The current instability has foreign investors in the currency worried, and there’s fears of a sell-off of currency, which will drive down the value of the dollar.

2) We’re already seeing the result of the half-point cut in the fact the value of the dollar is tumbling. As it stands, Bernake is trying to minimize the damage of the poor business practices of the past 6 years. The good news is that the damage from those practices will seem severe in the short-term, but the economy will be able to recover after a recession. It’s my recommendation that the economy be allowed to slow down and suffer the negative effects of this downturn to rebound faster and stronger. Cutting the interest rates is only going to prolong the inevitable and hurt the dollar.

3) I’ve never been worried about a “strong dollar” or a “weak dollar” until now, simply because the dollar looks to be in a freefall. The Canadian dollar is now trading nearly equal to the American dollar, which just shows how far the dollar has gone. This will help American exports and hurt the import markets, and we should see a spike in inflation, but again, it’s short term. The markets need to restabilize after this housing problem, and once it does, we can begin rebuilding.

Don’t fight the future. Let it happen, but plan on how to come out of the recession stronger. And don’t blame Bush for this, whatever you do. The President has little to do with the economy, and the economy has been doing well under Bush. The fact that one market will depress the economy for the short-term is nothing that you can fault Bush for. Heck, we’ve been fighting a war overseas and in the meantime the deficit of 2003 has nearly been eliminated. That’s a remarkable achievement.


In your face, U.S.!

Looks as though the US economy is not growing as fast as the economies in Europe or Japan, the UN is prepared to say.

I’m not sure why this is such big news, as it happened in 2001 as well, and happens from time to time, usually when the US is in a recession. But right now it’s a mix of housing market troubles and a booming world economy which is propping up everyone who isn’t the US.

The fact the UN is making a big hub-bub about it is rather odd. I guess it’s their way of saying, “Socialism rules, Bushitler!”

And don’t be surprised if housing drags the US into a mini-recession. Combined with a Fed that’s not really paying attention to indicator markets, I’m sure we’ll see the US economic growth stagnate in 2008-2009 (bad news for whoever gets elected President, I’m sure). But once the housing market hits equilibrium again and the Fed cuts interest rates, we’ll see the economy pick up steam.

And mark my words– $3.00 gas is here to stay, but unless we have another Katrina-like storm wreck output and refining capabilities along the gulf coast, don’t expect to see any major gas price jumps this winter, but don’t expect a major decline in prices. I’ll go out on a limb and say that the mean price of gas will hover around $2.70-2.80 a gallon, about where it is now, through the winter, and we can expect heating oil prices to remain steady.

If you want to see a decrease in the price, get a local refinery built, as that’s one of the reasons prices have been so high lately.


From the "What the Hell Were You Thinking" Files…’s CEO Jeff Bezos told some stockholders that even though they have 1 million orders of the latest Harry Potter book, they aren’t going to make a profit. Inc. has taken more than a million pre-orders for the final “Harry Potter” book due out in July, but the world’s largest Web retailer won’t make a profit, Chief Executive Officer Jeff Bezos told shareholders at the company’s annual meeting Thursday.

Amazon’s handling of the “Harry Potter and the Deathly Hallows” release – a $17 discount off cover price, a free shipping offer and guaranteed on-time delivery – showed yet again that the company is willing to take a hit to cement customer loyalty.

Customer loyalty?! It’s the biggest selling book this year, if not possible this decade. In an era where someone who moves 30,000 books in a week is doing well, Harry Potter is doing far better. And considering the success of the previous books, this was not a surprise.

But Bezos seems to think that customer loyalty is more important than making a profit on the biggest bestseller of the decade.

Had they offered a $10 discount price, I’m sure they would have moved a million books still, and that would have made a difference of $7 million dollars. The pricing in this case is amazingly silly and foolish. If 1 million people are buying books from your site, you don’t have to worry about customer loyalty. You just need to worry about the happiness of your shareholders.


Vacation Blogging

Our outdoor fun has been cut short due to rain and cold, so I’ve been reading some. Here’s some recommended reading:

I’d say this young woman is on the fast-track to an early Ph.D. in climatology. Her analysis is incomplete, but her style and presentation of information are truly impressive (her analysis of the El Nino Southern Oscillation is compelling and is a much better indicator of warming trends). I wish more of my students were as thorough and engaging in discussion as she is. Maybe she can explain to Nancy that witnessing glacier calving isn’t the same as saying the world is warming. But remember– liberals don’t have to face facts (like #6 here), they get by on feelings.

Your government is hard at work hiding their total mismanagement of our taxes, according to USA today. Remember, flat tax, cut government programs, and, for God’s sake, TERM LIMITS!!! Do you really think anything is going to change if we keep the same crew in Congress?

Slate is blogging the Bible. It’s off to a great start, and it’s making the serious mistake of going it alone without someone to put everything into context. Meanwhile, the indefatigable Robert Spencer is going to tackle the Koran over at Hot Air in a weekly column. Robert’s been a Koranic scholar for a long time, and he’s browsed the most famous commentary on the subjects.

I plan on doing much lounging tomorrow before another day of travel, so I may get a few more posts in. If not, I’ll see you all next week.


I can’t understand why the economy is doing so well!

That’s effectively the take by Kevin Drum over at the “Washington Monthly”, the “progressive must-read” of James Carville.

Borrowing a line from the AGW crowd, he says:

Well, look: anytime any aggregate growth figure [homebuilding] is low you can always point to its weakest component and say that things look a lot better if you just exclude it. A couple of years from now it will be something different: “Sure, there’s a slowdown in the IT sector, but it’s temporary and the rest of the economy is growing at a nice clip.” This kind of analysis leaves me pretty cold.

For years now people have been warning that the “housing bubble” is going to burst, and there’s plenty of indicators that show it’s happening. The first sign of trouble with the housing market is the damage to people with adjustable rate mortgages.

Hey, ARMs were great when the interest rates were in the 1’s, but now we’re creeping back up to normal, and there was plenty of time to Re-Fi into a fixed-rate adjustable, even locking one in at a low interest rate (although not as low as the ARM). And what we end up with is stupid people who’ve borrowed too much and are now feeling the pressure of an adjusted ARM.

As a result of interest rate increases, mortgages are harder to afford. I wish I had some career stability in the past 5 years to take advantage of buying a house, but I wasn’t in one place long enough to make a house purchase feasible. So I could get an ARM now and get a house, or I could do the smart thing and wait, save, and get a 30-year fixed rate. Or a 15-year fixed rate (but that would require the wife to agree to a smaller home, and that’s just not going to happen).

But now that other people are understanding long-term loans are just not the solid deal they once were, borrowers are scarce, and new home construction as well as existing home purchases are beginning to sag, and soon they’ll collapse under their own weight.

We’ll see a direct hit on the economy as companies fold. It’s called a correction, and it happens all the time. Wishing for doom and gloom, as Kevin does, and expecting the economy to self-destruct is perfectly aligned with Harry Reid and the defeatist plan for Iraq. Progressives just aren’t happy unless the US is suffering.

And Kevin is befuddled as the economy moves forward. The growth is good, not spectacular, and it’s steady, so the economy is strong. Unemployment is low (4.4% compared to 6.3% in June 2003). Kevin has to look at any “bad thing” and say “look, the economy is tanking!” And one day he’ll be right.

But the housing market’s bubble is bursting, and it’s going to impact the economy, but don’t expect it to force a major recession. It’ll be a correction, and most of us aren’t going to notice. Well, I will. With a collapsing seller’s market in real estate, it’ll be an ideal time for anyone to buy an existing home.

As an aside, I’m also doing this to test memorandum. I used to get links there, but evidently I kicked someone’s dog, so I’m never linked there any more. So, unless I get some memeorandum love, I’m going to kick it and its sidebar to the curve.


Detroit in Crisis

It’s no secret that the housing market in Detroit has hit rock bottom. Anyone selling property there is in serious trouble because nobody wants to buy. The city’s economy is bad and the crime problem is worse, and the elected officials are woefully incompetent.

Want proof? Sure. There’s a plan by Michigan Democrats to buy an “MP3 player” for every child going to school in Michigan. Why, you ask? “To assist education.” How is a student in my classroom rocking out to Ludacris on an MP3 player instead of participating in lecture going to assist that?

Insanity? The Detroit Free Press seems to think so. Will it turn the state Republican? Unlikely, and not like that would really help matters. Michigan needs to put all elected officials out on their ear and start over.


4.4% of you are lazy jerks!

I’m kidding! You’re just out of work.

So, the unemployment rate is at a 5-year-low. Bush has really screwed up the country, hasn’t he? I’m glad we elected a bunch of Democrats. We really need to fix this problem. Too many people are working! I’m so ashamed to be an American.

France: 8.7% (2006 est, according to the CIA).
Germany: 10.8%
Finland: 7%
Sweden: 5.6%
Greece: 9.2%
Spain: 8.1%

I can’t wait for Hillary to get elected and make us a socialist state just like these other ones!

About Me

My name is Doc. Welcome to my blog. If you're visiting from another blog, add me to your blogroll (and I'll happily reciprocate). I have a Ph.D. in Chemistry and live in Wisconsin. If you have any questions, feel free to email me. My email is docattheautopsy at gmail. (No linking to deflate the incredible spam monsters).



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