Q1 2006 is shaping up to be a big GDP downer (RECESSION)

[berni_mccoy]

The latest housing numbers showed a HUGE drop in the housing market (http://abcnews.go.com/Business/wireStory?id=1763903&CMP=OTC-RSSFeeds0312). The bubble is popping.

Unfortunately, that was the last big component of the GDP that was positive. When the new GDP numbers come out, they will not be so rosy as Q4 2005. In fact, they will be down right depressing. That's how fragile our economy has been: buoyed only by the housing market and government spending. Thankfully, the gov't raised the cap on the budget this year, otherwise, the GDP numbers coming out would probably be worse than they actually are.

This will obviously send BushCo into a tizzy of spin. What will they say? Will they blame it on Democrats? Will they say Terra Terra Terra?

Combine this with rising interest, a NEGATIVE savings rate that hasn't been seen since the great depression (http://www.fool.com/news/commentary/2006/commentary06030917.htm), an UNPRECEDENTED Gov't Deficit and with the latest attempt by the Fed to put some positive light on the shift away from the dollar by government after government that is spreading like a human-to-human transmittable airborne version of the bird-flu: http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2006-03-23T232454Z_01_WBT005031_RTRIDST_0_ECONOMY-FED-BERNANKE-DOLLAR.XML

Yeah, let's make those tax cuts permanent (http://www.washingtonpost.com/wp-dyn/content/article/2006/03/15/AR2006031502107.html), let's keep on giving SEVEN BILLION DOLLAR tax breaks to oil companies (http://www.commondreams.org/headlines06/0214-01.htm), and let's keep burning the ever more costly oil, even as the cost per barrel surges to $64 (http://www.forbes.com/business/healthcare/feeds/ap/2006/03/23/ap2617388.html).

My friends, we are on the verge of a major recession. This quarter will mark the first negative quarter that starts us into a spiraling recession. We're past the precipice now... we just don't realize it yet.

[kenny blankenship]

1. Well of course it would have to be the Democrats' fault

for stopping the Republican controlled House, the Republican Senate and the Republican White House from doing everything they wanted to do in the way of "incenting" the economy with tax cuts. (Or leastways, as big a tax cut package as the Lord wanted his regent on Earth to enact.)

And mostly because they criticized the annointed President and the Holy War, because they're always so negative about things, because they hate America, because they don't have the love of Jesus in their hearts.

[A Simple Game]

Well good. It's nice to see that

some people are finally starting to understand *'s biggest problem!

[A Simple Game]

5. delete, itchy finger.

[Name removed]

4. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Warpy]

2. Well, we knew that three months ago

when the yield curve on bonds started to invert. That's a sure indicator that a recession is just around the corner. We'll be lucky, though, if this one doesn't turn into a depression. The combination of concentration of wealth plus cheap labor conservatism are about to reach their inevitable conclusion, I'm afraid.

In the meantime, we're likely to see some pretty steep inflation as the decline in the dollar plus the increase in transportation costs due to the increase in fuel costs are felt at both wholesale and retail levels.

We're also quite likely to see a fairly steep increase in the interest rate, both to shore up the dollar and because the Fed really doesn't have any other ideas on how to control inflation, other than blaming working people for being greedy and heating their houses and feeding their kids (remember the 70s?).

Advice: if you're carrying credit card debt, pay it off now, any way you can. Credit card companies have NO REAL LIMIT on the interest they can charge you if you're a nanosecond late with a payment, and maintaining that debt is a shortcut to ruin. Think smaller, just get out of debt now, if you can.

[okieinpain]

3. what about these quotes.

"Economists still believe that housing is likely to see a moderate slowdown this year rather than anything as severe as the bursting of the speculative bubble in stock prices at the beginning of this decade. That decline was severe enough, wiping out trillions of dollars in wealth, that it helped pushed the economy into a recession."

"Excluding transportation, orders fell by 1.3 percent last month, the weakest showing in this category since last July. But analysts noted that this drop followed strong gains in the non-transportation area in the previous two months, a good signal for future growth.

"The bottom line here is that industry is doing well," said Ian Shepherdson, chief U.S. economist for High Frequency Economics."

"The 2.6 percent increase in overall orders was the biggest gain since a 5.3 percent rise last November. It left total orders at $215.8 billion last month, an increase of $4.99 billion."

not fussing, just asking.

Thanks.

[berni_mccoy]

6. I would respond as follows

"Economists still believe that housing is likely to see a moderate slowdown this year rather than anything as severe as the bursting of the speculative bubble in stock prices at the beginning of this decade. That decline was severe enough, wiping out trillions of dollars in wealth, that it helped pushed the economy into a recession."

We are well past a moderate slowdown with a 10% drop in sales. We are now over 1 year of a continuous negative savings rate. People have been spending more than they earn and they've been borrowing the equity in their homes to do it. The rise in mortgage rates in the last two years would have produced a "moderate slowdown" if they were the only factor. But with people borrowing more than they should to spend at increasing rates, we are seeing the limit of equity that is allowed. A 10% drop in sales will drop home values considerably (as much as 25%) meaning that people may be in negative equity situations or at least under 20% equity. And that means re-introduction of PMI on many many people. This will be another added expense that will further snowball the slump.

"Excluding transportation, orders fell by 1.3 percent last month, the weakest showing in this category since last July. But analysts noted that this drop followed strong gains in the non-transportation area in the previous two months, a good signal for future growth."

Our manufacturing is the weakest part of the GDP. The fact that orders fell by 1.3 is bad news. A recession is defined by two quarters of decreasing GDP. Q1 2006 will be the first quarter and it will be a doozy.

"The bottom line here is that industry is doing well," said Ian Shepherdson, chief U.S. economist for High Frequency Economics."

For who? It won't change the fact that Q1's GDP will be worse that Q4 2005.

"The 2.6 percent increase in overall orders was the biggest gain since a 5.3 percent rise last November. It left total orders at $215.8 billion last month, an increase of $4.99 billion."

Notice they aren't talking about imports, which are rising at a faster rate and will overshadow any marginal increase in mfg.