Property Grunt

Wednesday, December 12, 2007

Aww nuts

Pass the Malox.

The common mantra in finance is that when the real estate market is up than the stock market is down and vice versa. However it appears that mantra is being mashed into paste.

Fed Cuts Rate a Quarter Point; Stocks Dive

The Federal Reserve cut a key short-term interest rate today by a quarter of a percentage point, to 4.25 percent, signaling its concern that the credit crisis might be gradually damaging the broader economy beyond housing.

Policy makers also cut the discount rate to 4.75 percent, from 5 percent, essentially encouraging bankers to turn to borrow from the Fed to keep up their lending to consumers and businesses.

Investors reacted by sending stocks plunging and by bidding up Treasury bond prices. The Dow Industrials fell more than 200 points in a matter of minutes and kept sinking through the afternoon, closing off more than 294 points, or 2.1 percent, for the day, according to preliminary figures. Broader indexes like the Standard & Poor's 500 and the Nasdaq Composite fared even worse.

In an unusual statement after the meeting, the Fed’s policymakers declined to say whether they were more concerned about inflation or the outlook for economic growth. Their statement said that “Recent developments, including the deterioration of financial market conditions, have increased the uncertainty” about what will happen next.

It doesn't seem like anyone can do anything right. In fact it seems like any attempt to correct the situation just makes it worse. For instance, Bush's mortgage aid program has not been welcomed with open arms. Even Warren Buffet is a little concerned.

Billionaire investor Warren Buffett said the United States could slip into a recession if the jobless rate increases, he told CNBC television on Tuesday.

In a series of interviews throughout the day, Buffett, who built Berkshire Hathaway into a $205 billion conglomerate, gave a sobering view of the economy's prospects, including the assessment that holiday retail sales were not looking good despite a post-Thanksgiving holiday burst.

Consumer spending is seen as a key buffer preventing a weaker U.S. economy from sliding into recession as the housing market continues its free-fall and the banking sector remains challenged by a credit crisis.

"If unemployment picks up then we could be in for a recession," Buffett said.

Yesterday morning I heard this guy on Bloomberg Radio

Dec. 11 (Bloomberg) -- DuPont Co. Chief Executive Officer Charles Holliday said the U.S. economy will avoid a recession in 2008, buoyed by services and commercial construction as well as falling oil prices.

``The odds are not likely for a recession, but pretty slow growth,'' Holliday, 59, said yesterday in an interview in New York. ``So much of the economy is now the service sector that it takes more to take us into recession than it did.''

Morgan Stanley and Merrill Lynch & Co. have predicted the U.S. economy, the world's largest, will enter a recession as the worst housing slump in 16 years prompts lenders to tighten credit. Economists expecting the U.S. economy will shrink next year rose to nine last month from five in September, according to a survey by the National Association for Business Economics.

DuPont, based in Wilmington, Delaware, is the world's largest maker of car paint and supplies Corian countertops and Tyvek insulation to homebuilders. U.S. demand for automotive products will slow in the first half, Holliday said. Outside the U.S., where DuPont gets 60 percent of sales, growth remains ``solid,'' especially in Asia and Latin America, he said.

``We are in a recession in the U.S. housing industry right now,'' Holliday said. ``We think it will take longer to come back.''

Crude-oil prices may average about $85 a barrel next year, Holliday said, down from today's close of $90.02 in New York. DuPont, the third-largest U.S. chemical maker, expects the dollar to be little changed against the euro and yen, he said.

Since when are recessions selective? Either you are in one or not.

You know what I want to hear? I want someone in the financial hierarchy, someone with credibility to say, we are frakked. That this economy is undergoing a Cylon level beating. But like the Galactica and the fleet that she protects, we are going to find our way to Earth. You have to be a complete dunderhead to not know how dire of a situation we are in.

Of course no one is going to say that. Well, no one sane that is.