1784- 4TH QUARTER
Okay- it’s the end of the month and I have yet to comment on the last quarter of last year.
Those of you who have read my posts near the end of the year- you saw that I was more bearish than bullish on the economy.
Some smart guys were beginning to say they felt the last 3 months of the year might show a 3.5 percent growth rate.
I did think these guys were too ‘exuberant’ [Greenspans Irrational exuberance- remember?] But I figured I’d wait and see- and sure enough the numbers are out- and I was ‘more’ right than them.
The economy grew at a 2.8 annualized rate in the last quarter- not good at all.
The Fed is now predicting that for 2012 we will see about 2.5 percent growth for the year.
And some are now saying that we might even slip below the 2 % mark in the first quarter.
Simply put- these numbers mean we are not going to see the economy heat up any time soon.
The Euro zone?
Yes- the credit rating agencies are all downgrading these shaky European economies. Greece is still trying to solve its debt crisis.
Let me give you a local example of how this affects our own economy.
Here where I live I am surrounded by Naval Air bases. I used to be stationed at the one in Kingsville- and I live about 200 yards from the one in Corpus Christi.
About 20 miles across the bay- if I walk down the block and look over- I can see the former base that was in Ingleside. This was a newer base that did all the training for our mine warfare guys.
So a few years ago this base fell victim to the base closure commission and it got wacked.
So the Port commissioners and the local govt. guys have been trying to sell the property and get a good company to utilize this valuable space.
As I have been reading the local news I saw that the last company that put down a non refundable million dollar down payment- they missed the deadline- 3 times- to come up with the rest of the cash.
I thought why would anybody put down a million dollar non refundable down payment on something that they don’t have the money for.
Then I saw that the investors did have the money- but some of it is tied up in the European banking system- and they can’t get a good exchange for the money into U.S. currency.
Everybody with any sense has already cashed in as much of their Euros as possible. These governments are at a point where they might go bust- Greece is trying to convince their bond holders to take a 60% hit on their bonds- and the payout will be longer- and at a lower rate.
So this small deal that did not go thru where I live- was indeed a victim of the Euro Zone crisis.
When you add this in with the less than stellar economic numbers- then I don’t see how we will mount any type of real recovery for this year.
Then why is the DOW up to around 12,600?
If you ask me- that’s a bubble.
But as I watched the news over the last month- I have seen many reports of how good the economic numbers were- and they even reported ‘good news’ about the jobs numbers.
I remember during the Bush years- when unemployment was around 5 %- some news folk reported it as bad.
We are at 8.5- and they are actually saying this is good.
So the media have a way of selling us stuff- stuff that we don’t- or should not want- and we buy.
I’ll end with one last example. A few years back during the first big financial crash of the current time- many people lost tons of money overnight- we have never made up the trillions that were wiped off the books.
Now- at the time it was common to read your 401 k statement and see a huge hit.
I saw/read a report how some investors were actually putting their money into money market accounts that guaranteed a loss.
Yes- the money market said up front ‘you put in 1 dollar- we will pay you less than a dollar when you take it out’.
Why would people do this?
Because they were told ‘geez- you can’t put your money under the bed’.
Well yes- if you took all your money and stuck in under the bed- over time inflation would eat up all your buying power- and your money would lose value.
But if you are putting it into an account- that says up front ‘we guarantee you that you will lose some value’ then you would be better off under the bed.
Note- Do me a favor, those who read/like the posts- re-post them on other sites as well as the site you read them on. Thanks- John