We find ourselves at an extremely difficult point in the market and for the US economy. Oil prices continue to rise to $140 per barrel. World wide demand is growing. Everything that comes from oil, including gas, transportation, product which are petroleum based, pretty much everything, will be going up in price. Combine that with higher food costs, also brought on by high oil (transportation, farming, ect.), terrible flooding in the mid west, the diversion of corn crops to ethanol, has but a huge amount of price inflation into the economy. At the same time, unemployment is rising, housing values are declining, credit has become scarce, so consumers are trying to buckle down and contain costs. The GDP of the United States has ground to a halt. That's what a recession is. However, the problem now is that we have an economic and consumer reccession while we have terrible commodity inflation. That's bad. Normally, the Federal Reserve can change the Fed Funds rate to combat these but you can't fix both at the same time. They can't cut rates further and flood the economy with dollars as the dollar is so weak already and they can't hike rates as that would really end any hope for economic growth which we need to get unemployment down and get the consumer feeling comfortable enough to start spending money again.
So today everybody threw in the towel and it's going to get worse before it gets better. :wallbash:
Wow, sounds like a real mess, and difficult to solve. I live in Canada, but we feel a lot of what happens in America here as well. I guess that gives me a reason on why it has been so hard to sell my house. Thanks for the explanation, there are certainly a lot of things happening at once. What is the issue about Corn and ethanol? Are they using to much for ethanol, and need it for other things such as feed?
Sounds like it's time to buy!
Absolutely. The young people who are in the market today for a house will find some great deals. No matter the naysayers, we are still not in a recession.
Quote from: markinro on June 26, 2008, 03:47:18 PM
No matter the naysayers, we are still not in a recession.
Well call me naysayer.. but this sure feels like a recession.
Quote from: StarTrekFanatic5 on June 26, 2008, 03:59:31 PM
Quote from: markinro on June 26, 2008, 03:47:18 PM
No matter the naysayers, we are still not in a recession.
Well call me naysayer.. but this sure feels like a recession.
I'm going to agree with Kenny as I see problems just getting worse. Local businesses here (and I mean long-time lived companies) are beginning to consider closing shop permanently. Just because of Gas prices.
I think we are definitely in a recession
King
A couple of things. By definition we are not in a recession and we may not actually breech that criteria of 2 consecutive quarters of negative growth. Yes, housing is relatively cheap compared to a few years ago, but if a young couple can't get financing and don't have enough saving due to high gas prices, it won't matter.
It WILL be a time to buy, just not yet.
The US government decided to embark on a ill advised program to incentive farmers to grow corn for the ethanol as opposed to feed grain and human consumption. The result is we still are a million miles away from having ethanol become an effective fuel source while meanwhile all the corn feed for livestock is rocketing up in price. Guess who gets to pay more at the supermarket?
Quote from: Bryancd on June 26, 2008, 04:46:36 PM
A couple of things. By definition we are not in a recession and we may not actually breech that criteria of 2 consecutive quarters of negative growth. Yes, housing is relatively cheap compared to a few years ago, but if a young couple can't get financing and don't have enough saving due to high gas prices, it won't matter.
It WILL be a time to buy, just not yet.
The US government decided to embark on a ill advised program to incentive farmers to grow corn for the ethanol as opposed to feed grain and human consumption. The result is we still are a million miles away from having ethanol become an effective fuel source while meanwhile all the corn feed for livestock is rocketing up in price. Guess who gets to pay more at the supermarket?
Thanks for the explanation on the Corn/Ethanol issue, as it was fresh in my mind as I basically watched a 2 hour advertisement for Ethanol this past weekend. It is good to hear the other side of the story, and this makes the picture a lot more clear for me.
I know for myself with selling my house, I was fortunate to buy when the market was really low where I live a few years back, and in theory, my house is at least double what I paid for it 4 years ago. I think people might be taking a wait and see approach with housing and see how far it falls, plus for people selling and moving up to larger houses, they may need to get a certain price out of their house. I know for myself, I have an offer on another house, so I need to sell my house at a certain price at this time. I guess for me either the deal falls through, or my realtor has to convince the other party to reduce their price and I reduce mine. So I wonder if a lot of people are in similar position as I am in, and not ready to hit the panic button quite yet and drop their house prices. Like Bryan said as well, house prices can go down, but if other expenses go up, then young people still might not be able to afford entry level homes.
Things are bad enough with high gas prices without having to deal with higher grain prices. Even I knew years ago that ethanol was not a good source of fuel--at least not the way it's being made now. We're certainly getting a double-whammy with high energy and high food prices. Politicians should get a majority of the blame for the mess we're in.
All I know is that it's time to buy stocks and buy again :)
I blame politicians for handcuffing our drilling in within our boundaries. I love how Americans are OK with destroying other people's environments to get oil but when we have the opportunities to do so we say NO. Now that is hypocritical.
And as many of you know I am a Republican but for the love of god please stop dropping money out of the sky ( stimilus checks ), just so people can buy more big screen TV's :)
It is definitely a complex and difficult time to live in. I feel fortunate that both Lynn and I are working. But many people are not as fortunate. Living in the Motor City something that really bothers me are foreign vehicles. There was a time that they were better than US made cars. That time is long past. And with the extremely amazing deals the US car companies are offering these days you would be silly to not at least test drive a few and see what you think if you are in the market for a new vehicle.
P.S. And for goodness sake, if you have some type of gas guzzling monster that you drive for no particular reason - dump it!
Quote from: Bryancd on June 26, 2008, 04:46:36 PM
A couple of things. By definition we are not in a recession and we may not actually breech that criteria of 2 consecutive quarters of negative growth. Yes, housing is relatively cheap compared to a few years ago, but if a young couple can't get financing and don't have enough saving due to high gas prices, it won't matter.
It WILL be a time to buy, just not yet.
The US government decided to embark on a ill advised program to incentive farmers to grow corn for the ethanol as opposed to feed grain and human consumption. The result is we still are a million miles away from having ethanol become an effective fuel source while meanwhile all the corn feed for livestock is rocketing up in price. Guess who gets to pay more at the supermarket?
I've been saying this for years about corn based fuels. Did people really think it would come from nowhere? It also takes twice as much ethanol to produce the same energy in a gallon of gas. then when you factor in transportation cost to get the corn to the refinery and then from the refinery to the pump, you are doubling transport cost via the shipping. Then factor in that the corn has to come from somewhere and you see an across the board price increase. You also see farmers dumping other crops to cash in on the "new" oil. Thus increasing food prices that much more.
Going in to corn fuels, they knew we would not have enough and if we converted every farm in america into corn, we still wouldn't be able to keep up with demand because of the low energy output of the fuel requires more to go the same distance. Bigger gas tanks leads to more weight and lower fuel efficiency, compounding the problem.
Corn was a joke to begin with and people bought it because it's more profitable than fuel cell technology. I mean using renewable energy to turn water to hydrogen and oxygen, then using that hydrogen to power your car where it turns back into water vapor. How much can you really make on that? I'm glad cars are coming out with fuel cell tech now, but we as a people really need to stop reading the press on why something is good for us without looking at the rest of the puzzle.
If we actually tried solving the energy problem instead of trying to solve it at the greatest profit margins, we wouldn't be in this mess.
Quote from: Rico on June 27, 2008, 04:34:51 AM
It is definitely a complex and difficult time to live in. I feel fortunate that both Lynn and I are working. But many people are not as fortunate. Living in the Motor City something that really bothers me are foreign vehicles. There was a time that they were better than US made cars. That time is long past. And with the extremely amazing deals the US car companies are offering these days you would be silly to not at least test drive a few and see what you think if you are in the market for a new vehicle.
P.S. And for goodness sake, if you have some type of gas guzzling monster that you drive for no particular reason - dump it!
Agreed. Biofuels are not economically feasible. Drill here, drill now. We're talking about a piece of land the size of an airport.
In the area I live in, we are a bit of an anomaly (pardon the pun ;) ) in that people still buy a lot of larger sized vehicles and trucks. A neighbor of my parents deals in importing and exporting of vehicles, and lately he has been importing a lot of large sized trucks. He said business has never been better for him given the dollar comparisons between Canada and the US, and the economy my province is in. I guess there is a real need for large sized vehicles here mostly for companies due to our booming oil economy ( seems ironic in a sense) and the northern terrain. I guess with Manufacturers cutting back on making trucks and other large sized vehicles, companies cannot find enough locally, or at good prices, so he has been importing a lot from America.
I agree with you Rico, it is frustrating to see some one driving around in a large sized truck just to go to the mall. I think as well, a lot of people around here use these company vehicles, as the company pays for the gas.
Oh, I'm definitely fine with trucks, SUV's, vans, etc. where there is a need. But man, I hate seeing them at the grocery store with ladies buying a bag of food.
We have a lot of larger vechicles in our area to. We have a lot of big families in our church and the only way to transport all the little rug rats is to have a bigger vehicle. I know we are trying to drive less and our car gets about 21 mpg. My truck gets more, but my middle son is driving that, and I am walking... (and I lost another pound last week! :) Sweet!)
So a lot of times we don't know why people are driving a big rig. It could be that they do have a use for it, but don't own a smaller vechicle to putt around with.
Again, when there is a need it's fine. I'd love you guys to get a look at what I see driving down to Detroit every day. Talk about waste. Hummer's, Escalades, etc. with one guy in them. :dry
yeah, when we are up towards Seattle we see a lot of that, but down where we are ... well I live in a very small community. Our whole county only has about 60-65 thousand in it.
I mean the longest our commute can be is about 20 minutes. :)
I am not sure what the connection people are making here. Are you saying people driving SUV's are cuasing the price of oil to go up or something or causing bad things in the economy.
I am nore concerned with people buying everything on credit than anything else.
I'm sorry for the slide over into car and fuel use talk. Part of my point is many people have bought large vehicles with big engines for years partly because fuel was cheap. Now it costs a lot more and they are complaining about gas prices but still are pulling up to the pump every few days to fill up. Perhaps it might be time to save some money, save some fuel use, and trade that Escalade in.
No but overall the high oil prices overall are affecting the choices people make in car choices. I know there are a few auto plants around here that are in a lot of trouble and the government is stepping in to convince the auto companies to retool them from building SUVs to more efficient cars instead of closing them and moving to Mexico.
My father in law has always mentioned that the state of the auto industry tends to be an indication of the general direction of the market in the near future.
Been seeing a lot of motorcycles in the area. I think more-so than usual. Or I have a bad memory. Who knows. We do have a gas-guzzling truck, but we use it primarily to help our "operations" on the farm. And even that is limited. Otherwise you'll see us mostly in small 20-30 MPG cars. Honda ftw.
King
Quote from: Blackride on June 27, 2008, 09:10:48 AM
I am not sure what the connection people are making here. Are you saying people driving SUV's are causing the price of oil to go up or something or causing bad things in the economy.
I am more concerned with people buying everything on credit than anything else.
Yes, our car buying habits haven't created the current high oil prices, instead our car buying habits were encouraged by our traditionally low fuel prices vs. the rest of the world. That has certainly been changing as of late. Ford and GM have been shifting resources away from SUV/Truck production back to economical car production. The problem is that Toyota and Honda have a huge leg up on them in those area and Detroit is playing catchup.
Here are my thoughts.
- Not all cars are good on MPG. People assume that because a car is small that it will get good MPG.
- If you want the American car manufactures to do well then you should support larger cars like trucks since that's what they excel in. Just a different way of looking at the problem.
- The free market system will drive our change in energy policy. When I say this I mean that as the prices of fuel go up consumers will buy less efficent cars and pressure companies to produce different types of cars. Companies like GM has already said that there is going to be a fundemental shift in their cars to accomodate the new gas prcices. In short, where there is money to be made a company is going to step in and take advantage of it ( good for consumers).
***
To me all the options on the table currently are short-term and I would love to see more incentives for universities and companies to research new energy sources now.
My car is pretty good on gas compared to some - about 25 mpg. You are making some big assumptions on your second point. I have been in several US auto plants. I know many people who work for the big three. What money they make varies greatly from vehicle to vehicle. And actually right now since larger vehicles are not selling well at all they are taking some big hits on getting rid of them.
And I don't understand your last section at all. Especially this part....
"When I say this I mean that as the prices of fuel go up consumers will buy less efficent cars and pressure companies to produce different types of cars."
Buy less efficient?? Huh???
I meant buy more efficent. Basically Free Market system rules!
Typing on my blackberry now :)
Rico - I did not mean that they are not hurting at the big plants. I meant that people should support buying bigger cars if that's what America does well. They just need more hybrid trucks. I agree that for America to compete within Honda and Toyota on compact cars is going to be hard. I guess my statement does not make sense in practicality.
Buying anything from them will support them. And like I said, they make variable amounts depending on the vehicle you get. For example, my G6 convertible gave GM much more money in their pocket than if I had gotten a Chevy truck or van.
Quote from: Rico on June 27, 2008, 09:03:30 AM
Again, when there is a need it's fine. I'd love you guys to get a look at what I see driving down to Detroit every day. Talk about waste. Hummer's, Escalades, etc. with one guy in them. :dry
Yup. Oakland County has one of the highest % of single drivers. Make the left lane car pool only from 7-9 and 4-6 M-F. Minimum 3 people. Only problem is that no one will do that and the other lanes will be jammed. This is one of the worst cities to drive. Yeah, yeah Rico -- service drives, service drives. :)
Here we are with $4/gallon and GM announces the Corvette VR1. They're in their own little world. Toyota/Honda are going to dominate the auto industry if they don't wise up.
Making the speed limit 55 - I tried that for a month. I saved maybe 2 gallons.
Quote from: markinro on June 27, 2008, 11:49:30 AMMaking the speed limit 55 - I tried that for a month. I saved maybe 2 gallons.
I suppose you stopped now right? Actually, that's not too bad if you started with a 10-gallon tank. That's 20% savings. If I travel between 60-65 mph instead of 65-75 mph I get an extra 5 to 6 mpg or about 19% -23% more mpg. That's over $9 in savings for me for every tank.
Quote from: PepperDude on June 27, 2008, 11:43:09 PM
Quote from: markinro on June 27, 2008, 11:49:30 AMMaking the speed limit 55 - I tried that for a month. I saved maybe 2 gallons.
I suppose you stopped now right? Actually, that's not too bad if you started with a 10-gallon tank. That's 20% savings. If I travel between 60-65 mph instead of 65-75 mph I get an extra 5 to 6 mpg or about 19% -23% more mpg. That's over $9 in savings for me for every tank.
It depends on many factors again. Engine size, car weight, roads driven, etc. I think Mark was saying he saved maybe 2 gallons over a whole month of driving. I'm not sure how many fill ups that is but I'd guess 4 or 5. Say at a 15 gallon tank that's at least 60 - 75 gallons with a 2 gallon gas savings or about a 3% savings. Not really a big amount. One less trip somewhere will save about that.
Than again...if everyone used 3% less gas...
Nah, it wouldn't affect the market. Oil companies would just withhold more supply.