Top Ten Signs the U.S. Economy is Healthy
1. Almost all mortgages are not in default.
2. Almost all workers in the labor force who care to work are not unemployed.
3. The largest percentage ever of American household units own their own homes.
4. The stock market, in both absolute terms (the number on the Dow) and relative terms (the relationship of price to earnings), reflects optimism and an extraordinary, robust level of profits.
5. The spread between the interest rate paid on risk-free Treasury issues and on the Merrill Lynch master junk-bond index is far, far less than it was in the dark days of the tech meltdown from 2000 to 2002. This is a sign of less than horrific fear about high-risk debt.
6. For all but the least qualified buyers, mortgage money is plentiful, and in fact the potential borrower is bombarded with offers.
7. Hotels are full.
8. Airplanes are full.
9. Casinos in Las Vegas are jam-packed.
10. There is still a long waiting list for Bentleys in Beverly Hills.
~From Ben Stein's article in today's NY Times Business Section, "The Gloomsayers Should Look Up"
7 Comments:
I've lost all respect for this blog. Have you ever taken a logic class Perry? "All people who care to be employed are". WTF? Have you looked at the bus ticket sales?
Anonymous 8:55,
I'm pretty sure the post said "almost all". The difference is important.
Does casino activity increase with a poor economy or a good economy (or does it matter)?
And, unemployment offices are full. Why didn't that make the list?
I always get nervous when higher profile public figures start telling me how good the economy is.
When was the last time that a majority of mortgages were in default? Besides not all home loans are true mortgages.
Almost everyone that cares to eat has found a way to survive even if that means being under-employed and taking an unsustainable pay cut just to be able to buy groceries.
While a greater percentage of American household units own their own homes is that percentage going to hold over the next five years. Ask your local mortgage broker and see what their answer is.
The stock market while exuberant is more a reflection of the global economy and U.S. consumer ability to borrow than long term sustainable prosperity here at home.
Stein says the spread between the interest rate paid on risk-free Treasury issues and on the Merrill Lynch master junk-bond index is far and suggests that it shows a less than horrific fear about high-risk debt. It could also show that there is a better chance of government bailouts when tangible assets like voters houses are involved.
Mortgage money has always been plentiful for all but the least qualified borrowers. The definition of a "least qualified borrower" is dynamic and changes with market conditions.
Just a couple of years ago anyone with a pulse could get a stated income, no supporting documentation home loan that allowed them to pay as an alternate to the regular mortgage payment an interest only (never pay off the loan) payment or a less than interest only payment (never pay off the loan and actually owe more each month you do this) or pay a little more against the outstanding principal. This person with a pulse was considered a "qualified" borrower. Now this person would be laughed out of the mortgage brokers office.
Hotel Occupancy rates across the U.S. are down slightly over last year. The year to date occupancy rate for the U.S. as of July 2007 was 64.4% and that is hardly "full." http://www.michigan.org/mtr/enewsletter/combo.asp?ContentId=C3BD1340-3E6E-4ABC-8500-0480768DBFC1
Airplanes are fuller not full. This was accomplished by a reduction in the number and size of the aircraft fleet. "The nation's airlines were late more often this summer, lost more baggage and bumped more passengers off flights in more than a decade."
http://seattletimes.nwsource.com/html/businesstechnology/2003963294_airlineprofit20.html
While casinos in Vegas may be doing nicely it isn't so grand in other communities in Nevada. One industry, in one city has never been a legitimate barometer of the national economy.
http://www.casinocitytimes.com/news/article.cfm?contentID=169181
Just mentioning that a few people are waiting to buy a Bentley in Beverly Hills as some kind of evidence that the economy is healthy completely ruins Mr. Stein's credibility. He should be ashamed of himself.
11) Emergency Rooms in hospitals are packed!
12)From today's Wall Street Journal... Chapter 13 Bankruptcy filings are up.
Two more indicators of how great the economy is...
The restaurant I went to the other night was full.
The Secretary of State office on Miller Rd in Flint Township is always busy.
45,000 shoppers flocked to the new mall in Macomb County, MI, The Mall at Partridge Creek.
The die-hards lined up early to be among the first to experience Partridge Creek when it opened at 8:30 a.m. Some griped about waiting in the rain, but it didn't douse the enthusiasm of most.
Detroit News 10/19/07
Aren't anecdotes fun?
Anonymous 1:51,
A majority of mortgages have never been in default.
Information about the subprime "crisis":
http://mjperry.blogspot.com/2007/08/why-concern-about-subprime-loans-is.html
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