30 December 2008

Can You Spell D-e-p-r-e-s-s-i-o-n?

On 30 December 2007 I wrote an entry in my web log detailing my thoughts on the coming economic year. I titled it Can You Spell R-e-c-e-s-s-i-o-n?

I am no financial genius but I do know how to read and listen and digest what experts say. Based on that, I figured things were going to get rough. I was wrong: 2008 was not a rough year, it was a disaster.

So, now, here are my thoughts for 2009:

I think we are going to look back on 2008 as "the good times." 2009 is going to be worse. How bad? I don't know. I will echo my advice from last year: for the next 12 months do not make any changes to your job, your family or your house unless those changes are to pay off what debt you have and save even more money than you are now. I am pretty confident that 2009 will be the worst of it, and that 2010 will start the recovery -- although many experts are saying it will be 2012 before we see things start getting better.

There is one part of my web log where I was totally correct. I said that "this could be the first time in my lifetime ... where we as a country have gotten ourselves so far underwater that it might actually change the course of our country's history." Review the list below of major economic events during 2008 and see if I wasn't right.

Oil hits $100 for first time in history

Citigroup bank reports loss of $5.11 billion ($1.02 per share) for first quarter 2008

According to Standard & Poor's, housing prices dropped 15.8% this month compared to the previous year. This is the largest decline since they began tracking this number in 2000

Oil reaches a trading record of $143.67 a barrel

Sales of new homes fell for the seventh time in eight months

Record number of foreclosures in California: 118,020 homes from April to June up 125% from the same period last year

Wachovia Corp. (banking) reports loss of $8.86 billion ($4.20 per share) for second quarter 2008

Ford Motors reported its largest quarterly loss ever of $8.7 billion

Oil reaches a trading record of $147.27 a barrel

The euro hit a new record high against the dollar of $1.6036

First seven months of 2008: 463,000 jobs lost

Wholesale inflation shot up 1.2%, rising at the fastest pace in 27 years

Government takes control of mortgage lenders Federal National Mortgage Association (FNMA, also known as Fannie Mae) and the Federal Home Loan Mortgage Corporation (also known as Freddie Mac)

Auto companies ask for $50 billion in government loans

Lehman Brothers Holdings Inc. filed for bankruptcy

Merrill Lynch & Co. was forced to sell to Bank of America for $50 billion in stock

American International Group Inc. asked the Federal Reserve for emergency funding

15 September: Dow Jones lost 504.48 points (4.42%) erasing about $700 billion in shareholder wealth. The Dow is now down 23% from its record high of 14,198.09 October 2007

19 September: the Bush administration requests a $700 billion proposal to purchase bad mortgage debt in an effort to stabilize the country's credit markets

22 September: oil prices briefly spiked more than $25 a barrel before falling back to settle at $120.92, up $16.37, shattering the previous record for a one-day jump of $10.75

25 September: The Federal Deposit Insurance Corp. seized Seattle-based Washington Mutual Inc. (founded in 1889, with $307 billion in assets) and then sold the thrift's banking assets for $1.9 billion making it the largest bank failure in the country's history

29 September: Stock market lost 777 points -- the largest drop in its history -- on news that the $700 bail-out package was not approved by congress

06 October: The Dow closed below 10,000 for the first time since 2004, down about 370 points at 9,955.50. At its worst point, the Dow was down more than 800 points, an intraday record. Today's close was almost 30% lower than its all-time high of 14,164.53. In Japan, the Nikkei average lost more than 4%, Britain's FTSE-100 lost nearly 6%, Germany's DAX lost 7% and France's CAC-40 dropped more than 9%

09 October: Dow fell to 8,579, below the 9,000 level for the first time in five years and one year to the day after the Dow closed at its record high of 14,164

13 October: The stock market rose 936 points for the biggest single-day stock rally since the Great Depression

28 October: The consumer confidence index fell to 38, down from 61.4 in September, and down from 95.2 a year ago

30 October: The gross domestic product fell at an annual rate of 0.3% in the July-September period. When compared to the 2.8% growth reported in the prior quarter, this represents the largest drop in 28 years

In October, the nation's unemployment rate reached a 14-year high of 6.5% with a loss of another 240,000 jobs. For 2008 alone, 1.2 million jobs have disappeared, making a national total of more than 10 million people unemployed. This is an increase over last year of 2.8 million people. At this time last year, the unemployment rate stood at 4.8%

The Labor Department said the number of people continuing to draw unemployment benefits jumped to 3.84 million in late October -- a 25-year high (late February 1983)

According to the Commerce Department, October retail sales fell by 2.8% -- the biggest drop on record, surpassing the old mark of a 2.65 percent plunge in November 2001

According to the Labor Department, consumer prices in October fell by 1% -- the largest drop on record (dating back to February 1947)

The Commerce Department reported that construction of new homes and apartments fell by 4.5% in October to the slowest pace on record (dating back to 1959)

11 November: Shares in General Motors Corp. hit a 65-year low as the result of a Wall Street firm's forecast that the company's stock value could drop to zero within a year. The stock finished at $2.92 -- the lowest it has closed since 1943

01 December: The National Bureau of Economic Research announced that the U.S. economy has been in a recession since December 2007

05 December: The Labor Department reports the loss of 533,000 jobs in November, the most for a single month in 34 years. The unemployment rate now stands at 6.7%, a 15-year high

11 December: Bernard Madoff was arrested for fraudulent investments that lost more than $50,000,000,000 of his client's money

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