CHESSNOID

Today the stock market took a dump and all closed in the negative. The Dow closed 360 points down. Just a week ago, it had another 362 point down day. This is the closing numbers for the last 6 days.

11/7/07 ** 13,300
11/6/07 ** 13,660
11/5/07 ** 13,543
11/2/07 ** 13,595
11/1/07 ** 13,567
10/31/07 ** 13,930  This market seems to be getting more volatile every week that goes by. I can’t help but think this is still the result of the housing bust that is currently underway. There is a credit crunch that is hurting our domestic housing market which is creating a domino effect in our economy. Chrysler recently announced they are laying off 12,000 employees. The federal reserve has made two drops in interest rates, and now the dollar is suffering. All other currencies are trading higher. In the near future, the federal reserve probably won’t have the ability to lower the rate because it is so low and now we will be pressured by other countries who are buying dollars to at least maintain a certain value.
We see it on the news every night but unless you read about it most of it seems like stuff that doesn’t affect us on a personal basis. On top of the negative impact the dollar has had on other currencies, both gold and oil are hitting new highs. We hear that every night now and again the only thing a consumer can see is the price of gasoline going up at the pump or heating oil a bit more expensive than last year.Dr Housing Bubble posted a great article the other day talking about the massive layoffs that most people don’t realize are adding up just in the housing industry. According to Marketwatch, so far this year just in the housing sector we have had over 650,000 people laid off. A sampling is listed below:

Estimated Job Losses from Companies

Countrywide:11,520
American Home Mortgage:6,000
First Magnus:5,000
New Century:5,200
Bank ofAmerica:3,000
Lehman Brothers:2,225
HSBC mortgage businesses:1,760
WashingtonMutual:1,640
First Horizon:1,560
NovaStar Financial:775
Lending Tree:650
E-Loan:627
Wells Fargo Home Mortgage:500
Mohawk Industries:200

Dr HB called the housing bubble a long time ago when housing experts and analysts stated that housing prices were fine and not over valued. There are still many people who feel their cities will not be affected by this housing bust and that the prices in their area will maintain or have 1-2 % increases. They are non-believers that housing prices going down won’t affect them. Once we are actually in a recession, they will see that high unemployment will mean people will not have money to spend on luxury items, and people with money will hold onto it in fear of losing their own jobs. Certainly, housing sales will continue to slow, foreclosures will continue to pile on to a mountain of inventory of empty homes that were once speculated commodities.

To recap what I have observed in the last 6 months: Housing sales slowed, housing prices dropped, foreclosures started to rapidly increase, mortgage companies closed and laid off people, the federal reserve said no problem, banks started announcing major losses, the federal reserve lowered rates, then major investment companies announced major losses, the federal reserve again lowered rates, insurance companies announced major losses, the heads of all these banks and investment companies all resigned (Countrywide, Citibank, Merrill Lynch, Morgan Stanley) literally the next day, these companies announced layoffs, insurance companies (AIG insurance) affected by the subprime loans are now coming out saying they have major losses too, foreign countries see the value of their currency hit new highs as the dollar weakens from the previous rate cuts, a barrel of oil steadily increased from $20 barrel in 2002 to $98 barrel in 2007, gold is hitting new highs, major car companies announcing layoffs because of major losses…

I know this sounds like doom and gloom, but really it’s not. This is part of the business cycle in a free market system that professors teach in economic courses at college . Some people are waiting for a rainy day, that is just around the corner and many good deals will be had. Everything will be on sale soon at discounted prices too good to pass up. At that point, the business cycle will begin its ascent with the abundance of opportunities. But for now we just need to manage our finances better and wait for that time. My guess is that turning point may coincide with the withdrawal from Iraq and the elimination of wasteful spending of literally a billion dollars a day being stolen from us by the War Profiteers.