CHESSNOID

Just looking at the stock numbers, it looks like the economy has stabilized. We have rallied in the last week with some impressive numbers. Google made close to a 100 point jump in its stock price in one day. It looks like the recession is over. Or is it?

Warren Buffett agrees that the United States is in a recession but also feels that it will be worse than most people believe. This comes from the richest man in the world. According to Reuters:

“This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think,” Buffett said. “This will not be short and shallow.

“I think consumers are feeling gas and food prices,” he added, “and not feeling they’ve got a lot of money for other things.”

He was not immediately available for further comment. Known for his frugality, the 77-year-old Buffett has lived in the same 10-room Omaha, Nebraska, house for a half-century, despite being worth an estimated $62 billion.

On Wednesday, the U.S. Commerce Department is expected to say how fast the economy grew in the first quarter. Economists on average have projected that gross domestic product grew at an annualized 0.2 percent rate in the quarter.

Two quarters of declining GDP is a traditional indicator of recession. That last happened in 2001. Economists expect the U.S. Federal Reserve on Wednesday to cut a key lending rate for a seventh time beginning last September.

Berkshire is a $197 billion conglomerate best known for its insurance holdings, such as auto insurer Geico Corp, but it owns more than 70 businesses.

Many of those businesses are tied to the housing market, including Acme Brick Co, insulation maker Johns Manville, and the real estate brokerage HomeServices of America Inc.

Others depend on consumers to spend more on discretionary items, such as Ben Bridge Jeweler and Borsheims Fine Jewelry.

“In the retail businesses … if anything, they’ve gotten a little worse,” Buffett said. “Of course, things connected with housing, whether it’s in brick or whether it’s in carpet, those businesses have shown no uptick at all. Jewelry had a bad Christmas … and it stayed that way.”

Buffett sees no respite from the housing slump.

“I think this is going to be fairly long and fairly deep, but who knows,” he said.

He obviously has great insight. His company owns many other companies and they are all feeling the pinch.

Recently, Congress and the White House passed a stimulus package where most people who filed a tax return will get a rebate check. I am anxiously waiting for mine. Will these checks really help the economy? It is hard to say but over time we will find out. I would guess it probably won’t have the impact we would like because of the high crazy prices in gas and commodities. I think when they passed this bill, a barrel of oil was still below $100. Now we are approaching $120 a barrel. Gas in my area is about $4 a gallon. In California, many people commute and own big cars. $300 is probably gas money for about a month for most residents here.

According to CNN.Money, many economists think the effects will not avert the recession:

The stimulus package, passed with overwhelming bipartisan support earlier this year, will give rebates to about 130 million Americans, costing the U.S. Treasury more than $110 billion. Married taxpayers earning $150,000 or less will get up to $1200 while single taxpayers earning $75,000 will receive up to $600.

But since the measure passed Congress, there have been growing signs that the U.S. economy has already fallen into recession.

“This is will not avert a recession, because it is too late,” said Lakshman Achuthan, the managing director of the Economic Cycle Research Institute. “For this to have kept us out of what was an avoidable recession, it needed to happen a couple of months ago, in January or February.”

In the past three months, employers have cut 232,000 jobs from their payrolls. The unemployment rate has climbed to 5.1% from 4.7% as recently as November.

Another 80,000 job losses are forecast to be reported in the April employment report this Friday, according to economists surveyed by Briefing.com, while the unemployment rate is expected to climb to 5.2%.

In addition, leading retailers have reported disappointing sales. Auto sales have tumbled 8% from year-earlier levels in the first quarter. Home prices and sales have also continued their slide.

Finally, rising food and energy prices have hit consumer confidence. With that in mind, Achuthan thinks that people who will be receiving rebates will probably use them to pay bills or deal with a tighter budget brought on by higher prices. In other words, there won’t be the type of incremental spending that could actually spur the economy.

Every month we will have many more reports coming out about the economy. I think they will be telling in which way the economy is headed. I really doubt that the bottom of the housing market is here. If we keep having reports that show increasing numbers of foreclosures and lower sales of both new and used homes, the cost of gasoline at the pump continuously inching up, and food prices doing the same thing, then I think we should all prepare ourselves for the worse.