Not sure....but my twin just called to tell me a friend in Indiana saw the price of gas go from 3.09 to 4.09 since last night! If you have an SUV - that REALLY hurts no matter how much you make.

posted March 7, 2008

This could be a novel. But I'll keep it short, simple and to the point. I can only respond to this on a professional level regarding how the media has affected my business.

In the mortgage business, the media has deceived, de-valued, and demoralized anything legitimate the industry has to offer. It represents the law-makers as heros and the borrowers as victims, when in many cases it is just the opposite.

For example, watch the way Yahoo Finance twists stories to make them appear positive or negative, depending on the direction of the markets. Furthermore, new regulations and these "bailouts" brought about by law-makers that have know knowlege of the mortgage industry have made the industry worse. Why would Fannie Mae and Freddie Mac impose harsh penalties on borrowers whose credit is below 680 making it more difficult to get a loan? The answer: they have their own agenda. However, everyone continues to hope the government passes new laws, the Feds lower rates, and someone steps in to save those in trouble, because the media makes them out to be the heros and most mortgage companies as the villians.

Borrowers can be even worse. They complain they can't afford a mortgage, only ring up more credit card debt and refinance themselves out of trouble. You then tell them this mortgage is not in their best interest and they respond by saying "I'll find someone else to do it". That is why foreclosures are soaring & there is a so-called "credit crisis". I wouldn't call it a crisis, I would call it a lack of discipline. The media has trained me to think that EVERYBODY is in the same situation, everybody carries credit card debt and over-extends themselves on their mortgage.

The media needs to stop playing therapist and start being realistic with people. The fact is, people spend more than they earn, think they can afford mortgages that they can't, and that there are alot of people out there who are normal, hard-working people, that pay their bills on time and live within their means. Unfortunately, we, the mortgage business, are left being the ones to tell borrowers that, and typically our response is "ok I'll find someone else who will get me the loan".

I apologize for being harsh. We all do our best to help those within our industry, but the media makes it difficult when they have a distorted perception of reality or choose to present certain stories over others.

posted March 7, 2008

I would start with the notion that there are still business cycles, and taking the bait of moral hazard is common. Media, informational and hype push both the booms and the busts, When I took basic economics, back quite awhile ago in the 1970's, "Jaw boning" or government and agency spin and hype was already considered part of the game... from at least a century before that.
Look back a few years, IMO, media hype about house prices, the concept of being able to flip probably brought in some moderate percentage of buyers, the real stage for crisis was being set behind the scenes with "Mark to model" and essentially fraudulent packaging of loans, excessive leverage by funds. That too much borrowing at many levels occured is/was real, the liquidity crisis is partly a faddish group behavior that dosn't necessarily need media hype to continue.

posted March 7, 2008

Recession is part of the pie. You can NOT have expansion without recession. They are forever linked. Like the waves of the ocean--you can not have a high without a low. Like the old song says, "Baby... that's just the way it is, baby."

A few things to consider:

Contrary to popular opinion, that somehow "the Fed" or the President's Economic Policy has something to do with the recession, there has been a recession in the United States of America EVERY SIX YEARS since 1776, except for the period between 1990 and 2000. That was the longest economic expansion in history, blamed mostly on the Internet's ability to radically reduce cost and spread resources to the most-efficient markets.

What the government CAN do is try to prevent a deep recession, a depression, and control inflation... but there will always, always, always be corrections and recessions.

This last period of economic expansion officially started in 2001-2002. Forward six years and you have THIS YEAR. We're DUE.

The point is, except for one outlier (1990-2000), statistics prove that recessions are normal, recurring and important to the general economic health of a country. The GDP has always been HIGHER at the high-point of the NEXT expansion than the last, so we're always growing. And, other than the Great Depression, the trough of the recession has not really ever been AS BAD as the recession before.

Finally, there has never been a recession in an election year before. If a recession does hit this year, it will cause incredible stress on the candidates when all the OTHER issues will take a backseat to the one issue: MY MONEY. Get a good seat. This will be a good one to watch.

Besides, when has the news or the media really EVER been out in front of a trend. They don't care about creating anything.... they only want EYEBALLS watching their program, so they will scour all the possible stories to find the one story just ghastly enough to get people to "tune in at 11" and find out.

posted March 7, 2008

Kiley, this is not "alleged" -- this is ugly -- and potentially far worse than the 1991 credit crunch. We are seeing an accelerating deleveraging of the economy. Converted to english, money is fuel. When banks don't lend, businesses don't grow, don't hire, and employees don't spend. And they are now calling in credit lines, reducing leverage on existing portfolios, and desparately finding ways to shore up their capital base as stock prices (their ability to raise capital) declines. It is a vicious down cycle.

And yes, the press loves a good story.

Links:

• http://WWW.LANGENBERG-LLC.COM

posted March 7, 2008

Hi Kiley,

Yes. One has to agree with you.

There are some fundamental problems. Defaulting mortgage loans, weak housing market, and illiquid credit markets - but, the hysteria in the media is unforgiveable.

The media is doing its best job to destory 'confidence' in the U.S. economy - to drive up ad revenue for 'news shows', political careers and the ego's of the talking heads.

Don't forget the primaries - you would think by listening to the candidates that it is the 1930s all over again with families BBQing babies because of a lack of food to eat and mass migrations of unemployed Americans.

Destroying 'confidence' will harm more people than any fundamentals.

JC Brandon

Links:

• http://www.JCBCapital.com

posted March 7, 2008

seems to me that the media was late in reporting the recession and that the wheels started to fall of the economy a few years back.
Subprime and other creative mortgages caught on because few could afford a house (here in CA and other high priced markets) using conventional financing.
Hedge funds and lenders with exposure to these loans have been failing for over a year now.
There have been major layoffs in this industry, and those that work for commission or such as real estate brokers or those that work per project like construction workers are making less money.
Most states and cities are facing budget deficits. California has a $15 Billion budget deficit, this will likely result in over 100,000 layoffs and pay cuts just in CA.
This was a very weak holiday shopping season, many stores are closing. Major retailers such as Sharper Image, Levitz and Wickes Furnature have filed for bankruptcy and many finacial companies are very close.
General Motors and Ford are laying off or giving early retirements to 10s of thousands of people.

i think if anything, the media is sugar coating it.

posted March 8, 2008

I'm not sure the media does it, but certainly public opinion affects recession. If people become afraid, then they stop buying.

posted March 8, 2008

I don't think anyone (Senators, higher ups), but I really feel that media contributes to a lot of bad rather than good. The media is so corrupt on what it shows across millions of television screens. The only true sources of media I use is The Wall Street Journal and the BBC news, to give the outside perspective in.

In a world that is allows for people to manage there own stocks. I think the media should have a limit on what they should be able to say, because you can see some crazy fluctuations in stocks and I believe that is due to media exploiting a fact, but to an extent where it frightens people.

I also think thats the only purpose of media these days is not really to inform, but to put fear into the people that watch it. I'm not a believer at all of media(in general news respect.)

posted March 8, 2008

Television media are the worst offenders, in particular, those on Local TV channels. How much more can they report on murders, kidnappings and such. Most media is completely junk.

We must read the good old fashioned quality newspapers, who really know what they're talking about.

I believe we are in a recession. all the factors point to one: spreads are sky high, strong Yen, sluggish growth from companies ...

It is what it is.

Recession is a good thing in a way; it seperates the good companies from the bad. Makes you more lean, efficient, and conscious.

Would rebates do the trick? Perhaps not. Unlike our Euopean counterparts who seem to be relatively unfazed, we should just stare the R- word in the face and move on.

The economy is similar to life, full of ups and down.

Hope that helps Ms. Newbold.

posted March 8, 2008

Hi Kiley, good question. Absolutely incorrect that the media plays a major role in stimulating or slowing the economy.

The "economy" is the sum of many parts, with metrics attached to each. Each week data come out for some of these. For example, last week we got the big Nonfarm Payroll (1st Friday of each month) figure. It was a crushing blow. The negative surprise (always bad news) was that instead of creating 25,000 jobs the economy lost 63,000 jobs. For the second straight month we got a decline, and last months' was even revised downward. Ouch, ouch, ouch.

Productivity (as measured by GDP, ISM services/non-services, durable goods) remains very anemic, while PPI/PCE stays robust along with inflation (higher energy, materials costs - which is hitting consumers where it counts), which feeds the "stagflation" discussion. Consumer confidence is actually hanging in there fairly well.

Need we even mention the credit sector? Risk remains to the downside, which is amazingly scary considering what we've seen. And this, too, is not so much a media story: credit/liquidity HAS tightened, arms HAVE come due, employment isn't as plentiful as several years ago, etc.

The dollar is in the dumps for good reason! And will remain so.

The economy is slowing not because of something as simple and small as the media, but for much, much bigger reasons. We're seeing these played out in the data. They involve credit, real estate, debt, the dollar, inflation and so on.

I'm not inherently a bear, and I well recognize that the market is not an objective organism. The media can scare people, influence people to a degree, but these things play out for better reason than someone with a mic reaching a segment of the US population. The carry trade was weakening before the media even beat any war drums. Inflation was climbing. These are issues involving a global economy and complex involving inter-markets. Rest assured the media absolutely plays no major impact, at all, in causing a recession - which we already are in, by the way. It's always a rear-view matter, and the National Bureau of Economic Research just hasn't made it "official" yet!

Remember: "A recession is when your neighbor loses his job. A depression is when you lose your job". Thanks Reagan! (and his third line was: "And recovery is when Jimmy Carter loses his")

Links:

• http://www.fedstats.gov/
• http://www.fmcenter.org/site/pp.asp?c=8fLGJTOyHpE&b=213512
• http://www.nber.org/

posted March 8, 2008

That's a really good question, and I think my answer might be a little different than the others here, although I think I'll get to the same place in the end. Sometimes people throw around words like "media", "economy', and "recession" like they are real, actual things. They aren't. They are an amalgamation of lots of people and organizations with a lot of different agendas (often contradictory) acting in many different ways.

I think the main way the media influences people is in the way the influence how each person views their personal world. If the headlines read "The Economy is Going Down the Toilet", everyone who reads that headline will now think the economy is in trouble. They will then take actions that reflect their belief that the economy is in trouble, which will only exacerbate the problem. When this happens over and over on an individual level, you see the macro-economic effects.

It's like having a run on a bank. If everyone thinks the bank is failing and runs to get their money, then the bank runs out of money and fails. It's a self-fulfilling prophesy.

My suggestion - stop reading the newspaper and don't watch the news. Who said that they get to dictate how we view our world. They're just trying to sell papers and advertising space - and nothing sells as well as bad news. So they have incentives to overemphaize the negative. I work with a lot of business owners and sales people who are doing great, even though "they" say the economy is in "trouble".

posted March 9, 2008