Network News

X My Profile
View More Activity
2.7%  Q1 GDP    4.57%  avg. 30-year mortgage     9.5%  Unemployment

Readers: It's Not a Turnaround Yet

Earlier today, we asked our readers: "Do you think the turnaround has begun?'

So far, 61 readers have replied. The overwhelming majority answered -- either verbosely or succinctly -- "no."

There was some cautious optimism sprinkled in among the comments, which you can see here.

But by and large, most of you do not trust that today's Wall Street rally was the beginning of a real economic turnaround.

Here are your greatest hits, some of which we've edited and condensed:

Does the math; it looks bad:

-- "At 8,000 the market was close to being right-priced. At 9,000 the Dow is overpriced. The market will hit bottom during summer of 2009. The sub-prime foreclosures should peak by summer of 2009 since most of the sub-primes were taken out between 2004 and 2006. Those on 2/28 mortgages have seen their adjustable rates reset which means those most likely to default bought towards the end of 2006. Since it takes six months to a year between the time a mortgagee has trouble paying their bill to when foreclosure takes place we won't see the peak until perhaps the middle of 2009." (Ed.: A 2/28 mortgage has a low fixed rate for the first two years then "floats" for the remaining 28, tied to the interest rates. Mortgage payments usually rise significantly.)

'Dead-cat bounce:' A temporary recovery from a prolonged decline or bear market, after which the market continues to fall.

-- "This Dow run-up is nothing but a 'dead-cat bounce.' The stock market can't keep going straight down. The [short-sellers] have to take their profits, and that pushes the market back up for a while. We may well have a few thousand more points to go down before it ends."

Award for Most Poetic response goes to:

-- "In a word, 'no.' One flower does not make a spring."

This sums up what most are probably thinking:

-- "Yes, I think it has begun, but I think it will take at least two years. And it will take me five to 10 just to recoup my retirement losses."

Didn't know enough not to overspend, but knew enough not to buy a house:

-- "I think we're far from the bottom. I am a consumer who will only be paying my credit cards off for the next year-and-a-half...You see, I've been spending at a faster rate than I earn, and I have a strong suspicion that there's a lot of that going on...The economy simply cannot continue to grow at a pace greater than what people earn and can spend...What REALLY irks me though is any suggestion of helping homeowners that can't pay their mortgages. Exactly whose fault is that?...I KNEW that these ridiculous prices wouldn't be sustained and that the result would be negative equity. SO I DIDN'T BUT A FRICKIN HOUSE!!!!"

U.S. needs return of its manufacturing base:

-- "The fundamental problems with the economy are unchanged and there will be no real recovery until housing prices are allowed to reach their natural bottom and America starts producing something of real value, not just a bunch of fancy securities that our financial industry has peddled like snake oil."

Remember history:

-- "I hope so, but doubt it. I am mindful that the market turned around in 1930 following the 1929 crash, only to lose its gains in a long, steady slide between 1930 and 1933. We are likely seeing the same thing now."

Finally, we have to print this one. Touche:

-- "Why not ask an economist? How would the general public know based on one good morning of trading? Journalism has been reduced to telling people what to think one minute and then polling them the next." (Ed. -- We ask plenty of economists; we like to give you your turn here.)

-- Frank Ahrens

By Frank Ahrens  |  October 13, 2008; 6:33 PM ET
Categories:  The Ticker  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Today's Surging Stocks
Next: Morning Briefing

Comments

This bounce will be short-lived as the economic news continues to be bad and profits are taken on this large upswing in the market. The promise of taxpayers getting a return on their investment,read bank bailout, is an illusion. Any Treasury return on this taxpayer "investment" will be pumped right back into the bailout system,without any fanfare or front-page news coverage.

Posted by: EB | October 13, 1908 7:10 PM | Report abuse

"Any Treasury returns on this taxpayer "investment" will be pumped right back into the bailout system"...."

For sure, if McCain and the Republicans continue to control the situation. The only chance of taxpayers seeing these potential returns directly helping Main St. lies in the election of President Obama and a Democratic congressional majority with a 60+ Democratic senators.

Posted by: EB | October 13, 1908 7:18 PM | Report abuse

Let's watch the Asian markets Monday night/Tuesday morning...
But profit taking is likely to occur tomorrow anyway.

Posted by: JP | October 13, 1908 7:34 PM | Report abuse

Today is Columbus Day, banks are closed, bond markets are closed, the EU just emptied over three times the amount America is willing right now to put into the banks, 3.2T v. 700B, (actually a lot more of floating capital than America which just leaked to the press only $250B would be used...so in actuality about nine times as much). I don't see a turnaround rather than an attempt to make a quick buck before the bond markets open.
We as a nation need to ignore the entreaties of bushie et al to go out and spend, we need to save, pay down our debts, reorganize our priorities and protect the future for our children and our grandchildren. Otherwise we will have the first generation of Americans living below the standards of previous generations.
We need JOBS, real jobs that provide a living wage, that actually produce physical, tangible goods that other countries will be willing to buy and that provide for a re-balancing of the trade imbalance. We are sending JOBS and $$$ overseas and bankrupting ourselves in the meantime.

Posted by: Cait | October 13, 1908 7:36 PM | Report abuse

President Obama will end up having to nationalize the banks just like the Brits did today. Sixty percent stake in one forty in another. What does that tell you? That their banks are broke? At least the Brits own up to it. What about our banks? Of course our guys know. They just won't admit to it publicly.

Here's the thing, taking a scalpel to the Federal budget is like taking a steak knife to clear away the mess after a hurricane. And adding hundreds of billions more in social spending would be like opening the flood gates to pour more water into New Orleans after Katrina.

Next year treasuries will be the new toxic bonds. When foreigners stop buying and start selling and just when the govt needs to borrow trillions of dollars for all these new spendings and bailouts. That's when the music really stops.

Posted by: Anonymous | October 13, 1908 7:37 PM | Report abuse

Yes just a bandaid for this problem. Now President Hoover would be proud of George W. Bush as the stupidity continues. Hank Paulson is doing his best to feed as much of the 700 billion to Goldman Sachs and Bush friends. Paulson took his cut out first. The Stock Market is howing the EU put 2 Trillion dollars in the Markets. Now the US is acting like we did something. Bush and Paulson are still working on the so called plan.
Yes Obama has laid out his plan for all the see and with the help of Bill Clinton's blueprint change is comming. McCain/Palin are just still spreading hate and terror as both are clueless to Economic and really don't care about the American people they just want to get in Office so they can start stealing by using the Bush Policies.

Posted by: Jackie | October 13, 1908 7:38 PM | Report abuse

I was just getting used to gas being down 30%.

Posted by: Darnit | October 13, 1908 7:41 PM | Report abuse

A coordinated consistant response by all the major economic powers! What took so long? This should have been done 20 years ago. Global markets imply a global economic system, and a global economic policy. If "everyone" can keep their act together, there will be a degree of predictability in economic polcies around the world. Markets love predictability! This is not a "dead cat bounce," its the market saying "thank g-d the adults are back in charge." Or at least the amateurs are following the adults - 'cause they don't know what else to do! Fortunately, "amateur hour" is almost over. The Bush administration has shown what a bunch of amateurs can do to screw up a military response to a terrorist threat, as well as the economy of a major economic power (to say nothing of FEMA). If we get some real professionals running the government, the economy will do just fine (5 years after the '87 "crash" the DOW had doubled). PE ratios expand when there is a reasonable prediction of consistent economic growth. We saw how quickly a deficit can be paid down in the 1990s, even with Congressional Republicans acting as "speed bumps." Hopefully, the latter will soon be on the "endangered species" list.

Posted by: Kenarmy | October 13, 1908 8:30 PM | Report abuse

Over half of the American federal budget goes for defense and military spending. Billions for Iraq and Afghanistan and to support a volunteer Army. More then all the other nations of the world spend on their militaries, combined. Fortunately, Obama has a plan to bring this under control. He's going to pressure the Europeans to ante up and contribute, and it's about time. IF we can get the federal deficit down and keep Americans employed we will have a chance. As for the markets, it's hard to say. When a bottom occurs, historically, few ever really know. A record rise in the Dow however cannot be ignored, it should be seen as some kind of signal. The most money is made the first 2 months when the market changes. I would say, just keep that in mind.

Posted by: Joseph | October 13, 1908 8:45 PM | Report abuse

This stock market rise means absolutely nothing. He stated that the real issue has not been addressed. That issue is the mortgage loans and the value of the housing market. Since the house is not worth the value as originally sold for, many will not continue to pay the debt back and will leave. This is the real problem here in America. It is not bank liquidity or the international bank liquidity but rather the reason for people to keep their homes and pay down the debt on those homes.

Once that part of the plan is somehow implemented, the stocks can go up or down, but it will mean nothing to the value of anyones house or in general to the housing market.

Posted by: Per an Economist | October 13, 1908 8:52 PM | Report abuse

If we are going to measure our economic well-being by how the stock market does then this country has not learnt its lessons.

Posted by: Venkat | October 13, 1908 9:00 PM | Report abuse

The turnaround will not solidify for several years, perhaps more than a decade.

The subprime mortgage mess needs to move through the pipeline. Most of the borrowers understood the risk they were taking, and should be required to make serious lifestyle sacrifices in order to avoid foreclosure. There should be more generous terms for relief for the elderly or less educated that mortgage scam artists preyed upon. Mortgage holders who had the sense to take out more conventional loans but are having difficulty paying also deserve assistance; they may be in danger of default due to job loss or other reasons brought on by the current state of the economy.

Beyond that - mandate that Congress restructure Social Security so that it is concretely funded to at least 2050, even if that means a reduction in benefits. Then rebuild lost retirement savings, pay down debt that accumulated during the crisis, take care of infrastructure projects that were delayed, push hard at ALL levels - government, private and individual - to develop alternatives to oil and coal, rethink our housing and transportation from A to Z, and bring back jobs to THIS country. We need to reinvent ourselves, and soon.

The next administration and Congress should do as little as possible to spare their constituents the pain of dealing with this situation. It should be dealt with now. If our generation made foolish decisions about our finances and lifstyle, then let our legacy be that we took responsbility and corrected it, not that we passed along the bill.

Posted by: shehermit | October 13, 1908 10:30 PM | Report abuse

Stock market has it's biggest one day gain in history!Now some other memorable moment's in history.Barry Bond's break's all time home run record!Mili Vanili win's Grammy Award for best recording act!The way I see the stock market today is,stupidity is way up and common sense is way down.I wouldn't trust Mother Theresa with a piece of string and she's been dead for over a decade!

Posted by: Mr.Peabody | October 14, 1908 1:07 AM | Report abuse

Your flowers are real important. I have lots of flowers and I never count them. It's the flowers that count. There is real opportunity in a crisis. It makes people think harder. I'm on the permanent plan, so it never changes. We have empty factories here and I'm moving so there will be an empty house. It looks like there are going to be a lot of empty houses as the bad mortgages continue to bankrupt people. I'm not sure bankrupting the government will make matters better. That looks like the direction things have gone. Now the bankrupt government is going to print money and deposit it into bankrupt banks and everything will be good again. I dunno about that. I'm packing my stuff up and moving. I guess we'll have to see what happens. Please help keep me out of the newspapers. Thanks.

Posted by: Night Mayor | October 14, 1908 1:58 AM | Report abuse

Here is a good question.
"Will You Love Me in December (as You Do in May)?" Yes I will.
The next thing you know it will be Christmas and then it will be Memorial Day again.

Posted by: Night Mayor | October 14, 1908 2:13 AM | Report abuse

http://mrahalom.myminicity.com/tra

--------

Posted by: benq11 | October 14, 1908 12:44 PM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company