Back in 2010 when I first wrote this post, The Economy Seems Fine. I was confused by the state of the economy. We had just gone through a horrendous Global Financial Crisis. Yet, things felt as strong as usual.
Today, the economy seems fine despite the K-shaped recovery. After all, stocks and real estate have done well since the March 2020 lockdowns.
Let's review the state of the economy back in 2010.
Am I Living In A Parallel Universe?
As far as I'm concerned, the US economy is recovering handsomely. How could it not with packed restaurants, and traffic that makes me want to pull your hair out?
Facebook is worth well over $20 billion now in just a few short years. Meanwhile, the whole world is hooked on Apple products with iPads ($500-800) and iPhones ($200-300) selling like hotcakes. Who needs yet another computing device? I guess millions do!
There is so much money flowing into the Bay Area, it's hard to imagine another financial crisis on the wing. Yet, I've read plenty of posts on “steps to take when the next financial crisis comes” and I'm scratching my head.
Am I living in a parallel universe where every other car I see is a fancy German vehicle, and I can never get a reservation at my favorite sushi joint? I feel like I'm living in a little optimistic bubble where the world isn't falling off a cliff and is actually doing well. Tell me if I am, because bubble living is delusional living at its finest.
The stock markets, although highly volatile have recovered some 50% from the bottom and generally serve as as a leading indicator for the economy. Yet people are still talking about a double dip recession.
Yes, the biggest worry is stubbornly high unemployment, but you'll never be able to tell if you walk the streets of San Francisco.
LOTS OF POSITIVE ANECDOTES
* Commute time from the city to the airport has increased from 25 minutes to 35 minutes on average due to traffic.
* The House Of Prime Rib is always packed and calling two days before gets one a reservation for two at 10pm.
* The BMW dealer says they are moving cars at the fastest pace since 2007. The new 5 series is in, with a price tag of $72,000 for the 550i version.
* Venture Capital and Private Equity firms are flush with cash and are looking to find a home before they have to return money to investors. Foursquare, Pandora, Zynga are getting funded for ridiculously high multiples.
* Banks are cashed up and lending again based off my conversation with three mortgage brokers.
* Headhunters (recruiters) are calling incessantly and it's already past the halfway mark.
* You can never get a tennis reservation at 3:45pm, 5:15pm, or 6:30pm at my club because people make so much money they get to leave work early or don't have to work at all. Membership has increased by over 30% in one year.
* A house down the street received multiple offers and was in contract within 10 days.
* Advertisers have been filling my inbox seeking to do business.
* Landscaper had to delay a job for one week after already starting at my house because there was a bigger job to do elsewhere.
* Went to go buy a pair of retro Air Jordan Infrared VI shoes for $340 (package set of two) 20 minutes after Nike Town opened and they were sold out. Went to two other stores, sold out! Typical buyer? High school kid.
* I can never get on the bus after 5:30pm because the bus gets completely full in the first 3 stops of a 7 stop pick up route.
* QE2 baby! Asset reflation on a one way train up.
CONCLUSION – The Economy Seems Fine!
The newspapers and TV stations constantly tell us how rocky things are. Even fellow bloggers are urging caution. Yet our fearless leaders in Washington are telling us we're recovering quite well.
I'm generally wary about government prognostications, but with the amount of activity in the Bay Area, gosh darn it, I think they might be right!
How else can the government raise taxes for the rich to 60% (Federal, State, City, FICA, Medicare) next year without torpedoing the economy? The government must know something, and it seems as if people are also catching wind that the good times are back again.
Even if the markets drop 10% by end of the year, it still doesn't take away the fact that activity is back, and in a big way.
What's very insightful about this post is that if you decided to go ALL-IN on the S&P 500 and real estate in 2010, you would be up massive 11 years later. To get rich, you must consistently try and predict the future!
Achieve Financial Freedom Through Real Estate
Real estate is my favorite way to achieving financial freedom because it is a tangible asset that is less volatile, provides utility, and generates income. Stocks are fine, but stock yields are low and stocks are much more volatile. The -32% decline in March 2020 was the latest example. However, real estate held steady and appreciated in value then.
Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity.
Take a look at my two favorite real estate crowdfunding platforms that are free to sign up and explore:
Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing.
CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends.
I've personally invested $810,000 in real estate crowdfunding across 18 projects to take advantage of lower valuations in the heartland of America. My real estate investments account for roughly 50% of my current passive income of ~$300,000.
Readers, do you believe the economy is solidly recovering? How is your neck of the woods doing? Any anecdotes you'd like to share indicating a weak or strong economy? The economy seems fine here in San Francisco. The economy also seems fine in every other city.
My old man once said that all politics are local and that I should be careful to put much emphasis on what is going on outside of my “local”.
It’s great that the Bay area is doing good, but have you looked at the total mess the California state budget is in? I live in Illinois and our state budget is facing a huge budget short falling and I know of two small businesses that have closed in the last six months resulting in at least 10 people losing full time jobs.
There was a small trucking company that has been family owned and operated for 20 years that has had annual revenue of $500,000 a year but has closed shop this year because the cost of running a business has climbed to the point where it makes more sense to not work. According to current administration he is “rich” but after reviewing his books and writing a software program to help him track miles on his trucks I can tell you that $500,000 in revenue is not anywhere close to him being rich or making $500,000. This last year after paying salary, workers comp, social security, taxes, insurance, fees he will clear less than $35,000 running this company. With the new health care fees and taxes going into effect he had to drop all coverage for his employees and even then it’s still not worth keeping the company going. At the end of the day he felt like he was being punished for running a business and attempting to be successful. I know how much everyone in the Bay area hates truckers and the use of oil, but these truckers play a vital part in getting grain from the fields to the processing plants and I hope everyone enjoys paying more for food in the next few years.
Hi Patrick, don’t know where you get the idea that the Bay Area hates truckers and use of oil. Thanks for your example though. Costs are ROCKETING…….. but not anymore with the new Republican controlled congress. I don’t think taxes are going up.
More importantly, how are YOU doing?
I still believe the Dow is going to hit 12,000 by year end…
With a Republican House, perhaps a bit of confidence will be restored into the business market place?
Wow, if the Dow goes to 12,000 that would be huge! And good call!!
The economy is recovering and things are improving. The news networks are always the last people to realize these things. They never tell you when a recession is coming and can never identify when one is over.
Things are also peachy in the northeast. My customers are all doing well again, mfg shops are busy, restaurants are packed. I’m an engineer though, so I realize my opinion is skewed. Although a ton of my friends/co-workers were impacted by the downturn, most found new jobs rather quickly if they had a technical background.
I was thinking it would be a good time to look at oceanfront property but the real estate correction around the cape wasn’t nearly as much as I would have expected it to be.
I made similar observations around Indianapolis even back in 2009… The shopping malls and Cheesecake Factories are always jam packed with people.
I can’t wrap my heard around the high unemployment rate either. The company I’m working for was laying off a bunch of people back in 2008-09, but right now is struggling to fill open positions, as if we are in an employee’s market again… What’s your thoughts?
If America becomes hyper consumers again, I wonder if people needs to start taking Chinese lessons… as comedian Joe Wong once said, you’ll need it to “talk to the debt collectors”.
Haha, nice. There is NO DOUBT in my mind that Americans will come back with a consumption vengeance! Can’t keep the US consumer down!
It depends on where you live. The big cities don’t seem to be suffering, but when you go to smaller areas, you can really see the recession hitting, in terms of undeveloped lots, abandoned stores, unfinished buildings. Especially when you go area to area around Southern California, you can tell when you get to the Inland Empire, it’ll hit you that we’re not out of the woods yet.
I’ve been a teacher in Southern California for 7 years and am very afraid that I’ll be let go after next year. They aren’t funding the schools like they used to. I’m also trying to refinance my house. I bought it for too much money — 400,000 and it seemed to make sense when the housing prices kept going up and it would be my last chance to jump on a house. My neighbors house just sold for under 200K and the house next door has been empty for a year. I think I may loose the house in coming months here.
David, I’m sorry to hear about your situation. Don’t be afraid to get let go. Every time I start to fear the worst, I think of the best. I do everything I can to make myself the most valuable person in the organization. If you’re the best, you’ll never be let go!
I would try and work out a short sale with your bank. Don’t go the bankruptcy route. Hang in there!
Sam: How much of this spending is done in cash and how much of it is going on credit cards, I wonder?
I think a lot of wallets slammed shut a couple of years ago because people panicked about the financial turmoil. Now some of them are tired of frugality and are spending again — whether or not they can pay the card balance each month. Frugality was a fad for them and they got bored with it. They want to go shopping and they want to go to Applebee’s.
I live in Seattle and have family/friends in Arizona, Alaska, New Jersey, New York, Illinois and South Carolina. No one I know feels good about the economy. In fact, most are actively worried. Maybe it’s because most of them aren’t highly skilled/educated professionals and the rest are professionals in faltering or glutted industries (newspaper journalism, teaching).
I hope that YOU’RE right — but I think that *I* am.
I’m not so much concerned about the cash/credit breakdown so much as I’m happy that people are spending again!
So far, I’m right cuz It’s been one BULL ride since July! :)
Phoenix family- two struggling real estate brokers, one booming car repair business owner, nieces and nephews all employed and doing well. Housing prices continue to fall- but considering that they doubled and tripled in the last 7 years—why is that a problem?
Idaho- my retired BIL is making a good second living being a handiman. His five children are all well employed in the medical fields. All the married women are SAHM’s . So things are good.
Las Vegas- housing prices stink- but all of our family(5) there are employed. Most took big salary cuts (but their salaries were unrealistic for LV economy- just like their housing prices).
Washington DC- one defense contractor struggling- but he is new at the game and will learn.
Kansas- many teachers laid off in southern part of the state- but being laid off means they get unemployment (which teachers rarely can apply for). Frivolous projects are finally being questioned and developers from other places abandoning projects and ditching property taxes leaving us holding the bag (thus the rant about my taxes going up). Everyday farmers and soldiers continue to work and make a good living-providing plenty of money for the local economy.
We retired this year- so things aren’t terrible to say the least!
Hate the idea of bailing out California. It is time for you to lift that ridiculous ban on property taxes for those who bought in the 70’s, and pay for your colleges! (Lived there as well:>)
My greatest fear is owing money to China and Saudi Arabia. Saudi already sees us as their “call in army”. China would love to prove they were right long ago. I lived in both countries. I am not looking forward to them tightening the purse strings and demanding payment.
The recovery is here- the other shoe is the debt.
Second fear is all that money that we paid into for social security will be gone:<( Give me my principle and let me invest it instead of giving it to my mom who never worked a day in her life!
Jan, thanks for your GREAT anecdotes! Overall, it doesn’t seem like people are starving at all, and are doing well based on your info.
It would be great to have the option of social security to do what we wish. There’s no way we should count on it.
Prop 13 is amazing for the ones with multi-million dollar houses who pay such little in taxes. Gotta love it!
I think our national deficit will bring this country to its knees if the powers that be do not get our deficit spending under control. The government needs to get out of the way and let the free market work!
Are you saying it is wrong for the government to run RECORD deficits themselves while admonishing citizens for their own debt problems?
Yes, it doesn’t bode well for us in the long term as it will require a larger percentage of our tax dollars to keep up government outlays. As far as our local economy here in Tulsa, we just weren’t hit nearly as hard as other parts of the country. We did not have the run-up in house prices, therefore the local economy has suffered comparatively less. The unemployment rate is starting to ease a bit from a high of 7 percent and the city’s tax revenue is starting to pick back up so I’d say things are looking up. Just my humble opinion.
Hi Jslugger – I didn’t ignore anything you said. We all know there are plenty of people out there who are hurting, and I chose to address the fact that you are another great anecdote as to why people are actually FLOURISHING during this downturn.
Did I not provide a link as to NYC hiring again? That’s relevant and something you should know being in finance in NYC.
I’m curious to know if you are a relative novice or a veteran b/c that sheds light on your situation and for readers. Some young guns may only have $100,000 in their 401k. Even a 50% drop to $50,000 still only takes 3.5 years to get back to $100,000 for example. Veterans could have a couple million in their 401K, but it’ll take years to get back since the limit is only $16,500.
Sorry for the Genius’ attack. You’ll have to fight it out with him.
Admin what relevance is my theory on other commenters views, when purposely choose to ignore any point and counterargument I have made on your anecdotal views?
I think I have been very specific with my examples to support my arguments yet somehow this has turned into a silly character attack and prove my credentials discussion.
Does it truly matter if career path is that of a novice or veteran? Would my views be any less credible if I was a sanitation worker or school teacher?
Obviously we don’t agree but instead of having a reasonable debate I find avoidance on your part and my being called a prick by another poster.
Provide a credible discussion on my previous postings and I will gladly provide u with my theory of why the other commentators and yourself seem to be drinking the veritable the economy is fine kool-aid.
Genius is there really a need to resort to name calling and assuming what my character is beyond what I write? Sarcasm, contempt and scorn are fine in communication and debate but name calling is simply silly and evidence that you never learned proper social skills from your parents.
What exactly are you angry about?
I just called you a Wall St. prick, who likes to brag about how much money they make and how they haven’t been affected at all by the recession.
All I know is that it’s obvious you have a chip on your shoulder, you don’t work for one of the Tier 1 finance firms, and you a junior employee.
I’m not angry at all. I’m just sick of idiots who say the economy is horrible, and yet tell everybody they are doing great. That’s being a prick. Ask yourself why nobody likes you. And you’ll realize why now.
You speak as if u assume recovery is a straight line up, u do realize that it can stop exactly at this point and there are plenty of historical examples of stagnant recovery.
I live in NYC and although things appear to be better on the surface they really are not. Tax revenues are much lower, commercial real estate is weak, older development projects are being completed but newer ones are almost non existent. Daily cost of living has increased given the drastic cut backs in govt services. Unemployment is about 10% and in some ethnic communities 20%. Cut backs in schools, hospitals, police, arts, social programs, charities,etc
Many friends working longer hours and doing the job required of 3 people pre-crash for less pay. Many friends still looking for work. A state operating in the fiscal red ink dependent upon federal govt subsidies to balance the budget
So yeah if I simply measured things by my personal stock portfolio and getting a rez to a high end restaurant or buying toys like an ipad things look awesome but if the metric is the quality of living for all then it is still pretty abysmal.
Let me put it to u simply,my quality of life increased exponentially during the recession and current times simply because I was in cash prior to the mkt crash, i invested heavily during the crash and my income from employment actually increased. I benefited because I didn’t suffer financially and was able to take advantage of cheaper assets and command discounts on goods and services.
The majority however were not as fortunate as I was.
It’s a recession when your neighbor loses his job and it is a depression when you lose yours.
I suggest you take a more careful look at others outside of your bubble.
Oh and u are not worried about Cali defaulting because the fed will bail you out? Cali has the means to bail itself out but it’s residents are too afraid to shoulder the burden. So are u implying that default and a bailout carries little to no risk or has no real ramifications in everyday life?
Your comment is puzzling
Great comment JSlugger! You’ve given me another positive anecdote! Of course your life increased exponentially during the crash. Most people’s did, as I too was cashed up, bought stock and still have a job. Very few people financially suffered, and you’re living proof that things are doing great.
It’s so funny to hear people talk about “other people” suffering, out of work etc, when frankly “other people” are ourselves! It’s almost as if people are smug to talk about other people’s misfortunes to make themselves feel better about themselves. Sad, actually. I’ve actually got plenty of friends in NYC who are doing great because the city is hiring like gangbusters again.
Thanks for sharing another positive anecdote why the economy is recovering nicely!
It’s simple schadenfreude Sam. JSlugger and many others (i.e. reporters) like to report bad stuff to make themselves feel better about themselves.
If I were to guess, JSlugger works in finance in Manhattan, and is probably one of those Wall St. pricks who like to show off their wealth and tell people how smart they are. In fact, I would venture to guess he’s got a large chip on his shoulder for still being a low ranking employee.
@JSlugger, tell us more of how great you are!
Very few people financially suffered? Whoa! You really must be joshing me right?
My example was simply to state that whilst some have benefited from the crash many many others have experienced pain and just because our personal balance sheets look good, it is not evidence that everything is swell for the whole.
Please show me where in NYC there is hiring going on like gangbusters because I definitely don’t see it.
There are fundamental things that you seem to overlook like the fact that we have historically low interest rates, backlogged home foreclosures, technical defaults on mortgages that are not being paid by occupants, banking profits not made primarily on lending, federal deficits subsidizing state deficits, etc.
Yes I do work in finance and possibly I see other indicators that you are totally unaware of as most people were unaware pre 2008. The so called recovery was a recovery from a possible depression that is still reverbating throughout the country but if that is your benchmark then things are simply wonderful and blue skies
Do you mind sharing your theory why everybody online, and those who comment never seem to suffer and always make money even in the worst of times, yet the media reports people have lost a lot of money? Don’t you think it’s a curious case?
My theory is simply that most people weather storms quite well and take advantage of disconnect and also have great timing.
Did what The Genius say was true about your early stage in your career or are you a savvy veteran?
Coastal economies are improving from the lows and the overall economy has improved but what you like many others in the happy camp keep missing is that the economy can improve but it can be a jobless improvement. Basically you don’t have to replace the number of jobs lost due to downsizing, increased productivity, etc to have an improved economy.
Go take a tour of the rust belt and other historical manufacturing bases around the country to see that those economies are not recovering. Also take a look at state balance sheets(particularly your state of CA), do they look like they are recovering minus the subsidies of the fed govt? The financial industry is still living off of govt subsidies, manufacturing is gutted and the housing market is still fragile.
I would say basically u are living in a geographic bubble world compared to the majority of the nation. The US is not going to recover and have a robust economy WITH jobs based on the innovations of silicon valley, govt hiring and financial wizadry of wall street.
Bottom line is 2yrs ago we were on the edge of a cliff looking at an economic depression and now we are not but the heavy lifting needed to keep the country moving in the right direction will be years in the making. Be prepared for peaks, valleys and a whole lot of sideways movement
Sounds good. But, what about where you live? How are things going on your end?
Isn’t going from the edge of the cliff, to a nice path of recovery a good thing?
I’m not worried about California, b/c the Federal government will bail us out. Moral hazard at its finest!
MidAtlantic region is doing fair…many cuts in DH’s pay (civil servant…lost all overtime pay, no raise, higher insurance premiums) and all services and utility prices are up (power, trash disposal, cable, water); I have some family members who are self-employed and their business is very slow. There is a glut of new and pre-owned houses on the market with prices down 25% from 2007.
I do seem to notice less businesses closing and more hustle and bustle. This could be just be due to lower fuel prices, aggressive sales and marketing campaigns, the summer, and cabin fever, though.
Yeah, I’m wondering maybe it’s b/c of summer, and San Francisco is a tourist attraction, which is why it seems so damn busy here.
Thanks for providing some of your anecdotes. The main thing is, your DH still has a job right?
Sam,
I think it depends on where you live. For me in Southern Cal, I’m dealing with clients who have friends and relatives out of work for two years. If you’re over 50 and were an executive, get ready for a pink slip. I get more calls every day by people asking for help in finding work . The construction industry is still around 25% unemployment or so.
Companies are planning the next wave of layoff in anticipation of the health care costs. Credit has been shut off to small businesses so companies are tapping the owner’s retirement plans to keep the doors open. The bankers are getting ready to flood the market with REOs that they were paid to hold off the market. Commercial real estate is in the dumps with 80% vacancy at some key buildings.
My office is one of only 3 companies in our office building that has survived the recession. The others are a politician’s office and a foreclosure processing company. The rest of the building is empty and we’re in a prime location.
Half of my favorite restaurants in the OC area have gone out of business. Even Norms and Marie Callenders are closing. IHOP was so dead on a weekday that you can hear a pin drop. The only busy restaurant is Olive Garden on a weekend (I refuse to eat there).
The main residential activities are short sales and foreclosures and some are taking up to 8 months to close.
Thousands of teachers were laid off and still unemployed a year later.
My perspective is probably colored by all the sources I talk with every day.
Hmmmm, what you describe sounds like war-time Kosovo?! Is it really that bad? Very interesting datapoints on the politician’s office (of course!) and foreclosure company.
Can you remind me/us what exactly you do for a living if it’s public? I couldn’t tell from your about page. Very nice site you’ve got btw!
I have a financial management firm. We handle pensions and 401k for companies. I also oversee the insurance division of an independent full service brokerage. I don’t put much on my about page because I adhere to regulations that governs what financial advisers can promote about themselves on a website. Disclosure of the firm name and soliciting business is not etc. is not allowed.
My site is a personal project to provide financial education.
Good stuff! A good personal project to have, which ties in completely with work. I wouldn’t worry about the little things here and there. They’ll always be there. Might as well just go for it.
Hah. I really don’t believe into the premise of a true recovery at 20% unemployment, 40 million on food stamps, a masked deflation, low loan interest rates, and a 15 trillion (70 trillion counting the bailouts) which could lead to a possible inflation. I believe this recovery is only temporary. But I’m most certainly prepared for the worst. So prosperity or faulter, I welcome it.
Facebook… Making an IPO? Now this could be interesting… I may consider buying a call optiion if such is possible.
I don’t think you can buy call options on Facebook pre-IPO unfortunately. But who knows what valuation they come out with, so it might be good you don’t!
Bailout money for all paid for by ‘the rich’, whoo hoo!
I was glad to come across an article that is so optimistic. In a few of the graduation ceremonies I have attended over the past few months, all of the key note speakers spoke about the importance of entrepreneurship. The high unemployment rate is quite disheartening, but new grads are looking for ways to be innovative and work for themselves.
You might find this interesting, Sam:
As others have said, I think it depends on who and where you are. I’m in one of the areas that was heavily hit by the housing bubble. (As in, housing prices shot up an insane amount, people panicked and bought or got greedy and bought, and then it all came crashing down.) There are still foreclosures and short sales everywhere, and a lot of people are still out of work, although it does seem to be improving.
People are still spending though, just maybe differently. I’ve noticed that the less expensive restaurants are packed (like In-n-Out and Pei Wei) and the more expensive ones (meaning places where it might cost you $60 for 3 people to eat) have no waits. The malls are packed here but that’s normal for the summertime. People just hang out to get out of the heat!
In the Research Triangle Park area (NC), there never seemed to be too much of a change IMO. Many property values have remained relatively unchanged. My favorite restaurants are always packed as well. I can’t speak to unemployment although I know we certainly loss some businesses. However, the vast majority of the ones I patronize remained intact. Who knows whether or not the country will experience a double dip; it never hurts to be ready though.
Regards,
Shawn
I’d have to agree with you on this one. I live in the DC Metro area and things are quite busy. However, I don’t think that this area was ever really hit as hard as the rest of the country. Think about it, DC is sucking more and more money from all of the country to THIS location, it makes sense that this location will at least not be hit so hard by the recession. The more taxes DC takes in, the more government jobs they can create.
That makes sense. Government employees are raking it in, in the recession, and taxes are being raised. DC Metro area should be just fine!
Here in West Virginia, we don’t see much of a boom, so there isn’t much to bust. Things overall are going fairly well here, and there are always enough people in this area who want to live off of the government to ensure me that I will always be able to find somewhere to work. But as far as the rest of the nation goes, I always say that the recession will eat alive those who allow it to. You can choose to participate in the recession, or choose to beat the living crap out of it.
That’s what I’m doing, and what I’m teaching my clients to do. Too many people are happy being average. (which, incidentally, is what today’s blog post is about).
Glad things are going well. Let me know if you pick up one of those 550i’s. haha.
Ha! I’ll never spend $70K on a dumb car, even if I did make $700,000/yr based on my 1/10th rule for car buying. BMW did raise their operating profit guidance by 50% today though, which caused the stock to shoot up 8%!
I love how you have chosen to beat the living crap out of the recession! That’s an awesome attitude!
I’ve seen both improvement and recession problems over here in Raleigh. There have been layoffs with some of companies, but many of my friends have been able to find work sooner than expected (according to the media).
I think part of that dealt with how they saw the situation. They’re back in the same field, but doing slightly different work. They took it as an opportunity and switched it up a bit.
Real estate has been slow for, but I think part of it is due to competition from new constructions. The new townhouses we saw were just a better deal than some of the older places.
I think things are improving, but just at different speeds, depending on location.
Sounds like your friends are making lemonade from lemons. Good for them! Good to know Raleigh is holding its own!
I have been thinking the same thing about Vancouver … Where is the recession?!?
We had the olympics so it was probably helping and lots of infrastructure work going on in the area with target dates of 2013. The government has fuel the economy a bit. It will probably slow down though at the next budget and try to cover the deficit. From what I hear, the private sector job creation has not picked up that much yet.
I think, like others, that the life style adjustment of some has not quite happened yet …
I was also curious what normal levels were… Surely, we all like when it’s high but they probably were above the norm and not sustainable just before the meltdown. Instead of comparing with the highs, how are we doing against the norm? The average over the past 5 or 10 years for example.
I have the exact same thought running through my head when I head downtown to Vancouver too. Downtown is packed with people with shopping bags, eating out, buying the newest gadgets. Where IS the recession? Most lay people I talk to (who don’t look at the market news etc.) think the recession is over. It could be that people were just getting tired of scrimping and the spending beast got unleashed.
I’m just AMAZED how strong the Canadian housing market is. I guess you guys will be raising interest rates way before the US, b/c the US housing market is still quite sluggish.
That said, it’s a great time to lower one’s property taxes!
I think most people have at most 2 years of living below their normal means until they want to let loose.
I am not entirely convinced the ugly days are over. My stock positions are still all in the red. Luckily I didn’t invest that much but I still can’t get myself to take a loss so fingers crossed they will at least break even soon (but I think there’s still a long way to go).
That said, firms are hiring again so things are definitely a lot better than a year ago. I’m still being very cautious with my money and avoiding any impulse buys. If my firm gives me a great bonus this month I’d definitely feel more optimistic but haha that’s not gonna happen.
I don’t know about a parallel universe, but just like real estate, the economy too is “local”. Various pockets of the country are recovering and/or booming, but in aggregate, the country’s a mess and getting worse. And even in California, much of the favorable spending patters you see may change when taxes skyrocket, public sector unions face layoffs (or minimum wage like Arnold is proposing) and reality hits from a fiscal standpoint. California is actually ranked right around Portugal and Iraq from a “likelihood of default” standpoint which does not bode well for the local economy long-term (not my link, but “The Mish” is a deficit hawk worth checking out):
https://globaleconomicanalysis.blogspot.com/2010/06/illinois-leaps-ahead-of-california-in.html
I too, was amazed when I went to put in granite countertops when the Recession started and I was told it would be weeks before I could even get a quote and there was no haggling on price. I understand now there’s more wiggle room, but some things just don’t seem to make sense. But the numbers don’t lie. Reported unemployment at 9.5% and going nowhere fast. Real unemployment/underemployment about double that.
It hasn’t been this bad in my lifetime.
It will be quite interesting if California goes into default! But, before we do, I’m pretty sure the Federal Government will bail us out, and send us stimulus checks to spend on fun stuff like ice cream!
Things haven’t been this bad, yet things seem fine. Which means, things aren’t so bad!
Be grateful. Myself, and pretty much everyone I know, is unemployed, unable to find work, and struggling. We’re living with parents, eating Ramen, and worrying about how we can cut more expenses….not living it up like you. Count your blessings. For everyone I know, This is the Great Depression. :/
Sorry to hear about your situation. I’m definitely grateful to be able to get on a bus to get to where I’m going. How long have you been looking and what area of the country are you in?
I was in Florida, looking between the beginning of 2007 to the end of 2009 for Graphic Design work (I have a BFA in Graphic Design. Then, things got so bad, I had to move back in with Family in Utah. Started looking again in Utah at the end of 2009, beginning of 2010. I’ve since gave up looking in my field, and am going back to school now to become an Accountant.
I’ve since put in for retail jobs since to help get me through school, but with no luck, and am continuing to do Freelance graphic design to pay my way through school.
My unemployed friends live all over the USA, and have a wide variety of careers that they are unable to find work in: Journalism, Animation, Missile Engineering, etc.
Yeah after 2007 things kind of fell off a cliff, and with the property market implosion in Florida, I’m guessing things really start to negatively compound.
I really do feel and see the economy recovering, so hang in there. It’s great you’re going back to school as well, why not right? Somebody always needs an account, and freelance graphic design stuff sounds good too!
The bay area is not America. My home town Brisbane in Australia is the same, no unemployment problems, house prices went up through the GFC but my state is flush with mining money, the bay is flush with IT money. We’re not in parellel worlds just parallel ecconomies. It’s referred to here as “the 2 spead ecconomy problem” 2 states WA and QLD have double digit gdp growth and the other states are draggind down the whole ecconomy.
The best idicator of a global ecconomic recovery and remember the US is 25% of global gdp is the Baltic Exchange Dry Index ). This is an aggregate of the cost of shipping. THe higher the cost the greater the demand and hence the better trade and the global ecconomy is going. I shows that demand has dropped. Double dip recession? Maybe
Ben, thanks for your thoughts. What are your thoughts on our new Prime Minister Gillard? Do you think there should be a super tax on mining profits above a certain level? I’m shocked how my mates can so easily vote out Rudd so quickly.
This is a lesson for America and the current government. Raises taxes too much and you will get an enormous backlash!
The economy is recovering down in the south end of the state as well. My work had a streak of turnover after very little for two years, the restaurants are packed and real estate (at least in my neighborhood) moves much quicker now.
I was visiting the Gas Lamp district the other day… seems like the convention season is in full swing and Taka restaurant on 5th Ave was packed!
I’m sure it depends on the person. People who had secure jobs and DB pensions never even noticed the recession. Some of us took a serious pay cut, but the recovery feels real. The outlook in Calgary is pretty optimistic.
I doubt we’re in for a double-dip. Now that we’ve been shocked by a market crash, we’ll be seeing market crashes everywhere. Everyone seems to be playing it safe. Once the memory fades, we’ll be surprised by the next market crash. I’d guess it’ll be a couple years.
It’s funny that you’ve posted this. A co-worker and I were having this same conversation today. He is a speculative stock trader and is currently shorting the market. I told him that while it may seem that the market is going to fall, there is no true impetus to do so. Yes, unemployment is high but there are many people employed who like you stated, is still willing to purchase homes at a discount, the newest cars, and the newest technology. Yes the housing market sucks but if you think about it, how can someone really be affected by falling home appreciations if their payments are fixed and they would have to pay for somewhere to live either way ( really, it’s a question ). Unless your mortgage was an ARM, or you lose your job, housing values don’t really matter ( unless you are someone like me who purchased a home and is now subsequently trying to sell it ).
Housing values don’t matter if you never plan to sell. Also, if your ARM resets now, your rate is at 3.5%! That’s incredible!
No offense but are u in any sort of financial profession? Stating that housing values don’t matter if u never plan to sell is a very ignorant comment to make and demonstrates a basic lack of economic knowledge.
So a valuation of $1 vs a valuation of $1mm is irrelevant if you never plan to sell?
Ask yourself exactly what things are related to housing valuations.
No offense taken. Are you in the finance profession?
I’d much rather have my home valued at $1 vs. $1 million. If that was the case, my property tax would be only 1.1 cent a year vs. $11,000!
The market value disconnect would be AMAZING if this were the case. The value is what I’d be willing to pay to rent the place. If I own, with no debt and just carrying costs, that is sweet.
and exactly how would your local govt function on that 1.1 cent tax(simplistic functions such as police, fire, waste removal)?
-How would you pull equity out of an illiquid asset if valuations don’t matter?
Tax the rich at 90% of course! That’s what the people want and think is fair, don’t they?
Why would I need to pull out equity in a house btw? That’s the wrong thinking. A house isn’t an ATM machine.
Our town just raised the mill levy AGAIN. At this point only 50% pay their back taxes (current is less). So…our house was reappraised UP!!!! My completely paid for house is now costing me 500 a month in taxes and it is worth no where near a million.
The lure of lower property taxes is calling this retiree family!
On the other hand- we never really had unemployment and the area is quite stable.
Property taxes are at close to 2% of valuation near downtown where I live… $350,000 condo = $6000+ in taxes/year.
good points Sam…in Peru my students have told me that things are still pretty rough/not getting better. I known because they can’t afford their books and I let them use photocopies, even though it’s against the rules.
As far as back home in Georgia goes, have an interesting story. A buddy of mine works for his father in a boutique upscale cabinet shop, making high end cabinets. They suffered real bad, I mean real bad during the recession, but now they have more business than they known what to do with. This is mainly due to survivorship, as many of their competitors went out of business. My buddies in commercial real estate are being forced out or relocated, friends selling insurance having a rough time of it, and most in the 20 something crowd are underemployed. Just my two cents…
Appreciate your two cents. From your anecdote, maybe that’s the secret, just surviving, and let everybody go bust around you!
One interesting thing I’ve lately seen is that even with the end of the real estate tax break, I’ve been getting much heavier search engine traffic for my post on the lowest property taxes in the USA. Which seems to mean a lot more people are interested in springing for houses.
As far as the financial industry goes I’ve read 2 conflicting current reports. One that the financial industry is hiring again and the other that hedge funds are very heavy in cash in this crazy up and down market.
It’s hard to get a fix on the economic situation in the city because with all the intense heat we’ve been having, lots of people (myself included) are hibernating at home with their beloved air conditioners.
That’s a very insightful tid bit regarding your search engine on lowest property taxes in the USA.
Mortgage rates are so cheap now, if I didn’t own, I’d be hunting aggressively now. In fact, I’m hunting aggressively now anyway as I type!
Come out West. You don’t have to hibernate in 65-75 degree weather!
I’ll use my neighborhood bay area park indicator and surmise that the current residents are no longer contractors (they started leaving in 2009) but that they have been replaced with pass-thru retirees. A few months ago, the spots were mostly empty. In other words, people aren’t staying here anymore to work and the park takes what rent/income it can get from outside money i.e. government transfers, that is, Chinese money or whoever is funding the budget deficit these days. Some economy this is …
Looks like foreign money ie Chinese are really starting to purchase real estate here in San Francisco. Pretty encouraging to see an international demand curve!
Sounds like things are looking up! People still gotta work and eat. However, is it a real recovery, or is it confirmation bias? There are a lot of hidden variables out there, and this could just be the eye of the hurricane.
Definitely NOT confirmation bias. What I see is real, and I see bull market indicators EVERYWHERE.
First of all, remind not to be next to you in the car in bad California traffic. (Quoting from your post: “traffic that makes me want to pull your hair out”. ) Could be dangerous for my hair! :)
I think the perception of recovery may be dependent on where you live. The Detroit area is still seeing their unfair share of foreclosures and our unemployment is very high. I actually have no trouble getting a seat in a restaurant. I will be thrilled when the recovery hits here!
Ahhh, you caught my play on words! Nice! I wonder if anybody would pick that out. I try and throw something quirky in each post. Kinda like a Where’s Waldo thing going on.
Detroit area must be tough. I hope people are able to move away and find better opportunities elsewhere.
i defintiely agree with you that times are much better than they were even 6 months ago. while i dont see a double dip coming, i do think the bay area you are in is and will recover much faster compared to some of the older regions of the country such as the midwest. Im glad things are going well where you are, and i hoenstly think that is an indicator of good things to come for the rest of the country!
Preferred Financial Services Blog
I’m guessing the large cities, like San Fran, New York, LA, Chicago are approaching recovery. If the article I read in the NY Times is any indication of the recovery, that Wall Street is on a hiring spree, then perhaps we’re moving into better times. I wouldn’t bet the farm on it, but my guess is in two to three years we’ll have moved past this recession. It’s hard to see it from my view point, as the teaching profession isn’t hiring at all in SoCal and my husband’s business has definitely slowed down this year. Which is weird because his business was booming in ’08 and ’09. Hopefully 2011 and 2012 will be recovery years!
At least business was booming in 2008 and 2009, the two most ugly financial years of many people’s lives!
I’m betting the farm on it that the economy is doing just fine and we’ll be in better shape 2-3 years from now for sure.
Question: Previously, did you see any of those indicators drop? Here in Tacoma, the Applebees and Olive Garden parking lots are always full, but then during the whole “great recession”, they’ve stayed full.
I have clients who’ve had to lay off a large percentage of their employees and real estate agents are squeaking by, but everybody is still buying Starbucks and eating fast food – even the real estate agents.
The market P/E is still at 20. I think the only thing holding it up is the low interest rates. Other than cash, there’s nowhere else to invest.
Here’s the thing…. if people can continue to afford their $5 Starbucks, then I think people are rich. B/c, they are spending their disposable money continuously on what they want, in addition to what they need.
Still on slightly shaking grounds with promise for recovery. I do think we are on a wayward trend up.
Makes me think of the Stanley’s book that I am reading right now, Stop Acting Rich. Where he says frugal is the new black right now. But that it will end when the economy goes back up. Then we’ll all be hyperconsumers once again. “True”, I say. But I still think there is going to be a group of us that will continue to build solid financial grounds with continued frugalness involved. Why? Because in the face of every mishap is the light of opportunity. And I think the jolt of this economic downturn is going to realign many people’s thinking for the better.
Okay, enough chattering. I hope it all made sense. ;) Yes, things are getting better.
I’m banking on the large majority of Americans to be hyper consumers again! It is what we need to get this economy roaring again, that plus easy credit to blow ourselves up with!
Encouraging post! Anecdotes from my life seem to mirror the mixed messages of the media. Relatives and friends who work in the financial services sector seem to be getting hired or are being converted from temp to permanent employees. On the other hand, my wife and several friends in other sectors–particularly higher ed, the arts, etc–have been looking for work now for over two months!
Ahhh, it’s so good to look back at this post 7 months later and see that it was spot on!
Hope everybody did well and invested in the markets and refinanced their homes at this time.
Sam
2/20/2011
I would actually say that we haven’t recovered at all. What we are experiencing with some of our statistics is not really a recovery, it’s just that we are comparing our current progress to terrible numbers.
It’s like if you make $100,000 one year and then $30,000 the next year, that looks horrible. But once you go up to $32,000 and compare it to $30,000, it seems like a recovery. It may be semantics, but I see a difference in doing “almost as terrible but just a tiny bit better than the ultimate low” and “recovery”.
With that said, I believe the economy will fall far below current levels do to the future of the housing market (we still have much of our wealth tied to it), our inability to create jobs, our irrational thinking, and the terrible tax policies of our current administration.
We are experiencing the calm before the storm, and consumers are already forgetting the lessons they should have learned over the past few years!
That’s a pretty bearish assessment. Going from 30K to 32K a year is recovering by definition no?
Calm before the storm? I highly doutbt it. Not sure where you’re based, but things seem to be rock and rolling here at least.
What do you do for a living?
You still think we aren’t recovering 4 months later mate? Markets are on fire!