The Business Men


By DIA, Section News
Posted on Sun Dec 02, 2007 at 06:09:02 AM EST

On November 16th, a mere two weeks ago, The Albany Times Union's lead article had this headline
Brighter days for economy in analyst's outlook
It was an article about a local banker from Keycorp who now has his own firm where he hands out advice like this. This is how the TU summed up his view on the economy.
Former KeyCorp economist says worst of housing decline has passed, manufacturing remains strong
Now, it should be noted this guy was a banker. My advice is to never take advice from bankers. But the TU loves 'em. It also should be noted that the article below that one on November 16th had the following headline, "More out of work in region" and the one below that said, "MapInfo Purchaser cuts staff". Brighter days indeed!

It is pretty hard to find someone with a decent track record of honesty about the economy willing to talk of brighter days right about now or anyone saying the worst of the national housing market decline is behind us. But a whole two weeks have passed so perhaps that banker the TU featured has changed his mind, too. I mention this because today the TU is running an opinion piece by one of their business writers. This also is their lead piece in the section. Headline:
Housing Market Stays Steady
In fairness the guy is only talking about our local market and not the national market but they decided to omit that from the headline for some reason. Essentially he is saying since housing prices didn't go up much in the region, they can't go down much. Tell that to the people in Saratoga if you want to make them feel better this holiday season. Anyway, I'm not going to offer you investment advice beyond simply ignoring bankers. But I would make sure to check some other facts and figures and sources before believing what you read in the Times Union business section about the health of the economy. Their track record isn't so hot.

Update [2007-12-3 15:47:51 by DIA]: From the AP today.
Toll also said home prices "may not have stopped falling yet," adding that it may not "be the best time to buy a home."

Mark Zandi, chief economist at Moody's Economy.com, predicted that, if the economy slips into recession or if efforts to modify loans don't pick up substantially, the housing market downturn could last through the end of the decade.

"This is the most serious housing downturn since the Great Depression," Zandi said.

Many analysts say next year is likely to be worse.

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The Business Men | 1 comment (1 topical, 0 hidden)
Yeah, riiiiiight (none / 0) (#1)
by champlain on Sun Dec 02, 2007 at 10:09:07 AM EST
KeyCorp dude wrote some serious poopy.  The worst of the housing crisis has yet to hit.  I'm guessing the worst will be 2nd, 3rd and 4th quarters of 2008 when the foreclosure rates will zoom to the sky because that's when the subprime mortgage rate resets will hit the hardest.

Albany County will have its foreclosures, but it won't be nearly as bad as the super crazy speculation parts of the country like certain counties in Cali and Florida. Prices in Albany may stay flat for a year and may even drop some, but not a ton. You're right that Saratoga County has seen real estate prices drop substantially, but it's still not as bad as the super crazy areas in the U.S.

Last week the WSJ reported:

The property value of U.S. homes will fall by $1.2 trillion, and "at least" 1.4 million homeowners will lose their properties to foreclosure in 2008, according to a study released Tuesday by the U.S. Conference of Mayors and the Council for the New American City.
The study, prepared by forecasting firm Global Insight Inc., predicts a widespread and deep economic impact from ongoing housing market problems, which many expect to stretch through next year.

Lots of the big investment banks have exposure to the subprime financing instruments and they are VERY SCARED right now and are being super careful with their loan deals.  There is very definitely a crisis of confidence.  Citigroup is preparing for its second round of large scale layoffs for the year, the new round could be as many as 45,000 people from the current total of 320,000 employees. Ouchy. Lots of the youngsters will have "back to school" time for that MBA now. The not-so-youngsters will be polishing their resumes. The big finance houses have seen their own stock prices fall substantially.  Business Week recently reported:
As of Nov. 19, Citigroup is down to $32.50 a share from its 52-week high of $57 on Dec. 28, 2006. Bank of America is at $43.15, down from $55.08 on Nov. 20, 2006. AIG is at $55, down from $72.97 on May 11. JPMorgan is at $42, off from its high of $53.25 on May 9. Merrill Lynch tumbled to $53.50, from $98.68 on Jan. 18. And Morgan Stanley dropped to $51.16 from $75.50 on June 15.

That's a lot of pain, of course the banks have also announced $50 BILLION in write-downs in the last quarter related to the mortgage crisis. $15 billion or so was by Citigroup.
http://news.yahoo.com/s/nm/20071119/bs_nm/citigroup_downgrade_dc
It's easy to see why people may not trust in the health of the big financial houses as they still hold a whole bunch of crap mortgage backed securities paper.

Of course people like KeyCorp dude make a living off of other folks investing - so of course he'll continue to engage in endless happy talk. Even if a recession starts, they'll continue in their happy talk.

Buyer beware.

The Business Men | 1 comment (1 topical, 0 hidden)
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