Recovering from some kind of flu gave me the chance to watch CNBC where Bernanke, the fed chief, spoke about the economy.
- Expects 75-100 banks to go under. Analyst noted that during the S&L crises, 1600 banks closed. ml-implode.com tracks the mergers and closings of banks.
- This market change is worse than 2001 because mainly institutions were hurt.
- Inflation raises have come mainly from food and fuel rising.
the Fed faces three “fronts” – namely a weaker economy, jittery financial markets and uncomfortably high inflation. Mr Bernanke made it clear the Fed’s central concern is on the first two, thus the 225 basis points in rate cuts since September despite inflation rates above the Fed’s assumed comfort zone.
The analysts talked about fear and skepticism. Pessimism and optimism control the market to a point, the same way the price of a house is decided on between a willing buyer and a willing seller.
Consumer confidence is so important to judging any market they actually have indexes that you hear about from time to time. In 2005-6 in our area, confidence was overblown. Overblown by the loans people took and by the homes they purchased. Now things have swung the other direction and the lack of confidence will keep people off the market.
A few things may help us.
- We are the least expensive city on the west coast.
- We don’t seem to have the same exposure to subprime loans like other cities.
- So far the news for our area has been about as good as it gets creating confidence.
- Still historically low interest rates.
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