Stimulus Check Gone with Price of Oil: Running the Actual Numbers Behind the Non-Issue Stimulus Checks.
You may be wondering why the $150 billion stimulus package has had such a minimal impact on the markets and the general economy. The problem is, the entire stimulus package was spent merely keeping up with rising oil prices. Since the start of the year, oil has gone from $95 to $145 to the current $136. Yet we have remained in the high area for sometime. So let us take some rough estimates from the last month to see how many days it took to wipe out that stimulus.For the month of June, oil per barrel averaged $130. This is 36 percent higher than the $95 point we started at in the beginning of the year. So let us look at some data:
High gas prices are nothing new to those that live in Southern California. But there is something surreal about seeing prices quickly approach $5 per gallon. In fact, as you scroll through the list of your local gas station options, you’ll already see $5 a gallon for diesel serving as a highlight of coming attractions.
There may be a silver lining in falling prices and that is, homes are selling. Maybe not at the blistering pace of the early 2000s but there is definitely a minor jump in those searching for bargains in the now heavily hit
Sometimes the best way to measure one current downturn with one from a distant past is to look at the headlines. Many will recall that California in particular Southern California faced a boom and bust cycle; in the late 80s prices went up only to bust during the early 90s. Much was to blame including a recession and also local factors including the shrinking of the aerospace and defense industries. Yet as is currently happening, there is always a multitude of reasons why housing is declining. The actual forces have been here for sometime including dropping sales and increases in distressed properties.
The California housing market continues to face severe pressure from distressed properties. Currently the amount of inventory on the market is near 1 year and prices for the region have fallen a stunning 27 percent on a year over year basis. Each of the major counties are now down $100,000+ from their bubble peaks. About one-third of all sales are distressed properties which only adds pressure to the future trend of the market.
If you needed any more evidence that the loss party on Wall Street isn’t anywhere near an end, just look at the whopping $2.8 billion loss posted by Lehman. This is the first loss ever posted by the Wall Street investment giant:
The Washington Post has an excellent three part series that will be highlighting the epic in progress housing bubble. For those of you who are still uncertain how this entire jigsaw puzzle comes together, this resource will prove to be invaluable. You have to wonder how the entire economy has become so dependent on structured finance and archaic instruments that make no sense, even to some of those in the investment firms. Many estimates are predicting that we’ll be seeing about $1 trillion in writedowns so anyone predicting a bottom is completely calling the game way too early: