Tuesday, January 08, 2008

South Bay-Beach Cities: How Much Trouble Are we Really In?

I thought I would start the New Year with a few observations. The last week has seen the R word rear it's ugly head in most of the media. The problem with recessions is that you are usually in one before the smart guys have figured it out. I know a number of people who believe that all the signs for a recession are staring us in the face. Others tend to think that while the economy may be on the weak side.. it still has enough punch to keep things rolling along.. slower but still rolling.

I'm not sure how much difference a small recession is going to make in our area. Right now there are no signs of big trouble in the South Bay. That of course could change in about 20 minutes but for now we seem to be somewhat stable since our job sector diversified from being 90% aerospace oriented. The Writers strike has had an effect but as more and more companies make individual contracts with the Union and the major networks see continued falling revenue the strike may get settled sooner rather then later. No one in their right mind wants to see the actors or directors join the picket lines. Most of the people I know are fairly secure in their jobs.. or at least as much as one can be in today's economy.

However there are other areas of concern that may or may not lead to some serious future problems..

Oil is way higher then it should be mainly because every time some nitwit sneezes the price of oil shoots up. If we were smarter we would get our act together enough to come up with good alternative sources of energy and say phooey to the middle east. It's hard to eat oil or sand and we have an abundance of food. It's a thought..

Nationally the credit crunch continues...It looks as if Countrywide is in a lot more trouble then they want the public to know..but did anyone really think they were going to skate through the credit morass without problems. They made some very bad loans to people who could not afford them. They compounded that error by having a company president who literally raided the cookie jar to make sure he got his and to heck with the stockholders or the customers.

I don't know about others but I'm a wee bit tired of all these guys who take huge amounts of cash from their companies while the companies are in big trouble. A little personal responsibility could go a long way to help mitigate the public's perception of how much trouble the economy and the country is in.

I find it a bit disconcerting that the American Dialect Society chose subprime as 2007's Word of the Year. Personally I like bamboozle better.. it has a certain cachet.. but nobody asked me. The LA Times had an article on January 5, 2008.. Job Slump Latest Omen of Recession that posed a rather intriguing question.. namely why has the rather small number of subprime mortgages brought the financial markets to their knees. Subprime mortgages are a relatively small number of loans compared to the larger number of mortgages that are in good standing. No one seems to care if Bob , Steve, Cheryl, Jean and Pete pay their mortgages on time. Nope... everyone is concerned about Charley who shouldn't have had a loan in the first place.

There is a lot of talk about returning to economic basics about housing costs and home prices. Everyone making $70,000 in California, who can't buy a home, believes that prices will drop to 1990 levels. They also believe that the reason prices rose was greedy homeowners and slick real estate agents. No one wants to believe that prices rose because of cheap interest rates , a surge in demand and a lack of building of affordable homes in some place other then Palmdale. Interest rates are still cheap, there are still a lot of people who want to buy a home and we continue with our policies of NIMBY when it comes to affordable housing. I don't foresee a big enough drop in home prices to change the situation. As long as we refuse to allow density to increase we will have a high cost housing market. The LA City council wants to put a moratorium on building. Smart move in an area with little affordable housing.. limiting housing is certainly a good way to bring down home prices.

We are in an election year... so we can plan on hearing a lot of people who want to be elected promise a lot of things they can't produce. It might be time for us to take a serious look at those seeking our approval. I remember an interesting statement about elections.. you get the government you choose.. whether or not you vote... so maybe we should think about that. Voting is a privilege that many of us have forgotten to exercise. If you don't vote then you are allowing someone who did to choose for you. I think that's something we should all think about this year. There is a lot riding on this election.


Linda said...

Interesting article. Very insightful.


Kaye Thomas said...

Thank you for taking the time to comment