71% of Economists Say We Are In A Recession

Fully 71% of 51 Economists of surveyed agreed the US economy has slid into recession according to Wall Street Journals online edition today.

Retail sales fell a pointed .6% in February as consumer spending tumbled. Consumers continue to grapple with high fuel prices, bad home value information and shrinking 401Ks due to market issues.

This is a big turnaround from just 5 weeks ago. 20 surveyed felt the economy would actually go backwards for the year and that unemployment would rise to 5.5%

The turnaround in opinion can be traced to the recent employment report that showed a loss of 63,000 jobs for the month. The second month in a row with negative job growth.

A better phrase is probably "recessionary" as the textbook definition of a recession is two consecutive quarters of GNP (Gross National Product) decline. However, I prefer the "Poor Richard" definition. "A Recession is when your friend loses his job, a depression is when you do!"

Unless some stability to home and gas prices (although in different directions!) can be found the public psychology is going to get tighter which could accelerate the slowdown. It is going to be a tough Election round in the US. As the sign said..."It's the Economy, Stupid!"

My Blogs first 90 Days

Monday, March 10th was the 90-day anniversary of Life, Liberty and the Pursuit of Money. I was originally planning to post this Monday night, but then my computer died so it has been hit or miss time-wise. I really want to write this post to the person starting out (which I still am!) who is thinking about starting their own blog or just started and might be frustrated.

I started the blog for a couple of reasons. One, We were just starting to get serious about getting our finances in order and the advice and stories of others from the Blogsphere was very helpful in showing us we weren't alone in the good fight. Second, I have always enjoyed writing and wondered if it was something I could do as a wider shared project.

A couple key things that I learned so far, for those starting out (otherwise known as things I wish I knew when starting!):

• It is way harder then it looks! - Knocking out approximately 50,000 words over 90-days is like writing a book in that amount of time...albeit with a horrible plot and ever changing characters!
• You never know what post are going to click - I have written posts that I thought would get people talking and...crickets! Others like the Restaurant Guide took off (due to someone featuring it). So don't toss any idea. It could be the thing that takes you to another traffic plateau!
• Don't get wrapped too deep in the numbers - Visitors at first have a very interesting traffic pattern. Stare at the numbers too much and you'll lose sight of what you are doing for the long term.
• Learning to accept some folks just don't like you - I have pretty thick skin, but I saw myself getting wound-up over something someone would say...even though I don't know them, they don't know me, and we probably never will. It just doesn't matter.
• You get to meet more great people then you could imagine! - Some people have bent over backwards to provide tips, information and links to expose this blog to their readers. It is very kind and the top thing that I am enjoying about doing this!

Top People to Thank:

• Brightside of Debt - Great conversational writer that was one of the first that I read!
• Madame X - My Open Wallet - First Googled "Personal Finance Blog" and found her first! She provided linking to her blogrole to a very new blog which really help people find LLPM.
• ShoeMoney and John Chow - Two great blogs about the business of blogging and how to structure your site. Both have provided link back here through there comment sections which has really helped traffic.
• Fiscal Musings - Great writer that puts out nothing but top-level work and a great cross-promotional friend
• Mrs M and Catherine L - Both showing how important it is to go out and comment on others blogs and get the post rolling! (Even though they don't link to me in their blogroll :) )

Cool Milestones from the first 90-days:

• Over 10,000 Visitors! (Half of them this week from The Consumerist!)
• 3,872 Visitors in One Day!
• Over 18,000 Page Views
• Over 50 Subscribers
• 3 Mentions on msn MoneyBlog
• 1 Feature on msn MoneyBlog
• 1 Mention on WSJ.online
• 1 Mention on Reuters Online
• Featured on The Consumerist

I truly never thought I would get that many readers ever, much less nearly 4,000 in one day. The milestones aren't there to brag, but to let you know you can do it to. I can be frustrating when you first have those days with 5 or 10 visitors, it will pick up! Just keep writing.

You have all been so kind in sharing so many great comments over the last 168 posts! I look forward to the next 90 days and beyond. Thank you all so much!

Personal Finance QuickTake: Carl Icahn

Carl Icahn is a pretty interesting guy. Along with Henry Kravis of KKR, he was one of the most feared names in Industry. The shear mention that Carl Icahn was "on the phone to talk to you", would scare most CEOs into writing him a check to go away!

60 Minutes had a great piece on him and how he makes his money, and as one of the Top 20 richest people on the planet, he does know a thing or two about how to make money. He might not make companies cower with just a call anymore, but he does know how to rattle his sabre.

Icahn was one of a handful of Corporate Raiders that bought up companies with little or no cash, loaded the company with debt and would then spin then off or tear them apart. Think Gordon Gekko from the movie "Wall Street". Icahn's famous takeover of TWA in 1985 is the stuff of legends. But the Airline was stabilized and saved, at least for a time, but a lot of people were put out of work.

He is now known more as a Board of Directors worst nightmare. In an era of huge CEO pay packages Carl has the audacity to ask if they are worth it! And if doesn't get the answer he wants he isn't afraid to try and replace the Board themselves.

His recent fight with TimeWarner about their disastrous merger with AOL is a great example. He disagreed with the direction of the company, tried to force CEO Dick Parson to sell or spin off large portions of the company, and even though he lost got the stock moving enough to still make $300 Million in the process.

Like him, hate him or don't understand him, he is still fascinating and offers a great glimpse into what happens backstage at some of the largest companies in the world. And bigger isn't necessarily smarter!

Personal Finance QuickTake: Stock Market Loves the Fed

The Stock Market jumped 416 points today based on the Federal Reserve move to improve liquidity to the market. This is the largest gain for the market since July 2002.

This $200 Billion flu shot, gives liquidity to an area that companies have been to afraid to buy or allow to use as backing for other loans; Mortgage backed securities. This will develop a market for those securities that have seen constant write-down, as even good performing portfolios have been painted with this tainted brush.

This International Fund, backed by the Federal Reserve, European Central Bank, the Bank of Canada and the Swiss National Bank aims to put a floor over the bottomless pit that had drained markets over 500 point in the last 3 days. Based on the large increases today, Wall Street believes that they did just that.

These Central Banks are hoping that these moves prove more effective then rate cuts, which have been only temporary bandages.

From the Yahoo Report:

"It's not just a rate cut. I think it's a very creative way to do financing," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. "It shows the Fed is willing to do things that are a little out-of-the-box to shore up credit issues. I really think they went to the heart of the issue."

The latest step by the central banks was seen as a direct lifeline to investment banks, which previously couldn't borrow beyond already established Fed liquidity plans. The plan basically allows Wall Street's biggest institutions to put up troubled assets as collateral for loans, use the new capital to make money in the market, and then pay back the loan up to 28 days later.

Though eventually banks would be forced to take the troubled mortgage-backed debt back on their books, the plan still takes short-term pressure off them. Many of these banks will release first-quarter earnings reports next week.

Hopefully this puts a stopgap into place so the market can break out of this death cycle. The constant write-down of these debts has put many small and medium banks on the edge of Bankruptcy. As the report states this is only a 28 day cooling off, as this is how long they would have to repay the bridge loans, but it might be the break needed to re-establish liquidity.

One of the issues has been that even though the Fed has cut rates, mortgages and other credit vehicles haven't lowered as much as there just isn't a lot of money available to loan, even for the good customers. This had led to a viscous circle, where you can't even refinance to take advantage of the lower rates so the rates keep going lower to help the economy.

Only time will tell...Funny, that Zombie movie is called "28 Days Later!"

Are Oil Hedge Funds to Blame?

The US is very shortly staring at $4 per gallon gas in its near future. Oil was at $108 a barrel today and given that those are 55 gallon barrels that is nearly $2 per gallon...for crude oil! The $1 Trillion Question is, Why?

What has changed in 24 months in order to send oil from $50 to over $100? Is it demand? Nope, demand is rising 10%+ and will probably slow down to very low growth due to consumers driving less. Has OPEC turned off the spicket? Nope. There have been fluxes, but for the most part...no. Iraq and Venezuela have been an issue, but not enough to cut supply by half. Which is what it would take to double the price (at least in a linear fashion). This report from WTRG shows more great slides to review for yourself.

From the report:

The U.S. petroleum industry's price has been heavily regulated through production or price controls throughout much of the twentieth century. In the post World War II era U.S. oil prices at the wellhead averaged $24.20 per barrel adjusted for inflation to 2006 dollars. In the absence of price controls the U.S. price would have tracked the world price averaging $26.16. Over the same post war period the median for the domestic and the adjusted world price of crude oil was $18.53 in 2006 prices. That means that only fifty percent of the time from 1947 to 2006 have oil prices exceeded $18.53 per barrel.

Until the March 28, 2000 adoption of the $22-$28 price band for the OPEC basket of crude, oil prices only exceeded $24.00 per barrel in response to war or conflict in the Middle East. With limited spare production capacity OPEC abandoned its price band in 2005 and was powerless to stem a surge in oil prices which was reminiscent of the late 1970s.

I was puzzled, why the super rise then? Then I ran across another, bit older article from Fortune about Oil Traders and Oil Hedge Funds. While this article is a bit out of date it really lays out where the groundwork for this bubble has come from. Oil Hedge Funds. Talk about printing money for the last three years!

It works like this: I think oil is gonna rise, so I buy a "future contract" for oil at x date at x price. The fellow I am buying the future is betting the other way. So let's say I think oils going to go to $125 by Christmas (Gosh I hope not, but as an illustration) I would put a bid out to get the lowest possible price for that December 2008 oil. Timmy thinks it is going to $115, so he is happy as punch to sell me all the oil I want for $125! So he takes my bid at $125...It is now December. Oil is at $150! I get to buy it at $125 and Timmy is selling it to me at that price, even though the market is $25 higher now. So I made $25 per barrel!

The only issue is that you do not have to hold it all the way to December. If the market looks like it is going against him Timmy can sell the contract off, probably at a loss, but better than it could have been.

When this is out of control it can become a real Ponzi Scheme, in Biblical terms you rob Paul to pay Peter. Exactly like what was going on with housing. The problem with a Ponzi Scheme is that you eventually run out of suckers and it crashes!

Which is exactly why OPEC doesn't want to jack production (even if they could) way up. They all expect a big crash. Irrational Exuberance, to quote Mr. Greenspan.

While the housing market (the other Ponzi Scheme) is to blame as well, oil touches every budget point, for everyone and I believe our biggest true inflation issue. They government could step in and freeze oil prices, but that would kill any reason for the oil companies to reinvest, which leads to higher future prices.

A crash is coming. And I hope it won't be too late!

Welcome All Visitors from The Consumerist!

Woke up this AM to an insane amount of visitors!

I would like to Welcome all of theose visiting from The Consumerist, a personal favorite of mine as well. It was trully an honor to be mentioned.

If you like what you read, sign up for my RSS feed! and have it delivered directectly to you free every day!

Once again...Welcome!

Banks to Bust says Billionaire

CNBC had a great interview with Billionaire Wilbur Ross, CEO of WL Ross and Co. In the interview Mr Ross the question I have been asking; With all of these bad loans going on, why haven't we seen more bank closings?

His answer: a very simple, "We Will." "I think that's going to be the next wave, and coupled with problems in the commercial real estate market; I think they'll be the next bubbles that burst."

He was also asked about risk to big banks. ""I think that the big banks won't fail in the sense that they will go to zero and depositors would lose money," Ross replied. "I think the Fed and other regulators will make things happen. I think it's the medium-sized banks, and particularly some of those that got overextended with the subprime and other kind of mortgage debt. I think those are the ones that had the serious mismatch, making 20- and 30-year loans based on 90-day deposits."

This matched what the Federal Reserve Chair Bernanke told a Senate committee in late February. He believe those small banks that took flyers on higher returns on medium and high risk loans are at risk.

There are more and more reports about people walking away from their mortgages and in a report last night it was said that 28% of those in default aren't even talking to their banks. Given that the banks need another house like a hole in their head, this is the best time to work with your mortgage company if you are having issues.

The bigger problem is that that consumers aren't there to bail out the economy this time, and even those in good or better shape are spending less to prep for harsher conditions instead.