BY Jack Lee
Not long ago one of our posters accused me of overstating my case when I warned of a deep recession ahead. Of course I disagreed, because nothing could have been further from the truth. However, I was just far enough out in front of the supportive news that people might have found it hard to believe…but now the time has passed and here we are.
But, if you’re still in denial, let me ask you when was the last time you saw companies like Bear Stearns, Washington Mutual, HMS Capital, American Insurance Group, Countrywide Financial, Lehman Brothers and Indymac, all tank at once? Or when was the last time the American auto industry was on the brink of failure? You know Detroit is looking for another $120 billion from the feds to stay afloat and thats on top of the $50 billion they’ve already received.
Not enough? OK, when was the last time Fannie-Mae, Federal National Mortgage Bank, American Sterling Bank – Wholesale, Mervyns, CTX Mortgage Co. – Retail, Equity One Commercial, Coldstream Financial Svcs., or over 300 other major companies and corporations all began to fail at once? Getting the picture now?
Of course this is just the news of companies closing down. This doesn’t cover the huge layoffs that have only just started, in both public and private industry, and have yet to be felt in our communities.
Remember this one from last month’s headlines, “…record stock plunge saw approximately $1.2 trillion wiped off the market value – the first-ever trillion-dollar one-day loss, according to the Dow Jones Wilshire 5000, the broadest measure of market activity. The biggest-ever loss is almost double the size of the rescue package rejected by the US House of Representatives earlier on Monday.” This is a remarkable and telling event of how deep this recession will be and how long it will take to recover.
Layoffs start: Fidelity Investments is initiating the first of two rounds of job cuts, laying off about 1,300 people this month. Qwest revealed that its profit has dropped and it will cut 1,200 jobs. GM’s sales were down 45% last month, the auto industry sales were off to a 25 year low. Now GM will eliminate another 1,500 jobs because of sagging demand for new cars.
A growing number of auto industry analysts have expressed concern that the financial crisis could soon overwhelm the biggest U.S. automakers, known as the Big Three and 1.5 million jobs could be at risk. In September, US employers took 2,269 mass layoff actions! So don’t tell me this thing isn’t that serious!
Rumors abound that AT&T (T), Yahoo (YHOO), and eBay (EBAY) will together release thousands of workers into the unemployment pool. Actually Yahoo just announced it is releasing 1500 workers. Those layoffs will add to the mounting figures from earlier this year, Sun Microsystems (SUNW)let up to 2,500 employees go; Nortel (NT) is cutting 2,100 jobs; Hewlett-Packard (HPQ) will reduce staff by nearly 25,000 following its acquisition of Electronic Data Systems; and even Google (GOOG) got into the game with the shedding of 300 jobs at DoubleClick. Whirlpool will cut 5,000 jobs. California already has over 1.4 million people from the private sector out of work, and soon there were be layoffs of service workers within the state government.
Layoffs directly impact the retail industry, real estate, banks and this eventually leads to even more downsizing and the cycle continues. That also translates over to lower corprorate profits and of course they all pay less taxes….and that causes government to panic and RAISE YOUR TAXES! Gov. Arny wants to do with the sales tax…brilliant. Absolutely counter-productive…have we learned nothing from history?
Wall Street has shed roughly two trillion dollars in assets this year and this has led California’s PERs to be light $27 billion in its investment portfolio, and so it goes one thing begats another. The debts and losses keep piling up, the revenues keep falling and we are likely less than 10-15% through this recession. Many of these record setting woes have not been seen since the Great Depression, some events have even broken Depression era records, so when I said we were going into a recession I wasn’t kidding. As tough as the news may be, you still need to hear it in order to chart your own path through the coming months and possibly years.
This is big, it’s global and it’s unique. We’re seeing protests by laid-off workers in China, thus signalling a hint of what is yet to come as the global recession expands. Like their counterparts in North America, Europe and elsewhere in the world, workers in China are being hit hard by accelerating plant closures, especially in the major export industries.
Welcome aboard our titanic ship of state that’s sinking bow first…. President elect Obama!
President Bush had 9-11 go down his first year in office and now Obama has own version of 9-11 before he can even take office. He’s going to have to hit the deck a-runnin! Won’t be any time to ease into this job. If he does or if he makes major mistakes, it could mean more far more trouble for the economy and you. Bush did more to disrupt the economy than Al Quead did knocking over the Trade Towers or slaming into the Pentagon. His reaction was exactly what terrorists hope will happen, radically disrupt a society, change business practices, hunker down, spend money on every conceivable risk area all to placate irrational fears. Now what will Obama do with the financial crisis? Bush started to throw money at it, just like Hoover did in 1930-31. We saw how that worked out.
And lastly here we are, a rock on one side and a hard place on the other. We’re stuck living with their choices because we are the little guys, the typical American taxpayer. We have limited savings, we have bills to pay, we have an average of $7k in credit debt and to make our world a little more uncertain, we’ve got a brand new head of state with no history of doing anything, be he has lots of platitudes. He’s never even managed a city government and now he is head of state at exactly the same time we’re facing the worst financial crisis in decades and perhaps since the New Deal. I hedged, because despite all the hints we still don’t know how bad its going to get because this is mostly unchartered territory. We’ve never had anything quite like this, not even in 1929… and when this went global, well, it made it all the more complicated.
LAST MINUTE UPDATE: Chrysler LLC is rapidly burning through cash and being driven to prepare for a possible break-up if it can’t clinch a merger with General Motors Corp or get government funding needed to ride out the economic crisis, people with knowledge of the situation said.
The U.S. Labor Department said Friday that the nation lost 240,000 jobs in October, worse than what Wall Street economists were expecting. It brings the nation’s unemployment rate up 0.4 percentage point to 6.5% — the highest the nation’s unemployment rate has been since March 1994.
GM has just reported a loss of 2.25 billion in the last quarter.