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December 23rd, 2008
11:34 AM ET

Financial Dispatch: Econorama

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2008/images/12/23/art.bankowned.jpg]
Gene Bloch
Managing Editor
CNN New York

“It could have been worse” has often struck many of us as a silly expression. Couldn’t anything on earth always have been worse?

Maybe those who use it are trying to offer some measure of comfort in a difficult situation.

With that thought in mind, this morning we received a slew of economic news, and while it was pretty bad, it could have been worse.

First off, sales of existing homes tumbled 8.6% in November, a steeper decline than expected, and the median price of a previously-owned home slid 13.2% from a year ago to $208,000. That price decline is the biggest since the Great Depression.

Sales of new homes were down last month by 2.9%, which is also worse than expected.

A key measure of consumer confidence meanwhile showed unexpected improvement. The Retuers/University of Michigan revision for December showed a nearly 5-point increase in its index. How to explain the increase? It’s people feeling better about lower prices. One in four people according to the survey expect declines in prices, which is more than any time since the 1950’s according to the survey’s director, Richard Curtin.

And the final verdict is in on how the economy did in the third quarter – and the picture has not gotten worse from the last time we got a reading.

Gross Domestic Product – the total value of goods and services produced within U.S. borders – contracted at an annual rate of a half percent in the third quarter, no change at all from the previous estimate. The decline follows a 2.8% GDP GAIN in the second quarter, mostly the result of those government stimulus checks that went out. The time we really should be focusing on though is right now, and some economists are predicting fourth quarter GDP is down 6-7%, that would be the worst decline in two decades. We’ll get our first look at the figure in January.

Add Textron and Unisys to the list of big companies reporting job cuts. The two on Monday announced plans to eliminate a combined 3500 jobs.

Unisys also said it will suspend its 401(k) contributions, just the latest company to make such a move.

The prevailing mood of shoppers remains lackluster, and that’s extending to cyberspace. After seven years of growth, the pace of online holiday shopping is retreating for the first time. According to ComScore, which tracks all those clicks, online spending during the first 49 days of the season fell 1% to $24.03 billion (that’s compared to the same period in 2007).

Can the Securities and Exchange Commission be blamed for ignoring warning signs of Bernard Madoff’s alleged $50 billion Ponzi scheme? One woman who lost almost $2 investing with him thinks so. The Wall Street Journal is reporting that Phyllis Molchatsky, a 61-year old retiree from Valley Cottage, NY, filed a $1.7 million claim against the SEC. According to the claim, reports the Journal, the SEC’s "failure enabled Madoff to perpetuate and expand the scheme, drawing in more and more innocent investors."

Is what Madoff is accused of doing that rare? Most Americans don’t think it’s an isolated case according to a CNN/Opinion Research Corp. poll. Three-quarters of the country thinks that Madoff's behavior is common among financial advisors and institutions. Maybe that's why one in three Americans, if given a thousand dollars in cash, would keep it under their mattresses (metaphorically speaking) rather than depositing it in a bank or investing it in stocks or bonds. 45% would take that money and stick it in a bank; 24% would invest it, and 29% would keep the cash in their own homes or somewhere else where it would be under their direct control. Nearly six in ten think there should be more regulation of the financial world, an increase of nine points since September.

Gas is down for a fourth straight day. AAA reports the price of a gallon of regular unleaded gas fell 4-tenths of a cent to $1.659 ($1.66 for graphics). That price is down almost 60% from its July peak.

In today’s Energy Fix, we look at some of the “midnight regulations” the Bush administration has enacted. Environmentalists are up in arms over some of them, calling them a parting gift to Bush-friendly industries. One makes it easier for coal mining companies to dump debris into nearby rivers and streams, after blowing up mountaintops.

Another lets companies burn hazardous chemical waste in their own incinerators for fuel, instead of paying highly-regulated incineration firms to destroy it. The White House says these changes have been in the works for a long time, and have received public comment and full inter-agency review.

Critics say it could take the Obama Administration or congress years to undo the new rules.


Filed under: Bailout Turmoil • Economy • Gene Bloch
soundoff (4 Responses)
  1. Dan W

    It could have been worse, but I believe it will keep getting worse. The bottom is not in sight yet, and this is starting to look like 1929 to 1931. Read the books, the stock market did what it is doing now up and down, the prices are just starting to deflate, and the jobless numbers just keep coming in, and getting larger. Yes, I believe we are headed for a depression, and yes I am getting ready for it. My 401K has been wiped out (the Tech bubble started it), my savings are dwindling – high prices and stagnat wages. There is no real light at the end of the tunnel, except for the freight train, and I think this global economy is headed for a big bust.

    December 23, 2008 at 12:47 pm |
  2. Annie Kate

    Congress could stop some of those regulation changes through some mechanism in the Congressional Record – at least I read that they could. It would be easier to do it now than to wait until after the regulation changes take effect just before Obama's inauguration. Bush timed his changes to go into effect just before that so they would get done, would be largely unnoticed at this time of the year so there would be few comments on them, and it would take years to reverse them, giving his friends in Big Coal and Big Oil ample time to destroy our environment some more to enrich the few. If Congress could just put the changes on ice so they wouldn't go into effect before Obama takes office then Obama could issue an Executive Order to revoke them – all it would take is a few minutes of his time and his signature.

    If I were given a thousand dollars I would pay some bills off with it. I'm sure not going to invest it in the market though.

    December 23, 2008 at 12:24 pm |
  3. Maria

    Happy day Gene
    Now the economy is the daily drama in all world headlines and its really unite the globe in single issue “economy crisis”, not to mention the bailout word hits record, it is a real challenge everywhere, reform, cut, stimulate all are efforts to stop the proliferation of the crisis…Madoff’s victims are everywhere….and the gas moody prices is shaky for Wall Street….It might badly affect the global warming rescue efforts….

    December 23, 2008 at 12:16 pm |
  4. Jackie in Dallas

    Please, God, let President Bush break his arm and hand he uses for writing and signing his horrible Executive Orders. Strip mining, lumber exploitation of our national parks and wilderness, offshore drilling in critical ocean areas, burning hazardous wastes without regulations, dumping mining debris into streams and rivers...will this man ever realize that he is letting his pals rape our environment?

    This is the first time I've heard of a lot of these, and I'm an environmentalist! I would certainly have objected very vocally - and did about the offshore drilling. The newest site Bush opened is right off one of the most pristine coastlines, and is an important mating/spawning area for dozens of fish we routinely catch for food. Even the Navy came out against that one because it is an area used for Naval trainging that they are cluttering up with rigs!

    January 20th can't come soon enough!

    December 23, 2008 at 11:49 am |