Eli Broad Says Economy in Worst Slump Since World War II

July 2, 2008

July 1 (Bloomberg) — Billionaire investor Eli Broad said the U.S. economy is in the worst recession since World War II and a recovery in the housing market is “several years” away.

 

“This is worse than any recession we’ve had since World War II,” Broad, 75, said in an interview yesterday. Broad, the founder of homebuilder KB Home, said the U.S. should avoid a depression on the scale of the 1930s because the country now has sufficient “safety nets.”

 

With home sales and prices declining and consumer confidence at a 28-year low, “I don’t see it turning around very quickly,” Broad said. The economy expanded at an annual rate of 1 percent in the first quarter, the Commerce Department said last week. That caps the weakest six months of growth in five years.

 

“This is the worst period of my adult lifetime,” Broad said, speaking about the U.S. economy. “I do not think things are going to get any better” before the next president takes office in January. Selling off vacant, unsold homes could take “several years,” he said.

 

The U.S. will avoid a collapse as severe as the 1930s thanks in part to Federal Reserve oversight of the banking system and other safeguards that didn’t exist then, he said.

 

New Capital

 

Still, U.S. banks may have to raise as much as $65 billion as losses and writedowns extend into the first quarter of 2009, Goldman Sachs Group Inc. analysts said last month.

 

The world’s biggest financial firms have posted about $400 billion in writedowns and credit losses tied to the U.S. housing slump, according to data compiled by Bloomberg.

 

The U.S. lost 49,000 jobs in May, when the unemployment rate rose to 5.5 percent, the fifth straight month with a drop in payrolls and the biggest jump in the jobless rate in more than two decades. Financial companies have announced plans to eliminate more than 83,000 jobs since last July.

 

Broad said his concerns for the U.S. center around energy, healthcare and public education.

 

“I don’t see national leadership that is going to have the ability to really ride over the deep rooted vested interests,” he said.

 

“The problem is, people don’t believe prices have bottomed out,” he said. “You’ve got to induce people to buy houses” with federal policies including tax incentives.

 

Our Perspective:

 

The economy is now foremost in peoples mind. Gas continues to go up, now it is over $4.00 a gallon. There is even talk of prices being over $5.00 per gallon in the fall.

 

The mortgage market is at a stand still. Although rates are very desirable, the only people to benefit are those with above average credit ratings. Granted things got a little out of hand, the mortgage companies were giving away money to anyone who was willing to sign there name. There must be a middle ground. Confidence must be gained to allow the economy move forward.

 

Food costs are now feeling the effect of higher gas and utility prices. This is going to cause more anxiety.

 

Speaking of utilities, natural gas prices are continue to climb even thou reserves are still at a 5yr high. New Jersey Natural Gas has applied for an 18% increase beginning Oct 2008. In NJ, PSE&G electric rates just increased over 13% in June 2008. 

 

What to do

 

Consumers must be more diligent. Although you are paying more, take the time to look at viable alternatives. Just don’t settle for business as usual.

 

Businesses who use a large volume of natural gas can buy their gas in the deregulated market. Savings are normally 5% to 8% lower than the provider.

 

Tired of rising electric prices! Get off the grid. There are incentives to install solar panels at your business or home. These incentives more than cover the cost of installation. Become your own provider.

 

Should you want to know more about opportunities to reduce cost and discuss viable alternatives email george@hbsadvantage.com

 

Visit us on the web www.hbsadvantage.com to learn more opportunities available for you.

2 Responses to “Eli Broad Says Economy in Worst Slump Since World War II”

  1. […] bookmarks tagged diligent Eli Broad Says Economy in Worst Slump Since World … saved by 13 others     Timberwolf220 bookmarked on 07/03/08 | […]

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