GenY and housing

Ah the American dream or nightmare- home ownership.  All you Gen Y’s, are you considering buying a home in the next few years?  We are! My husband and I are saving for a modest home in California and since home sale price medians in LA County range around $317,000, we’ve got some work to do.  With unemployment rates at such levels, fewer GenY’s are financially secure enough to take such a major step in their lives.    And although majority of the country has experienced declining home prices , Sydney has actually seen a rise.   In fact, the median Sydney home price is around $644,658! With such high home prices, Gen Y Aussies are cutting back on spending tremendously  (or considering robbing a bank) to save for a down payment.  NOW, I’ll stop complaining about Cali home prices.

GDP

The final GDP reading for 2^nd quarter came out today at 1.3%.  Each initial GDP report gets revised twice before the final figure, so this would be the final for Q2 . If you’ve ever taken an Econ class you’ve probably learned about GDP.  Gross Domestic Product (GDP) is the total market value of all the final goods and services produced within an economy in a given year.   

GDP= total consumer+investment+government spending+exports-imports

What this means for you?

Growth in GDP is what matters.   The faster the U.S. economy grows, the less pain we’ll feel.   At a pathetic rate of 1.3%,  it’s clear that we’re on a slow growth track.  Brace up.

Texas Tea

Crude closed at $80 a barrel and seems like the pumps are fast to rise and slow to fall.  So what’s the relationship between crude oil prices and pump prices? 

Let me explain. The lag between US Department of Energy gas prices and crude is around 5 days. (Using a weekly average for both) The pump price at the station you’re pulling into isn’t based on the cost of the product that’s under the stations underground tanks.  Instead, its set by how much it will cost to buy the NEXT delivery which factors in distribution costs, refinery margins, crude oil prices, etc.  So the next time you’re at the gas station getting mad because prices have climbed up, it’s not the owners fault!  In fact, when crude oil prices drop the owner has a better opportunity to make some dough!

CCI

It’s the last Tuesday of the month and that means the Consumer Confidence Index (CCI) is released.   The CCI is an economic indicator of well, consumer confidence.  For example, if you feel like your standard of living is increasing, you’re more likely to drive into the BMW dealership and buy a new car.  So the CCI is a gauge of financial health, spending and confidence of the average consumer, and since consumer spending accounts for ~70% of U.S. economic activity, economists watch this pretty closely.

And so for September consumers’ confidence remains weak, even weaker than what economists predicted.   WAAAAH

Disgruntled

Here’s to all the disgruntled employees making their way in this Monday morning.  Check out this humorous rant from Christoper Cristwell (who is now fired) to start your day with a laugh :

 

We think it’s hilarious- Howard Schultz not so much. So long Christopher!

Two bulldogs

From Carly Fiorina, one of the most powerful women in business with a checkered track record as a charismatic CEO, who was forced out of HP after a series of setbacks comes another strong woman, Meg Whitman.  Whitman the former eBay CEO will be taking over one of the hardest CEO slots to fill.   With HP in the gutter, Whitman is an “Obama” trying to save a sinking ship.  Mrs. Whitman the pressures on... its about time to get HP straightened out!

Thred^

Look in your closet.  I’m sure you have tons of clothes that you don’t wear that just takes up space.  That is how these three entrepreneurs, Reinhart, Homer and Lubin , created SF based thredUP.  ThredUP started out as an online community where people could inexpensively buy and sell used clothing.  These 3 soon realized they would tap into children’s clothing since parents retire about 1400 articles of clothing as a child grows. $CHA-CHING$

In April ’10, the site launched a children’s clothing service.  For $5, members could purchase a box of used kids’ clothing; they can upload and offload their own boxes. This turned out to be such a hit, they retired the original service and focused in on children’s clothing. 

Mommies check it out: http://www.thredup.com/

Weekend

With all that's going on in the economy, make sure you take some time to relax and enjoy the weekend.

Operation twist

So you’re hearing all this talk about OpTwist and you have no idea what the hell is going on with this economy.  Let me explain.

Operation Twist is named after the popular dance craze when all the FED governors were young, it’s not quantitative easing, its “operation twist” .  It originally happened back in the 60s but it was ineffective because it wasn’t done for a long enough period of time.  So Operation Twist is:  interest rates on short- term Treasuries are lower than on long term.  For example, if you financed a house with a 10 yr loan the interest rate would be cheaper than a 30 yr loan right?  So OpTwist involves selling short term treasuries and buying long term ones.

So what the hell does this mean for you and your wallet?

Nothing really.  If you’re in the market, it can lower long term interest rates enough that people decide to sell their bonds and buy stocks.  You won’t see any drastic changes in the interest rate on your loan or CDs, no jobs, no housing improvement, just a dance.

Let me see those nails

History has shown that when the economy goes into a recession or a depression, the sale of lipstick increases.  Nowadays, in this unstable economy, it seems pretty difficult for women to justify spending their hard earned money on the latest Dior bag.  Instead, they are indulging on nails!  Since the recession, nail color growth has exceeded the growth of the entire cosmetics category.  So go ahead, spend $20 on that nail polish- it’s the new accessory!

Oracle of Omaha RULE

Obama revealed his plan to cut the national debt by $3 trillion by increasing taxes on the wealthy and corporations.  His plan also includes a “Buffett Rule”. Buffett has complained that the mega rich pay a lower tax rate so this would set a minimum tax rate for anyone making more than $1 million a year. As usual the details will be ironed out in the future. But for now, the very few people who have worked their $@# off and have succeeded in breaking through a 7 digit net worth figure will have to thank Mr. Buffett.  Seriously Buffett, shut up already!

My consumer surplus

I am happy today.  I was out shopping for golf shoes and was mentally prepared to spend $75 but instead found a great pair for $60.  I immediately purchased the shoes!  The difference between the max price I was willing to pay, $70 and the market price, $60 is my consumer surplus.  If I go in next week and the price is reduced even further to $50 my consumer surplus would be $25.  If market price falls, consumer surplus must increase.

Here’s an example of producer surplus and consumer surplus from the movie Pretty Woman. In the clip Edward and Vivian (aka Julia Roberts) negotiate on $3000.  She would have stayed for $2000 so the producer surplus would be $1000 and he would have paid $4000 so the consumer surplus would be $1000.   Check out the minutes from 4:40-6:30.

http://www.youtube.com/watch?v=g_rlhF8NmKE

Cali Love

California, how I love you...your beautiful mountains, 70 degree summer nights, 1100+miles of breathtaking coastline, expensive homes, high taxes and hardly any good jobs.  With California’s unemployment rate at 12% and Texas at 8.4%, it’s pretty clear why families are making their way out of the Golden State.  Currently living in the dirty south, where we’ve traded Dr. Dre for Bun B.  We have the bragging rights of better jobs, cheaper housing and great bbq. Miserable during the summers- YES! But, being a millionaire by 40 is feasible.  Obviously you can throw in quality of life and LA is a definite homerun. But when it’s just black and white- strictly numbers, Houston is the place to be.  We don’t have the Lakers, Tupac, or Malibu, and our neighboring state is not Vegas, BUT we do have George Bush’s Presidential library. Need I say more?!

Here are the 15 best cities for young professionals:

http://www.forbes.com/pictures/mhj45effk/introduction#content?partner=yahoo

LEH

Today marks the anniversary of the largest bankruptcy in the US, Lehman Brothers filed for bankruptcy in 08 and as we all know, it set off a domino effect across the global financial world. Main street is dead in the water with zero new job growth and rapidly rising poverty rates.  Surely Dick Fuld, the man vilified for the collapse of Lehman Brothers is haunted by the day, but rest assure the $22 million bonus from just March of ’08 should help keep his mind on other things.

Ouch GenX

Another bubble

If you’re in a slump and haven’t found a job yet- you’re probably thinking of going back to school.  Just like everyone else in GenY.   I don’t want to come off as a hypocrite but I myself am in B school but only for the reasons that my company pays for it and because I love the material. If you are in the process of earning a higher education in hopes that it will make you rich in the future and it will appreciate in value- think again.  A top tier program is by no means a requirement for success. Universities have gotten a lot more expensive and normal supply and demand doesn’t justify this increase but several still believe that whatever the cost, an education is a necessary ticket to future prosperity.   So tons of students are taking on mounds of debt and are comfortable with it because they believe the value will always go up… sounds like the housing bubble right?  In ‘05 awesome Bush announced that student loan debt is debt that you can’t get rid of by declaring personal bankruptcy-this means you’re stuck with it!   Next time you’re considering pursuing a higher education make sure you realize it may not be the golden ticket.

Remembering 9/11

God bless the victims of 9/11. God bless the families who are still dealing with the pain. And God bless this great nation. United we stand.

Speeches

What a day. Here’s the gist of the speeches for today:

Bernanke reiterated he has a few tricks left in his hat but isn’t specifying what kind of tricks or if he’ll use them yet to foster economic growth.  Pretty much saying we’ll do the appropriate thing at the appropriate time but not doing anything at the moment. 

Obama proposed a $447 billion jobs package which included:

Preventing local government layoffs

Infrastructure spending

Unemployment insurance extension

Payroll tax cuts

Tax credits for long term unemployment

...Oh ya and this plan is “paid for”

In spirit of fashion week

A spot at Lincoln Center ranges between $30,000 and $100,000.  More established brands like the Michael Kors’ and Carolina Herrera’s can drop close to $500,000 for a 15 minute runway. OUCH!  Rafael Cennamo, a newbie to fashion week, has dropped close to $50,000 to be there.  What!!! No discounts?? With stars like Beyonce and Taylor Swift sporting his evening gowns, surely he’ll be able to justify the return on the investment.

Lost another one

As of yesterday, there were 12 Fortune 500 companies that were run by women…now it’s down to 11, which is 4 less than last year.  We’ve lost another one. Carol Bartz, ex CEO of Yahoo! Inc. was fired yesterday.  Bartz who took over as CEO in '09 frustrated several investors with falling sales, lost market share and disputes with Asian partners.  As a result, Yahoo shares up up up.

Job speech

Unless you’ve been living under a rock, you probably know that Obama will give a job speech this Thursday.  With the unemployment rate stuck at 9.1%, the job market is dead in the water… and everyone’s pretty nervous we’ll be heading for another recession.  Obama’s proposals could include programs to fund infrastructure building, help struggling homeowners and possible tax breaks to encourage hiring.  Thursday can’t come soon enough…Show us the JOBS O-MAN!

Opportunity Cost

Let’s face it… we can’t do it all! As much as you and I think we can load up our plates with managing our careers and running a household… we aren’t a bionic breed and must stop once in awhile.  With each decision we are making there are opportunity costs.  The thing we end up not choosing or doing is our opportunity cost.  Here are a few examples:

Career or raising your baby: A HUGE decision every women faces.  If you decide to raise your baby, you may lose your position within the company and chances are in this tough economy, landing a job with the same pay and seniority will be difficult.  If you do choose to go back to work, the time lost with spending time with your baby and paying a sitter is your opportunity cost.  Decisions. Decisions.

Shopping. There are a few of us out there that want the best deal in town and will shop around until we get it.  When you evaluate how much to “shop around” you should consider the opportunity costs. 

For example, Bloomingdales and Nordstrom Rack are carrying the same Freepeople blouse you’ve been dying to get.  You can drive to Bloomingdales which is 5 minutes from your house and get the blouse full price, or you can drive to Nordstrom Rack and get the same blouse for 25% less but it is 30 minutes from your house.  What to do?! Depending on how you value your time, some might consider driving 30 minutes to get the discount on the blouse.  The opportunity cost of driving to Nordstrom Rack is what you’re giving up if you decide to buy the blouse at Bloomingdales for full price.