We are now halfway into 2002, and it’s a good time to take a look at our economy and determine direction.
Stock Market, Thumbs Down
Anyone looking at your 401k or retirement statements can attest to the fact that we are in a second year of a bear market. Terrorist threats, oil prices and lack of solid economic growth is shattering investor confidence, with the market appearing to be going sideways. The implication to agriculture is that we are seeing people redirecting monies into hard assets, such as gold and land. This will continue to keep our farmland values strong, which is 70 percent of U.S. farm balance sheets.
The price of oil is hovering around $25 per barrel. If we go to war with Iraq, there is over a 70% probability that oil prices could shoot to $35 per barrel, hindering economic growth.
Consumer Buying Binge
Housing prices have remained strong because of low interest rates. This has allowed home equity loans to pay off credit card debt and create cash spending money that keeps our economy going.
Zero Percent Financing
The zero percent financing on trucks and autos is very popular. Expect over supply and great deals on all autos and trucks through late summer and early fall. Classic economics: supply exceeds demand.
The Bottom Line
The Government will soon announce that the U.S. had one of the shortest and most shallow recessions, ending around December 2001-January 2002, since World War II.
Any terrorist event, war or a spike in oil prices will put the U.S. into a classic "W" recession.
The Power of Focus and The Millionaire Next Door are good reads.
One of the benefits of travel is meeting celebrities. I had the chance to meet Peter Graves, "Mr. Phelps" of Mission Impossible. His brother is James Arness, better known as "Marshall Matt Dillon" of Gunsmoke. By the way, the airport didn’t self-destruct!
My e-mail address is: firstname.lastname@example.org
Editors' note: Dave Kohl, Soybean Digest Trends Editor, is an ag economist at Virginia Tech. He recently completed a sabbatical working with the Royal Bank of Canada. He is now back at Virginia Tech with his academic appointment, which is teaching, extension, and applied research.
To see Dave Kohl's previous road warrior adventures type Dave Kohl in the Search blank at the top of the page.
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