Woo hoo. The Fed cut interest rates by 1/2 of a percentage point
Maybe the country won't careen into a recession right away, now that the Federal Reserve Board has cut the overnight interest rate by -- stand back -- .005 ! Yep, one half of one percent. If you have a variable credit card or mortgage, you may notice that your interest payment will go down almost perceptibly.But who cares -- the stock market kinda loved it (up 2.4%) and the prime rate dropped from 7.75% from 8.25% (woo hoo, as I said). If you are paying 8.25% interest on a $100,000 loan that is based on the prime rate -- such as a home-equity line -- that's a difference of $41.66 a month in interest charges. Woo hoo.
Meanwhile, the dollar dropped to a new record low against the euro and also fell against most of its other major counterparts Tuesday, after the U.S. Federal Reserve cut its benchmark rate. A euro now costs $1.39. The cost of a foreign car or anything made overseas just became more expensive.
Crude oil is at an all time high of $82 a barrel, which has to tickle OPEC pink, and it means that $4 gallon gas will be everywhere soon in the US. It will easily cost over $100 to fill up your SUV.
Meanwhile the National Association of Home Builders said confidence among builders fell to its lowest level in the 22-year history of its housing index, a sign that the housing market could continue to worsen in coming months. Homebuilders like Hovnanian Enterprises Inc. are cutting house prices by $100,000 to find somebody will buy a house. Foreclosures are up 115% in the last year. There were almost a quarter-million foreclosures in the U.S. last month alone; a 36% jump since July.
What do YOU think? Are law firms facing an economic recession (fewer M&A deals, fewer commercial real estate transactions, less litigation). Or am I just a Nervous Nellie worrying about nothing?
Larry, You are not a nervous Nellie...this is a bandaid..one which could very well drive inflation which is worse. But if you really want to understand why we are headed inevitably into a serious depression, conceivably worse than 1929 is because of demographics, an aging population...think Japan 1987...this cycle can be tracked back for hundreds of years..it is the 81 year lifecycle. And their ain't nothing we can do about it but hunker down intelligently....trim fat, get rid of debt...and save like never before. The only difference between 1929 and today...back then there were no alternatives where to place money but back into our economy. Today, we have many other developing countries to invest in as an alternative..Chindia for one..with the exception of infrastructure in this country which the government cannot avoid doing. If you are a nervous Nellie...it's not such a bad thing.
As for your big firm clients....they should be learning new languages, hiring cultural translators and following the money....out of this country. (That sounds so unpatriotic...but you've got a job to do,right?
Larry, yesterday the US dollar actually fell below the Canadian dollar in international trading. Granted, it was for about half an hour, and by the merest of percentage points, but still, I'm pretty sure that's one of the signs of the Apocalypse. :-)
Larry,
This drop is in the short-term rates. It says nothing about the economy in the long term. While I expect that the drop in the rates will termporarily ease the fears of inflation, many law firms agree that costs are inched up on the last few years. The increase in costs will increase legal fees without a doubt.
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