An Idiot’s Guide To A Bad Economy

March 6, 2008 by Douglas A. McIntyre

Today was the day the roof officially fell in on the US economy. News from Europe involving bank trouble at UBS (NYSE: UBS) and an inadequate rescue of Ambac (NYSE: ABK) helped push at least a half a dozen major financial stocks to 52-week lows.

The Fed then came out with news that is as bad as anything it has passed along this year. Americans’ percentage of equity in their homes fell below 50 percent for the first time on record since 1945.

According to the AP "Moody’s estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be "upside down" if prices fall 20 percent from their peak."

On the heels of that news The Mortgage Bankers Association said that "proportion of all mortgages nationwide that fell into foreclosure shot up to a record high of 0.83 percent in the October-to-December quarter." The delinquency rate for all mortgages climbed to 5.82 percent in the fourth quarter. That was up from the 5.59 percent in the third quarter and was the highest since 1985.

Due to the price of oil staying over $100, gas prices are also moving up. The national average price of a gallon of gas rose 0.7 cent overnight to $3.185, according to AAA and the Oil Price Information Service.

For people who don’t know what a recession looks like, this is it.

Douglas A. McIntyre