Dr. Ted Jones Economic Update Beaumont January 2012

8/3/2019 Dr. Ted Jones Economic Update Beaumont January 2012

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Dj Vu All Over AgainAn Economic and Real Estate Forecast for 2012

Ted C. Jones, PhD, Chief Economist, Stewart Titlehttp://blog.stewart.com/


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Dj Vu


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The fact that we are here today to debate raising

Americas debt limit is a sign of leadership failure. Itis a sign that the US Government can not pay its

own bills. It is a sign that we now depend onongoing financial assistance from foreign countriesto finance our Governments reckless fiscal policies.Increasing Americas debt weakens us domestically

and internationally. Leadership means that the buck

stops here.' Instead, Washington is shifting theburden of bad choices today onto the backs of our

children and grandchildren. America has a debtproblem and a failure of leadership. Americansdeserve better.

SenatorBarack H. Obama, March 2006


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Mega Themes Residential Renting vs. Owning

Liquidity Trap

Massive Uncertainty fromWashington, DC

Time to Over-Weight in Real Estate


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Axiom 1There is No Such

Thing as a National

Real Estate Marketor a

National Economy


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Jobs AreEverything

Period.


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http://taxfoundation.org/files/bp60.pdf

Texas Best Business Tax Environments


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U.S. Job Numbers

0

75 77 79 81 83 85 87 89 91 93 95 97 99 '01 '03 '05 '07 '09 '11

70

80

90

100

110

120

130

140

150Recession

Millions of Jobs

Seasonally-Adjusted

6.44 Million

Jobs DownFrom Record


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128

130

132

134

136

138

'07 '08 '09 '10 '11

U.S. Job Numbers

Jobs (Millions) Seasonally Adjusted

6.44 Million Fewer vs. Jan 1 2008120,000 Gained in Nov 2011


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-6.0%

-4.5%

-3.0%

-1.5%0.0%

1.5%

3.0%

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11

US

Percent Change from Same Month Prior Year

US Jobs

Not Seasonally Adjusted


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155

157

159

161

163

165

167

169

'07 '08 '09 '10 '11

Beaumont-Port Arthur MSA Jobs

Jobs (Thousands) Seasonally Adjusted

7,100 Jobs Down Since Aug 20082,000 Jobs Added Last 12 Months


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-7.5%-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11

US Beaumont-Port Arthur

67

Percent Change from Same Month Prior Year

Beaumont-Port Arthur Jobs

Not Seasonally Adjusted


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Global Oil Consumption Per DayMillions of Barrels

5560

65

70

75

80

85

90

80 82 84 86 88 90 92 94 96 98 '00

'02

'04

'06

'08

'10

'12f

Capacity to spool up annual production 1.5million barrels per day.


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$0

$2

$4

$6

$8

$10

$12

'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10

Well Head Natural Gas Price

Price Per 1,000 Cubic Feet3 Month Moving Average

$2 to $4 2X


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$0

$20

$40

$60

$80$100

$120

$140

'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10

Spot Oil Price West Texas IntermediatePrice Per Barrel3 Month Moving Average

Wall Street Journal-St Louis Fed

$20 to $100 5X


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U.S. Oil & Gas Rotary Rig Counts

0

300

600

9001,200

1,500

1,800

2,100

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Number of Rigs 5 Week Moving Average

Oil

From 20 Percent Oil to 53 Percent Today

Gas


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US Energy Consumption

0

20

40

60

80

100

'50

'54

'58

'62

'66

'70

'74

'78

'82

'86

'90

'94

'98

'02

'06

'10

ConsumptionQuadrillion BTUs

Oil

Natural GasHydro

Nuclear

Other

Coal


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President Obama 80 Percent Clean Energy by 2035

Nuclear Power Plants 104

Annual Quadrillion BTUs 8.44

Quadrillion BTUs Per Plant 0.0812

Annual

Quadrillion

Current Energy Source BTUs 10% 20% 30% 40% 50%

Coal 20.71 26 51 77 102 128

Oil 35.97 44 89 133 177 222Gas 24.67 30 61 91 122 152

Coal + Oil + Gas 81.35 100 200 301 401 501

Required Number of New Nuclear Plants

To Replace Respective Percent of Each

U.S. Nuclear Power Production


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0%

2%

4%

6%

8%

10%

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

GDP Implicit Price DeflatorPercent Change from Same Quarter in Prior Year

Current 2.40 Percent2.26 Percent 10-Year Average

US Dept of Commerce-Bureau of Economic Analysis

Inflation


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3.0

4.0

5.0

6.0

7.0

8.0

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11

US Existing Home SalesSold (Millions) Average Per Month For Prior 12 Months

National Association of REALTORS

$8,000Tax

CreditNormal

Bubble

Season

allyAdjustedAn

nualizedRate


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$140

$160

$180

$200

$220

$240

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11

U.S. Existing Home SalesMedian Price -- $ Thousands -- Average for Prior 12 Months


Current Median Down 25.8 Percent from Peak in July 2006


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U.S. Residential Building Permits

0.00.3

0.6

0.9

1.21.5

1.8

2.1

80 82 84 86 88 90 92 94 96 98 '00

'02

'04

'06

'08

'10

Single Family Multi

Number of Dwelling Units -- Millions


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$0

$300

$600

$900

$1,200

$1,500

'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10

GoldPrice Per OunceNominal (Not Inflation Adjusted)

Jan 1980 to June 30 2011

Gold Up 136.9 Percent


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$0

$25$50

$75

$100

$125

$150

$175

$200

$225

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

Existing Home Prices

$ Thousands --NominalAverage of MSA Medians


Jan 1980 to June 30 2011Housing Up 225 Percent

Even Though Down 25.7 PercentFrom Peak (12-Month Average)


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Beaumont Home Sales

0

2550

75

100

125150

175

200

225

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

Average Number Per Month For Prior 12 Months

Beaumont Board of REALTORS


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Beaumont Home Prices

$0

$25$50

$75

$100

$125

$150

$175

$200

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

Average Price



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Beaumont Home Prices

$0

$25

$50

$75

$100

$125

$150

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

Median Price12 Month Moving Average



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Beaumont-Port Arthur Residential Building Permits

0

500

1,000

1,500

2,000

2,500

80 82 84 86 88 90 92 94 96 98 '00

'02

'04

'06

'08

'10

Single Family Multi

Number of Dwelling Units

2,000 New Jobs vs. 648 New Dwelling Units in Last 12 Months


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0

4

8

12

16

20

'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

Light Weight Vehicle SalesMillionsSeasonally Adjusted Annual Rate

Bureau of Economic Analysis

3 Month Moving Average


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$0

$300

$600

$900

$1,200$1,500

$1,800

$2,100

'80 '83 '86 '89 '92 '95 '98 '01 '04 '07 '10

Money Supply M1$ BillionsSeasonally Adjusted

Federal Reserve

Currency, Checking Accounts, Demand Deposits


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Stock Values vs. GDP

0

1

2

3

4

5

6

'75 '77 '79 '81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11

Real GDP

Real Dollar Stock Values

Index 1975 = 1.0

S&P, BEA

Rational Behavior Returns


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U.S. Personal Savings Rate

0

12

3

4

5

6

7

8

9

'07 '08 '09 '10 '11

Percent of Disposable Income

St. Louis Fed

PlungingSavings

Rate


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Household Debt Service as a Percentof Household Disposable Income

9

10

11

12

13

14

'81 '83 '85 '87 '89 '91 '93 '95 '97 '99 '01 '03 '05 '07 '09 '11

Percent

FED Board of Governors, BEA

$15,799 Average Credit Card Debt Per Household


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0

1020

30

40

5060

70

80

90

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

Business Bankruptcy Filings

Number of Filings -- Thousands


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0

300600

900

1,200

1,500

1,800

2,100

2,400

'80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10

Consumer Bankruptcy Filings

Number of Filings -- Thousands


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Bank Failures

0

100

200

300

400

'70 '73 '76 '79 '82 '85 '88 '91 '94 '97 '00 '03 '06 '09

Number of Institutions Per Year

FDIC

2011 estimated


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$140

$150

$160

$170

$180

$190

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11

U.S. Real Retail & Food Service Sales

$Billions Seasonally Adjusted


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-$10

$10

$30

$50

$70

$90

$110

$130

$150

72 75 78 81 84 87 90 93 96 99 '02 '05 '08 '11 0

3

6

9

12

15

18

21

Oil Prices

10-YearTreasuryRates %

Oil Prices & 10-Year Treasury RatesSeptember 2011 Dollars


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$20

$40

$60

$80

$100

$120

$140

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11

$0.85

$1.05

$1.25

$1.45

$1.65

Dollars

PerEuro

Oil Prices & Exchange Rates $US Per EuroOil inSeptember 2011 Dollars

Oil Price


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Operation Twist

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr 30 yr

Percent Treasury Yield Rates

Federal ResaveOwns $1+ Trillion

of Treasuries

Sell These

Buy These

Early 1960s Operation Twist Saw

Long-Term Rates Decline 0.15 Percent

Yield Curve Data as of Oct 28 2011

Since commencing program, 30-yr rates up 47 basis points


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Federal On-Budget Deficit Forecast

-$1,600.0

-$1,400.0

-$1,200.0

-$1,000.0

-$800.0

-$600.0-$400.0

-$200.0

$0.0

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11p

'12

'13

'14

'15

'16

'17

'18

'19

'20

$ BillionsBaseline ($10.7 Trillion Total Debt 12-31-08)

$7.6 Trillion 2011-2020

$10.7 TrillionCumulative Debt

Dec 31 2008

$14.8 TrillionOct 31 2011


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Interest Expense on Federal Debt

$0

$200

$400

$600

$800

$1,000

$1,200

88 92 96 '00

'04

'08

'12

'16

'20

$ Billions 2011$438 Billion

2020$1.1 Trillion

CBO Forecast

Forecast Assumes No Added Federal Spending Programs

Not Already in the Budget Healthcare Funding is Adequate (taxes)


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U.S. Income Taxes 2008

Top 1 Percent 38 PercentTop 5 Percent 59 Percent

Top 10 Percent 70 Percent45 Percent of Taxpayers Paid $051 Percent of Taxpayers Paid $0 2009

Tax Payers Percent of All Taxes Paid

Home Prices and Stock Market Performance


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Home Prices and Stock Market Performance12-Month Moving Average

70

90

110

130

150

170

190

'02 '03 '04 '05 '06 '07 '08 '09 '10 '11

SP500 DJIA Home Prices Commercial Values

January 2002 = 100 Quarterly Commercial Data Modeled to Monthly Returns

NCREIF, S&P, Dow Jones, National Assn of Realtors

CommercialReal Estate

Housing

DJIA

SP500

Real Estate


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2011 $220 Billion (Teds Forecast)2012 $250 Billion

Real Estate

Percent$ Billion Change

2007 557.8$

2008 181.6$ -67.4%

2009 54.4$ -70.0%

2010 120.0$ 120.6%

Commercial Sales


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Q3 QualityLocation

PropertyTenants

Ted C. Jones


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Mortgage Bankers AssociationOffice Building

Washington, DC

Purchased 2007 $79.0 MillionSold Feb 2010 $41.3 Million

Loss $37.7 Million47.7 Percent


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Mortgage Bankers AssociationOffice Building

Washington, DC

Purchased 2010 $41.3 MillionSold Feb 2011 $101.0 Million

Gain $59.7 Million145 Percent


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2012 Economic Concerns

Wall StreetWashington DCLiquidity JobsStimulus Did Not Work

GDP = Consumption + Investment +

Government Spending + Exports - Imports Cold War IITerrorists

Rural Land Bubble

Liquidity Trap

Energy: US Imports 50+ Percent of Oil

Real Estate-Autos-Credit Cards-Banks


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Teds Blog

http://blog.stewart.com/


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Ted C. Jones, PhD Chief Economist

Documents

Dr. Ted Jones Economic Update Beaumont January 2012