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Are we close to hitting bottom yet?

Let's talk about bear bottoms.

This being a business column, I hope we're on the same wavelength. I'm talking about market bottoms. Like the bottom of this bear stock market. The bottom for Tampa Bay and Florida housing prices. The bottom for unemployment here, which seems poised officially to roar into the double digits. And the bottom for public confidence among Floridians.

Bottom, as in the lowest price reached for a given commodity over a given period of time.

We need all four of these — stocks, homes, jobs and confidence — to hit or approach bottoms before we can regain our faith that the economy is, if not yet rebounding, at least no longer falling off the capitalist cliff.

It gets tough to call our financial fate when some of these four indicators hit bottom while others still have a way to go. We're getting close on stocks, hopefully. Closer still on a bottom on Tampa Bay area housing prices. But stabilizing job losses and confidence? We're not there yet.

There's renewed hope in the stock markets that we may have hit bottom this past week when both the Dow and S&P 500 hit an annual low on Monday at 6,440 and 667, respectively, only to end the week — its best since November — at 7,223.98 and 756.55. There's a slight whiff of optimism out there, from the kinder words on the economy from President Obama to last week's claims from bailout kingpins GM, Citigroup and an even bullish Bank of America that maybe they don't need more funds at the moment, if ever.

So did we hit bottom last week or did we just bounce before another slide?

We're down roughly 50 percent from the market highs.

There's renewed hope, too, that Tampa Bay area housing prices may at long last be approaching a bottom. Metro-wide home prices took one of the largest one-month tumbles in history, falling 16 percent from December to January, driven by a higher volume of foreclosure sales.

A typical home here sold for $122,400 in January. That's down, like the stock markets, roughly 50 percent from the median home price peak here of $240,000 in mid 2006.

We have not seen a $122,400 price range here since mid 2003. Are we finally close to a bottom? Or will the hefty backlog of foreclosures and home sellers now conditioned by the down market push prices still lower?

Less clear is whether we're near a bottom, so to speak, for unemployment here. In January, Tampa Bay area unemployment rose to 9.7 percent. That's a surprising 1.1 percentage point higher than Florida's statewide 8.6 percent jobless rate in January. And it's a remarkable 4.4 percentage point increase — 88 percent higher — than Tampa Bay's unemployment rate of 5.3 percent only one year earlier, in January of 2008.

We'll find out February's area jobless rate on March 27. We may be approaching 11 percent — scary territory — given the recent pace of month-to-month increases.

Finally, Floridians may be close to bottoming out on consumer confidence. The state index that monitors confidence among Floridians fell 3 points to 63 in February. That's 4 points above the all-time low of 59. Chris McCarty, director of the University of Florida survey research center at the Bureau of Economic and Business Research, said the decline occurred as the "novelty of a new administration met with the sustained reality of a faltering economy."

All this pain has come at an enormous cost.

Last week, the Federal Reserve said the net worth of American households fell during the fourth quarter of 2008 by the largest amount in more than a half-century of record keeping. The drops in the stock market and home prices were the main causes for the record 9 percent decline in household net worth in 2008's October-December period compared with the third quarter.

The Fed's analysis does not include the deeper damage sustained so far in 2009.

Since my father died last year, I've tried, with my brother and sister, to help my mother deal with some money issues. To say the fall of 2008 stock market crash compounded problems is a no-brainer.

Since my mom is 84, we recently learned about the investing term capitulation. It occurs when an investor sells a security at a loss for the specific purpose of moving funds from the sale into a less risky investment. That's what we did when we felt forced to preserve some remaining value for my mother in the ugly declines in the markets since the fall.

To investors, capitulation refers to "giving up" on a particular security. But traders look for signs of capitulation near market bottoms.

Glad we could oblige.

So once we really do hit bottom in the markets, what then? Even a vigorous recovery will take serious time with the Dow already off 50 percent.

Just remember: We're getting a lot closer to all four bottoms. That's good news. Bottom is not just a recent low in a stock market index. It signals a reversal of the primary trend.

Robert Trigaux can be reached at trigaux@sptimes.com.

Are we close to hitting bottom yet? 03/14/09 [Last modified: Sunday, March 15, 2009 4:30pm]
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