Mourning the death of the inheritance

Just read an interesting article at Your Money from the New York Times.  Here’s the full article link.

Essentially, it suggests that older americans are spending more of their savings and inheritances are dwindling.  Here’s a few reasons why that may be happening.

- With the economy in an all but declared recession, seniors are choosing (or perhaps more out of necessity) to help their children with their expenses even when the children are adults.  Seniors can disguise it as helping pay for their grandkids tuition, sports activities, and maybe clothes, but the fact remains that the money could have stayed in the bank. 

- Seniors are spending more because they are living longer.  Rising health care costs are eating away at the nestegg.  Medicare and social security benefits are being reduced, forcing more money to come out of pocket.

- Seniors are healthier longer and having more fun.  Spending money on travel, dining out, and other fun activities are being enjoyed for a longer period of time than ever before. 

It makes you think, as a parent.  What will I leave behind for my children?  It might not be the inheritance that fill bank accounts.  For my wife and I, it’s more important for our kids to learn how to make, save, and give back money.  Sure, the inheritance check is important, but that can be spent and it is gone.  But the knowledge is sharpened with each use.

And the rate cuts end, finally.

Tuesday June 3: “WASHINGTON — Federal Reserve Chairman Ben Bernanke on Tuesday suggested interest rate policy is on hold, said “relatively weak” U.S. growth may be better in the second half of the year and termed the central bank “attentive” to economic risks posed by the weak dollar.

At an economic conference in Spain, Bernanke called current Fed interest rate policy “well positioned to promote moderate growth and price stability over time.”

What does this mean?

His words strongly suggest that the central bank is getting more worried about inflation.  They appear more concerned about the weakening of the dollar and rising costs.  As of now, I think the Fed thinks the economy has survived the credit mess, the spike in oil prices, and although weak and feeling wobbly, has not broken.

As a consumer though, I don’t know how much more I can take.  $4.00 gas is not a happy thought.  It has changed my driving habits.  My grocery bill is my next challenge.  With a family of 4 kids, I can’t believe how much per week I a paying just for the essentials.  Forget about that Sunday cookout of shrimp and some steaks.  It’s burgers and hot dogs for us.

Slow-down hitting commercial real estate?

The scope of our economic troubles seems wider and deeper than many of us want to admit.  If you are a real estate owner looking to refinance your current property, sooner rather than later may be best option.  I recommend you do your homework now and explore all of your options.

For the full article, go to the wall street journal article.

Here’s a summary:

Cracks are starting to show in commercial construction.

For the second month in a row, the Commerce Department reported a decline in spending on nonresidential construction — which includes everything from hospitals to office parks to shopping malls. The report yesterday showed construction spending fell 1.7% in January from December, the steepest drop in 14 years. While residential construction accounted for a big part of the decline, spending on nonresidential construction slid 0.8%.

Meanwhile, there may be an oversupply of shopping malls and office buildings after a period of intensive construction. It adds up to bad news for employment, the economy and investors.

While the boom in commercial construction wasn’t as dramatic as in home building, the impact of a slowdown on the economy could be significant. Nonresidential construction accounted for 3.6% of gross domestic product in the fourth quarter of 2007, up from 2.5% five years ago and the most since the second quarter of 1988, according to Moody’s Economy.com.

As home construction got caught in a downward spiral last year, nonresidential construction continued to expand at a healthy clip. Spending on nonresidential structures rose 16% in 2007, the biggest four-quarter increase since 1984, according to Morgan Stanley.

Signs of trouble cropped up at the end of the year. As credit markets tightened, office space sold in the fourth quarter dropped 42% from a year earlier, and sales of large retail properties declined 31%, says Real Capital Analytics, a New York real-estate research group.

If spending continues to slow, construction workers, who are reeling from the housing slowdown, face more layoffs. Construction jobs made up 5.4% of nonfarm payrolls in January. While that’s down from a peak of 5.7% in April 2006, it’s still above the long-term average of 4.9%, say economists at Payden & Rygel in Los Angeles, leaving room for more job losses.

Nonresidential construction payrolls, down 2.7% in January from their recent peak in March, posted year-over-year declines in December and January, the first such drops since August 2004. A construction slowdown will be especially tough on specialty-trade contractors, such as plumbers, painters and electricians, who account for about two-thirds of overall construction payrolls. This could spell trouble for consumer spending, which accounts for two-thirds of the U.S. economy.

Another problem: Property values of commercial real estate are declining. A Moody’s index of commercial real-estate values fell 1.5% in December from the previous month. It was the fourth steepest monthly decline in the seven-year history of the index, which nearly doubled from the end of 2000 through October.

Moody’s expects a peak-to-trough decline of 15% to 20% in commercial real-estate values, returning prices to where they stood about four years ago. Goldman Sachs Group Inc. analysts have projected a drop of as much as 26%.

The outlook is souring. Retailers have reported a slowdown in sales. Wal-Mart Stores Inc. and J.C. Penney Co., among others, have pared expansion plans. Electronics seller Best Buy Co. has reined in its quarterly earnings forecast. Talbots Inc., Movie Gallery Inc.’s Hollywood Video and numerous home-furnishings retailers have announced store closings. Others, including Bombay Co., have liquidated under bankruptcy protection.

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End the recession watch…It may already be here

Weakness in the service sector has caused more experts to declare that the economy has entered a downturn. Retail, real estate, finance, and construction industries were hit hardest.

The full article is at: http://money.cnn.com/2008/02/05/news/economy/recession/

Although more fed rate cuts appear to be expected, few experts appear to be seeing a quick turn-around. The market appears to be looking for the fed to make a significant cut in rates, but opinions vary about whether a big rate cut would be wise or beneficial in the long term.

Currently, the future market is anticipating a 100% chance of a quarter-point cut in March, and a 28% chance of a half-point cut during the month.

Although it appears banks are being a little tighter on loans, there are still great programs out there for business owners. Please visit our site, www.bedrockfinancing.com for a list of programs and more helpful information.

Oil Prices Another Signal Of Trouble

The AFP is reporting that world oil prices fell amid concerns of a drop in energy demand.  This is largely in part because of the weakness that the US economy is showing and the world is believing.

Further interest rate cuts may not bolster the economy, and they will only hurt the value of the dollar.  Just another sign that a recession is on the way…spin it however you want.