By: Anirban Basu

1
It Was the Best of Times, Now What?
On Behalf of
CREW
By Anirban Basu Sage Policy Group, Inc. January
10, 2008
2
I. Worsening Economic Imbalances
3
University of Michigan Consumer Sentiment
SurveySeptember 2001 through December 2007
Between Aug. 2005 and Sept. 2005, the consumer
sentiment index dropped 12.2 points, the largest
one-month decline since December 1980.
Source University of Michigan Dismal.com
4
Retail Food Services SalesJanuary 2001 through
November 2007
Source Dismal.com
5
Non-Revolving Consumer Credit OutstandingJanuary
2002 through October 2007
Source Federal Reserve
Revolving credit means that a borrower can draw
down funds, repay the amount drawn and draw again
up to the maximum agreed upon. In a
non- revolving credit, a borrower does not have
the flexibility to redraw on funds paid.
6
15-Year Fixed Mortgage Rates, January 1995
through December 2007
Source Freddie Mac
7
U.S. New Home SalesJanuary 1999 through November
2007
Source Economy.com, Census Bureau
8
U.S. New Residential Construction January 1999
through November 2007
Source Economy.com
9
U.S. Existing Home Sales September 2001 through
November 2007
Source Economy.com
10
Change in Maryland Housing Units Sold
January 2002 through November 2007
Source Maryland Association of Realtors
11
2006 Residential Building Permits per 100
Households (2006 estimates) by select Regions
Source U.S. Census Bureau
BW Corridor includes Anne Arundel, Howard,
Montgomery and Prince Georges counties
12
Current Hot Metro Housing Markets (154) Annual
Existing Single-Family Home Price Appreciation
2007Q3 vs. 2006Q3
Baltimore 1.7 New York
-0.6 Philadelphia 2.9 Boston
0.6 Washington, D.C. 1.3
Source National Association of Realtors
U.S. -2.0 in 2007Q3
13
Active Housing Inventory by Baltimore MSA
Jurisdiction, November 2006 vs. November 2007
Source Maryland Association of Realtors
Maryland November 2006 37,596 November 2007
47,390
14
Active Housing Inventory by Suburban MD
Jurisdiction, November 2006 vs. November 2007
Source Maryland Association of Realtors
Maryland November 2006 37,596 November 2007
47,390
15
Mortgage Bankers Association Delinquency Rates,
Prime Mortgage Loans, 2005Q1 through 2007Q3
Source Economy.com
16
Mortgage Bankers Association Delinquency Rates,
Subprime Mortgage Loans, 2005Q1 through 2007Q3
Source Economy.com
17
NYMEX Crude Oil Future Prices in U.S.
DollarsJanuary 1995 through January 2, 2008
Source Energy Information Administration
18
U.S. Personal Savings Rate vs. NYMEX Crude Oil
Prices, January 2002 through November 2007
Source Bureau of Economic Analysis Energy
Information Administration
19
CPINovember 2007
CPI 4.3 Core CPI 2.3
Source Bureau of Labor Statistics
Core CPI All items less food and energy
20
U.S. Trade Deficit, January 2001 through October
2007
Source Dismal.com
21
Value of the Dollar (Broad Dollar Index) January
1999 through December 2007
Source Federal Reserve Board
Broad Dollar Index a weighted average of the
foreign exchange value of the U.S. dollar
against the currencies of a broad group of major
U.S. trading partners.
22
U.S. Federal Budget Deficit, 1995-2010
Source Congressional Budget Office
2007-2010 data are projections
23
Mr. Greenspan says.

• When you get this far away from a recession,
  invariably forces build up for the next
  recession, and indeed we are beginning to see
  that sign, for example in the U.S., profit
  marginshave begun to stabilize, which is an
  early sign we are in the later stages of a
  cycle
• While, yes, it is possible we can get a
  recession in the latter months of 2007, most
  forecasters are not making that judgment and
  indeed are projecting forward into 2008with some
  slowdown.

Source The Wall Street Journal
Speech made February 26, 2007 at the VeryGC
Global Business Insight Conference via satellite.
24
II. Silver Linings
25
Dow Jones Industrial Average January 2003
through December 2007
Source Dow Jones
26
Gross Domestic Product1990Q1 through 2007Q3
2007Q3 4.91
Source Bureau of Economic Analysis
27
Contributions to GDP Growth by Component, 2007Q3
Source Bureau of Economic Analysis
28
Contributions to Gross Investment Growth by
Component, 2007Q3
Source Bureau of Economic Analysis
29
Corporate Profits (SAAR)2001Q1 through 2007Q3
Source BEA
With inventory valuation and capital consumption
adjustments
30
Net Change in U.S. JobsJanuary 2000 through
December 2007
12/07 18,000
Between March 2001 and July 2002, the nation lost
nearly 2.4 million jobs.
Over the last 12 months (Dec. to Dec.) the U.S.
added 1.328 million jobs
Source Economy.com, Bureau of Labor Statistics
31
National Nonfarm Employmentby Industry Sector
GroupsDecember 2006 v. December 2007Absolute
Change
1,328k All Told
Bush Scorecard Private Sector
4,471,000 Public Sector 1,553,000 Total
6,024,000
Source Economy.com, Bureau of Labor Statistics
32
Maryland Nonfarm Employmentby Industry Sector
GroupsNovember 2006 v. November 2007
Absolute Change
MD Total 36.9K 1.4 US Total 1,536K 1.1
Source Bureau of Labor Statistics
33
Baltimore MSA Nonfarm Employmentby Industry
Sector Groups (NSA) November 2006 v. November
2007Absolute Change
Baltimore MSA Total 16.3K 1.2 MD
Total 36.9K 1.4 US Total 1,536K 1.1
Source Bureau of Labor Statistics
34
Washington, D.C. MSA Nonfarm Employmentby
Industry Sector Groups (NSA)November 2006 v.
November 2007Absolute Change
DC MSA Total 40.4K 1.3 US Total 1,536K
1.1
Source Bureau of Labor Statistics
35
Unemployment Rates, U.S. States (SA) November
2007

Source Bureau of Labor Statistics
U.S. unemployment rate November 4.7
36
Unemployment Rates (NSA), Maryland
CountiesOctober 2007
Source Bureau of Labor Statistics
37
Conclusions

• Chances of recession now approaching 50 for
  2008
• Risks include oil/energy, the dollar, interest
  rates/subprime, and the flu
• The macroeconomic imbalances are huge and
  widening and
• The Federal Reserve Chairman will come under
  enormous criticism.

38
Thank You

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