Friday, March 24, 2006

Left holding the bag:

With the Governor race heating up, Spitzer with the Dem nod pretty much locked up and several Republicans looking to take him on, it would seem being Governor of New York would be a great job to have next year. But is it?

Earlier in the month I placed a post, titled “Getting setup for failure”, where I offered the idea that our new Governor might be taking over at the top making for an unfriendly honeymoon. Today, based on another disappointing home sales number, I think I’m ready to predict that being Gov. of New York this next time around is going to be one sorry job.

Markets move in cycles with times of acceleration and times of contraction, though politician can give the cycle little kicks in either direction to get it going, like lower interest rates for the fed and lower taxes by President Bush, when things reach their peak, they reach their peak.

Currently it’s definitely safe to say things are reaching their peak. Interest rates have gone back up making it more expensive to buy a home and with that harder to sell one. As a result the average price for homes have started to come down over the last few months and builders are starting to report cancellations. GDP has been growing at 4%, which is a crazy number for an economy of our size, which makes the likelihood of falling back to 2-3% probable. Lastly unemployment is under 5%, another crazy number and will most likely not move much from here and maybe even slip back. With President Bush tax cuts in jeopardy of not being extended and millions of Americans estimated to fall into AMT next year, the risk for a slowdown is even greater.

If a slowdown does play out it probably will most likely not show up in the number and felt by the people until the middle of next year when our new Gov has had enough time to take the blame similar to what happened to President Bush when he took office in 2001.

In 2001 President Bush was left holding the bag of the dot com crash and still till today is paying for it despite the economy getting itself right again. In 2007 New York’s new Governor should get to know how he feels.

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