RMCA Denver Feb 2009 Cut3

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Presentation on the US & Denver Economies to the Rocky Mtn Compensation Assoc Feb 2009

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RMCA Denver Feb 2009 Cut3

  1. 1. Hopeful Prospects Navigating the US and Regional Economies in 2009 P te C. Burle CRE e r y, Vic P s e Re e rc Sim s n Ho ingLLLP e re id nt s a h, po us Denver – February 12, 2009
  2. 2. An Important Disclaimer The opinions expressed are those of the Speaker And do not necessarily reflect the views of Simpson Housing LLLP, its Related Entities, Properties, Partners, Senior Management, Maintenance Personnel, Parking Attendants, or Human Resources Staff, None of whom are likely to Agree with me anyway…
  3. 3. Another Important Disclaimer Data and Analyses are Compiled from Sources Deemed Reliable But Not Guaranteed No Offer or Solicitation Implied … Subject to Change Without Notice…
  4. 4. In Nominal Terms, A $14 Trillion Economy Total Gross Domestic Product (Nominal $Bil) 16000 14000 $14.4 Trillion 2008 12000 10000 8000 6000 $237 Bil 4000 1947 2000 0 1947Q1 1959Q3 1972Q1 1984Q3 1997Q1 2009Q3 Source: Moody's Economy.com; Bureau of Economic Analysis
  5. 5. Consumers & Government Make up the Lion’ s Share Nominal Contribution to GDP (Pct, Q1:2009) 70 60 50 40 30 20 10 0 -10 on en t ies rts nt pti tm tor po me um nv es nv en t Ex v ern ns dI I Ne Go Co xe ate al F i riv rson nP Pe ei ang Ch Source: BEA, Moody's Economy.com
  6. 6. Consumers & Government Make up the Lion’ s Share Nominal Contribution to GDP (Pct, Q1:2009) 72 70 Personal Consumption 68 66 64 62 60 1947Q1 1959Q3 1972Q1 1984Q3 1997Q1 Source: BEA, Moody's Economy.com
  7. 7. In Inflation Adjusted Terms, an $11 Trillion Economy Total Gross Domestic Product (Bil 2000 $, SAAR) 12000 11500 Tech Slump 11000 and 9/11 10500 10000 The Current 9500 Unpleasantness 9000 1990-91 8500 Recession 8000 7500 7000 1990Q1 1992Q3 1995Q1 1997Q3 2000Q1 2002Q3 2005Q1 2007Q3 2010Q1 Source: Moody's Economy.com; Bureau of Economic Analysis
  8. 8. Trends in the US Economy Over Time 8 Gross Domestic Product (Annualized %) 6 4 60-Year Average 2 0 1990-91 -2 Recession Tech Slump Current Post 9/11 Recession -4 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Q1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 90 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 19 Source: Moody's Economy.com; BEA
  9. 9. A 140 Million Job Economy The Current Recession 140 Total Nonfarm Employment (Mil., SA) Tech Slump 135 Jobless Recovery 90s 130 Expansion 125 1990-91 120 Recession 115 110 105 100 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 Q1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 90 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 19 Source: Moody's Economy.com; BLS
  10. 10. Job Growth & Decline over the Past 20 Years 1.5 Change in Employment (Mil, Qtr) The Current 1 Recession 0.5 0 90s Expansion -0.5 1990-91 Recession -1 Tech Slump Jobless Recovery -1.5 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 91Q 92Q 93Q 94Q 95Q 96Q 97Q 98Q 99Q 00Q 01Q 02Q 03Q 04Q 05Q 06Q 07Q 08Q 09Q 10Q 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 Source: Moody's Economy.com; BLS
  11. 11. Unemployment Trends Unemployment Rate (%) 10 1990-91 9 Recession The Current Recession 8 Tech Slump 7 Jobless Recovery 90s Expansion 6 5 4 3 3 1 Q3 1 3 Q1 Q3 Q1 Q1 2Q 5Q 97 0Q 2Q 05 07 10 90 99 99 19 00 00 20 20 20 19 1 1 2 2 Source: Moody's Economy.com; BLS, CPS
  12. 12. Unemployment Trends Unemployment Rate (%) 10 9% -plus 9 7.6% 8 7 6 5 4 3 3 1 Q3 1 3 Q1 Q3 Q1 Q1 2Q 5Q 97 0Q 2Q 05 07 10 90 99 99 19 00 00 20 20 20 19 1 1 2 2 Source: Moody's Economy.com; BLS, CPS
  13. 13. Unemployment Trends Unemployment Rate (%) 11 10.7% 10 9% -plus 8.8% 9 7.6% 7.6% 8 7 6 5 4 3 2 8Q 1 0 Q3 3 Q1 5 Q3 8 Q1 19 4 1 96 1 97 1 98 1 99 Source: Moody's Economy.com; BLS, CPS
  14. 14. Some Important Unemployment Definitions •“Officially” Unemployed – In the Labor Force and working or actively looking for work •Discouraged Workers – Have a Job-market Related reason for not currently looking •Marginally Attached – Have Worked Recently, Aren’t Looking, But are Available •Underemployed - P.T. for Economic Reasons; Have Settled for Part Time Work, Prefer Full-Time
  15. 15. Unemployment Trends Unemployment Rate (%) 15 14 Official Unemployment Rate++ Discouraged Workers + Officially Unemployed Marginally Attached + Underemployed Discouraged Workers + 13 P.T. for Economic Reasons 12 11 10 9 Official Unemployment Rate + Discouraged Workers Officially Unemployed + 8 Discouraged Workers 7 6 Officially Unemployed 5 Official Unemployment Rate 4 'JUL 08 'AUG 08 'SEP 08 'OCT 08 'NOV '08 'DEC 08 'JAN 09 Source: Bureau of Labor Statistics
  16. 16. Critical Dynamics in the Economy The US Housing Market – Boom to Bust The Subprime Crisis & Mortgage Market Meltdown The Business Environment Workers & Households A Consumer Crisis
  17. 17. Critical Dynamics in the Economy The US Housing Market BOOM
  18. 18. Things Were Simply Wonderful: Sales Kept Rising 9 Units Sold (Mil, SAAR) 8.5 8 Existing New 7.5 7 6.5 6 5.5 5 4.5 4 1 1 1 1 1 1 9 Q1 00Q 01Q 02Q 03Q 04Q 0 5Q 199 20 20 20 20 20 20 Source: Moody's Economy.com; NAR; Census
  19. 19. Things Were Simply Wonderful: Builders Kept Building Total Housing Starts (Mil Units, SAAR) 2.2 2.1 2 1.9 1.8 1.7 1.6 1.5 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 Source: Moody's Economy.com; Census
  20. 20. Things Were Simply Wonderful: Lenders Kept Lending Real Estate Loans ($Bil., SA) 2800 2600 2400 2200 2000 1800 1600 1400 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 Source: Moody's Economy.com; Federal Reserve
  21. 21. Things Were Simply Wonderful: Ownership Kept Rising Homeownership Rate (%,SA) 69.5 69 68.5 68 67.5 67 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 Source: Moody's Economy.com; Census
  22. 22. Things Were Simply Wonderful: Rates Kept Falling Mortgage Interest Rates (%,, NSA) 18 16 14 30-Year Fixed 12 10 35-year average = 9.1% 8 6 4 1971Q2 1976Q2 1981Q2 1986Q2 1991Q2 1996Q2 2001Q2 2006Q2 Source: Moody's Economy.com; Freddie Mac
  23. 23. Things Were Simply Wonderful: Rates Kept Falling Mortgage Interest Rates (%,SA) 8.5 8 7.5 7 6.5 6 5.5 30-Year Fixed 5 4.5 4 Adjustable 3.5 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 Source: Moody's Economy.com; Freddie Mac
  24. 24. Things Were Simply Wonderful: Buying Was Cheap Percent Adjustable Rate Mortgages (%,NSA) 40 35 30 25 20 15 10 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 Source: Moody's Economy.com; FHFB
  25. 25. Things Were Simply Wonderful: Prices Kept Rising Median Existing Home Price ($Ths, SAAR) 240 220 200 135% 180 1990-2005 160 140 120 100 80 Q 1 Q3 Q1 7 Q3 0 Q1 Q3 Q1 90 99 2 95 99 00 00 2 00 5 19 1 19 1 2 2 2 Source: NAR; Moody's Economy.com
  26. 26. Things Were Simply Wonderful: Prices Kept Rising Median Existing Home Price ($Ths, SAAR) 240 220 60% 200 1999-2005 180 160 140 120 100 80 Q 1 Q3 Q1 7 Q3 0 Q1 Q3 Q1 90 99 2 95 99 00 00 2 00 5 19 1 19 1 2 2 2 Source: NAR; Moody's Economy.com
  27. 27. Critical Dynamics in the Economy The US Housing Market BUST
  28. 28. It Couldn’ t Last: Prices Outstrip Incomes Annualized Growth Income vs Home Prices 25 20 15 Median Home Price 10 5 0 Median Household Income -5 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 Source: Moody's Economy.com;NAR;Census
  29. 29. It Couldn’ t Last: Affordability Began to Slide 140 Housing Affordability Index 135 130 125 120 115 110 105 100 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 Source: Moody's Economy.com; NAR
  30. 30. It Couldn’t Last: Demand Began to Ebb 9 New & Existing Home Sales (Mil Units, SAAR) 8.5 8 Mil Units .5 8 Q3 0 5 :2 0 7.5 5 Mil Units .3 7 Q1:2 0 09 6.5 6 5.5 5 4.5 Existing New 4 1 1 1 1 04 Q 5Q 6Q 7Q Q1 9Q 1 0Q 1 20 00 20 0 20 0 08 00 01 2 20 2 2 Source: Moody's Economy.com; NAR; Census
  31. 31. It Couldn’t Last: Sales Slowed Across the Country 2.8 Existing Home Sales (Mil. Units, SAAR) 2.6 2.4 2.2 2 1.8 South 1.6 1.4 West 1.2 1 Midwest 0.8 Northeast 0.6 2005 2007 Nov Jan Mar May Jul Sept Nov p Source: Nat'l Assoc Realtors
  32. 32. And Mortgage Activity is Has Slowed Mortgage Originations ($Trillion, SAAR) 4.5 4 Re-Fi 3.5 3 2.5 2 1.5 1 Purchase 0.5 0 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com; FRB
  33. 33. The US Housing Market: The Drop in Prices Median Existing Home Price ($Ths, SAAR) 230 220 210 -22.5% 2005-2009 200 190 180 170 -7.8% 2009-2010 160 Q 1 Q2 Q3 Q4 Q1 04 05 06 00 7 09 20 20 2 0 2 20 Source: NAR; Moody's Economy.com
  34. 34. The US Housing Market: Prices Around the USA Boston Chicago % change year ago % change from peak Denver Las Vegas Los Angeles Miami New York San Diego San Francisco Washington -40 -35 -30 -25 -20 -15 -10 -5 0 Change in Home Prices (Pct, Year Ago, Peak) Source: Moody's Economy.com; S&P/Case Shiller
  35. 35. The US Housing Market: Prices Around the USA Boston Chicago % change year ago % change from peak Denver Las Vegas Los Angeles Miami New York San Diego San Francisco Washington -40 -35 -30 -25 -20 -15 -10 -5 0 Change in Home Prices (Pct, Year Ago, Peak) Source: Moody's Economy.com; S&P/Case Shiller
  36. 36. Inventories of Unsold Homes Have Risen Sharply 12 Months of Supply Existing Home Inventory 10 8 6 4 2 0 l t 20 05 2006 2007 v c n b r r y No De Ja Fe Ma Ap Ma Ju n Ju Aug Sep ct r ov p O N Soure: Nat'l Assoc Realtors
  37. 37. Builders Have Pulled Back … Way Back 2.4 Starts & Permits (Mil. Units, SAAR) 2.2 2 1.8 1.6 Permits Starts 1.4 1.2 1 0.8 0.6 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Soure: Moody's Economy.com; Census
  38. 38. Builders Have Pulled Back … Way Back 7.8 Construction Employment (Mil, SA) 7.6 7.4 7.2 7 6.8 6.6 6.4 6.2 6 Q1 Q1 Q1 Q1 Q1 Q1 Q1 Q1 02 03 04 05 06 07 08 09 20 20 20 20 20 20 20 20 Source: Moody's Economy.com; BLS
  39. 39. Critical Dynamics in the Economy The Subprime Crisis
  40. 40. Subprime Lending Made Home Buying Easy •Credit to borrowers who do not meet prime underwriting guidelines. •Heightened perceived risk of default due to: history of loan delinquency or default bankruptcy limited debt experience •Almost All Made as ARMs, Subject to Reset •Most Packaged and Traded as High-Yield Asset-Backed Securities
  41. 41. Subprime Lending Made Home Buying Easy 350 Subprime Mortgage Originations ($Bil) 300 250 200 150 100 50 0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: Fed. Res. Bank NY
  42. 42. Until Adjustable Rate Mortgages Started to Reset Mortgage Interest Rates (%,, NSA) 7 30-Year Fixed 6.5 6 5.5 Adjustable 5 4.5 4 3.5 2003Q1 2004Q2 2005Q3 2006Q4 2008Q1 Source: Moody's Economy.com; Freddie Mac
  43. 43. And Some Borrowers Were Not Prepared Total Loans Overdue (%,SA) 22 20 18 16 14 Subprime 12 10 8 6 All Loans 4 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com; MBA
  44. 44. And Homes Were Being Lost Subprime Loans in Foreclosure (%,SA) 5 4.5 4 3.5 3 2.5 2 1.5 1 1998Q1 1999Q2 2000Q3 2001Q4 2003Q1 2004Q2 2005Q3 2006Q4 2008Q1 Source: Moody's Economy.com; MBA
  45. 45. Subprime Lending And Convoluted Debt Swaps "With this complicated intertwining of bets of great magnitude, no one could be sure of the financial position of anyone else-or even of one's own position. Not surprisingly, the credit markets froze." Joseph Stiglitz
  46. 46. Critical Dynamics in the Financial & Economic Crisis Excess Inventory Price Declines Refinancing Issues Bank Capital Bank Losses Mtg Foreclosures Depleted Bank Failures Liquidity Crunch Fed Actions Econ Stim '08 Hope Now TARP More Fed Action Other H.O. Programs
  47. 47. Critical Dynamics in the Economy The Investor Response
  48. 48. Some Mortgage Backed Securities Issuance Stopped 3500 Mortgage Securities Issuance ($Bil) 3000 2500 Agency NonAgency 2000 1500 1000 500 0 96 97 98 99 00 01 02 03 04 05 06 07 08 * 19 19 19 19 20 20 20 20 20 20 20 20 20 Source: Securities Industry and Financial Markets Assoc
  49. 49. Issuers and Holders of Mortgage Backed Debt Weakened Bear Stearns (daily closing price, $/Share) 180 $171.50 160 140 120 100 80 60 40 20 JP Morgan Offer $2.00 (later $10) 0 05 05 06 06 07 07 07 /20 1/ 20 8/ 20 8/ 20 2/ 20 7/ 20 6/ 20 0 9/ 2/ 6/3 11/2 4/1 6/2 11/1 NYSE
  50. 50. Issuers and Holders of Mortgage Backed Debt Weakened Countrywide Financial Corp (daily close, $/shr) 50 45 40 35 30 25 20 15 10 5 0 0 5 0 05 0 06 0 06 0 06 0 07 0 07 0 08 / 20 3/ 2 7/ 2 9/ 2 1/ 2 8/ 2 0/ 2 1/ 2 4/ 1 8/ 2 1/ 1 6/ 10 /3 3/ 2 8/ 2 1/ 1 NYSE
  51. 51. Critical Dynamics in the Economy The Lender Response
  52. 52. Banks Have Clamped Down Net % of Banks Tightening Standards for Mortgage Loans 80 70 60 50 40 30 20 10 0 -10 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com; FRB
  53. 53. Banks Have Clamped Down C&I, RE Loans (% Chg) 8 7 C&I 6 5 4 3 2 1 RE 0 -1 2005Q4 2006Q2 2006Q4 2007Q2 2007Q4 2008Q2 2008Q4 Source: Moody's Economy.com;FRB
  54. 54. Banks Have Clamped Down Consumer Credit Outstanding (% Chg) 2 1.5 1 0.5 0 -0.5 -1 -1.5 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 Source: Moody's Economy.com;FRB
  55. 55. Critical Dynamics in the Economy The Business Environment
  56. 56. Profits Have Slumped Corporate Profits Before Taxes ($Bil., SAAR) 1950 1900 1850 1800 1750 1700 1650 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 Source: Moody's Economy.com;BEA
  57. 57. And, Financial Markets Remain Wary….and Weary Dow Jones Industrial Average 15000 14000 13000 12000 11000 10000 9000 8000 7000 1/3/2005 10/18/2005 8/4/2006 5/23/2007 3/10/2008 12/22/2008 Source: NYSE
  58. 58. Businesses have grown pessimistic…. Moody's Economy.com Survey of Business Confidence (Index) 15 10 5 0 -5 -10 -15 -20 -25 -30 -35 8 8 08 08 -09 -09 -09 p -08 ep -0 t-0 t- ec- n n n -Se -S - Oc 4- Oc - D -Ja -Ja -Ja 12 26 10 2 19 2 16 30 Source: Moody's Economy.com
  59. 59. Cutting Back, Preserving Workforce, Reducing Costs Pay Cuts Salary Freezes Reduced Raises Reduced Hours, Overtime Unpaid Furloughs Pension Contribution Freezes/Cuts 401(k) Contribution Freezes/Cuts
  60. 60. Cutting Back, Preserving Workforce, Reducing Costs Pay Cuts FedEx Caterpillar Gymboree YRC Worldwide Trucking
  61. 61. Cutting Back, Preserving Workforce, Reducing Costs Salary Freezes Dow Jones & Co. Publishing
  62. 62. Cutting Back, Preserving Workforce, Reducing Costs Reduced Raises Half of 620 Companies surveyed By Hewitt Associates Report that average raises will Drop below 3% Source: L.A. Times, 1/ 2009 15/
  63. 63. Cutting Back, Preserving Workforce, Reducing Costs Unpaid Furloughs State of California Gannett Co. Publishing
  64. 64. Layoffs Remain the Favored Strategy Major Layoff Annoucements (#) 2400 Mass Layoff Events – All Industries (#,SA) 2200 2000 1800 1600 1400 1200 1000 Source: Moody’ s Economy.com; BLS 800 06 N 07 N 08 N C '20 JU '20 JU '20 JU DE Source: Bureau of Labor Statistics
  65. 65. Who is Laying Off This Month ? Selected Layoff Announcements in January/February 2009 Circuit City – 30,000 Saks – 1,100 Caterpillar – 20,000 Walgreens – 1,000 Nissan – 20,000 Schlumberger – 1,000 Pfizer – 19,500 Cummins - 800 Alcoa – 13,500 Autodesk - 750 Boeing – 10,000 Logitech - 500 GM – 10,000 Neiman Marcus - 375 TDK – 8,000 Ethan Allen - 350 Sprint Nextel – 8,000 New York & Co - 350 Home Depot – 7,000 Barnes & Noble - 100 ING – 7,000 Google - 100 Macy’ s – 7,000 World Wrestling Ent - 60 Philips Electronics – 6,000 Motorola – 4,000 Hertz – 4,000 Honda – 3,100 EMC – 2,400 Barclay’ s – 2,100 Cessna – 2,000 Source: CNN/ Reuters MeadWestvaco Corp – 2,000 Cigna – 1,100
  66. 66. The Result of Mounting Layoffs is Mounting UE Claims Initial Claims for Unemployment Benefits (#/Wk, 600000 550000 500000 450000 400000 350000 300000 250000 1 01 02 v-0 3 v-0 4 05 06 p-0 7 p-0 8 a n-0 ec- ec- o o ct- ct- e e 7-J 23 -D 8-D 23-N 7-N 23 -O 8-O 23-S 7-S Source: Moody's Economy.com; Employment Training Admin.
  67. 67. Employers are Cutting Back 300 Thousands of Jobs 200 100 0 -100 -200 -300 -400 -500 -600 5 9 1 5 9 1 5 9 1 6M 6M 07 M 07 M 7 M 08 M 08 M 8M 9 M 2 00 2 00 20 20 2 00 20 20 2 00 2 00 Source: Moody's Economy.com
  68. 68. Critical Dynamics in the Economy The Household Environment
  69. 69. Wages, Salaries Have Swooned Wages & Salaries (Year-Over-Year Pct) 3.4 3.2 3 2.8 2.6 2.4 2.2 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; BLS
  70. 70. Household Assets Have Crashed Household Net Worth ($Bil2000, SA) 56000 54000 52000 50000 48000 46000 44000 42000 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; FRB
  71. 71. Household Liabilities Remain at All-Time Highs Household Liabilities ($Bil SA) 15000 14500 14000 13500 13000 12500 12000 11500 11000 10500 10000 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; FRB
  72. 72. Household Debt Burdens Remain High Household Debt Service Burden (% of Disposable Income, SA) 14.5 14.4 14.3 14.2 14.1 14 13.9 13.8 13.7 13.6 13.5 13.4 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; FRB
  73. 73. Household Cash Flow Has Shrunk Household Cash Flow ($Bil 2000 SA) 9900 9800 9700 9600 9500 9400 9300 9200 9100 9000 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; FRB; IRS
  74. 74. Consumers Are Running Behind Pct of Accounts Delinquent 30 Days ($ Volume) 2.4 2.2 2 1.8 1.6 1.4 1.2 1 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; ABA
  75. 75. Consumer Confidence has Collapsed Consumer Confidence (Index) 110 100 90 80 70 60 50 40 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; Conference Board
  76. 76. Retail Sales Have Hit The Skids Total Retail Sales (% Chg) 4 3 2 1 0 -1 -2 -3 -4 -5 -6 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; BOC
  77. 77. Retailers Are Discounting Like Crazy Consumer Price Index (YOY%) 5.5 5 4.5 4 3.5 3 2.5 2 1.5 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; BLS
  78. 78. But, Discounting Isn’ t Helping A Whole Lot Vehicle Sales (Mil Units, SAAR) 18 17 16 15 14 13 12 11 10 2004Q1 2005Q2 2006Q3 2007Q4 2009Q1 Source: Moody's Economy.com; BEA
  79. 79. Monetary Policy Actions: A Near Zero Funds Rate Federal Funds Rate (%) 7 6 5 4 3 2 1 0 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com; FRB
  80. 80. The Troubled Asset Relief Program (TARP) Designed to Provide Relief to Financial Institutions by Acquiring Troubled Mortgage-Backed Assets, Guaranteeing Assets, And Recapitalizing Banks Through Preferred Stock (or Not…..) $700 Billion ($350 Billion X 2)
  81. 81. The Troubled Asset Relief Program (TARP) Outlays Through January 30, 2009 Citigroup - $50 B in Preferred Stock; $306 B Guarantees B of A - $45 B in Preferred Stock; $118B in Guarantees AIG - $40B in Preferred Stock JP Morgan Chase - $25B In Preferred Stock Wells Fargo - $25B in Preferred Stock Goldman Sachs - $10B in Preferred Stock Morgan Stanley - $10B in Preferred Stock PNC Fin Svcs - $7.5B in Preferred Stock US Bancorp - $6.6B in Preferred Stock GMAC - $5 B in Preferred Stock Capital One - $3.5B in Preferred Stock American Express - $3.4B in Preferred Stock Bank of New York Mellon - $3B in Asset Guarantees
  82. 82. The Troubled Asset Relief Program (TARP) Oh, Yeah….. General Motors - $13.4 B in Preferred Stock Chrysler - $4 B in Preferred Stock
  83. 83. Term Asset-Backed Securities Loan Facility (TALF) Designed to Stimulate Credit Markets By Issuing Loans on Asset-Backed Securities Loans May be Auto Loans, Student Loans, Credit Card Loans or Small Business Loans $200 Billion (beginning February 2009)
  84. 84. American Recovery and Reinvestment Act of 2009 Combined Direct Stimulus and Tax Cuts To:  Generate Renewed Demand Create Employment Invest in Economic Growth $800 - $900 Billion
  85. 85. American Recovery and Reinvestment Act of 2009 Proposed Elements of the Stimulus Plan • Infrastructure Improvements • (Education Facilities Modernization) • Renewable Energy Investment • (Health Care Records Modernization) • Science, Research Technology • Medicaid Assistance to States • Unemployment Benefits Extensions • COBRA Credits • Food Stamps • Household Tax Cuts/Credits • Business Tax Credits and Offsets
  86. 86. The Likely Effects of the Stimulus Plan • Create Jobs, Boost Incomes • Hiring Incentives w/ Business Tax Cuts, Credits, etc. • Boost Spending
  87. 87. The Likely Effects of the Stimulus Plan: Employment Growth 1 Employment Change (Mil.,SA) 0.5 0 -0.5 -1 -1.5 1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q 06 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 20 Source: Moody's Economy.com
  88. 88. The Likely Effects of the Stimulus Plan: Unemployment Unemployment Rate (%) 9.5 9 8.5 8 7.5 7 6.5 6 5.5 5 4.5 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 Source: Moody's Economy.com
  89. 89. The Likely Effects of the Stimulus Plan: Housing Markets 7.5 Total Home Sales (Mil Units, SAAR) 7 6.5 6 5.5 5 4.5 4 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 Q1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 07 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 20 Source: Moody's Economy.com; NAR; BOC
  90. 90. The Likely Effects of the Stimulus Plan: Spending Total Retail Sales ($Bil., SAAR) 4900 4800 4700 4600 4500 4400 4300 4200 4100 4000 2007Q1 2008Q2 2009Q3 2010Q4 2012Q1 Source: Moody's Economy.com; Census
  91. 91. The Likely Effects of the Stimulus Plan: GDP Growth 8 GDP (Annualized %) 6 4 2 0 -2 -4 -6 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 Q1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 07 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 20 Source: Moody's Economy.com
  92. 92. The Likely Effects of NO Stimulus Plan: Employment Growth 1 Employment Change (Mil.,SA) 0.5 0 -0.5 -1 w/Stimulus -1.5 w/o Stimulus -2 1 Q2 Q 3 Q4 Q1 Q 2 Q3 Q 4 Q1 Q 2 Q3 Q4 Q1 Q2 Q3 Q 4 Q4 Q 06 2007 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 20 Source: Moody's Economy.com
  93. 93. The Likely Effects of NO Stimulus Plan: Unemployment Unemployment Rate (%) 12 w/o Stimulus 11 10 9 w/Stimulus 8 7 6 5 4 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 Source: Moody's Economy.com
  94. 94. The Likely Effects of the Stimulus Plan: Housing Markets 7.5 Total Home Sales (Mil Units, SAAR) 7 With Stimulus 6.5 Without Stimulus 6 5.5 5 4.5 4 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 Q1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 07 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 20 Source: Moody's Economy.com; NAR; BOC
  95. 95. The Likely Effects of the Stimulus Plan: Spending Total Retail Sales ($Bil., SAAR) 5000 4900 4800 4700 4600 4500 4400 w/Stimulus 4300 w/o Stimulus 4200 4100 4000 2007Q1 2008Q2 2009Q3 2010Q4 2012Q1 Source: Moody's Economy.com; Census
  96. 96. The Likely Effects of the Stimulus Plan: GDP 8 GDP (Annualized %) 6 4 2 0 -2 w/Stimulus -4 w/o Stimulus -6 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 Q1 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 07 2007 2007 2007 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2011 2012 20 Source: Moody's Economy.com
  97. 97. The View from Denver: Employment Trends Similar to US Employment Growth (Ann %) 3 2 Denver 1 US 0 -1 -2 -3 -4 -5 -6 -7 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com; BLS
  98. 98. The View from Denver: Mirroring, Bettering the US Relative Employment Trends (Index, 1997Q3=100) 120 115 110 105 Forecast 100 95 90 1995Q1 1997Q3 2000Q1 2002Q3 2005Q1 2007Q3 2010Q1 Source: Moody's Economy.com; BLS
  99. 99. The View from Denver: Unemployment Rises Rapidly Unemployment Rate (%) 8 7 6 5 US 4 Denver 3 2 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com;BOC
  100. 100. The View from Denver: A Well-Diversified Economy Constrn Mfg TCU Wholesale Denver Retail Information US Financial Pro/Bus Svc Edu/Hlth Svc Leisure Svc Other Svc Govt 0 2 4 6 8 10 12 14 16 18 Percent of Total Employment Source: Moody's Economy.com; BLS
  101. 101. The View from Colorado: Denver Is a Popular Destination Survey says Denver is most popular place to live Percentage of Americans who say they want to live in this city or metropolitan area: Most popular Least popular Denver: 43% Detroit: 8% San Diego: 40% Cleveland: 10% Seattle: 38% Cincinnati: 13% Orlando: 34% Kansas City: 15% San Francisco: 34% Pittsburgh: 17% Tampa: 34% Minneapolis: 16% Source: Pew Research Center
  102. 102. The View from Denver: A Popular Destination 35 Net Migration (Ths., SAAR) 30 25 20 15 10 5 0 Forecast -5 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0Q 001Q 002Q 003Q 004Q 005Q 006Q 007Q 008Q 009Q 010Q 011Q 012Q 20 2 2 2 2 2 2 2 2 2 2 2 2 Source: OED/Policy Group, March 2008
  103. 103. The View from Denver: Wages Remain Barely Positive Wages, Salaries, Disposable Income (YOY%) 16 14 12 10 Disposable Income 8 6 4 2 0 Wages & Salaries -2 -4 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com; BEA; BOC
  104. 104. The View from Denver: Incomes Swing Cyclically Median Household Income (YOY%) 12 10 Denver 8 6 US 4 2 0 -2 -4 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com;BOC
  105. 105. The View from Denver: Home Sales Track Nation Single Family Home Sales (YOY%) 30 20 Denver 10 US 0 -10 -20 -30 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com; NAR;BOC
  106. 106. The View from Denver: Home Prices Did Not Boom Median Single Family Home Price (YOY%) 20 15 US 10 5 0 Denver -5 -10 -15 -20 2000Q1 2001Q2 2002Q3 2003Q4 2005Q1 2006Q2 2007Q3 2008Q4 Source: Moody's Economy.com; NAR
  107. 107. The View from Denver: Foreclosures Briefly Spiked Here 6000 Foreclosure Filings 5000 4000 3000 2000 1000 0 88 0 0 06 007 19 20 20 2 Source: OED/Policy Group, March 2008
  108. 108. A Denver Forecast
  109. 109. A Denver Forecast: Employment Growth 15 Employment Change (Ths., SAAR) 10 5 0 -5 -10 -15 Forecast -20 5 Q2 6 Q1 7 Q1 8 Q1 9 Q1 0 Q1 1 Q1 2 Q1 2 00 2 00 2 00 2 00 2 00 2 01 2 01 2 01 Source: Moody's Economy.com
  110. 110. A Denver Forecast: Employment Growth 10 Major Sector Employment Change (Ths., SA) 5 0 -5 Tourism Education & Health Services, Professional & Business Services -10 Information Transportation & Utilities Manufacturing -15 -20 Q1 Q1 Q1 Q1 Q1 1Q1 Q1 00 6 00 7 00 8 00 9 10 01 01 2 2 2 2 2 20 2 2 Source: Moody's Economy.com; BLS
  111. 111. A Denver Forecast: Unemployment Unemployment (%) 9 8 7 6 Forecast 5 4 3 2 1 2 3 4 1 2 3 4 1 2 0 0Q 001Q 002Q 003Q 005Q 006Q 007Q 008Q 010Q 011Q 20 2 2 2 2 2 2 2 2 2 Source: Moody's Economy.com;BLS
  112. 112. A Denver Forecast: Unemployment Unemployment (%) 10 9 8 US 7 Denver 6 5 Forecast 4 3 3 1 3 1 3 1 3 Q1 7Q 08 Q 08 Q 09 Q 9Q 0Q 0Q 07 20 0 20 20 20 20 0 20 1 20 1 20 Source: Moody's Economy.com;BLS
  113. 113. A Denver Forecast: Wages & Salaries Wages & Salaries (YOY%) 16 14 12 10 8 6 4 2 0 Forecast -2 -4 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 3 Q 4 Q 1 Q 2 Q 01 02 03 05 06 07 08 10 11 00 20 20 20 20 20 20 20 20 20 20 Source: Moody's Economy.com; BLS

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