renee d. laychur, cfa senior vice president & senior portfolio mgr first national bank
TRANSCRIPT
Renee D. Laychur, CFASenior Vice President & Senior Portfolio Mgr
First National Bank
Revisiting the Past Year
Those who cannot remember the past are condemned to
repeat it.
George Santayana
Roots of the Financial Crisis – 2003 to 2007
•Credit Growth Exceeded
Economic Growth•Historical Low Interest Rates•Sub-Prime Loans •“Creative” Mortgage Products
– Packaged & Sold•Housing Prices Rose Creating
“Bubble”
Financial Crisis Timeline
• 3/16/08 – Bear Stearns Acquired• 9/7/08 – Federal Takeover of Fannie Mae and
Freddie Mac• 9/10/08 – DJIA clings to 11,000 level• 9/14/08– Merrill Lynch Sold to Bank of America• 9/15/08 – Lehman Brothers Declares Bankruptcy• 9/16/08 – Fed lends AIG $85 billion to Prevent
Bankruptcy: Reserve Money Fund “Breaks Buck”• 9/29/08 – House Rejects Financial Rescue
Package
Financial Crisis Timeline
• 10/3/09 – House Passes Financial Rescue Plan• 10/6/08 – DJIA Closes under 10,000 for first time 4
Years and Losses over 22% for the Week - Worst in 75 Years
• 10/11/08 – Most Volatile Day in DJIA’s 112 year History, up over 900 Points
• 12/11/08 – Bernie Madoff Arrested• 12/19/08 – Treasury Grants Loans to GM &
Chrysler• 3/9/09 – DJIA Declines to 6,440
Dow Jones Industrial Average – Past Year
Dow Jones Industrial Average – Past 5 Years
Market Highs to Lows
• Dow Jones Industrial Average
- Peaked at 14,164.53 on 10/9/07
- Bottomed at 6,547.05 on 3/7/09
- 54% Decline• Since 3/9/09 DJIA has appreciated 3,080 points or 47%• Year to Date DJIA is up over 9%• Interesting Fact
- On 9/10/01 DJIA closed at 9,605.51
- On 9/11/09 DJIA closed at 9,605.41
Economic Activity
The Great Recession
• Longest and Deepest Post WWII Recession• Currently in 22nd Month of Recession which
began in December 2007• First Quarter GDP Decline of -6.4% is the Largest
Drop in 27 Years• Four Consecutive Quarters of Negative GDP –
Longest Streak on Record
Gross Domestic Product
Copyright © 2009 CRANDALL, PIERCE & COMPANY • All rights reserved. • 14047 West Petronella Drive • Libertyville, Illinois 60048 • 1-847-549-6015 • Internet: www.crandallpierce.com
This copyright protected illustration is for internal use only. Under no circumstances may this illustration be copied, reproduced or redistributed in whole or in part including the data contained herein, without prior written permission from Crandall, Pierce & Company.The information presented herein was compiled from sources believed to be reliable. It is intended for illustrative purposes only, and is furnished without responsibility for completeness or accuracy. Past performance does not guarantee future results.
Real Gross Domestic Product
Sources: Bureau of Economic Analysis; National Bureau of Economic Research; Copyright © 2009 Crandall, Pierce & Company • All rights reserved.
*Data Released August 27, 2009 Shaded areas represent recessionary periods.
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In percent change from previous quarter,seasonally adjusted annual rates.
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122nd Quarter 2009 (Preliminary)* - Real GDP decreased at anAnnual Rate of -1.0%, or -32.9 Billion Dollars. In the 1st Quarter2009, Real GDP decreased -6.4%, or -216.5 Billion Dollars.
77 79 81 83 85 87 89 91 93 95 97 0199 03 05 07 09
GDP – Quarterly Long Term Perspective
Business Inventories
Employment
U.S. Unemployment Rate
Unemployment by State
Unemployment – Lagging Indicator
Unemployment – Initial Claims
Unemployment
• Since Beginning of Recession 6.9 Million Non-farm Jobs Lost
• Year to Date in 2009 – 3.85 Million Non-farm Jobs Lost
• 9.7% Unemployment Rate – Highest in 26 Years• Average Duration of Unemployment – 24.9 Weeks• Teenage Unemployment Rate 25.5% - Highest
Ever
Housing
Home Prices
Home Prices
• Case-Shiller U.S. Home Price Index Rose in May & June 2009
• First Increases in Almost 3 Years• 2Q 2009 Prices Down 14.9% versus 2Q 2008• Las Vegas and Detroit Worst Markets
– Las Vegas Prices Down 54.3% from Peak– Detroit Prices Down 45.3% from Peak
Home Price Recovery
New Home Sales
Housing Starts
Consumer
Consumer Spending
• Consumer Spending Represents 70% of Economic Activity
• 2009 Back to School Season Appears to have been Weak
• Christmas Season Important, but Current Surveys not Looking Promising
• 2008 Christmas Spending was Worst in 40 Years• July Consumer Credit Down $21 Billion – Largest
Decline in 43 Years
Retail Sales
Consumer Credit
Household Debt
Personal Savings Rate
Vehicle Sales - Cash for Clunkers
University of Michigan: Consumer Sentiment
Economic Themes
• Slow Growth – V or W• Jobless Recovery• Weak Consumer Spending• Restrictive Credit Conditions• Future Inflation Concerns• Dollar Weakness
Copyright © 2009 CRANDALL, PIERCE & COMPANY • All rights reserved • 14047 West Petronella Drive • Libertyville, Illinois 60048 • 1-847-549-6015 • Internet: www.crandallpierce.com
Sources: Bureau of Labor Statistics • Copyright © 2009 Crandall, Pierce & Company • All rights reserved.Shaded Areas - U.S. Recessions, Dashed Line - Beginning of Latest Recession
Consumer Prices and Producer Prices
191C CCLXXXI
Year to Year Percentage ChangeLast Observation July 2009
This copyright protected illustration is for internal use only. Under no circumstances may this illustration be copied, reproduced or redistributed in whole or in part including the data contained herein, without prior written permission from Crandall, Pierce & Company.The information presented herein was compiled from sources believed to be reliable. It is intended for illustrative purposes only, and is furnished without responsibility for completeness or accuracy. Past performance does not guarantee future results.
Consumer Price Index: All ItemsYear to Year Percentage Change
Last Observation July 2009
Producer Prices: Finished Goods
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73 75 77 79 81 83 85 87 89 91 93 95 97 99 01 05 0703 0969 7167656361
Inflation
Oil Prices
Natural Gas Prices
Federal Government Debt – Total Public Debt
Interest Rates – 10 Year Treasury Yields
Interest Rates – 3 Month Treasury Yields
Pennsylvania Economy
Pennsylvania – Unemployment Rate
PA Unemployment by County – December 2007
PA Unemployment by County – June 2009
PA Unemployment – Rural versus Urban
Pennsylvania Housing Market
• PA fared Better than U.S. in Price Depreciation• Foreclosures
– Nation - 1 in every 357 Homes– PA - 1 in every 950 Homes– Nevada - 1 in every 62 Homes
2nd Quarter 2009 -Metropolitan Area House Price Year to Year Change
Metropolitan Area Chg Metropolitan Area Chg
Allentown-Bethlehem-
Easton-5.4% Philadelphia -3.1%
Altoona 2.6% Pittsburgh 1.2%
Erie 0.7% Reading -3.7%
Harrisburg-Carlisle -1.0% Scranton-Wilkes Barre 0.3%
Johnstown 2.2% State College 1.5%
Lancaster -0.9% Williamsport 2.3%
Lebanon 0.7% York-Hanover -3.5%
Regional Leading Indicators
Economic Outlook
It’s hard to make predictions,
especially about the future.
Yogi Berra
Federal Reserve Bank of Philadelphia
Aruoba-Diebold-Scotti Business Conditions Index
Aruoba-Diebold-Scotti Business Conditions Index
The Aruoba-Diebold-Scotti business conditions index is designed to track real business conditions at high frequency. Its underlying economic indicators (weekly initial jobless claims; monthly payroll employment, industrial production, personal income less transfer payments, manufacturing and trade sales; and quarterly real GDP)
2010 - Real GPD Projections
2010 – Unemployment Projections
2011 – Unemployment Projections
FRB Philadelphia – Survey of Professional Forecasters
Average Annual Data
Real GDPUnemployment
Rate
2009 -2.6% 9.2%
2010 2.3% 9.6%
2011 2.9% 8.9%
2012 3.2% 8.0%
Finally
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