Water Cooler Finance: The Post-Stimulus Slump
We're stopping, we're going. We're climbing, we're falling. The recession is over, it hasn't even begun yet. And all the while, unemployment has hovered in the same general area of nearly 10%. Based on economic trends and analysis of the last year or so, it's safe to assume that the only companies making money sell pain medication and alcohol. (Missed last week's Water Cooler Finance? Catch up by reading The End Of The Recession.)

In the last month alone, it was determined that we've been in a recovery period for over a year, yet fears of an even worse recession are looming. Are there any concrete signs of stability out there?

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Driving with a Flat
Last September, America's recovery plans under President Barack Obama were beginning to see the light of day. The Car Allowance Rebate System (CARS), popularly dubbed "Cash for Clunkers", had recently ended and had accounted for just over 690,000 transactions at dealerships nationwide. Also, due to the advancements in gas consumption of the new cars purchased versus their traded-in counterparts, the program was responsible for a 58% improvement in fuel efficiency. Both positive results during a tough time for the country, even though many critics claimed that Cash for Clunkers promoted Japanese-made cars over American ones and was a short-term solution to a struggling economy. Both criticisms were re-enforced by the sharp drop in auto sales shortly after the end of the CARS program.

So, where are we now? One year after the CARS initiative, Chrysler is reporting an impressive 61% jump in sales for September, against its same-month last year, and Ford (NYSE:F) saw similar results of 46%. Positive news, right? Consider first that both companies only saw single-digit sales increases compared to August, 2010 - 1% for Chrysler, and 2% for Ford. Toyota (NYSE:TM) saw a 17% increase from last year, and General Motors' sales grew 11%, but both of these companies saw sales decrease from August, 2010 figures. Toyota's were down 1%, and GM's 6%.

So, the recession may have technically ended in 2009, as was announced a short time ago by the National Bureau of Economic Research. But the crawling recovery has many analysts and observers fearful of a double-dip - which has also become a popular buzzword in the last few months.

Cars aside, there was marginally faster growth in the economy than predicted in the second-quarter of 2010, as was reported by the Commerce Department on Thursday, Sept. 30. While growth was initially estimated at 1.6%, the gross domestic product (GDP) was measured at 1.7% growth for April, May and June. Still, with economic growth below the 2% mark, recovery is sluggish at best, and non-existent in some areas.

Loss of Stimulation
The end of the stimulus boost to the Temporary Assistance for Needy Families (TANF) program has brought massive layoffs for youths and disadvantaged parents. A $5 billion boost to the program brought temporary employment to approximately 250,000 people in a stimulus attempt. That funding was split between employment, housing assistance and food programs, among other areas. But many of those jobs ended when the federal program's time line expired on September 30.

At a time when employment has been circling the high 9's (it currently sits at 9.6%), many who joined the program in anticipation of further employment may be in for a long winter.

The TANF program was implemented under the Clinton administration as a replacement for the heavily criticized Aid to Families with Dependent Children (AFDC) program.

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Missed It by That Much
Nintendo (OTCBB:NTDOY) is known for its strong Christmas season sales. The video game and console manufacturer has recently earned impressive holiday numbers with hardware and software sales for its motion-based Wii and hand-held DS gaming systems. This year, however, the company will be essentially sitting out of the video game wars.

Originally, Nintendo had planned on releasing its 3DS system for the Christmas season. The 3DS is a hand-held gaming device with two screens, one with 3D capabilities that requires no special glasses. At a press event on September 29, 2010, the company announced that the Japanese launch date of the device had been pushed back to late-February, and no North American date has been set as of publication time. Nintendo claims that the decision was made in order to prevent shortages in supply.

Based partly on this announcement, Nintendo now anticipates that its fiscal year's profits will be 90 billion yen ($1.07 billion), as opposed to its previous estimate of 200 billion yen.

The other video game giants will not be idle. Next month, Microsoft (Nasdaq:MSFT) will be selling its motion-based Kinect system, which is controlled by players' movements. And just a few weeks ago, Sony (NYSE:SNE) began selling its motion-based PlayStation Move accessories. Both are in direct competition with the Wii. (Find out how to invest in these companies in Power Up Your Portfolio With Video Game Stocks.)

Bottom Line
Over the next month, some stimulus withdrawal is expected to continue weighing on the economy. However, we are heading into the holiday stretch, so it's possible that things may start looking up as the year begins winding down.




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