July 20,2009

July 20, 2009

I took last week off and went to the beach without my laptop, blackberry or anything other than a basic cell phone. I wanted to see if I could go a whole week without any outside contact. It was amazingly liberating…after the first few panic attacks.

It was really refreshing to be able to think without having my thoughts interrupted by tweets, face book, text messages, etc. Thinking is a good mental exercise. The mind, like other body parts requires exercise to stay healthy and at the top of its game. The Ocean and the weather really cooperated making it a wonderfully relaxing week.

Now I’m back with a clearer head on what the economy is doing and how panic struck the administration and congress is. It is going to be a challenge for us and for them. Now is the time to make your feelings known to your representatives on the key topics of national debt, taxes and health care. Just remember you can’t have programs without the funding for them. Tough choices are going to be made. Get your voice heard.

Democrats, minus Sen’s Byrd and Kennedy (both ill), don’t have the magical 60 votes in the senate and there are some more conservative Democratic Senators who are uncomfortable with the size of the Debt. The once Messianic President is seeing the ratings drop as debt and unemployment climb and the economy fails to respond to his brand of stimulus. Check out the stock markets of Asia and even Europe and compare them to ours. Not pretty.

On the brighter side, The Philadelphia Fed Index and the Empire State Index are running a parallel and very positive trend although neither has passed the “0” point yet which is the transition from contraction to expansion. First time unemployment claims have slowed, meaning unemployment continues to grow, just at a slower rate. Not great news but positive. The State Street Investors Index is showing the highest results in more than a year in both the last two months. Other leading economic indicators are showing positive signs as well. The overall unemployment rate will continue to rise, since companies don’t hire people back until they are sure that there will be a need. Overtime is a nice expansion valve and an easy economic indicator. When it is cheaper to hire a new employee than it is to pay overtime, unemployment will start to decline. That will be awhile.

In the interim, if you have cash available, you can get some great deals on just about anything you need. Note that cash is king. Financing is still difficult to arrange for all but the very best borrowers and then only for the best of deals. A year or 18 months from now these deals will be gone, so keep that in mind. Mortgage money is starting to get more expensive and housing prices have begun to stabilize. If you are a potential first time buyer the government will give you major bucks to help you get that first home. That deal may disappear in the not too distant future so remember the phrase- He who hesitates is lost.

In summary, Congress is afraid of the cost (read that tax increases) of the reforms Mr. Obama is pushing and at the same time afraid that doing nothing (their favorite approach to dicey issues) is no longer an option. The economy is still contracting and the national debt is skyrocketing. No easy fix this time. Just hard facts and tough medicine. What will they do and will you remember at the polls in 2010?