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The talking heads and pundits are again responding to a single data dot as though it were a serious trend line.
Do they not realize that people are more uplifted in the spring? Consumer confidence is up but it was a single moment in time. Jobs continue to disappear and housing prices continue to decline. Long term confidence may be higher than it was six or eight weeks ago but this thing has a way to go. Stocks rallied (yes even the deepest bear markets have rallies) and mortgage rates dropped. Yes rates are down, that happens when no one wants to buy anything and borrow money because they are fearful of losing their job. Those who do want to borrow, can’t for a variety of reasons. Rates may continue to decline, although there isn’t much lower to go. The auto companies can’t sell cars even when they offer to protect you if you lose your job. Local dealers (new and used) are dropping like fly’s.
I suggest that the next six months will see housing begin to stabilize and the economy bottom out. The recovery however will be slow and shallow until the economic stimulus money begins to get spent in later 2010 – and first quarter 2011. Then the recovery will begin to get legs. Interest rates will rise sharply in 2011 as will taxes to control inflation and keep it in the manageable and sustainable 3% range. With inflation at 3% the interest rates we could expect would be in the 6% range for mortgages. That will raise mortgage payments about 18% compared to today (6% then; 4.5% now). To put that another way, an extra $90 per month for each 100,000 of mortgage (30 yr. fixed). That will slow housing value growth and when coupled with tighter loan underwriting will slow sales. It may be a good thing for landlords, especially those who have their financing in place now.
While I openly admit to being a curmudgeon, it seems that life as the young and restless knew it may be over. Life may more resemble that of my father and grandfather. General Motors may only have four brands. Ford may be a big player with its three brands and fuel economy will remain more important than performance, at least until the economy recovers. We didn’t learn our lesson in the 1970’s or the 1980’s (The last two times we had high gasoline prices and shortages). I’m skeptical that this time will be much different.
What you do now will likely impact your future. Be cautious and spend/invest wisely. You can be a big winner when this is over. And it will end. Just not real soon.
Wednesday, April 29, 2009
Wednesday, April 15, 2009
April 15th TAX DAY
April 15th.
Is there an Ides of April? Beware the Ides of March but what about April? I don’t know but it is tax day. Today you settle up with Uncle Sam, paying your share of the Military, Social Security, health care for the poor (Medicaid), unemployment for those who are looking but can’t find a job, food stamps and all the other entitlement programs that we, as citizens of a civilized and refined country think we should have. While I am an admitted curmudgeon, I am not opposed to helping the helpless, assisting those who need help to get from where they are to where they need to be to become self supporting. I just wonder how much of the world we should be helping when we are borrowing money to pay for that help.
What is happening? Greedy pirates are taking ships left ands right. Aids is killing an entire generation in parts of Africa. Starvation is an on going problem around the world. There is a rising portion of our own people who are homeless. Greedy bankers and insurance executive have caused many to lose jobs. IBM is moving jobs to foreign countries at the rate of 5000 per quarter, adding to the unemployment ranks in the USA. Greedy politicians are lying their butts off (Dodd) and the lobbyists are running amuck.
Will the well intentioned but inexperienced Mr. Obama drive the USA off the cliff? Can he gain control from the likes of Nancy Pelosi and Chuck Shumer before something horrific happens and like the Soviet Union, the DotCom bubble, the housing bubble and the up coming US Treasury bubble, we implode and collapse. Will the mighty US dollar become like the German Mark after WWII when it took cartons of Marks to buy groceries. Think it can’t happen here? August 14, 1971 Gold was $35/oz. On April 14, 2009 Gold was $887.50/oz. An increase of 25.4 times in 38 years. If the dollar continues to lose value at the same rate going forward in 2047 (when those born in the 1980's are reaching retirement) gold will trade at $22,504/ oz. OK so Gold may be a bit unique. What about housing? In 1987 a house that sold for $650,000 in 2008 (after the peak) would have only cost about 134,400 according to the Case Shiller index. That is a rise of 4.8 times in just 20 years. Cars that cost $2900 in 1969 cost $20,000 today. 6.9 times more in just 40 years. Get the idea? Oh I just read a report that Energy Information Administration just announced that it expects gasoline to be about $2.23 during this summers driving season and peak at $2.30 in late summer. They must have just read my blog from March 18th. I said $2.50 by May. Let’s see who gets closer.
By the way the deficit for this (fiscal) year is nearly 1 Trillion so far which is about double where the deficit stood this time last year. I'm not sure this is the kind of change any of us wanted.
This is still the greatest country in the world however, and if you look at those same statistics for other western countries, it doesn’t look any different. The western world moves largely in lockstep on these things. Even Asia is largely coupled with the west if only because they export so much to the west that negative situations in west have a significant impact on Asia. The solution isn’t bailouts and Trilion dollar ($1,000,000,000,000 or $3 for every human in this country) plus yearly deficits. The solution is unwinding the excesses and getting our collective heads out of our behinds going forward.
Is there an Ides of April? Beware the Ides of March but what about April? I don’t know but it is tax day. Today you settle up with Uncle Sam, paying your share of the Military, Social Security, health care for the poor (Medicaid), unemployment for those who are looking but can’t find a job, food stamps and all the other entitlement programs that we, as citizens of a civilized and refined country think we should have. While I am an admitted curmudgeon, I am not opposed to helping the helpless, assisting those who need help to get from where they are to where they need to be to become self supporting. I just wonder how much of the world we should be helping when we are borrowing money to pay for that help.
What is happening? Greedy pirates are taking ships left ands right. Aids is killing an entire generation in parts of Africa. Starvation is an on going problem around the world. There is a rising portion of our own people who are homeless. Greedy bankers and insurance executive have caused many to lose jobs. IBM is moving jobs to foreign countries at the rate of 5000 per quarter, adding to the unemployment ranks in the USA. Greedy politicians are lying their butts off (Dodd) and the lobbyists are running amuck.
Will the well intentioned but inexperienced Mr. Obama drive the USA off the cliff? Can he gain control from the likes of Nancy Pelosi and Chuck Shumer before something horrific happens and like the Soviet Union, the DotCom bubble, the housing bubble and the up coming US Treasury bubble, we implode and collapse. Will the mighty US dollar become like the German Mark after WWII when it took cartons of Marks to buy groceries. Think it can’t happen here? August 14, 1971 Gold was $35/oz. On April 14, 2009 Gold was $887.50/oz. An increase of 25.4 times in 38 years. If the dollar continues to lose value at the same rate going forward in 2047 (when those born in the 1980's are reaching retirement) gold will trade at $22,504/ oz. OK so Gold may be a bit unique. What about housing? In 1987 a house that sold for $650,000 in 2008 (after the peak) would have only cost about 134,400 according to the Case Shiller index. That is a rise of 4.8 times in just 20 years. Cars that cost $2900 in 1969 cost $20,000 today. 6.9 times more in just 40 years. Get the idea? Oh I just read a report that Energy Information Administration just announced that it expects gasoline to be about $2.23 during this summers driving season and peak at $2.30 in late summer. They must have just read my blog from March 18th. I said $2.50 by May. Let’s see who gets closer.
By the way the deficit for this (fiscal) year is nearly 1 Trillion so far which is about double where the deficit stood this time last year. I'm not sure this is the kind of change any of us wanted.
This is still the greatest country in the world however, and if you look at those same statistics for other western countries, it doesn’t look any different. The western world moves largely in lockstep on these things. Even Asia is largely coupled with the west if only because they export so much to the west that negative situations in west have a significant impact on Asia. The solution isn’t bailouts and Trilion dollar ($1,000,000,000,000 or $3 for every human in this country) plus yearly deficits. The solution is unwinding the excesses and getting our collective heads out of our behinds going forward.
Thursday, April 2, 2009
Spring is here; are politics and money due to bloom?
Well it’s April, and I hope you’ve not been fooled. Perhaps the spring weather and the rhetoric coming from the media have you believing the recession is over. I think not.
Mr. Obama is heading to the G20 meeting unlikely to find a lot of support there for bailout mania. The Europeans did a lot of these things after WW I and the inflation rate got unbelievably bad. They have not forgotten. We have not experienced it because we were on the Gold Standard, where the dollar was pegged to gold at $35 per oz. Mr. Nixon was President when that was abandoned (1971) so it wasn’t all that long ago (38 years). Look at where the price of Gold is now. The difference from $35 and today’s price ($928) is called inflation. Today’s Dollar is worth less than a 1971 nickel) and that occurred in a normal course of business. Can you even begin to imagine where we are headed with all this borrowing and bailing out nonsense?
We can not borrow ourselves to greatness. We must become great, here at home by hunkering down and doing what needs to be done.
Spreading taxpayer IOU’s around to help the information technology industry while it (IBM especially) is moving thousands of jobs out of the USA as we speak is another example of the lunacy. 5,000 announced in January, effective in February. Another 5000 announced in March to be effective in April and May (based on the required notice which is driven by state law). Rumors are strong that there will be another 5,000 in June. This will be effectively 10% of IBM’s entire US work force at the beginning of 2009. Why? Because it is cheaper to use eastern European and Asian labor which is well educated but does not have the inflated expectations of the American worker. As long as we permit companies to do this it will be difficult to recover from any recession. And it will take longer to repay an ever increasing debt. Mr. Reagan basically bankrupted the old Soviet Union in an arms race that they couldn’t afford, causing their collapse. Now we are bankrupting ourselves with programs that we can’t afford.
The taxpayer in the USA needs to revolt again. Not against Mr. Obama (he hasn’t been around long enough to really blame) but the political hacks like Nancy Pelosi and Chris Dodd. We need more independent members of congress who aren’t partisan but actually want to do what is right for ALL the people. We clearly need less lawyers in congress (but why stop there) and more people able to see the larger picture. Doing what is right isn’t rocket science. It is simply a case of reviewing the problem, looking at what others around the world have done when faced with similar problems and understanding the results. There are no new problems. Collapsing financial systems have occurred across the ages. Health care issue has been addressed by countries around the globe. Which solutions work and which ones don’t? Perhaps our culture and time is in need of a slight variation on one of these themes but let us not shoot ourselves in the foot while trying to be an “AMERICAN ORIGINAL” and jockeying for credit as though the plan were an original of one party or the other.
We can not allow the mid term elections to create a filibuster proof senate. If we do, then the minority party which represents a significant number of citizens has no voice. We are effectively governed by only one party with no need to consider the wants or needs of nearly half the population. I don’t think any of the citizens truly want this. No one wants an unbridled left or right running anything. Liberals and conservatives both perform a valuable role in keeping us in the center of the roadway and out of the ditch. If we allow the senate to become filibuster proof we will be in the ditch is mere weeks.
Will Chrysler become Italian? It tried German and that didn’t work. Who will be picked to lead GM and who will pick them? Will there be senate confirmation hearings? Interesting questions when you have the executive branch of government in a position to fire a CEO of a taxpayer bailed out firm. Want to see the TARP money repaid from banks? Every CEO out there is wondering if he’s next and fearing that they will working hard to repay and get the President out of his company. Don’t misunderstand I have no sympathy for anyone making more than a million a year. But, Congress hasn’t demonstrated the ability to run anything yet, so why are we letting them tinker with the biggest and most influential of our companies?
I believe the stock market has more downside risk. I don’t believe that we will be out of this recession until 2011 or 2012. This gives us a lot of time to evaluate anyone running for election in light of the current situation. Barney Frank, Chris Dodd, Nancy Pelosi all need to be run out on a rail. Send your congressman and the Whitehouse a tea bag. Let them know that you’re ready to revolt.
Mr. Obama is heading to the G20 meeting unlikely to find a lot of support there for bailout mania. The Europeans did a lot of these things after WW I and the inflation rate got unbelievably bad. They have not forgotten. We have not experienced it because we were on the Gold Standard, where the dollar was pegged to gold at $35 per oz. Mr. Nixon was President when that was abandoned (1971) so it wasn’t all that long ago (38 years). Look at where the price of Gold is now. The difference from $35 and today’s price ($928) is called inflation. Today’s Dollar is worth less than a 1971 nickel) and that occurred in a normal course of business. Can you even begin to imagine where we are headed with all this borrowing and bailing out nonsense?
We can not borrow ourselves to greatness. We must become great, here at home by hunkering down and doing what needs to be done.
Spreading taxpayer IOU’s around to help the information technology industry while it (IBM especially) is moving thousands of jobs out of the USA as we speak is another example of the lunacy. 5,000 announced in January, effective in February. Another 5000 announced in March to be effective in April and May (based on the required notice which is driven by state law). Rumors are strong that there will be another 5,000 in June. This will be effectively 10% of IBM’s entire US work force at the beginning of 2009. Why? Because it is cheaper to use eastern European and Asian labor which is well educated but does not have the inflated expectations of the American worker. As long as we permit companies to do this it will be difficult to recover from any recession. And it will take longer to repay an ever increasing debt. Mr. Reagan basically bankrupted the old Soviet Union in an arms race that they couldn’t afford, causing their collapse. Now we are bankrupting ourselves with programs that we can’t afford.
The taxpayer in the USA needs to revolt again. Not against Mr. Obama (he hasn’t been around long enough to really blame) but the political hacks like Nancy Pelosi and Chris Dodd. We need more independent members of congress who aren’t partisan but actually want to do what is right for ALL the people. We clearly need less lawyers in congress (but why stop there) and more people able to see the larger picture. Doing what is right isn’t rocket science. It is simply a case of reviewing the problem, looking at what others around the world have done when faced with similar problems and understanding the results. There are no new problems. Collapsing financial systems have occurred across the ages. Health care issue has been addressed by countries around the globe. Which solutions work and which ones don’t? Perhaps our culture and time is in need of a slight variation on one of these themes but let us not shoot ourselves in the foot while trying to be an “AMERICAN ORIGINAL” and jockeying for credit as though the plan were an original of one party or the other.
We can not allow the mid term elections to create a filibuster proof senate. If we do, then the minority party which represents a significant number of citizens has no voice. We are effectively governed by only one party with no need to consider the wants or needs of nearly half the population. I don’t think any of the citizens truly want this. No one wants an unbridled left or right running anything. Liberals and conservatives both perform a valuable role in keeping us in the center of the roadway and out of the ditch. If we allow the senate to become filibuster proof we will be in the ditch is mere weeks.
Will Chrysler become Italian? It tried German and that didn’t work. Who will be picked to lead GM and who will pick them? Will there be senate confirmation hearings? Interesting questions when you have the executive branch of government in a position to fire a CEO of a taxpayer bailed out firm. Want to see the TARP money repaid from banks? Every CEO out there is wondering if he’s next and fearing that they will working hard to repay and get the President out of his company. Don’t misunderstand I have no sympathy for anyone making more than a million a year. But, Congress hasn’t demonstrated the ability to run anything yet, so why are we letting them tinker with the biggest and most influential of our companies?
I believe the stock market has more downside risk. I don’t believe that we will be out of this recession until 2011 or 2012. This gives us a lot of time to evaluate anyone running for election in light of the current situation. Barney Frank, Chris Dodd, Nancy Pelosi all need to be run out on a rail. Send your congressman and the Whitehouse a tea bag. Let them know that you’re ready to revolt.
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