2009

May this world experience, in 2009, enlightenment in understanding what is really important here; love and compassion for all the earth's inhabitants.   Wishing each individual a meaningful 2009.

Resilency

The market is holding up well with bad news flooding the forefront of everyone's consciousness.  

I'm watching Putin in Russia warning that foes attempting to destabilize Russia will be suppressed, knowing he has his own agenda, being a former member of the KGB.  If he is trying to put this country under a police state, I think the economic situation will rule the day and minimize his control in doing this.  

Pension funds of corporations in the S&P 500 are underfunded.  They are being forced to decrease contributions and in some cases plan on closing the funds.  This is a clear sign of the long range affects that this current situation is having.  I happen to have a defined pensioned plan with General Dynamics, who bought GTE Government Systems where I worked for 13 years.  I can collect a monthly pension or lump sump when I'm 65.  This company seems to be healthy and thriving in this climate.  If it is there when I reach this age, great.  Otherwise, I'm not including it in any life planning.

More than 12 million home owners are under water; an estimate of $5 trillion in housing values lost.  In 2009, there is an estimate of another 25% reduction in housing prices, and it it to continue into 2010.  Even though low rates are being offered and people are saying what a great deal houses are now, consider offering 25% less for any house you may be serious about buying.  The 'present value' of houses is not being reflected yet.

Credit is continuing to be tight because the banks receiving the $700B bailout are buying U.S. Bonds and Treasury Bills.  Where is the management and pressure to force them to lend  the money as originally defined to the individual?  This is a sure sign that those at the top of government have no control in how the money is used.  Lowering the discount rate to 0-.25% is suppose to encourage them to move forward in this manner.  Time will tell.

Overall, the 'fall' is continuing all across the world.  Japan and Germany are pumping extra funding into the system.  The Belgium government collapsed after it failed in an attempt to bailout its financial group Fortis Bank.  If you look at the results of all of the actions, the truth is revealed.

As I have said repeatedly, if you can reduce your own personal debt, and be less tied to what is happening to the world financial system, you will be free to act in an abundant way when the bottoms are reached.

Cleaning Out The Financial Closet

The threads are surfacing more frequently now, reflecting the cracks in our financial foundation.  High profile New York figures like Bernard Madoff show us a great example of what is yet to come:  at least $50B in losses with his ponzi scheme.  France banks are exposed to at least $400M, Sweden $300M, Spain $3.1B, HSBC in Geneva at least $4.22B, hedge funds yet to be identified, and the beat goes on.  Contraction exposed this fraudulent setup.  And what blows my mind is that Madoff is a former chairman of the NASDAQ stock exchange.  A second example is Marc S. Dreier to the tune of hundreds of millions.  The ripple effect over the next few weeks, as the system continues to contract, will determine the extent of the tsunami.

Watch the dollar. As it goes down U.S. Treasuries become less appealing to foreign investors, and it leads to more inflation.  Bernanke is looking at reducing the discount rate again, to possibly zero.  This will affect the dollar in a huge way.  Again, what is the point of diminishing returns when the creditors say 'enough is enough' and no longer buy our bonds and treasuries?  I think it is closer than the horizon.  The best step each of us can take is keep paying down the personal debt.  That step gives us more freedom when the biggest tsunami we have ever experienced touches our shore.  I am not being pessimistic.  I think what is happening is for the highest good, especially now that the worms are coming out of the woodwork who used the expanded liquidity over the last decade or two to hide behind.  It does show a giant hole in the regulations are implemented. 

Addendum to Previous Blog

Today, two important points to mention:

1.  The office of the comptroller said that the re-default rate is 58% of those borrowers who had their mortgages modified in the first half of 2008.  These will go to foreclosure.

2.  Feds Kohn said that bank lending has dropped back in recent weeks, resulting from tightening terms and standards.

Yes, the market is up again today based on 'surface' news of president-elect Obama's job creation plan and an imminent rescue of the auto companies.

Keep looking at our underpinnings.  That is going to determine the lasting affects on this market.  

I think what Abraham Lincoln said when he took office and the colonies had separated from the group, when he mentioned having "patient confidence" is great advice for us to use to minimize the influence of our emotional selves when investing in this market.  That's the one thing you do have control over, how you respond to the events happening.  Actually, it's a prudent motto when dealing with life.

Transparency

I wrote to Senators Shelby, Feinstein, Boxer, and Herger to oppose bailing out the auto industry.  Here is the summary:  "As I wrote to you regarding the $700B bailout, I am writing to say  I am opposed to bailing out the auto industry.  This country is spending hundreds of billions in the short run and I don't see anyone looking at 'saving' something for future unknowns.  Also, why give money or loans to the automakers who have the same business structure and management that brought them to the financial situation they are in?  This country cannot afford to keep 'rescuing.'  We will get to a point where the U. S. cannot rescue themselves when the foreign investors finally say 'enough is enough' with buying our bonds and treasury bills.  The government needs to start showing its citizens how to 'save' money by setting the example.  We are on the wrong track and moving at lightening speed. To get off this track will be painful for most of us.  But the time is now.  I don't want to see our kids, grandkids, and those to follow bear this burden.  We need to resolve it now.  Thank you for listening."

Since I wrote the last email, looking for threads, I saw a few interesting ones.  First, over the next 18 months, banks are going to cancel lines of credit from credit cards to the tune of $2 trillion.  Second, money for mortgages are shrinking and the forecast is that it will push the price of homes down another 20%.  Contrast this with what our government is doing; flooding hundreds of billions into the banking system for the purpose of providing stability so money will be loaned to consumers.  As you can see this is a paradox, yet it is prudent on part of the banks to be conservative.  With the job losses mounting, it will be very important not to loan money to those who do not have the ability to repay.  I see our top leaders having no affect to the bottom line, regardless of how much money they print and distribute.  It is time to rein in our debt all the way through the system, from top to bottom.  This is already happening, yet isn't apparent because of the government's behavior with its ability to create money and how they are using it.  Now I think this market will drop well below 8000 and stay there until we as a world, not just a country, move in the direction of 'saving' along with spending.  This is a unique time in history and we happen to be alive to experience it.  This is an opportunity for great soul growth if you look at what is going to unfold as a needed correction for the benefit of the whole.

Here is  a quote from Thomas Jefferson in 1802:  "I believe that banking institutions are more dangerous to our liberties than standing armies.  If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered."  

I look at this as prophecy that can be changed.  It is you and I, the individual, collectively working together to make sure that our government acts in a manner that serves all of us, regardless of how painful it may be for each of us individually.

One final thought to those who are invested or investing currently.  What seems like a good deal based on the past may not be a good deal based on the future.

Look Behind the Scenes

The market plunges almost 8% today and the consensus is that the recession has 'officially' been announced and it started a year ago.  I don't agree with this since we all new that we have been in a recession long before it became official and the market has reflected this psychological impact.  I think something else is winding its way through the system that even the experts are unaware of. 

Look at Russia and Putin trying to convince the residents not to withdraw their money and send it to other countries for safety.  As a result of this action, the leaders are forced to spend less on military.  As I have said before, Russia will be reined in from spending aggressively on the military because the economic concerns will always take precedence.

The leaders of China are saying that they aren't keeping up technologically.  What are they really telling us?

What is the truth ?  I think the example given here plus other countries and what they are saying and doing lead a direct path to us to see why this market  fluctuates in the extreme.  It goes beyond the Bear having its way.  When I see it, I'll post it here.  If you see it, please let me know.