Where are we going?

Two significant signposts presented themselves Sunday when Capman, a commercial real estate lender valued at $20B in assets, filed for bankruptcy. The big banks are the ultimate holders of the liabilities. I see a fresh round of scrutiny coming with them. Also, noted in this article was that commercial property defaults played the significant role in the 106 banks failures that have occurred so far this year.

Housing sales and prices rise for three straight months. Lets see if this trend continues when the $8,000 tax credit for first time home buyers end next month. Given what happened with car sales after the 'cash for clunkers' ended it makes sense the same will happen with housing. The government can only prop things up temporarily. At some point we have to 'face the music.' We can dance or stay on the sidelines. I think it is better to participate. :)

Consider this statement: each of us has everything we need to get what we want. Take that to the next level beyond only the material.

Housing, Credit Card Debt, Stock Market, North Korea

As you know I watch the housing climate and look for a bottom. We are far from it. Foreclosures were up 5% over the summer at a pace estimated to reach 3.5 million by the end of this year, up from 2.3 million last year. That's equivalent to 1 foreclosure every 13 seconds. Contemplate on that a moment. Keep in mind the commercial real estate defaults have yet to be acknowledged by the banks.

Bank of America lost over $2B last quarter and much of it was credit card write-offs. Consumer debt is contracting, mainly because they don't have the means to cover their survival level.

The stock market reaching $10K makes me uneasy. Notice it goes up and down depending on who comes out with earnings or losses. There is instability because the foundation is sitting on shifting sand. Again, without a bottom in the housing market most of the money the government spends has no return on the investment. The deficit is the biggest since WWII, 1945. There WILL be a ceiling to our debt level. Our debt holders will be the telling sign of the end of the road as we this method to try and artificially hold up the market that needs to purge itself so we can start anew from the bedrock.

I still watch the rebel countries. Having a senior North Korean diplomat visit us this month is a good sign that they are receiving the attention they need. Their country seem to be in the adolescence phase and need to be related to with this view.

Peace, Market

I want to acknowledge President Obama for receiving the Nobel Peace Prize. What a tremendous responsibility publicly bestowed on his shoulders to monitor his progress towards meeting the expectations of those who chose him for this award.

This week I sold stock and brought my cash position to 40% of my portfolio. I am in the process of rethinking how I invest and also, the memory of the October 1987 crash when I was fully invested played a role in this action.

Gold has reached record highs as the dollar continues in the other direction with a few blips, now and then. Countries, like Australia, who recently raised their interest rate is financially solvent, and so has more freedom in taking this action. The U.S. with its debt level is limited in this direction, even for the purpose to counter inflation.

Auto and Home Sales, Olympics

After the ending of 'cash for clunkers,' sales dropped dramatically as predicted. GM is down 45% and Chrysler down 42%. It is doubtful that the taxpayer loans will ever be repaid. Notice Ford who did not accept government loans was down 5%, beating some of the Japanese companies. It's another example of the drawbacks of government intervention that provided only a brief injection, and added years of debt to future generations.

'Pending' home sales rose 6.4% from July, and 12.4% higher than last year. What is important is the 'closed' statistics on home sales since a third of mortgage applications are denied. Also, the impact of the $8K first time buyer tax credit ending next month will create a chasm like the auto industry is experiencing. Foreclosures continue to increase and even personal bankruptcies are at a 4 year high. Unemployment keeps going up too, against the grain of those who keep using words to reflect improvement. Be aware of the use of words like pending to make people believe that everything is moving in the recovery direction. The only truth so far is that the recession has 'officially' ended.

Regarding the quest to have the Olympics here in Chicago, I thought it was appropriate to send the first lady over there to speak for us. I thought it was totally inappropriate for the president go over after she did. It diminished her effort and made it look like she couldn't hold her own. He talked briefly and left, showing no understanding of other cultures and what they expect. He treated them as he would any business dealing in the U.S. I am glad that Rio De Janeiro was chosen. It provides South America the opportunity to be recognized and included in the world in a big way.