The Numbers Tell the Story

I seem to be locked into viewing the continuing foreclosure momentum. There are 5 million families who owe at least 25% more than what their house would sell for. 2 million go underwater if their houses loses 5% of their market value. There are about 11 million underwater. The biggest statistic is that since 2006, families have lost $7 trillion in home equity value. That has created a huge psychological impact to feeling rich or poor and what and when to spend money. Compare that to the trillions in debt this country has incurred and one can see that we are being bombarded from all directions. The housing situation is more subtle yet powerful in its influence over everything else. Look at Fannie and Freddie and the billions they ask for quarterly with no ceiling in effect like our debt ceiling that Congress has to vote on. They receive what they ask for. This is a reflections of millions of people losing their biggest asset. Viewing the headlines today, it seems to be under the radar because there has been so much emphasis on it in the recent past. Yet it will come back to the surface again, because action is required to set this on a different path.

Bernanke's latest implemented plan to buy $600 billion of bonds to keep the interests down and the dollar lower has created the opposite effect. Since our search for a home, the mortgage rate has gone from 4.12% to 4.7%. That is a 14% increase in less than two months. On a $150,000 mortgage, that is an extra $72.50 a month.

Numbers are meaningful. They tell the story. Is there anyone interested in reading it?

Fannie Again, U.S. Debt

Here's an update regarding the property that needs a new septic system that we offered $179K versus Fannie's asking price of $150K. Yesterday, we saw this property with a price reduction to $134K. Here is an actual example of the inefficiency in this organization. There is no encouragement to perform, because whatever losses are incurred are covered by the federal treasury with no ceiling. I also read that FNM and FRE are estimated to cost $685B. The positive in this is the Republican who is expected to replace Barney Frank as chairman of the House Financial Services Committed said he will put these two organizations at the top of his priority list to address. I will be watching to see if it goes beyond words.

Another important subject that I emphasize repeatedly is our country's debt load. It is estimated to be 67% of Gross Domestic Product by 2013 if this congress does not act in any way to contain it. We are now spending 63% more than the tax payments we receive.

Banks and Their Court Actions to Remain Invisible

Fannie responded to my queries, after I gave up, and referred me to a company they use to handle the foreclosures, and other real estate matters. I found out that we were rejected because there was uncertainty as to whether the new septic system could be installed in the winter. What is interesting is that the property showed back up on the market this week, disclosing the need for the septic. Their answer doesn't hold much authenticity given they are trying to sell the property again. I consider it a positive to even receive an answer of some kind.

In previous blogs, I commented on how the Treasury and banks went to court to prevent the public, us, from seeing who used the discount window during the crisis and their borrowing patterns. The appeals court said they had to show the information. Today, I saw that the banks, like Bank of America, JP Morgan Chase, Citibank, are going to appeal this to the Supreme Court. I strongly believe that transparency with these banks is essential. The more visibility we have, the less power they over us financially. Their actions using the court system is to retain that power. These banks were rescued when they should have been allowed to struggle for survival. They can still be humbled them if this information is made visible.

Change

Change is everywhere and more noticeable when it is not judged as good or bad. The establishment is showing its resistance as the final elections completed yesterday. What is reassuring is that the resistant energy is not strong enough to stop the change that is necessary, especially in our government. Ignorance, inexperience, and ineptness cannot stop it. Collectively, I think we have caught on that this country is in the hands of all of us; the individual, the average citizen. The incumbent of each party needs to go.

I enjoy looking at the details, at the root level to estimate how much longer this country and the world will continue to contend with more than a recession. That is why I focus on foreclosures and watch to see what is being done with Fannie and Freddie; two companies run by the government now that is a trough for most of the mortgages, and that have unlimited funding provided by the taxpayer. They are so big that there is concern that any change with how they are doing business would cause a major negative impact to the housing industry. What I see is no change in their direction and this feeds on itself. When homeowners are under water, they stop spending and begin looking at walking away. When they are behind in mortgage payments, they stop spending on other things, that which this country counts on to have a healthy economy. This kind of uncertainty leads to saving verses spending. Without strong leadership in this arena, I see the economy staying the course like it is for another two years. And I see banks having to go through another round of solvency review as the mortgages continue on the same path.

Is there any part of your life that is continuing on a path that you would like to alter, yet have chosen not to yet? Take a look at the health of the roots of your life and see if there is a step to take outside the normal groove. Individual change contributes to collective change that is reflected in our government and the world's too. Today, we have a birds eye view of the outer world and it points to the roots in each of us.

The Finger in the Dike

Greece is unable to get its arms around its debt which is 195% of GDP, including government, public, and corporate. The government debt which is 115.1% of GDP has been downgraded to junk status, which adds impetus to the downward spiral. This country is part of a currency union and cannot print money like the U.S. can to inflate the currency. It can only default by not paying on its bonds, where the U.S. can default through inflation.

Portugal is now on the radar of public discussion with its debt 236% of GDP. Spain, Ireland, and Italy are behind them. As we look at these European countries, we can see that collectively they are in the same boat and the only way to stay afloat is for the creditors to accept a loss on their investments in these countries i.e. mainly the banks.

We saw what still continues from the aftermath of the housing bubble. Foreclosures are still healthy and prospering. Fannie and Freddie, the two government mortgage firms are now offering to help homeowners to do a 'short sale' or 'deed-in-lieu-of foreclosure.' In other words, by continuing to modify the mortgages and have these incur over a 50% default rate, the government has figured out that it's a waste of time and money to continue in this manner. Helping the homeowner in these other two ways saves money for the banks than going the foreclosure route.

Now being discussed, and I agree, the next bubble that is well underway is the 'government debt bubble.' We can see it easily by looking to Europe. Yet it is right under our nose here too. The ripple effect from Europe, once it gains momentum, will be a catalyst for us to act sooner rather than later in stopping our deficit spending. The longer we wait to act, the bigger the immediate impact on all of us.

Credit Tsunami

Mr. Greenspan said he is in 'shock' at the failure of the credit markets and that he sees this as once-in-a-lifetime tsunami.  The free market scenario did not work according to what he believed to be the path.  Look at the reverberations of the world markets as ours whip up and down by the hour, hundreds of points at a time, with no consistent pattern.  We are definitely being shown how small this world is and how intricately connected we are.  I feel we are in a world nuclear storm and no one knows the way nor what the outcome will be.

Unfortunately, there is so much emotionalism and high panic levels that more sellers are in force than buyers.  I agree it is difficult to refrain from following the 'herd,' but if you can look out beyond the immediate to a year or two from now, there will be more visibility and I believe a turnaround.  

As you know I was opposed and still am to the $700B bailout plan.  I'm seeing daily how the federal reserve is socializing company losses, like the recent Bear Stearns loss, and guaranteeing debt holders of Fannie and Freddie.  This is going to expand to a level far beyond what has been currently funded.   

My primary sector of interest is the solar/alternative energy.  That groups has been hit harder than the financial sector, dropping as a group more than 30%.  Solid stocks like ENER, ESLR, FSLR, LDK, STP, SOL, SOLF, SPWRA, TSL, and WFR have touched below their 52 week lows.  What is happening is irrational and nonsensical given that I believe this group to be the next prime investment opportunity as the world seeks to find alternatives to oil.   

Use your current financial status to review your world and what is important.  Prioritize those things and act accordingly.  Know that whatever crosses your path is there for a reason.   Seek to understand the purpose of the experience and use it for your spiritual growth.  All lessons in the material are reflections to help us see inside ourselves more clearly and make changes that better our lives.