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.

World and U.S. Debt Load, California Debt North Korea

My concern level has elevated after looking at some debt statistics here and worldwide. Notice the U.S. stock market keeps looking for more good news daily. This reflects no long-term up trend, given this view. Here are some numbers that we all need to be aware of:

* The U.S. government has $11.2T in debt which is 79% of GDP at $14.1T. Money is being printed to pay the interest on it. California doesn't have that option.

* California has sold close to $14B in bonds this year to cover the debt (this is only the for the first half), compared to around $8B for all of 2008. This state's credit rating is the same as Russia's.

* The emerging markets are paying less for insurance against debt default than we are overall. For example, Turkey paid less for this coverage than New York City for two weeks.

* The U.S. Federal government alone has a debt load close to the sum of 95% of the world's population. That is excluding the $47T in total public and private debt.

I think we are riding a debt wave of such magnitude that it is invisible to this country and the world at this time. It is beyond human comprehension. Yet we are all here to enjoy the ride depending on our attitude when we realize by looking at the rest of the world that we are over our collective heads. The statistics given here are an indicator of how far along we are moving.

Also, North Korea has indicated that it wants better relations with U.S., this coming on the heels of Bill Clinton's visit. I suggest that the way he used words was effective and either he should continue what has been started or someone needs to be coached by him. He knows the importance of psychology.

Profanity, Underwater, Commercial Bankruptcies, North Korea

There has been lots of talk about Treasury Secretary Geithner's profanity being intentional in front of Bernanke, SEC Chairman, Chapiro and FDIC Chairman Bair, to try and build power to force the independent regulators to go along with the administration's reform of financial regulations. I see this as a red flag and it is very important for regulators to stand on their own feet, hang onto their independence, and not bow to pressure. There has to be a check and balance. Also, to get from underneath this kind of forcefulness, all of the banks who took government loans need to repay them as timely as possible.

Commercial bankruptcy filings jumped 42% in July 2009 from a year ago. This is an area that hasn't fully been felt yet like the residential side. Foreclosures in this sector will increase and create a chain effect on companies who are in this industry and those who depend on it for their business.

Another troubling statistic is that 48% of homeowners are expected to be underwater in 2011. It's currently 26%. That is a tremendous increase and no one knows what the ramifications are going to be. Again, practice prudence with your way of life.

North Korea needs attention and knows how to get it; the most recent example by having Bill Clinton take pictures with the leader and bringing the journalists back. We need to be creative in using this behavior to align with our goal, removing the threat of nuclear weapons. I think we are still using the traditional ways that are obsolete now.

North Korea, China, and Tidbits

Fingers are pointing at North Korea for the recent cyber attack on South Korea and several different U.S. agencies; National Security, Homeland Security, the State Department, Pentagon, White House, and New York Stock Exchange. The news is that the software attack was successful with the Treasury Department and the Federal Trade Commission. I don't think we will be told the depth of the other successful penetrations because of national security. I am surprised that North Korea has this kind of enterprising ingenuity. The picture by the mainstream is that it is an impoverished nation and using the threat of nuclear missiles to get attention. Perhaps this country is doing a lot more behind the scenes while it keeps our attention with the surface threats.

China's behavior with its citizens is consistent with their communist system. It's a good reminder for those who only focus on the economic interdependent relationship we have. China has been around for thousands of years and our country only 233 years. We need to learn to look far ahead, economically, like they do and act accordingly. This is the biggest benefit that I see they can teach us.

51% of all foreclosed homes have had prime loans, not subprime. Yet all the news for the last couples years have blamed this on subprime and the associated actions from banks, mortgage brokers and so on. This statistic shows that as home prices continue to fall, more people who are underwater are going to walk again from their mortgage.

The market is getting close to testing the 8000 mark again. Watch the patterns that show us repeated cycles and invest accordingly.

Is There A Big Picture?

Reading about Iran's runner-up decision moved me deeply as he declared that he is ready for martyrdom and will continue that path. He called for a strike if he is arrested. Throughout history, there have been moments like this and they seem to be a sign of destiny at work. Loss of many lives have been the sacrifice for any significant change in a country. I see Iran as a leader for change because it is occurring from within the country versus a country like Afghanistan who is trying to change with the help of outside influences like the U.S. presence there. I think that permanent change comes ONLY from within, collectively and individually.

North Korea seems to be attempting to act on what its leader has said, like the publicized threat to Hawaii with its missiles. Again, I think destiny is showing in this country. The outcome seems unpredictable, but it gives us all an opportunity to look at our lives; be thankful for what we have and make changes in the areas that we are dissatisfied. The world is inundated with flux now. This is the perfect time to prioritize what is important and let the rest go, the material and nonmaterial. The impetus of the changes in the world are helping all of us go through this process, willingly or unwillingly. Stay present (this minimizes fear's control), follow your conscience (stand apart from the crowd), and act when you know that it is 'just.' Each of us is responsible for how we behave.

Update on North Korea and California Predicament

The youngest son of North Korea's leader visited China last week, all done secretly. Our president said today that we will not continue the pattern with North Korea where they can renege on the agreements after receiving aid. The energy is intensifying to allow enough pressure for a direction to be shown. All of the earth's inhabitants will be affected in some way by whatever the outcome is.

For over 20 years, California has missed the constitutional budget deadline and as a result has the lowest credit rating of all the U.S. states. With a projected $24.3B budget shortfall (each estimate has been too low), the money box is empty in less than 45 days. The difference now is we don't have the tax revenue to bridge the gap. I would not ever have imagine that the governor and legislature would be working on eliminating the welfare system. It is time for this state to come to terms in learning to live within fluctuating means, determined by where the cycle of the economy stands. Too many years have been spent by going 'full throttle,' regardless of the income, and making up the difference through debt. There is enough history to come up with a plan that will put this state on firmer ground, and that plan should include the repayment of the existing debt over time.

North Korea

The leader of North Korea has stepped up the rhetoric with his intimidating words. He said, "... the chance of a nuclear war are the highest in the world." The consensus is that he has enough material to make 6 nuclear bombs.

The U.S. is emphasizing the importance of being firm with the sanctions. Unfortunately, stopping any ships headed for North Korea because of suspected nuclear materials may be the catalyst to push him over the edge. As I said before, my opinion is that he has nothing to lose, and only cares that his son take over and have the full power that he does. It seems that we may be destined to participate in another war, and this one with someone who can annihilate millions of people, and poison the air for an unknown number of others. This may be the event that I referred to in the last blog that sets the stage to affect all arenas of our lives. If this occurs, we will be exposed to another level of survival in addition to the affects we have felt from the collapse of the world financial markets.

Things Happen in Threes

North Korea has renounced that its truce. originally established in 1953 with South Korea. Within the past decade it also abandoned this truce in 2003 and 2006.  I'm observing that this is the third time, but also that about every three years, this intention occurs. Given that the leader is priming his son for the top spot, I think that he will take whatever steps he deems necessary to transfer that power to his son.  He does not seem to have any concern for the well-being of his people at the survival level, so he is unpredictable. 

Some tidbits:

*  The dollar has lost 96% of its value since 1913.  Keep an eye on it to gauge how we are doing creating and managing the escalating debt. The lower it goes, the less stable we appear to other countries who buy it.  Also Standard and Poor reaffirmed our AAA rating as a country. What else can they do? So goes the U.S. and the affect on the world will be devastating.

*  There were 616,000 foreclosures in the first three months of this year, a record high.  Fixed rate loans represented more than half, where in the past adjustable rate mortgages were in the lead.  

*  12% of the homeowners are behind or in foreclosure.

We are all in this together. The 'bump' that I referred to before has yet to arrive.  I call it a bump because it won't take much given the momentum of government spending.

Perspective on World, Taxes, Drought

Looking at different corners of the world and noticing repeat events:

*  North Korea is no longer talking to South Korea and threatening to send off a missile toward Japan.  It appears that the conservative South Korean leader changed the policy and does not send in humanitarian supplies to North Korea.  When 'social stability' is in jeopardy due to survival needs not being met, there will be civil unrest and violence, either against the government or other countries.  China, Russia, and European countries are experiencing that now.

*  Russia and Cuba recently signed a partnership agreement.   

Having 3 individuals with tax issues who were selected to be in the president's cabinet is troublesome, especially with the implemented detailed screening by the president.   The fact that there were mistakes/errors and amended returns had to be submitted is okay.  But not paying the taxes until being asked to take a cabinet post is an indication of the level of integrity and ethics.  Taxes are the foundation of our government structure.  Back in my career days, I was audited about every other year so I am familiar with the process with the IRS.  What appears also is that the IRS did not diligently pursue these individuals to collect the money due as they do individuals like myself.  No one is too big or important to act outside the laws.  We all need to be treated equally or our Republic that our forefathers set up will be in jeopardy.  I am heartened that 2 of the 3 individuals withdrew.  My judgment is that all 3 should have withdrawn.

Drought is a key word again in California, like in 1977 and 1991.  We are moving into our 3rd year. Lake Shasta, close to where we live, is 31% of capacity.   It was 74% in 2007.  Percentages like this are reported in the lakes and reservoirs in this state.   In researching this historically, there were 'mega-droughts' that lasted 140-200 years around the time of 1100 A.D. and 1350 A.D. Data reviewed over 150 years ago shows that what we consider normal is wet.  The past 100 years may be the wettest in 1000 years.  Imagine if we are alive now to experience the beginning of another drought that will displace people and resources.  This subject could even overshadow our state's debt of $42B.