New Era to balance materialism with other important aspects of life

We seem to be entering a new era. Expectations need to be readjusted. What lies ahead is a positive because we need to contract to balance out the excesses and sweep away the dead matter. I trust that delaying it through government intervention is to help us collectively be prepared. What may seem bad is a healthy cleansing and correction of our patterns so humanity can be uplifted. We can clearly see how the burden of debt affects companies, individuals, and so on. It's time to start to move away from materialism as the 'only' focus and allow a higher quality of life on a nonmaterial level. We can only see this new path by losing the material aspects that have controlled our lives.

The stock market is staying buoyant from company earnings exceeding expectations. Keep in mind they have trimmed their employee base to do this and the numbers are reflected in the unemployed. There needs to be a focus on the small businesses in encouraging them to take the responsibility in creating jobs. There are incentives to support this, but our leaders are moving in the opposite direction; still looking as to how the government can create the jobs.

The contraction of consumer spending is very good. Including savings as a part of our personal budgeting process is essential. We need to look at how to export more goods and services to consumers in other countries instead of relying on us to do the buying.

Deficit spending is on the increase as Mr. Geithner tells the world a strong dollar is important which means reining in our spending and increasing interest rates. We continue in the opposite direction. I know they are waiting for the right timing, but I think that when we arrive to what that is we shall see the error of our ways, and it will be too late in that we will have to experience the magnitude of that mistake.

FHA, the government controlled housing lender needs a bailout. Add them to the list with the others like FRE, FNM and so on that I have mentioned before. This is another marker to see that foreclosures and the housing foundation is still trying to find a bottom.

The FDIC has run out of money i.e. insolvent. They now have ordered the banks to 'prepay' $45B to keep them in business of closing down 'insolvent' banks. The banks with the biggest bill received the most TARP money. I look at this as a creative accounting action of the government borrowing from the government in an indirect way.

I'm smiling as I write this. And I'm glad to be around for this part of the world's journey. :) :)

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.

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.

Savings

I am very heartened that people are now saving money even though the stock market does not like it since consumers make up 70% of economic activity. In 2005 the saving rate was less than 1%, in 2008 it was close to zero, and to-date in 2009 it is at 6.9%, the highest since December 1993. Hopefully, since this recession has been more disruptive than previous ones, so that people won't forget once the economy gets back on track that they still need to save as a way of life. This action would help minimize the financial cycles that are part of the capitalistic system.

Inflation

GDP contracted, a given.  The Feds loaning and giving billions to the top banks, backing commercial paper and money market funds.  Banks holding the money, doing the opposite of the intention of $700B bailout.  How long has it been since it was shoved through congress with the warning that there would be a financial meltdown without it?  There's a credibility gap with the Treasury with them using the 'cry wolf' approach.

Everyone is focused on the trees as inflation moves silently through the forest.   I can see a headline on the near horizon:  The world struggles to contain inflation that has jumped into the double digits.  People would argue that commodity prices are falling.  I am looking at the massive printing of money to meet the trillions of spending set in motion by Congress and the Treasury Department.  And if we end up with a Democratic controlled House of Representatives, Senate, and Presidency, then the momentum will continue with deficit spending to rescue the 'American people.'  

The good news is the stock markets don't mind inflation because prices can be raised to offset it.  The bad news is the consumer's money is worth less unless they are receiving raises or creating money to meet or exceed the inflation percentage increase.

What I find unfortunate is that we have had a check and balance for the last 8 years with a Democratic controlled Congress and a Republican presidency, and still we increased our debt by the trillions.  It appears that regardless of who is in control, the same path is continued.  I know that, at the world level, we will reach a peak regarding the debt level because there will no longer be willing and eager buyers without huge interest returns.  There will be a point where the answer is 'no.'  That will be a good turning point and also a painful one for those of us who participate in the financial system; virtually all of us.

The Relationship of October with the Stock Market

October is being October.  What is happening is not surprising except that it is happening on a much larger scale.  The U.S. market only dropped 2% today.  The foreign markets are a different story.  Japan falling 952 points, the largest drop in 21 years.  Russia dropping 10% and stopping trading until Friday, and Brazil also with a 10% drop, and the beat goes on.  Raise yourself above the earth and all the activity going on here.  This is a time of global change.  It's starting at the top and will affect all of us individual inhabitants.  We need to be creative and look for new ways of thinking and doing in this world.  Obviously, for those of us living today, we are ready to face the challenge, individually and collectively.  With this approval of the $700 billion bailout, we knew before it would be more than $1 trillion.  Today, we loaned AIG double digit billions in addition to the $85B.  Then it comes out that this company spent close to half a million at a California resort to have a rest and relaxing adventure for their top insurance sales people.  This kind of excess is being exposed and will continue to keep the passion energy high to make sure change is permanent and not forgotten easily.  There needs to be a purge and it is underway.  Look at this as part of our history and the timing for a 'fall.'  I think the market will settle above 8,000.  By that time there will be much purging in places that we have not even imagined.  I appreciate your own thoughts.