Get Used to the Negative News

It is almost comical that the headlines on Thursday were virtually the opposite of Wednesday. I wish I had copied and pasted the Bloomberg headlines Wednesday when the markets were up, but here they are right now:

• Asian Stocks Slump on U.S., Europe Unemployment, 7-11 Earnings; BHP Slides
• Yen, Dollar Advance Versus Euro as Stock Losses Increase Demand for Safety
  
• China's Zeng Peiyan Urges More Supervision of Reserve-Currency Countries
  
• Treasury Said to Start Distressed-Debt Program With $20 Billion of Funds
  
• Australia Facing `Full Brunt' of Global Recession as Exports, Lending Drop
  
• Lehman Minibond Offer Made by Hong Kong Banks After Outcry, Sing Tao Says
  
• Mukherjee May Increase Spending on the Poor in Indian Government's Budget
  
• Obama Calls Jobs Data `Sobering News,' Says More Time Needed for Recovery
  

Not exactly positive. Yet I have to say it is exactly the opposite of the way the headlines read just the day before. Oh what one unexpectedly negative jobs report can do. Don't ask me if it was unexpected by me. The occasional positive news is what has me off guard.

Seriously, until our debt load decreases drastically, on an individual, government and corporate level, I see no real recovery in place. And our debt load right now could take a decade or more - optimistically - to get back to normal, i.e. sustainable. I am amazed at how everyone seems to be willing to ignore our still record debt levels. HELLO!! This bubble was built on debt. With unemployment obviously on the rise how in the hell is debt at any level (as a percent of GDP) coming down. Sure government stimulus spending can counter it a bit, which explains most the positive headlines the past few months, but at the end of the day we still have to address and reduce the debt. And I might add the government stimulus is adding to our debt, not reducing it. Whether you like it or not, reducing debt will be very a long slow process despite what the government does. I personally do not see any sustained economic rebound until the debt levels are seriously reduced. Debt spending by the government could cause temporary rebounds up to a year or two but we will, IMO, slip right back, in no small part due to government debt not effective in replacing personal or corporate debt - it is still debt. You have to address the fundamentals and we are not.

The Unemployment Surprise

I highly, highly recommend going to the Calculate Risk link here. It has a picture of an office of the National Association of Home Builders in D.C. trying to sublease some of their space. Telling, very telling. But the real significance of the post is that unemployment is now the second worst since WWII. And the link has numerous significant links on unemployment, bank failures (apparently there were 7 last week and not the 5 I reported), personal bankruptcy filings up 40% YOY, and other not so positive data. Get used to it. I have to say, I suspect the rate of bank failures will be picking up significantly as this year progresses.

Government 125% FHFA Refinancing into Trouble

Undoubtedly the legislators thought the FHFA refinancing of up to 125% LTV was a good idea to help homeowners in trouble out. And undoubtedly it was pushed by some lobbyist or politician backed by some banks. As it turns out, in many instances this program helps the banks and screws the homeowners. For example, many in California may be trading a non-recourse loan (i.e. you can walk away and they cannot come after you) for a recourse loan and the banks make out quite well. Not exactly a nice deal for a homeowner obviously under water. Perhaps jingle mail is the better alternative to the government's latest plan. I want to know who sponsored this crap. They should be voted out of office.

This is not humorous. There are people who will unwittingly use this program and screw themselves. They will tie their lives to homes that could take a decade or more to recover in price. And this is what the government considers to be help for mortgage holders. This is really getting me upset. The government is not only mortgaging my children's future through all the stimulus, TARP and other alphabet soup programs but now it is screwing us with programs that mask themselves as benefiting those under water. We need some outrage here!!! Let me repeat, the government is selling our childrens' and grandchildrens' future (SIGNIFICANTLY) and it is doing nothing to cure the problem in the long run. Again, I am outraged!!! Come on people, get with the program and see what is happening. I am seriously concerned on the future for my children. Are you?

Disclosures: None.

Comments

[debtelim:]

The interesting part is everyones seems to be complaining about their debt issues but not actually doing anything. Waiting for a government solution isnt the answer. If each and every person hunkered down and took contraol of their individual debt issues it would be a huge start . Eliminatiing debt is actually a obtainable goal for anyone who at least have income, this does not seem to be sinking in for most and they will wait until it is too late to fix. The time to deal with this issue is when you still have a job, That is hwy I have decided to dedicate my resources to be the squeeky wheel, not enough people are taking the right action to correct their problems. Paying the amount of moeny we are in interest charges should be seen as a problem, time to STOP and work it out. I have spent many waking hours examing my customers patterns and always see the same thing, they are not applyinmg their funds correctly so their debt SLOWLY melts away. I would suggest that they do some heavy research or find a reputable to help them, the sooner you start the sooner you recover. Your financila future and our countries are at stake.
Good Luck

Jul 05 07:27 AM

[WS1835:]

Outrage?? Take control of their lives??

Not to state the obvious, but if Joe average was inclined to spend any amount of time thinking about public policy and balancing his check book, Washington DC would still be a swamp on the Potomac. Let's face it folks, the reason we have a huge debt and a group of 'almighty' politicians well on their way to establishing an bureaucratic aristocracy is because the average guy votes aprty line and doesn't bother to think beyond the soundbites leading up to election day. And in the few instances when the plebes do focus on a real issue for a moment or two (that is, something other than the next season of American Idol or the Sweet 16....) , they are generally so steeped in pop-culture propaganda that there is little or no understanding of the question. Let alone a reasoned answer.

At this point in time, one must honestly stop expecting responsible/productive behavior from the masses. For decades they have been trained to spend, spend, spend and borrow, borrow, borrow. When things blow up, the media spin puts the blame on some other politician and then goes on to promote the political cause du jour as the new solution. Even if in many cases (like today), the cause du jour is nothing but rehashed political dogma from two generations ago.

The only thing I have found surprising about the current remake of the same old political saga, is just how vapid and transparent the partisan punditry have been and how clearly the puppet strings are showing in regards to the current administration. The daily flip flop of headlines is one thing. But the continual effort of painting lipstick on a pig is getting old. How many 'green shot' articles have you seen in the last three months that start with 'the rate of decline is slowing' and some how try to spin that as a sign of recovery. Just ridiculous.

Jul 06 01:11 PM