Look! The sky isn’t falling!

Why is the US Economy going in the toilet?
Greed! That one word philosophy has been driving the US economy into the toilet. Banks, Brokerage houses, US businesses and our politicians are being driven by Greed.
First , I am going to put it to you that the business hand shake means almost nothing anymore. A few of us “Old Farts” will still do business with a hand shake. But those of us who will do that are just looking at basic business. We are saying that if you want to buy my business you will be willing to pay a fair price with some negotiation.
I have a company I am selling right now. The first three semi-offers I received, wanted to steal the business. One of those businesses is now sliding and I expect another to go into the toilet as well. Why because they would not look at the reality of the situation. The business I am selling is recession proof and has orders coming in every day.
Let’s talk about big banks. National City one of the largest regional banks in the US is considering selling out because their entry into the mortgage business is not working. THEY ARE NOT CONSIDERING FIXING THE PROBLEM AND HELPING THEIR CUSTOMERS THEY ARE CONSIDERING JUST DROPING A “DIME” ON THEIR INVESOTORS. Why not fix the problem? Why not say we messed up, but now we know it and we will bite the bullet and fix the problem and try to make our customers whole? Why not?
Because that would mean that they would have to hunker down and try to make things work. It would mean that they were responsible for their clients, the homeowners.
Can their clients be treated fairly? Yes! Could they help themselves and their clients? Yes! Will they? Probably not. Because no one wants to admit they screwed up. They do not want to admit that they, like their customers, must change the way they do business.
Can it be done? Yes. Just look at the following. This program and this company can fix National City’s problem and the problem of many other institutions. The solution is simple. Just take a look:
True Foreclosure Prevention. LLC claims that the program they developed will reduce foreclosure rates by 60% and that is a proven fact. Here are the reasons why.
• The True Foreclosure Prevention program is a multi-week face-to-face educational program designed to help the home-owner facing foreclosure re-evaluate their lives so that they can live successfully in the current economy and get their obligations back on track.
• The precedent for TFP was developed by the Family Housing Authority of Minneapolis and St. Paul in 1995. Their pilot program had a 60% success rate and cost $3,300.00 per home owner. This program empowered 480 families out of 900 to save their homes, while putting their financial house in order.
• While $3,300 per home owner is far less that the $26,600 to $73,320 the Federal Reserve Bank of Chicago’s Consumer and Community Affairs division reported it is currently costing lending institutions to foreclose, TFP has been able to reduce this cost by more than 30%!
• The current cost to the lender, in the TFP 12-week educational program, is $2,250.00 per home-owner. This is based on 20 homeowners per class meeting once a week for 2 hours. If a lender’s foreclosure costs are just the minimum $26,600 they will have a payback with two saved foreclosures, and if they are average or the 60% saved level; then, the lender will have saved $319,200 and 12 home owners. This will create a very positive Public Relations image for the lenders.
• The lender selects the home owner mortgagees for the program. The lender, in addition to paying for each home owner’s tuition, is expected to offer certain additional incentives to the home owner.
• TFP assists each Bank to custom tailor the program to suit the Bank’s operating policies and lending guidelines.
• According to John S. Nevitt, Associate Director of the Louisville Metro United Way, True Foreclosure Prevention, LLC is the most comprehensive family based foreclosure prevention program he has ever seen.
• TFP is not affiliated with any bank, financial institution, realtor, financial planner or sales institution of any kind.
• TFP is a scalable program that can be launched in any community where a lender has 20 or more participating home owners.
If you know a bank that would like to be a winner. A bank that would like to show how the people of America can lead the charge to toward a new realistic conservative economy introduce them to True Foreclosure Prevention. http://www.trueforeclosureprevention.com
From http://www.boomershout.com

When in doubt: follow the money….Do what our beloved Corporations do when times get tough: take the cash off-shore so you don’t have to pay taxes and you can convert to stronger currencies. Business leaders and the wealthy are what they are because they are NOT stupid. Wealth WILL maintain wealth any way it can. Things will get much worse before they get better and the low point will be when those with cash come to town to start buying assets at pennies on the dollar: a new cycle begins. The time tested adage of ‘buy property when blood runs on the street’ is completely valid. The Vultures are waiting for the bottom.

Yes, the sky is still falling, it’s just that it will fall on the Middle class, and not the Bankers of Wall Street. Please stop lowering the interest rates.I don’t have a problem getting credit, I don’t want any additional credit, I would like a stronger dollar, so my savings doesn’t drop like a rock.

when you read the article below remember that last monday no one brought US T-bills.

The Decline of the Dollar: Four Torpedoes Headed Straight For the U.S. Dollar… Take Cover and Profit
by Frank Trotter, Special to Investment U

For as long as “money” has been in existence, there has been debate about its value. At one time, the questions were simple: Is the coin you offer gold (or silver, copper, nickel, etc.)? How much does it weigh?

From about 1280 until today, the “Trial of the Pyx” has been held in London to maintain confidence in the money of the realm. Test coins are stored in a locked box (the “Pyx”) and the multiple keys required to open this box are distributed to unrelated parties. At least once a year these parties gather to open the Pyx and test the coins. If validated, the Trial Court certifies that public and private holders should have confidence in the coins of the Mint.

Today, we freely exchange money that’s not backed by gold or anything else with intrinsic value. The dollar is merely “legal tender for all debts, public and private.” And the fact is, its future is grim.

There are four major concerns agitating the dollar’s current value and jeopardizing its future. Let’s look at each of them and see what you can do now to brace your investment portfolio for a potential decline of the dollar. There’s even a way to profit if the dollar slides…

The Trial of the Pyx for the U.S. Dollar

While we feel that the U.S. dollar is in a long-term downward trend, since 2002 we have felt especially that it was overvalued. And over the past four years it’s declined against most major currencies.

Today, in our own Trial of the Pyx, we have called in various “key-holders” to assess where the U.S. dollar stands. And here’s what they’re telling us…

Key-Holder 1: The Federal Budget Deficit

The U.S. is running a budget shortfall over 4% of GDP. And when it runs a deficit it needs to borrow money. You already know that foreign creditors have stepped up to the plate to buy U.S. Treasuries – and foreign holding now stands at over 54% of net outstanding federal debt (in 1985 this was around 15%). But at the margin it appears that foreigners have purchased about 97% of net new U.S. debt issued over the past four years!

The Federal Reserve conservatively calculates that this has lowered long-term U.S. rates by 1.5%, and many think much more. Additionally, the World Bank estimates that nearly 70% of global foreign reserves are in U.S. dollars.

Imagine for a minute that one of two things might happen:

Foreign investors reduce the number of U.S. Treasuries that they buy…or,
Foreign investors actually sell some of the Treasuries that they hold.
Our simple math leads us to conclude that rates will rise – perhaps abruptly, or the value of the U.S. dollar will fall, or both. What’s your bet?

Key-Holder 2: The Trade Balance

Hard on the heels of the Budget Deficit is what used to be referred to as the Trade Balance. Today, this is simply known as the Trade Deficit since it is nearly 7% of GDP and forecast to head much higher. Exports have been growing nicely, averaging 9% over the past three years as the impact of the lower U.S. dollar and global economic growth are felt. Unfortunately, imports have grown at a 12% rate and started from a higher nominal level.

The companion to the Trade Deficit is the Current Account Deficit, which also has to be financed for the books to balance. This figure explicitly requires investment from abroad, which has to come and at an ever-accelerating rate. With the drum beat of over $60 billion in net monthly financing, rates must rise or the U.S. dollar must fall to maintain foreign buyer interest.

Key-Holder 3: The Mortgage Market

Much has been written about the spending habits of the U.S. population. Collectively, we seem to feel that the good times have no end, that history no longer matters, and that housing prices will run upward forever. It is often noted that the savings rate in the U.S. has actually turned negative for the first time since the Great Depression.

One key companion to these well-researched topics is the growth in mortgage debt over the past four years. We already know that due to the artificially low rates of the Greenspan Fed refinancing of mortgages placed billions of dollars in the pockets of U.S. consumers. The data seem to show that much of this benefit was squandered on consumer spending, which does help to bolster the economy. But it has also severely expanded the demand for foreign goods. In addition, recent statistics suggest that as rates have climbed, spending is starting to drop.

But if the U.S. population was only refinancing, then the mortgage debt outstanding would stand level. In fact, over a period of time where there was net negative job growth and net negative increases in real personal income, mortgage debt outstanding has grown at an average rate of 12.41% over the past four years – around four times the current growth rate in GDP! But perhaps more important to this discussion, you may not realize that the mortgage debt outstanding dwarfs U.S. Treasury issues (yes, mortgages are that taller bar in the chart below).

In and of itself, that is unremarkable – private markets are likely to be larger than their government counterpart…

Enter our foreign creditors again. While they do not yet dominate the mortgage market as much as with government debt, there are signs that the influence is becoming strong.

IndyMac, a major mortgage bank was quoted in The Wall Street Journal in August 2005 as saying that between 10% and 20% of their sales were directly to foreigners, and how many more are bought on the secondary market? In addition, The Wall Street Journal also reports that China has made direct purchases of mortgages through an agency – here we go again. To put this in perspective: If 20% of the new growth in mortgages were purchased by foreigners in 2005, that volume of purchases would amount to about 100% of the net growth in the U.S. Federal debt that year.

Key-Holder 4: The Wild Cards

Taiwan
Iran
North Korea
Nigeria
Terror
How You Can Profit From A Decline In the U.S. Dollar

The Key-Holders have spoken, and in all cases there is a significant risk for U.S. dollar decline. Doug Casey is fond of saying that the U.S. dollar is headed for its intrinsic value. While we are in agreement in the long run, for the foreseeable future we simply believe that the long-term prospects for the U.S. dollar are down.

Investors should look at ways to hedge against the potential decline by considering holdings of foreign currencies and precious metals in their portfolio.

For currencies, successful investors have maintained a core holding of euros, yen, New Zealand and/or Australian and/or Canadian dollars, changing the weighting for each group through time and adding in special situations. Right now, we favor the Canadian dollar and the Australian dollar for higher impact.

Metals investors are buying gold and silver to hedge against market disrupting risk from global crisis, from the long-term impact of inflation on purchasing power, and to profit from changes in supply and demand patterns.

Preparing for hard times in the U.S. dollar is one of the smartest strategic moves you can make in your portfolio right now… before the debate over its “value” takes yet another negative turn.

All the best,

Frank Trotter

If the United States in such a desperate financial crisis why don’t we ask all the countries that we’ve provided foreign aid to pay us back. We have supported other countries long enough. Those country’s repaying their debt’s would ease the national debt and take some burden off of tax payer’s and help stimulate the economy.

Paul,

Didn’t you ask much the same question last week? I’m amazed by the crowd psychology that accompanies the volatility of the market. Yesterday it was if the bottom was ready to drop out. Today the market is rallying despite the fact that the “good news” is really not all that good. It only seems so because expections are so low right now that any signs of life result in another bout of irratinal exuberance. Tommorow may be altogether different.

The fundamentals have not changed that much in the past few days. The FED is limited in what it can do. You have said as much. When foreigners stop purchasing T-Bills then I want to see what happens.

Let’s wait a few weeks/months before we close the book on this bear market and the health of the economy. I don’t think we’re out of the woods yet.

The long term out look for America is very grim we no longer manufacture anything, nobody wants to buy our Treasury Bills (last week the Fed could not sell $180 billion of them) and in the next 5 years $5 trillion dollars worth of principle and interest are coming due on top of the $800 billion dollar a year National deficit.

Just what is good about things. There is no way the Fed is going to be able to meet increasing naitonal debt service the national debt coming due in the next five years.

What about total economic collapse doesn’t everyone understand. Just how is this country going to come up with 8 Trillion dollars in the next five years.

What the Fed is not telling you the banks are frozen not over home mortgages they are frozen over Treasury Bills that are coming due tomorrow and Fed can not pay them off.

Just wanted to address the remark about debt due to credit card over-extension. ONE ANSWER- get out of debt! Get an extra job, go through the line a MacDonald’s a little less often, buy OFF BRAND CLOTHING (that hurts the next generation’s thinking about what they are entitled to), etc. etc. etc. and put all that extra toward your debt! There are many debt consolidator businesses out there that are helping people to find their way out of debt in order to have more money at the end of the day! It takes determination, but millions have dug their way out of debt and are liging within their means and the economy is stronger for it!

Again I stand amazed, people, the markets are not just a set of numbers – they are companies that hire people like us! People like homedepot, J.C.Penny’s you name it, THEY are the market.

Yes the financial sector was a big part – but that is shaking out, if you keep blaming these rich dudes for all the problems you are having, you have missed it. When they start having problems you do not have a job!

I am so thankful today the market is rallying, if it does not LIFE WILL GET REALLY REALLY BAD! We do not have it bad – yet, oh we have our crunches, but live in Columbia, or Romania, or a dozen other countries who do not live in our economic brilliance – walk to work every day, or do like China and live in a government approved apt. with only one week a year that you can go home to your family! Or how bout living in a country where bombs fly, or like Columbia where Chevez is lurking at your door! We have so much to be thankful for, so much.

At this point all I can say is I’m speechless. I’m short the market because I know the economy is in rough shape, and is going to get worse, much worse. Yet the market completely ignores this. I had a sneaky feeling that one of the big banks was going to go down, and it happened!!! I thought if that happeed the Dow would fall by 500 points or more. And yet the Dow, incredibly, actually rose!!!!!! I absolutely do not get it. Then today Goldman and Lehman report terrible earnings, but since they beat such low expectations the market rose again! Housing starts fell, building permits fell, core producer prices rose, and the market says “we could care less…all we care about is the Fed rate cut.” Which, by the way, will only make matters worse by fueling more inflation that consumer can’t handle. A lower Fed funds rate will help the banks, but this isn’t a liquidity issue, it’s a risk issue. You can have all the money in the world to lend, but if you are so worried about originiating bad loans, and nobody wants a loan anyway because they are already overloaded with debt, it isn’t going to help. There is only ONE thing that is going to bring the economy back to health…only ONE thing, and that is a rebound in home prices, and that is going to take a couple years, at least. But if the Fed lowers rates, inflation expectations will rise, and so will Treasury yields and mortgage rates, which will make matters even worse for the housing market. When home prices finally do start rising again, there will be more opportunities for people to refinance, the toxic subprime securities will rise in value, banks will be able to “write up” these securities on their balance sheets rather than writing them down, people will start buying homes again, household wealth will rebound, job growth will rebound, consumer spending will rebound, corporate profits will strengthen, and stocks will turn upward. Until then, I expect more bad news on the economy, and in theory, stocks should go lower. But so far I have been completely right on the economy, and completely wrong on the market’s response. It’s a crap shoot right now…dip your toe in the water, and you’re bound to lose your whole foot!!!

Thank you for the BALANCED comment on the markets. What is a good rule of thumb in life is to maintain balance! When our body’s systems are out of balance it is called DISEASED. We have PLAGUES in our economic system which need to be diagnosed and medicated by the professionals! Death only comes when we ignore a problem and allow it to take over! I,for one, want to trust the professionals to give the proper MEDICATION to the problems in the ecomony and start implementing some PREVENTATIVE measures. Thank you, Mr. LaMonica, for avoiding the extemes and superlatives and pronouncing the death sentence when LIFE still can be found, if you look in the right places and listen to the right people! We have a LONG way to go, but I think we have a good start! HEALTH does not come overnight!

Touching on something else in the article, it seems to me that the housing market would improve if there were less new housing starts instead of more. My logic here is based on the assumptions that with lower building activity, there will be lower supply of houses, and therefore prices will rise. I understand that a rise in building activity can be viewed as a sign of confidence from builders, but can someone please explain to me why a rise in supply is good for the housing market in general?

Of course the sky is falling. The so called economy is powered (all are happy to remind us often) by consumer spending. The American consumer is out of money. Loose credit on the part of the feds wont change the fact that people have spent their houses, pegged the credit cards, taken on monthly obligations that eat up every $ of regular income and are paying more for food, fuel, and health care.

Help is on the way though. The fed will keep up its rate cuts, which will drive up prices. In part because it will drive down the dollar which will allow a return to actually producing in the US. Return of jobs of middle America. Return to a real economy.

It aint gonna happen at wall street speed though. Stocks have a long ways down yet to go.

The American consumer is out of money. Period.

There is such a disconnect from reality when it comes to the markets VS the economic outlook. The markets both jumped 200 points on Monday and today (Tuesday) YET we have just found out on CNN Money that wholesale prices are still increasing, lay offs are mounting, and the Fed continues such a loose money supply which all point to a recession ahead.

Also, the Govt. is continuing it’s corporate welfare by baling out companies (Bear Stern) while the little guy (You and I) are going to get screwed .

People- DON’T! believe the market upswings. These are NOT indicators of a rebound.

“Is the the worst finally over for stocks and the economy”? increasingly seems like two questions (stocks vs. economy). This AM the stock market seems happy with the drastic actions of this weekend, and a possible mega-rate cut. The problem is the other part of the question: the economy. It’s still consumer-driven and consumers are arguably in the worst shape they have been in for the last 30 years. It doesn’t matter how low lending rates are if people’s credit has been tanked by the combined effects of declining real wages, soaring prices and tiny savings.

The writer’s auto has 155,000 miles. But sorry, Detroit, I still owe on it and will not and cannot purchase a new one for the next two years at the very least. If forced to, I will buy a low end used piece of junk. Another telling sign – I shop at Goodwill and the clerks tell me donations have dried up for the last 3-4 months. No one is discarding anything; they are using things up until they are trash.

Wall Street can exhale it wants, but if Main Street is bleeding the respite will be short lived.

Yes, Yes, Yes Dear Mr. La Monica – the sky is NOT falling, Greed had to be shaken out, adjustments HAD to be made, but we still have more TIME!

Again, I am THANKFUL for Bernanke, He has stood on what he believed inspite of all the lions roaring against him. His ideas on how the banks can avoid foreclosure is brilliant – if they will listen to him. He does know his stuff.

Again as I said yesterday, Greenspan is the problem, He left this legacy, this horrible mess to mop up. Is it NOT interesting that he resigned when he did! He knew this was all coming down the pike – because HE did not do anything to prevent it. HE could have encouraged the banks be more responsible, He could have set in regulations when all this began to happen, but HE did not.

So for him to do his little speaches, AFTER he takes his money and runs – is a horrible thing.

I believe in the next ten years we will be thankful Bernanke is at the head. He is a man with a job that is overwhelming, he is going to have to bring us through white water waves that will take our breath away – a position that HE did not cause.

So thankyou for giving us hope today, and it is hope – the markets, big business, little businesses, all the way to the checker at the grocery store – needs hope.

I am from a small town, but I am a thinker, and I refuse to ever let panic rule me, because then I can not make wise choices – something for those in the market to remember.

One last thought, if the government would reduce the tax on all our gas – I understand it is about fifty cents on the dollar – that certainly would put money back into our pockets – hmmm.

Nobody knows about whether the worst is over for stocks in the short run, but for long-term investors, there are plenty of attractive opportunities with strong, market leading companies with attractive balance sheets and growth opportunities are trading with dividend yields at or north of where the 10-yr is trading. That is a buyer’s market for equities.