"Personality can open doors, but only character can keep them open." -Elihu Burrit
Drink Of the Week
Absinthe Flip Recipe
Ingredients
1/2 oz Absinthe (Deva)
1/2 oz Cointreau
2 tsp Lemon juice
1 Egg
1 tsp Sugar
Nutmeg Mixing Instruction
Shake ingredients well with ice. Strain into a prechilled Delmonico glass. Sprinkle nutmeg on top.
The economy is absolutely going to experience major problems over the next four years and possibly beyond. This is a recession that could could resemble the recession of the 70s - and it is hard to see a silver lining around this cloud, that for many people will offer misery. The Federal Reserve is called before Congress to provide reports on what the economy is doing and how the Fed is acting in the best interest of the nation. (Or something like that .) The decision that the Fed makes will and do effect everyone, in fact the decision made at the Fed have global implications. The main stream media always covers this event and play snippets on TV. The should just play the whole thing. The Federal Reserve decisions are as important as any election. The decisions and actions of the Federal reserve can make or break any political initiative, because the government always needs money to do things.
Below are links to articles from the last few years where the Fed is letting us know how thing are going to be and how programs are working. These are articles and not the actual Fed reports, but it makes one wonder about the clarity of the communication being provided and if the main stream media is competent in evaluating the facts before editor release the articles. Keep in mind that economists are trained to see the big picture and, one would assume, that the Congress would be asking questions of the Federal Reserve about long-term (5 to 20 to 50-year) implications of the current conditions.
These article below seem to indicated contradicting information or simply misleading information and, whether by intent or ignorance, the information is not helpful, if it fails to communicate the critical and dire truths about our state. The headlines below seem to contradict each other as do the articles, which indicates a grand problem in communication and that Bernanke of the Federal Reserve is being far (very far) from "transparent". Indeed it seems as though a good bit of double-speak is underway. The man is in a difficult position, indeed.
(For your convenience, these articles will open in a separate window.)
There shouldn't be this kind of confusion on a matter. when direct questions are asked about quantitative issues. While it is understandable for their to be disagreement on what the values mean, either the questions are not being answered in a straightforward manner or the wrong people are asking the question - what is the point of these kangaroo proceedings. How can the legislature and the citizenry assess the efficacy and implications of the Fed decisions if the agency in charge of making the decisions and analyzing the data associated with those decision is playing hide and seek with the information.
My take on it is this: With low interest rates (and the interests rates are low compared to 20 years ago) the economy should be roaring. But is not. This is not a bull market and the consumer driven portion of the economy is facing a real threat from lack of credit. Many households, particular those who have the sub-prime loans, will find their purchasing power further diminished over the next two years and the credit that they need to function under the system we have now wil be injured for 7 years.
Banks will be tentative about issuing credit. Banks need to be tentative, however, banks revenues are largely derived from repayment of debts issued. The banks need to issue debts, yet the interest rates as low as they are in a period of economic uncertainty and the recession that we are in (the signs are there) will make the risk vs. benefit associated with the lending, increasingly less rational. There is less to gain and the same amount to risk.
Neither the Democratic and Republican candidates are making a the economy the central issue. The Dems want to add a new entitlement program and reduce the amount of capital moving through the top of the economy, by rescinding tax-cuts and extending more healthcare to the public. (Which represent a great platform for acquiring the working class vote) and the Republican want to keep on marching down the same path.
A plan to issue a moratorium on foreclosure, simply delays the inevitable. If the government steps in to perform the bailout it encourages the same bad behavior to happen again and again and again. Take the example of the airlines and auto industry - the bankruptcy protections, negative feedback interruptions issued have not resulted in solutions to the underlying problems. The fed has performed a massive bailout for a number of industries by reducing interest rates an creating cheap money. The consequences of cheap money are what the Fed and the government are trying to contend with now and contribute to the rise in consumer prices for commodity goods and imported goods as well. Were it not for Wal-Mart many people would buy far less than they presently do - unfortunately Wal-Mart also helps them lose their jobs.
Something has to be done, but the somethings that are being suggested look like actions that will make the problem more severe when it fully returns. And, it will.
The last several months have brought bad news for the mortgage industry, primarily due to the subprime implosion, that threatens to take a few institutions out with it over the next few years.
Senator Clinton is talking about a moratorium on home foreclosures that would have some interesting market effects. I doubt however that it would do anything that would lead to a recovery in the housing market. A moratorium would only delay the inevitable and would probably do very little for seniors who are in home with very little equity and home owner who overstated there income to get into the property anyway. This is the group that represents the greatest problem.
There could be some good new however for reverse mortgage lenders and senior citizens that own homes with equity. The moratorium will slow the fall in the housing prices that always accompanies waves of foreclosures.
There are many companies out there that specialize in generating targeted mailings to the senior market and many of them have simple websites that have not been updated because they are so busy connecting senior homeowner 62+ years old with mortgage brokers that can help them generate tax-free income out of the equity in there home.
Targeted mailing is still a great business, particularly with older customer who actually read their mail and spend little time on the internet.
The Motley Fool is looking for the positives in this transition, they are advising that people stick it out and the article briefly discusses the impact of adverse feedback loops in the economy. The idea behind an adverse feedback loop is that a downward spiral can become self sustaining if there is a sell off in the markets combined with negative investor sentiment regarding making new investments. Kudos to the Fools.
If you want some more bearish news follow these links:
If I am a long term investor, I am going to look at Brazil, Russia, India and China and plan an attack on the new economy. Particularly with China, because China is a developing an educated professional service class, a powerful military industrial complex with the engineers to support it, is not currently engaged in any wartime action that threaten its ability to produce and distribute, and still has the cheap labor that is necessary to put other countries out of business. Remember, jobs were going to Mexico, until China got on board and was able to produce and ship products into Mexico with the same and often better quality.
China is building the infrastructure for a new world and is allowing the wealth to spread throughout its country and still has it currency artificially held down in value. China can make itself wealthier by selling off US securities and then unpegging its own currency and trading in that. China has the ability to become a dominant producer and a dominant engine of growth regionally. There is nothing better than an production based economy - long term it trumps a consumption based economy in most scenarios, because production eliminates debt, whereas consumption creates it.
By the way, get into commodities or commodity related markets rel="nofollow". Things that keep on selling and represent strong positions for the future. If you aren't in a position to invest in the commodities market - learn about them and understand why the money goes there and what they are. People will still need to eat and replace essential consumables. There is opportunity in these markets - look at the performance of gold over the last 10 years. The commodities markets are rising despite all the signs of US economic slowdown and this creates some problem in doing good analysis of the future, but betting against commodity markets in the near term looks like a bad bet.
As the laws are today and with the pressure there is in the US to remain competitive by developing young people with advanced degrees, it appears that there is room in the market for more accreditation institutions, particularly those that have experience professionals that are qualified to assess the ability of a school to teach.
The problem is that most school accreditation is built around how much can a school pay as opposed to basing the accreditation on how much can a school offer. All schools that back up the public representations about the institution with course and instructors that can deliver the product. The key is the educational product. Schools that can prove that they can provide the educational product should be accredited.
I recently spoke with the director of a new accreditation agency that aims to reduce the cost of school accreditation, while still verifying that the school provides the service it advertises. This is a real business and has collected a group of professionals who are not motivated by personal gain, but are motivated to help more American become educated professionals prepared to provide services in the new economy and stem the tide of job outsourcing in the United States. The value that this company offers will increase as time goes on, because they plan to move into the arena of financial aid and all schools approved through US Accreditation will be eligible for federal funding that will help increase the enrollment of the schools. This seems like a win-win for education. This is a new agency, but one that I will follow based on the sincerity of its ownership.
The US Department of Education is not in the business of accrediting school, which is surprising to say the the least, however, the private market has demonstrated a clear interest in doing this important work. This opens the door for accrediting institution to set up agencies and help the department of delivering the key product in its arsenal federal funds - our schools and students need to be funded. Although there is no magic bullet solution to the accreditation and education woes our country experiences, it is an important matter for anyone concerned about the welfare of the nation.
If you, your child, or a friend are going to attend a
If you are not afraid of recession, don't worry you'll get to experience one anyway. Whether you work pouring concrete patios or selling HDTV sets it will find you and let you know when it is here. The next president will inherit a recession and will have less tools available to correct the problem.
Can interest rates be lowered? Yes, but that will make the currency weaker and make the US treasuries less attractive as investment instrument. When the Fed Cuts rates it hurts the economy in a number of other places and just pushes the pain down the road.
Get Rich Quick Schemes. It would seem that the climate is right for get rich quick schemes to be be all over the market. As 75% of American households are currently considering a home-based business. This is not much of an indicator really, but more will take the leap if they lose there job or see that there is outsourcing in the tea leaves. There will be more incentive than ever to stop the pain. The problem is that fr most people a home base business, means a local business and unfortunately for most people that is a weakness. The get rich scheme manufactures will have a field day offering a quick fix with only an $400.00 investment or telling people that all they need is this $40.00 info pamphlet or to come to my seminar to get started.
Monster.com and Careerbuilder.com: Monster.com and Careerbuilder.com are ramping up their advertising - they can see the writing is on the wall and this is where there company makes the most money. Monster and Career Builder do far better when people are losing jobs and can't find jobs. When there is sever dislocaiton in the job market Monster and CareerBuilder will be king.
