Friday, March 20, 2009

Bear Market Rally and other thoughts

I haven't posted any comments lately because my mother died recently and I've had other more pressing issues to deal with. Having said this, life goes on and so does the economic downturn.

We've been on a pretty wild ride in the stock market since last September. With most of the movement on the DOW and S&P being of a downward nature, long term investors have had little news to cheer about recently. That is until the recent bear market rally of the past several days. Is this the bottom? I don't think so. Not a chance - no way.

My common sense tells me that with most consumers feeling like their financial stability is precarious at best, with about 8 million more mortgages set to reset to higher rates in the coming 12-18 months, with demand for goods and services still down 20-50% and with small businesses closing by the thousands every month, we haven't seen the end of this very deep recession.

With every passing day where businesses fail to get back on track, more pain gets created and the domino effect continues - forget the DOW or the S&P!

If you are working for a company that produces goods or sells services that rely on consumer disposable income for its survival, brace yourselves, it's gonna get worse for you. If you have work skills that are still in demand then make the most of it by saving more and reducing your daily expenses to build up a higher economic security buffer in case you do find yourself out of a job at some point. Deep recessions such as the one we are currently battling don't resolve themselves in short order. They drag on for years.

I realize that my predictions for a long lasting economic downturn are mostly negative but then again, so is the shape of the world's economy. The banks and financial institutions still have secrets they're keeping and the financial industry overall will continue to reel from irresponsible bets made over the past 8-10 years. Buckle up because we're not even close to getting out of the woods on this one. Be prepared to spend the next 3 years adjusting your lifestyle to new standards because I believe that it will take 7-10 years for the economy and personal wealth to recover from the trouncing the commercial and investment banks have spent a decade creating.

What do you think?

Wednesday, March 11, 2009

Can things get any worse?

Yesterday we enjoyed a near 5% increase in the value of the DOW. Big deal! Most people long invested in the stock market have lost 30-40 and 50% or more of their investment value.

Anyone that believes this is anything but a bear market rally, and a short lived one at that is kidding him or herself. Look around at any of the main economic indicators:

Home prices continue to drop as do existing home sales

New home construction hits new lows

Unemployment numbers continue to increase

More large companies announce massive job layoffs

Losses at Freddi and Fannie keep mounting - now in the tens of billions of dollars

GM could be forced into bankruptcy as soon as April

And the list goes on and on. Only when employment increases and once home prices have stabilized can we begin to feel somewhat safe again.

The rally in stocks might last a few more months as speculators try their best to regain their losses through shear manipulation but the house of cards will come crashing down again, I am sure of it. When it does, it will send consumers into a near panic as they realize how tough their lives will be for the foreseeable future. Hang on, it's going to be a scary ride.

What do you think?

Thursday, March 5, 2009

The End Of The World As We Know It?

Today the DOW index dropped another near 300 points. With no bottom in sight yet, what is the average American to think about the future?

Well we all know that the "lower the lows", the "higher the highs" right? The problem is that when we finally get to that magical turnaround point, there may not be many of us left standing to take advantage of it.

I've been through many recessions of varying degrees but like many of us, I worked hard all my life to reach a point where I became my own boss. Thirteen years ago, I founded The first couple of years were difficult as starting any new business can be. We experienced some highs and some lows particularly immediately following the 9/11 tragedies. The next few years were great for business and we were all busy making money

In late 2006, my business volume began waining. I wondered if this could be a sign of the beginning of a massive economic adjustment. The decline in sales continued and accelerated towards the end of 2007 and through the first three quarters of 2008. And then, WHAMO, the financial markets collapsed followed by even more dramatic and continued drops in the value of homes nationwide. Consumers were now maxed out and loosing equity and wealth faster than anyone could keep track off.

That meant near disaster for my company and for millions of small business owners during the last holiday season. The beginning of 2009 has seen the catastrophic decline in consumer confidence continue along with the dramatic slide in just about every industry I can think of .

Deep breath. So where do you go from here? If history is any indication, it could take up to a decade for our standard of living to return to 2005 levels. That means that we all need to re evaluate our priorities, tighten our belts and put away as much of our income as possible to weather the storms ahead. In the meantime, don't sweat your credit score. Put your money under your mattress and tell the credit card companies that as soon as you recover your losses, they can look to recover theirs. Put your family FIRST - not your creditors. Why? They're the ones singularly responsible for creating the deplorable conditions we'll have to live under for years to come. That's my story and I'm sticking to it.

What do you think?

Tuesday, March 3, 2009


The next time your credit card statement rolls in, just say no.

No to paying the bill. Just tell your credit card company that until they repay you the taxpayer, you want to renegotiate your own payment terms with them. Be specific: you want to reduce your monthly payment to say $25 or $50 and you also request that they not report you to the credit agencies as delinquent. If they say no (and I GUARANTEE they will), then I urge you to tell them to take their unsecured debt and write it off because you're not going to be sending them any more money.

After all, you'll never see most of the taxpayer's bailout money again. Don't kid yourself, these companies receiving the bulk of the TARP & TALF money (Citi, BofA, AIG) are BANKRUPT companies that will never bounce back from their bottomless losses. If you as a taxpayer are more concerned with how your family will survive and pay your rent or your mortgage or your electric bills, STOP sending these criminal enterprises your hard earned money.

I call these banks and insurance companies criminal enterprises because although they apparently broke no laws bankrupting the world's economy, they all lied to investors about the enourmous nature of their exposure to risky investments and bad loans. Six months ago, most were telling investors that their fundamentals were sound (kinda like John McCain telling us the fundamentals of our economy were sound, remember that?).

Well unfortunately for these executives, there are laws that govern what executives running publicly held corporations can or cannot say about the state of their businesses. It's simple, they ALL mislead us right up until the total collapse of the financial markets in the last quarter of 2008.

For this, they should all be prosecuted to the fullest extent of the law. Since that means that the SEC would be involved, I wouldn't count on this scenario playing out so:

The only way for you as a taxpayer to recover some of your money that's being dolled out to these criminal enterprises is to STOP paying them. After a few months of collection calls, they'll be willing to negotiate a lesser payoff of your balances. That's when you can make your best offer and potentially save thousands of dollars in principal and interest payments. Just do it.

What do you think?