Sunday, January 03, 2010

Is the “Recession” Really Over?

Let’s just lay things out in a very basic simple form.
1. Housing is underwater
2. Unemployment is high
3. The banks are in bad shape
4. The national debt is skyrocketing
5. Credit card rates are doubling
6. State governments are running out of funds
7. Congress has tripled spending
8. The consumer is broke
9. Fannie and Freddie need another 200 billion
10. The FDIC insurance fund is just about out of funds
11. The Federal Reserve owns 4/5’s of all the Treasury’s issued
12. Car production is way down
13. The stock market is up 20% from last year?????
14. Interest rates for home loans have never been lower?????

Then we have Congress trying to save the world from a financial meltdown. Not to mention unemployment benefits are now at 100 weeks. Banks are no longer foreclosing on homes that have been stripped. Congress has agreed to give Fannie and Freddie another 200 billion. The ”No upsided-down-homeowner-loan left behind” program is failing miserably. If you lied on your application to begin with, that problem is not going away.

I tend to agree the recession is over. From here, we start to feel the real pain of a full blown depression. My crystal ball has been fully functional with a miss or two since 2006, but in order to sell newspapers, you have to push the rosy outlook. People need to be told that things are getting better to cheer them up. Here's some "good news" from today's front page of the San Diego Tribune. The bad news is; there are a lot of people not buying into this. (Double click for a larger view)

Somebody lost an awful lot of money and it wasn't the homeowner with zero down. The San Diego tax base will also take a big hit.

The government's buy back of Freddie and Fannie real estate could be the straw that breaks the camel’s back. These government programs to get us back on track are like a hooker with VD—you get what you want today and end up getting what you hadn’t bargained for later. "Beware of Greeks Congressmen bearing gifts."


Ohio Loan Officer said...

OBama just held a summit with CEOs from the country's largest banks and Credit Unions asking them to start loosening up the money.

At the same time, new Federal Reserve and FHA regulations just went into effect that stifle lending even further. But you don't hear about that on the news.

It's like one hand doesn't realize what the other is doing.

And then these new regs---- it's painfully apparent that bureaucrats that have no experience with real world lending are the ones that designed them.

AIM said...

This article will show you if the recession is over.

From this graph, showing this decade's performance compared to the last 6 decades, I think it is pretty easy to see that it is "full steam ahead" for a depression.

Japan has had two lost decades and now we have had one.

Rampant greed and lack of ethics from our banking system plus ignorance, corruption and poor leadership from our government equals a devastated economy circling the proverbial toilet bowl.

More home load modifications and idiotic plans to stop foreclosures; Congress giving 200 billion to fannie and freddie; Bernanke now stating that this all had nothing to do with The Fed/Greenspan lowering interest rates; the healthcare bill; and all the other nonsense...

It looks like our government isn't going to stop until the whole thing is toast.

It's every man for himself.


Anonymous said...

"Let’s just lay things out in a very basic simple form."

And yet somehow the Dow levitates inexplicably above 10k.

NamesAreHardToPick said...

I love the crass approach of this country to problems. In good economic times, the people spend money. In bad economic times, the government spends people's money. Question: when do people and their government save?

Anonymous said...

Yeah, levitates over 10k. It is a bounce. Always is a bounce after a crash. It could last a while but will probably end in 2010. Why? There really isn't any drivers in place that would make corporate earnings go up. Plus, taxes and other government reg will inhibit business even more.

Stocks are doomed. If you made money on this rally in 2009 in stocks, I'd say be happy and get out. Stocks went up in 2009 but this was the worst decade for stocks in 70 years.

And US Treasuries are probably the next bubble that will implode.

Everything is crashed out or in danger of crashing out. No where to go as regards conventional investments.

This is all a facade, extend and pretend, government cover up and the intention to keep things afloat no matter what... print, spend and borrow no matter what to avoid the correction.

Asset deflation, stagflation, monetary inflation, maybe even hyper-inflation, lost decades like Japan's, depression (whether deflationary or inflationary). This is what is coming in some form or another, some mix or another, some sequence or another.

Prepare as best you can.

Tyrone said...

This should brighten your day, courtesy of Jesse's Cafe and Zerohedge:

Is the US Goverment Preparing the Lifeboats for the Next Financial Disaster?
"A key proposal in the overhaul of money market regulation suggests that money market fund managers will have the option to 'suspend redemptions to allow for the orderly liquidation of fund assets.'"

Jane! Get me off this crazy thing!!

Jim in San Marcos said...

Hi Ohio Loan Officer

You raise an interesting point. How can you loosen up lending without loaning to people that have no hope of paying it back? We got into the excesses of speculation from loaning to everyone who could fog a mirror.

An article I wrote a while back shows you what Fannie and Freddie may be doing A Dollar Down Moves you in. They are probably still offering no money down with cash back to first time buyers. The people in this example bought a motorcycle and a pickup and lived in the house for 9 months rent free and gave it back. The gentleman that gave me the paper work on this was mad as hell that his newlywed son and wife even qualified for the loan.

I think each hand knows what it is doing, and neither care about the consequences.

The concept that everyone ought to own a home is a joke. Without a large down payment, the bank is the real homeowner. That concept hasn't sunk in yet (and probably never will as far as Fannie and Freddie are concerned.

Thank you for your comments.

Jim in San Marcos said...


Thank you for the link.

Our government is beginning to look like a three ring circus.

It is very hard to plan for the future. Everything has a look of uncertainty to it.

I'm about ready to buy a dozen eggs and a sunlamp;>)

Jim in San Marcos said...

Hi Names are hard to Pick

Good question, the "and" is the qualifier there (people and government). My guess, is probably never.

Jim in San Marcos said...

Hi Tyrone

Thank you for the link

I don't think that government intervention in mutual funds will have much affect.

Here is a post of mine from way back on Mutual Funds. With 80% of them offshore, sooner or later the "investors" will realize that they have been sending their funds to a post office box. They have lost it all.

Jim in San Marcos said...

Hi Anon 1:26

I totally agree with you.

The Stock market may seem to be doing the impossible, but most probably the common man realizes the market is way to high and is shorting it, and big money can take an opposite position and eat him alive.

Once the shorts are all burned, the market could drop like a rock. It could be a real barn burner when it happens.

The shorts provide a downside brake to the market. They have to buy back to show a profit when stocks drop. If the market goes up, they have to buy back and cover their loss. Without the shorts, you hear terms like "air pockets." This means there are no buyers and the stock could drop a bundle.

Thank you for your comments.

frakrak said...

Hi Jim, Australia is by no means a significant player in this unfolding financial disaster. But it would seem we are making the same mistakes the rest of the world is making!

News just out from our Reserve Bank has highlighted just how short sighted government can be, as it would seem like yours:

They (the government) have radically cut back their first home owners grant ($21K) after released figures from our RB saying that personal debt has grown substantially this past year to a staggering 104% of GDP ($58K) for every man woman and child in this country. And not all the figures are in; the RB has figures to September and expects this to be revised to 108-110% once all the data is processed. The report has highlighted the first home owner’s scheme as a contributing factor to a massive bubble in the housing sector.

It would seem all you really need to bankrupt your economy is a duly elected democratic government and not aggressive trading practises from global competitors!!

It would seem there is no such thing as safe sex when the government is intent on “screwing” its citizens!

Have a friend in Israel that sends me quite a few links on this topic! I guess you have seen Alex Jones, “Fall of the Republic”? Not to sure if it is a recommendation to view it, but would recommend this one:

Anonymous said...

This blog exposes what is happening in a clear, logical fashion. Alex Jones flys off on conspiratorial tangents in the pursuit of increased ratings. I'm not sure we should associate the two. The Jones reader base is often intellectually challenged and paranoid.

Jim in San Marcos said...

Hi Frakrack

I disagree Australia is a very significant player. We are like twin countries with reversed seasons.

That link with Janet Tavakoli was 59 minutes--I gave her 5. So that didn't go too far, sorry.

We are all in the same boat, the world is losing faith in their elected officials. I can't for the life of me figure out how they were suppose to get us out of this mess. They dug the hole too deep and now they can't get out.

It reminds me of the grave digger joke where the digger dug the hole too deep and couldn't get out. A drunk staggers by and hears his call. "I can't get out and I am freezing." The drunk says, no wonder your cold, let me cover you up.

The point being, the solution is not going to be to our liking.

Iceland could be the key. They are about to tell the world to "Go Fish." It sure beats printing money and stealing from those that save their dollars.

I'll google "The fall of the republic" by Jones after I put away all of the Christmas stuff.

Take care.

Jim in San Marcos said...

Hi Anon 8:48

Thank you for the compliment.

I did google Alex Jones and he seems just as you suggest---in the deep end over his head.

Thank you for your post.

Rob in NS said...


I agree with Anon 8:48 as well. The best way to understand what is happening is to stick to facts. That's is why I enjoy coming to this blog. A little sanity goes a long way to ease my mind about what is going to be coming down the pipe. As for Alex Jones I have to admit that I visit his site once and a while but I take everything he says with a grain of salt. His reporting of news is similar to Nancy Grace's. Take a bowl of speculation cover with with a dollop of news and facts and presto. Dinner's ready. I suppose we are all guilty on occasion of simplifying the facts. If only it was that easy to understand what is going on.

frakrak said...

Hi Jim, Alex Jones seems to have quite the reputation for moving the facts a little to the left for a “slick production.” I did note the man uses some of the same “experts” Michael Moore has used in his epic on this topic. It is heartening to see the comments on this and the loyalty it has generated for your blog.

In eighteen months of google (ing) I have found only one other source that has the same ethic for the facts your blog has.

Being on the other side of the world we don’t get to see Congressional debates, enquiries, committees I viewed on the F.O.T.R. That to me showed a shocking contempt the leadership in your country has for its citizens, this was the part I found amazing. I have only the highest regard for the American people, and it would seem the American people need leadership that will reciprocate this regard. The American people DESERVE nothing less!

Unfortunately for Janet T, you may have had to suffer her consummate television persona for another 15 minutes before she began her explanation on toxic debt and its origins and the perpetrators, and the last 10 minutes she gave a considered view on how to cleanse the systemic failure in the banking system. The clip is about a year old and would recommend its cogent approach for beginners like me to get a handle on the terminology, best I have seen!!

To get this back on topic, I would like to make a comment on conspiracy, is there anyone reading this blog that does not believe there has been a conspiracy to mislead, defraud, the American tax payers out of billions … trillions of dollars?? The fourteen points you mentioned Jim, if you followed your governments propaganda on economic recovery would have you believe unemployment is 10% when the “facts” say it is pushing 20%, is this not a conspiracy to mislead? Owning 80% of all treasuries issued, have they told the American people this? Or do you have to google the Financial Times to get the facts?

One of Obama’s election platforms was to reform the financial markets and bring back accountability; we all know the team he has assembled to get this job done!! If this is a conspiracy can anyone put a suitable adverb to finish this one off? All the points you have mentioned in this post you have had your delinquent government distort the nature of their meaning and it takes a citizen of your GREAT country to go to blogs like this to pursue the facts …..

Jim in San Marcos said...

Hi Frakrak

I'll give Janet another chance, I'll turn it on and multi task for the first 20 minutes.

I don't think what the government is doing could be considered a conspiracy even though it smells like one. They are trying to save our bacon. An awful lot of homeowners sold their houses to deadbeats and took the cash and ran. The deadbeats are giving the houses back to the banks. The retirement savings of this country is where the loan money came from for these new purchases. The government is trying to paper this over and it will fail miserably, just give it time. The alternative is to tell the baby boomer's that all of their savings are gone. You know that's not going to win any elections!

As for Obama and his political platform, I don't even see them as players in the game. They can't cut spending (that is considered doing nothing), and increasing spending only makes it worse. In times of stress people look to government for help, and it is really the wrong place to expect real results. It is the private sector that will get us out of this mess.

IMHO, time will cure this situation, government programs just make it take longer.

How is real estate doing down-under in your neck of the woods?

Jim in San Marcos said...

Hi Rob in Nova Scotia

I know what you mean, it's a little like listening to Rush Limbaugh or watching professional wrestling. They know what you came to hear or see, and they get paid to deliver.

When you start hearing generalities like "All Republicans are . . . or All Democrats are. . .
You identify with the speaker.

It's kind of like me on a bad day saying "I can't do anything right." That is not true. I got up, got dressed, made breakfast and drove to work, so there is a lot hidden in how we perceive our own thinking process. Talk show hosts can feed on that.

I think you have hit upon something; we tend to over simplify things to make our life easier and we don't even know we are doing it. It reminds me of Pogo's cartoon quote, "We have met the enemy and it is us."

Throw a log on the fire for me, it has to be cold up there.

Take care

AIM said...

Gerald Celente says: current events predict future trends.

An American philosopher (I think it was L.R. Hubbard) wrote something to the effect of: just look at the current society and who are being the most ambitious (whether the bankers, the citizenry, big business, government, etc.) and that will tell you what to expect in the future.

So -- we see that current events is the government, follow Keynesian economic theory, is borrowing and spending and stimulating like mad in order to stop this deflationary correction. They will never stop this approach because no Congress or politician wants to have to tell the public "we've crashed, we're broke, we need to sacrifice and follow a major austerity program in the hope of salvaging this country". So Bernanke will continue to keep interest rates low, buy treasuries and mortgage backed securities and implement quantitative easing (print money and create credit) until he destroys the dollar. And Congress will continue to borrow, spend, create more and more deficits and get caught up in that dwindling spiral.

Consumers are saving and not spending; unemployment is 17% and rising (most jobs lost are never coming back); commercial and residential prices are only staying up due to government prop up; manufacturing and production are down; there are no fundamentals or drivers that will create future growth; we have a trade deficit; we have a huge and growing national debt; GDP "growth" is mostly all government and defense activity; etc.

So these are the current events and the investment bankers, Wall St. and big business are the ambitious ones.

Easy to predict the future really isn't it?

Deflationary spiral finally overcome by massive inflation that destroys the dollar. Easily a decade or two of recessionary/depressionary economy with no real growth. Tax revolts. Food and water revolts and riots. We possibly wind up in major war. US no longer the global super power.

AIM said...

Oops! Forgot the second part. So -- if these are the people the most ambitious at this time, then the future is an oligarchy and the government will be bent to its will. The power elite will ensure that all government actions favor them and the middle class, the average American, the taxpayers, the workers, etc. will get the raw end of the deal... they'll be TOAST.

frakrak said...

Figures for December show real estate values in most Australian capitals to be buoyant Jim, with a yearly growth somewhere between 3 and 4%. Building approvals for the past month have increased to a little over 5% (but has come off a very low base), most economic pundits are predicting a bubble with real estate courtesy of the Federal Gov intervention here.

The Reserve Bank aggressively cut rates over the past year, but the last two quarters is now raising rates aggressively, this has had its effect on curtailing “real” job growth with unemployment somewhere between 4-5%, but like your country’s rubbery figures, unemployment is suspected to be somewhere near 8% (a little cheeky but should we call this phenomenon the Obama multiplier?)! Some economists expect Australia may slip into a technical recession for the first quarter.

And here I go with the links again!!!, a good site to get this information is “Access Economics” they are a major consultancy here “down under.” Definitely “hogged the blog” this time, finally, I hope your president knows the difference between “saved” bacon and “smoked” bacon …..

Jim in San Marcos said...

Hi Frakrak

It looks like your country is holding up well. Your government raising rates is a good thing. Your unemployment seems more acceptable compared to ours, we are at about 20% (unofficially) or 12% officially.

I think when this mess ends, they will hang it all on Obama, and it makes me laugh. The poor guy happen to be in the wrong place at the right time. He's only been in office one year.

I am not sure as to "saving the bacon" vs "smoked bacon." There is going to be some butts smoked, but in this case, they aren't going to be pork.

Thanks for the links and the feedback. take care

Anonymous said...

There's a movement to radically change California government, by getting rid of career politicians and chopping their salaries in half. A group known as Citizens for California Reform wants to make the California legislature a part time time job, just like it was until 1966.