Friday, December 31, 2010

Musings for the New Year

Another year has come and gone. We have gone from the year that was called the “Worst recession since the Great Depression,” To “The Great Recession.” The price of oil is up to 90 dollars a barrel and silver just hit 30 dollars an ounce (Ben denied printing any money on 60 Minutes).

The debate in Congress for the coming year will revolve around jobs. Of course the new hires will be off shore where there are no mandatory health care insurance premiums to pay.

Look for a Congressional investigation of the retirement funds, CalPERS will be center stage. A lot of life insurance companies could also be in very bad shape; not many annuity models were built on a 2 percent return on equity.

Several States will run out of funds for operation. Technically they can’t file for bankruptcy but they will be insolvent just the same (a vendor or a citizen can’t sue a state for non-payment). You might have to wait 100 years to get paid. Of course that won’t stop several hundred cities from declaring bankruptcy and adding to the frenzy. This could lead to local governments outsourcing emergency 911 calls to India.

Nationwide, expect the median price of homes to increase -- why buy a starter home when you can purchase a McMansion for 20K more ---with low interest and nothing down government financing.

Several European governments could collapse or repudiate their debts; Greece and Ireland come to mind. The problem not fully understood here, is that the real wealth of these countries is their educated youth. These people will vote with their feet if things don’t change and emigrate to other lands.

Iceland’s repudiation of its debt is kind of like a cat walking in front of a chained dog (i.e. the Euro Union). Will the Germans pay to keep the toilets clean in the rest of Europe? This could become another tea party movement, a goose-stepping one on steroids.

The idea that big is better in business, kind of falls apart during bad times. Fixed costs and tight profit margins can kill you. The A & P Tea Company, one of the nation’s largest grocery stores just filed for bankruptcy. Look for several more big names to file for BK this year.

The commercial loan sector is exhibiting severe signs of stress. A lot of non renewable 2 to 5 year loans are coming due. Bernanke is going to have a rough time trying to wall paper over this mess. More debt to add to the residential real estate bank losses.

Congress will have to deal with Social Security and Medicare. The new medical plan will be called Shaft-care---the Democrats and Republicans will unite together and shaft the silver foxes.

Look for oil to go higher and silver and gold to drop in price. It’s a normal reaction when you need to raise cash. Sell the good stuff and hold on to the dogs hoping they will come back. In reality people should be selling the dogs for what they can get, while they are still worth something. Retirement funds will save the garbage because it stays on the books at cost. Of course Ben and the Banks do the same thing.

Tomorrow brings in the New Year. It will be time to figure out how much we owe in taxes for last year. Thank God that we don’t have to pay for everything that Congress bought, where would we get the money?

Have a Happy New Year everyone, and God Bless.

Copyright 2010 All rights reserved


dearieme said...

I thought I might punt on Norway and Switzerland.

dearieme said...

And pray that we're not facing a new Ice Age.

Jim in San Marcos said...

Hi Dearime

Ahh--can you re-word that in English?

dearieme said...

I thought that I might bet on.... make a speculative investment in .....

Anonymous said...

nice article, i liked many of the points you made but...

2011-2006 = 5 years and counting...

i'm sure you will eventually be correct but im not sure i will live to see that day.

Paco Bell said...

2010: Banks use taxpayer money to drive the stock market higher. 2011: banks are lying in wait for tha suckas to 'get back in' so they can dump and run.

I marvel at the casino we've become.

Thanks for the Best line so far of the New Year:

Thank God that we don’t have to pay for everything that Congress bought, where would we get the money?

I also liked Caroline Baum's New Year wish for the SEC; that they might prosecute somebody somewhere for something at sometime.

Wishful thinking methinks.

Happy New Year to you and yours,

Clueless Numpty

Jim in San Marcos said...

Hi Anon 3:01

Glad you liked it. As for the 5 year discrepancy, the Great Depression stated in 1926 with the Florida Hurricane and it was 1933 before it was labeled a depression.

From studying the Great Depression, the thing that surprised me when I read the day to day news of the time, no one saw the depression until it was in the rear view mirror.

March 6, 1933 was the start of the Bank holidays and at that point, everyone was in agreement, the economy was a mess.

Maybe my mistake was to make the assumption that with the increased speed of communication, this depression would progress at a faster rate.

The dots are so close together now, I don't even have to connect them. You could be right, it's going to take a tad longer, with Bernanke tinkering, trying to "save us."

Jim in San Marcos said...

Hi Paco Bell

Thank you for the ata boy.

I do think that the stock market is a casino, but only because everybody that should know better, is in the market day-trading thinking that they know what they are doing. The stock market mavens always talk about the money on the sidelines waiting to get into the market and it makes me chuckle. Even during the Crash of 1929, someone owned every share of stock in the market. In order for someone to get in, someone has to get out. Its when everyone wants to get out at the same time that you have a real problem. Nobody wants to buy in.

I don't see the banks in the stock market, when they can pick up an easy 20 to 30 percent interest on credit cards. That's where the real money is.

Caroline may get her wish, the SEC is investigating several hedge funds.

rob in ns said...

I read somewhere that Facebook has a book value of 50 billion dollars (American). ed. Our dollar is now worth more than yours which is pretty impressive because it wasn't that long ago that it was hovering around 60 cents. Says alot about current state of economy. I guess gossip pays better than mining, manufacturing.


frakrak said...

The situation has now moved to a crises of confidence in America!
Corrupt dealings, and the average Joe and Josephine are caught in the middle.
Jim do you remember back in the late 90's when the Chinese Prime Minister visited Washington during the Asian Crises? The guy (Deng)I think his name was left Washington beaming, a man that reportedly approached life with a poker face and never betrayed any emotion!
But he couldn't wipe the smile from his dial after that meeting. My guess is that he was handed the US industrial complex on a silver platter.
Capital knows no national loyalty, doesn't give a toss about international boundaries and will sell any or all down the gurgler for profit.
Your economy was given up to the competition.
Really when you haven't got the capacity to generate wealth to pay back debt, the hyper inflation/depression debate becomes a nonsense!!
Should have collapsed the whole box and dice in 2008, we would be coming out of this mess by now,
cheers said...

"Nationwide, expect the median price of homes to increase -- why buy a starter home when you can purchase a McMansion for 20K more ---with low interest and nothing down government financing."

Who the heck wants a McMansion anymore?!?

Jim in San Marcos said...

Hi S&P

Nobody really, but when you see the median home price jump, what you are seeing is a million dollar home selling for 300K.

The crap starter houses don't even sell, you buy up a tad and get a real home with Government Financing.

From statistical appearances, it looks as if housing is starting to come back. In reality, nobody is buying the starter home. The better value homes are being discounted drastically.