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"Recovery" might look a lot like "stabilizing low."
Those of us who actively invest call this trying to "catch a falling knife." It's very painful. Don't do it.
A recovery is official after three consecutive quarters of economic growth, just like a recession is official after three months of economic decline. Of course, those called doomsdayers are proven right when their early calls of recession on are proven true. That's what happened in 2001 and what is happening right now. It's a cycle. The sky is not falling.
After the smoke clears (around 2012), those who haven't destroyed their credit ratings and reputations through carefree and irresponsible participation in this debacle will have their day. This bubble implosion is good news for young families, for savers, for the prudent who didn't fall for the "buy now or be priced out forever" mantra of banker-assisted financial suicide. The bubble collapse is, however, bad, bad juju for those that have overextended themselves, and whether they got overextended intentionally or not, the math is going to catch them short. Way short.
I agree with this, except for one thing. This paragraph very accurately describes both the pain AND the future opportunities if the housing bubble is allowed to deflate and sanity is returned to the real estate markets. What is so disturbing is that the Fed and the politicians seem absolutely determined to use "the hair of the dog" as the cure and try to re-inflate our way out of this mess. The very likely collateral damage from that could leave the US economy (and Colorado's) in shambles for a decade or more, and actually gravely undermine the national security along the way. Unfortunately, the electorate has become so used to expecting quick, simple "sound-bite" solutions that they are willing to elect representatives who appear more than able to sell the future of all of us down the river for some short-term pain relief.
I agree with this, except for one thing. This paragraph very accurately describes both the pain AND the future opportunities if the housing bubble is allowed to deflate and sanity is returned to the real estate markets. What is so disturbing is that the Fed and the politicians seem absolutely determined to use "the hair of the dog" as the cure and try to re-inflate our way out of this mess. The very likely collateral damage from that could leave the US economy (and Colorado's) in shambles for a decade or more, and actually gravely undermine the national security along the way. Unfortunately, the electorate has become so used to expecting quick, simple "sound-bite" solutions that they are willing to elect representatives who appear more than able to sell the future of all of us down the river for some short-term pain relief.
I agree that intervention would be highly likely to make things worse. But, that said, the Fed is about out of Schlitz...with inflation spiking up, any further easing will be even more disastrous for the dollar and will drive energy and food prices to the moon. They've already used up two-thirds of their treasury reserves to provide terminal life support to banks now seeing the consequences of their greedy imprudence...there's only ~$300B left in the kitty for them to trade for trash now...and much more of that action could incite a flight from treasuries that would spike the long bond into double-digit territory and increase the government's borrowing costs to the breaking point. Bailout plans that might try and rescue borrowers by putting a floor of some kind under inflated house prices ignore the fact that new buyers still would have to be able to swing supersize loans to pay the supersize asking prices. The age of kamikaze loans seems to have passed, as lenders are discovering that having borrowers that can and will actually repay their loans is, as Martha Stewart might say, "a very good thing."
And...the number of responsible borrowers, renters and homeowners without mortgages (about a third of all homeowners in the US don't carry a mortgage) is large enough that any bailout that involves an actual bill to the taxpayers stands a good chance of ending some lawmakers' careers.
So far, the Congress and the Treasury have been pretty skillful in appearing to be doing something without actually doing anything too harmful (or useful, for that matter). The "sound bites" so far give the impression of a Congress that cares...all good PR...and then leave the workouts as a matter between the irresponsible borrower and the imprudent lender. One can only hope for more of the same.
As PJ O'Rourke says, "be glad you don't get all the government you pay for."
Well, it's Friday evening. Oil is at a record price today, and the Dow shucked more than 400 points. Unemployment had the biggest one-month gain in over two decades. I'm eagerly awaiting what the "Don't worry, be happy" crowd has to say about that. I fear that we are reaching that point where events may start to take on a life of their own. Sort of like when a forest fire gets big enough that it starts to make its own weather.
While all of this was going on, I had to make a 40 mile roundtrip on business today--on a rural western Colorado US highway that is pretty popular with tourists. Friday afternoon--gorgeous day. I did not see one out-of-state car. Not one. I don't think I've seen that on that highway in 20 years or more. Draw your own conclusions.
Better to burst into song than to burst into flames, I guess...
Driving easy
Driving free
H-3 Hummer down in Tel-u-ride
Asking nothing
Leave me be
Taking everything in my stride
Five buck diesel
Visa's fried
Ain't nothin' I would rather do
Going down
Party time
My friends are gonna be there too, eh
I'm on a highway to hell
On the highway to hell
Highway to hell
I'm on the highway to hell
No stop signs
Speed limit
Nobody's gonna slow me down
Like a wheel
Gonna spin it
Nobody's gonna mess me around
Hey Bernanke
Paid my dues
Bankin' with a losin' hand
Hey momma
Look at me
I've got a mortgage on the Promised Land, woh
I'm on the highway to hell
Highway to hell
I'm on the highway to hell
Highway to hell
Mmm, don't stop me
No, oh, ouuuuuw
I'm on the highway to hell
On the highway to hell
I'm on the highway to hell
On the highway to Hell
Highway to hell
I'm on the highway to hell
Highway to hell
Highway to hell
Highway to hell
I'm on the highway to hell
Highway to hell
And I'm goin' down,all the waa-ay-aay, woh
I'm-on the highway to hell
Well, it's Friday evening. Oil is at a record price today, and the Dow shucked more than 400 points. Unemployment had the biggest one-month gain in over two decades. I'm eagerly awaiting what the "Don't worry, be happy" crowd has to say about that.
Actually, the "don't worry, be happy" is a good thing to live by. It has Biblical truths, as it mirrors the Bible verse "do not be anxious about anything..."
What can we do anyway? We can't change anything. Am I supposed to run around in misery and worry about the future? What will that accomplish?
All we can do is ride it out and do our best to plan for the future. Being happy and optimistic is best both PHYSICALLY and MENTALLY. Being worried and pessimistic is bad for your health and bad mentally.
What happened to the great mortgage clean up? Several houses in my neighborhood have sold recently. Hooray! Except that all of the buyers put less than 5% down. Gotta love those public records.
Actually, the "don't worry, be happy" is a good thing to live by. It has Biblical truths, as it mirrors the Bible verse "do not be anxious about anything..."
What can we do anyway? We can't change anything. Am I supposed to run around in misery and worry about the future? What will that accomplish?
All we can do is ride it out and do our best to plan for the future. Being happy and optimistic is best both PHYSICALLY and MENTALLY. Being worried and pessimistic is bad for your health and bad mentally.
Good thing old Noah prepared for the future.
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It has Biblical truths, as it mirrors the Bible verse "do not be anxious about anything..." 
