We're number 1 - again

Yea team! Detroit is number one on yet another top ten (or whatever) list - this one for the metro areas in America where home prices have dropped the most. Read the story from Business Week at http://tiny.cc/lpDGS . I'm not sure whether this is good or bad. It's bad because so much value has been lost, but it's good because housing is now so affordable. Of course one has to have job to be able to afford a house and that's still a problem in Michigan where unemployment is now above 12%.

After a while it gets to be weary to read time-after-time how bad things are in the area where you live. Locally, we have the amusing Monica Conyers vs. Ken Cockrel battle over the Detroit City Council President's job to watch unfold. The ever popular wife of Congressman John Conyers is working hard to keep us all laughing. Throw in Oakland County's always-ready-with-a-quip L. Brooks Patterson and you have a Three Stooges meet the Keystone Cops movie waiting to be made. In business the daily drama of the struggling automotive companies plays out across our TV's and keeps us guessing. And then we have the Red Wings to keep us on the edges of our seats in sports. Of course the Lions are always good for a chuckle, too; but we're concerned about the future of the Pistons. So we have things to focus upon, other than just housing problems.

So, we're number one in housing value losses. Tell us something that we didn't already know. We're beyond that. We've moved on. We're ready for our recovery or our bailout or both. Next!

Get your hands out of my pockets!

There seems to just be wave after wave of really disgusting news coming out lately about how we, as taxpayers and average citizens, are being picked clean by the clowns who caused the mess that we are in right now.

Lately we have seen several TV and newspaper articles about the excessive charges and interest rate increases on credit cards. I read one article that took the position that it’s our fault as credit card holders that we aren’t profitable enough for the card companies, especially if we pay off our cards on time. They need for us to be late, so that they can charge us late fees and make money on us. Ridiculous! Last night on the TV news, in an interview, the credit card industry spokesperson said that they have had to raise the rates on cards so that they can make a profit, in order to be able to pay back the government loans that bailed them out. So now it’s our fault for saddling them with those nasty bailout debts. Outrageous!

Today I read an article that says that lenders are deliberately holding foreclosed homes off the market as a means of artificially holding prices up (www.tinyurl.com/c3hk8y). Of course this too was couched in “it’s actually good fore the consumers to pay more” terms by the banks’ reps. They don’t want to see us all suffer more by having to give them more bailout money, if the foreclosed homes market sees a price collapse. I feel better, knowing that they are looking out for my best interests by charging me more. Gee, I wish the government had thought of that – Oh, wait, they already did.

So here we are with some credit card rates as high as 29% and foreclosed houses so few that multiple offers are being made on them and it’s all out fault! We should flog ourselves or fast or something in penance for our transgressions. Obviously we are not to be trusted with our own money, so these helpful people will take care of us by taking it from our spend thrifty pockets and putting it to work for the good of America or at least for the good of the banks. After all, we’ve been told over and over that what’s good for the banks is good for America. And we’re all patriots, right? Come on, empty out those pockets for America!

Like ducks in the shooting gallery…

Did you ever see those cartoons where the shooting gallery duck get hit, falls over and then comes back up going the other way? That’s sort of like what our so-called leaders in Washington are like when it comes to things like regulating the financial industry.

Quack. Everything’s fine with Fannie Mae and Freddie Mac. They’ll get through this OK. Bang!

Quack! The Sky’s falling. We need to bail them out now! Bang!

Quack. We don’t need any more regulation of the financial industry. Bang!

Quack! The sky is falling! How did we get in this mess? We need more oversight of these unregulated banks! Bang!

Quack. Investors should remain calm. Lehman Brothers, Merrill Lynch and AIG have plenty of liquidity to see them through. Bang!

Quack! Bail out! Bail out! The sky is falling! We need a bail out immediately or the whole system will collapse!

Bang! You’re dead.

The best newspaper cartoon that I’ve seen lately shows our White House Bozo calling for taxpayer bailouts when Fannie and Freddie failed and taxpayer bailouts when the big investment banks failed and taxpayer bailouts when AIG failed and then looking befuddled (one assumes the cartoonist had no trouble with that pose) when the advisers said that now the taxpayer need a bailout. How true is that!

The really pathetic thing about all of this is that the same clowns who stood by and let this all happen are still there and now they’re in charge of getting us out of the mess that they helped create. I guess the only good news is that the pendulum has swung back to the “Do Something” side of the aisle, from the “Do Nothing” nothing side that it has been on for years. I’m not sure whether the “regulate everything and make everyone equal” crowd on one side of the legislative aisle is any better that the “regulate nothing and let the market work” crowd on the other side. There does not seem to be a “let’s find a reasonable, common-sense compromise” option in Washington any more.

So, like the ducks in the shooting gallery, we all cruise along.

Quack. I’m retired with a full pension and health care. Bang!

Quack! The sky is falling! The company just canceled my health care and turned my retirement into a lump sum cash payment. Bang!

Quack. I’m OK. I’ve got a good union job and seniority. Bang!

Quack! The sky is falling. My plant was closed and I was laid off.. Bang!

Quack! I’ve got a nice home in the suburbs. Bang!

Quack. The sky is falling and I’ve been foreclosed. I’m losing my house. Bang!

What the hell happened to America? Bang!

Hunker down or take action?

As I opined yesterday, these are calamitous times for all of us, caused mainly by the on-going financial meltdown. Predictions of even worse times to come, give one pause to ask, what should I be doing?

There is a natural inclination to hunker down, to take to the fox hole, or head under the table and cover one’s head and not to look up until the noise dies down. One is taught to run to the basement and hide when the storm comes and this surely is a financial storm if monumental size and potential consequences.

But, what are the alternatives? Well one could sell what you have left, go to Las Vegas and put it on a number at the roulette table. Or, one could cash out of the markets and take the cash and hide it in the mattress. Neither alternative sounds convincing as a winning strategy. But, perhaps this is not a zero sum game where there has to be a win or lose strategy.

There are times when “do nothing” is bad and could even get you killed – standing on the tracks as a train approaches come to mind; however, other times doing absolutely nothing may be the only way to survive. This may be one of those times. Running around trying to figure out where to move your money to avoid further losses may only benefit those who make money every time you buy or sell stocks (those same wonderful folks who work for the companies that got us into this mess to begin with). To my way of thinking that would be very much like market timing, which I have been repeatedly advised not to try.

Just about anything that you do at this point to try to make things better also has about a 50-50 chance to actually make it worse. So let’s all head to the basement and play a few rounds of Monopoly, which is the only place where we’ll have a chance to make money for a while. To those saying that you should be doing something; ask, “What?” Then spread a little salt on the floor and listen to the soft shoe routine going on in front of you. If the person telling you that is your broker advising you to start selling and buying a bunch of things; remember that he/she is the only one that will make money off those moves.

If you are still overwhelmed by the urge to do something; then gather up all your money and come see me. We’ll go out a buy a bunch of foreclosed houses together. You can get some great deals right now. You’ll feel better and I’ll certainly feel better, but your broker and financial advisor will be really PO’d. You can find me hiding in the basement.

Hitting the reset button…

America appears to be hitting the reset button big-time. Home values are being reset, stock prices are being reset, the very landscape of our financial markets is being reset. The big question which is still up in the air is “reset to what?”

Will we reset to the values and price that we had right after the 9-11 crisis or are we gong further back in time? The Dow closes below 10,000 today. Where are we headed? Will it fall below the 9,000 level? Will home values fall into the 1990’s or 1980’s levels? Where will we land?

Those are certainly troubling questions and thinking about the potential answer is even more troubling. I watched much of my retirement nest egg disappear in the bust following the Internet bubble. It took 5 years to climb back to near where it was before that event. Now in just days all of that gain is gone again and we start over; maybe this time from an even worse level – it hasn’t stopped falling yet.

When I was much younger and working at a good high paying job, I guess I wasn’t as concerned about such events, After all there was always time to earn it back and I was years and years away from needing it anyway. Now that I’m trying to live off at least a part of it (trying to earn a living at real estate has a way of doing that to you these days), it is of great concern to me. I don’t have the time to keep hitting the reset button and waiting out yet another financial crisis.

So it is with great trepidation that I watch the news of the market falling a couple hundred points last week and over 500 points today. Each of those points likely represents another bill that I’ll have trouble paying or a vacation trip that my wife and I can’t take. It’s already meant that I’ve got to patch up the old car again and try to see if it can go another 50-100,000 miles and I’m hoping that the roof can last an extra few years.

It was during the Lyndon Johnson administration that the term Misery Index was first used to describe how bad things were for the citizenry of the country. That index combined unemployment with inflation to rate the misery level of the country. Well drag that puppy back out, because this is getting pretty miserable; only now we'll have to have it measure a combination of loss of value in our stock portfolios and home values - the loss of our net worth. For many negative numbers will have to be used.

Of course both political parties will be trying to lay claim to being the ones that can change things and make it better. Getting rid of George Bush and his policies will already make it somewhat better (like pulling an impacted tooth); but, we’ll still have the infection of this financial mess to cure before we really recover.

So, let’s get on with the elections and hit the reset button and hope, just hope, that where we end up doesn’t leave us with another 5-10 year fight to get back to where we were just a year or two ago. I’m told that adversity and struggle build character, but I think I’m a character enough without any more of this – enough already!