The Great American Workout

Congrats to Chip for taking such a dire subject and injecting a sense of humor and a bit of hope.



From our perspective at MoneyAssistant.org there is a ton of pain ahead. In addition to expected spikes in unemployment and further underemployment, tightened credit and higher interest rates, and expected deficits at all levels of government, housing and other asset values are continuing lower.



With an expected $2 trillion of consumer debt defaults over the coming year, many of us will either be in various modes of workouts with our lenders, creditors and governments.



There is much to fear out there in the business community. This is evidenced by continued severe tightness of credit markets, recent bond issues by some fairly solid companies at rates between 13% and 16%, the bond markets pricing in default levels of 12%+ (more than 1 in 10 large companies are expected to go bust), and corporate valuations that are at 60% of values just 12 months back.



Thankfully, Uncle Sam has put bailouts, restructurings, recapitalizations, and HOPE into the current language of our economic chaos (I refer to it as the Red Plague.) If they will expand the circle from Wall Street, Banks, Detroit, to include Main Street and its small businesses and the consumers/homeowners, we may all survive and be in better shape at the end of this ordeal.



See http://guruatmoneyassistant.wordpress.com for additional comments and thoughts.

Refer to http://www.moneyassistant.org for resources and additional information
About Economy
Read the Article at HuffingtonPost

The Great Depression, Pt. II

Great article.

Lots of risk and parallels, but fortunately (hopefully) different due to FDIC protection of depositors and fast government intervention.



See additional thoughts at http://guruatmoneyassistant.wordpress.com
Read the Article at HuffingtonPost

A Great Weblog of timely and entertaining financial news.

The author is right on target!!

With real unemployment continuing to rise, corporate and private bankruptcies spiking, earnings levels eroding tremendously, asset values tumbling, and credit severely restricted, the “tide” must first recede before it turns and begins to improve. Things are continuing to get worse. Thus, they can not, on average, get better. We must wait and then let the tide reverse.

In addition to coordinated intervention by the governments and cooperation from our financial institutions, we must be patient….
The challenge is to financially survive while being patient.

naked capitalism: Past Financial Crises Suggest Pain Far From Over

naked capitalism: Past Financial Crises Suggest Pain Far From Over

A Wish for The New Year

On December 15, 2008, Peter Zeihan wrote "Falling Fortunes, Rising Hopes and the Price of Oil". See it at:

http://www.stratfor.com/weekly/20081215_falling_fortunes_rising_hopes_and_price_oil

Stratfor is the world’s leading online publisher of geopolitical intelligence. Thus, it is an amazing source of real news and analysis.

Mr. Zeihan's article begins: Oil prices have now dipped — albeit only briefly — below US$40 a barrel, a precipitous plunge from their highs of more than US$147 a barrel in July. Just as high oil prices reworked the international economic order, low oil prices are now doing the same. Such a sudden onset of low prices impacts the international system just as severely as recent record highs." Please see it at the link for the full article.

My thoughts:
I would emphasize the tremendous risk economically, politically, and globally that severe volatility (both on the upside and downside, of valuations for energy, currency, food, labor and more) can and will present to the US and all global economies and cultures.

Though economically, the US will benefit from significantly lower energy costs and many, many other commodities which have inflated over recent years due to the the rising energy costs and the great speculation/investing in "hard assets", the risks to our way of life and our economic vitality are potentially greater.

The article describes the potential impact on governments and regimes, and the possible instability that will likely ensue, given human nature. Interestingly, I have been pounding the table with my equity investor clients on the reasons to purchase stocks in defense oriented companies, due to these very reasons. This article, plus the recently announced government spending plan, fully supports the strength of the sector and the essential need for continued development, irregardless of our incoming government's timetable for Iraq.

Interestingly, our financial leaders are extremely concerned about the potential for spiraling deflation. They have defined deflation as the deferral of purchases in anticipation of lower prices. From my vantage point, the deflation that we are currently experiencing is more of the reversal and undoing of inflation of past years. Additionally, in the economic studies I have read recently, the decline in current consumer spending has not been due to "waiting for lower prices" but due to the lack of money to buy goods and services within neighborhoods and communities throughout our country and in many places in our interconnected world. The volatility economically and emotionally of having significant access to money (through savings or credit) to having little or no discretionary spending capability should be an area of focus for our national and global leadership.

In this holy season, as well as this season of new beginnings, we all must be optimistic about tomorrow and at the same time pray for political, economic and social stability locally, nationally, and globally .

All the best for the New Year!