Any Good News Out There?

If you find some good news, please pass it on. Only thing I could find was that oil continues its decline, which is good for some, but not for all.

Throw More Money At It

Naked Capitalism has a nice piece pointing out that throwing money at the problem in the U.S. is perhaps not the right approach. She does make a valid point that pretty much none of the objectives of same have been achieved to date. Credit is still non-existent and households largely used their "stimulus" checks for savings (which I think was the right thing for them to do). I still think the infrastructure spending is a good move as we need it anyway and, if nothing else, we come out of this with some nice infrastructure improvements. We will spend the money either way and spending it now saves money as we employ people and do not have to pay unemployment/welfare/food stamps/etc. for same. So if it needs to be done anyway, now is a perfect time. Besides, labor and commodity prices are way low, so building infrastructure now makes abundant sense. More sense than giving money to corporations that created this mess.

Nonetheless, Yves - and the others she notes - make a valid point that great depression era ideas for the U.S. do not work today as we are in a totally different situation now than we were then. Back then, we were the big exporting country and were, in fact, too dependent on our exports. Spending money internally to build internal demand, and thereby lessen the dependence on exports, made sense. Now the opposite is true. Indeed, we are in this mess because we have been spending too much internally and a lot of that has been buying imports. The cure is not to spend more.

On the flip side, China really needs to be spending some money to try to build internal demand and lessen its dependence on its exports here and elsewhere. As I noted the other day, we are not returning to the economy we had the past few years anytime soon, nor should we, so China needs to get used to a world not as hungry for its imports. Sustaining growth rates above 9%, which it needs to supply jobs, is going to be very difficult.

Yves makes another valid point about the money we are spending on all the programs here in the U.S., which I have mentioned; things are going to get ugly when those supplying the dollars to us for our bailout decide to stop supplying those dollars. China is one of the countries doing so and it needs the money itself right now.

2009 is going to be very interesting indeed.

http://www.nakedcapitalism.com/2008/12/martin-wolf-says-big-stimulus-programs.html

Merrill Lynch Hard To Swallow - No $%@#

I am no expert at this stuff, but just studying some basic stats on subprime, Alt-A, CDSs and the like and I don't think you even need to see the books of the big financial institutions to know there is too much bad - unpredictable - stuff there to make them a wise investment. Yet the government has somewhat openly supported these toxic waste dumps merging together to move themselves from the too big to fail category to the too big to save category. And none fit better in the too big to save category now than Bank of America.

Well the Merrill Lynch merger is about to be finalized and it seems Lewis at Bank of America needs some Tums right about now. Let's see, MBNA, Countrywide Financial and Merrill Lynch all being acquired in the course of three years. Seems a bit much to digest. And now the U.S. has an institution that is the country's largest bank by assets, largest broker, largest home lender (after Feddie/Fannie) and the largest home loan servicer. You may ask how can they handle it all? I haven't the foggiest and it appears that they are starting to have their own doubts too. Be afraid, very afraid.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aB93nd4UXjvs&refer=home

They Listened!

I knew if someone of my stature said to stop giving Paulson money Congress would soon listen. Now turning off the TARP spigot seems to have bi-partisan support.

Let's rewind a bit. It seems to me just a week or two ago the Bush administration was going to leave the rest of the TARP money for the Obama administration to handle. Then this past week Paulson decided he needed to spend the rest in the 50 some days left before Obama takes office. Now Republicans and Democrats alike are not liking the idea because, it seems, no one is particularly happy with Paulson's erratic spending habits. Yes, it seems he changes his mind faster than a new born's diaper on how to spend it and the folks in Congress are having second doubts. Too bad they did not stick with their first doubts.

Seriously folks, Paulson is so clueless for someone in his position that it is embarrassing to our country. And helicopter Ben is not a whole lot better. At least Congress is now smelling the coffee. Dodd and Frank seem to be the latest to get the scent. I am not a fan of either, but so long as they are against wasting more money with Paulson, they have my support in doing so. Go for it!!

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCCnou4rggxg&refer=home

http://www.nakedcapitalism.com/2008/12/paulson-may-ask-for-remaining-350.html

Penny For Your Thoughts

The heading above has two meanings. First, I am happy to announce that due to people (both of you) clicking on my site I have made one penny with Adsense. Yeah! I don't think they actually pay me until I get to $100 and this penny took a month to achieve, so not time to pop the cork just yet, but about the time I retire I might be able to afford a cork. Anyway, if I was doing this for the money, you would have to be reading someone else's blog.

The other reason for the heading is that I would love to hear from you (yes both of you) on ideas, articles of interest, news, whatever. That is what the comments section is for. I got three comments one day and was very happy. I may have written one myself, but I am still counting it. Anyway, I would like this to be a bit more interactive, so shout out.

Colder, Colder, Coldest . . .

We hide treats from my dog and she really understands the hotter/colder statements you make to guide her to the treat. I wish that is what I meant by "colder." For a month or so now I have had a side bar on this blog about the gradual thaw of credit. And it did thaw for quite a while. I believe the LIBOR improved for well over two weeks in a row. I guess all good things come to an end, despite the money we might throw at them.

Calculated Risk has been following certain credit indicators and lately they have not seen much of anything positive. Rather, it seems some signs are pointing in the wrong direction. I have seen the same story in other respected blogs and, moreover, in the stats that relate to this. This is not a good sign. I consider it as much a symptom as a anything, but symptoms let you know when you are sick.

This relates to a broader, overall, not so happy feeling I have been getting lately. Okay, I know, gut feelings are not a very professional way to decide things, and I don't recommend going on mine. I had some spicy chili yesterday, and it could be that, but I am having this hair raised sense and it is making me uneasy. No, I am not talking another 50% drop in the stock market, though I still think we will see new lows next year (if not sooner), but my sense right now is that this recession will be significantly longer than I have been expecting.

Now there are stats to support my gut, and I have reported here on a lot of them - ARMs, China, Europe, CDSs, frozen credit and the like - but this is more based on not seeing the light. "Light" as in not seeing what is going to get us out of this. I think it is pivotal that housing reach a bottom. I am not talking a false government supported bottom, but a real housing- is-affordable-and-people-with-decent-credit-want-to-buy bottom. When we get there we will overshoot because credit will be too tight and the bad economy will keep people from being able to afford much, but we will and must get there. I am just thinking right now that this day will come in 2010, at the earliest.

When we get there, whenever it is, will that be it? No, it is a small beginning. What started as a housing problem has become a world-wide contagion. There are something like three or four economies in the world today (I read this stat earlier this week) that are doing fine, and they are not economies that matter to us. Anyway, the point is, globally we and other countries have massive problems to solve and so far the solutions are often worse than the problems they are meant to solve.

All this is a long winded way of saying Noriel Roubini may be right, or even an optimist. My sense is that he is seeing something somewhat worse than what he is describing. If you watch his interviews he cites a lot of statistics and he hedges his statements on how bad it could be, but he does indicate every time it could be very, very bad.

What I fear, and I am seeing little reason not to fear it, is that this recession will go much longer than we anticipate. I can see it going five years plus, seriously. And the longer it goes the worse it will be as more and more companies get to the point where they can no longer hang on. I am mixed on this. Flushing out the weak allows the survivors to be stronger, yet the flushing part can be quite painful, especially for the families affected. Frankly, I have no desire to watch things go sideways or south for an extended period, but that is my fear. Only time will tell. I hope I am wrong!! I fear I am not.

Some friends (CL) call me chicken little, yet I think they read my blog because this year the chicken littles have mostly been right, whether we like it or not. I guess my true test will come if I am Mr. Bull at the appropriate time.