DEBT, DEBT AND MORE DEBT- GET USED TO NEGATIVE NEWS!!

It is almost comical that the headlines today are virtually the opposite of yesterday. I wish I had copied and pasted the Bloomberg headlines yesterday when the markets were up, but here they are right now:

•Asian Stocks Slump on U.S., Europe Unemployment, 7-11 Earnings; BHP Slides
•Yen, Dollar Advance Versus Euro as Stock Losses Increase Demand for Safety
•China's Zeng Peiyan Urges More Supervision of Reserve-Currency Countries
•Treasury Said to Start Distressed-Debt Program With $20 Billion of Funds
•Australia Facing `Full Brunt' of Global Recession as Exports, Lending Drop
•Lehman Minibond Offer Made by Hong Kong Banks After Outcry, Sing Tao Says
•Mukherjee May Increase Spending on the Poor in Indian Government's Budget
•Obama Calls Jobs Data `Sobering News,' Says More Time Needed for Recovery

Not exactly positive. Yet I have to say it is exactly the opposite of the way the headlines read just yesterday. Oh what one unexpectedly negative jobs report can do. Don't ask me if it was unexpected by me. The occassional positive news is what has me off guard.

Seriously, until our debt load decreases drastically, on an individual, government and corporate level, I see no real recovery in place. And our debt load right now could take a decade or more - optimistically - to get back to normal, i.e. sustainable. I am amazed at how everyone seems to be willing to ignore our still record debt levels. HELLO!! This bubble was built on debt. With unemployment obviously on the rise how in the hell is debt at any level (as a percent of GDP) coming down. Sure government stimulus spending can counter it a bit, which explains most the positive headlines the past few months, but at the end of the day we still have to address and reduce the debt. And I might add the government stimulus is adding to our debt, not reducing it. Whether you like it or not, reducing debt will be very a long slow process despite what the government does. I personally do not see any sustained economic rebound until the debt levels are seriously reduced. Debt spending by the government could cause temporary rebounds up to a year or two but we will, IMO, slip right back, in no small part due to government debt not effective in replacing personal or corporate debt - it is still debt. You have to address the fundamentals and we are not.

The Unemployment Surprise

I highly, highly recommend going to the Calculate Risk link below. It has a picture of an office of the National Assocition of Home Builders in D.C. trying to sublease some of their space. Telling, very telling. But the real significance of the post is that unemployment is now the second worst since WWII. And the link has numerous significant links on unemployment, bank failures (apparently there were 7 last week and not the 5 I reported), personal bankruptcy filings up 40% YOY, and other not so positive data. Get used to it. I have to say, I suspect the rate of bank failures will be picking up significantly as this year progresses.

http://www.calculatedriskblog.com/2009/07/another-involuntary-landlord-and.html

Government 125% FHFA Refinancing into Trouble

Undoubtedly the legislators thought the FHFA refinancing of up to 125% LTV was a good idea to help homeowners in trouble out. And undoubtedly it was pushed by some lobbiest or politician backed by some banks. As it turns out, in many instances this program helps the banks and screws the homeowners. For example, many in California may be trading a non-recourse loan (i.e. you can walk away and they cannot come after you) for a recourse loan and the banks make out quite well. Not exactly a nice deal for a homeowner obviously under water. Perhaps jingle mail is the better alternative to the government's latest plan. I want to know who sponsored this crap. They should be voted out of office.

http://www.nakedcapitalism.com/2009/07/is-new-affordable-fhfa-loan-program.html

http://www.nakedcapitalism.com/2009/07/freddie-fannie-to-provide-125-ltv.html

This is not humorous. There are people who will unwittingly use this program and screw themselves. They will tie their lives to homes that could take a decade or more to recover in price. And this is what the government considers to be help for mortgage holders. This is really getting me upset. The government is not only mortgaging my children's future through all the stimulus, TARP and other alphabet soup programs but now it is screwing us with programs that mask themselves as benefiting those under water. We need some outrage here!!! Let me repeat, the government is selling our childrens' and grandchildrens' future (SIGNIFICANTLY) and it is doing nothing to cure the problem in the long run. Again, I am outraged!!! Come on people, get with the program and see what is happening. I am seriously concerned on the future for my children. Are you?

Disclosures: None.