You Ask Me - Things Ain't Lookin' So Good

I will not spend a lot of time repeating what I am linking here from Bloomberg, but the bottom line is that corporate bonds are selling at spreads last seen when Lehman went under. Lots of jitters in Europe.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aU1fAD2hZxd4&pos=4

I tend to think the austerity measures will not work and the EU 3% cap on public debt versus GDP is toast. Governments need to spend some money in financial crisis so caps on spending should go by the way side - though I am the first to note that government support needs to be coupled with taking down and dismantling some companies, debt restructuring and such. We need to spend the money wisely. In any event, the PIIGS are on the spit.

Not the least of the problems in the EU is the new inability of companies there to raise capital. Seems no one is buying. Everyone is hunkered down.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aOMbAJVBGXhU&pos=7

Now this is a case where fear feeds on fear because no one wants to be left holding the bag, so folks will exit the markets before logic dictates simply because they expect others to exit before logic dictates. They want to be the first to the door, not the last. And so this spiral builds upon itself.

Generations Lost

I will have more to say about this in time, but I just want to note that I am totally ashamed that I have lived the generation where we undoubtedly will, for the first time in centuries, leave the next generation worse off. There has been increasing talk in the press lately how for the first time in hundreds of years we may leave the next generation worse off than us. This takes many forms. First, due to fast food, prepared food and our inability to cook food at home, kids today are expected to live shorter lives than us. Now medical science at great cost could avoid this, but the point is that our kids will grow up less healthy than us, largely due to diet and exercise. It is no secret that kids are more obese than ever and this is in no small part due to diets. And I have to wonder to what extent our population growth may be to blame. What are now increasingly large corporate farms are growing our food - vegetables, fruit and meat - on a massive scale using new chemicals and technologies. Call me crazy but I suspect from a nutritional perspective this is not ideal. Time will tell.

Second, on the financial front, we have royally screwed our children and grandchildren and for that I am ashamed. Our debt load in the U.S. and most industrialized countries is incredible, both on a corporate and individual level. In the U.S., when you hear stats, pay attention on whether they include unfunded Social Security and Medicare obligations. If they do not, ignore them. If they do, you will realize there is no way we can fund these obligations - especially with the current economic conditions. No question but that Social Security and Medicare will either disappear or be wholly revamped lower in the next 10-20 years. Two words to the wise: (1) don't bank on Social Security or Medicare being there when you retire and (2) plan for your kids and grand kids to have to endure what we have built.

Disclosures: None.