First a little history, the phrase “perfect storm” originated with the 1997 book The Perfect Storm, and was cemented into most minds by the 2000 movie of the same title which starred George Clooney.  The phrase the perfect storm refers to the simultaneous occurence of events which, taken individually, would be far less powerful than the resulting combination of events.  Such occurrences are rare by their very nature, and any slight change in any one event would potentially lessen its overall impact.

Not surprisingly with all the turmoil in nature and financial markets recently, the phrase was awarded the top price by Lake Superior State University in their 2007 list of words that deserve to be banned for overuse.

Unfortunately, there is no better description today for what is going on in the economy and why it has become such a worldwide problem.  Headlines from today’s news and web sites show the obvious problems:

CNNMoney.com – “Big Three Plead for $34 billion from Congress.”
Wall Street Journal -  “Bernanke Urges Actions on Foreclosures.”
MarketWatch.com -  “Thirty Thousand Are Being “Right Sized” Right Out of Jobs.”

These are serious, and unless someone takes the reigns and owns up to the solving the underlying issues it’s not going to get better any time soon.  Some of you are probably wondering what that means, and that’s where my rant begins.  Everything I hear about lately involves handouts, buying worthless paper, and taking a loan that may or may not be enough and may or may not be repaid.  Not one article talks about putting people to work, improving our infrastructure, or investing these billions that we’re using in the bailout to build a better America.

We’ve lost our touch – America used to be an economic powerhouse.  Much of this was attributable to our military, but it also included our banking, manufacturing, technical, and pharmaceutical strengths.  Today we’re outsourcing, learning from other countries, and gambling on the future with derivatives and other crazy financial tools.  Major Wall Street firms are failing because they forgot the core tenants of business, including, don’t spend what you don’t have and don’t buy into anything that you don’t understand.  Many of these stoic organizations were quite literally gambling with your savings.  Through it all, the “rescue” starts with the people responsible for creating the catalyst for the downfall of the financial markets and bankrupting the average American.  They should be shunned and publicly humiliated for what they’ve done, and instead their cronies in Congress start by bailing them out and covering their losses.  These banks and investors are being rewarded for their own failures as the government not only offers financial salvation but creates a term for their spoils, toxic assets, so they can con scare Americans into believing that they’ve done the right thing.

The solution isn’t in these bailouts, and while there clearly haven’t been problems like this before, history tells us what might work to resolve this problem.  Instead of trying to buy banks out of this problem by covering their past losses, the government needs to put a “New Deal 2009″ program into place that takes from Roosevelt’s plan and initiates programs that will people people back to work, reform business and financial practices, and improve the American infrastructure.  Stop pork-barrel spending, wasteful government programs, and funding foreign countries and their wars.  Start helping states, promoting equality in foreign trade, raising money through duties and import taxes, and improve legislation to prevent financial companies from gambling with their assets and investor’s monies.

Frankly, I don’t think Bernanke (and obviously not Bush) are the people to drive this forward, and I am only somewhat hopeful that Obama will quickly get a solution in place, but I have to believe that something will read history and come up with some ideas that have worked.  It obviously can’t start with UncensoredRants.com, but my opinions can’t be alone here, either.  The average American has to use their voice and hold the torch for what they believe in.  Mine is lit – is yours?

Ranter

During this November 26 through January 9th morratoreum, both government controlled mortgage servicers will work to implement a new loan modification program that should allow them to significantly increase the number of loans that they will be able to work through.

“Freddie Mac is on track to help three out of every five troubled borrowers with Freddie-Mac-owned loans avoid foreclosure this year,” David M. Moffett, Freddie Mac Chief Executive Officer, said in a statement. “Today’s announcement … provides a new measure of certainty to many of these families during the holidays.”

The only addition that I would add to this is the obvious – what about the people that are on the brink of foreclosure and nto yet three months past due.  According to this plan they’ll still get foreclosed on starting again January 10.  Merry Christmas.

Ranter

Shoring Up the Economy

Experts are predicting that there will be somewhere between 3 and 5 million foreclosures next year alone. These figures amount to somewhere between 8,000 and 14,000 people evicted from their home every day. This is obviously not a small problem and with the continued acceleration of foreclosures it is very unlikely that it’s going to get better any time soon.  Something has to be done; the situation has gone from bad to worse and the world economy is now free-falling into a global recession unlike anything imagined before.

I’ve already expressed that Henry Paulsen is not able to help the economy and I believe that time will show he prolonged and worsened the problems that he/Goldman Sachs helped create.  I’m hopeful about Barack Obama coming into office because I believe that the world needs change and hope to empower the average citizen to help with improving the economy – to help the consumer believe.  Unfortunately, I don’t think that Barack Obama will be enough and that’s where I believe the United States (and the world as an extension of the US) needs a bailout/stimulus plan that helps stabilize the markets while simultaneously improving consumer confidence.  Some components should include:

• Clear, sustainable leadership. The Treasury Secretary of the United States will make a great point position for the foundation of these improvements, but ultimately I believe that the solutions will include a multi-faceted approach to solving this problem.  What we’ve learned from Paulsen is that one person is not enough – a team of experts with real world experience should be brought in to help resolve these problems.  This team should include citizens to articulate the problem, experts to analyze the information, and businesspeople that have shown they have the experience, perseverance and strength to enact and stick with their policies.  This team may or may include international members, because we’ve already shown this is a world problem, it’s going to take the world to correct and rebound.  This team will need have the power to act and consistently provide a uniform front.  This team must not put the interests of the banks and financial institutions ahead of the interests of the country and its citizens.
• The ability to let companies fail. I believe that many of the problems we are facing today stem from the fact that we, as Americans, believed were told that AIG was too big to fail.  The world has to accept that no company is too big to fail, and some companies should fail.  Those failures will bring pain, discomfort and financial losses, but, they will be controllable, calculable losses of investor’s dollars and not carried on the shoulders of the American public.  If AIG had filed for bankruptcy when this all began, would the situation be better or worse today?  I sincerely doubt they would be worse.
• The ability to succeed. One of the issues that keeps playing into this bailout/stimulus package is an unjustified urgency.  The original $700 billion was decided on virtually overnight – obviously without any foresight and based on the numbe of times Paulsen has changed his plan – without a real plan, either.  A plan needs to be created, enacted and allowed to succeed.  It took a long time to get into this mess, it’s going to take a long time to get out.  Let the experts and people selected to do this job do their job and then give their solutions time to work.  Too many people are looking/hoping for an overnight answer, some sign of the bottom, or an explaination – that’s not going to come without a plan and some time.
• Help for the consumer/homeowner. It’s obvious that many of the problems that exist today started with what are being called toxic investment or sub-prime home loans.  This is a small part of the problem – a very small part actually – but they show that the market didn’t deteriorate on its own – it had help.  Some of that help can in the form of fraud, but the majority came from greed, ignorance, and deceipt.  To change this, we are going to have to back up, start over and solve the problems within the foundation first.  This may mean letting some sub-prime borrowers who really can’t afford their home under any revised plan know the truth – they shouldn’t own their home.  At the same time help those people that are able to pay their home but can’t because they’ve lost their job, can’t refinance their loan, or are in a situation that was partially caused by the very banks that are now looking to take their home.  Let these owners recoup some of their losses from depressed home values from the companies that helped create the sub-prime mess.  Start there, do something quickly and shore up the foundation.
• A New Deal. The government is spending a lot of money, but unlike in previous times of crisis the money is only going to reduce the financial exposure some companies have created by making risky investments that they didn’t understand.  Some of that money needs to go to infrastructure projects, state projects, and other places that will create new opportunities, money and jobs.  This will include putting some money back into the states, propping up education nationally, and making sure that our cities and states aren’t going in bankruptcy in this volatile and unforgiving.
• Reduce government spending on frivolous projects and start reducing the deficit. At some point even the United States is going to feel the pinch of trillions of dollars in outstanding loans.  The consumers and  “average Americans” are already feeling that pinch as social services continue to decline nationwide.  If the government looked closely at “pork barrel spending” and reduced the unnecessary projects, the savings would be immense.  Even working through normal business efficiencies it’s obvious the government could save tens of millions.  I’d encourage our new administration to really look to business leaders to help so that it’s not simply politicians guessing what needs to be done.  Find someone that knows what it’s like to hit rock bottom and dig their way out and put that person on the team – they’ll tell you what’s frivolous, unnecessary or unlike to improve the situation.
• Stop the war. While reducing waste and frivolous spending is important, it’s also time to start looking at the two wars that we’re fighting and consider reducing our exposure to something more manageable, both logistically and financially.  It’s not up to America alone to defend democracy and at some point it’s time our country and government starts seeing the facts.  It costs approximately $341.4 million dollars each day we are at war in Iraq.  To put that into perspective – we’ve spent enough money on this war to provide health-care to 289,177,337 children for a year.  Where would you rather see that money go?  These costs do not include the 4,196 casualties that have been suffered since the war began – an incalculable cost by any measure.
• Pursue renewable energy and a reduction in global warming at all costs. I’m constantly amazed at how much talk goes into the arguments surrounding global warming and renewable energy while preaching “drill baby drill” comes from politicians looking to get into office.  Drilling for new oil is not the answer for anything other than how to deplete the worlds natural resources.  These things aren’t coming back and if we as a country and humans as a species don’t join together to protect our fragile ecology, it will not be their for our future.  Too many people seem to think that because this happens so slowly it doesn’t impact them or there’s nothing that they can do about it.  Absolutely untrue.  It does impact you.  It affects your life, your health, and your children.  The future is not about tomorrow, the future is about what we do today.

Obviously, I am not an economist.  I am not a statistician.  I’m barely an environmentalist.  I do not govern, fight wars, or influence great number of people.  I am a father.  I am an American.  I am concerned.  I want to know what’s going to be left for my children and theirs.  I want to know that the country and freedoms that I believe in so strongly will sustain in spite of the disregard that we have given them.  I want to know that people will care – about their rights, their country, and their future.

These words aren’t an answer to the ails of this world or even the problems that we’re facing today.  There is little more than my business and life experience to tell me that these ideas might have a hope of changing the economy or world for anyone.  These ideas are simply a starting point – an open dialogue for the readers of this blog and anyone who cares to share them with others.  It’s also my expression that we, as a country and through our government need to start somewhere.  We need to act.  Henry Paulsen’s 15 minutes of fame are up – it’s time to get moving – do something.  Now is a time for action.  From Paulsen, Obama and us as Citizens of this country.  Now is the time to act.

Ranter

Some experts contend, and I would assume that they are correct, that the 158 year old Citigroup is simply postponing the inevitible if things don’t change in the economy as a whole.  Of course, it will curb the ever increasing number of foreclosures, but until the underlying problems get resolved its impossible to know what the long-term benefits of this halt will be.

From my chair, the government’s bailout (still be referred to as only $700 billion) is focusing too much on bailing out the financial institutions, which isn’t going to help the economy or, as is becoming increasingly obvious, the average American family.  People can’t get loans, jobs are being lost, and there is a tremendous amount of fear about what is going to come next.  The Mortgage Bankers’ Association recently revealed that 4 million borrows are at least one payment behind and 500,000 are in the process of losing their home.  These are the people that should be benefiting from government intervention.  It’s not going to fix the banks or solve their problems, but it will certainly save homes and families while benefiting the economy as a whole.

Unfortunately, that’s a lot more work, and we already know how the government feels about work.  It’s much easier to sit back and help your cronies so you can keep your dead-wood-ass in office to continue bilking the American public of their hard earned money.

Ranter

Bernanke Tries to Decide What Next

The stock market volatile – imagine my surprise – but a recently headlined article on Marketwatch.com reminds us that consumers think it’s going to get worse.  Of course consumers think it’s going to get worse – the media keeps telling us it is going to get worse.  Even good news is buffered by some footnote as to why this is an exception to the bad that’s yet to come.  And if the media tells enough people, and talks about it long enough, eventually the American public begins to believe.  After all, if it can work for presidential candidates like John McCain…

So is the economy bad?  Yes, it’s terrible.  This is the worst thing that could have happened to America at the worst time.  It’s caused market upheaval around the world and some analysts think that it would be worse right now if we knew what to look for.  Fortunately, or not, depending on your view, the Wall Street shenanigans are as difficult to unravel as they were successful in their profiteering during the good times.  But, the media is missing something very important – we, as people and as a country, will recover.  And if history serves as a measuring stick, we will recover relatively quickly.

The good news is everywhere, too.  Gas prices are falling.  Homes are selling.  Interest rates, for those people that can qualify to get them, are historically low and overall it’s a great time to invest in real estate. If you don’t listen to the media.  If you listen to media you may as well put your head in the sand and call it done.

The media is talking about doom and gloom in the credit markets, extensive foreclosures and saying that home prices have dropped to the point where Americans can no longer afford to sell.  But, depending on how you look at things, the numbers might tell a different story.

Average home prices (based on sales) have fallen in the past few years, but not necessarily because the average American is selling their home for less.  It’s all tied together – home prices are falling because there have been more foreclosures and the banks need to sell these homes.  They need to get the properties off their books and into the hands of a homeowner.  They don’t have pride of ownership.  They don’t have a bottom price.  They don’t have any reason to try and maintain the market.  They are a business with an asset that they want to turn into a liquid asset – it’s that simple.  Banks need cash – not a place to live.

Now, is this bad?  Yes, it’s terrible, but it’s also consistent with curves that we’ve seen in the past and home values will return.  Adjusted for inflation it’s still a significantly better investment (looking at today’s market position) then the same investment in something like the S&P 500, not to mention that for most Americans it’s a leveraged investment that returns dividend in the form of a tax savings and a place to live.  No other investment out there can touch real estate over a long period of time – so I say it’s a great time to buy, and I think the media needs to start looking at the real pictures.  Present the facts, not the glorified grief that you’ve been handing out.

Ranter