David Stockman, “How my G.O.P. destroyed the U.S. economy."

David Stockman, lifelong Republican and President Ronald Reagan's director of the Office of Management and Budget, wrote in a recent New York Times op-ed piece titled, "Four Deformations of the Apocalypse", or, “How my G.O.P. destroyed the U.S. economy." Of course, the New York Times or as I refer to them as, The Toilet Paper of Record - would fall all over themselves to publish anything this hyper critical of the Republican Party, but when a Reaganomics warrior the stature of Stockman says “ destroyed” and American Apocalypse” in the same paragraph, I listen.


Stockman is also equally damning of the Democrats' and their Keynesian policies. But what this indictment by someone so close to the development of the Reaganomics ideology says about America, helps all of us better understand how America's toxic holy war of partisan-politics is destroying not just the economy but capitalism in the process. Unless this war stops soon, both parties will succeed in their collective death wish for each other at the expense of our freedom and prosperity.

Why should we focus on Stockman's message? It's already lost in the 24X7 news cycle. We live in a nation where our current President thinks it’s vitally important to sit on the mid day gossip couch with a gaggle of imbeciles and talk about Lindsey Lohan, Mel Gibson and Snooky. Talk about dumbed down – America and its leadership is Snooky Stupid.



Ask yourself: How did this great nation lose its moral compass and drift so far off course, to where our very survival is threatened?

This nation has arrived at the tipping point. Although we have plenty of external enemies, they are no longer the real threat. We are committing suicide. Democracy. Capitalism. American exceptionalisim, the so called American dream. All dying. Why? Because of the economic decisions of the GOP the past 40 years, says Stockman.

While the economic policy of the Democrats have dominated congress the bulk of the last 40 years, and we know what those policies are because they haven’t changed in almost 100 years: a blend of Keynesian, Progressive and Fabian socialist tripe. But it has been the Republican blunders and their inability to counter the Keynesians and Socialists with a sustainable capitalist alternate that has us on the ropes. Stockman’s argument makes for a powerful history lesson, because it exposes how both parties are responsible for destroying the U.S. economy.

"If there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. “ One has to admire that statement coming from a true conservative pedigree like Stockman’s. Much of the substantive content of the so called “Bush Tax cut” stand to be lost in the argument that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase.

With the nation's public debt soon to reach $18 trillion, Republican insistence upon salvaging the 3 % to the wealthiest 5% seems absurd. Meanwhile the Democrats would throw away the Bush cut in capital gains, hurting every property /equity investor. Compromise? Not with the partisian death match being played out on the Fox News 24X7.

In the past 40 years I have been watching politics, traditional Republican ideology has gone from the solid economic principle of balancing accounts in government, trade and the banking system to hype and slogans. It was believed and practiced that prosperity depended upon balance.

Stockman says there's a "new catechism", making a mockery of traditional Republican ideals. He says that this amounts to, "little more than money printing and deficit finance, vulgar Keynesianism robed in the ideological vestments of the prosperous classes." Worse, it has resulted in "serial financial bubbles and Wall Street depredations that have crippled our economy."

Nixon dumping gold started the U.S. spending binge and gets Stockman’s ball rolling. I have spent a considerable amount of time studying the relationship between the gold standard and the decline of the dollar. Stockman assaults the Nixon's gold policies for defaulting "on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world." This is a sound point and as the history reveals, America has been living beyond its means as a nation ever since. Stockman goes further saying, "borrowed prosperity on an epic scale ... an outcome that Milton Friedman said could never happen when, in 1971, he persuaded President Nixon to unleash on the world paper dollars no longer redeemable in gold or other fixed monetary reserves."

In Nixon’s defense, he had to pay for Johnson’s Great Society somehow, and the thought of rolling back the wave of entitlements was politically unthinkable at that time. Nixon was a coward.

Milton Friedman: "Just let the free market set currency exchange rates, he said, and trade deficits will self-correct." Stockman remarks that Friedman was wrong by trillions. And unfortunately "once relieved of the discipline of defending a fixed value for their currencies, politicians the world over were free to cheapen their money and disregard their neighbors." Without monetary discipline America was also encouraging "global monetary chaos as foreign central banks run their own printing presses at ever faster speeds to sop up the tidal wave of dollars coming from the Federal Reserve." Yes, the road to the coming apocalypse began with a Republican president listening to a misguided Nobel economist's advice. Sound familiar? Every Democrat President since has had their favorite Nobel laureate as well. So much for the value of a Nobel.

Stockman says "the second unhappy change in the American economy has been the extraordinary growth of our public debt coupled with warmongering. In 1970, US debt was just 40% of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater. Blame? Not that the Democrats weren’t spending big at every opportunity, but Stockman points out with the 20/20 clarity of non-partisan hindsight that "the Republican Party's embrace of the insidious doctrine that deficits don't matter if they result from tax cuts" exacerbated a three decade long rise in deficit spending by both parties.

Traditional Republicans supported tax cuts, but they had to be matched by spending cuts, to offset the way inflation pushes many taxpayers into higher brackets and to spur investment. The Reagan administration's hastily prepared fiscal blueprint, however, was no match for what Stockman cites as” the primordial forces -- the welfare state and the warfare state -- that drive the federal spending machine."

As one absorbs Stockman's indictment of how the GOP has "destroyed the U.S. economy," you're probably asking yourself why any conservative like me believe what sounds like a traitor to the Reagan legacy.

Party affiliation is irrelevant.

Stockman exposes a dangerous historical trend where politics is so partisan it's having huge negative consequences.

Does the GOP have a welfare-warfare state mentality? The NeoCon GOP does. The NeoCons have pushing the military budget skyward. Republicans on Capitol Hill who were supposed to be about cutting spending, ignored most of the Democrat domestic budget, the entitlements, farm subsidies, education, etc and in the end it was a new cadre of ideological tax-cutters who killed the Republicans' fiscal religion."

When Fed chief Paul Volcker crushed inflation in the '80s there was a economic rebound. But then says Stockman, "the new tax-cutters hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts." By 2009, they "reduced federal revenues to 15% of gross domestic product," lowest since the 1940s.

Recently Bush made matters far worse by "rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures." Bush capitulated on domestic spending cuts, signing into law $420 billion in nondefense appropriations, a 65% percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy. Therefore: Bush was a tax cutting big spender and not by any measure a conservative, but a true Neo Con.

Wall Street enters a 'vast and unproductive expansion'. Stockman : "The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector." Anyone in business or even interested in business should have seen that Republicans have been oblivious to the hazard of financial markets flooding with freely printed money and deregulated of traditional restrictions on leverage and speculation. Wrong, not oblivious. Self-interested Republican loyalists like Paulson, Bernanke and Geithner knew exactly what they were doing and saw in the Democrat’s 2 decade long housing bubble just the means to the end they were seeking.

They wanted the economy, markets and the government to be under the absolute control of Wall Street's banks. They backed a foolish, left leaning power hungry Congress and Fed into bailing out an estimated $23.7 trillion debt. Worse, this bought and paid for congress have since destroyed any meaningful financial reforms by letting the banksters write the regulations. So Wall Street is now back to business as usual blowing another bigger bubble/bust cycle that will culminate in what Stockman calls the coming "American Apocalypse." When a character like a David Stockman uses the word Apocalypse, one better stand up and listen.

Stockman refers to Wall Street's surviving banks as "wards of the state." Finally I can disagree with him on a point: the opposite is true. Wall Street now controls Washington, especially the President. Unproductive trading is extracting billions from the economy with a lot of pointless speculation in stocks, bonds, commodities and derivatives. Wall Street banks like Goldman were virtually bankrupt, would have never survived without government-guaranteed deposits and what Stockman calls; "virtually free money from the Fed's discount window to cover their bad bets."

The New American Revolution; class-warfare coming soon says Stockman. Finally, thanks to policies of both Republican & Democrat, that let us "live beyond our means for decades by borrowing heavily from abroad, steadily sending jobs and production offshore," while "high-value jobs in goods production, trade, transportation, information technology and the professions shrunk by 12% to 68 million from 77 million."

As the apocalypse draws near, Stockman sees a class-rebellion, a new revolution, a war against greed and the wealthy. And he sees it happening soon.

The trigger will be the growing gap between the economic classes: No wonder. Stockman illustrates that during the last bubble (from 2002 to 2006) “ the top 1% of Americans -- paid mainly from the Wall Street casino -- received two-thirds of the gain in national income, while the bottom 90% -- mainly dependent on Main Street's shrinking economy got only 12%. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy."

Stockman’s bottom line: "The day of national reckoning has arrived. We will not have a conventional business recovery now, but rather a long hangover of debt liquidation and downsizing ... it's a pity that the modern Republican Party offers the American people an irrelevant platform of recycled Keynesianism when the old approach -- balanced budgets, sound money and financial discipline -- is needed more than ever."

Preaching to the choir here Brother Stockman, but I must admit that I am set back on my heals not by the message, but by the messenger.

But like messenger before him, will anyone get it? Most are helpless and would do nothing even if they could. They sit in the bleachers watching Snooky, sports and other bread & circus diversions. In fact, most Americans are so cynical that they just don’t care.

The politicians? They are now a class unto their own; the Political Class. They are so deep in the pockets of the Wall Street conspiracy that controls Washington they are part and parcel of the problem. The President on The View or their endless $100,000 a day vacations. Vacuous. Oblivious.

No, his message lost in the 24/7 news cycle, and even after final apocalyptic event, the next bigger global meltdown, the next Great Depression and through a historic class war, this deadly partisan game will continue unabated, just like a TV reality show.

A whack on the head, or the kick in the balls?

I'll take the kick in the balls!

And which will you choose Mr. & Mrs. Home buyers?
The whack on the head or the kick in the balls? How about both?


Just when you thought it couldn't’t get worse – it does.

When you thought that the mental defectives league on Capital Hill and their minions within the Beltway & On The Street couldn't’t possibly cause any more damage – they find a way.

When the entire housing market is teetering on the brink, when values are failing in what is rapidly becoming the double dip of the mother of all deflations, only this government could deliver a coup de gras – an insult to the intelligence, a mallet to the head – hell - I’ll call it what it is – a kick in the balls and call it anything other than a tax.

How about the whack in the head?

How? How about a new “fee“?

Be aware that the U.S. Treasury Department is considering a new mortgage fee to fund the backstops it gives for loans purchased through Fannie Mae and Freddie Mac.

Oh boy. Now you know why they left any reform of the mortgage giants out of the recent finreg bill. They had a sleeper in the wings.

Treasury analysts say the new “fee” may be up to 1.5 percent of the borrower's mortgage, which would be a big increase from the current 0.25 percent that both Fannie and Freddie currently charge mortgage borrowers. Plus, it remains to be seen if this new charge would be in addition to that current charge!

Why not two fees? Just call the original one an “origination fee” and the new one a “Mortgage Assurance fee” – or some other happy horseshit. Hey – don’t forget - once you have a new fee – you can always raise it! Hell – raise em both!

The Treasury also has under consideration breaking up Fannie and Freddie and selling pieces to the major banks, though most believe it will end up going with the fee. Hey – why not both!

So if you obtain a mortgage for $300,000 you could see an additional fee of up to $4,500 ... and the additional cost would just keep rising with the size of the loan.

How’s that for a reversal from the recently-expired home buyer credit!


Meanwhile, banks continue to significantly tighten their mortgage lending standards.

For instance, on June 1, Fannie Mae put into effect the Loan Quality Initiative (LQI), which requires lenders to pull two credit reports along with additional verification checks on potential borrowers.

That means even if you are initially approved for a loan, it can still be put on hold or cancelled altogether if you run-up credit card debts ... apply for other new loans of any kind ... or otherwise take actions that change your perceived risk profile before the mortgage actually closes.  Exactly what happens when people are trying to buy a house.
And it's worth noting that this initiative is mandatory — affecting practically every mortgage lender and secondary mortgage market product!

Therefore: (follow me here) This government, on one hand is now making it more expensive & harder to qualify for debt to buy something that on the other hand they say they want us all to buy despite the fact that this something is decreasing in value because,
there is so much of it on the market because
everyone is trying to dump it because,
it has become too expense to afford because,
there is already too much debt secured by it because,
the government wanted it to be cheap & easy to borrow because
they wanted a more egalitarian society by expanding property ownership, regardless the ability to pay.

Result, we are all poorer and hence more equal.
Guess the government got what it wanted.

How’s that for a kick in the balls?

A Dangerous Game of Confidence

I'm going to be very brief and get straight to the point:

Wall Street brokers, Real Estate Hustlers, their touts and pundits seem to think their dangerous con game can prevail despite a major decline in the real economy.

Well, I have news for them: They may have lured a few investors into this most recent stock market rally. But they're certainly not convincing the hundreds of millions of consumers and businesspeople who have to deal with the worst housing deflation, the highest long-term unemployment, and the most chronic credit squeeze ever recorded.

What? You need proof?

1st: Credit — one of the best barometers of consumers' appetite for spending. Either they can and won’t or can’t. Doesn’t matter which.

Compared to the prior year, new borrowing has now suffered its deepest plunge since the 1940’s.

In fact, this is only the second time in the past 60 years that we've actually seen consumers borrow less than they're paying back. The last time was in 1991; this e, the decline is more than TWICE as bad and lasting a lot longer. I don’t know what your doing but I ‘m investing in debt retirement rather than in new debt.

What about the so-called recovery? Well, there was none whatsoever in consumer credit. It has continued plunging virtually nonstop.

#2: Consumer confidence.

Every single survey — by the Conference Board, the University of Michigan, and others — confirm the same trend: Consumer confidence plunged massively as the housing market collapsed.

Then, it rallied moderately with the Obama stimulus package.

And now, it's suddenly suffering a new plunge ... and that spells trouble for the entire U.S. economy.

Ditto for small businesses. The National Federation of Independent Business (NFIB) just reported that its optimism index plunged to a low of 81 in March of last year, enjoyed a moderate rally, and is now falling again! The main reason, according to NFIB, small business credit is in a DEEP RECESSION.

All this is very obvious to virtually everyone in America except the denizens of Wall Street & inside The beltway. Beware. Be afraid, be very, very afraid of anything coming out of the Beltway to “help small business”. It will amount to another over-reach by government. Another form of takeover of private enterprise. It’s tough enough when you borrow from a regulated bank or a private equity “loan shark” like GE Capital. They want just a little bit of control in exchange for they capital. How much control will GovCo Loans Inc take?

Equally obvious, as I explained here last week, are the three main reasons for this great malaise:

The U.S. housing market is now locked into a chronic, long-term depression/deflation, with housing starts over most sectors in a disaster zone, exsiting home sales stalled, commercial equities in the danger zone and high value properties (over 5 Million) seeing unprecedented value deflation.

In just three years, 79 percent of America's largest industry, impacting more  Americans than any other, was wiped away.

Despite a series of government agency programs to shore up the industry ... plus $1.25 trillion poured in by the Fed to buy up mortgage-backed securities ... plus a big tax credit for new homebuyers ... housing starts perked up only a tad.

In fact, this recovery was so small, even after massive government efforts and even at the highest point in their recovery this year, the housing industry recouped less than one-tenth of its historic three-year bust from 2006 to 2009.

Worse, the housing industry has now resumed its decline with foreclosures rising sharply again!
Long-term unemployment in the United States is now the worst since the government began keeping records over 60 years ago.

A record 4.39 percent of the work force — or 46.2 percent of the unemployed — have been out of work for 27 weeks or more. That's DOUBLE the worst level ever recorded and TRIPLE the peak level seen in five of the past six recessions.

Plus, on average, America's unemployed have been out of work for 35.2 weeks, also the highest on record.

Most American consumers and business people clearly see all this in the real world. So they refuse to believe Wall Street b.s. and Washington propaganda. They are fed up and voting "NO" with their dollars each and every day. Do NOT fall victim to those who would lure you back into the same kinds of stocks and bonds that torpedoed your portfolio last time.

Buy down your debt. If you have anything left over, save it. Cash. Hard money, gold & silver. Pick your spot in real estate, but be careful! As The Will Rogers quote says: I buy Real Estate because they ain’t makin anymore of it” still rings true – it has to be the right real estate for your portfolio and there may be more deflation still ahead.

More about that next.

Comments, questions, dissagree - agree ?  

Graphs from Money & Markets

The Mystery of the "Great Disconnect"

We are living in the time of the "Great Disconnect".
Nothing reported, either economically or politically, seems to connect with reality. The reality of which I speak is of the look around you and the look it up variety. The reported cause never seems to line up with the reported effect. Most often, they are two completely unrelated events that are formed by the masters of spin into an unintelligible & intentionally misleading corollary.

Let give you a simple example using a recent event on the Dow Jones.

An investment newsletter to which I subscribe reported that on Monday, the Federal Reserve Bank of Dallas released its latest manufacturing survey. This wasn't old, stale data; this survey was conducted in mid-July. And the results were bloody awful, with the headline index plunging to -21 from -4 a month earlier. That was the worst showing in a year.

Yet the Dow Jones Industrial Average jumped 101 points.?

Now that jump was rationalized by reports that many companies were reporting good earning, example; FedEx boosted its 2010 earnings target and Harley Davison showed excellent earnings. But wait a minute: If you know anyone living in South Eastern PA, you know that Harley’s sales are in the tank. But they also have laid off over 1500 bodies in recent months – no wonder they have good numbers, at least for the nonce. As for FedEx, they can boost their projected earning all the want, but I ask; how many cuts have they made and from what direction are those consigned loads travelling? West to East, or East to West?

Or how about what happened a few days earlier? The ECRI ( The Economic Cycle Research Institute’s US weekly leading index) released its latest index report, and the results were dismal once again ... and I mean beaucoup ugly- slumping to -10.5 percent. I am told that is the worst reading going all the way back to May 2009. Every single time this indicator has slipped into double-digit negative territory, a recession has followed. Every single time.

Yet that Friday, the Dow kited another102 points. The reported rational? Honeywell and Verizon topped earnings targets, while companies such as Ford talked about a brighter 2011. Big DEAL. What did Honeywell & Verizon adjust or cut to eek out some earnings and “ brighter” isn’t any indices I would hang my hat upon, although I say good for Ford for surviving without the bailout.

You can get the disconnected spun bull on from CNBC all day long. Pundits claim investors are ignoring the bad economic news because things are about to turn, and because company comments should outweigh macroeconomic data.

Prosperity is just around the corner. There is light at the end of tunnel.

Companies, politicians, bureaucrats, real estate hustlers and those who tout them for a living, Can't — or Don't Want to , See the Train Bearing Down on Them!

If you were to climb into a time machine and go back to late 1999 and early 2000, you'd hear corporate executives waxing extremely bullish about their prospects. The heads of Cisco, Intel, Amazon.com, and many others saw nothing but rainbows and blue skies ahead. This continued even as all the leading economic indicators of the day began to slump.

What about a more recent example — say, in real estate or mortgage lending? You should go back and read the transcripts from 2005 or 2006. These guys were falling all over themselves talking about the new paradigm in housing ... the surging sales ... the soaring prices.

They continued to spout happy talk even as the underlying, empirical economic data and leading indicators began to roll over. Result: Yet another pasting for anyone who listened to the supposedly clued-in execs.

It's hard not to conclude that the corporate & political classes of America are full of liars, cheats, and charlatans. And in SOME instances, that's exactly the case. But more is going on here ...

For starters, corporate execs, especially the Real Estate Hustlers extrapolate too much from current trends. If sales are improving, say, because of the biggest government bailouts and stimulus packages in the history of the world, they tend to view the trend as sustainable. That forms the basis of their forward projections.         If sales fell sharply and they cut production (and payroll!) but were able to sustain current sales levels from already paid for stock inventory and with much reduced labor outlay – in these times of the “Great Disconnect” – that calls for a great earning report. The Harley Davidson spin is a fine example.

These are the lessons of Enron, Tyco, and WorldCom. Why haven’t we learned them?

But that tendency is precisely the most dangerous at turning points in the underlying economy!

Here's something else to consider: CEOs depend on positive market perceptions of their prospects. That's because most of these guys have thousands and thousands of company shares in their portfolios.

If a corporate CEO came on the phone during a conference call and said: "You know what guys? Business stinks, and it's getting worse. Better sell your stock ... fast!" what do you think would happen?

The stock would tank, and his or her personal wealth would evaporate. So of course most CEOs are going to talk a big game just like any politician or Real Estate Hustler

The U.S. economy is stuck in the mire. But overseas economies ... particularly in Asia ... are doing better. Multinational companies that have exposure to those healthier regions are temporarily able to offset their lousy U.S. operations with foreign strength. That was definitely the case with FedEx, to cite just one example.

But we need to Cut through The BS !

When I survey the economic landscape, I see:

• Consumer confidence falling to multi-month lows,


• Regional manufacturing indices falling off a cliff,


• Banks lending less money, and mortgage and consumer credit plunging, and


• Durable goods orders falling, and job creation completely MIA.


• Real estate sales at a standstill & values cratering –again!


• And a government hell bent on destroying wealth.

And against that, I hear plenty of optimistic comments from corporate execs/ politicians, /bureaucrats / reporters/pundits and real estate hustlers who stand to benefit by talking up their prospects.

They just don't match up to reality.

A Dead Cat Bounce: Your Real Estate Values, Employment Stats.& The Federal Reserve,

Dead Cat Bounce

In testimony before Congress last week, Ben Bernanke lifted the Fed's skirt and gave us a glimpse of the disasters now sweeping through the U.S. economy. 
To my knowledge, he was not asked nor did he volunteer whether or not a dead cat bounced, but there were 3 other bombshells he surely did NOT talk about.

 

#1. What's CAUSING the economy to sink?

The stock market has not yet crashed.

Interest rates have not yet surged.

Gasoline prices have not skyrocketed.

There has been no recent debt collapse, market shock, or terrorist attack.

So what is the invisible force that's suddenly gutting the housing market, driving consumer confidence into a sinkhole, and killing the recovery that Washington was so avidly touting in this Summer of Recovery?

Bernanke didn’t say but the answer is clear enough: The recovery had very little substance to begin with. Rather, it was a dead cat bounce!  An illusion bought and paid for with massive bailouts, stimulus programs, borrowing and money printing.

Put another way, the recession never really ended. Yes, we saw some growth in GDP. And yes, thanks to that growth, some companies are still reporting better earnings — the news that spurred a rally in the stock market last week. But at the core of the economy, the fires that started the recession are still burning intensely.

#2.The U.S. Housing Market Is Now LOCKED Into a Chronic, Long-Term Deflation

Housing starts — traditionally the most important measure of the housing industry — is still a disaster zone, despite the latest spin. If viewed beginning in January 2006, they suffered their worst plunge in recorded history — from an annual rate of 2.3 million to a meager 477,000 in April 2009. Thus...

In just three years, 79 percent of America's largest industry, impacting more Americans net worth & American jobs than any other was wiped away.

Then, despite a series of government agency programs to shore up the industry ... plus something like $1.25 trillion poured in by the Fed to buy up mortgage-backed securities ... plus a big tax credit for new homebuyers, housing starts perked up ever so slightly: They recovered to an annual rate of 612,000 in January of this year.

It took me a day or two to look up the numbers and fiqure it out, but this recovery was so small, it retraced just 7.5 percent of the prior fall.
In other words,
Even after massive government efforts, and even at the highest point in their recovery this year, the housing industry recouped less than 1/10th of its historic three-year bust from 2006 to 2009.
Worse, existing housing value has now resumed its deflationary decline.

The most alarming factor is that widespread reports of "strategic defaults" on home mortgages have returned.

These are defaults by homeowners who can afford to meet their monthly mortgage payments, but have deliberately decided to stop paying. Their home is now worth much less than they owe and recovery of value is nowhere in sight. They know their bank won’t or can’t get around to evicting them for as long as two years, (in many states), allowing them to live in the house cost-free. They also know this tactic can give them tens of thousands of dollars in extra cash. So they're defaulting en masse and getting away with it.

To add fuel to this fire, many sellers bought in on the bounce produced by the tax credit driven sales, believed they were seeing price stabilization and placed their properties on the market this spring, only to languish as those buyers dried up.

End result:
• Market inventories are once again ballooning as far as the eye can see ...
• Bankers who would rather cut their wrists than finance new homes, and ...
• A new slump in housing that's worse than even some pessimists were expecting.

#3. Despite his now-famous quote that this is "the worst labor market since the Great Depression," Bernanke failed to reveal that...

Official Government Data Continues to GROSSLY Understate the Magnitude of Unemployment
Bernanke did not mention that the percentage of long-term unemployed in America is the worst it's been since the government began keeping records in 1948. Two facts availalable from The Heritage Foundation's website:

• Fact #1:  46.2 percent of the unemployed — have been out of work for 27 weeks or more. That's DOUBLE the worst level ever recorded and TRIPLE the peak level seen in five of the past six recessions.

• Fact #2: On average, America's unemployed have been out of work for 35.2 weeks, also the highest on record.

Bernanke did not remind Congress that based on the government's own broad measure; the true unemployment rate in the U.S. is not 9.5 percent. It's 16.5 percent — or seven full percentage points more than the figure anyone in government ever refers to.

This broader measure includes workers seeking full-time employment, but temporarily settling for lower paying part-time jobs. Plus, it's supposed to also include "discouraged workers" — those who have given up looking for work because there are no jobs to be found. During the Clinton administration, discouraged workers were "redefined" to EXCLUDE those who had been out of work for more than a year — and that definition continues to be used to this day.

That makes absolutely no sense. If they're out of work for a year, they're discouraged. But as soon as they're out of work for a year and one day, it's suddenly assumed they're happily going about their life?!

Thus, precisely when economists now recognize that one of the biggest challenges of this Great Recession is long-term unemployment ... the Obama administration, both parties in Congress, and all U.S. government agencies continue to exclude the longest term unemployed from every single one of their unemployment statistics.

This could go down in history as one of the greatest deceptions about the true state of U.S. labor markets. And according to John Williams of Shadow Government Statistics, it's big: When you add these long-term discouraged workers back into the jobless count, you find that the real unemployment rate in the U.S. is actually 21.6 percent!

But no matter how you count it, some outstanding facts are absolutely self-evident:

FACT: The enormous magnitude of the government's intervention FAR surpasses anything ever witnessed in the history of humankind.


FACT: It's not working! Housing is still collapsed. Long-term unemployment is the worst ever recorded. And the recovery, already anemic, is aborting prematurely.

Bottom line: Dead Cats Do In Fact NOT Bounce. If you were counting on the government to prevent the second major leg in this great double-dip recession, don't hold your breath.
Your Action: If you are a real estate seller, time is of the essence. Shortening your time on market is more important than ever. The need for aggressive, market capturing marketing is paramount. If you are in the position to accept current market value, the competitive bidding format and time defined nature of auction marketing may be right for you.

Real Estate Catastrophe! Or Real Estate Hyperbole?

BREAKING NEWS: The industry that triggered this great recession in the first place is coming apart at the seams ... AGAIN!


The U.S. Commerce Department just reported that all the gains made in home-building activity since last October have just been wiped out — construction of new homes and apartments just fell off the cliff:

Between May and June, new housing starts plunged 5%. That’s an absolutely astounding annualized rate of decline of nearly 50%.  At this rate, HALF of all home construction — and construction jobs — would vanish in a year!

Plus for companies involved in building condos and apartments, things are even worse: Their activity plunged 19.3% IN A SINGLE MONTH!

Bottom line: This could NOT be a more serious blow for the U.S. economy. After all — it was the housing bust that drove foreclosures sky-high and pushed our largest financial institutions to the brink of bankruptcy in the first place.

OR? NAR economist expects stabilization in 2010

The National Association of Realtors’ chief economist, Lawrence Yun, Ph.D., told his constituency at the NAR convention here that the national real estate market should stabilize in 2010.

He got a big ovation from a packed ballroom at the San Diego Convention Center this morning when he heralded the “power of the NAR” for successfully encouraging Congress to extend the $8,000 first-time home buyer tax credit. As a result, “the credit is working better than first projected,” Yun said. “It now looks like we’ll have 2.3 to 2.4 million first-time buyers this year.”

OR ? ! New data: Home inventory rises as prices continue to get slashed!

All three of these headers appeared on industry newsletters over the last few days. My inbox is full of such weakly.  But what is the truth? Which statement can one trust to make a real estate decision?

ALL Three statements are TRUE & All Three are also Hyperbole.

And there in lies the 2010 Real Estate Dilemma.

1. New home construction is at the precipice, ready to fail as an industry. A large swath of the nation’s unemployment number relates to that fact. Yet in my own zip code, a long stalled 55 & over apartment tower is currently under way and moving forward at a brisk pace. Once competed will it sell or sit? Will a run by local empty nesters from their too big and overtaxed single homes push that local inventory over the tipping point? Seems that the value here will get punished by success or failure of this project.

2. NAR chief economist Yun’s numbers are also correct, but also hyperbole. All I can say to the so called success of the tax credit is, “so what”? What is the net result of an $8,000 tax credit in the overall picture in the purchase of a property in excess of $200,000.00 and was offered to a very small sector of the buying public? But it did get some people in the market and the numbers reflect it.

3. With the withdrawal of this credit and the usual summer lull in sales, prices are falling again. Sharply. Despite the hype over the credit, real interest in housing hasn’t returned.

4. For commercial real estate, multiply by a factor of 3. It hasn’t had any of the attention that housing has received and is outright foundering with no relief in sight.

Yet, despite all this negativity, a family member recently successfully marketed their attached home and traded up to a larger single property to accommodate a growing family. No tax credit was involved by either party and the price paid in both transactions reflected fair market value. Nobody got rich in the deal, but no one was distressed by it either. All were in positions whereby they COULD accept current market value.

I said in March that if one didn’t sell by May 31st, that they won’t be able to sell until September or later. I appeared to have been right. On June 1st, I said that if you bought in the last ½ of May, you probably paid too much and if the deal relied on a tax credit to qualify, you will be underwater by August. I believe that will be proven to correct as well.

Hyperbole ? No, because there are always exceptions.

Some markets have stabilized, but not due to the tax credit.
Are we “at the bottom”?
Depends upon where you are standing and what you are standing on.

We are still in a market whose overall price trends are “lending limited”.
Uncertainty is still a dominate market influence.

Time on market will now return to the front burner.

We used to just call these guys Assholes, but today we diagnose them.

This Obama guy is failing more completely than any president in my lifetime. One may need to go quite a’ways back in history to even find a close comparison for failure this expeditious. On every front he is floundering, overreaching, or outright flunking. His only success — health care legislation — was achieved over the will of the people. That is rarely a good idea.


His greatest success is rate at which he is manufacturing conservatives and libertarians, the ranks of which are expanding at an unprecedented clip. The only mystery left for the coming November election is how bad this beating will be.

Why has this happened?

There are several obvious answers. Obama, too inexperienced for his office, never expected to accede to it so quickly in the first place. The public (correctly) has no stomach for a multicultural foreign policy. Almost 20 years of liberal economics, (as much congressional as presidential) has reached the end of its Ponzi scheme road. Adding Obama’s & congress’ doubling down on war & foreign sourced debt and we’re in a recession/depression with no end in sight. Then there is that little eco-catastrophe in the Gulf that Mr. Obama manages with a summer golf tour.

All of that aside, there is another reason, perhaps more important than all of them. Obama has been unable to use the Bully Pulpit. No one pays attention to him. The vaunted Demosthenes of the campaign trail disappeared literally upon inauguration. He hasn't’t been able to convince anyone of anything. He only succeeds when he acts purely as a thug, muscling through legislation.

Some say and I strongly concur that this is because he wasn’t such a great orator in the first place. He just reads well enough from the teleprompter and with the prompter gone the emperor has no clothes.

But I think it is something more complex and deeper. There have been plenty of presidents with limited abilities. Many who were not orators and some with limited executive experience, although not many with NO experience. Even his less than experienced challenger and current Sec. of State could at least claim 1600 Pennsylvania Ave as her mailing address for 8 years.

No, I think it is because Obama was elected on a lie and not the lie you think. ( Although anything is possible)  A big lie that was enabled by the mainstream media, and that by the time he was in office he had spent his all his credit. Belief was gone. Everyone knew he was a liar, including many liberals, even if they can’t or won’t admit it to themselves and even if they had colluded with him in the lie.

I am referring to the Reverend Wright affair. I thought it was serious at the time. In retrospect, I think it was disastrous, probably fatal. There isn’t a bus big enough to throw The Reverend under to cover this attempted deception.

Obama told us on several occasions then that he had not been aware of Wright’s extreme Black Nationalist views during the candidate’s twenty years in the reverend’s church. That made no sense at the time, but for many it flew. Obama had dedicated his book to Wright, had his children baptized by him, etc.

Wright’s separatist brand of black liberation theology was no doubt quite familiar to Obama. More familiar than it had been to many of us for decades. But likely quite unfamiliar to those 40 & under white voters who pulled the change lever. Especially the Jewish ones.

How would those too young to remember the sixties, those who wouldn't know Bobby Seal, John Africa, Elijah Muhammad or Angela Davis as anything other than names from a modern history curriculum with a nostalgic leftest bias for those wonderful 60's, and the hate and anti-semitism that they were all about. How would those sheltered from this particular brand of hate detect this lie for it gravity? 

Because, the mainstream media paid little attention, or tried not to, certainly did not investigate in any depth. Indeed they went so far that many of them declared Obama’s Philadelphia speech on race a masterpiece of the MLK level, when it was no more than an assemblage of clichés and mendacious clichés at that, since they covered up the obvious uncomfortable truth that the candidate knew all about Wright and his ilk. Unlike Oprah Winfrey, who left the Trinity Church years before, Obama chose to ignore it for reasons he could or would not be honest about.

So we were lied to about this by Obama and the MSM winked. Yet it was a far more significant lie than those Presidential lies we have become all too familiar with. Obama’s prevarication was about the very essence of his political zeitgeist. Widely desirous of electing its first black president — I felt this myself but did not act upon it — the nation closed its eyes and ears, and swallowed the lie. But, whether consciously or unconsciously, it did not forget.

We have a president that no one wants to listen to because we do not believe him. His own party ignore him and not just because they fear his growing unpopularity. They also know he is unable to convince anyone of anything. He has 0 credibility because we the voter have shut him off. When his face appears on the tube, I can hear millions of remotes switching to anything – infomercials, World Cup Soccer – anything.

And now the testimony of the Christian Adams has shown that his Department of Justice has a racial bias not entirely dissimilar to those of Reverend Wright. Again the MSM is doing its best to ignore this, but the damage is still there and growing and Obama will not be able to make a speech in his defense.
I am reminded of something I was taught about people by a business mentor. It was, “when someone says to you that money is no object, you better believe that money is the ONLY object.” Now, when Obama or his surrogates try to say that race isn’t the issue, America will hear that race is the only issue.

With this fundamental obfuscation of one of his core fundamentals, his whole political persona becomes a lie. Sure, everyone tries to project the image we want people to accept and respond to, but this man's arrogance seems pathological and he has plenty of enablers.

In this short time, we are already at the “diagnoses stage” with this president. Even Nixon had a longer run of trust before his pathology caught up with him and the diagnoses began. For Nixon it was “paranoid.” For Obama? Socialist will be the least of his labels. I’m betting on narcissist.

It’s over. For all the excitement of his election, having lied his way into office, Barack Obama was essentially DOA his first night at the White House.

Obama’s place in history is assured as the 1st black president, but that fact may only be the byline. The subtitle and his real legacy may be for the shortest tenure of trust of any president in our history.