Marketwatch has a nice article today highlighting thirteen reasons why Bush’s bailout plan won’t stop a recession.

Like the tide, recessions are natural, healthy, positive … and inevitable

Fortune magazine recently put CEOs such as Citi’s Prince and Merrill’s O’Neill under the microscope: “What Were They Smoking?” The best-and-brightest lost $165 billion, but exited rich, with hundreds of millions.

Now we need to ask guys like Paulson, Bernanke and their Beltway buddies: “What are you guys still smoking?” Bailout? Freeze? Voluntary? They must be smoking hundred dollar bills from lobbyists because this government intervention scheme smells bad.

It’s not what they were smoking, it’s what they were drinking. (If you want to drink some too, you can buy through Amazon by clicking the link at the top of the left column).

Why? Because all these solutions are being dreamed up by the same political and financial geniuses who got us into the problems in the first place. The same guys who failed to act before the economy spun out of control. Trusting those same guys makes absolutely no sense! They were clueless going in. They’re clueless about the solutions. So, a new rule: “What do you call a politician with a prediction? Wrong!”
Though you may disagree with Dick Cheney, this time he’s the only guy inside the Beltway who’s got it right. Fortune says “the staunchly free-market Vice President can be expected to resist any impulse to soften the blow with government action.” His position: “The markets work, and they are working.”

Good old Dick just might be right on this one. The markets work, so let them be.

Kool-Aid, Economy | 2 Comments »

This was seen last Friday on Yahoo, but it’s too good to pass up. Recently compiled statistics show that consumer borrowing, specifically credit card use, increased significantly.

Credit card debt has been surging in recent months as consumers have started borrowing more heavily on their credit cards now that home refinancings have slowed. That slowdown has reflected tighter bank lending conditions as a serious slump in housing has sent home prices falling and increased the level of mortgage defaults.

The Home Equity ATM used by many has been tapped dry now that real estate values are going down and lending standards have tightened, so consumers are turning to the plastic. Good thing for credit cards! They’ll help keep the holiday spending train rolling.

Credit, Economy | 1 Comment »

There have been many things going on in the financial markets here in the United States; the terms “Credit Crunch” and “Subprime Crisis” seems to be dominating the headlines. But what’s going on in the rest of the world? We’ve all been aware of a booming market in China with a growing middle class and increasing wages transforming the population and moving them up on the ladder of social status. Marketwatch is reporting that the IPO boom might be over, with investors losing the desire to get in on Chinese IPOs.

“Institutions seem to have gotten a bit cautious about valuations,” said Howard Gorges, vice chairman of South China Brokerage.
Recent IPOs to be delayed include one from China’s largest aluminum-foil maker, another from a motorcycle manufacturer and also an offering from a department-store operator.

“The underwriters are realizing that people can discriminate,” said Gorges. “Unless the price is right, i.e. lower, they (underwriters) may just figure that it is too risky.”

Is the China bubble about to burst, and if so, what effect will that have on the US economy? Perhaps the China bubble was fueled by the wealth debt created in the United States (by rising real estate values), which allowed millions of consumers to buy Chinese made goods which in turn caused Chinese business to soar.

Financial Market, Investing, Economy, Stock Market | No Comments »

Yahoo has two articles today that tell how employers added jobs last month, but consumer confidence remains at a two year low.

Analysts said continued gains in hiring showed the economy was not at immediate risk of crumbling onto recession despite strains from a weak housing sector and credit tightness. But a later report showed consumers’ moods grew darker in December.

Come on, America! This is December, the shopping season! Why do you have to be so negative? Have you no faith in our strong economy. Wall Street and Washington are working together to ensure that there is enough credit to go around for everyone.

“There’s a great deal of angst out there,” said economist Ken Mayland, president of ClearView Economics. “There is a great deal of fear and foreboding.”

Economists said a host of factors were to blame for the still gloomy mind-set of consumers. The collapse of the housing market, which has dragged down home values, has made people feel less wealthy. Home foreclosures have shot up to record highs. Harder-to-get credit has made it difficult for some to make big-ticket purchases. High energy prices are squeezing wallets and pocketbooks. And, Wall Street’s gyrations have made some worry about the value of their nest eggs.

Those gloomy consumers need to get out to a mall, that will make them feel better. Just like the rise of the housing bubble made consumers feel and spend as if they were wealthy (even though they really weren’t), the collapse of the bubble (which is still collapsing) is causing people to feel less wealthy. Are consumers starting to see that wealth is more closely tied to their savings or investment account than some imaginary number given by a home appraiser?

The high energy prices that we’re currently paying are insignificant compared to the value of all the home equity extractions that have taken place over the past few years. Despite that, there seems to be some psychological effect that high oil prices have on consumers.

Economy | 1 Comment »