Thursday, December 11, 2008

BOTTOMLESS IRRESPONSIBILITY

On the plus side, the stock market hasn't tested its November bottom... On the negative side, the stock market hasn't tested its November bottom...yet.

Much negative news has clearly been ingested, if not digested by the financial markets - rising unemployment, declining industrial and business activity - worldwide, the spending of several trillion dollars domestically so far with little to show for it. Although, one must admit, had the Treasury and Federal Reserve NOT printed trillions of dollars to date, exactly where would we be? I shudder to ask and cringe at responding.

We have not reached the bottom of the burst housing bubble. Previously creditworthy folks still cannot buy automobiles. Many banks that claim to be refinancing difficult mortgage loans on better terms are often refinancing in such a way as to actually increase a homeowner's monthly payments.

A decision on federal loans to U.S. automakers has yet to be made - by anyone. It seems to be a "let them eat cake" mentality with no regard for human beings with jobs and mortgages, let alone buying power.

While Wall Street and an as yet unknown number of investors try to sort out the estimated $50 billion Bernard Madoff scam - "eh small potatoes!" - we can only wonder...

As has just begun to be reported in recent days and weeks, have we discounted the millions of projected mortgage defaults yet to come over the next several years? Have we discounted rising defaults on credit card and other consumer debt? How about commercial mortgage debt?

How long will the prices of oil, gasoline, natural gas and fuel oil remain relatively low? Will OPEC succeed in slashing production as demand declines worldwide, something they have usually failed to do?

How long will deflation be with us? When will the enormous wave of inflation that we have created reach our shores?

I truly hate to toss out more questions than answers at this writing. But here's the point...we can all take for granted that the stock market - historically - has been a pretty accurate leading indicator of turns in the economy. But in order to accomplish that, it needs reliable data.

Sorry...not enough data. Far too many unknowns. This recession is unlike any recession in the real life memories of those who are managing money.

Cash remains king (or queen).