Housing – Madness, Denial and Regrets

Madness – US Confidence Plunges to a Record Low. Consumers aren’t confident about the future. What, they are surprised that real estate prices can’t rise forever? They’re surprised that interest rates on their adjustable-rate mortgage went up? Where have they been? What were they thinking? Madness of the crowd convinced them that there is no history worth reading.

Denial – No matter how bad things look, there’s always a bright spot. As in the article linked above…

S&P noted one bright spot as the acceleration in decline was only moderate in August from July.

Amazing.

Regrets – I regret that I bought the home in which I currently reside, purchased before things got ridiculous, instead of one way over what I could afford, because it looks like people who signed up for liar’s loans may well get bailed out and be allowed to stay in the homes they couldn’t afford. If that happens, how will you feel about paying part of that mortgage payment? That’s what you’ll be doing.

The Wheels are Starting to Come Off

In truth, if you’ve been reading this blog, and the websites and books recommended here, you know this whole thing started years ago, lug-nuts beginning to loosen and slowly rotate without any change being noted by the vast majority of Americans. But, it’s hard to ignore the problem now.

The credit crisis has flared and is now building again in intensity. The stock market, when it opens today (in about an hour from this writing) will almost certainly crash, possibly big.

The European and Japanese stock markets have “been mauled,” on what could very well be known in the years that come as “Black Friday,” or maybe “Bloody Friday.” Whatever the case, it won’t be pretty.

This week has seen a LOT of building bad news. Unemployment projections are looking bad. The snowball of advertising cancellations for November and December, where advertisers cancel already placed advertising orders with radio and television stations and newspapers. Massive layoff talk has been out in the open this week. Despite the fact that oil prices are tumbling, and with them, the price of gas at the pump, economic activity is quickly winding down.

Also out in the open in the news this week, has been talk of state and local tax shortfalls. When there’s lower economic activity, tax revenues fall, and so the amount of money states and cities have to spend on services falls pretty fast. This causes more layoffs, and since in many areas, states and cities are high headcount employers, the problem spirals and can crash pretty quickly.

Which it is most certainly doing.

Power Shortages in Your Future?

Taking a break from the slow-motion crash our economy is currently engaged in, and turning to one of the byproducts of those problems, this morning’s Rude Awakening from Agora Financial has some sobering words about coming shortages in power. Think blackouts and brownouts.

Earlier this week, I attended a privately sponsored presentation on U.S. energy policy. The main speaker was a senior faculty member from Carnegie Mellon University. This guy has been “doing electricity” for about 40 years or so. He has written reports for the National Academy of Sciences. When the people at the U.S. Department of Energy have a question about electricity, they call this CMU professor.

The news is not good. In 2007, there were about 144 new coal-fired power plants on the drawing boards of the U.S. energy utilities. But, said the professor, “We will probably build none of them.” Indeed, “The electric industry in the U.S. is in terrible shape,” said the CMU man. So we should expect local and regional brownouts and blackouts to become common occurrences “within five years.” But the first isolated instances of brownout and blackout will hit us much sooner than that.

As is the thesis of this site, we are in for challenging times.

What Americans Don’t Know WILL Hurt Them

I must admit, I’ve been mystified by the reaction, or more accurately the lack of reaction by Americans with regard to our imploding economy. But I get it now, thanks to Dmitri Orlov’s excellent Reinventing Collapse: The Soviet Example and American Prospects. Orlov, an American with Russian roots, was able to watch the collapse of the Soviet Union while visiting a number of times during that collapse.

At the height of the intensity of the bailout drama a couple weeks ago, I visited a nice, mid to upscale mall where I occasionally shop (I needed the Apple Store, my only consumerist passion). I was amazed that even though our economy was on the verge of meltdown with anyone who knew anything about what was going on tense and wondering how the next couple days were going to play out, the everyday consumers flowing around me in the mall seemed completely unaware that anything unusual was going on. I realize now that they weren’t completely unaware of dramatic things going on, they were simply convinced that it wouldn’t affect them. That’s a distinction that was lost on me that day, as the well-practiced credit-card presentation moves were displayed even as the Secretary of the Treasury Henry Paulson got down on one knee to beg Nancy Pelosi to pass the $750 Billion bailout bill.

I was comfortable spending a little money that day, because I have protected myself from short-term disruptions in the everyday workings of our economy. Having cash on-hand, safely stored along with enough food, water and household goods to easily weather a couple months disruption is something I recommend to anyone who asks my advice about what could possibly happen. But looking around, I realized that few, if any, of my fellow shoppers had protected themselves in that way.

Reading Orlov’s new book yesterday, I realized that we Americans are asleep about what could happen to us because we don’t believe anything catastrophic could happen to us. And that’s not a completely unreasonable assumption, since nothing bad has happened to us in almost 80 years. Plus, it’s been almost 150 years since war has been seen on our shores, as wars are something that Americans have to travel a long way to participate in. It’s been that way since the Civil War ended in 1865. Europe lives with that collective memory still relatively fresh. Even if Europeans haven’t lived through it first-hand, it’s a part of their history that’s closer to the surface.

We in America are living in one of the best-insulated pockets of comfort the world has ever seen, and that will make the troubles that are almost certainly coming much harder to deal with. The shock Americans will feel when the ATMs don’t work will be devastating. When the grocery shelves are cleared by those with a little cash on-hand, the panic will set in. Most people don’t plan for disruption because they don’t believe it is possible. Waking up to the realization that their assumptions in that regard aren’t true will be a difficult experience.

The alarm has most certainly gone off. The government is frantically doing what it can to keep hitting the snooze button, but when it’s morning, you can only do that for so long before waking can no longer be delayed.

Obama Problem #3

Problem number 1 will be the economy. He will be in charge of the world’s only remaining Superpower in decline, and possible economic collapse.

Problem number 2 is Iraq. He claims to know what to do, and it’s entirely possible he will get the chance to prove whether he does, or will just screw things up worse.

Problem number 3 will be impeachment. There is no way a candidate for President of the United States can raise $150 million in a month without his organization making some big mistakes. I predict that in the coming months, should Obama be elected, we will hear about a massive donation from somewhere horrifying. I guarantee that Senator Obama’s opponents have already begun investigating where the almost quarter of a billion dollars in donations in August and September came from.

He shouldn’t have taken the money. First, in doing so he broke an agreement with Senator McCain to take public funds, which would limit his outside fundraising. Secondly, studies show once you get to a certain level of money, incremental dollars don’t help that much, if at all. He didn’t need the money.

The problems associated with massive fundraising in my opinion (which I should tell the reader ISN’T backed up by any first-hand experience with political fundraising – just common sense) just aren’t worth the benefit derived from them. The more money rushing in, the more likely it is that some of it will be difficult and/or embarrassing to explain. I think the possibility exists that a President Obama will spend a great deal of attention during his first term explaining not a spot on a dress, but a million dollar contribution by someone he shouldn’t have taken a dime from.

Again, I believe an Obama Presidency, should it occur, will be an ugly time. And that’s unfortunate, because I don’t fear Barack Obama as a person at all. I think, if he were at the head of a complete overhaul of our political landscape in Washington, DC, we could do far worse in a President. But, it’s not a complete overhaul, and a lot of the same players are in charge in Washington. I don’t fear the results of a President Barack Obama, but I am concerned about what can happen with Nancy Pelosi, Barney Frank and Harry Reid in charge with a rubber stamp-providing President in the White House.

They are incompetent and corrupt and will play Obama like a fiddle.