Is 2008 Happening All Over Again

I really need to start blogging again. Although I am not sure if anyone is blogging anymore given how popular podcasting has become, I believe people are not reading as much as they used to given that media and information in general has become more visual. I am guilty of this myself  as I pretty much get all my information and news from YouTube Videos which in my opinion has become the new cable network. Anyways, although my output has become sporadic over the years, I seem to write these blogs at periods of time when there seems to be turmoil not only in the United States but globally as well. The last one was about a year and a half into the Covid pandemic and the US Mid-term elections coming up. What has happened since my last post. We seem to have Covid under some control despite there being many variants since the initial outbreak. Although people are still getting infected whether or not they are vaccinated/boosted, deaths have come way down. I believe most people don't care about it anymore as most of the mask mandates have been rescinded. I still wear a mask in subways and crowded places. I feel like it has become an appendage to my body. We can debate until the cows come home whether masks made any difference anyways. To me, it is just no big deal in wearing it. The world is starting to open up  as China has opened it's borders to foreigners again. What else happened during this time. As you recall the world was essentially shut down for almost two years. Trillions of dollars of government support flowed to individuals, businesses to keep economies from collapsing. Interest rates were kept at zero or close thereto. What typically happens when debt is cheap, asset prices start to rise. However, inflation starts to rear it's ugly head as well. How do governments respond to rising inflation, they start to raise interest rates. What else happened during this time. Mr. Putin decided to invade Ukraine which ended driving up the price of food and fuel and disrupting supply chains again. Over the last year or so, The Fed has raised interest rates at a remarkable pace not seen at any other time in our country. What does that mean for all that cheap debt that was issued. NOT GOOD. Most of that debt was floating rate debt which means that in many cases, interest payments could double. We are already seeing cracks in the real estate market where owners are just handing over the keys to the lender, particularly in the office market which has not recovered from Covid. Also, the value of long duration bonds start to suffer due to higher interest rates. Was a perfect storm brewing. You bet. About a week ago, a good old fashioned run on the bank happened. Silicon Valley Bank considered the Bank for Startups was seized. The first bank seizure since you guessed it 2008. Silicon Valley Bank had many problems. Many of their customers were going out of business or severely downsizing as funding was drying up due to the economy going into recession. More importantly, the bank was caught in a liquidity squeeze as they had bought long dated bonds that were rapidly losing value. When people began to learn of their precarious financial position, it became a stampede to withdraw their money from the bank. Signature Bank followed and it looks like Credit Suisse is hanging on by a thread. I read a report that 34 regional and community banks in the US are in worse shape than Silicon Valley Bank. Now the finger pointing begins. Did the Fed raise rates too quickly. Can these bank failures be contained. With respect to the Fed raising interest rates, the Fed had talked about raising interest rates at the end of 2020 beginning of 2021. Interest rates can not be kept at zero forever or we would suffer the same fate as Japan. Just like I said back in 2008, no one wants to be the one to to tell people the party is over. Regarding bank failures, if you recall in 2008, the crisis started with the failure of Lehman Brothers and Bear Stearns and then spread like a virus to bigger institutions such as Merrill Lynch, Morgan Stanley, Goldman Sachs etc. I can certainly see that scenario here particularly if Credit Suisse goes under or more likely to happen get bought for pennies on the dollar. 

Signing Off

The End of Innocence

 It has been a long time since I published my last blog. It was 2017 and the beginning of the Trump presidency had started to rear it's ugly head. The United States has changed so much since then. Although the country seemed so divided during the 2016 election, those cracks in our social and political fabric just seemed to get wider and wider as the years have gone by culminating in the January 6th, 2021 Insurrection or some would call it the 2nd American Revolution. How did we get to that point where democracy as we know it in this Country was almost tossed away like some used tissue. If we go back to the year 2017, many of us who couldn't stomach President Trump's loud, obnoxious and brazen manner and cringed at some of his policies particularly around immigration, environment, gender etc., secretly rejoiced in the booming economy that of course President Trump took full credit. That period of exuberance lasted for about two years where towards the end of 2019, the stock market was at all time highs and the economy was at record low unemployment. New Years Eve 2020 was going to ring in a New Year of prosperity. People were celebrating without a care in the world. President Trump was going to be a shoo-in for another four years. Then the wheels fell of the bus. It probably started around the middle of January 2020. The media started reporting on an outbreak in China of a respiratory illness. They said it probably started in December of 2019 and that it was contained to a province in China. Since China seems to have a history of these various outbreaks, I don't believe that many people here in the United States gave it much thought. Probably, the worst most people thought was that it was probably not a good idea to visit China any time soon. Then around the beginning of February 2020, the  United States reported it's first case. The world changed as we know it. Again people thought it was an isolated case and nothing to worry about. Much to our chagrin, more and more cases started popping up across the United States. Finally, President Trump decided that he needed a press conference to reassure the American people that there was no reason to panic and that this outbreak would be over in two weeks. Boy was he wrong. Literally two weeks after that press conference the United States along with the rest of the world decided to shut down. Cases kept rising, deaths started to mount, and the health care system globally was on the verge of collapse. Of course fingers started pointing. How could our government along with every other government on this planet been so unprepared. Of course President Trump pointed his finger at China calling it the "China Flu."  The fact of the matter is that our government under President Trump cut spending to prevent pandemics as part of his overall tax cut plan. States were competing against each other just to get PPE. To me, there didn't seem like there was a national response to this pandemic. Every state or person was left to fend for themselves. It was around this time that conspiracy theories began to flourish. "Covid was started by the Democrats". " Bill Gates wants to put computer chips in your brain." The more absurd the better. Instead of figuring out how to end this pandemic and to help those people devastated by the pandemic, the issue became a political weapon. We got our measly "stimulus checks" but those checks barely paid our rent or mortgage and was primarily used to pay down consumer debt.  Any attempt to deal with these issues on a more fundamental level was met with political opposition. It was better to do nothing than to give the other political party a victory. The suffering by the citizens almost became irrelevant. Small businesses even today are still trying to get emergency funding almost two years after the pandemic started. Isn't that a joke. Also, during this time there were other events going on. In the beginning of the pandemic there were race riots going on primarily because of police shootings. With regards to police brutality it seems like nothing ever changes. I still remember the Rodney King case. However calls to defund the police are just ridiculous as crime would skyrocket without a properly funded police force. Do police officers need to be held accountable for their actions. Absolutely but we have a justice system to deal with that. There was also an election going on. It seemed to me that the whole campaign just became a pissing match about who could do a better job handling the pandemic.  President Trump was trying to blame the Democrats for blocking his legislation to get more relief to the people and the Democrats claimed his legislation didn't go far enough. Whatever legislation the Democrats proposed, the Grim Reaper Mitch McDonnell was there to make sure it never saw the light of day. Meanwhile people kept getting sick, dying, losing their jobs but it didn't seem to affect the stock market. For the most part it kept going up. I believe that most people thought that President Trump was going to win re-election. However, by some miracle Joseph Biden became the next President of the United States. It is after that election that our country started to go down the toilet. Former President Donald Trump started challenging the election results in key states. It was the beginning of the "Big Lie". Former President Trump or his henchmen started making ridiculous claims that the votes were tampered with or changed. Although it was later found out thru countless audits that there was no widespread voting fraud in the country, they refused to give up their narrative. With Former President Trump refusing to concede defeat there was legitimate concern that he may not voluntarily leave the Oval Office after the inauguration. These actions undermined the foundations of democracy and set the stage for January 6, 2021. As I watched what happened on January 6th, 2021 I started to cry as what unfolded in front of me was not the peaceful transition of power but the acts of a vengeful mob spurred on by the vitriol of a demagogue that happened to be the former President of the United States. It was democracy at its lowest point. There have many times in my life where I did not like or agree with the winner of a political campaign. The thought of trying to violently overthrow that election was not even fathomable to me as I thought that those type of actions only happened in "Third World" countries. Even though the Former Vice President and members of Congress were threatened with violence, Congress did not have the courage to impeach the man responsible for this eyesore. Shame on them. It was around this time that vaccines became available to most people to try and combat this pandemic. Again the conspiracy theorists saw fresh material. The "Big Lie" didn't seem to working as they were losing every court case. They needed a new rallying cry. Vaccines seem to fit their bill. "Vaccines aren't safe." "We shouldn't be told to wear masks." "We must open up the economy." "They are making up the number of Covid deaths."  Unproven treatments were given equal weight with FDA approved vaccines. It was like the world went mad. We were approaching more deaths from this disease than any other but many people still didn't want to take measures to combat this pandemic. What does this mean today almost two years after the pandemic started. Although most people have been vaccinated and many including myself have recieved the booster, cases from the new variant are on the rise. Some countries have already begun to shut down again.  Most people I know ask "When will this end." I wish I knew. If  I am alive in 10 years, I will look back on my life as the pre-covid and post-covid years.

The First 100 Days

In the last blog we discussed how a non-politician became President. However, can someone with no political experience actually govern. The President of the
United States is the Leader of the Free World. We are not talking about Mayor, Governor or Senator of a city or state. During the campaign, President Trump talked about his skills as a negotiator which according to him was the basis of his tremendous wealth. Those skills were put to the test immediately when Republicans
 tried to repeal the Affordable Care Act or what was more commonly known as Obama Care. Their proposed legislation did not even get out of Committee and the
 President could not convince enough Republicans to vote for it. Where are those
 Negotiation Skills when you need them. What a joke. I believe some sane Republicans if there are any left realized that you could not repeal Obama Care without something closely resembling it.  Otherwise, the Republicans would have targets on their back in the next elections. It was estimated that nearly 30-50million people would lose their healthcare coverage under the proposed repeal. Many of them had voted for President Trump. I agree that Obama Care had problems and in my opinion not very well thought out. However, gutting it without a better plan was ludicrous. The President is next trying to tackle tax reform. Let's see if his so called superior Negotiation Skills finally work. Tax reform is probably one of the hardest areas to actually reform. Too many special interest groups
Signing off

It has been a very long time since my last blog. Did anyone miss me. Apparently not as I only have four followers. So Why am I back. Well, we have a new President and I believe the next four years at the very least will be interesting if not catastrophic. Why so gloomy. Has anyone seen the new circus in town called the White House. It's replacing Barnum & Bailey. Everyday some new gaffe is being sputtered by the one it's clowns. I better watch what I write as I may be attacked on Twitter. The first question one has to ask is how did this come to be. Wasn't the plan that Queen Hillary was supposed to be coronated. Well as they say the Emperor or in this case the Empress has no clothes. As usual her campaign blew it. They failed to see the prevailing tides. The sea change of attitudes in this country, especially from Main Street USA was not supporting her message. We had a glimpse of this revolt in the previous elections. It was called the Tea Party. However, they didn't have a strongman who could pull all those disparate elements together and still appeal to mainstream voters. One man stepped forward and his name is Donald J. Trump. No one is talking about the Tea Party anymore. We slapped a new label on it. "Alt-Right". What bothers me the most is the prevailing attitudes of these supporters. Anti-(Immigrant, Woman, LGBT, Muslim, Jews) etc. I feel like this country has gone back in time to the 1950's. Did I go to sleep one night in a time machine and wake up and it is 1956 all over again when our life seemed to be an episode of Ozzie and Harriet. What I still can't fathom is how many woman and Jews unfortunately voted for him. In the end I feel like our country is going thru some profuse changes from a social, economic and cultural standpoint. Many people long for the good old days. I guess it depends on what your memories are from those times. Although I was a young child at the time, this period also has the feel of the 60's as well.
Signing off

2011 Economic Forecast

Happy New Year to Everyone. Hopefully, we have all survived another year. Some would say the worst of this nasty recession is over. There are some positive signs in the economy. Manufacturing output is up and jobless claims are down. So far, there has been no sign of inflation. However, there are some troubling signs as well. Official unemployment rates are still hovering around 9.5 -9.8 per cent. The real estate market is still not rebounding. I am deeply concerned about the financial health of pretty much every municipality in this country. The price of oil is slowly creeping up. People always ask me, "How should I invest my hard earned money." I wish there were easy answers. I certainly don't hold myself to be a pundit with some crystal ball able to divine the markets. The problem is that most people buy too late and sell too early. Most people don't take a long term view towards investing. They are basically trying to chase returns. What is the hottest stock or sector right now. Having said all this, I believe there are some sectors that are worth taking a more serious look at. If you invested in US Large Cap Equities in the last few years, either through an S&P 500 Index Fund or through direct investments, your portfolio probably declined in value at least 10%. However, certain sectors within US Large Cap Equities did not fare as badly, namely technology and consumer retail stocks. Yes, their stock price was down but these companies still showed either stagnant or slightly increased revenue growth. You have to remember that we are either still in or just coming out the worst recession since the Great Depression. These companies were still able to generate revenues and are poised for significant growth once the economy really starts to hum again. I call it the "Bounce Back Factor." How quickly can a company "bounce back" from bad economic times when the economy turns around. Another sector that you have to look at is commodities. When you talk about commodities, you are almost required to talk about Gold. Oh, Gold, the currency of Kings. I believe that Gold is really a fear investment. There is certainly reasons to be afraid. Our Government keeps printing money, the dollar is buying less and the risk of inflation is looming in the not too distant future. However, I believe Gold should be part of your portfolio for other reasons. We are just not replacing the amount of gold consumed by the voracious appetites of India and China. There has not been any major gold discovery in the last ten years. They are discovering gold deposits in much more difficult political and environmental climates. So what do you invest in, the bullion itself. The price of gold has certainly risen substantially in the last few years. I believe that the price of gold has probably reached close to it's high. So where can you unlock value. The stock price of gold mining companies, especially the small to mid-cap companies has not risen in the same proportion as the metal itself. In fact, in some cases, it has had an inverse effect. Despite rising gold prices, some small to mid-cap gold mining companies actually went bankrupt because they weren't able to attain financing. Gold has been like a double edged sword. What do I look for in a gold mining company. I look for companies with large high quality deposits with a low cost of extraction. The formula is pretty simple. High Quality= Less Waste+ Low Cost Extraction = More Profit. I like the other metals as well such as copper, platinum, zinc, iron ore etc. Why, because they have an industrial use. When the Global Economy turns around, there will be an increased demand for these metals. However, my favorite commodity is agriculture. The World's population keeps growing. There is an ever increasing need for agricultural products, especially in the Emerging Markets. I will talk about the Emerging Markets in a minute. Again, as the Global Economy turns around, and as more people become consumers, the need for large scale agricultural products will grow thus causing price appreciation. Finally, in our insatiable quest for investment returns, we have to talk about the Emerging Markets, namely Brazil, India, Russia and China. What is our infatuation with these countries. The answer is quite simple. It is where the growth is. These countries will experience between 5-12% annual growth in the next few years. The populations of India and China together are almost 10 times the size of the population of the United States. All the BRIC countries are consuming resources, buying goods etc. No matter what business you are in, you would be foolish not to look at these countries as new markets. How long can this last, 5 years, 10 years. I don't think anyone really knows for sure. Who will be the next BRIC countries. If you really have an appetite for risk and a strong stomach, then start dreaming of far away places where there are still riches to be made. I wish everyone a Healthy and Prosperous New Year and we will see if anything I said now makes sense in the coming year.
Signing Off

Is China The Second Coming of Jesus Christ

With that title, it is obvious I have gone stir crazy from this past snowstorm. Is that statement really that outrageous. Haven't we come to expect China to save the world economy. Wouldn't the US economy collapse if China decided not to buy our t-bills anymore. In reality, aren't they really feeding our drug habit (Printing Money). Other countries have become Chinese drug addicts as well, selling off their industries to the Chinese as fast as the Chinese can unload the bags of cash. Yet, the World wants the Chinese to change. They want the Chinese to move from an industrial superpower to a consumer society. Except in major Chinese cities, there is little, if any, consumer spending. The Western World needs that to change as they will have to pay the Piper shortly and curtail spending. Who will pick up that slack. We need the Chinese to buy our goods. Even the Chinese government realizes that it has to transform itself from a cheap wage manufacturing economy to a consumer/service economy. Rising wages in China has resulted in some industries actually moving their operations to a lower wage country. To accomplish this goal, the Chinese government will have to devote more resources to education and technology. Advances in technology usually results in higher paying jobs in the short term. Higher wages will increase demand for foreign goods. This will open up the Chinese economy. Saved again by the Chinese. Isn't it ironic that an atheist country is the New Messiah.
Signing Off

A Look Back

It's been awhile but I am back with more ranting and raving from a certified mental patient. It's been a little over a year since my last post and WHAT HAS CHANGED. Yes, the world did not collapse while I was away. The Banks, Wall Street, and Corporate America have come out this financial crisis even stronger thanks to good old Uncle Sam. Although the Banks are still playing hide and seek with their toxic loans, the capital markets are opening up again allowing them to pawn them off to some sucker, OOPS, I meant investors. Corporate America, flush with cash, can't stop stuffing their pockets with cash but I hope this attitude will change as the economy needs Corporate America to start spending again(hiring employees, technology spending etc.). Shareholders will eventually feed at the trough and ask for increased dividends. What probably will happen is that Corporate America will just swallow up their competition. Mergers and Acquisitions is great for all the service industries that support the behemoth but sucks for all the employees that get laid off because of the merger. How can I leave the real estate industry out of this discussion. My favorite topic. As I stated in previous blogs, the loan modification program would be a complete failure as the underlying basis for the loan modification, namely re-payment has become as toxic a term as the original loan itself. What I didn't fathom is that the whole foreclosure industry is as dirty as the mortgage industry. The Borrower's rights have been trampled upon in a rush to sell their home to someone else. WHO CARES WHO OWNS THE DEED, JUST GET THESE DEADBEATS OUT. What amazes me is that some Judges around the country have been rubber stamping foreclosure proceedings just like the Banks were rubber stamping all documents. The recording of title, that is a minor detail. We were to busy acting like Ron Popiel, slicing and dicing mortgages with the latest gadgets. The outcome of this fiasco is of course more work for lawyers. In general, lawyers were hit hard during this recession. They needed to create a new industry. FORECLOSURE LITIGATION.

Signing Off