Wednesday, December 22, 2010

'Twas the night before original version

'Twas the night before Christmas, when all through the house,

Not a creature was stirring, not even a Stock Market Bear’s Pulse;

The Economy has the illusion it’s being handled with care,

Knowing the Bernanke printing press will always be there;

All the Democratic EX-congressman were nestled snug in their beds,

With visions of infinite sugar-PENSIONS dancing in their heads;

Commodity prices have skyrocketed, our National Debt too,
As the Political Will-power resides in way too few,

Out on the Horizon will arise such a clatter,

Debt, Pensions & benefits are what’s the matter,

Making the country a wash in cash,
Will one day cause extreme whiplash,

Sentiment is down right giddy and “Perceived risks” at an All-time low,

Which gives a contrarian a moment of pause, too ponder what might lie below,

When, what to my wondering eyes should appear from the galleys,

But a miniature sleigh, and eight tiny donkeys,

A driver appeared, with that middle-name that’s so strange,

I knew in a moment it must be our “lord and savior” of change,

More rapid than a democrat extending free benefits, his coursers they came,

And he grumbled, and vilified, and condemned the “Rich”,
Reliant upon Biden, and Clinton, and Pelosi that *****,
How dare people work hard and deserve what they earn,
Redistribution of wealth is surely what we need to learn,
To the top of Washington !  To the top of the Hill!
Quickly, swiftly, Before the populace get’s to ill,
Now dash away! Dash away! Dash away all!
He was articulate, and thin, and full of hot-air,

And I laughed when I realized how people could fall for his flair!
A wink of his eye and that smile he gave,
Soon made me realize he was taking us to the grave,
He spoke not a word of his true agenda, but went straight to its undertaking,
He filled the working-class with promises of profiteering,
And by laying the groundwork to move from an outhouse to Penthouse,
Immediately, to cult status he rose!
He sprang to the sleigh, to his team gave a whistle,
And away they all galloped to D.C. and their new found castle,
But I heard him exclaim, as he rode out of sight,
Merry Christmas to all!  You’ve all been hood-winked!  And to all.....A Good Night!”
On a serious note:  Merry Christmas and Happy New Year to All of You!

Thursday, October 21, 2010

Cities Finest: "To Serve and Protect".....You? or their Wallets?

Question:  What is the correct Title for our Cities Finest?  You know, the one’s wearing those shiny gold badges and sparkling dark blue uniforms……. Is it LAW Enforcement???......or is it SWEET-HEART PENSION Enforcement?

Last week, to my surprise (well, after my write-up you can see why I wasn’t all that surprised after-all)….I received a Voice-Mail on my Cell Phone from a Live, in-person, local POLICEMAN.  At first, I was taken back, thinking….Oh great, what the heck did I do….right?  He introduced himself as a police-officer from the local Police Department, than continued on telling me that He and “All” of the cities Police Department were fully supporting, backing and voting for a particular candidate…and than (he really used these words) for the “safety of “our” communities’ future” I should vote for this Candidate come election day.

At risk of not being so eloquent he went with his version, but this is what he really meant to say: ”I am a trusted Community figure and by gosh I’m going to use my power in my Self-Serving favor.  Right now, every year I work, I get a measly 3% of my salary put towards my pension when I retire.  So….anotherwords….if I work for 30 years….I get 90% (3% X 30 years) of my last, Highest earning year….FOR LIFE.  I am currently in my 40’s and have been in the force for 15 years….my current Salary is $125,000 and have made $1.5 million from the city over my past 15 years of service….I only have 15 more years left and than I can retire at $140,000+/- for the Rest of my life….which equates to a Total Cost of my employment & pension to the City of just under $8 MILLION if I live to be 85 years old…..After all, I work in a city where my life is never put on the line, the crime rate is Negative AND I write more parking tickets than rabbits have babies.…..

So please, for the love of god!!  Vote for this candidate who has Promised to never, ever take away these unbelievably ridiculous benefits I am currently receiving… return I just have to convince you stupid voters to get this Political Sell-out in office and than I will continue to live-off YOUR, Tax-Payer Money FOREVER!!!   Mmmmmuuuuuuuhhhhhhaaaaaaahhhhhhaaaaahhhhhaaahhhaahhaahahahahahahahaha.….

Now go Vote…..So I can be the Richest Man in Town…..and the Ultimate PENSION ENFORCER!"

Friday, October 8, 2010

It's the economy stupid...

As we grind closer the the November elections, I don't think the quote, "It's the economy stupid" could be ringing any's job report was brutally ugly and shouldn't really be a surprise....

I’m going to break down the overly complicated state of the Economic times in a hopefully easy to understand manner.  We hear so many, statistics….from jobs numbers, to housing numbers, to what the stock market is doing to what interest rates are doing and on and on and on….we get “lost in translation”.

So here’s my translation:

The U.S. economic troubles boil down to this.  Currently there are about 7 million working-age people and 5 percent of the nation’s industrial capacity sitting IDLE and not producing what they "could".  In good times, nothing is sitting idle and we have full employment around 5%....this what is called Maximum Capacity or Full Output. 

Today, the gap in workers who want to be employed and the factories, etc that aren't producing what they could, due to lack of final demand is what is called an Output Gap: the divide between what the United States “CAN” produce and what it “IS” producing.  The output gap is currently $900 billion which is why it still feels like a recession even though technically, you are hearing we are in recovery.  So....MILLION DOLLAR question:  How does this “Output Gap” get filled?

3 scenarios, which telegraph just how difficult it is to move the needle on an economy as large as ours….

If GDP grows at 6% - (very unlikely), but worth depicting nonetheless.  Output gap would be filled by 2012 and unemployment would return to 5%.  We could all sit around the camp fire and sing “Cumbaya”….after arriving to the campsite by flying unicorn’s….after purchasing them from my Unicorn Ranch…..well you get the picture.

If GDP grows at 3% - Output gap would be filled by 2020 and unemployment would return to 5% in 2020….Ouch that’s a long process….

If GDP grows at 2% - (a tad Above current growth rate).  Output gap would be filled by…..wait for it......NEVER….that’s right… WON'T keep up with pace of increased productivity and population growth.  Therefore, unemployment wouldn’t get better….and would actually rise to 12% by 2020…..

I just gave 3 scenarios of Positive GDP growth....2% growth looks pretty dire....what if god forbide we actually contracted....or double-dipped?

There are 14.8 million Americans that are unemployed.  Full Output and an unemployment rate of 5% means 7.8 million Americans need to find jobs......Problem:  2010 has averaged on a monthly basis an average of about +40,000 jobs per month….I hate to mention that most of the + was Census hiring by the Gov’t, but I’ll give the benefit of the doubt and even round up to a positive 50,000 jobs per month.  At that rate to get 7.8 million back to work it would take 156 months or 13 years…..that coincides with the Output Gap never getting filled and Sub 2% growth....

Don't give up hope....Our "Lord and Savior" of Change and his pro-business stance just came on the tube and blasted Republicans for not wanting to save Public police, fire, and teaching jobs....shame on them for wanting to save over $4 million per job cut....thats right.....that's what it costs to employ one Policeman for life....this is what we are dealing with....maybe, just maybe if you got those costs in-line with the Private sector, job Cuts wouldn't be needed!

Please forgive me for the lack of humor today and the serious tone....but im just to PO'd, I just can't find the energy from hearing such garbage being thrown around....I'm just sick and tired of today's society turning into the "Zero Accountability" generation....It is always somebody else’s fault….how is the next generation going to be if they grow up always hearing they are never wrong, and they can never fail....failure is what you make of is how you pick yourself up and can you learn without failure?

Shame on "Us"...

Tuesday, October 5, 2010

Asset Astrology...

Hoorah!!! ....Every “Asset” is going up, and up and up....Stocks to the moon!  Oil to Mars!  Gold to Saturn! Copper to Jupiter!  The Dollar to Uranus! .....wait....Hold on, I don't like the ring to that....

Mr. Dollar...well, he's growing real tired in his old age....he's going down to a place where he can't be spent or used as a medium of exchange outside our border...

This is your hard earned moola getting squashed by all other countries: Dollar Index Chart

Memo to the FED: Trading Asset price inflation for Debt will end very, very badly....Look no further than Mr. Greenspan and his "No Recession on his watch" philosophy, which ended pretty well right?

I feel terrible for the last "retail investor" in the pool again this time....2007-2008 might look like a "walk in the park"....Good thing Uranus doesn't have a currency...

Friday, October 1, 2010

Happy Fiscal New Year!

Today, marks the start of our Federal Governments new Fiscal Year!  ….Now that the Streamers and Confetti and empty bottles of champagne have been cleaned up….let’s pop a few ($trillion) aspirin from last night’s (year’s) hangover and see where we stand (more like kneeling) today.  Oh God my head hurts….pass the soda crackers please.

The federal government now spends $7 million a minute.

Within three years, the government will spend more than $1 billion a day just to pay the interest on our debt.

The debt is on pace to double in 10 years.

Our national debt is more than $13 trillion, which means every man, woman and child owes $42,000 to debt holders.  Let’s just all cut a check and get this hangover to go away. 

Wait, but that’s only our National Debt, which is our Government (Public) side of the equation.  Let’s slop in the total Consumer’s debt, which is $11.7 Trillion or another $39,000 per man, woman and child.

So, actually let’s each cut a check for $81,000 and pretend we all blacked out last night and those bad decisions after 2am didn’t really happen. 

Hold on, over 40% of Americans don’t even pay any income tax, so how can they be expected to pay there own way…come on fair is fair and obviously these people need help….so they shouldn’t be cutting that check. 

Let’s re-distribute the wealth and have 60% of the American’s cover the Tab.  So all American’s who pay tax cut a check for $135,000 and then we can all get outta bed today…party on Wayne…after all last night didn’t really happen right?

Wait a second, that isn’t fair either…Our, most respected leader, or should I call him the “Lord and Savior” of Change….remember he starting going to church again…says that this 60% is primarily the Middle-Class and they need tax breaks….not increases! 

So, instead of the top 60% erasing our memory from last night, let’s have those real heavy-hitters bite the bullet….you know who you are, that 5% of all tax-payers…stand up, show yourself.  Now since you are so lucky to be “rich” and definitely didn’t work any harder than the 40% paying zero tax….and your Head-Ache obviously isn’t as bad as the rest of “ours” from last night because you can afford that really expensive top-shelf alchohol.  Can you?…wait scratch that…You are now ORDERED to pay $1.62 million each….no more “Dom” or “Cristal” for you!

Back to the Korbel and that bottom shelf….after all you need to feel like the rest of us again and spend the rest of the day on your knees praying to the “porcelain god”….

Wednesday, September 29, 2010

California Dreamin'...or is it hallucinating???

These little known, and non-publicized California factoids (I wonder why?) should help make your decision very easy on the upcoming elections...absolutely shocking financial decisions were made under Gray Davis, that our State is paying dearly for today and into perpetuity unless something drastic changes...Our Governator and his 20 inch biceps couldn't even muscle the union firepower....ya they are that powerful....imagine if you had a union friendly governor....

- 80 cents of every Dollar of California’s revenues is spent on State Employees costs, compensation and benefits.

- California Revenues have risen by 29% over the past 10 years for the State, while pension costs have risen 2,500%!

- California is on the hook for $550 billion of State employees retirement debt, which is un-funded and promised by past governments.

- This year the cost of servicing that debt is $6 billion. Next year it will rise by 15% and rise again the year after until this payment will be just shy of $30 billion in 2020.

- This year California had $80 billion in revenues….so $30 billion on Retirement costs is ludicrous to contemplate; this money has no direct impact on the states current or future needs, but is all in arrears.

- Since 2007, Gov’t employee costs have been steadily moving higher, while over 1 million private jobs have been cut.....Who pays for these public sector increases? Oh thats right, the private sector is on the hook for these huge public cost increases....private sector is the one who's getting skewered right now....fair?

I want to ask a question which hopefully sheds some light on how California’s Public sector is absolutely running amok and taking advantage of its union powers.  According to the Department of Labor, 1 out of every 8 workers are in a union, which breaks down to 12.5% of all workers.  Why does California spend 80 cents of every Dollar it earns on State Employee (Current and past) costs?  Shouldn’t this number be closer to 12.5% instead of 80%?  After all, 1 out of 8 are in a Union, but we are currently shelling out Cash as if 6.4 out of 8 people are in a Union…..

.....Texas, Washington, Nevada, Alaska, Florida, Wyoming and South Dakota and their Zero State Income Taxes sound pretty good right about now huh?

For some quick perspective…back in 1945, just after WWII, Unions accounted for 33% of all American Workers, or 1 out of 3 people….so Union members have been whittled way down, however, zero progress has been made on the financial power and strangle-hold they have on our State and local governments!

We, Californian's are not dreaming anymore......we are Hallucinating if we think this is Sustainable!

Thursday, September 23, 2010

A little Nut humor...

The Night Watchman:  If this doesn't sum up our Goverment perfectly...I don't  know what does.

Once upon a time the government had a vast scrap yard in the middle of a desert. Congress said that someone may steal from it at night; so they created a night watchman, and hired a person for the job.

Then Congress said, "How does the night watchman do his job without instruction?” So they created a planning position and hired two people, one person to write the instructions, and one person to do time studies.

Then Congress said, “How will we know that the night watchman is doing the tasks correctly?” So they created a Quality Control position and hired two people, one to do the studies and one to write the reports.

Then Congress asked, “How are these people going to get paid?” So they created the following positions, a time keeper, and a payroll officer, and hired two people.

Then Congress asked, “Who will be accountable for all of these people?” So they created an administrative position and hired three people, an Admin. Officer, an Assistant Admin. Officer, and a Legal Secretary.

Then Congress said, “We have had this command in operation for one year and we are WAY over budget, we must cut back our overall cost.”

So they fired the night watchman....

Wednesday, September 22, 2010

Ironic state of the times...

How about this for irony?

15 million Americans unemployed....supposedly can't find jobs....and over the past week I've seen at least 5 signs in storefronts saying they are HIRING....McDonald's, Subway, Pizza joint, Chinese restaurant(cook), etc...

Mismatch in job skills?  Or mismatch in government policy allowing people to live off benefits for 99 weeks?  If you didn't have to do anything to get a $600 check every week why would you take a fast-food job?  You wouldn't, nor are any other Americans...

Sign of the times...government not allowing market forces to re-shape the economy...Long-term Structural mismatch will continue.

How about this for Irony #2?

Caught President Obama on the Tube again the other afternoon campaigning for another democrat up for re-election....

He went right after the RICH or people who make more than $250k, and was adamant that they need to pay more taxes.  He then said "We" can not give them $700 billion in Tax breaks anymore, because it is too expensive for "Our Country"....funny how these "Rich people" PAY the retirement/Pensions of our fine elected officials and former Gov't employees at an annual clip of $800 Billion!  Not to mention they have to fund their own retirement as well!  Seems to me you could just cut these "Rich Pensions" (My new term) and you could actually make out $100 billion ahead from Barack's goal.  But...not surprisingly...No mention about cutting these Rich Pensions....just continued rhetoric blasting the rich. 

Irony at it's Peak:

Rich people "supposed" tax breaks = $700 billion  *estimated figure, but not proven, I'm just using it for this exercise*

Annual Gov't Pensions = $800 Billion

First glance...Pensions look to be getting the better deal....right?

Now I propose one very simple question:  Who is richer?  An individual who has to fund ZERO Retirements or TWO Retirements?

I would love to get my paycheck without having any retirement contributions withheld...i'd be instantly richer!

For any republican leaders now reading this blog...please feel free to use this question...I think even irrational people maybe able to understand it....well on 2nd thought....adding Zero and Two in your head might be too difficult.

Rant over.

Friday, September 17, 2010

Fun Fact Friday….well.... fun for me cuz I'm a Renter

There were 4 million homes listed with brokers for sale as of July 31st…this would take a RECORD 12.5 months of current sales pace to take this inventory off the market!

The number of U.S. homes in default or foreclosure is 7 million as of July 31…most have not hit the market as inventory yet…

The average time for a home to actually reach foreclosure after defaulting is 469 days…..say what? That’s almost 1.25 years from original default!!! So how many more defaults have occurred recently that won’t hit foreclosure till the end of NEXT YEAR?!?!?!

Also worth noting is that a current homeowner survey revealed that another 3.8 million homes or 5 percent of U.S. households said they are “very likely” to put their properties on the market within six months if there is an improvement….I believe this goes with my statistic presented earlier that 30% of ALL homeowners in the U.S.A are UNDERWATER....and lurking, waiting, and beggin' to get out beggin' for an ocean-front estate in Maui too but that isn't happening either...

I won't even mention the possible "Shadow inventory" predictions that I've been reading about recently...makes the picture look even more bleak

These stats just reinforce my opinion……re-read my original post:

Housing simply isn’t anywhere near bottoming!!!!

Thursday, September 16, 2010


I call this one of the largest ponzi schemes ever created….Bernie Madoff is an amatuer compared to this....take a look at the below chart. It is a graph of U.S. GDP from 1980 through today.

Pretty nice right? I mean we have gone from $3 Trillion a year in GDP to $14 Trillion in 30 years. That’s an annual growth rate of 3.66% per year. Not to shabby for an economy this large!

Okay, now here's the rub….unfortunately much of this so called growth has been artificial. It has been created 100% by the Borrowing or DEBT of the U.S. Government. Take a look at the next chart. This is a nice picture of the U.S. Federal (Gov't) Debt over that exact same time period.

Wow…picture’s worth a 1,000 words right?  Well gosh these Graphs look eerily similar, like almost too darn similar to be a coincidence. Well I’d like to say I have all the answers, but this one just boggles my mind.  It’s criminal what Madoff did….stealing from all those people and just spending all that Moola like he actually earned it!  I think it’s about time us Americans see that the Government is doing the exact same thing to us.  The only difference is this is somehow Legal.  I think this is only happening because the Public doesn’t understand.  The Government has run-up almost a $13.5 trillion dollar DEBT.  They are spending OUR dollars that we HAVEN’T EVEN MADE or EARNED YET!  Just like Madoff was spending $$$ from clients he hadn’t even signed up yet!

One last thought:  How is it that GDP has risen by a 3.66% avg over the past 30 years....YET Government PENSIONS....the money PAID to themselves into perpetuity which was decided on by themselves has risen a whopping average of 30% per year?!?!?  Look at the chart:

Do you realize virtually the same amount of Money each year is spent on Government Pensions as it is on Saving our Lives from another Terrorist Attack, i.e DEFENSE Spending???  Seriously $800 Billion is spent each year on PENSIONS and $900 Billion is spend each year on DEFENSE….I don’t know about you but I don’t think that a retired Politician worked any harder than you and I do everyday, nor did he or she SAVE MY LIFE…but somehow he or she is saddled with 100% of there highest earning year for life after they retire?!?!?!  Oh and by the way we are expected to pay for their retirement....and our own?!?!?

And the Government wants to cut Defense spending right?  Any mention of cutting any of their own fat Pensions????  Of course not! But, I do hear a whole lot about raising taxes to pay for these rising Costs...i.e Gov't's really pretty sick if you think about it...because no matter how high they raise taxes they will always come back for more!  Because now that revenues are golly they "deserve" to pay themselves more!!!!

Enough is enough...forward this post or blog on and let's take America BACK!  The Monthly Nut is running for president in '12....

Tuesday, September 14, 2010

Tuesday's Tidbit...

Gotta feel a lot like quick-sand right?....damn near impossible to get out of....

The public debt levels of the G-7 countries (US of A, Japan, Germany, France, UK, Canada & Italy) has increased from 35% of GDP in 80% of GDP in 110% of GDP in 2010....I’m holding my breathe now….don't know how much longer I can do it for....For god’s sake grab my hand and pull-me outta here…!

(source: International Monetary Fund).

Friday, September 10, 2010

Tax Drivel...

TODAY...Mr. President Barack Hussein Obama said extending tax cuts for the wealthy (defined as households who make more than $250,000) was a "bad idea" because it costs too much and that extending the tax breaks for the wealthy represent "probably the worst way to stimulate the economy."

Obama also said: "We can have a further conversation about how Republicans want to spend an additional $700 billion to give an average of $100,000 to millionaires," he said, emphasizing his position that "there are a lot better ways of spending it."

Let’s go to the NUMBERS, the STATISTICS, the GRAVY, the FACTS, the CHEESE or whatever you want to call it….

….apparently our President doesn’t look at the numbers that His own Treasury Department releases…

AFTER THE (BUSH) CUTS WERE IMPLEMENTED in 2001 - Individual income taxes collected by the US government rose from $858 billion during fiscal year 2002 to $1.16 trillion during fiscal year 2007. This was an increase of +35.5% or +6.3% per year (source: Treasury Department).

....insert my joke here: a republican and 3 democrats walk into a up a nice leaves right before the bill comes....who pays???

Answer: the republican still pays because the 3 democrats are living off his tax dollars.

Question: If all republicans moved out of the U.S., how would the democrats pay themselves??? seriously this is an honest question....just ponder it for a and spend, tax and spend...then the tax dissapears how do you spend???

Thursday, September 9, 2010

Government Report Card....You decide the Grade

Let's rehash the last 2 years of the unbelievably ridiculous spending binge this government has gone on and the impact that it has had on the economy....I will even use ALL Government released Numbers....I just won't spin them quite as nicely as they seem to do….


- Recession officially starts in beginning/middle of 2008 after two consecutive Quarters of Negative GDP Growh.
....Caused by massive amounts of debt being taken on by the private sector...thank-you Mr. Greenspan for your ridiculously bubbleicious monetary policy....and of-course the every American should own their own home and that wonderful slice of the American dream...thank-you Barney Frank and Co.

- 2008....the credit markets start to freeze, stock-market plunges and massive lay-offs take place.
...Now enters Govt's record stimulus package of $814 Billion promoted by the President's most trusted economic advisors...Summers, Romer and Bernstein saying this stimulus would carry a 1.5X multiplier effect and stave off unemployment from rocketing above 8%....and without this massive package we could see unemployment go to 10%! Ouch….according to the stats we hit 10.2% even with this massive spending spree….glad they aren't giving me advice....1.5X mulitiplier effect my pretty little A**

- During this same time the Federal Reserve buys a Trillion bucks of Mortgage-Backed Securities and lowers interest rates all the way down to 0%....don't need to say much here

-Who can forget that Cash-for-Clunkers program and the 1st time Home-buyer tax credit.
....all great ideas to pull demand forward for a one-time injection....but, did anyone think about what would happen after? …that maybe, just maybe sales might screech to a halt or land-slide…no pun intended.

-Unemployment benefits extended to 99 weeks....began at 26 weeks….no comment here

GRAND TOTAL of all these programs costs = almost $3 Trillion in Federal Debt in 2 years time!

Return on that investment = 14.9 million unemployed...a housing market that can't running at 21% below last year....and a now staggering 9.6% unemployment rate!  Oh, but I don’t want to short change this return on investment….so I can't forget the nice equity stake in Goverment Motors, and CitiGoverment Bank....and A.I.G overnment....all top-notch investments of course....that's why the Gov't OutBid all suitors....wait I forgot there weren't any private suitors!!! ....I wonder why?

Never in United States history has any Government been responsible for a larger percentage of total American's income.  The Government now tops the scales at accounting for 30% of Americans Income. The highest prior levels were in the '91 recession when this level hit 27% and back in 1975 it peaked at 28%. The most incredible stat is the amount of Transfer payments the Gov't is now responsible for. (Transfer payments is the very kind lingo or PC term for Welfare payments) These have smashed all previous marks at current clip of 18.4% of all INCOME in the U.S.A.!  If you live on a small block of 5 houses….that means 1 of those households is FULLY supported by the Government….or YOUR HARD-EARNED TAX DOLLARS!

I just want to make very clear, when the Government says we are headed in the right direction...I want to highlight that it certainly is a direction this great country has never headed in....but right direction? Well I'll leave that for you to decide. We have been told that the economy avoided the Great Depression 2 right? Well at least that's what we are told....I argue that when you look at these numbers we’ve seen a Controlled Depression….only staved off because of the highest Gov’t support of ALL-TIME…The government was only responsible for 16% of all Personal income during the Great Depression….And today this number is almost DOUBLE at depression right?

The most difficult part to stomach is that as far as I can see, there is no exit package to wean off of this support…no incentives being taken seriously to hand-off to the private sector....just more talk about another bloody stimulus package and Gov't support...there has to be a time when the Gov’t support level reaches a point of no return…where if they were to reduce the support it would be devastating to the economy….I’m afraid we are going that is defined as unsustainable.

Tuesday, September 7, 2010

The Good, the Bad and the Ugly of Consumer Debt....minus the Good

I talked a little bit about the American Consumer in my first blog I thought I'd go into more detail about just how bad the average american is hurting right now...just got done reading the 40 page report titled "Household Debt and Credit" written by the Federal Reserve of New York and wanted to reiterate the STRUCTURAL shift we will continue to see...simply put, the consumer is SPENT!

The United States consumer has a whopping $11.7 Trillion worth of Total DEBT.  This Debt level in '99 was $4.6 it's roughly tripled in 10 years....okay great well that $11.7 Trillion sure sounds like a lot, but how much is it really???

Let's put this number in perspective because it is tough to really comprehend. The entire U.S. GDP or all the money our Economy generated in 2009 was $14 Trillion. Sinking in a little yet?  So theoretically, if you took almost all of everything we produced in a year you could pay this debt off.

Let's look at it another way. If you took the 4 largest banks in the United States...the banks who seemingly everybody gets their loans from....JP Morgan, Bank of America, Citigroup, & Wells add up EVERY single LOAN they have outstanding, it only equates to $3 Trillion or 25% of all debt outstanding. Now remember how the "credit crisis" wreaked havoc on our financial system...well sorry to say, but it really hasn't gone away.  If 25%, or just 1 out of 4 Americans decided to walk away from their could theoretically wipe out all these institutions...yes I know if you walked away from your house these banks theoretically have an asset against their liability, but what if they can't sell that asset? Then they have to mark that asset down, which in-turn causes them to raise capital, and a vicious circle ensues.

Currently, new mortgages are being originated at 50% what they were from 2003-2007. So another words, if these banks get the houses put on them due to the delinquent loans....these Banks have 50% the market to try and sell the house back into....can you say S...O...L???

Okay, now the truly frightening part.  According to the Federal Reserve, 11.4% of ALL Debt is Delinquent. That equates to $1.3 Trillion...enough to wipe out Wells Fargo ($750 Billion in loans) and CITI ($650 billion in loans)...oh ya, I forget to mention the Seriously delinquent loans which are "defined" as over 90+ days late....that's another $1 Trillion which would wipe out B of A ($950 billion in loans).
The consumer simply ain't gonna lead us outta this slow-down....sorry, but the numbers don't lie!

Friday, September 3, 2010

Some Nuts are bigger than others...

Okay, let’s end the week on another positive note….I’m going to start re-visiting some of my Best and Worst financial decisions as an open book to you….hopefully you can pick something up that you can incorporate positively into your life.  My 100%, hand’s down, Best financial decision I’ve ever made, by myself and now with my Wife….is to month in and month out (not easily by the way)….Spend less than we make…because we created a very comprehensive Budget. Sounds so simple right?  Well, unfortunately overspending is probably the most difficult thing Americans struggle with.  I equate it to a disease…or an addiction that culturally makes it okay to spend more than you take home.

The name of this blog is “The Monthly Nut”…which is another expression for your Monthly Fixed expenses, your fixed nut so to speak….the money that no matter what…you have to spend to live.  Rain or shine you have to cut these checks. It’s your Rent, mortgage, cable bill, grocery bill, PG&E bill, on and on and on.  Do you know what your “Monthly Nut” is???  I reiterate I’m sick, but I know what mine is pretty close to the last buck.  Knowing what my monthly nut is allows me to know what I can save in a given month (or how much slack or room I have in my budget)…which in-turn let’s me know how that extra round of golf or dinner out will affect my savings goals or how it will effect me breaking-even for the month.  It allows me to prioritize on what is important to my life-style, to do the things my Wife and I want to do, but also take a pass on the things that we really don’t need and infringes on our “savings goal”.

So, going into the weekend I beg you to find out what your “Monthly Nut” is.  Really, really dig into it….gals - find out how much that monthly back waxing is....and for the men, how much are those monthly facials?....yes it takes time, but I promise you it will be worth it.  Everyone has different expenditures, so of course yours will look very different than mine.  I’ve listed the majority of every monthly expense that I have below to get you started on where to look….No joke, after doing this exercise you will gain so much power over your personal finances that it you will be shocked.  You will also find out by doing the exercise what is discretionary vs. fixed.  Add up every single bill you have and find out where you stand…when I did this with my Wife, we found out real quick where we could cut some fat and I bet you will too….it’s truly enlightening!

Have a great Labor-day weekend and I’ll be back at it next week!

Rent / Mortgage
Cable Bill
Electricity Bill
Phone Bill (home & cell)
Car Payment
Car Insurance
Parking spot payment
Student Loan payment
Credit Card payment
Groceries (My wife and I spend $400 a month for example)
Dining out allotment
Basic Necessities (what we spend at CVS/Long’s every month)
Dry Cleaners
Gym Membership
Subscriptions (i.e. Netflix, Magazines, etc)
Golf rounds for my wife
Manicures and pedicures for me

Thursday, September 2, 2010

I love big Government and I can not lie! other brothers can't deny....

Sorry those aren't the right lyrics...insert proper word and you catch my drift...

Today, I want to dive into the FACTS that the Government has provided about its brilliant idea to meddle in the Loan Modification market for delinquent homeowner’s.  After all, I’m pretty sure that these borrowers were delinquent for a good reason in the first place.  Putting faith in these delinquents is kind of like taking King Henry the 8th’s word that he would be faithful the 2nd, 3rd, & 4th time around….minimum wage can’t support a half a million dollar mcmansion.…but who am I to try and tell the Gov't this, afterall, I also don't spend all day trying to fit a square peg in a round hole either....
Here is a quick rundown: (Through end of July...Data the Gov't has Provided)

- A total of over 1.2 million households have applied for this Government sponsored loan modification program.

- 630,000 households have been dropped by the program due to non-payments, not filling out paperwork, etc….50% drop-outs...looking good already!

- 438,000 households are currently in the Trial phase of the modification program….not real relevant…let’s move onto the success stories.

- 421,000 households have successfully completed the trial phase and become permanent loan modifications…that’s 35% of all who started…now here’s the good stuff….

- 15% of these PERMANENT loan modifications have made it 6 months after they became permanent....let me reiterate 15%!  It gets better….

- And of the 15% that made it 6 months….1/5th of them have defaulted AGAIN over the course of the next 3 months….check please!

Simply put, I don’t think many of us would continue to get paid by our employer’s with a success rate of 12%….maybe hitting .120 as a pitcher is in the Big Leagues is acceptable, but as a Government, please don’t propagate the success your having with these Loan modifications when that simply isn’t true. 

This process has just delayed the inevitable...prices are heading lower and the gov't can't do anything to stave it off this time...I can't promise you they won't continue trying to stick that square peg in that round hole though...

Hopefully I have some Seinfeld fans out there...Put in the famous words of Jerry Seinfeld looking at George Costanza while lying face-down on the floor with his pants down…”And you want to be my latex salesman???”

Wednesday, September 1, 2010

Shout out to All my followers...

…the blog hit the 500 views mark this morning and I appreciate everyone for stopping by!!!

 I’ve really enjoyed writing this stuff so I will try and keep it going the best I can....please email me with any recomendations, thoughts, ideas or topics you'd like to hear more about...and I'll try to address them in a timely matter.

I've also added a subscribe to link on the Top Right due to a email recomendation (thanks!)…so you can get an update when I post.

thanks again!

Tuesday, August 31, 2010

Dividends Schmividends...

If someone gives you the advice to purchase stocks because their dividend yield is high....please run far, far away.  This rationale is a terrible reason to buy stocks.  It has been proven that Stock yields do not have a positive correlation with stock returns.  Yes, stock prices can go lower and dividend yields can go higher.  Cheap is a relative term...anyone remember 2008???  It will forever be etched in my memory and taught me to question everything and everyone...because the smartest of smart money saw their portfolio's Halved!

Let's look at 2010 so far and if you would have taken this brilliant strategy for face value at the end of last year.  Let's use the Dow Jones Industrial Average as a Broad index strategy.  If you would have purchased the Dow at year end '09 for that irresistible yield of the Dow is down 4% Year-to-date...but wait you've gotten paid 9 months of dividends or 1.83% (9 divided by 12 times 2.45%) now your only down 2.16%....great trade!  And if the market continues to fall....that 2.45% dividend will surely keep my porftolio afloat....or will it?

Let's look at a few of the DOW companies for this year, just incase you would have gone the single-security route instead of the overall index.  Here's a quick example from a few different industries. Pfizer, Exxon Mobil, United Technologies, and Johnson & Johnson, which are all great dividend paying stocks.  After including the 9 months of dividends in their performance, these stocks are down respectively; -9.15%,
-11.05%, -4.25%, -8.55%.  Makes me say hmmmmmm....

Monday, August 30, 2010

Simple "World" Math...

I’ve heard the comments too many times to count and wish to dismiss such rubbish. “The BRIC (Brazil, Russia, India, China) countries will lead global growth and thus double-dip recession is off the table”. You’ve no doubt heard about the torrid growth coming out of the emerging markets. I can not dispute that and fully agree…Brazil is humming long at 5% clip…Russia was at a 5% clip till last year where it dropped 8%...India is moving at a 7% clip…....and last but certainly not least China is flying at a 8-10% pace. So no question these countries are Emerging.

Here is what I wish to question. The United States, Europe, Japan and the U.K. account for 65% of the World’s GDP. Arguably, this 65% is seeing no growth or very little if any. All of these 4 places have serious debt problems that continue to move above and beyond the 100% debt to GDP level.

Let’s take a closer look at the BRIC’s. Add these 4 countries up and you get 15% of the World’s GDP. All these countries are growing nicely, except Russia, and have very little Debt to hamper their growth.

So my simple math problem is how does the 15% carry the other 65% of the bums???

Let’s take a real-life example…I’ll even make it Politically Correct….Wife makes 65% of household income or let’s call it $65,000 a year for simplicity, and Husband makes 15% of their income or $15,000 per year….Now factor in that Wife has growing expenses at 10% of her income which would be $6,500 this year and she can’t cut any expenses because they are Fixed.  Now husband has a nice bump in income at 8% of his salary this year which works out to $1,200 and he has no growing expenses.

So his $1,200 bump can help make a dent in Wife’s $6,500 increase, but it doesn’t carry her the whole way. So how the heck can the BRIC’s carry the rest of the INDUSTRIALIZED World on it’s back???

Even the math doesn’t add up.  I strongly oppose this opinion that the emerging markets will carry the rest of the world into the Holy land.  I Don’t think David takes down Goliath this time…oh and by the way I don’t have a unicorn ranch either…prepare accordingly.

Just in case you wanted to see the numbers:

(% of World’s GDP)

E.U – 28%
U.S. – 24.5%
Japan – 8.7%
U.K. – 3.6%

Total Industrialized = 64.8% of World’s GDP = Not growing with Significant Debt

Brazil – 2.7%
Russia – 2.1%
India – 2.1%
China – 8.4%

Total Emerging = 15.3% of World’s GDP = Growing quickly with barely any Debt

Thursday, August 26, 2010


To my loyal followers...I will be outta town through Sunday. I will be honoring and celebrating the life of my Grandma....she will be missed tremendously! So Posts will resume early next week!

Sent from my Verizon Wireless BlackBerry

Wednesday, August 25, 2010


I saw on the headlines this morning that a Brand New Animal has been added to the Endangered Species list….THE LONG-ONLY MONEY MANAGER. Yep that’s right…the public is fed-up and rightfully so! Just this morning I’ve heard 3 of these Endangered species go on TV and state that the market has no business being down this low, that the economy isn’t really in that bad of shape, yada yada yada. All I hear is excuses, excuses, excuses.

It really is unfortunate, because money-management is a sort of art, it’s a craft that has to be constantly reviewed, tested and is constantly evolving. The only crutch that these endangered LONG-ONLY MONEY MANGERS have is that they prey on the weak and the uninformed. Don’t be one of the uninformed, it’s your moola so ask tough questions, and don’t except the status quo. Afterall, the status quo saw your portfolio DOWN 30% over the past 10 years….DOWN 12% over the last 5 years…and down 6% this year alone! If these LONG-ONLY MONEY MANGERS don’t evolve, they will go the way of the DODO BIRD.  Remember, the DODO BIRD couldn’t fly and nested on the ground, therefore getting eaten along with it’s eggs.  Don’t except that old excuse that “we are in it for the long-term” only to watch your portfolio constantly go in one direction….Down.

 I understand going SHORT in the market to many people is like Un-American and due to pop culture is considered more risky than being LONG.  I 100% disagree and now opened a whole different can of worms that I can't touch on without going on for way too long.  I will touch on this subject another time.  I will simply leave you with the thought that CASH is an Adequate Asset-Class.  Being in Cash this month has saved my portfolio 7.2%....Enough said!


Tuesday, August 24, 2010

Poll Questions...

Thanks to the 7 people who took the time to answer!

On average what has been the worst performing month for the Stock Market?
Answer:  September (hang on to your britches...)

How many states in the U.S are up to date and have Fully-Funded employee Pension Programs?
Answer: 3 states!!!  or a measely 6%....the 3 states are Florida, New York & Washington.
And the 2 Most UNDERINVESTED Pension programs are in California and Illinois....and the Governator gets made fun of....who ran Illinois?

P.S.  Worth pointing out: When states run their Annual Fiscal Year budgets….these UN-FUNDED pension programs do not even count as a line item towards the Deficits…Meaning states are running these huge deficits WITHOUT factoring in the 30-50 years worth of Dough they owe their retirees….

Monday, August 23, 2010

240 year old Quote...pretty eerie huh?

“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover that they can vote themselves generous gifts from the public treasury.  From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy…”

Alexander Fraser Tytler, Scottish lawyer and writer, 1770

Amazing Mr. Tytler didn't even know about Nancy Pelosi's wardrobe or Rangle's hidden the late Johnny Carson used to say "Weird, Wild stuff!"

Friday, August 20, 2010

TGIF...and the Holy Grail of Investing

I've decided to end this week on a positive note. No more rants until next week!

I want to bring to light what I would consider the HOLY GRAIL of investing...the magic of the Compounding of interest. Ya, ya , ya sounds so boring, I’ll try and make it interesting for you. This alone is how the rich get richer so why can’t our poor souls use it while we are young. We have the luxury of time on our side….don’t squander it!!!

Ladies you remember that last pair of shoes you purchased for around $100 (who am I kidding those are cheap right, but for simplicity I’m sticking with $100). Gentleman, you remember that last time you blew $100 on eating out and a bar tab? Yep every weekend for many....Well if you are 30 years old and placed that $100 in a Roth IRA and earned 10% a year till you were allowed to take it out at age 60.....that $100 is now magically $1,745! Let’s take it a step further if you maxed out your ROTH IRA contributions for the year, which is $5,000….when you retire that 5k is now worth $87,247….holy **** right??? Now just imagine the possibilities when you start throwing larger numbers into the mix.

It doesn’t matter how old you are…it is never too late….20’s, 30’s, 40’s, even 50’s…Make it happen, don’t put it off any longer. I urge you to go through that next week or two, and when you are about to make a big purchase that you really don’t need….look at these Numbers below….This is what you are really spending….That old quote “A penny saved is a penny earned” still holds true…now throw in the compounding of interest on that penny saved and it is how YOU will take care of your financial future.

Say it with me, that pair of shoes just cost me $2,810….that $300 I squandered eating out all month really cost me $8,431….you’ll get the hang of it….might even be fun if your sick like me…


25-   $100 = $2,810
         $200 = $5,620
         $300 = $8,431

30-   $100 = $1,745
        $200 = $3,490
        $300 = $5,235

35-  $100 = $1,083
        $200 = $2,167
        $300 = $3,250

40-  $100 = $673
        $200 = $1,345
        $300 = $2,018

45-  $100 = $418
       $200 = $835
       $300 = $1,235

50-  $100 = $259
        $200 = $519
        $300 = $778

Thursday, August 19, 2010

High Profile Crooks...

GM announced this week they have an IPO on the shelf. I urge you NOT to partake in this utter travesty. Let me make this clear…I hate GM with a passion after what they did last year. There is no difference between what GM did back when it entered bankruptcy to you or me breaking into an old Ladies house and stealing everything she owns. Really, I’m serious, General obaMa decided to screw ALL Bondholders which historically are supposed to be at the TOP of the Capital structure. Miraculously, when our President got involved, those “Fat-cat, rich bond-holders” (i.e. widowed old ladies living off a fixed income from their bonds they have held for 15 years), were deemed worthy of losing all their money. Yep, so that LOL (little old lady) lost all her $$$, because our LEGAL system was hijacked by a hidden agenda that voted in favor of the UAW pensions and healthcare benefits for former employees. I was appalled to see that the LAW was not upheld for the General Motors….never has this happened before….unfortunately I can’t say it will be the last time either. So that IPO being flung to the public is 18% owned by the UAW…and that LOL….well hopefully she can still afford those med’s….thanks General

Too say I will NEVER buy a GM vehicle EVER AGAIN is an understatement….

Wednesday, August 18, 2010

What’s good for the Goose ain’t good for the Gander….

You know what really fires me up, when I hear “people” adamantly stating that the Government needs to provide more stimulus, i.e spend more Money to get the economy going again. In theory this sounds great right? The Government can borrow a little money, spend it (flush it through the economy) and in turn get demand going again. Giving the Gov’t a Credit Card with an unlimited credit line, is a lot like giving that spend-a-holic spouse (thank god mine’s not) a credit card and hoping to end up with a bunch of stuff you actually need. Remember that beautiful down comforter fellas or those cute throw pillows? How about that big flat screen ladies? Problem is you end up with a whole bunch of **** you don’t need and a looming liability that has to be paid back!

Here are the cold hard facts, which in my opinion are impossible to dispute: Public (Gov’t) employees on average make $71,206 a year compared to the average Private worker taking home $40,331.(USA Today) That’s exactly 1.76 times the pay of a private worker. Please tell me how this is efficient? Actually I beg you to rationalize this….

Okay, you say that I’m looking to small, that’s only at the individual level. Fine, point taken, let’s take a look at all those individuals, add ‘em up and see how it looks on a larger scale. Let’s look at the State and local Governments across our nation….after all, these state and local Governments decide to pay their employees 1.76 times the private sector, they set the salaries, so let’s see how they have performed.  Currently, they have a projected Deficit of $180 billion for fiscal year 2011 and another $120 billion Deficit for 2012! And this as after they ran a $200 billion deficit in 2009 or another words spent 30% more than their General Fund (Income) allotted for.  That 1.76 X private sector = Money well spent right?  Logic tells me there's a little fat in that extra 1.76 multiple...don't tell the DMV receptionist that, she might treat you better.

The most alarming and sickening statistic I’ve seen is the fact that since the peak of the last business cycle (2007) the Private sector has CUT 8.5 million jobs….wait for it…the Public sector (Gov’t) has CUT 200,000 jobs….uh-huh...I'm starting to choke on that goose right about now.  That’s less than 2% of the jobs lost.  Hold on...I can't breath, the goose is lodged in my throat....All those Private sector 401k matches…GONE….Private sector Profit sharing from employers…Forget about it....Longer hours, less pay….Yes Please, but wait extra MSG please!!!  Correct me if I’m wrong but last time I checked Public employees haven’t seen a halt to their retirement benefits…Please, sombody! I need CPR, help me get that goose outta my throat....cough cough….or god forbide ask the Public employee to work more than the union mandated 8 hour day….with a lunch and a mid-morning break….Oh jesus...I'm having a full fledged heart-attack over hear now...swallowed to many of those geese or is it gooses?  doesn't matter...not much time left I'm on the way to the E.R. now...Maybe I'll see the United States of America on the operating table next to me...hopefully that little machine doesn't flatline quite yet...

Monday, August 16, 2010

Move over World...

China has officially passed Japan to become the World's 2nd largest Economy....I think they have officially emerged!

In recent years China has flown by... #6- UK, #5- France and #4- Germany....

some see U.S. being passed by 2030 ?!?!?

The Economy, Housing and YOU...

Recently, seemingly everywhere I turn, I hear from people, pundits and realtors (undoubtedly) that this is a GREAT time to purchase real-estate. To all I come across directly, I pose the very simple question….”WHY?” To those indirectly, I pose that same question? This little write-up began about a month ago when I interacted with a friend who is contemplating purchasing a piece of property. The answer I received from my question was uninspiring and lackluster and in-turn provoked me to finally Put Pen to Paper, well actually keystroke to computer, MY thoughts on the matter. As it turns out, I wrote about way more than just the housing market, so even if you already own a home, I dive into the economy, banking system, etc., so there should be a little bit of everything for everyone. Everyone has an opinion, and I undoubtedly love forming my own, I also love debating critical thinking with others, and am always willing to admit when I’m wrong. So feel free to fire back at me where you disagree. Below is my overly long, detailed, “Outside the Box” thoughts and analysis. As you will see I refuse to go along with the Herd Mentality and I refuse to listen to a real-estate agent who tells me that this is a great time to buy a property, but can not answer my simple question with any relevance.
Feel forward to forward this on to anyone who might like some controversial reading over the weekend.

Today, almost 3 years after one of the worst recessions of all time began, the Ultimate Cause, has not been solved…..DEBT! What started as an overly Debt-laden Private sector was transferred directly to the Public Sector….aka Uncle Sam’s balance sheet. You throw in a depreciating environment in the only places Americans derive there wealth from: Homes, Jobs and Portfolios….and you have a Private sector that has barely De-levered at all. That’s right, most Americans are in worse shape than they were in 3 years ago! The fact that a very small percentage of this Debt has been paid down means Governments and Individuals will be forced to spend less and save more. This will prove to be a very gradual process, think about how long it took to reach the “Great Excess” we saw just 3-4 years ago. I am confident that we are still in the early innings of what I’m coining the “Great De-Leveraging”. This process could take years, maybe even a decade to work through.

The U.S. Economy- (If numbers and forecasts bore you skip to next paragraph) We are currently seeing below average growth and a weak economic recovery out of arguably one of the worst recessions of all-time. The 2nd half of this year will be worse than the 1st half of the year. Fiscal stimulus has worn off. The 1st half of this year had Comparisons from the 1st half of ’09 that were about as low as we’ve ever witnessed. That does not bode well for 2nd half forecasts as the 2nd half faces tougher Comp’s than the 1st half . 1st quarter GDP growth for this year was forecasted at 5%, then was steadily lowered from there and the official Final number was revised to 3.7%. 2nd quarter GDP numbers just came out and 2.4% was the reported number, down from the originally estimated 3%. Then the U.S. trade data came out after GDP report and it and all but guaranteed that the 2nd Qtr GDP will ultimately be revised down to 1.0 -1.4%. Two quarters in the bag, two quarters dreadfully lower than expected. Final sales will be worse in 2nd half of the year as inventory rebuilding is all but completed, thus pushing Growth even lower for the 2nd half of the year. 1% GDP growth for the 2nd half of the year could be about right and technically would not be defined as a Double Dip recession. A recession is defined as two sequential quarters of Negative GDP growth. 1% however, coming out of the steepest recession since the Great Depression will definitely feel like another recession. I argue that this meager growth is not sustainable to create new jobs, new business investments and therefore could ultimately push us downward into a Double Dip Recession. The Washington uncertainty…. the Bush tax cuts are set to expire and are up in the air, financial regulation leaves question marks for Banks, and the uncertain costs for companies trying to price there future healthcare costs does not bode well for future investments. If the economy limps along at +1% growth….consumer loans, auto loans, credit card debt and student loans will continue to become a larger and larger proportion of Americans budgets.

Moving on to Government Policy. What can the Government do to help stave off a slow-down this time? There is significantly less Ammo that the Fed/Treasury has at there disposal for this round. Rewind back to ’07-‘08….interest rates were at 0-0.25%...that’s right as close to zero as you can get. That means as the economy struggles, the Fed has ZERO Monetary Policy flexibility, after-all you can’t lower interest rates to below zero! Rewind again to ’07-’08, the Federal Balance Sheet was in much better shape. We were able to essentially backstop the entire financial/banking system without creating havoc on the Governments cost of borrowing. As our Federal debt continues to rise (currently +100% of GDP) and we require 50%+ of our Nation’s Deficit to be funded by Foreigners we begin to enter a danger-zone. Now let me be clear, nobody, I mean nobody, knows when creditors finally seize to buy our debt. Look at Greece …everything was fine until one day it simply wasn’t and there cost of borrowing skyrocketed. No-one can predict when that line is ultimately crossed. I’m not even saying that it will happen here in the U.S., I’m simply saying that we can not afford risking getting close enough for it to even be a possibility as it would be catastrophic. Greece had the European Central Bank to step-in and bail them out….who steps in for the US Treasury???

Moving onto banks…the good the bad and the ugly of the current environment. Banks are currently sitting on over $1 Trillion of reserves earning a meager 0.25% from the Federal Reserve. Now before you say those damn banks, they are at fault, and now they aren’t helping, please remember the glory days…Yep that’s right, back when YOU or a Family Member or Friend or Neighbor got a Loan for a home without a problem and Benefited from the transaction. You or your family member or Friend or neighbor suddenly made a whole pile of cash as that home rose in price…then the mindset suddenly shifted to thinking the House could never, and would never, ever, go down in value. This caused the good ‘ole fashioned piggy-bank or Home-Equity line of credit to be tapped in conjunction with those Pretty Plastic cards….Those delightful drapes, great granite countertops, beautiful boats and who could forget those tremendous trips that were being taken….they were all to plentiful....Yep the “Great Excess”, how it felt oh so good. Oh how the “Great De-Leveraging” is going to feel oh so BAD. Were the banks at fault for these no-doc loans and was Wall-Street at fault for the securitization and shameless promotion of these securities? Absolutely! Shame on them! Was it “Us” Americans who are at fault for gorging endlessly on the seemingly endless abundance of money that was now suddenly growing on trees? Absolutely! Shame on “Us”! That money that was created and spent throughout the “Great Excess” had no business being in the system, it was artificial, and then that artificial money was levered and levered again, therefore creating a compounding affect that was unsustainable. WE Americans, collectively are at fault, not the banks and not the individuals alone…WE acted dependent of each other, everyone had their say and now….Unfortunately, it is time to fall from that money growing tree Together.

Today, these banks are still in risk-aversion mode from the “Great Excess”. They still have bad loans on there books. Yep that’s right you borrowed that Money, they didn’t force you to take it and now your balance sheet is upside down, thus creating stress on the banks, now Wonder why the Banks maintain their cautious stance!

Finally….Housing - the whole point of this rambling right? Back in 1992, about 4 million homes were being purchased every year. A decade later, 5 million, only a 25% increase. Then the boom, a short 3 years later that number jumped to 7 million units a 40% increase! Today, the residential real-estate faces numerous headwinds. Everything stated up to this point, both indirectly and directly effect housing in a very negative way. So let’s look a little closer at the Micro picture.

Loans….Once given to anyone with a pulse, are now tough to get. Inventory…extremely high and shadow inventory almost unquantifiable. All those foreclosures, not yet released by banks…all those speculators or flippers who are underwater just salivating at the thought at getting out even or anywhere near….waiting, lurking ready to sell. Over the past few months I’ve had a dozen clients mention they are waiting to sell a house, but haven’t listed it yet…case and point. Unemployment….remains high, will continue to be remain high and does not provide adequate backing to a sustainable recovery in housing. Lastly, very simply put…..Prices….they remain too high!

How can houses continue to be priced to high after over a 30% decrease? Using almost all quantifiable metrics this is still the case. Consider prices relative to income. From 1977 through 2010, the median price was 4.1 times median household income. The mean today is still above that 4.1 level, and that “mean” level is even artificially high because of the 2002-07 boom. Take a look at the chart below (top). We have room to fall. And it would not be surprising to see prices over-correct below the mean before it is all said and done. Home Prices vs. Rents shows the same picture, Prices remain too high (2nd picture below).

Government interaction has put a temporarily pause to the decline in home prices. The tax credit and mortgage modification programs helped stave off supply entering the market over the short-term. However, now that the tax-credit has expired and the modification program has proven to be widely unsuccessful, the market will go back to figuring out the appropriate equilibrium for prices over the Long-run. With all the cyclical, structural and long-term headwinds mentioned, this price-equilibrium will be found at much lower prices.

To overly simplify the analysis, there will continue to be far more Sellers than Buyers for the foreseeable future. So if you don’t have to be a Buyer right now…I urge you to happily wait on the Sidelines, it is not as bad a place to be as the Media and pop culture makes it out to be!