11.21.09
Posted in Economy at 03:59 by lnxwalt
Foreclosures hitting more people with good credit – Yahoo! News
The foreclosure crisis likely will persist well into next year as high unemployment pushes more people out of homes, pulls down housing prices and raises concerns about the broader economic recovery.
The latest evidence was a report Thursday that a rising proportion of fixed-rate home loans made to people with good credit are sinking into foreclosure. That’s a shift from last year, when riskier subprime loans drove the housing crisis.
The report from the Mortgage Bankers Association also found that 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September. It was a record-high figure for the ninth straight quarter.
This news means that it may be a while before most people can look to large employers for jobs that will help their personal recessions end. Instead, we should be looking around us to see what needs are not being met in our local communities. Providing some needed service that is currently missing in the local area is going to be the best thing that any of us can do to get something going right now.
As individuals, family members, and small business owners (or prospective and hopeful small business founders), we have to stop telling ourselves that some large, out-of-area corporation (LOOAC) or government agency is going to save our bacon. It is going to be you and your family (and any employees) working together to meet your individual and collective needs, not big corporations, big banks, or big government. While the government is telling us that the recession may even have already ended, the data does not agree. Unemployment is rising, as are foreclosures. Almost one in seven homeowners is in the foreclosure process or behind on payments. In addition, there are a lot of commercial rental properties that are considered in danger. If retail sales this holiday season do not recover from the depressed levels of last year, landlords (who typically get a percentage of gross from tenants as part of their rent) will have even less money to pay their mortgages. The first half of 2010 could see a wave of bankruptcies, foreclosures, and bank failures. Recession ending? I wouldn’t bet on it.
When I say this, I am not taking a political stance. I am not for or against any politician. I am for smaller, locally-owned businesses (SLOBs) and against whatever I perceive to be against SLOBs (and their owners, managers, employees, and investors). The government is not really going to advance the needs of small business over those of LOOACs and big banks (LOOABs), nor will it subordinate the urge to pull more power and funds into each agency to the need of smaller businesses for less control and lower taxation (or at least less complicated taxation).
As with any other LOOACs, we cannot depend upon the MSM (mainstream media) to give us accurate information about what we need to do to survive the crisis. It is my suggestion that you develop a network of information sources, individuals and smaller, localized organizations (SLOs), including SLOBs, which are “on the ground” in the areas that interest or affect you. You will surely find, as I have, that whenever I know about a subject or event, the news media consistently gets it wrong. How are you supposed to decide when to invest, when to expand, when to hire, when to relocate, if your information comes from biased and controlled outlets? Answer: You cannot do so with any expectation that your decision is based on the best information. Instead, turn off organizations like ABC News, CNN, MSNBC, and Fox News. Get yourself connected with those who are most likely to supply accurate and timely information.
Finally, do not be a knucklehead. One of the things America did in the 1930s and 1940s that helped our nation survive the severe hardships of those years was pray. Get to know the God who is in control, the one who made you and the universe in which you live. Depend upon him to give you the intelligence to properly use the information you obtain, and the empowerment that enables you to actually perform the tasks you need to do in order to get through. Do not waste your resources on Cadillacs and expensive living. Try to live for the long term.
I have discussed the Econolypse over on Owner-Managed Business several times this year. You can find that content on that blog.
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11.11.09
Posted in General Management at 20:07 by lnxwalt
If you are at all aware of the world around you, you know that the U.S. and most of the world is experiencing an economic downturn. As part of our national response, the government has pumped billions or even trillions of dollars into keeping the financial industries going, including commercial banks, savings banks, credit unions, consumer finance companies, mortgage lenders, insurance companies, and investment banks. They have even jawboned these companies, telling them to help keep consumers in their homes in the hope that arresting the mortgage slide would enable people to once again borrow against their properties and spend money. In other words, the Bush and Obama administrations’ hope for recovery is based on a return to the asset price bubble of the past twenty to thirty years.
This should scare you. Because when you hear “recovery is coming, recovery is coming”, what you should hear is we are going to make sure that we get a truly devastating and unique economic depression. Unique because nearly every depression in the past two hundred years was deflation-based. To have one where most prices are deflating, while certain prices (energy, for example, and very likely food) are rapidly inflating will be even more devastating. Just wait until sales of almost everything fall through the floor (I’m talking double-digit percentage drops, something we have not seen since at least the 1930s) as people see prices decline, yet food and fuel prices run in the other direction with almost the same speed. Some won’t be able to afford to buy food, while farmers won’t be able to sell food for prices high enough to cover their costs.
This, of course, will lead to some civil unrest. I’m hoping this is peaceful: protest marches about the availability and pricing of food and fuel (and jobs), rather than some kind of violence. I still remember watching some of the college protests on television in the late 1960s and early 1970s. As an elementary school student, this was quite frightening. Were these crazed and violent people coming to burn down our homes and schools and kill us? (This inability to put events into proper perspective is another reason why children should not be watching television or browsing the Internet without parent supervision, including some discussions that bring historical context to the situation.) You and I can help to minimize the disruption of these things by reducing our dependence upon outside resources–plant a garden, so you can raise a portion of your own food requirements; put aside some water and canned foods, including food for your dogs and cats; get a first aid kit; get some blankets and store them with the rest of your emergency supplies–and by helping to ensure that our family members, friends, and neighbors are also provided for.
But you should not allow the government, the financial industries, and their media servants to deceive you. Stop listening to them, or even better, listen with a critical ear. When someone announces that the recession is ending, ask yourself how gross domestic product can begin to increase when 70% of that figure comes from consumer purchases, and consumers are still losing hundreds of thousands of jobs each month. And then ask yourself why they would attempt to fool you into believing that things are getting better if the economy is clearly still down in the dumps?
Are you getting it yet? Perhaps the financial industries have some control over the politicians. I’m not suggesting anything illegal, such as kickbacks. Instead, I’m suggesting that campaigning for office is increasingly expensive. As the largest beneficiary of government handouts over the past couple of years, and as the beneficiary of such laws as the 2005 Bankruptcy Elimination Act, the financial industries wield enormous power in Washington. They have a lot to gain and a lot to lose.
Rather than allowing the government / financial industry / media message to influence you, block it out. Use your brain and think for yourself. Do not allow anyone–least of all someone on the Internet that you haven’t even personally met–to do your thinking for you.
Because if you think for yourself, you will quickly realize that you should be cutting your consumption and putting away some reserves for the near future. But here’s something else you should be thinking about: if there is a food or water shortage and you obviously aren’t being affected, your neighbors will kill you and take your food and water. Piling up guns and ammo won’t help either, because some of your neighbors can match your firepower. Instead, your preservation plan should include your neighborhood’s residents and even your town’s government.
Back in the 1930s, nearly everyone had an uncle who had a farm. Families could send their teens and young adults to help Uncle Jim in Kansas, even though he didn’t really need any more “help”. This meant that they’d have food to eat and some tasks to keep them busy, keeping them from becoming hobos or joining the “roam from town to town looking for work” brigade. Now, very few of us have that connection, so we have to find ways to reduce our dependence on “the system” for our basic needs. The political and economic system of this nation is buckling under the corrosive effects of undue influence by corporations of all kinds, and the entrenched power brokers are not going to easily surrender their control. It could take between two and ten years for their power and influence to be torn away by the continuing economic crisis.
And, no, I’m not advising anyone to turn into the kind of survivalists that head for Idaho with a cache of food and guns. Again, if things ever got that bad, your weapons are not going to be sufficient to keep everyone else out. Nor should you be piling up gold–you cannot eat or drink gold, so it won’t help if basic survival is in question–or other ‘barter-type’ assets to trade for food and water. Instead, your focus should be on getting through a moderately difficult period (but more difficult than today) for a period of two to five years. In that length of time, you will exhaust your stored food and water, so your plan should include marshalling the resources to replenish those necessities.
As individuals, you should be working out what you need to do to ensure that your family gets through. But if your family is anything like mine, don’t think that telling everyone to cut spending and save up is going to help. Neither, in this age of apartment dwellers, is telling everyone to start a garden or raise chickens and rabbits. Instead, you have to be like Joseph in Egypt, preparing the way for your family members, friends, and neighbors to also get through the rough spot. As with Joseph, this isn’t a reason to brag or be bossy, but to understand that God is positioning you to help preserve your family, your friends, and your neighbors.
Again, you have to shut your ears to the message they want to send you. Use your own eyes, ears, and mind, and you will make better decisions. You really have to be like a small child who puts his fingers in his ears and says, “La, la, la, la. I’m not listening.”
One more thing I want to add. I really don’t think it will be big business and big government that gets us out of this economic mess. I think it depends upon you and I to start and / or grow our own small, locally-owned businesses (SLOBs) and to put people in our localities to work in productive jobs. It depends upon us finding local (or at least domestic) suppliers and products. It depends upon us using our brains and not allowing someone else’s agenda-influenced news to dissuade us from preparing.
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11.07.09
Posted in Economy, News and Announcements at 05:22 by lnxwalt
What recovery? Unemployment shoots past 10 percent – Yahoo! Finance
And the unemployment rate doesn’t include people without jobs who have stopped looking, or those who have settled for part-time jobs. Counting those people, the unemployment rate would be 17.5 percent, the highest since at least 1994.
Economists had expected unemployment to rise to no more than 9.9 percent, up just a tick from September’s 9.8 percent, and the surprising jump added to fears that the recovery could fizzle if Americans don’t spend.
Already, consumer confidence for October came in well below what analysts were expecting. Shoppers’ sentiments about the state of the economy are the gloomiest in nearly three decades.
If you have been listening to the news coverage of business and the economy, you probably thought that things are really getting better. After all, the banks and other financial industry companies are reporting profits again, and even some of the tech industry companies are seeing gains. But the reality is different.
The biggest part of the gross domestic product–somewhere around 70%–consists of consumer purchases, which in recent years was primarily financed through debt, including refinancing of residential real estate. In other words, the level of purchasing we saw in 2003-2006 wasn’t supported solely on personal incomes, but on borrowings, including loans against home values that were far too high. How do we expect to repeat this when between 10 and 22% of the workforce is unemployed?
With layoffs and foreclosures continuing at above-average levels, I would expect that the overall economy will remain at a lower level for at least the next six months. After all, real estate prices still have not fallen to sensible levels, and even if they had, every state in the union is trying to squeeze more money out of its residents. California, for example, raised its payroll withholding rate by one-tenth, as an interest-free loan from its employed citizens.
So I ask you, how does any supposedly competent economist expect things to pick up soon? Is money supposed to fall from the sky? Indeed, I am surprised that economists and financial analysts did not notice that the economy’s underlying fundamentals changed some time in the past twenty years or so. If they had noticed, they would not have been surprised when the debt-fueled growth stopped. And they wouldn’t have supported economically-illiterate moves like the bank bailouts, because they would realize that the overly-expansive financial industry had thrown common sense out the door in the pursuit of ever-increasing profits.
This irresponsibility of finance industry companies hurts families, small businesses, and municipalities, primarily because it hides their need to dramatically constrict spending, and to save up for larger purchases. Irresponsible finance companies make it too easy to spend now, even when the better way would be to defer spending and save. Naturally, fiscally-aware families soon find themselves left behind as overspenders continue to pile up more and more new “stuff”. Finally, even many fiscally-aware families have to take the dangerous course of living on credit just to avoid divorce.
In finance classes, they talk about “financial leverage”, where using debt to finance a part of a company’s capital needs can increase the return to (a reduced-size group of) shareholders. The other side of this, of course, is that the firm’s profits become much more sensitive to changes in sales. In other words, returns can be increased at the expense of making those returns more risky. This kind of financial education is badly needed in every corner of our society, from the White House on down to the guy living in the shack downtown.
Perhaps the media chooses its pundits based on the desired message. It surely cannot be choosing them based on any rational criterion related to understanding the impact of continuing job losses and lender paralysis on the largest part of the economy. For then they would not be seeking out the “the crisis is ending” group. This is not a “jobless recovery”. It isn’t a recovery at all. In fact, it is only the constant promotion through the mainstream media (MSM) that has kept the economy from going into full free-fall.
What should you do? Well start by turning off the media, going to the library, and reading history, economics, political science, and related books. Learn to understand the knowledge gathered by many generations of curious and independent thinkers before you. If you have a back yard, plant a little vegetable garden. This isn’t an attempt to become a subsistence farmer–if things get that bad, your neighbors will kill you and take your food–but an a way to help you feel a little bit of independence. Start cutting your unnecessary spending, so you can save something just in case things get hard.
It might never get harder. In that case, keeping your spending in check and saving up funds can put you in the group we call “investors” instead of the group we call “consumers”. You can be one of the ones who rejoice when the Dow Jones Industrial Average goes above 10,000. But if things do get harder and you have an extra three months worth of income saved up, you might get to keep your home when your neighbor loses his.
Important: I am not a financial advisor. If you take financial advice from some random person on the Internet, you’re being foolish. Instead, consider this an opportunity to start thinking for yourself.
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