Newsletters

We have just passed a dubious anniversary date, or actually week. If you have been watching many of the media outlets, CNBC in particular, you are constantly reminded of where we were and what was happening at this time last year. It certainly was a very difficult time. Obviously, as I have remarked over the past year in writings and conversations with clients, there still is no definitive light at the end of this tunnel, although I think many would agree, things are generally a bit better, or at least, not as bad as they were in September 2008.

Yet, there are some troubling undercurrents in our economy. The one which grabs most of the headlines is the unemployment rate, currently at 9.7% with many states rates above 12%. Truly, there are many people with very little hope of employment in the near future. As a result, they are not buying anything and perhaps are at the end of the road for unemployment benefits. No confidence is being exuded by these folks. In addition, along with these folks are the people who are underwater with their homes. They took on too much debt and now all the indebtedness surpasses by a great deal, the values of their homes. Therefore, there is no hope in the near future. None of these people will be spending money any time soon.

One of the next headaches for this economy I have already indirectly referred to and that is the continued slump in housing nationwide. There are certainly some encouraging signs in some geographic regions. However, prices remain depressed and the inventory is still huge. Buyers are still in the drivers seat in most markets. Further complicating the situation is the tightness of the banks new lending standards. It is said that the best loans are made in a recession (even though if you believe Ben Berrnanke, the recession is over!!!), but not many are being made. Therein lies a very big problem. As buyers step up to the plate, they cant get financing unless they have the very best of credit scores. Even worse, if buyers are ready, willing and able, the banks seem to be all out of sorts in terms of moving short sales and foreclosures, dragging the process out indefinitely and to the point where buyers are lost and the market remains stagnant. Until we can move these properties at reasonable speeds, the housing market will remain soft.

I cant get through this newsletter without commenting on the current legislative environment in Washington, which normally, is a disaster. Right now, the Health Care Reform bill is languishing in both the Senate and House. It doesnt seem as though the President has been able to move the debate in either direction. Without his leadership, it will be hard for the Democratic party to hold together and craft the legislation in the fashion which they desire. The Republicans simply dont have the numbers to block any legislation. Given that fact, I predict that if any Health Care Reform is passed, it will be so watered down so that it will be unrecognizable. I think there is a better chance of a bill not passing. In fact, that would be better for all as we simply cant afford this bill at this time and from what I read, most Americans are at least mostly satisfied with their health care coverage. Time will tell.

Finally, we have the Cap and Trade legislation and the hint of a second ( I hope not) stimulus package. According to Mr. Bernanke, as referenced before, the recession might be over and if so, that would mitigate the potential of the second stimulus. The bottom line is that in the past 12 months, Washington politicians have spent way too much money and leveraged our future. Perhaps with a decent recovery, we can at some point have sustainable growth to begin to offset the spending increases. However, any more spending and we could be in some serious trouble down the road. More on that in my next posting.

Please note that during the week of October 5-9, we will be traveling out of the office. As usual, phones are forwarded to my cellphone and I can be reached at 561-254-9418, but it may be a short while until I can return calls. I will be back in the office on October 12.