Monday Thoughts – Are People Waking Up?


As I sit in a convention (industry stuff) I am pondering the market action today. basically my assessment is, no one has a clue what will happen (me included). I do think though, that people are in for some big surprises and the response economically could be very  painful. Risks do still exist and honesty is very lacking in many conversations with  national, economic implications. Let me point out some examples:

1. We are getting reports from banks that their profits are up sharply for the last 2 quarters. However, what they are not telling us is that defaults are up sharply also. We are finding this out delayed in the headlines but anecdotally, it is obvious. Banks, in some cases, are not filing NOD’s (Notice of Defaults) and not foreclosing on many delinquent homeowners. It may seem they are being polite or concerned, but I imagine it has more to do with not wanting to REPORT these numbers to the shareholders. Like many, they are holding out HOPE that things will get better. This is just my opinion but I believe it. They will likely try as far as possible to keep people in their homes and keep those loans CURRENT.

2. Inflation data, for years has been underreported. Go to the excellent site “ShadowStats” (link to the left) and see. The Government has changed how they calculate inflation since the time of Carter. Basically, inflation is under reported and deflation is effected fully (witness the NO cost of living increase this year in social security and the muted increases in prior years as gas, oil, taxes, food prices doubled!).  Soon price increases will return and it will be very obvious.

3. Taxes won’t increase for those earning under $250k. Folks, every year the social security wage base (the income level upon which social security is taxed) increases (even when there’s no inflation!). Anyone earing over $110,000 will see a tax increase this year. If you don’t know how this works, ask your accountant. Those who are self-employed can see this more easily. Many other tax situations change too that sneak up on you (tax tables return to 2001 levels if no action is taken before 2011). Also, I bet you didn’t factor in state and local tax increases, and increases in services  costs (such as train tickets) did you?

4. The Fed will pull the plug on money printing before inflation really kicks in price increases – do you really think, in the midst of a recession, which will last longer than Big B thinks it will, that Bernanke will raise interest rates and take his money handouts back? His many speeches on his study of the Great Depression should successfully counter his own claims of  knowing when to and having the guts to pull back monetary stimulus if necessary.

There are many more falsehoods passing around that should not be taken as a sure thing. Be careful in your projections before you spend money foolishly or make aggressive economic choices. Use the search if you’re interested on some money saving tips. I have many past articles that can help you cut your budget and make smart choices about your money.

Chris Grande