Romney Reassess His Campaign Strategy

 Mitt Romney is pressing reset.

After a crushing loss to Newt Gingrich in South Carolina, the former Massachusetts governor made clear Sunday that he plans to attack his chief rival’s character, release his tax returns this week and try to right a campaign he acknowledged had been knocked off kilter.

“It was not a great week for me,” Romney acknowledged during an interview on “Fox News Sunday.”

And at a rally here, his first event in Florida after the loss to Gingrich, Romney assailed the former speaker’s leadership abilities. “We’re not choosing a talk show host, alright?” he said. “We’re choosing a leader.”

Romney now turns to Florida at what is possibly the most critical moment of his campaign, after two weeks of sustained attacks from his opponents and a series of self-inflicted errors that erased any notion that he would be able to lock up the nomination quickly by winning this state’s Jan. 31 primary.

“I’m looking forward to a long campaign,” Romney said on Fox News. “We are selecting the president of the United States. Someone who is going to face ups and downs and real challenges, and I hope that through this process, I can demonstrate that I can take a setback and come back strong.”

Even if Romney does manage a victory here — his Florida campaign is by far the strongest of any in the GOP field, and he and his allies have been alone on the air for weeks — the race has become a two-way fight between him and Gingrich, the former House speakerwith a huge dose of momentum.

And now Romney’s team is girding for a long and costly fight that extends well beyond Florida. Saturday night’s shellacking in South Carolina underscored the former Massachusetts governor’s vulnerabilities and undermined his claims of becoming the inevitable Republican nominee.

Over the next 10 days, the candidates — including former Pennsylvania Sen. Rick Santorum and Texas Rep. Ron Paul — will meet twice on the debate stage, a venue where Gingrich has thrived in recent weeks and Romney has struggled some when pressed about questions about his wealth and private business experience. The debates — Monday in Tampa and Thursday in Jacksonville — present fresh opportunities for both breakout performances and mistakes.

Romney brought out his more aggressive posture and lines of attack toward Gingrich at the Sunday rally. “Speaker Gingrich has also been a leader. At the end of four years, it was proven that he was a failed leader,” Romney said, referring to the ethics investigation that resulted in a rare reprimand for a House speaker.

It’s clear the campaign is worried voters have forgotten Gingrich’s history. “He had to resign in disgrace. I don’t know whether you knew that,” Romney said.

“I’m asking the people of Florida to consider: what are the qualities of leadership?” he said. “What makes an effective president, a great president, even? Ronald Reagan, Dwight Eisenhower and FDR, even?”

It was an angrier, more aggressive Romney who took the stage at the rally here. He shouted back and forth with the crowd after Occupy Wall Street hecklers interrupted him and rattled off a list of leadership qualities, drawing cheers after each, in a rare back-and-forth with the crowd.

Romney attacked Gingrich’s time working for the quasi-government mortgage giant Freddie Mac, calling again for him to release records related to his consulting work for them.

Behind the scenes, aides also indicated that Romney would go after Gingrich’s character in Florida as a way to distinguish himself — a father of five who has been married to the same woman for 42 years — from his thrice-married rival. And the aides argued that the results in South Carolina don’t indicate Republican primary voters everywhere are willing to overlook Gingrich’s two divorces and acknowledged infidelity. Gingrich’s second wife, Marianne, told ABC News in an interview aired Thursday that the former speaker asked her for an open marriage so he could continue having an affair with the House staffer who is now his third wife.

Publicly, Romney has refused to engage on the subject thus far, saying at a debate Thursday: “Let’s get onto the real issues. That’s all I got to say.”

But Romney has started poking at Gingrich’s character by raising questions about the ethics investigation against Gingrich in the 1990s, when he was House speaker, and suggested that the former Georgia lawmaker was hiding something by refusing to release reams of documents he apparently gave to investigators back then.

Asked Sunday whether character would become an issue, Romney said, “No question.”

“Leadership is the key attribute that people should look for in considering a president,” Romney said, “and character is a big part of leadership, as is vision, sobriety, steadiness.”

Romney’s team also plans to contrast his experience as a governor and businessman with Gingrich’s experience in Congress and his later work with former colleagues on behalf of businesses.

Romney, meanwhile, also is working to fix a key vulnerability — defensiveness over questions about his personal wealth, including money in funds in the Cayman Islands, a popular haven for international investment.

Under pressure to release his tax returns immediately, Romney reversed course and said he would release those documents for 2010 and an estimate for 2011 on Tuesday — months ahead of their planned April release.

The documents will lay out just how Romney, a multimillionaire many times over, makes his money and reveal his actual tax rate, which Romney estimated at about 15 percent.

His wife, Ann Romney, addressed the issue at the Florida rally, suggesting family was more important than money.

“I understand Mitt’s going to release his tax forms this week,” she said as she introduced him. “I want to remind you where we know our riches are. Our riches are with our families.”

“That’s where we measure our wealth, is through those children,” she said.

New Jersey Gov. Chris Christie, a backer who had called on Romney to immediately release his returns, told NBC’s “Meet the Press” that Romney made the right decision, saying, “I’m happy he’s doing it.”

Republican 4 Go On To Florida to Fight Another Day

After a bruising clash in South Carolina, Republican presidential frontrunners Mitt Romney and Newt Gingrich will take their battle to a bigger stage when the campaign moves to Florida on Sunday.

Gingrich, a former U.S. House of Representatives speaker, thrashed Romney in the South Carolina primary on Saturday, suggesting the race for their party’s nomination and the right to face President Barack Obama in November may last months more.

The largest of the early voting states by far, Florida presents logistical and financial challenges that appear to give an advantage to Romney’s well-funded campaign machine.

But Gingrich has momentum after coming from behind in South Carolina to win around 40 percent of the vote, followed by Romney with 28 percent. Rick Santorum, a former U.S. senator, was in third with 17 percent and U.S. congressman Ron Paul in fourth with 13 percent.

“We proved here in South Carolina that people … with the right ideas beats big money,” Gingrich told supporters after his victory in the conservative state.

After strong performances in a series of debates, Gingrich was seen by South Carolina voters as the most likely Republican to beat Obama, a Democrat, in the November 6 election.

They also rejected millionaire former businessman Romney’s pitch that he is the best bet to fix a broken U.S. economy and win the White House.

Romney and Gingrich, who have attacked each other mercilessly in a series of negative television ads since December, face off in a debate in Tampa, Florida, on Monday night.

ROMNEY TAX SOLUTION?

Romney has stumbled over questions about his personal finances in recent debates and acknowledged last week that he only pays a 15 percent tax rate, much lower than that of most working Americans.

The former Massachusetts governor has so far resisted calls from rivals, and even ally New Jersey Governor Chris Christie, to release his tax returns.

To try to put the tax return controversy behind him, the Romney campaign has a plan to settle the issue next week, a Republican official said.

That is part of a strategy to be more aggressive against Gingrich, a formidable debater who nevertheless has personal and professional baggage that the Romney team could exploit. Romney accuses Gingrich of being a Washington insider.

“The choice within our party has also come into stark focus. President Obama has no experience running a business and no experience running a state. Our party can’t be lead to victory by someone who also has never run a business and never run a state,” Romney said on Saturday.

Romney saw his aura of inevitability erode in South Carolina after leading opinion polls by 10 percentage points a week ago.

In Florida, he leads Gingrich by 40.5 percent to 22 percent, according to a poll of polls by RealClearPolitics.com. Santorum, a social conservative who is from Pennsylvania, is third with 15 percent.

Campaigns must spend at least $1 million each week to reach voters in the sprawling southern state, according to local political officials. Romney’s allies have already spent $5 million, mostly on ads attacking Gingrich. No other candidate has a significant presence in the state.

 

Spain’s Difficult Task Ahead May Prove TOO Difficult

MADRID (Reuters) – Spain’s new government will push ahead within weeks on labor reform aimed at tackling the European Union’s highest unemployment rate after unions and employers failed to meet a deadline for agreeing how to modernize a rigid system that harms them both.

It is difficult to see how the reforms can help Spain’s immediate battle with a chronically-weak economy and a jobless rate that has soared to 23.5 percent in recent months, leaving some 5.4 million out of work.

But Prime Minister Mariano Rajoy drove home the need for action by releasing the latest unemployment figures two weeks early this week and says he will do what is needed to loosen up the system and enable freer job creation.

To do so the government will have to take aggressive measures to worsen wages and conditions for employees that unions warn could prompt a national strike. From what signs the government has given on the shape of the reform, on the other hand, economists say it may also fail to please employers and risks not doing enough to generate meaningful improvement.

In a speech in Malaga on Saturday, Rajoy called the headline unemployment number – equivalent to almost one in four of the economically active population – “astronomical” and said his government would “wage war” on unemployment lines.

“This is in keeping with the change of government,” Santiago Sanchez, chief economist at Juan Carlos III university in Madrid, said.

“The previous government looked for positive statistics to highlight its management (of the economy) .. and this one is rooting out the worst ones to justify its tough austerity measures.”

Elected in a landslide in November, Rajoy gave worker and employer representatives until last Friday to agree on a broad sweep of reforms as he tried to draw a line under some 18 months of largely fruitless talks. They missed the deadline.

The government also faces credit agency pressure, with Standard & Poor’s warning it could cut Spain further this year or next following Friday’s two-notch downgrade if reforms were delayed or “insufficient to reduce the high unemployment rate.”

‘GOLDEN OPPORTUNITY’

Job creation in Spain has been crippled by a stagnant economy, a tough austerity program and exceptionally generous redundancy deals. Critics say the labor market is shackled by complex and rigid agreements on collective bargaining, statutory redundancy payments and temporary contracts.

“The (labor) reform has to be thought of as a golden opportunity to change the structure of the way the Spanish labor market operates and to be a major force for higher productivity and to reduce structural unemployment,” Antonio Garcia Pascual, chief southern European economist at Barclays in London, said.

Unemployment rates were likely to rise further given Spain’s economy was set to shrink this year, he said, but reforms making it easier and cheaper for companies to hire and fire as well as giving more workers better protection would promote jobs growth once the upturn comes.

Terms and conditions for Spanish workers tend to be agreed at regional level and sometimes across industries, giving unions strong negotiating powers that they will battle to protect.

But generous permanent contracts mean firms are more inclined to hire workers on temporary ones that offer little protection.

“Collective bargaining .., is something we are particularly sensitive about,” said a spokesman for the country’s biggest union, the blue-collar CCOO, warning that major changes could provoke a general strike.

Garcia Pascual said the government could “probably” live with that. “I suspect that with 23 percent unemployment the response (to a strike call) may not be so enthusiastic.”

Gilles Moec, analyst at Deutsche Bank in London, said he expected the new laws to give firms greater freedom to opt out of collective contracts. “My understanding is that the government is ready to go there,” he said.

The government will also scale back redundancy payments for permanent staff that are among the highest in the world, favoring contracts offering a statutory minimum of 33 days’ pay for each year worked, Treasury Minister Cristobal Montoro said.

Unions are demanding 45 days’ pay and employers 20, but even the lower figure dwarfs payoffs in other countries.

In Germany, at least half a month’s pay is usual and in France a fifth, while in the United States there is no statutory requirement to award severance pay.

The heavy extra potential burden on employers in Spain means many are prepared to offer only temporary contracts that give workers little if any protection against dismissal.

A SINGLE CONTRACT

According to the national statistics institute, 26 percent of all Spanish employment contracts were temporary as of last September, and the proportion has almost certainly risen since.

For Barclays’ Garcia Pascual, the labor market will not revive until that trend is reversed.

“I think they should be bold and think about a single contract where the firing cost increases with seniority. (But) that is not easy to sell to unions or employers.”

“The best way forward would be to reduce the level of protection on permanent contracts and improve (it) …on temporary ones,” added Deutsche Bank’s Moec.

The labor reform draft is expected to be ready by early February and Treasury Minister Cristobal Montoro said it would be pushed through without a broader consensus if necessary.

The government would however “keep lines of communication open” with unions and employers in the run-up to the new legislation, a labor ministry spokeswoman said.

While angering unions, more flexibility would please domestic employers and would-be foreign investors.

“What most people want is more flexibility and collective bargaining agreements” tailored to individual companies and sectors, said U.S. ambassador Alan Solomont.

He cited the U.S. practice of linking work hours to productivity cycles, for instance in auto plants. General Motors Co operates a large assembly line in Zaragoza.

The strategy also worked well during the 2008/9 economic crisis for Germany, where unemployment fell in December to its lowest level since the country’s reunification two decades ago.

We Should NOT Expect a Change in our Economic Condition Soon

When you see a dramatic change in the DOW it is nothing particular that causes it  but it is a reflection of the amount of speculation that is built into the current pricing. I believe the fair value of the DOW today is around 8000 +/- 300 points… even then I may be generous in the event that the FED will increase interest rates eventually and IF Consumer spending creates demand the amount of investment on plant/Equipment and labor will significantly affect  the EPS  and dividends thus a double whammy on stock prices.

I have frefained in making predictions sine 2009 because of the illogical actions by the government and the Quantitative Easing. IF QE 3 takes place then we should NOT expect a major change just a continued extension of the current  maket.

I am preparing a piece to publish soon .. one that will be considered economic heresy.. but that is the type of planning I do.. OUT of the norm and changing the Paradigms that  contribute to the problems. Radical for some.. but NOTHING that has been tried so far gives me any indication that it will solve the dilemma we are in economically

2009 Economic Predictions by Craig Eisele

2009 Economic projections by Craig Eisele

Note: the following is MY opinion and how I see the economy… it should not be considered investment advice or factual as to the actual performance of the US and Global Economies in 2009.

If you do not want to hear bad news I strongly suggest you stop reading at this point and read a good fiction book….or watch Kudlow on CNBC who is more of a cheerleader then as realist…. Although a caution as to the rest of the CNBC team as they seem to realize more the current economic realities.

One of the greatest threats we face is Deflation during this recession… WHY?? Because the economic definition of a DEPRESSION is Recession accompanied by Deflation… BUT do not expect the government to say we are in a Depression until it is either over or is so evident that denying it would be fruitless. The government is afraid to start any panic as to the true severity of this crisis we are in and as such will try to protect the citizens as long as possible from the hard realities.

Before this economic crises is over I believe that we will see history actually show that we have or will have had entered into a Depression…. The only question is: for how long.

In the United States approximately 70 percent of our economy is based upon Consumer spending…  as such Particular attention will be paid to that segment of the economy.

Estimates so far are that at least 70,000 retail locations are expected to close in 2009. Personally I see that number even higher and expect over 100,000. Thus higher unemployment will occur.

Personal savings rate will continue to be negative throughout the year with rare occurrence of it turning positive.

Over all the consumer is being hit with rising prices from the Summer 08 Oil Prices and those prices have not come down in tandem with Oil. Corporations are struggling to meet cash flow needs and turn profits for their shareholders and as such are reluctant to lower prices.

Credit will not loosen very much in 2009… Credit card companies will continue to reduce credit limits (2 Trillion dollars so far) and will raise interest rates on balances even for the slightest blemish or down grading of your credit. Keeping your credit cards in the back of a drawer and NOT canceling them is advisable.

Expect Congress to address these issues in Credit Card operations and policies in 2009 in an attempt to protect consumers a bit better… but high expectations for relief should be discouraged because of the powerful lobbying teams of Banks and other financial institutions. Result Consumers will and should pay down more of their debt and spend less thus creating Consumer slow down in spending in 2009.

Oil Prices will NOT stay low for long. Oil Producing Countries need the revenue for their own countries economies…. Demand may be down globally but the minimum necessary price is 45 dollars a barrel while countries like Venezuela, Iran, Russia etc require upwards of 70 dollars a barrel to keep their domestic programs going and to maintain their economies. Expect Oil close to or above 100 dollars a barrel by the end of 2009 based upon the needs of the Oil Producing Countries.

Job Loss and fear of Job Loss with hamper Consumer Spending even farther. This includes areas like housing and Auto sales as well.

Credit availability for Housing will be tight for many years to come. Impeccable credit and a hefty down payment  of 20 percent or more,will be required as it was over a decade ago. The result will be a continuing deflation in Housing prices and no bottom expected until mid 2010. These expectations of losing money on a new home purchase will also keep many buyers on the sidelines.

Credit will also suffer because of continued required write-downs by Mortgage holders and those holding the Mortgage backed securities. Expect the Foreclosure rate to keep high thus flooding the market with additional homes. This credit problem will be further exacerbated by rises in Commercial Mortgage defaults. Particularly in Retail Commercial properties.

The measure of companies with retail locations in terms of profitability will be changed. MOST leases no Commercial Property like retail are triple net… meaning that the tenants are responsible to paying a pro rated share based upon occupancy of leased space for Utilities, Taxes and maintenance. The additional burden placed upon them buy the loss of other retailers coupled by decreasing sales will cause more stores to close. Currently the VACANCY rate in retail locations is at 8.2%. That will continue to rise throughout 2009.

Commercial Mortgages are often done with long amortization rates meaning 10 to 30 years mortgage payment rates, with a balloon payment (the full balance of the Loan) due after 5 years. As properties increased in value and occupancy rates were high and credit was readily available this was not a concern. Today, however, those criteria for refinancing can no longer be met by most mall operators or owners of other retail properties. Even the Commercial office space Market will be effected.

Loss of retail also usually has a negative effect in Commercial Office space… and even the A class properties are now feeing the potential problems growing. Expect an increase in “services” oriented companies across the USA and several hundred thousand jobs lost as a result, many of which do not and will not qualify for unemployment compensation to help them.

The stock markets will continue to act in a volatile and irrational way. Over reaction to perceived good news and bad news will move the market in triple digits and randomly. If you are brave and can wait 10 years or more for profits then now is the time to buy select companies that may recover faster as the economy bottoms and flattens in 2010.

Federal funds rate will not be increased for the first half of 2009, but may have a slight increase of 0.25 to0.50 in the second half of 2009 and into 2010 as the dollar weakens and the need to strengthen the dollar increases.

The need to have safety for cash will continue to hold the Treasury Bonds yield down to hover at or near zero as banks are not considered safe enough and consumers are fearful.

Bank Write offs will continue and the biggest shocks to the market will be in Commercial backed mortgages as well as increased Credit Card default rate as climbing interest rates and lack of credit availability will force consumers into decisions that will not factor most creditors.

Housing prices will continue to decline throughout 2009. Lack of demand and increased inventories by those underwater on their mortgages and those foreclosed upon homes, and the lack of credit and the return to the requirements of old with 20 percent or more down and verifiable rations of income to mortgage payments as well as HIGH credit scores… all combined will be a continued drag in the housing market and will even affect places like New York City on 2009 through at least the first half of 1020.

Retirees will delay their retirement and the “equity” they thought they had in their homes and the devastation to their retirement funds will be so bad as to force more people to work longer and will contribute to the lack of available jobs for younger people.

Unemployment will rise to double digits…. Most likely to around 11 percent official and 17 percent unofficial Unemployed people will number more than 18 million people.  Currently the Unemployment are has gone over 7.2%. I expect that before we flatten out that number will grow to close to 11 percent. Currently the number of those unemployed is over 6 million…. but those numbers a skewed to those who qualified for unemployment and or are seeking employment actively.  The REAL number of unemployed is substantially higher if the number of those underemployed, working only part time, or who have given up looking for work are included. The number of long-term unemployed (those jobless for 27 weeks or more) rose to 2.6 million in December and was up by 1.3 million in 2008.

Bankruptcies will hit all time highs both for individuals and Businesses.

The Auto Industry: This is the hardest to predict in some ways. BUT… Knowing that credit is hard to get to purchase an automobile, and that demand is down because individual consumers are feeling the economic pinch and are concerned about their declining home and retirement values, and compounded by job uncertainty will make any recover of the Auto Industry in general almost impossible in 2009. While most of us abhor the idea that the “Big Three” in Detroit may declare bankruptcy. I see no choice especially given the legacy costs of pensions and health care that hurts their price competitiveness. Premium prices for things like the Chevy VOLT or other fuel-efficient cars will not me tolerated by a price sensitive consumer market in these economic times. Therefore the demand that Auto Makes produce these cars, while admirable, is not productive to the automotive industry recovery at this time.

The result of the above will be continued declines and flattening of the Auto sales, which of course, contributes considerably to the GDP of the United States. A downward spiral that cannot be stopped without bankruptcy to protect those companies and jobs till the economy flattens out and hopefully and gradually raises enough to spur more automobile sales.  Bottom line…. expect one or more of the Detroit 3 to declare bankruptcy in 2009.

GDP Contraction 5 % or more: I hope this is self evident given what I have already written…. the ONLY way this will not happen in 2009 is if we devalue our dollar by printing more money…. but that results in hyper inflation and higher prices which would artificially make our GDP that much higher.

Federal budget deficit of 1 trillion and growing to possibly 2 TRILLION as the need for spending like the years of Roosevelt in the New Deal Era increases and as the concession to business for tax rates being the same or even lower taxes are made and the revenue for the US Government continues to decline from Lower profit, less payroll tax income and growing social programs to assist the impoverished. The NATIONAL DEBT will run higher than 12 trillion dollars UNLESS the government prints more money…. but that will further weaken the value of the US dollar. A delicate trade off that has to be dealt with in 2009.

LOWER corporate taxes and/or Capital Gains in a declining economy will NOT spur employment or Investment in Pant or equipment. The only people who will possibly benefit are those who own stocks in those companies. And even then the benefits will be minimal. Worse the Down side is lower revenue for the government in a time when spending must be increased to spur economic recovery.

Globally expect more instability in under-developed countries. Poverty, starvation and generally declining conditions in these countries will give rise to radical idealists who will create chaos and instability in those countries. Antagonistic behavior towards those industrialized countries that are seen as culprits in this economic crisis will be the most villianized. Terrorism abroad will increase in response to the frustration and need to blame someone increases.

Currency fluctuations will be as common as weather changes during 2009. 30-day moves can exceed 15 percent and daily moves may be as much as 5 percent. Thus this will make international business more volatile and difficult to conduct.

Parity with Euro and British Pound is possible given the currency fluctuation at this time only a 10 percent difference exists between the 2 currencies. Briton will continue to decline as the full effects of their new economy that was built on the financial sector and debt continues to play out.  France and Germany have yet to feel the real impact of what is happening globally and as such have been the prop to the Euro over the last year. The EU’s efforts to prop up Eastern European Counties with bailouts will have little effect on the full impact of the global recession. Ultimately the Euro will have to decline in value.

Weaken of the dollar … then strengthen and weakening. The Japanese Yen, the Euro, and the British Pound with fluctuate so much that any stability for the dollar will have to come from the USA itself. However that appears unlikely until the USA takes drastic steps to stem the bleeding and ultimately devalues the dollar.

EU predictions Italy and possibly Spain: I expect al least Italy to go back to the Lira and to try an peg the Lira to the Euro to allow it to re-enter the EU Euro denomination Currency in a few years. This will be necessary as the Italian economy and the EU regulations are in conflict and Italy cannot meet the EU demands for economic reform to satisfy the EU regulations. Spain faces the same situation.

France and German Social programs will be the downfall of these economies. With a global recession and decline in local economies the demand for these generous programs will go to an all time high and will send them into a deeper recession as they struggle to balance budgets and stem spending.

China will see continued decline in growth based upon the global economy. It is unclear if their domestic consumption can make up for the downturn. It may now feel the effect of the lack of a substantial Middle class and sustainable consumer base

India is just now feeling the effects, and as global outsourcing to India shrinks, and the allegations that the financial accounting is being doctored by some to keep showing profits surface. The “middle class” is mostly dependent on the global outsourcing in areas of IT and calling centers, which are declining rapidly. India will experience a recession that is severe and has potentially serious consequences on its economic stability.

It seems inevitable that the United States Government will be forced in 2009 or early 2010 to print more Dollars, to buy its own debt and to pay for spending programs as debt is not being bought by most companies or countries or even individuals. Hence a devaluation of the dollar… expect Euro and Pound to follow and a period of hyper inflation accompanied by higher interest rates when that happens.

I was reluctant to write this piece as I hoed to see more indications that things would improve…. However, that has not happened and the result is a significant delay in my predictions.

I hope I am just a pessimist.. however at this time I think I am more of a realist in how things are at this point in time. Things CAN change.. and my predictions can be totally wrong. But for that to happen requires political will and individual determination….And I see no signs of that at this time.

Regardless of whether you agree or disagree with my assessments made her.. YOU must decide for your self what you need to do if this scenario does take place… or if it does not. These are things the way I see them and should NOT be taken as factual or advice to anyone.

Craig Eisele

2009 Economic projections by Craig Eisele

Note: the following is MY opinion and how I see the economy… it should not be considered investment advice or factual as to the actual performance of the US and Global Economies in 2009.

If you do not want to hear bad news I strongly suggest you stop reading at this point and read a good fiction book….or watch Kudlow on CNBC who is more of a cheerleader then as realist…. Although a caution as to the rest of the CNBC team as they seem to realize more the current economic realities.

One of the greatest threats we face is Deflation during this recession… WHY?? Because the economic definition of a DEPRESSION is Recession accompanied by Deflation… BUT do not expect the government to say we are in a Depression until it is either over or is so evident that denying it would be fruitless. The government is afraid to start any panic as to the true severity of this crisis we are in and as such will try to protect the citizens as long as possible from the hard realities.

Before this economic crises is over I believe that we will see history actually show that we have or will have had entered into a Depression…. The only question is: for how long.

In the United States approximately 70 percent of our economy is based upon Consumer spending…  as such Particular attention will be paid to that segment of the economy.

Estimates so far are that at least 70,000 retail locations are expected to close in 2009. Personally I see that number even higher and expect over 100,000. Thus higher unemployment will occur.

Personal savings rate will continue to be negative throughout the year with rare occurrence of it turning positive.

Over all the consumer is being hit with rising prices from the Summer 08 Oil Prices and those prices have not come down in tandem with Oil. Corporations are struggling to meet cash flow needs and turn profits for their shareholders and as such are reluctant to lower prices.

Credit will not loosen very much in 2009… Credit card companies will continue to reduce credit limits (2 Trillion dollars so far) and will raise interest rates on balances even for the slightest blemish or down grading of your credit. Keeping your credit cards in the back of a drawer and NOT canceling them is advisable.

Expect Congress to address these issues in Credit Card operations and policies in 2009 in an attempt to protect consumers a bit better… but high expectations for relief should be discouraged because of the powerful lobbying teams of Banks and other financial institutions. Result Consumers will and should pay down more of their debt and spend less thus creating Consumer slow down in spending in 2009.

Oil Prices will NOT stay low for long. Oil Producing Countries need the revenue for their own countries economies…. Demand may be down globally but the minimum necessary price is 45 dollars a barrel while countries like Venezuela, Iran, Russia etc require upwards of 70 dollars a barrel to keep their domestic programs going and to maintain their economies. Expect Oil close to or above 100 dollars a barrel by the end of 2009 based upon the needs of the Oil Producing Countries.

Job Loss and fear of Job Loss with hamper Consumer Spending even farther. This includes areas like housing and Auto sales as well

Credit availability for Housing will be tight for many years to come. Impeccable credit and a hefty down payment opf 20% or more, will be required as it was over a decade ago. The result will be a continuing deflation in Housing prices and no bottom expected until mid 2010. These expectations of losing money on a new home purchase will also keep many buyers on the sidelines.

Credit will also suffer because of continued required write-downs by Mortgage holders and those holding the Mortgage backed securities. Expect the Foreclosure rate to keep high thus flooding the market with additional homes. This credit problem will be further exacerbated by rises in Commercial Mortgage defaults. Particularly in Retail Commercial properties.

The measure of companies with retail locations in terms of profitability will be changed. MOST leases no Commercial Property like retail are triple net… meaning that the tenants are responsible to paying a pro rated share based upon occupancy of leased space for Utilities, Taxes and maintenance. The additional burden placed upon them buy the loss of other retailers coupled by decreasing sales will cause more stores to close. Currently the VACANCY rate in retail locations is at 8.2%. That will continue to rise throughout 2009.

Commercial Mortgages are often done with long amortization rates meaning 10 to 30 years mortgage payment rates, with a balloon payment (the full balance of the Loan) due after 5 years. As properties increased in value and occupancy rates were high and credit was readily available this was not a concern. Today, however, those criteria for refinancing can no longer be met by most mall operators or owners of other retail properties. Even the Commercial office space Market will be effected.

Loss of retail also usually has a negative effect in Commercial Office space… and even the A class properties are now feeing the potential problems growing. Expect an increase in “services” oriented companies across the USA and several hundred thousand jobs lost as a result, many of which do not and will not qualify for unemployment compensation to help them.

The stock markets will continue to act in a volatile and irrational way. Over reaction to perceived good news and bad news will move the market in triple digits and randomly. If you are brave and can wait 10 years or more for profits then now is the time to buy select companies that may recover faster as the economy bottoms and flattens in 2010.

Federal funds rate will not be increased for the first half of 2009, but may have a slight increase of 0.25 to 0.50 in the second half of 2009 and into 2010 as the dollar weakens and the need to strengthen the dollar increases.

The need to have safety for cash will continue to hold the Treasury Bonds yield down to hover at or near zero as banks are not considered safe enough and consumers are fearful.

Bank Write offs will continue and the biggest shocks to the market will be in Commercial backed mortgages as well as increased Credit Card default rate as climbing interest rates and lack of credit availability will force consumers into decisions that will not factor most creditors.

Housing prices will continue to decline throughout 2009. Lack of demand and increased inventories by those underwater on their mortgages and those foreclosed upon homes, and the lack of credit and the return to the requirements of old with 20 percent or more down and verifiable rations of income to mortgage payments as well as HIGH credit scores… all combined will be a continued drag in the housing market and will even affect places like New York City on 2009 through at least the first half of 1020.

Retirees will delay their retirement and the “equity” they thought they had in their homes and the devastation to their retirement funds will be so bad as to force more people to work longer and will contribute to the lack of available jobs for younger people.

Unemployment will rise to double digits…. Most likely to around 11 percent official and 17 percent unofficial Unemployed people will number more than 18 million people.  Currently the Unemployment are has gone over 7.2%. I expect that before we flatten out that number will grow to close to 11 percent. Currently the number of those unemployed is over 6 million…. but those numbers a skewed to those who qualified for unemployment and or are seeking employment actively.  The REAL number of unemployed is substantially higher if the number of those underemployed, working only part time, or who have given up looking for work are included. The number of long-term unemployed (those jobless for 27 weeks or more) rose to 2.6 million in December and was up by 1.3 million in 2008.

Bankruptcies will hit all time highs both for individuals and Businesses.

The Auto Industry: This is the hardest to predict in some ways. BUT… Knowing that credit is hard to get to purchase an automobile, and that demand is down because individual consumers are feeling the economic pinch and are concerned about their declining home and retirement values, and compounded by job uncertainty will make any recover of the Auto Industry in general almost impossible in 2009. While most of us abhor the idea that the “Big Three” in Detroit may declare bankruptcy. I see no choice especially given the legacy costs of pensions and health care that hurts their price competitiveness. Premium prices for things like the Chevy VOLT or other fuel-efficient cars will not me tolerated by a price sensitive consumer market in these economic times. Therefore the demand that Auto Makes produce these cars, while admirable, is not productive to the automotive industry recovery at this time.

The result of the above will be continued declines and flattening of the Auto sales, which of course, contributes considerably to the GDP of the United States. A downward spiral that cannot be stopped without bankruptcy to protect those companies and jobs till the economy flattens out and hopefully and gradually raises enough to spur more automobile sales.  Bottom line…. expect one or more of the Detroit 3 to declare bankruptcy in 2009.

GDP Contraction 5 % or more: I hope this is self evident given what I have already written…. the ONLY way this will not happen in 2009 is if we devalue our dollar by printing more money…. but that results in hyper inflation and higher prices which would artificially make our GDP that much higher.

Federal budget deficit of 1 trillion and growing to possibly 2 TRILLION as the need for spending like the years of Roosevelt in the New Deal Era increases and as the concession to business for tax rates being the same or even lower taxes are made and the revenue for the US Government continues to decline from Lower profit, less payroll tax income and growing social programs to assist the impoverished. The NATIONAL DEBT will run higher than 12 trillion dollars UNLESS the government prints more money…. but that will further weaken the value of the US dollar. A delicate trade off that has to be dealt with in 2009.

LOWER corporate taxes and/or Capital Gains in a declining economy will NOT spur employment or Investment in Pant or equipment. The only people who will possibly benefit are those who own stocks in those companies. And even then the benefits will be minimal. Worse the Down side is lower revenue for the government in a time when spending must be increased to spur economic recovery.

Globally expect more instability in under-developed countries. Poverty, starvation and generally declining conditions in these countries will give rise to radical idealists who will create chaos and instability in those countries. Antagonistic behavior towards those industrialized countries that are seen as culprits in this economic crisis will be the most villianized. Terrorism abroad will increase in response to the frustration and need to blame someone increases.

Currency fluctuations will be as common as weather changes during 2009. 30-day moves can exceed 15 percent and daily moves may be as much as 5 percent. Thus this will make international business more volatile and difficult to conduct.

Parity with Euro and British Pound is possible given the currency fluctuation at this time only a 10 percent difference exists between the 2 currencies. Briton will continue to decline as the full effects of their new economy that was built on the financial sector and debt continues to play out.  France and Germany have yet to feel the real impact of what is happening globally and as such have been the prop to the Euro over the last year. The EU’s efforts to prop up Eastern European Counties with bailouts will have little effect on the full impact of the global recession. Ultimately the Euro will have to decline in value.

Weaken of the dollar … then strengthen and weakening. The Japanese Yen, the Euro, and the British Pound with fluctuate so much that any stability for the dollar will have to come from the USA itself. However that appears unlikely until the USA takes drastic steps to stem the bleeding and ultimately devalues the dollar.

EU predictions Italy and possibly Spain: I expect al least Italy to go back to the Lira and to try an peg the Lira to the Euro to allow it to re-enter the EU Euro denomination Currency in a few years. This will be necessary as the Italian economy and the EU regulations are in conflict and Italy cannot meet the EU demands for economic reform to satisfy the EU regulations. Spain faces the same situation.

France and German Social programs will be the downfall of these economies. With a global recession and decline in local economies the demand for these generous programs will go to an all time high and will send them into a deeper recession as they struggle to balance budgets and stem spending.

China will see continued decline in growth based upon the global economy. It is unclear if their domestic consumption can make up for the downturn. It may now feel the effect of the lack of a substantial Middle class and sustainable consumer base

India is just now feeling the effects, and as global outsourcing to India shrinks, and the allegations that the financial accounting is being doctored by some to keep showing profits surface. The “middle class” is mostly dependent on the global outsourcing in areas of IT and calling centers, which are declining rapidly. India will experience a recession that is severe and has potentially serious consequences on its economic stability.

It seems inevitable that the United States Government will be forced in 2009 or early 2010 to print more Dollars, to buy its own debt and to pay for spending programs as debt is not being bought by most companies or countries or even individuals. Hence a devaluation of the dollar… expect Euro and Pound to follow and a period of hyper inflation accompanied by higher interest rates when that happens.

I was reluctant to write this piece as I hoed to see more indications that things would improve…. However, that has not happened and the result is a significant delay in my predictions.

I hope I am just a pessimist.. however at this time I think I am more of a realist in how things are at this point in time. Things CAN change.. and my predictions can be totally wrong. But for that to happen requires political will and individual determination….And I see no signs of that at this time.

Regardless of whether you agree or disagree with my assessments made her.. YOU must decide for your self what you need to do if this scenario does take place… or if it does not. These are things the way I see them and should NOT be taken as factual or advice to anyone.

Craig Eisele

7500 DOW Possible??

The simple answer is YES!!!

I know I wrote in December 2007 that I expected a 9,000 DOW and believed that an 8,000 Dow is where I said it should be… but 7,500 is panic and that is what I am seeing around the world… people are afraid… plain and simple.

DO NOT sell you 401K or other funds now… it is far too late for you to do that… your best bet is to hold on and try to read and watch something other than economic news… at least until AFTER the election.

I am working on my economic predictions for the rest of 2008 and 2009… and in some cases even into 2010. I should release that November 5 or 6, AFTER the Elections… there is nothing good in store… except that we will know more about where our Government is taking us… and at least THAT will restore some stability to the financial markets in the USA and give a good indication of the future of the economic health of the Country.

You will see great swings in the market… mostly down for now… but you will get high upswings as well… do not take any of these seriously at this point… we really are at about the right pricing given the full economic data….

Additionally you will see a more bad economic news and then a few good pieces… but overall it is glum out there… so stop reading things like this and others and concentrate on what is important to you.. your life and your family… the rest will settle out soon… just not as soon as you would like.

Craig

NOTE:  This is MY OPINION. I make no assurances of this actually being the way the market will go. You should do your own research and make your own informed decisions!!!

I am FURIOUS at What is Going On!!!!

AND I AM NOT TALKING ABOUT MY EX-WIFE… and this is the last piece of levity you will see in this post!!!

This is a FIRST Draft… it is NOT my final draft of this post… I need to edit it but am pressed for time yet felt that the timely publication should help stimulate some debate as we all seem to be overwhelmed with so much happening so fast.

I have not been in Washington D.C long… but it appears that I could not have come at a more dramatic moment…. And what is going on infuriates me. I was going to write a piece in the Presidential race (and maybe even make a dispassionate prediction) but for now this Financial Crisis is more important and I feel it needs to be addressed immediately.

Simply, I am furious at our government taking over AIG and Fanne Mae and Freddie Mac…. Things have gotten so bad since that the hundreds of billions of dollars put up for them are not even being added to this current 700 to 1 trillion dollar action.

Now I read the following:

A little after 7 PM Saturday night (September 20, 2008) a Treasury “Fact Sheet” was released that sought to give the administration more flexibility, with an expanded definition that could include foreign banks. I quote:

“Participating financial institutions must have significant operations in the U.S., unless the Secretary makes a determination, in consultation with the Chairman of the Federal Reserve, that broader eligibility is necessary to effectively stabilize financial markets.”

See the Yahoo News report from Politico:

http://news.yahoo.com/s/politico/20080921/pl_politico/13690;_ylt=Anm5.jWbo72bCnhyicEpvVBh24cA

Bailing out any foreign bank or entity with US tax payer funds is wrong… AIG was example with bond holders (136 billion for China alone) being bailed out and with preferred stock holders being “saved” and common stock holders getting wiped out… and AIG was a profitable company in most of its operations…. worse more than half of AIG business was NOT in the USA!!! In essence a nationalization of a private company I would not be surprised if this is challenged in Court especially after this new round of bailout money.

Compare what the new regulations of the stock market with regards to short selling to a ball game with half players taken off field in the middle of the game because one team (a disliked team) was winning… or in this case right … don’t tell me the crap about naked short sells… ONLY 1% of ALL shorts were naked…. Worse… the “market Makers” who assure the liquidity of the stock in a company use shorts to help in their moving the buyers and sellers of stock… they are a necessary part of this market, and even they were hurt by this short sighted action by the SEC.

The run up of stock prices was NOT because the companies got better over night… it was mostly because short sellers (those who believed that the companies were not as healthy as the Wall Street Bulls said) were FORCED to buy stocks to cover their market positions that believed the market would continue to go down.

Additionally, the planned Federal Guarantee of Money Market Funds… could cause run on banks as bank deposits are only insured to 100,000 dollars and there is concern that the Federal Deposit Insurance agency responsible for making sure depositors get their money back does not have sufficient money to cover most of the banks that are in danger of failing.

The COST: the final “bailout” is shaping up to be about 3 TRILLION dollars… that money had to be “printed” (meaning the fed has to increase the money supply by that amount…. Which can be done by a few keystrokes on a computer) …… This amounts to a DEBT of $10,000 to $30,000 PER HOUSEHOLD. Worse it weakens the buying power of the dollar and will cause inflation probably in the double digits. Add to this that the Fed wants to pay interest to banks on their mandatory “reserve” they keep means that we are now paying banks to follow the law at a COST to taxpayers that is yet undetermined.

With higher inflation there will be higher interest rates… which also hurt every American.meaning mortgage resets will SUPPOSED to pay higher interest rates and also means that less people will be able to afford mortgages.

Personally I feel that since financial institutions ONLY make money by lending (if the FED does not give interest) then LET the Financial markets and the overall market place determine the value of these “financial instruments” that the US Government wants us the tax payers to foot the bill on… let the FREE MARKET REIGN… and let things work out themselves. Federal intervention in either Monetary of Fiscal Policies in the free market not only doom a free market by changing the rules in the middle of the game… but do nothing for the tax payers in the United States and mostly serve foreign interests.

I am actually sick to my stomach with what is going on here in the USA…. I feel that greed, corruption and politics are destroying this country and the adage that the rich get richer while the poor get poorer seems to be true today… the bailout ONLY serves the financial companies and foreign entities that hold this debt… while it is argued that the American citizen would be hurt worse if this was not done I find it untrue and the rhetoric is only being done to “sell” this to the American Public. I really find that the interference in a Free Market is untenable and irresponsible… let those that have done wrong pay the price… not the average citizen…. This is just plain wrong!!!

Craig’s Diatribe on the USA and Global Economy (# 1)

June 6, 2008

This blog entry is to try and express my viewpoints on the current state of the USA Economy, my predictions for the future and how we are no longer a localized economy but now are part of a GLOBAL economy. It is part one of a series.

Economic models are nothing more than a theory of how things work… while those theories have been fairly accurate on the last 2 or 3, or even 4 decades our understanding of the way in which the USA economy (as well as the global economy), works is in need of revision.

The USA used to be the master of its own destiny… no more!!!

Where to begin?? This could be a complicated entry and I do not want you the reader (especially if you are a novice) to get lost…. So here I go….

Americans, for the most part, have lost their direction over the last 15 or 20 years…. I cannot and will not blame the politicians… although they should share some of the blame… but we as individuals, need to accept responsibility for where we are today (at least mostly). What do I mean by this?? Well we became a society that never foresaw that our spending (consumption) patters were too great. We felt wealthy and even entitled to an ever increasing and higher standard of living. We disregarded the warnings of our grandparents and great parents who lived through the “Great Depression” years.

We did not save! We used our equity on our homes for newer cars, the latest technologies, and what we determined to me our “God Given right” to a vacation and other rewards for working so hard. We failed to save and invest wisely and gambled on stocks and the future value of our homes to be our savior in the years ahead. We thought about the future in lose terms but never really took the risk too seriously. We always believed that our life style would never be reduced but would continue to rise. WELL … If you still believe that you are in for a great shock… as our quality of life and our life style is never going to be the same. We are no longer masters of our own destiny and must now participate in a global society…. And these facts, my friends (and foes) are the mere facts of life today, which we have not yet accepted.

HOW DID WE GET TOM THIS POINT???

That answer is very complicated…. But lets examine some basics:

1 Commodities: There are two types of Commodities. One that we basically get from the earth in raw form and then convert to materials we use in our daily life…. Oil, Coal, Water, Natural Gas, Metals etc…. then there are those the we grow and raise… food stuffs primarily… the most basic being things like corn, wheat and rice…. Basics in almost every countries diet.

Commodities cost money and energy to produce… when we start importing and exporting those commodities then we have a currency exchange…. One country’s money in exchange for another’s for the buying and selling of those commodities. These “prices get higher the more “value” we add to each commodity…. For instance…. Refining oil into lubricants or heating oil and even more personal into plastics and Synthetic fabrics like Polyester and rayon etc.

We add even more value when we change those plastics into use for appliances, electronics, automobiles and so on… combining commodities to make products that end up in homes and offices, and to a lesser extent in factories where they are used to make “end user” products

Simply we as the consumer are at the end of the “value added” chain of events and must pay the final price ….. This does not include the “disposal Price” when we have to get rid of our “old things”.

REMEMBER: Supply and Demand economics is real… but NOT as important in the United States Economy alone… meaning that the Supply and Demand pricing models are now based on World Wide Demand and not just what is demanded in the USA… we ARE a global society now.

The “global economy” comes into play when we realized that much greater profits could be had by using another countries labor to add the value. Clothing was one of the first things that was “outsourced” and the Amalgamated Clothing Workers of America: fought hard to keep their jobs from going overseas… but obviously they were no supported very well in their protests.

We then subjected ourselves to the mandates of the WTO (World trade Organization) and had to negotiate trade agreements with various countries to keep the balance of trade in some order. However by doing this we lost more control over our destiny then anyone would imagine even to this day. Simply we cannot protect our own companies or workers that function in the USA because it is now against international law that WE agreed to (OK… this blame goes to the Politicians).

One needs to look only at the stocks that did well the last 6 to 9 months and see that MOST of their profits came from overseas…. More on how this is possible later….

Our thirst for MORE PROFITS, and the false belief that what was good for Wall Street was good for America is seriously being challenged… but it is to late to unwind the situation we now find ourselves… George Sorros calls for a new paradigm… maybe that is where we are already and have now acknowledged it… or at least told the average American.

Now the pressure has been on the Federal Reserve and the US Government to make things better… but they really cannot, and we need to stop thinking they can. These institutions CAN however reduce the amount of FUTURE pain that the average American is feeling.

There is a concern that the pain is now gone from “Wall Street” to “Main Street” with the focus on BUSINESS… but most Americans are now feeing it on “MY STREET” something that is being ignored. Business seems to be what we are most interested in, and for that the average person will continue to bear the brunt of this economic condition we are in… because … if you read above… the CONSUMER is the one who is basically the END USER… WE pay the final price for this.

OK… enough of the basic economics lesson for toady…. Later I will write about where we are and the CURRENT economic Condition that ALL of us need to be aware of… not the HYPE that the TV and other media wants us to see and hear… but realities

After that I will write on what we can do for the FUTURE… how we can survive… not thrive… in the downturn that is here and will continue for some time…. Practice advice that IF I AM WRONG… will never hurt you but only make you better off in the future.

Oil Prices. The Dollar value in the world, an Energy and commodity prices will be discussed. I know people are looking at the stock market after what happened on Friday June 6…. And especially they are looking at OIL PRICES… and there is a lot of attempts to LAY BLAME…. And to say it is speculation… our congress has tried to find a “culprit” to blame… and I firmly believe it is not the “Speculators” it is really because we are in a “GLOBAL ECONOMY” that these prices are raising…. That is why I have decided to write this post… so the average person will understand What has happened, what is going on and Where we are going ….. it is very important to knowing what to do in the future and to see how we are not in control of our destiny as we have been in the past and how we are really a global society now … whether we like it or not… and there is no turning back!!!

Post note: I know that this blog has been used for my promotion of Africa Development…. I am still working on these as well… I have been silent for some time for a variety of reasons… but I have not stopped working on these projects

I have also decide that now that BOTH parties have selected their nomine for President of the United Staes… NEITHER of which can make our lives like they were…. that the time was right to discuss our economy .

Additionally I was going to discuss the Housing Crisis in America and the weakening dollar and what the Federal reserves actions have been….but I do what to do that later… but please remember that the Federal Reserve is in charge of MONETARY POLICY… meaning the banking and Interest rates and to control the growth of our economy . There is considerable discussion taking place as to the Bear Sterns intervention by the FED and if is was a way to intervene in the Financial markets…. which was NOT disctated by their mandate from Congress… they are to be independent politically… but they a have limited authority… CONGRESS and the Executive Branch of Government has the responsibility for FISCAL Policy.. that means raising or lowering taxes and the borrowing of money to finance the government operations.. they can help or hurt the economy of the USA in general by the amount of money and the number of :jobs” they create within government. Sometimes those policies may appear to have a socialistic view point… but that is a discussion for another time…. just remember to keep the FED (Federal Reserve) and the FEDERAL GOVERNMENT as two distinct entities that try to work together and yet should never be able to influence each other in keeping the economy stable… also more on interest rates and why Mortgages are so hard to get today in a later post.

For the accuracy of my predictions I invite you to read my other posts on the US Economy at

http://craigeisele.wordpress.com/2007/12/10/my-predictions-for-2008-for-the-us-economy/

and

http://craigeisele.wordpress.com/2007/12/25/more-2008-predictions-from-craig-eisele/

More 2008 Predictions from Craig Eisele

2009 Predictions can be found at:

http://craigeisele.wordpress.com/2009/01/11/2009-economic-predictions-by-craig-eisele/

The below was written on December 25, 2007 for 2008:

More 2008 Predictions from Craig Eisele:

RETAIL: As I write this the bulls are still either saying it is a good season or hoping that last minute shoppers will make it one. Lets look at this in another way. I have been shopping EVERY weekend from Thanksgiving on… and what I have seen is dismal. This year, I have NEVER had to look for a parking space or needed to walk from the far end of the parking lot… I have seen LESS people in the Mall this year and many many more sales. Sometimes so bad I thought that it was March weekend shopping (meaning low numbers of people). I was extremely unhappy with FoxBusiness TV today when the announcer in a shopping mall was saying that the people were starting to flood in and I barely saw 10 people shopping in a wide-angle shot. Only later did ONE gust on the show tell it like it is… MANY of the retail Companies are having LOWER sales… and those sales that are moving are either in Electronics (lower profit margins) or in SALE merchandise… hence LOWER Profit margins… so even if you see higher sales… which is unlikely… the PROFITS WILL BE LOWER!

Credit Card Evaluation by Moody’s is showing a huge number of defaults in the 90 day ranges… and as those of you with Credit Cards you will know that ONE missed payment can mean a jump to 29 percent annual interest rates or higher. Capital One and Bank of America are shown as being at worse rates and possible doubling since their October numbers in their November reports. This does not bode well for Retail and some say as much as two thirds of our economy is consumer spending driven.

Remember that Saving Rates in the USA are AGAIN Negative (meaning we are spending more than we are making), Homeowners no longer have access to their home equity that they had in the past because of declining values and Credit card companies have been increasing interest rates based on your total credit report meaning that if you take out another credit card or even cancel some credit cards or are late on payment to ANY other creditor you can be hit with high interest rates on your credit card balance.

Because of the new bankruptcy laws these credit cards may still have to be paid off entirely but your interest payment may be stopped…. I predict a change in the Laws by a Democratic Congress to make it easier to have these and Mortgage related debts forgiven to better protect the consumer and to allow for MORE consumer spending fostering a recover in the economy. This does not favor the Financial Companies.

Talking about Financial’s… there is great excitement about foreign funds coming to the rescue of the various Financial Businesses… but what you generally do not hear is the COST of those investment… many are for PREFERRED STOCK…. With GUARANTEED rates of 8 to 12 percent… remember that Preferred Stock Holders are often given their payments before there is dividends to the Common Stock holders… and there are still more write offs to come for many companies.

Personally as I said earlier the “credit” market especially for the consumers will be tight and unless you have stellar credit there is most likely no way you will get a loan or if you do your rates will be high. Even Fanny Mae and Freddie Mac have indicated continued price and value declines through 2008 and MAYBE a slow recovery starting in 2009. When Housing prices do go up (and some analysts and pundits say the opposite of me here) the price increase will be slow because of the Credit requirements that will have to be slowly reduced as well as many people who will be wary of a repeat of the last 2 years and finding out that it is actually CHEAPER to Rent a home than to own it and risk their equity on another potential downturn. And for Zero Down Mortgages.. forget it… those days better be over!!

Simply ALL of those rosy predictions of a good 2008 are for the benefit of companies who want to keep your money in stocks without regard to the real possibility that this economy is in for a rocky 2008.

Recession: Do not expect to be told that this economy is in a recession until it is either extremely sever or until there is a reversal of the current trend, at which time you will be told that we WERE in a Recession. The “powers” behind the Financial information as well as the Government does not believe you are rational human beings capable of knowing the truth until after the fact. They are afraid you will panic and that is not good for business. Right or wrong that seems to be the way the general population of the United States is treated.

I stand by my predictions in the previous post, for the Euro vs. Dollar exchange and the price of Oil for 2008.

Craig Eisele