Archive for December 1st, 2008

Remember hearing that our brains have 100 billion neurons when we are born, and that with every glass of wine or cigarette we kill 10,000?  Didn’t 100 billion sound like an amazing amount?  I always wondered how I could have 100 billion connections inside my little brain……

I just participated in a discussion with a leading neurologist who cited the 100 billion number.  The first thought that came to my mind when I heard him say it, was “huh, 100 billion is not so much.”  I then thought, if 100 billion is not so many, what would be an amazing number?  700 billion, 800 billion, 1 trillion??????????

When our dear Uncle Sam can throw around 35 billion $, or 350 billion $, or 700 billion $, or another 800 billion $, is it really not such an amazing number?

How our perspectives have changed!!!! When 100 billion is no longer an impressively large number, and our US deficit for 2009 may well be $2 trillion!!!

The markets today gave up all their gains of last week!  Though the Black Friday numbers were much better than expected, the economic numbers regarding economic activity and future activity were horrendous.

The official group that announces recessions, announced today that the recession started December 2007.  Brilliant!!! It took them 12 months to figure it out???  Just look at any economic indicator and it is abundantly clear!

But, now that we are officially in a recession, it will either good worse or get better.  Its like alcoholism.  To be treated, first you must acknowledge the problem.  But, of course, it is not that simple.

Typically the Fed will lower rates and the lower cost of funds will encourage lending and capital investment.  The lower rates would also boost home prices through more affordable mortgages and refinancings.  This time, banks are not lending, companies cutting back on investing, and people generally unable to refinance due to the significantly reduced values of homes!  What’s Mr. Bernacke to do?

He will continue to reduce rates and flood the channels with money.

There is an old saying “Don’t fight the Fed.”  That is definitely going to be the case.  The question is how soon?

The reduced rates will ultimately make stocks more attractive.  The government bailouts, forced refinancing, numerous programs, etc.  will make things look better.  People will start feeling a bit better.  But, not until some more pain is incurred and fear speads like the Red Plague……

So, it can go lower.  It can go much lower.  It likely will retest lows over the next few weeks and then rally through inaugeration.  From there, it is the new administration’s problem, and ours………………

Leave it to Donald trump to come up with a unique reason why HE does not need to stand behind a $40 million personal guarantee made to Deutsche Bank regarding HIS hotel in Chicago.  He has claimed that the “force majeure” clause has become effective due to the economic chaos and world financial crisis.

Normally force majeure refers to catastrophic events, natural disasters, war and acts of G-d.

Fortunately the courts have rejected his absurd claim.  Unfortunately they did not penalize him for adding to the economic and financia chaos!