Let's sum it up

The employment picture in Finance , Insurance, and Real Estate is going to contract HARD.  There seems to be a lot of anger out there toward the working stiffs in the financial services biz - the mortgage broker, real estate broker, insurance broker, etc... judging from the comments on my blog and the email that I get.  

Folks... I DESPISE the Stan O'Niel's and Richard Grasso's of the world as much as the next guy.  These guys, and others like them, along with their boards of directors, etc... were a disgusting bunch of unethical elitists that had NONE of the talent they claimed and were so handsomely compensated for, that absolutely stole money by the basket and took the food right out of people's mouths.  Don't worry, Oh Roman Mob... we will hang not a few of them, and spend 10's of millions of $ on legal fees and prison cells, for all the good it will do us.  What do we do with the LEGIONS of people that just went to work at these places every day?  Let them eat cake?  

Should the U.S. bring legal action against the former Wall Street execs to recover excessive compensation?  Sounds ex post facto but that would be OK with me... I think - though I am not a lawyer and I have no idea what outrageous precedent we might be establishing, considering the convoluted self righteous way in which our legal system works.  Speaking of which... remember the good old days?  When everybody could agree that LAWYERS were the universal pariah?  Ah, I long for a return to simpler days.

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Now that it appears the Injection Plan is going to become law, I want to point out something that many of you who have read my stuff might find surprising:  

The Plan might not work.

Yes, I supported it.  No, it is not the best plan, or necessarily the one I would have gone with if I were a leading member of TPTB... But, I know something most of my readers (considering only the comments and emails that I get) do not - and that is how dependent our corporate payroll system is on the commercial paper market, and how that market, and hence American's paychecks, nearly came to an end last week.

We can all point to our favorite hero - Warren Buffet supports the plan (and wants a piece of it), George Soros hates it and thinks it will fail, T. Boone Pickens favors the plan, former U.S.  Treasury Secretary O'Neil says the plan is "madness".  I think they are all a bit right.  The plan IS madness, and it could work - IF the Fed and Treasury are successful in their bid to reinflate AND the Oil import crisis can be held off for a couple of years.  Still, I think that the U.S. had NOTHING to lose, and will only gain a few years for the better informed to make adjustments for the coming impacts of declining Oil inputs.

But look at it this way:  We are ALL going to die, but isn't it better to put off that eventuality for as long as possible?  

Those of you opposed to the plan might yet get your chance to say "I told you so", though I don't know what the appeal of collapsing right here and now instead of a couple years down the line has for you.  Don't be so impatient. We will get there.  Get your own house in order.

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The ECB and the Fed are both going to have to cut short term rates (for all intents and purposes, the Fed already has... they just have not made it official).  This should be interesting vis a vi the various commodities.  Consider these data points:

1. Oil & product inventories are down considerably from last year, but
2. The Global economy is in a recession...
3. Or is it?  It is VERY hard to have REAL Global demand decline for commodities in a world with 75 million new mouths to feed, water, clothe, and transport.
4. The U.S. and its currency sets the price of Oil, and the U.S. is clearly in a recession.  But Oil imports into the U.S. are down 8.8% in 2008 versus 2007.  
5. Will Oil imports into the U.S. continue to fall in 2o09 vs 2008?  If so, the U.S. recession is only just beginning (and if not, with all of the stimulus injected into the system, along with a potential Fed cut, it is hard to see how TPTB would be unsuccessful in reinflating.
6. Still, vehicle sales are crashing, down 27% from a year ago!  What is that saying about the market's view of future energy supplies?  Is the decline all due to credit? After all, why buy a new vehicle if you don't have the fuel to run them all?
7. Americans have no net savings.  The assets they have, real estate, stocks, and bonds, are performing poorly (to say the least). Americans will of NECESSITY have to increase their savings.  In contravention to item 5, it is very hard to avoid a significant contraction, irrespective of the stimulus mentioned, if folks save (under consume) rather than consume.
8. Even if credit is made available in the economy we still have the budget and trade deficits, unfunded healthcare, costly wars, etc... to contend with.  

The cuts will of necessity be coordinated.  How and how much and their subsequent impact on Gold, Oil etc... is going to be interesting.  Investing and doing business in this environment is going to be beyond the word "challenging". 

Good Luck!

Mentatt (at) yahoo (d0t) com