Ever since the day when our  first primitive Human ancestors stood up on two legs and surveyed  the world which would one day belong to His descendants,  Man has been struggling to control  his  environment.      

    Nature has ever been a source of conflict and danger.

    Competition with other animals for  food was the key to avoiding extinction.

    To eat and not be eaten, has always been a primary rule for survival.         

     Becoming a skilled hunter was important.  

     Developing the skills to avoid becoming the prey was a good idea. Life is much easier if you  live at the top of the food chain.        

     Humanity has learned to insulate itself from some of the ravages of nature.

     Animal skins, and other  types of clothing. helped Man to adapt to and survive more extremes of nature.          

     The Human Animal has always been inventive, utilizing the bounty of Nature to elevate Himself  above the other competing species that inhabit his world .

     Caves and trees as safe havens for shelter. 

     Bodies of water as  boundry’s and barriers for protection.

     Rivers as a means of transportation.   

     Sticks and rocks made effective weapons in the hands of an upright biped with a moveable  thumb     

     As human brain capacity evolved, humanity became the dominant species  on the Planet and was able to excert more and more control of  His environment.          

     The evolution of man’s soul and the emergence of his consciousness saw Man begin to develop an awareness of himself as an individual  entity, enabling him to relate to his peers as well as to the natural environment which was his home.

     Having evolved from nature, Man must learn to live in harmony with his world.

     Domination is a responsibility as well as a privilidge.

The current 7 month rally on Wall Street is unusual for a number of reasons, first and foremost being the lack of statistical relevance.

The underlying fundementals for  publicly traded companies generally provides a reality check that engenders a modicum of sanity to a roaring bull market.

Earnings and the P/E ratio(Price easnings ratio) historically give a focal point for evaluating a reasonable trading range for a companies stock.

This is not currently the case. Most companies have improved their balance sheets by reducing overhead, shedding employees, and reducing inventory.

These factors are admirable ,as corporate America attempts to weather the perfect storm of a heavy recession, an ultra left wing economic policy, real unemployment over 17%, and an arguably ineffective policy of squandered stimulus and corporate bail outs.

“Then why”, you might ask ,” is the market still going strong?”

This rally has no legs to keep it running.

Observations and interaction with the public has made me suspect that the retail public has not been the fuel for this rally.

This suspicion was recently confirmed by a report released by TrimTabs.

In the last 6 months only $ 2.5 billion has been placed into equity mutual funds, while almost 12 times that amount has gone into bond funds, an indication of conservative saving not speculative risks.

The U S investor has watched this rally rather being the fuel for its excess.

Who’s  behind the speculative excess which has seen this unworthy market gain over 50% from its march lows, defying all underlying realities.

The answer has to be hedge funds. institutional speculators, the investment bankers with their TARP money and access to treasury funding as newly accredited banks.

These Go Go managers have a different perspective on the rally.

If indeed the rally turns out to be real, and they miss it, their jobs and reputations are toast.

If the rally fizzles and fails, they are risking someone else’s money.

The risk reward is in favor of maintaining the speculative push.

The danger in this type of speculation is  extreme.

As they jumped into the rise, they will be willing to bail at the first sign of a negative reality.

We saw a free fall market last Fall.

Let unemployment continue to increase.

Let the next round of Prime Adjustable Rate mortgages begin to default.

Let the commercial real estate market crash due to the flood of small and medium sized companies being forced to close.

Let the perfect storm flood the boat.

You have heard the phrase , sink like a rock.

Let the little investor BEWARE.

It is necessary to revisit an article I wrote last January.

This pertains to a correlation between our current economic situation and the outset of the Great Depression.

There are many disturbing similaritiess, and the critical time line is getting too close.

Read and see if some of these actions taken by FDR sound chillingly familiar.

                             *           *           *
I have been telling you a shortened version of how Hoover and Roosevelt managed to turn a bursting speculative bubble, and a moderate recession into THE Great Depression.

In A previous article I gave you some unemployment data,based upon a Vedder & Gallaway  statistical study in their book “Out of Work”.

 Unemployment in November 1929 , was just over 5% almost two  months  after the market crash .

Unemployment hit a high of 9% + in December 1929, but gradually dropped to mid 6% by the beginning of Summer 1930.

 President Hoover and later FDR began tampering with the economy . They attempting to reduce unemployment  by  imposing  protectionist  tariffs.

This intervention resulted in double digit unemployment , but it was more than a year after the crash.

The more they attempted to fix the economy, the higher the unemployment numbers became.

F D R interfered with the economy more than any President to that time. Previously, it was not considered the business of the Government to  intervene in economic cycles.

The more Roosevelt tried to use government spending to help the economy, the higher the unemployment rates soared.

The methodology which he used , involved putting people to work!  Sponsoring Publick works! Rebuilding and improving the infrastructure! All honorable intentions.

However, let me explain.

Everyone knows the expression,” the road to someplace is paved with good intentions.”

Here is whar Franklin D Roosevelt and several other well intentioned leaders have done, or are about to do.

For clarity, lets shrink everything down to a small parable.

Lets say the President has $ 1 million available to stimulate the economy.The money was from the Treasury , and had come via taxes collected.

He looks at the pile of bills.” Not bad,” He thinks. This is quite a large pile. I should be able to help a great many people with all this money.

He scratches his chin,” My citizens are hurting. Unemployment keeps going up. The people are hungry.”

“What should I do?”

OPTION #1

“I know what I have to do.” He picks up the phone. “Mr Secretary, we must do the right thing. The safe thing.  The Politically expedient thing .”

He holds the phone away from his ear. The voice on the line is speaking loudly.

Finally the President becomes impatient. ” Listen” He says, ” Do you want to help the country, or do you want to get reelected?’

There was silence on the other end.

“We must get money and stimulus directly to the people.” He continues,” We will take our $1 million and create public works jobs .Our people will build bridges, repair roads, construct  hydro electric plants and wind turbine farms.”

” Of the $ 1 Million, $400,000 will go to administer the programs, maybe $250000 will go towards advertising and Public Relations, so that the voters know who created all these jobs.The rest will go directly to the people  to put bread on their tables.” 

 The plan was implemented. The money was spent. The people were put to work… For 1 year…Then what?

In this scenario, which is what happened under FDR, the unemployment rate went up to over 20% and stayed there with a few short term exceptions, for over 4 years.

We had created new dams and new roads, but no new jobs, no new industry, and no new wealth.

OPTION #2

The President takes the $ 1million and calls in CEO’s from 5 small but successful private buisnesses.

” Gentlemen,” He says.” Our Nation is in trouble. The economy is in a slide, and unemployment is growing. “He looks around the room.

“We need your help. Your Country needs your help.

Here is $1million. Taxpayer money. A precious public trust.

I want to give it to you Gentlemen to invest.

Take the money, go back to your businesses and invest this public money. Use it to expand your business. Enter new markets, create new wealth.”

THE GREAT DEPRESSION ENDED IN 1932. A GENERATION OF PEACE AND PROSPERITY ENSUED. A WORLD WIDE VISION OF CORNICOPIA BECAME A REALITY. A LITTLE KNOW RADICAL GERMA, ADOLPH HITLER WAS LAUGHED OFF THE WORLD STAGE.THEY DIDN’T NEED HIM, THEY HAD PROSPERITY.

All the commercials running on Television advocating getting the new Swine Flu vaccine which will be administered by Nurse Practitioners  appears to be a subtle yet insidious move by the Health Department , to get us used to the idea of being treated by these Nurse Practitioners.

The nurse practitioner will be a cheap alternate to the , medical school trained M D .

An R N with an extra 6 months of training will be an inexpensive  replacement for doctors.

The plan will make it easy for existing  nurses to up grade their license to practitioner nurse. This is destined to   become the standard for supplying  medical treatment to the Universal Healthcare  version of socialized medicine.

 Fast, quick, cheap, inferior replacement for the formerly respected profession of medical doctor.

This is one way they are going to accommodate 40 million new patients on government created health care insurance.

The care might be more generic, and the quality will certainly suffer, but the cost savings will certainly be worth the potential down grading of the U S medical system.

It will work, as long as the politicians and their loved ones are not stuck in the same inferior circle of health care.

Fed Chairman Bernanke announced today that the recession is over as of the 3rd quarter of 2009.

3rd quarter? Now? Where? When?

How did I miss this miracle recovery ?

The 3rd quarter of this year?

Pinch me so that I can wake up and smell the roses along with the rest of the country.

Excuse me. THERE IS NO RECOVERY!!!!!!!!

Its all a fake aimed at making Americans feel less uneasy about the future.

If we see the truth of how bad the economy truly is, then all of those $ trillion social engineering programs will never get done.

The motivating factor this summer concerning the town hall protests, and the recent tea party express shows the politicians that Americans are afraid of their economic situation, and truly petrified at the direction  in which  disappearing  former prosperity is heading.

Let me be perfectly clear. If you talk to the average American small businessman, you will know that there is no recovery. We are hurting and no one especially the government is helping  small business.

All the improvement is directly the result of bailouts. Nothing, not a cent is generic growth, either sustainable or recurrent. NADA!

When subsidies go away, so will the sales. We have used up probably the next 7 or 8 months of auto sales with the cars for clunkers promotion. Great, they were able to get rid of some inventory, and of course auto labor unions were able to keep their members happy, but the general recovery will end with the stimulus.

Our economy is beginning to look similar to the Japanese economy of the past 15-20 years.

When they entered their recession in the early 90’s the Japanese government lowered interest rates to almost 0 % to encourage borrowing. The Japanese people had just come off a disastrous economic fall wiping out almost 50% of their wealth,on their speculative bubble and they did not want to borrow. They wanted to save instead for retirement.

Instead of helping the Japanese people, the net effect of this fiscal policy of low interest rates and economic stimulus , was to encourage speculators from around the world to come to Japanese banks to borrow money at close to 0% interest.

They then used the cheap money to build a factory in China or Brazil or speculate in oil or other commodities.

Japan became the financier of speculation around the world, yet 20 years later their markets and real estate values are still down over 50%.

American banks have plentiful cheap money which they won’t lend to average Americans , who don’t want to borrow and spend anyway. Americans are interested in saving for retirement.

We can only hope that 20 years from now the American fiscal policy won’t be compared to the Japanese fiasco.

On Thursday I brought my puppy to work.

I am CEO of a company that imports slate, quartzite sandstone and limestone in tiles and slabs.

We would supply our dealers, and specified corporate projects throughout the United States. At least we used to be active distributors, but the recession/depression has seen our sales shrink by over 60% as the economy slides deeper and deeper into economic stagnation.

Our 10000 sf offices and distribution wareouse  is located in an industrial complex in Western Nassau County, Long Island.There are approximately 15 square blocks of what used to be an eclectic assortment of commercial  industrial businesses that called the area home .

On street parking was always scare, and the roar of large delivery trucks and interstate haulers caused  the buildings to vibrate.

That is all past tense.

There is plenty of on street parking.

The roar and vibrations of large haulers is no longer background noise.

Perhaps the most discouraging sight comes at the end of my day, when i take my puppy for a walk through the industrial park.

Everywhere there are signs of abandonment and stagnation.

Building available.

Property for rent.

Available sale or lease.

Available, will sub divide.

PLEASE BUY OR RENT MYCOMMERCIAL BUILDING. I CAN’T FIND ANY NEW TENANTS, AND THE OLD TENANTS CAN’T PAY THE RENT, OR THEY ARE OUT OF BUSINESS.

The signs of neglect are everywhere.

The lawns are shaggy.

The bushes are growing somewhat wild.

Pot holes remain for months.

The aftermath of a storm remains for weeks.

Where in the past the plants worked multiple shifts, with management staying till 6:30 or 7:00, now the streets are empty by 5:05.

I see this as a  microcosm of American small business.

The banks that hold commercial mortgages on these warehouses and small manufacturing businesses have to be in real jeopardy of  defaults and foreclosures .

The roar of the underwater commercial loans is beginning to glub!glub! GLUB!

Over the years, I have learned to become suspicious of  government facts, financial reports, and financial data.

Economists are polled about their opinions.  The resultant “guesses” are factored together to reach a consensus.

Depending upon the governments agenda, the results are added and subtracted, published and publicized then interpreted to reflect a positive or negative slant, with conflicting opinions excluded as irrelevant, if they do not support the desired agenda.

Last week, ( the end of August 09) the Gross Domestic Product( GDP)  for the 2nd 1/4  of  ’09  fell , according to the government,  by 1%. The polled economists had predict a 1 1/2 % fall. 

The market was encouraged by this ” less bad” news , took it as a sign of improvement, and  continued the rally which had been underway since March.

Ben Bernanke, was hailed as savior of the economy, by President Obama, during his  reappointment a Chairman of the Fed.

The truth is that they are attempting to create a new bubble to pull the economy out of the recession. Sadly the balloon has sprung several leaks, and the only way to keep the bubble inflating, is by pumping air at record deficit rates.

Don’t stop pumping or the bubble will deflate faster than it did  in October of 2008.

On Friday August 21st in a speech in Jackson Hole Wyoming, Federal Reserve chief Ben Bernanke declared” We have saved the World from disaster.

He continued, ” As severe as the economic impact has been, it could have been decidedly worse.”

Hallelujah! Praise the lord!.

Despite jobless claims increasing, and real unemployment exceeding 20%.

Despite the dollar being diluted as fast as the printing presses can print.

Despite small businesses being squeezed out of existence,

and despite a projected shortfall of $ 9 trillion over the next 8 years

Chairman Bernanke in lock step with President Obama and the socialist regime he leads, can state with a straight face that”  we have saved the economy from disaster.”

………So Far……..Maybe……..Or maybe not!!!

The government persists in putting a very one sided spin on the economic numbers, and the lap dog press spews the diluted pap that they are fed.

Their  ignorance of the dangerous times and potential disasters that they are perpetrating shows gross incompetence, and disregard for the survival of our country and our economy.

By “cooking the books” they are leaving the American public with misinformation and a lack of  knowledge necessary to survive hard times.

But they will have their social agenda.  Just no functioning society to support that agenda.

The real economic numbers are still falling, and misinforming the public is setting them up for another even harder fall.

We thought that the President could walk on water, now we find that the Fed chairman does the water walk bit too.

Competition or self deception?

The main stream media and the administration pundits continue to put a positive spin on the recovery of the housing market.

Last week they trumpeted  the proof of an emerging recovery.

Existing home sales jumped 7.4% between June and July. This represented the largest percentage increase in a decade.

The National Association of Realtors announced this increase, but also noted that the median selling price was down over 15% from the same period last year.

These encouraging sales figures were skewed by a large majority of low priced distressed properties. and were aided by very low interest rates and Federal tax credits for first time buyers.

The reality is sobering and the balance is extremely delicate and dangerous.

1. Most sales represent foreclosures and short sales, forced by financial distress,( almost 90% of the total.) Slightly over 10% can be considered normal sales

According to the Mortgage Brokers Association( MBA(, reportedly 1 in 8 mortgage holders are in some stage of delinquency or foreclosure.

The  majority of the increase in existing home sales has been seller driven by falling prices and defaulting mortgages. These pressures will continue to exert downward pressure on real estate prices.

2. There is a change in the origin of defaulting mortgages. The past two years, the pressure has been primarily from sub prime home owners unable to refinance because their  mortgages were under water.

The past 6 months has seen a shift from sub prime to prime borrowers, unable to make payments due to job loss and economic recession. According to the Mortgage Brokers Association, almost 60% of new foreclosures in current quarter were filed against prime borrowers, up from 40% last year. Sub prime was only 32% compared to 50% + last year.

3. The much larger number and size of the prime ARM’s which we have talked about extensively are set to begin adjustin in huge numbers beginning in 2010 and accelerating into 2011.

These are the infamous Alta and Option ARM’s which involve larger more extensive properties, and are arriving while unemployment continues to grow.

4. Commercial mortgages , Not heard from yet, but with all the abandoned stores and empty shopping centers, coupled with the wasteland developing in out industrial  parks, these mortgages are a problem in the works.

5. Home inventory of existing homes. In July home inventory increased by 7 1/2 % to over 4 million hoes. This is almost a ten month inventory, and does not include the shadow inventory of people who want to sell but are waiting for an uptick in the real estate market before putting their home on the market.

This is going to be a cold winter, a Madoff’d( Scrooged) Holiday season, and an even colder winter and spring for 2010.

Sorry, but the truth is the truth.

Everything is getting better.

The recession is over, and there never was a threat of a depression.

Last week 53 economists polled by Bloomberg, said the recession was over in the 3rd quarter of 09( this is the 3rd quarter) and we can expect renewed growth over the next 4 quarters of 1 1/2 – 2%.

Cool! Groovy! I wish I could be a professional economist so that

 I could make up neat fantasy stories.

It’s nice to know that the stimulus was a success.

Where did I put all of those credit cards that I swore I would no longer use?

Let the good times roll…or not…

Our economic prognosticators have overlooked a few facts, which casts a partisan pall on their judgment.

Foreclosures were up 7% in July over last year.

Housing prices are still falling.

Unemployment is still going up, and has exceeded 20% in real terms.

Consumer price index is falling. The sign of a deflationary response to shrinking demand.

Business profits are falling in real terms( more on this in a moment)

Consumer spending is down and savings are up from a negative 2% to a positive 7% + over last year.

Today’s lead article in the Wall Street Journal headlines ” Reluctant Shoppers Hold Back Recovery”

The article goes on to state that major retailers reported thet American consumers continue to hunker down, casting a cloud over the durability of the US recovery.

Retailers transcending  discount to luxury are providing foreboding results.From discount Target stores with a 6,2% drop in same store sales to luxury store Saks with a drop of 15.5%, retailers are forecasting slowing sales through the end of the year, and a “hoped for” recovery by the middle of 2010.

The Obama administration and the Democratic controlled Congress desperately need a recovering economy to maintain the justification for excessive spending. If the Stimulus spending and various other “changes to the economy” has worked then they stay in power and get to change and spend some more.

The 4th quarter numbers will reflect a healthy growth in Gross Domestic Production(GDP)

Don’t be deceived, The “healthy growth ” is compared to the 4th quarter of 2008, a period of  economic disaster.

Of course the numbers are healthy compared to the end of last year. Especially when most profit margins are being maintained by shrinking overhead, namely payroll.

Don’t be surprised by a rally in stocks in the fall and early winter, but be careful when the recession/Depression roars back with a vengeance  next year.

You can only cook the books so long. At some point reality will force its unwanted truth and the markets will have a serious correction.

Dear Friends.

PLEASE BE CAREFUL