Do Not Count Your Chickens Before They Are Hatched!

Another Blog I read this week praising how all was now well (DOW rose nearly 500 points) made me realize just how mis-informed the public is as to our current Economic crisis. It appears some are still wearing those rose colored glasses and viewing the very distant horizon of Economic Recovery with hope and enthusiasm. They view the past 8 days as a sign that Recovery has begun. I do wish that I could share their enthusiasm. On January 20, 2009, the DOW was at 8,280. Within 7 weeks of the new Administration, the DOW had sunk to a low of 6,440.08. At this moment, the DOW is at 7,298.85. There have been moments of optimism, but I fear they are only a false glimmer of hope.

Two major factors drive the economy: Consumer Confidence and Credit Availability. It is true that the current President has changed his attitude and rhetoric when he and his minions address the American public. In the first few weeks of his Administration, he preached the doom and gloom similar to another failed President James Earl Carter. Consumer confidence along with Wall Street was falling daily. Lately our new President has taken a page from the Ronald Reagan and William Clinton play-book as to preaching a more upbeat picture on our Economy. This "Change" alone surprised me. I thought he was too egotistical to listen to suggestions and ideas from others. This new attitude has helped to spur a positive reaction on Wall Street. It has also helped that Congress hasn't been as active wasting our money during the last 8 days. Unfortunately, the two major factors concerning Recovery and Growth have not changed. Unemployment the single greatest factor concerning "Consumer Confidence" has continued to grow. The outlook through Summer does not offer much optimism. The second major factor, "Credit Availability" can not be fully corrected by all the bailouts to our banks and lending institutions. Banks may have the money, but consumer spending habits have changed. Those $4.00 gas prices last Summer woke us up as to our discretionary spending. Those who are able to spend are "Hunkering down", and others have maxed out on their ability to borrow. This entire meltdown was set in stone more than 10 years ago. Those zero down 100% Appraised Value mortgages, and the HELOC's up to 120% of a homes value were a much too convenient way for greedy and foolish consumers to artificially fuel a growing economy. Those chickens have now come home to roost. As home values began to nosedive beginning in late 2007, consumers began to find themselves upside down in their home equity. Forget all the foreclosures. Those only make up a small percentage of outstanding mortgages. Many more homeowners no longer have access to that easy line of credit. Add in their fear of losing their jobs, and it is no wonder that "Consumer Confidence" is so low.

Sure wish I could spin a prettier picture, but I threw those "Rose Colored" glasses away in 1978. Regardless of blips on the DOW, I do not think we have yet seen the bottom. I am however very encouraged that one day I might be able to drive through Iowa without having to smell all those porcine odors. Not so in our nations capitol. No rose colored glasses, but I do try to view the cup as half full.