Misery Index

This commentary comes from a “We Beat the Street” commentary, an Investment Strategy company, via KITCO.   The author is Roger Wiegand, who I’ve also never heard of before and don’t know too much about, other than his biography on We Beat the Street and a bio on IIC.  But , lets take a gander into his crystal ball, shall we? [Hat Tip to Nightblogger]

Our new president is determined to hand out $860 Billion to One Trillion dollars in a Herculean effort to literally buy a new economic recovery.  While some of his ideas are noble indeed the overall plan will have little effect and Great Depression II shall take hold in 2009 with crashing stock markets in May and September-October 2009.  We think the worst of the worst hits in late September 2009.

Hey, what do you know, the one year anniversary of when millions lost nearly all of their 401(k)s when the market dropped out.  What a time to choose!  But I’m getting ahead of myself… lets hear about spring.  A time of green, fresh air, and everything coming back to life.  But the death of the stock market according to Wiegand.

During the spring of next year we see:

(1)  A second larger wave of residential housing mortgage failures; [Now, to be honest, I heard about this about two months ago.  Its a different kind of mortgage than the ARMs but it’s more “deadly” to the market  and banks.  Good thing we don’t have to pay a mortgage!]

(2)  The first big wave of auto loan failures and repossessions; [I heard about this one too about two months ago.  But if people can’t pay their mortgages, the next big ticket item is their car.  Good thing we don’t have to pay a car loan or lease!]

(3)  Over $40 billion in credit card defaults, smashing the bank lenders; [This is already happening, and again, another “big ticket” item are peoples credit cards.  Good thing we’ve never EVER used them.  If you can’t pay for it in cash, you don’t need it.]

(4)  The first wave of commercial mortgage failures and foreclosures on shopping malls, office buildings and other commercials; [This too is inevitable.  It is estimated that over 16,000 businesses will fail in the next year, leaving a lot of empty space in malls, strip malls, and business complexes.  Already, Circuit City has left quite a few leases up in the air, due to them filing bankruptcy.  Whose next?]

(5)  And finally, the grand smashing finale of CDS Credit Default Swaps originated with No margin money or down payments!  We heard today the total is 500 trillion!  I cannot even fathom that number.  These five converging train wrecks could take the Dow from a dead cat bounce of 10400-10800 back to 7250, or even 6600, or 5600.  [My other half and I have said, the Dow will crash out around 5000 in 2009.  So much for our stocks.]

But if you think the Dow at 5000-6000 is bad, you haven’t heard it all yet.  The above is just in the spring of 2009.  There’s how many months in the year, and how many seasons?

Then, in late September and early October, the New York, London, Tokyo and Asian markets take a monster crash.  how low is low and how bad can it get?  We think the Dow could end-up on November 1st, 2009 anywhere from 5,600 to a low of 3,000 or even 1,500. 

Ouch…. and how interesting that it’s just about the same time that the stock market crashed in 1929.  But the best.. err.. worst is yet to come.  And the capitalization isn’t my emphasis, it’s Wiegand’s.

Unemployment nationally in the USA is now touching 16%.  The officially posted number is somewhere near half of that.  By the fall of 2009, American REAL UNEMPLOYMENT WILL BE NEAR THE ALL TIME 1930’S DEPRESSION HIGH OF 25% UNEMPLOYED.  SADLY, THAT IS NOT THE WORST AS IT GETS MORE DIRE.  WE PREDICT, USA UNEMPLOYMENT REACHES 30-40%.  IN THE RUST BELT STATES OF MICHIGAN AND OHIO, WHILE 40% IS NOT UNREALISTIC.

Great… wonderful.  Buy your tents, Coleman stoves and sleeping bags now.  And maybe a nice little 9mm and shotgun.  Aww heck, splurge for a Desert Eagle.  Size is intimidating!  Make sure to not forget the ammo!  And begin to stockpile food, you might need it.  This might be the “new” money and a good bartering tool, as long as people don’t kill ya for it.  And LOTS of stocking up on toilet paper and um.. ah… guys look away on this one… feminine items.  And don’t forget things like cold medicine, aspirin, and topical antibiotics!But more realistically, stockpiling at least two months of food is a good way to make sure you have a food supply and “other” items if you lose your job or have to choose between food and a house payment.

The American federal government departments for food stamps and the job of providing welfare provisions will be overwhelmed.  This will be a Katrina event for the hungry citizens of the United States.  Urban areas will see skyrocketing crime and in parts of some cities, life could become totally uninhabitable.

The last report we’ve seen on those receiving food handouts and related welfare amounted to 11 million USA citizens with 700,000 children going hungry each day.  We suspect the true amount of those needing food help will rise to 35 million with an untold tragic number of them being little, defenseless children.  Governments remain in denial and are not prepared for this national emergency whatsoever.  As things worsen, food riots and others with violence aimed at the “have” are common.

Did I happen to say that I am also professionally trained in sword fighting?  And raised by a Father who taught me to shoot a .38 & .45 around the age of 8 and a shotgun at the age of around 10?  Who would have ever thunk it that I would need those skills in my personal life!  And a chick to boot!

And as for that stockpiled food, didn’t I just say it was going to be the new “money”?  Dollars will be worthless. 

The number of bank failures over the next three years will be in the thousands.   In addition, the US Dollar’s valuation could break recent lows near 70.00 on the index, dropping to 46.00 by 2011 or 2012.  Inflation or potentially hyperinflation is quite real as the Federal Reserve and US Treasury strain to print and circulate cash to prod our stalled economy.  It is simply not working even with the dramatically lower interest rates of late.

But to continue, Wiegand says just like in the Great Depression, families are “renting” out rooms, or “bunking” up to pool their money.

Consumers are broke and going broker.  Households of interrelated families are doubling and tripling up even with several employed members being under one roof.  Basic costs of rent, mortgage payments, health care, food, utilities and taxes are too much to bear on stagnant and in some cases falling wages.  In some areas of America, there are entire subdivisions of homes totally abandoned or existing with only a hand full of occupants.  The millions thrown at lenders for new mortgages are not getting through to buyers, as there are fewer of them.  We are witnessing a system breakdown.

Isn’t this already happening?  I recently blogged about Detroit and how many of the homes are already empty, and have been gutted for their copper and such.  And additionally, many who are behind on their mortgages, and said bank gets a bailout, refinances the mortgage, only to increase the payment by $300 to $500 a month, and also demands several thousand dollars just to stop the foreclosure within 30 days!

And states and cities will be broke also, so forget about getting any help from them, which is already happening.  Say bye bye to welfare and to schools.

Municipalities and states are sinking into a spending, debt-ridden morass.  It was reported today that 22 of 50 USA states are in serious budgetary trouble.  California is one of those in terrible condition and Michigan is already technically broke as many of her cities. [Don’t forget Ohio as the governor called Rahm and said he needed $5 billion!]  Detroit will file bankruptcy in 2009 and there will [be] many other surprises as well.  There will be a cascade of bond defaults and the outcome will cap the ability of these cities, states and countries to borrow ever more.

Hey, at least we are all in this together….. *smirk*  True worldwide Socialism!  YIPPIE!

The shining light through all of this is the faster we find the bottom the faster we can recover.  Sadly, the recovery process will take years.  Futures and commodities traders should continue to earn steady profits as the stock markets slide into oblivion for years.  We see no recovery until 2015.

Let see… Obama Jan 2009 – Jan 2013.  I wonder if he will run for re-election?

I find it interesting that there is no mention of the Big 3, or of a company such as Wal-Mart still being in business.  If Wal-Mart collapses, we are in trouble.

But wait.. according to the Russian nutjob, by 2010 we will be in a civil war and the United States will be split between Canada, China/Japan, Mexico and the EU with Alaska going back to Russia and Hawaii going to China/Japan so all of this won’t happen!

Of course there’s always Gerald Celente’s prediction of a total collapse of the economy and a revolution by 2012.

So well.. there’s my first post of the new year…… oh and… um… might be a little late… but have a happy and prosperous  New Year, while you still can? *shrug* *nervous smile*

UNEMPLOYMENT INCREASES 

The unemployment rate in Detroit is currently 21%, meaning nearly 1 our of 4 people are unemployed.

UTILITIES INCREASE

Michigan regulators recently approved electricity and natural gas rates for customers of Detroit Edison and Consumers Energy.  The $83.6 million in hikes for Detroit Edison included a rate “realignment” for commercial customers designed to cut energy costs for businesses, while apparently raising the cost for residential consumers.  Consumers Energy’s hike in natural gas prices totaled $22.4 million.

HOME VALUES PLUMMET AND FORCLOSURE RATES HIGH

The average sale price of a Detroit home so far in 2008 was $18,513, in the first nine months of the year, down from $40,011 in 2007, a drop of 55 percent, according to the Detroit Board of Realtors.  According to The Detroit News, home values in Detroit plummeted to an average value of less than $10,000; some foreclosed homes, gutted by scrappers, were placed on the market for $1.00; many other stand vacant or are burned to the ground.

Protestors recently picketed Bank of America, chanting “Bail out the people, not the banks.”  According to one protestor, her 30-year, fixed interest rate requires a monthly payment of $1,030.  Bank of American then received $25 billion in federal bailout money.  Under the terms of the restructured mortgage offered by the bank, her payment would go up $300 monthly and she would have to make a $2,000 payment in ten days.  But this would only put off the sale of her home until some time in January.

HOMELESS INCREASES

The chronically homeless community makes up 20% of the 19,000 people in metro Detroit who at any given time have no place to live.  According to Amber Arellano, a columnist on Detroit News, “Tent cities are sprouting up like winter grass in public parks here.”  “Doctors say they’re seeing suicide and depression skyrocket.”

DEMAND FOR FOOD BANKS SERVICES INCREASE

DeWayne Wells, president of Gleaners Community Food Banks of Southeastern Michigan, said demand is up by 25 percent from a year ago in the region’s food banks.  “Many people are first-timers – they have no idea how to navigate the system, how to qualify for food stamps.”  In a different report, Gleaners was reporting a 70 percent increase in need for food help this fall compared to fall 2007.

By next year, Gleaners anticipates local emergency food needs will rise as much as 50 percent.  “Its going to take much more than just food banks,” Gerry Brisson, Gleaners’ senior vice present said.  “The food bank network was designed to be a short-term stop gap.  It’s going to take good government to really help families who are really going to need the help in the mid-term.”

SCHOOLS CLOSING

Detroit is contemplating the closure of 63 schools by 2013.  At two area high schools there is now a lack of heat and lights in the classrooms and a shortage of teachers.

POVERTY LEVELS

According to the most recent numbers from 2007, 47.8 percent of Detroit children lived below the poverty line of $21,000 for a family of four while the national rate at the time was 18 percent.  Detroit’s overall poverty rate was 33.8 percent, the highest of any major city.

CRIME DOWN DUE TO LACK OF ‘VICTIMS’

The FBI’s latest statistics, for 2007, show Detroit with the highest violent crime rate of any major city. 

According to Jeriel Heard, chief of jails and courts for Detroit’s Wayne County, he reported that property crime in some Detroit neighborhoods had actually stabilized or declined because targets of opportunity were fewer now that most remaining residents are poor and many of the homes have been abandoned and cannibalized.  About 44,000 of the 67,000 homes that have gone into foreclosure since 2005 remain empty.

But yet, Detroit’s closure rate on homicides this year is expected to be 30 percent, half the U.S. average.

JAIL BETTER THAN THE REAL WORLD, SOME CHOOSING TO REOFFEND CHOOSING JAIL OVER HOMELESSNESS

Jeriel Heard, chief of jails and court for Detroit’s Wayne County, said jail conditions may deteriorate because of budget-related pressure to eliminate a quarter of the roughly 800 jail deputy positions.  He also confirmed that some offenders, notably those without homes of their own, were now expressing reluctance to leave jail when their sentences were done.

“For the first time, I’m seeing guys make a conscious decision they’ll be better off in a prison than in the community, homeless and hungry,” Joseph William of New Creations Community Outreach said, which assists ex-offenders.  “In prison they’ve got three hots and a cot, so they commit a crime to go back in and come out when times are better.”

CHRISTMAS DAY IN DETROIT

The Salvation Army of Detroit expected to feed as many as three thousand homeless and needy people on Christmas Day.  A breakfast was provided by the Salvation Army and consisted of eggs, French toast, fresh fruit and a variety of breakfast meats that was served at Detroit’s Masonic Temple.  In addition to hot meals, the homeless and needy were also given gifts of winter hats and scarves, and counseling by a social worker if needed.  A full turkey dinner was also handed out to thousands of needy individuals and families via the Salvation Army’s Bed and Bread program.

Christmas day was also Mitzvah Day – the day many in the Jewish community do good deeds, or mitzvahs.    There were nearly 1,000 Mitzvah Day volunteers at more than 40 metro Detroit locations.  At one church, 18 volunteers handed out clothes and served a Christmas meal to nearly 300 people gathered at the church.

NOT ONLY DETROIT, BUT MICHIGAN OVERALL

According to the Battle Creek Enquirer, Michigan is the only state in the union that experienced both a drop in personal income and a rise in the poverty level in 2007.  According to a New York Times story in Nov, 08; Michigan is in its fifth year of a recession, leading the nation in unemployment and 130,000 residents have been out of work for so long that they have run out of unemployment benefits.

Michigan’s overall unemployment rate rose again to 9.6 percent in November, the highest monthly rate since March 1992, and the highest monthly state unemployment rate in the country.  About 113,000 jobs were eliminated through November.  And meanwhile, Michigan has now lost people for a third straight year, the only one of the 50 states to do so.  And the state unemployment fund is in the red.  The state borrowed about $566 million from the U.S. Department of Labor, which is nearly $100 million more debt than just three weeks ago.  Next month, Michigan will begin levying a special “solvency” tax, said The New York Times.  This “solvency” tax will charge employers whose workers have cost the unemployment insurance fund more than the companies have paid in an additional $67.50 per employee.

Michigan faces a $1.8 billion deficit.  Governor Jennifer Granholm and lawmakers have approved a plan to cut $146 million from the state budget, including the closure of prison facilities in Ionia and Coldwater.  The plan reduces state spending on welfare programs by more than $63 million, due largely to fewer cases as a result of tighter eligibility requirements.  The state also recently increased its income tax rate from 3.9% to 4.35%.  Gov.

Medicaid enrollment was up 70,000 in the last year, according to the health department, for the entire state of Michigan.

Gleaners has secured additional food via the USDA to help reach the target goal of about 9 million donated pounds through Dec. 31 for more than 400 area soup kitchens, shelters, churches and pantries.  That figure is a 30 percent jump from 2007, which stems partly from greater need in outlying areas of Macomb and Livingston counties.

Demand for food is high at the Salvation army Eastern Michigan Division’s Farmington Hills corps who at one time only needed to restock its shelves once a month, is now restocking once a week.  “Our food is flying off the shelves.”  The Salvation Army hoped to have netted $8.5 million from its annual Red Kettle Campaign however, as of the beginning of the week of Christmas, donations were down about $623,000 from the same period last year, but overall demand for services was up 20 percent.

Homeless is up in cities in Michigan and nationwide, by an average of 12 percent, according to a survey by the U.S. Conference of Mayors 0 and the worst could still be to come.  The Michigan Coalition Against Homelessness reports there are at least 80,000 homeless people in the state.

About 71 percent of more than 300 nonprofits statewide noted a spike in demand for services this past year.  Meanwhile, 63 percent of the Metro Detroit agencies surveyed reported a drop in financial and in-kind support.  Many of the states' approximately 43,000 nonprofits are reducing staff, scaling back operations or exploring partnerships to offset a steep decline in funding. 

A once thriving auto hometown of Pontiac according to one columnist, resembles war-torn Baghdad.  Recently it’s unemployment rate hit the Great Depression-level of 20 percent.  GM is its only large-scale employer left.  The city is too broke to pay for adequate police staffing.  Vigilantes have begun patrolling neighborhoods to counter the community’s rising murder rate.  Even the columnist was not immune to this new rage.  On a recent evening her husband and brother walked along Pontiac’s Main Street, a truck load of four 30-something men, two armed with gun, drove up and asked if he had seen a man they were looking for. 

In Kalamazoo, the average number of children staying at the Gospel Mission on any given night is up 19 percent over last year, with an average of 64 children staying each night.  An average of three newborns a month start their lives at the Gospel Mission, after their mothers are discharged from the maternity ward.  Additionally in Kalamazoo, the Kalamazoo County Child Abuse and Neglect Prevention Council reported that their agency is getting more and more reports from concerned neighbors and others who are worried about children being left home alone by parents who cannot afford childcare while they work.

In Saginaw County, the Child Abuse and Neglect Council of Saginaw County reportes that overall their agency has seen a 23 percent increase in demand for services over last year.

In Grand Rapids, at the Guiding Light Mission, a steak dinner was served to just over 100 people on Christmas Day.

SOURCES:

• “Detroit Replaces New Orleans As Most Beleaguered American City”, South Florida Times, 26DEC08
• “Project Helping Hands combs Detroit daily offering help and hope”, Detroit Free Press, 26DEC08
• “Stats illustrate Detroit’s challenges”, AP, 20DEC08
• “Detroit:  America’s largest shrinking metropolis”, 13DEC08
• “Salvation Army Feeds Thousands Christmas Day”, WWJ, 25DEC08
• “Cutbacks threaten public education across U.S.”, WorkersWorld, 22DEC08
• “Members of the Jewish community perform good deeds on Christmas Day”, Detroit Free Press, 26DEC08
• “Michigan electricity, gas rates to rise slightly”, Detroit Free Press, 23DEC08
• “Ontario:  Detroit taking Canada water without OK”, Detroit Free Press, 23DEC08
• “Commentary:  Southeastern Michigan braces for safety net to break”, Detroit News, 15DEC08
• “Hunting a Killer”, Detroit Free Press, 16DEC08
• “Protestors ask Bank of America to help Metro Detroit residents keep homes”, Detroit News, 10DEC08
• “Poll:  Most in Mich. fear new Great Depression”, MLive, 24DEC08
• “Homeless treated to steak and scripture reading at Guiding Light Mission”, MLive, 25DEC08