Beware of the snare of greed. Can Government liquidity save us? What is the future for the consumer?

What is our government thinking?  Bailout after bailout.  Even a bailout for you, the consumer, through Bush’s stimulus plan.  I remember Ragin asking me what I was going to do with my stimulus check, I told him I was going to use it to short consumer stocks.

Right now, one of the key elements to fixing our economy is in the hands of the consumer.  Our market is fueled by consumption of goods.  The more people spend, the more our economy grows.

There’s just one HUGE FLAW with our system… credit abuse.  Too many people are living beyond their means, and our greatest lesson in that regard is the housing bubble.  In my line of work, I get to see how people spend their money, and let me tell you, majority of them do not know how to budget.  I prepare financial statements, and the debts people are running are huge!  I mean the numbers just don’t add up… how can you have a $900,000 mortgage on a house declining in value, with an anual household income of $60k?!  These people are -$30k on their mortgages!!  Simple math my friends.  But wait… WHO in their right mind approved of their loans?  Greedy loan officers, real estate agents, home builders, bankers, all abusing capitalism, ignoring the fundamental laws of supply and demand from every angle.

Right now our country is greatly divided.  Consumers in fear is a bad formula for our economy… plus you have government infusing more money, flirting with inflation.  Double ouch!  But again, lets focus on the consumers.  Money MUST be spent for the economy to grow.  Money spent, is just a fancy way to measure “demand.”  I don’t think we’ll head into another depression- the crisis is sector focused (banks, financials), and America has a lot of innovation in tech, alternative energy, and other strong sectors- but for us to hit a bottom, we need our consumers to regain confidence.  One way to measure this is through the MSCI index, which right now is at extreme lows.  What will get our confidence back?  Well, for one, all those who greedily abused the financial and banking and housing sectors must pay for their sins.  The whole house must come down.  Second, consumer confidence must be restored… something drastic must unify us.  The $ must be back.  Who knows what that will be?  What cured the Great Depression was a World War.  Maybe we’ll need another attack on American soil (like 9/11) to get us to forget about all this mess, and start spending wisely. 

The market ALWAYS re-balances itself.

-gio-