Is Reality Finally Setting In?

Here's a link to a story that finally sounds like reality may be setting in for many. http://www.msnbc.msn.com/id/28823013/

Just as in early 2008 when everyone was saying "Recession? What recession?" and then in mid 2008 they were saying "Oh, just a mild recession, a 'shallow' one." and then in the fall of 2008 it was "Oh, wow... ummm, ok, it's pretty bad, but the 2nd half of 2009 will be fantastic.".

Now, finally there are some coming to the realization that 2009 may in fact be a lost cause and are looking to see if recovery will come in 2010.

As to what is happening in gov't right now... what a mess. Our Sec'y of Treasury candidate is on the hotseat for tax problems, the second half of the TARP funds are on hold, a new 825 billion stimulus package that will do almost nothing... My personal feelings are that Obama is going to try to do the right things, but it's Nancy Pelosi, Harry Reid and Barney Frank that scare the absolute daylights out of me. They think they own the world right now, especially with a democrat in the White House. I hope that Obama keeps bumping heads with them and doesn't give them everything they try to get.

If I understand the 825 billions stimulus package correctly, the chunk of it for citizens will come as income tax savings in the form of modified tax rates for the first $10,000 or so of income. So in other words, you'll get a little extra in your paychecks that make up the first $10,000 of your income once it's implemented. Let's say you make $40k a year, the first $10k would come in 3 months. Spread $500 out over 3 months and you're looking at about $167 a month. If you get paid weekly, $40 a week.

Now... let me ask you something. Just what do you think will happen with that money? What could possibly be done with it that would STIMULATE THE ECONOMY? First of all, people will end up using it to pay their bills. Send a little extra to the credit card company... maybe. So, after 3 months, it's done.

If you make $80,000 a year, you'll get your $500 in bigger chunks. But if you make $80k a year, getting an extra $250 a month for 2 months isn't going to do a whole lot either. Right now, if you make more money, chances are you owe more money.

The $300 checks that G.W. sent out last year at least made a little more sense. It was a lump sum and having it in hand all at once got people to think about spending it. An extra $40 a week is going to get spent on necessities by most families.

Here's the true bottom line. The world economy is in worse shape than anybody wants to even acknowledge. Obama can't fix it. Nobody can. It's going to take time. It has to play itself out and we have a long way to go folks. I'm sorry to say.

By the way, did you see/hear the local headline yesterday? North Carolina unemployment shot up from 7.8% in November to 8.7% in December. Almost a full percentage point in a MONTH! And that hasn't taken into account the layoffs that are about to begin in the banking industry primarily in Charlotte. What do you think the U.S. unemployment figure will be when it's released...

Now, do keep something in mind. The recovery in the stock market during a recession does start before unemployment hits it's worst levels. So, don't track unemployment as your gauge of when stocks will turn around. As unemployment continues to get worse (because it's a lagging indicator), the market will eventually turn around.

Well, that's enough cheery news for one post. Have a good weekend everyone.