With a severe financial and economic crisis on our hands, which has surfaced no real leadership other than Hank Paulson and Ben Bernanke, there are plenty of things to rant about. But here are my top five:
1. The V-Shaped Recovery School
A V-shaped recovery is about as likely as the Oakland Raiders winning the Super Bowl this year. Here’s why:
- Unemployment will continue to rise as businesses lay more people off.
- Consumers continue to pull back spending.
National income is falling. - Accumulated consumer wealth is down as much as 40%.
- Credit to consumers and small businesses has contracted by more than $4 trillion, and consumers account for 70% of economic activity in this country, while small business account for 38% of GDP.
I guess the V-shaped recession cheerleaders flunked third-grade math. There are hard times are ahead in 2010.
2. The Idiocy of Wall Street
The Street just doesn’t get it. Every day the big wigs of Wall Street are distancing their world from Main Street, and this will only generate a spectacular backlash that has, to date, been suppressed by the Obama administration.
Only one CEO — the CEO of the only bank that did not get into trouble, Goldman Sachs (GS) — has apologized for the excess that has put several million people out of work. If I am right and unemployment continues to climb, the folks on Main Street are going to have their day of reckoning with Wall Street, and the result will be overregulation — perhaps as soon as 2010, an election year.
3. The Craven Banks
If the Street is bad, the banks are beyond belief. Wells Fargo (WFC) CEO John Stumpf complains about Uncle Sam more than a four-year-old whines at bath time and in the same interview demands that the Treasury has Fannie and Freddie increase the size of the mortgages they insure so his bank can make more money.
Most of the large money center banks are technically insolvent and have been aided and abetted — perhaps with good reason — by the Treasury and the Fed in obscuring their losses through accounting changes, fake stress tests and obfuscating public comments. This will wear thin in 2010.
4. The Obama Team
The world’s financial system is hanging on by a red, white and blue thread, and Washington has focused all of its political capital on pushing through a mish-mash of health care reform. The politicians seem to have no sense of how deep this recession is or how badly the financial system is in need of substantive change, some of it in the form of regulation.
When Franklin Roosevelt forced the regulation of Wall Street and the banks, he simply ignored the objections and saved capitalism from itself.
What is Obama waiting for?
Treasury Secretary Timothy Geithner to utter a coherent sentence? (Not gonna happen.) Or House Financial Services Committee Chairman Barney Frank to be able to get enough support form Republicans for meaningful, intelligent reforms. (Also not happening.)
And I doubt he’ll grab these problems by the horns in 2010.
5. The American People
This is actually a positive rant. Most Americans are not returning to the market, as evidenced by the incredibly low trading volume we’re seeing. They know their neighbors have been laid off and their favorite restaurant is half full when it should have a line outside the door.
Sure the average American is undereducated about money and finance, but they have far more common sense than our business and political leaders. Hopefully they will demonstrate this in mid-term elections in 2010.
So what should the American people do?
Be leery of the rally, stay in bonds, cash or selective long-term positions, avoid index funds and similar nonsense, and be prepared to short segments of the market as the reality of 2010 hits the Street.
Let Michael Shulman help you make money on the short side of the stock market. Download a free copy of his new investing guide, Double Your Money — and Double it Again.
