Bakruptcies, Bailouts & Mergers...Oh My!

I know you have been missing the daily updates; however, I have been a little distraught over the past few days. My head is spinning. I am questioning the limits of government. I am feeling sorry for the innocent employees getting ready to become an unemployment statistic. I am pondering the destructiveness of greed. Clearly, my mind is over worked.

For all of you that have been living in a cave, the financial news of late has not been pretty. The week started off with a bang. Lehman Brothers filed for Chapter 11 Bankruptcy protection. What? The same Lehman Brothers that survived the Great Depression? That would be the one. Scary, right? Well, it gets worse. Merrill Lynch was saved from imminent death when Bank of America bought them out. First, they bought Countrywide, now this! Are they searching for world domination on the horizon?

Just when we thought things couldn't get any worse, AIG (the world's largest insurer) hinted of major problems. A collapse of this magnitude would be horrific on a global scale. So, our government did what it does best these days....it bailed out AIG to the tune of $85 Billion! Just think, if those cocky CEO's at AIG didn't spend over $1 Billion a year ago to have their logo on Manchester United's "Football" Jerseys, the US tax payers would have been spared at least that much. Like my dad always says, "You get cocky, you get beat!"

What effects have the past few days had on the markets at large? I'm glad you asked. First and for most, it has become clear the government is controlling our economy. I can't be sure how I feel about this. I know they are trying to protect the people at large by their actions, but at the same time they are going against the capitalistic principles the country is formed upon. Quite a quandary. Repeat of the Great Depression vs. a centrally controlled economy. I truly do not envy their position.

All in all, the events that have unfolded have negatively affected the stock market, but the fact that it hasn't gone into full meltdown is a testament to the actions of Bernanke & Paulson. Many thought the fallout would be much, much worse. Some would say it proves they know what they are doing. I say, let's wait and see how this really affects our economy, our business practices, our government intervention, and our economic liberties as Americans. I hate to be a Negative Nancy, but I just don't like big government. On the surface it seems to help, but in the end the people like me are the ones that suffer. After all, the former CEO's get big "parting packages" as they exit the companies they ran into the ground. No wonder Morgan Stanley& Goldman Sachs are looking for investors to merge with. Here is the formula: Rise to the top of large company based upon your skill and investment prowess. Next, get caught up in the greed of Wall Street. Then, start rewarding your employees for short-term gains while gambling with the future strength of your company. Finally, get fired for ruining the company while laughing all the way to the bank with your $45 million payout. Honestly, can you blame these guys. When you are rewired for bad behavior you will continue with said behavior. It's Psych 101!

The trickle down effect of the chaos is hitting the global markets. Global Confidence dropped 2.8% this month, while we Americans saw our confidence drop 7.6%. It is so good to be number one! Also, housing construction fell 6.2% to its lowest level in 17 years, and the Security & Exchange Commission released a set of zero tolerance rules against abusive short selling of stock in publicly trades companies. Hopefully, traders will heed the warning and not end up knitting shawls in white collar prison! Even OPEC is sad. Their greed made them reduce their daily output of black gold to increase the price, but it is well under $100/barrel. I guess they haven't figured out that no money = less demand!

Finally, onto Hollywood where America's favorite messed up family is once again in the headlines. No, not for trips to the psych ward, beating up paparazzi, or being pregnant at 16! This time, Mama Spears is pimping out her family's drama to sell her new book about parenting & fame. As if enough of your dirty laundry is not already out there, you have to go and do this? I just want to thank my family at this point for being "normal." It means the world to me!

Oh "BIG BROTHER", Where Art Thou?

I may no longer be a man of constant sorrow; not after the watchful eye of Big Brother has taken over. I'm sure you have heard, since it is all the rage, the government seized control of the mortgage giants, Fannie Mae & Freddie Mac. Seized is such an ugly word, but let's face it, this is down right, run 'em through the mud, dirty! Let's review how it all went down, shall we? First, a little over a year ago, banks started dropping like flies. Then, investors only wanted Fannie & Freddie backed loans. Next, foreclosures started multiplying to historic levels. Then, Fannie & Freddie found themselves in the precarious situation of having way more debts than assets. Finally, the government stepped in, took control of all their assets, kicked the CEOs to the curb, caused shareholders to loose most of their investments and barred the firms from lobbying in Congress! Whew. Are you as spent as I am? It is all practically dizzying!

The Libertarian part of me keeps repeating, "How is this disturbing? Let me count the ways." 1. The government just seized control of the 2 largest mortgage lenders in the country! Need I say more? 2. The government now owns more than half of all US mortgages; maybe even yours! 3. The tax payers will end up paying a hefty price for this seizure, no matter what they say. 4. Fannie & Freddie shareholders were left in the dust. Let's hope it wasn't their retirement! 5. It's 2008, so why does it feel like 1984?

As I said, this is the Libertarian part of me. There is also this little mortgage banker voice that keeps screaming, "Is this the way out? I think I can see sunlight!" To everything, there is a reason, and the government had lots of them when they decided to take over. First and foremost, they were completely terrified of the mortgage giants collapsing. You think it is tough out there now? That would have been down right depressing. I guarantee you would have seen make-shift "Hooverville's" again. Also, they felt compelled to stop the bleeding in the market, and my wallet. The word on the street is this take over is going to lower 30 year fixed rates by almost a full point, leading to the rebound of the housing market! Can I get an Amen! Clearly, I smell a refinance boom! And here's the skinny. The more quickly the housing market rebounds, the less impact this whole take over will have on tax payers. So, here's the deal. We all need to get off our duffs and make this happen! With a quickness!! Never before has my mantra of "It will be if we believe," meant more!

Even though it doesn't seem like it, there are other items in the news today. As was expected, the markets have gone on quite a little rally today! Investors are feeling great and believe the new government mortgage presence will lead to a broad economic recovery. The global markets are also increasing, and much more confident about their US mortgage investments. Also, OPEC is at it again. With oil dropping from $147 to $109, Iran & Libya think there is just too much oil in the global markets. As a result, they want to cut production. Apparently, it is making them poor at $109/barrel, even though it was never that high until a year ago! Luckily, the Saudis have to approve reducing output and they are saying nothing needs to be done until oil reaches a floor of $80/barrel. Thank goodness. As a side note, I had a globe as a child that my dad would spin, point to a country and ask me for its capital. Fun game, I know. Anyway, during our issues with Libya in the early 80's, I blacked it out in pen. If they mess with oil production, I just may have to get out that globe again. After all, there is no need to be greedy, but this incident points out there plenty of need to have the US be Energy Independent.

Finally, onto Hollywood where Ms. Britney Jean Spears has officially proven you can have a comeback. One year after her disastrous, and quite embarrassing, performance at the MTV Video Music Awards, she took the stage looking poised and beautiful. She even took home 3 awards. Thank goodness for conservanship! Heading back to the East Coast, it is a story about the good, the bad, and the ugly! Serena Williams was all good as she won the US Open Tennis Championship and took over the #1 ranking in the world. Congratulations! But, unfortunately, there is no joy in Beantown, for the mighty Brady has been hurt! Yes, the bad and the ugly go out to Tom, who is out for the season with a torn ACL. We all wish him a speedy recovery!

Hanna...meet Oprah's Mama

Apologies to all of our loyal readers! We’ve been slow in coming back since the Labor Day holiday. The good news…nothing major has happened in the world except for a few annoying weather systems that are coming straight for us! Yikes! Yes it looks like Hanna will be making her appearance on the Outer Banks as soon as Saturday morning. At present she’s a Cat 1 which is about the equivalent of our typical Nor’ Easters. Of course the media will play it up with photos of random Outer Bankers fighting over ply wood and nails at the Home Depot! In fact, I saw Channel 13 at the Avalon Pier just last night. They were begging me for an interview but I told them they had to go through my publicist. That’s Emily by the way. So far no calls. My father in-law works for Noaa so I feel like I could be a good source of information on the upcoming storm. My take…I’ll finally get a nice rainy Saturday to be lazy and do exactly nothing. Works for me.

In other news, the markets are down this morning. Jobless claims rose (up 15,000) for the first time in three weeks. Currently the number of unemployed workers stands at 444,000. That’s up from the same time last year when 320,000 workers were without jobs. Analysts aren’t sure what caused the jump. Um…ok. I know I’m not officially “anyone” but it was just Labor Day and I would imagine that a lot of seasonal workers lost their jobs or went back to their home countries. Just an educated guess. Following that story, the private sector cut 33,000 jobs in August. Hardest hit were the construction and manufacturing sectors. The Service Sector on the other hand is reporting a growth spurt from 49.2% to 50.6 in July. Anything over 50 signals growth. Well that’s some good news!

Economists were expecting better “Back to School” numbers in the way of Retail Sales. The only retailer showing positive growth was Wal-Mart. Good ole Wally World! People buy where they can afford to buy. Does this shock anyone? Toll Brothers reported a Q3 loss but said they feel that the economy is stabilizing. Q3 saw their biggest decrease in clients cancelling their home building contracts in two years. They also noted that they are seeing an increase in the amount of deposit monies being given when contracts are written. Right….that’s the way the system should work. People who can’t afford homes shouldn’t buy them. People who can put down money shouldn’t buy them. It’s back to the old school way of doing business. Toll Bros also indicated that they feel the market will come back in full swing when the foreclosure market has been depleted. Agreed.

I’m skipping the RNC because I don’t feel we should get caught up in political rhetoric. Translation….I’m not into smoke and mirrors on either side. So it’s on to Hollywood where smoke and mirrors rule the world! David Spade may be a Baby Daddy! Seems he had “relations” with a Playboy model and…pop…out came a baby! No word yet on the paternity test. Mackenzie Phillips was arrested last week for cocaine and heroin possession. You’ll remember her from “One Day at a Time.” Very sad what’s happening to these childhood stars! Oprah’s Mama is in financial trouble! Seems she’s been doing some shopping to the tune of $155,547.31! Yup! She allegedly owes a Wisconsin boutique for various purchases. Her Mama hired a team of three lawyers to defend her against the claim. She shoulda just hired Oprah to pay that jam! Have a great day!