ABC News: More Americans Finding 'Fund My Mutual Fund' Blog and Discovering the Truth

Ok, that's not really the headline but it should be after seeing this news blip... boy, this list of items is like a whose who of topics we discuss monthly.

Unfortunately this data does not synthesize well with Wall Street's "6 more months to go and we're good!" theory, but "they" have been espousing that "6 month" theory for over a year now. Perhaps as more Wall Streeters hit the cold pavement out of work, they can relay back to their peers what the "real world" is like. Unlike Mr. Cramer, who thinks an avalanche of people are out there ready to put 20% down, and snap up homes with the new and sexy 4.5% (or lower) 30 year mortgage loans coming down the pike; I'd like to argue for a middle class that has been eviscerated of savings the past decade, stuck in non secure jobs (hey that makes US industry 'flexible!'), with median wages which have not kept up (more profits for those at the top! I mean if CEO's don't get 250x the average worker pay how will we retain the 'best and brightest'?) and without the house ATM Ponzi scheme.... said consumer has years of savings to rebuild... slowly. Or the alternative view is Uncle Ben will cause everyone to dip into their savings with his low interest rates. Wait... savings... or lack thereof.... that's the whole problem.

I really don't think the upper 1% get what's been happening in the hinterlands as they've enjoyed the fruits of the 2nd Gilded Age ... [Do the Bottom 80% of Americans Stand a Chance?]

• Across the country's kitchen tables, this recession is written in cutbacks, layoffs -- and pure worry. Job insecurity is at its worst in 33 years of polls; holiday spending plans, their worst in data back 23 years. Americans report cuts in work hours and pay, and concerns about making the rent or mortgage, heating the house, paying for retirement. In all, it's an extraordinary loss of confidence -- with repercussions in families across economic and political lines.
• Sixty-three percent in this ABC News/Washington Post poll now think the country is in a "long-term economic decline," (FMMF readers!) up from 49 percent 10 months ago; just a third say the economic system is still "basically pretty solid." (this third does not live in Michigan, Ohio, Indiana, California, Florida, Nevada, or Arizona)
• And while economic distress tends to be greatest among lower-income Americans, the biggest increase in views of a long-term decline has been among the better-off, who have been hammered by the stock market. (well 10 years of a zombie stock market, followed by loss of "paper wealth" via home equity gains will do that to the "better-off"; at least most still have decent jobs unlike those lower-income folk who never have enough to be in the stock market in the first place, or have a home unless its with a predatory loan. They are too busy praying they don't get sick so they won't go bankrupt. But not a problem - cut tax rates for the upper 2% - that solves everything - I heard it all summer and fall; must be true - worked like a dream the past 6 years)
• An identical 63 percent say they themselves have been hurt financially by this recession, 10 points higher than the damage in the recession of 1990-91. (hmm, strange since most pundits denied a recession up until September - so these 63% of Americans have been hurt by the NON recession - the next year is when the recession will hurt them) Three in 10 say they've been hurt "a great deal," double what it was just after that recession 17 years ago. (I'm not making light of it, I'm just shaking my head at these "thesis" on Wall Street; apparently they do not talk to the plumbers that come and fix the toilet their $2.8M apartments and ask how thing's are going out there)
• Two-thirds of Americans are worried about maintaining their standard of living, up from 51 percent a year ago -- nearly a 30 percent increase. (std of living - it's going down - global forces and your government - which is "saving you" - are going to make sure of that. Hey, Mr. 65+ year old - wanna know what you can get on CD rates now with the Greenspan/Bernanke tag team fiddling with rates below 1% twice in 5 years? Answer: your losing purchasing power by the day)

On the job front

• For many, these worries are more than theoretical: Twenty-seven percent -- more than one in four -- say they or someone in their household have had their pay or work hours cut in the last few months.
  
• Eighteen percent, nearly one in five, say someone in their household has lost a job lately.

So let me get this straight - you are saying in your "random" study - you found 27% of people are or know of someone who is underemployed, and 18% has someone in their household who has lost a job. Hmm, that is so starkly below what the government reporting says. [Nov 7: October's Unemployment Rate is Rises to "6.5%"] Surely your "random" statistics must of just been focused on Ohio, Michigan, Rhode Island, and California - otherwise these numbers are vastly overstating the damage out there. The government statistics point a much rosier story - something must be amiss. I am guessing the ABC reporting must be "off"; I mean I've read on a few blogs that the truth is more like 1 in 5 people are underemployed and unemployment is closer to 15% if you use the methodology the government used to employ before the 1990s; but I call those bloggers wackos. ;) (note to self: hi wacko)

Onto the stock market

• Far more, 51 percent, say they've been hurt in the stock market rout -- up from 43 percent just two months ago and more than half for the first time in ABC/Post polls dating to 1987. That soars to two-thirds of higher-income adults, who are more apt to have stock investments. (yes, Average Joe laying pipe generally is not making enough dough to lose 50% with such sound investments as Citigroup - oops, did I say 50%?)

Retirement?

• And less than half of Americans, 46 percent, are confident they'll have enough money to retire, down from a high of 69 percent three years ago. (this one will get far worse - a country of non savers who lack discipline to save for 5 years out, not to mention 30 years out, ripped of pensions their parents enjoyed and facing "401k matching freezes" every time the economy falters... combined with people trying to do the right thing but facing a stock market that has fleeced them twice in 1 decade.... well you get the picture. That's one of the long term emergencies facing the nation - but we don't even bother talking about it much since we have short term fires to face every week. In 10 years as waves of people are unable to retire, the myth of what a great idea 401ks are will be shown - much too late for a few generations) [Sep 1: Laboring Longer is a Growing Trend for Americans]

So let's review - not only do you not have job security, and companies have moved from pensions to 401ks to relive themselves from obligations, but the top honchos have increased their share of profits at levels not seen since the 1920s. Dear worker on the other hand, get the 3% salary increase as reward (3.5% if you're performance review is awesome!) Granted much of that annual bump goes to higher health care premiums but not to worry - you can make it up in the stock market. (or by flipping homes) And in return for this, the sheep of the nation will be forced to work til they drop as Walmart and Home Depot greeters - but it's all in the name of "flexibility" of our economic engine. (i.e. the flexibility to move much production offshore) The engine that has transformed us to a service based economy while offshoring many jobs that actually built a middle class. (darn those unions - it is ALL their fault) Yep - this flexibility has been working out great for all involved. Well at least shareholders and CEOs. Ok, not so much for shareholders... but at least the CEOs. Dogma rules. [Feb 18: Economic Woes Reveal a Long-Felt Unease & Denmark is the Happiest Place on Earth?] One year people are going to wake up to this all, and a heck of a backlash shall ensue. Until then, "baaaah".

• Among people who are currently employed, 21 percent -- one in five -- are worried about getting laid off -- nearly double what it was a year ago, and the most in polls dating back to 1975.
  
• If they were to get laid off, moreover, nearly half, 47 percent, think it's unlikely they could find another job as good

How about beyond jobs?

• Fifty-three percent are concerned about being able to afford health care for themselves or a family member; a third are "very" worried. And it rises to 75 percent among lower-income Americans; a majority in this group is very worried. (Fox News tell me the nearly 40% of Americans who lack healthcare insurance just don't work hard enough to deserve it, so spare me the pity - work harder!)
• Nearly four in 10 Americans, 36 percent, are concerned about being able to heat their homes this winter -- 28 percent of men, but 44 percent of women, and soaring to 68 percent of the lowest-income Americans. (this is something we talked about this summer [Jun 24: IBD - Heating, Electricity Rates Rising as Natural Gas Surges] - but not to worry, as gasoline drops from $4 to $1.65, people will be snapping up homes; just not heating them)

There's more in the ABC story but you get the picture... granted I live in a state with a 5 year recession so I'm biased with my gloom and doom. Apparently so are many in this study (Phil Gramm just called to repeat, it's all in their head) But it appears most of the punditry with their claims of imminent recovery and government saving us all, needs to go spend some time among those 2-3 income brackets lower (or at least talk to someone in the sub $60K salary crowd) to see what's really going on out there among the unwashed masses. For all the aspirational spending of the Coach(COH)/Whole Food Markets (WFMI) crowd - until there is health in the JCPenney (JCP)/Walmart (WMT) crowd - you don't have a national return to good times. There is no "economic bliss" in 6 months [The Economic "Recovery"] - this is brought to you by the same population espousing the "stimulus rebate" of spring 2008 which (they promise) would turbocharge the economy and fill our malls and home builder lots with eager spenders. That didn't quite work out....

So, to summarize, the Federal Reserve has deemed they will expunge all savers from our economy (including those "work til they drop" retirees trying to get a darn return on a CD over and above inflation rates) as cash is "trash". Although many are exhausting savings, the thesis is we'll dip into our (non) savings to return to a spendthrift culture soon enough since money will be free. Sounds (cough) reasonable. I, on the other hand, would like to propose far out solutions like actual job creation in industries that create products or goods that others in the world actually demand will pay for. That would help replenish savings without layers of more debt. Hmmm - open question is where or what are those industries....

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On a related note - I saw this video on Yahoo Tech Ticker Friday - Gary Shilling was one of the few out there to actually forecast much of this mess. Even more impressive to me, is his investment predictions for 2008 were so dead on - even making calls like go long the dollar and US bonds. Which were counter intuitive to what the rest of us who were fearing the economic storm were thinking (long the US dollar?!) Granted "short commodities" did not work out the first half of the year but anyone with the steel stomach to sit through oil jumping to $147 actually made out in a very short amount of time. (things tend to fall in the market much quicker than they rise!)

I am bringing this video here because he pretty much sums of my thoughts on the current... and future, in a much more polished manner - it's about a 5 minute video. We both agree: 2009 will be a make or break year for the government's interventions. Again, anyone saying they "know" how this magic experiment will turn out is lying, since we have no true precedent to rely on... should be another fascinating year.



He also believes, like I, that a "forced frugality" shall sweep the land; I think what people have to get their minds around is we are going to take years to get back to a normalized consumption pattern. And normalized is going to feel very different than what we just, collectively, did.