The Economy: Good News If It Weren't So Bad

It’s sort of fun to read business news these days. On one page of this week’s “BusinessWeek” we’re told that the coming recovery is going to be soon—and it will meet our most optimistic projections and hopes—up, up and away!
A few pages on and we are told that the housing market is unlikely to recover anytime soon. A third of all mortgages are still underwater (the homeowner owes more than he can sell for). We are further told that this number will probably keep rising.
Furthermore, we learn, banks are becoming less and less willing to accept short sales. This means that your bank (or mortgage holder) is beginning to refuse to forgive the amount you still owe when you sell. Since around 15% of all sales have been short sales, that’s a significant change.
Banks increasingly demand promissory notes (IOUs that say you still owe the money you couldn’t get out of the house) or even cash up front. Distressed buyers certainly cannot manage that. Banks are in some cases making the short sale market go away by taking months longer to give a decision.
After four months or more the prospective buyer is very likely to walk away. This leaves the beleaguered (often unemployed or under employed) owner with no choice but to hang on as he misses more and more payments, owes more and more back taxes.
That can add up quickly—as he teeters closer to foreclosure and possible bankruptcy. As the article points out, in days when banks couldn’t meet payroll, they took any money they could get. Now that things are a bit better, they want their full pound of flesh. (To add to all the money the government gave them?)
Another article tells me that airlines are in much better shape. They are making pots of gold by charging for pillows, luggage, food, use of certain credit cards and check in service. Another bit says TV execs are getting worried that we’re changing channels because commercials start before we’re hooked. They might double the time until the first commercial—from 8 to 15 minutes.
The President of Brazil (whose country is doing very nicely right now) faults US banks for having “no parameters on leveraging loans”. He says our banks were, in effect, lending money out that they didn’t have. But Mergers and Acquisitions are back (those guys haven’t been working much for a year). That makes a lot of people happy.
The stock market is booming. The DOW got so excited over new merger activity that it shot up 124 points in a day late in September. A law professor writes a column in which he points out that the market came back 90% after the Crash of ’29. (Spring 1930)
He could have gone on to mention that three years later, our GNP was down 50% and our entire banking sector had flat lined. Several prominent fund managers are quoted as saying that the market today is overdue for a “correction”. Read: down, down, down.
But a small electronics chain has done well by leaping into the gap left by the bankruptcy of Circuit City last winter. Oh, and another article assures us the nation of Turkey is doing much better handling this recession than it did the last few.
It’s like flying without an altimeter. Are we upside up or upside down? I keep remembering an old frontier ballad that contained the line, “Sun so hot I froze to death.” In any case, don’t cry, Suzanna—I come from New York City with my broker’s chit on my knee.