Stop Drinking the Kool-Aid

The following blog post was written after to my departure from the Betty Ford Health Center and prior to my excursion into Mexico.

If you are an adult and reading this, then you should know better than to drink Kool-Aid

Kool-Aid is a colored sugar that flavors water. In fact, Kool-Aid is a sweetener. It makes something bland taste better, and it becomes a magical drink for little kids. I know it was for me. For adults, it's unhealthy even though it still tastes good and if I refuse to think about the consequences of its effects, I might just like drinking. But I want to think about how the effects of this sugar, with food-coloring added, ruins my health in favor of water or even Gatorade.

Now, why do we say, "Stop Drinking the Kool-Aid" as a metaphor? Is it because Jim Jones placed poison within Kool-Aid during the late 1970s to kill a bunch of cult followers who could not think for themselves? Yes, that's one reason. The other reason is because it is a metaphor for not wanting to face up to the truth.

I have been trying to write about financial truth for the past couple of years, but I'm going on hiatus. I can't drink the Kool-Aid anymore--I'm too old--and I have to leave Washington, D.C. for awhile to see the world for myself. I'm going to cross the border into Mexico.

Some Wall Street salesmen who would, of course, call me "negative," stand up on Bloomberg Television to tell us the stock market is not overpriced, unemployment is improving because 65,000 people have more McDonald's jobs and the economy in general is slowly improving.

Recently in New York City, I realized that "You Can't Fight City Hall." It is true, and I give up.

Like economist David Rosenberg said a few months ago, it's not that I don't see a huge stock market crash within the next year or two but I'm just tired of waiting for it.

The Treasury Department (Timmay) pressured the Financial Accounting Standards Board (FASB) into changing mark-to-market rules so that banks do not have to write-off or write-down billions of dollars of residential and commercial real estate loans, not to mention consumer and corporate debt, so that they can receive billions of dollars in taxpayers money and hike up fees on taxpayers if they do not make their credit card payments each month.

They receive that money from Federal Reserve Chair Ben Bernanke, who first tells 60 Minutes that the Fed can print money and then, in his second interview, tells the viewing public--taxpayers--that he does not print up money. He said the subprime market was contained.

CEOs of major Wall Street investment banks lied to shareholders weeks, even days, before their values plummeted because they swindled investors by mixing subprime loans and prime loans and paid a rating agency to say they were all AAA loans. The Securities and Exchange Commission finds Goldman Sachs guilty of fraud and they pay a fine in taxpayer money.

The Federal Reserve pushes cheap debt to banks--taxpayer money--to large banks and they invest it into the stock market. Traders make money, Wall Street CEOs make money--our taxpayer money--and we look at the stock market as the President says the economy is improving.

My next door neighbor needs to sell his home and others are barely surviving on low-paying part-time jobs or no jobs at all. And, it's not like they are stupid or incapable of working. But, when a company owner is uncertain about an economy fueled by printed money, they are not going to hire anyone full time. So now, we have more than 16 percent of part-time workers who are frustrated that they are cannot get a full-time job. We also have people who dropped out of the labor force. We have people who are getting first-time unemployment, and it is increasing.

We have people like myself living in a home and not making any payments on my mortgage because laws prevent mortgage companies from foreclosing on me. As I move to Europe and lock up my home, it will sit, prices will remain stagnant and they will eventually fall once the bank forecloses on all the "modified" homes in the neighborhood.

When the neighborhood falls, residential prices drop and so does commercial real estate. And, when we fall into a double-dip recession, we might finally say, "A-ha, so it was a depression. That's what it felt like."

Of course it's a depression. We never made it out of the 1970s because after Jim Jones passed around the Kool-Aid in Guyana, the Federal Reserve borrowed in the name of USA and added debt to this country that lowered unemployed and boosted the stock market until it crashed in 1987. S&Ls borrowed to build commercial real estate until it was so overbuilt that it caused a recession and those materialistic 1980s were done.

Reagan said, "Just Say No" and everything in life would be great. Really? I don't think so. It was more like make as much money as possible and everything would be great. A reunion concert meant rock stars sold out, just like the baby boomers thought money can buy love.

With Bill Clinton, we thought we might have that liberal who would bring us back to thinking of ourselves as human beings rather than walking moneymakers serving the ruling class, or people who had alot of money thanks to multi-national corporations moving overseas.

But, no. Clinton--with Larry Summers, Robert Rubin, Alan Greenspan and all of those Republicans in Democrat clothing--founded financial engineering that churned capital into computers, personal computers, and start-up Internet companies that quickly went bust.

Then, in response to the President's blow-job in the White House, Congress repealed the Glass-Steagall Act and then, after a questionable election, we got George W. Bush and deregulation.

By then, baby boomers and their spoiled, self-centered kids brought the US into the age of narcissism, adding reality television to mix. At this point, we literally gave $1 million to the biggest a-hole on an island. We continue to reward bad behavior in sports, media and politics because it is really only about big-screen televisions, 24/7 access to information and lost in a sea of subtlety that we cannot even sit in quiet and think for ourselves.

So now, after I drank the Kool-Aid one last time with Barack Obama and really thought he was change I could count on, we continue to feed the Wall Street beast and listen to early stories about how Osama Bin Laden used his wife as a human shield before getting shot because it's exactly what we want to hear. Only, it's so good that they can't keep up the propaganda.

I grew up in a world where I thought propaganda started and ended with the Pravda and when they tore down the wall, I thought propaganda was gone. But, of course, spin substituted for propaganda and now it runs rampant in the U.S.

Propaganda, generally lies presented to the U.S. to make the nation looks better, is alive and well and stronger than ever. And, I'm tired of fighting it. I want to enjoy what is left of my life.

So, as I write this and finish my fifth of scotch, I will finish off my joint and take a temporary break from the hell I've been living in for the past few years trying to push the truth in the financial markets.

Go ahead, America, and listen to the salesmen on Wall Street's trading floors, and the well-dressed salesmen and saleswomen in Washington, D.C. because they sell what most of us in this boring, mediocre society crave for--fantasy.

We do not live in reality. Our agenda is greed and fear. Greed for anything and fear that we might not get it for ourselves. We are spoiled, self-centered children who need to express our views to everyone on the planet because nobody in our workplace wants to hear it--or read it. The million-dollar, or billion-dollar CEO doesn't want to hear it.

The President doesn't want to hear it. Congress doesn't want to hear it. Even consumer groups do not want to necessarily hear what 16 percent and more of the people want to say--let's help the people live in decent housing, get decent healthcare and take the pressure off the USA.

Frankly, I'm tired of feeling like Atlas, lifting the world in my little, insignificant job, so I can help produce a profit for my billion-dollar CEO. I'm tired of seeing other people pay their mortgages while I sit and pay nothing to live in my home. I'm tired of seeing banks lose paperwork because they only care about profit. And, I'm tired of U.S./multinational companies move outside the country and hire cheap labor so that they can make a profit at our expense.

We're paying for this. We pay more money in gas so speculators can make money; we pay so the U.S. can go into trillions of dollars in debt to give the illusion that we are in an economic recovery.

We earn our little salaries--those of us who have jobs--in little cubicles or offices as our supervisors monitor the mundane, daily work we have been doing for the past years, trying to build a 401K and hold onto health benefits. It's a rat race and, frankly, it's no fun.

So, I'm going to Mexico--leaving urban U.S. for awhile--because I want to see firsthand how real people live. You know, the people not in virtual, 3-D world, zoned out on reality television shows so that they can feel better about ourselves.

To all my readers, Hasta la vista, baby.

When Will It All Hit the Fan?

From the title of the post, you either think this will be about the NFL lockout. Well, it's not. It's about "extend and pretend," "kick-the-can" and the next bubble burst.

But, before I get to that, some followers of my blog ask me if I'm still doing it? I'll admit, in the past four months I have been in hibernation and stepped out briefly to realize there will be six more weeks of winter.

I'm stepping out today, President's Day, because I'm not working today, which allows me time to write a frivolous blog entry (even though I do need to keep working on my book as well), and I just need to put things in perspective for myself and others. I don't get paid for this and I'm working on a book, so this blog is not my top priority. That said, a few things to point out--most importantly, we're on borrowed time.

First, we have a divisive Congress that can't agree on the best place to get their shirts cleaned much less diving into a trillion-plus deficit and slashing social security, medicare and defense. Don't expect any budget slashing this year, a likely threat to shutdown the Federal government indefinitely, which will not happen because Repulicans don't want a repeat of 1995, and don't expect the Federal Reserve to pull back on Quantitative Easing measures, part deux.

Make no mistake, this economy is run by the Federal Reserve, for the Federal Reserve, and in Ben Bernanke we need to trust. All I can say is, if we have to trust a guy who says the Fed prints money in one 60 Minutes interview with Scott Pelley and then says it does not print money in another interview with the same Scott Pelley on the same program only a couple of years later, then we might want to question the character of people we trust in this world.

GDP is up, we're not in recession, because the Federal Reserve provides the capital to produce inventories and general growth. Here's the problem--unemployment shows no signs of abating. That means either more consumer debt, less consumer spending or both.

Housing prices continue to fall in most areas, meaning banks remain insolvent.

Commercial real estate values are stable but, depending on particular market economies, housing foreclosures and shadow inventories, as well as Borders' recent bankruptcy, that sector of the economy has a long way toward recovery. Office will not likely expand until unemployment declines, retail will not recover until consumers begin to really spend again and housing regains its footing, only business travelers are staying at hotels on a normalized basis and apartment properties are showing momentum.

Still, refinance activity of $1 trillion in CRE within the next two years remains a challenge without all the financial markets--banks, commercial mortgage-backed securities and pension funds running at full steam.

State and local governments continue to slash budgets, going after teacher pension funds in Wisconsin, with other states likely to follow. Peaceful protests in Wisconsin could sprawl throughout the country this year. But, either way, those budgets need cutting and that means higher unemployment numbers if private business does not higher.

The stock market value, now in the low 12,000 range, is just ridiculous. Remember the Internet bubble and the "New Economy?" Remember 14,000-plus when the economy overheated on housing-wealth from investment banker to borrower? Now, 12,000-plus on companies profiting from layoffs, budget cuts, debt reductions and no hiring. No extra employees, no extra benefit costs, no extra overhead and telecommuting becomes more popular for consultants and part-time workers. So, are these companies really valued properly? How long will it last?

Outside of the U.S., Egyptian protests overturned a dictator who kept peace between Egypt and Israel and kept trade open with its partners. But, with any global economic upheaval, the people become unhappy with the current regime and want change. Facebook helped spur it on and now the middle east has a series of protests for democracy. Greater uncertainty in the Middle East does not favor markets, democracy or no democracy.

Eastern Asia, China, India and other developing nations are beginning to see inflation rearing its ugly head, which would raise interest rates and increase import costs for other nations, including the United States. Meanwhile, a falling dollar could improve U.S. exports, if the U.S. exported anything. Mostly, they outsource manufacturing for cheaper labor and higher profits.

Once again, there is no solution to the job market-problem in this country.

In Europe, Portugal appears likely to be the next "bail-out nation," following Greece, Ireland and soon-to-be Spain with its 20 percent-plus unemployment level. When does the Euro face collapse? Or, will Germany fall in propping up the Euro and bailing out its fellow EU countries?

CRE worsens in the United Kingdom and, as Paul McCartney once sang, "the pound is falling."

If the U.S. economy was running on its own with all this taking place in the world, I would say we have a long recovery, but we will recover. It still runs on an engine of Fed dollars filtering through capital markets and it will be just a matter of time until the music stops. Who will have a chair to sit on and who will be left standing at the end of this charade.

There will be more bank failures as the country, and the world, continues to deleverage. And, there will be losers out there. My bet for the losers includes the middle class and poor, who were never given a fair chance for opportunity in this recession. The federal government's call on this extraordinarily deep recession was to favor the affluent, the too-big-to-fail banks, Wall Street and special interests with deep pockets. The money, from their way of thinking, I suppose, would "trickle-down" to middle-class and poor folk in terms of jobs and increasing values.

Think again. Trickle-down economics has not worked for the past 30 years, and it will not work this time. All it does is increase deficits, make wealthy people wealthier and poor people poorer.

It also creates booms--and busts. The only question now is--when does the next bust take place? I continue to go with Fall 2011, but I would not be surprised if the big crash, which puts us into a double-dip recession, occurs in November or December 2012, just after the next Presidential election. The only question is whether Bernanke, Tim Geithner and crew can hold off the economic pressures from outside the country as well as those creeping up domestically.

Don't wait too soon. We'll likely know by this summer.

Robert Michaels

Euromoney, Myomoney, We Have No Money

From the Eurozone, which they may start calling "The Twilight Zone," Hamish McRae from The Independent in London, writes:

There will be sovereign defaults in the eurozone, with a default by Greece now inevitable. Ultimately the thing that underpins any country's debts is its ability to raise enough tax to service and eventually repay them. Greece cannot hope to do that. Ireland will be pushed to do so but probably can. I would, however, worry about the long-term credit-worthiness of Portugal, Spain and Italy.

Hamish McRae is the principal economic commentator for The Independent newspaper, but he is also a visiting professor at Lancaster University and a council member of the Royal Economic Society (notice how there's no relation to Harvard University or Goldman Sachs).

McRae has been a financial and business editor for major national newspapers, and has won several awards for his journalistic work. His most recent award was Business and Finance Journalist of the Year in the 2006 British Press Awards.

I just mentioned McRae's biography to let you know this is a very credible source who just said that GREECE WILL GO INTO DEFAULT. That's not in question. Ireland will likely need to take a bailout and, if they do not, will have a problem increasing corporate taxes meaning multi-national corporations will exit and destroy their economy anyway. Portugal, Spain and Italy are all in trouble.

Some analysts say this is nothing new, but that's only because European financial ministers and U.S. leaders realize that everyone is more interested in Bristol Palin going to the finals in "Dancing with the Stars" than anything that has to do with a global economic crisis. For starters, they can understand a person who can't dance can go to the finals, whereas they can't understand that there are other countries in this world other than the U.S.

However, in today's global economy, we are all tied to together and a default in Greece for the U.S. may be analogous to a hangover the next morning. Some brain cells are dead, but we can still function. Only, a European contagion, which is likely to happen if one country goes into default and other PIIGS follow, becomes like a minor stroke. Even though part of the brain no longer functions because of all the dead brain cells, we can still go about our everyday lives with some medication.

The next and final step in a European contagion--London, France, Germany--once those countries have no backstop other than the United States, it's a major stroke and the U.S. cannot function. Finally, with all the Quantitative Easing and spending, we find no money left in our pockets to bail out the Eurozone. The U.S. either goes into default or raises yield on bonds to pay back creditors. Either scenario is bad--like a coma after a major stroke is bad. Like turning off the machines because the patient will have no brain function is bad. At best, interest rates go sky high, few people decide to buy homes, everybody saves money and we move into a recession at least as bad as this one if not worse.

That's how important the Eurozone is to the global financial equation. Let's get something straight--the Fed prints money by purchasing bonds and mortgages, not from the Treasury department but from Goldman Sachs. That money makes Goldman Sachs a profit because they and other banks can purchase mortgages and a lower price and sell them to the Fed at a higher price because THE FED IS BAILING OUT THE BANKS. It's not just TARP. If I could have a penny for every time I've heard "the banks paid back their TARP money," I'd be Goldman Sachs. No, not every bank has paid back TARP but, yes, most have.

Have banks paid back the Temporary Guarantee Liquidity Program that gives them free money? Will the Fed/U.S. ever have those mortgages they bought worth the same amount they paid for them. Probably not unless foreclosed assets can be worth the ridiculously overpriced amount they were worth from 2005 to 2007. Nevertheless, the Fed prints $600 billion after $1.25 trillion to help generate employment; low interest rates to spur the housing market; credit for creditworthy individuals to spend money and other economic events that are not happening.

My guess is that Quantitative Easing II developed when the Fed realized they would need about $600 billion channeled to Goldman Sachs to give to the IMF to bail out Ireland and the rest of the European countries that need bailing. It's in this manner that the Fed channels money to Goldman Sachs and other investment banks to push up stock prices; propel securities markets like the Commercial Mortgage-Backed Securities market and continue to help large banks hold enough capital reserves for all the crappy loans they have.

But, how long can one throw money at a problem and expect it to go away? And, how long can we live in a nation of "Haves" and "Have-Nots" before we funnel the money to create an equitable society based on a normally functioning economic process--not one based on financial engineering from the many graduates of Harvard Business School.

How long will the people of the world be able to cope with a system that calls for long-term unemployment and sluggish economic growth before the next panic sends the stock market plunging towards a proper price/earnings ratio.

The excuse for Ireland to take the bailout was that they may do it to curb panic in the market. Really? You're that confident in the fiscal soundness of your country, but you'll take the bailout just so the markets don't panic. Believe me. They have a reason to panic, and that excuse for taking a bailout is one of the main reasons for their panic.

It's time to come clean. It's not just about insolvency of U.S. banks or Irish banks or state governments or some European countries. This is global insolvency and the more money printed, the less valuable it becomes for all of us.
Only

Throw Money from the (Gravy) Train: An 11-Year History of the Washington Redskins

So, here I am watching Bloomberg Television today and they're talking about how the Washington Redskins were destroyed by the Philadelphia Eagles 59-21 at home on Monday Night Football after Donovan McNabb signed a $78 million, $40 million guaranteed. That makes it a business story and earns its way onto FIN TRUTH.

What I did not find out until later, from Lindsay Czarniak of local news WRC-TV4, is that the Redskins can release McNabb at the end of the season at a cost of $3.75 million. Brandon Lloyd, who did nothing for the Redskins but catch 8 passes in 2 years for $8 million and maybe one touchdown....earned $4 million a year for 4 catches (on average). So, signing McNabb to $3.75 million, a contract already on the table, and "putting to bed" the controversial benching in Detroit, was another great way of throwing money at a problem. Right? Wrong.

As usual, Snyder's idea was the typical businessman solution. Only, football is a game and throwing money at a problem will not solve the actual problem, which is that the Redskins no longer want Donovan McNabb and McNabb probably doesn't want to play for the Redskins after this season. This leaves the Redskins with no decent quarterback prospects for next season. They are basically in the dark on the quarterback position...except for this year. It's definitely Donovan this year.

So, what happened? Well, some coach--Kyle or Mike Shanahan, or both--decided to bench TEAM LEADER and a very good two-minute drill quarterback with 2 minutes left in Detroit and the Redskins down by 6 points. Everybody thinks it's stupid and those who are not sure realize it is when backup Rex Grossman fumbles the ball and it's returned by the Detroit Lions for a touchdown to lose the game. The Redskins might have lost anyway, but it would not have been because of a stupid, emotional decision.

Before, the locker room was not divided at all. Now it's clear the coaching staff was arrogant and/or egotistical in taking out McNabb and humiliating him--the TEAM LEADER. So, it's still not really divided. Right? Wrong.

Bring in Albert Haynesworth, the antagonist who is not a leader but a troublemaker. Sure, everyone was behind Donovan but, now that the coaches acted like the jerks Haynesworth accused them of being, Haynesworth might have some players wondering...players like DeAngelo Hall for starters. "Hey, maybe Albert's right...maybe these guys are just jerks. Look how they treated Donovan." So, during the Bye week, players start wondering if the coaches can be trusted--Is Donovan going to stay with the Redskins beyond this year? If not, what does that mean about next year? Do I have to play for this coach next year? Who will be the quarterback? Some players may stick with the coaches...like Chris Cooley. Others might be in the Haynesworth camp. Then, there's the Donovan camp--he's still the team leader, right?

The point is, there's a game coming up against the Philadelphia Eagles. They just beat the Indianapolis Colts in an authoritative fashion. This is a division game and the Eagles are playing for first place. The Redskins, however, are playing for a second place tie, one game behind first place, a 3-0 division record and a huge step toward a playoff birth--at home on Monday Night Football. They're all competitors; they know what's at stake.

Enter Redskins owner Daniel Snyder, marketing "guru" who has never played a down of real football in his life but whose philosophy, again, is to throw money at a problem to fix it. What Snyder doesn't really understand, because he's a sports fan and not a wise man, is that Winning the Game cures the problem.

If Snyder wants to throw money at Donovan McNabb, take him and his wife out to an elaborate dinner and some ridiculously overpriced steak house; talk about what's going on one-on-one; and, if Donovan wants to leave at the end of the year, that's okay, too. Just let him know he's appreciated and respected as a player and a person.

But, that's not the way Snyder does it. For the past 11 years, Daniel Snyder has thrown money at a problem, just certain he knows the answer. As Michael Wilbon wrote Tuesday in the Washington Post, names like Deion Sanders, Adam Archuleta, Dana Stubblefield (actuall, I think he was before Snyder's time), Bruce Smith (who could barely make a sack before he earned the overall sack record), Brandon Lloyd (now the top NFL receiver with Denver), Antwaan Randle-El, Albert "malcontent" Haynesworth, Jeff George (who pissed off future Super Bowl quarterback Brad Johnson) and the list goes on with Mark Brunell, etc., etc.

Will guys like Snyder ever learn that these athletes who are worth their weight don't care about money--they care about championships. They have plenty of money. Those who don't care about championships but care about money come to the Redskins.

Take, for example, LeBron James. Cleveland Cavaliers owner Daniel Gilbert, who made a fortune with Quicken Loans, wanted to become an NBA owner and bring the Cleveland Cavaliers to a championship. He got LeBron James and, in the NBA, that can just about do it. Only, even LeBron still needed one or two players more to complete the goal. So, when his contract was up and Gilbert threw all the money in the world at LeBron, he chose the Miami Heat. Why? Because he knew he could win a championship with the Miami Heat. Why do you think everyone wants to play for Phil Jackson, Kobe Bryant and the Los Angeles Lakers? Then, the question is: Is this player good enough to play for us? Not, how much can we give this guy to play for us.

LeBron James chose a potential NBA Championship ring over money, and that's the right choice. That's the noble choice. It showed character. What does Gilbert do? He tries to disgrace James by saying James turned against the city of Cleveland. Gilbert, of course, was acting like a spoiled loser, showed no character at all and just could not understand that throwing money at LeBron could not actually keep him in Cleveland.

Gilbert and Snyder are cut from the same cloth. Money will get them anything they want...until it doesn't. And, how do they react?

Well, back to the McNabb soap opera. After two weeks of waiting to see how Donovan and the Washington Redskins respond following the McNabb benching, the Redskins announce--unexpectedly--that Donovan McNabb has extended his contract for 5 years, $78 million, really $40 million, blah, blah, blah...and we walk into the stadium under the assumption that this contract means he's our quarterback ("we" meaning the fans).

Only, the team shows up as if they just don't want to be there. The first quarter, this fired up Philadelphia team walks onto the field and pounds another team that gave almost no effort, no fight, no physical football that we saw in first eight games. This was a team that did not feel like playing on Monday Night Football against a division opponent. Would they have been ready to play without this huge contract announcement? Perhaps.

But one thing we must now assume is that the players knew the entire contract announcement was all bullshit. They mush have known that all this means is that McNabb will play in Washington for at least the remainder of this season. That's it. For all we know, Snyder and McNabb agreed to this in an effort to put everything behind them. So now, the team must wonder--Is this the last season here for Donovan? Is Albert right about this organization? Is this the same old crap we've seen here for 11 years? Am I just playing for lousy organization with a horrible owner who tries to buy players and market it for his own "sport" rather than focusing solely on winning championships? And, all this time, a game is about to start against an extremely talented and physical division opponent.

The Redskins were not ready. The team gave a lackluster effort. The season looks over.

And, all this, because Snyder just can't help but interfere in the only way he knows how to interfere--money and marketing. Only, the fans want a championship; the players want a championship--except for Haynesworth who wants off of this team and the same is probably true of TEAM LEADER Donovan McNabb.

So, the season is probably over. As I said before, WINNING is what cures team chemistry problems in the NFL and not money. In fact, money causes team chemistry problems if it does anything at all. Ever see New England overpay players based on getting benched or in the hopes they will perform.

If the Redskins beat Tennessee this weekend, then perhaps all is not lost for the season. If they lose a close one, at least they have a shot. However, another blowout loss and this team has stopped playing for Mike Shanahan and, as usual, for marketing "guru" Dan Snyder.

Tight Credit Blocks Holiday Season Kick Off

Yesterday’s unemployment figures reflect today’s consumer sentiment and tomorrow's announcement will not likely help matters.

The monthly RBC Consumer Outlook Index showed 46 percent of Americans plan to spend less this year than last year on holiday shopping, while 8 percent plan to spend nothing at all. What does this mean for retailers and retail property?

Half of families with children at home plan to spend less, with an additional 6 percent of these families planning to spend nothing at all, RBC reported. Meanwhile, 7 percent of Americans and 9 percent of families with children expect to spend more this holiday season.

Before this week’s midterm elections, consumers who believe the country is headed in the right direction slipped to 35 percent, down from 37 percent in October, and the number who believe the country is on the wrong track edged up two points, to 65 percent.

Nearly 70 percent of Americans think the U.S. economy and their own financial situation will stay the same or worsen over the coming year, RBC reported

"Even in the face of soft consumer confidence, spending accelerated in the third quarter. This disconnect will have to be resolved, and the first real test is upon us with the beginning of the holiday shopping season," said Marc Harris, co-head of global research at RBC Capital Markets. "If it turns out that the spending last quarter was simply the result of pent-up demand and consumers are returning to frugality just in time for the holidays, this will not come as good news for retailers."

Let’s face it, millions of Americans don’t have a job and millions more only have part-time work. There were not many raises or bonuses this year except on Wall Street (see the 7 percent/9 percent of consumers who plan to spend more).

The holiday season, primarily Christmas and Hanukkah, reflects the most important time of year for retailers. It represents nearly 75 percent of all revenue during the year. Without that revenue—and unemployment stagnant for the next 18 to 36 months—retailers will have greater difficulty holding up from 2011 to 2014, much less have any hopes of paying their leases.

The good news, if you want to call it that, is that Fed “fun” money can cycle through the stock market, boost values and make it look like these companies are actually worth something. A higher stock for Radio Shack means it might be able to cash some money out and pay the rent for another year.

Now, just imagine you’re the Fed buying $600 billion in bonds, you spend $1.25 trillion to purchase Fannie/Freddie mortgage-backed securities and overall debt is in the double-digit trillions of dollars. That’s like someone who earns $50,000 a year in debt for $1 million. And, don't forget the ongoing Temporary Guarantee Liquidity Program.

How, exactly, do you pay that back in your lifetime without going bankrupt—or at least in default? And, what happens to the creditors that lent the money and get nothing in return? This is the future we face as a globally connected financial system.

But this is only one part—consumer spending in the United States and its impact on retail. Let’s not forget consumer spending and how it affects industrial properties, warehouses, shipments and storage. What happens to UPS, Fedex and the postal system?

Meanwhile, consumers spend on the necessities—food, shelter (mortgage or rent) and clothing. For that reason, Walmart, Target and Kohl’s remain best bets for retail. Also, since nobody can live without a cell phone in this world or a television for that matter, the Best Buy will always survive at a certain level. I would also give Macy’s a pass.

But, say goodbye to specialty retailers in any city other than Washington, D.C.; New York City and, perhaps, Chicago, Los Angeles and Dallas.

Gateway cities survive, but insolvency continues to spread throughout regions of the country where consumers plan to rein in spending.

Robert Michaels

Legacy Pursuits

In his first stint as the Washington Redskins head coach, Joe Gibbs never settled for anything less than excellence--or, in other words, a Super Bowl title. Anything less, was unsatisfactory.

The goal of winning a Super Bowl is a noble one--for a city, for its people and for a future Hall of Fame coach. Hence, a legacy for a Hall of Fame head football coach.

His next goal was to form a championship NASCAR racing team and, again, he succeeded. Again, a legacy in the racing world.

When Gibbs returned to the Washington Redskins as a Hall of Fame coach, however, his goal was to help his son become an NFL coach and to improve the Washington Redskins and bring them back to the glory years. Meanwhile, he was earning $5 million per year above his NASCAR royalties.

Actually, I'm not exactly sure why Joe Gibbs returned to the NFL but, after hiring Al Saunders as offensive coordinator in 2006, I'm not sure his goal was about winning a Super Bowl anymore.

That said, Washington Redskins fans will always remember the great Super Bowl teams during the first Gibbs era--his true legacy to Washington, D.C. and its fanbase.

These types of individuals, men and women who cannot be satisfied with themselves unless they achieve their ultimate goal to better others as well as themselves--to me--are a dying breed. Unless, of course, the goal is simply money, power and fame.

Take, for example, Angelo Mozilo, former CEO of Countrywide. This man is the "poster child" for a subprime crisis that sent the United States spiraling into another Great Depression (yes, I said Great Depression) and cost millions of people their jobs. Countrywide's origination practices were far from ethical and, we are learning each day about securitzation practices that also involved the investment banking side of the business.

Mozilo, just recently, settled with the Securities and Exchange Commission for $67.5 million. That's million, not billion--as in $800 billion in TARP. And, it's not trillion either. As in, this country is $3 trillion in debt for the past two years.

For Mozilo, who took a small mortgage company and built it into an empire, $67.5 million is equivalent to you and me buying a computer...maybe a nice MAC computer. Sure, it makes a dent but it's not like we're going bankrupt over it. But, this man should be going to jail--or at least to trial--and he is simply going to pay a fine.

Mozilo's very large company is allowed to destroy economic prosperity in this country and he pays out a very small ratio of money compared to the billions of dollars he has in the bank. Meanwhile, if a "middle-class" individual passes a school bus while rushing to work--and it just stopped and started blinking its lights--and a policeman believes the car passed it while the lights were on, it would cost that driver more than $500. For Mozilo, $500 is nothing but for a person of modest wealth, it could be everything.

Of course, Mozilo wouldn't even be driving a car. It would be his limousine driver passing the bus on Mozilo's orders to do so. And, would a policeman risk his or her job to stop Angelo Mozilo's car? Mozilo, who knows Congressmen and lobbyists and high-ranking officials at the SEC. This is a very important man and one might lose his or her job for giving this man a simple traffic ticket.

Now, I've spoken with Mozilo in the past and, to his defense, he has given quite a bit of money to charities--which we can all write off on our taxes--and sat on the board for a number of non-profit foundations. He comes from an immigrant family that pulled itself up from the bootstraps and with a "fire in his belly," he created a small company into a conglomerate. Some would call that the "American Dream." Some would call buying a house an "American Dream."

At one point, before the subprime crisis, Mozilo wanted to retire and, in hindsight, probably should have. But, he stayed on as Countrywide's CEO. The company peaked and then plummeted to an eventual acquisition by Bank of America. Those undervalued assets continue to sit on Bank of America's balance sheet--just one of the reasons that the bank is insolvent.

Had Mozilo retired, his legacy might have been clean. With this $67.5 million settlement, his name will simply ride off into the sunset, along with his billions of dollars, and only history will be able to determine his legacy--just as history will determine Bernie Madoff's legacy.

But at least he reached his goals. At least, he made the money and had the power he always wanted to achieve. At least those charities will now have more money to help others--and that's a good thing.

But, at what cost?

Are money and power noble goals? Should they give us that unsatisfactory feeling Coach Joe Gibbs had in the 1980s and early 1990s if he didn't win a Super Bowl? Should they give us a "fire in the belly" to go out and achieve? There is a cost for those goals and, if we cannot morally and ethically administer that cost as a society, then are they really noble goals?

I once asked Angelo Mozilo about financial literacy being taught in the high schools rather than in colleges, as he once suggested. His answer to me was that "they would all probably skip the classes." He said it jokingly and yet, he wasn't joking. His power and money made the case.

Similarly, I asked Franklin Raines, then CEO of Fannie Mae, the same question nearly 10 years ago. He replied, "We're working on it." Yes, that and his huge bonuses and helping to cause another economic collapse.

Mozilo, with the SEC, made his case with power and money. He paid a price for his crime--$67.5 million--and we all now must sit back and watch as only history will create his legacy. And what of Frank Raines' legacy, for that matter? Have we heard much from him lately? Does he currently have a six or seven-figure job lobbying on Capitol Hill?

Which brings me to my next question: What will America's legacy be for our justice system? That we can buy and sell justice? That it is not blind justice but greedy justice? And, if that's the case, where's the justice for the men and women without money? What will their legacy be?

What will America's legacy be?

The financial truth in this society today--high unemployment, higher savings rates, higher prices on food and energy--is that goals cannot be about money and power because we have seen the ultimate results of those goals. We've seen these goals perverted in the 20th and 21st century into economic collapses; wars and genocides.

We have also seen noble goals turn into positive truths, like a team perfecting an individual craft to better itself and the people who cheer for it (just think of how it helped the city of New Orleans in February); like building and manufacturing to create more jobs and enhance a culture; and like education to exchange ideas so that people can live in a society conducive to the common good.

What will your legacy be? What are your goals? Are they to earn more money, more power? Are they to achieve fame for fame itself? Most important, are these goals to better yourself and others. Because, if only for yourself, your goals need not factor into America's legacy.

Robert Michaels

Fed, Wall Street Spinning Wheels

Before we begin this weekend and step aside from overinflated markets and weak economic reports, let's all feel the momentum of a stagnant economy.

By now, we have 16.7 percent of the people who cannot find full-time work and companies with more than enough cash to hire them. But, they don't because they look at their balance sheets and say, "I can't hire anyone right now." But why?

Because companies don't have enough income coming in and they don't know when or how demand will improve. In other words, who is really spending money on any luxury items?

As unemployed workers fall off the extended benefit rolls, they have little money to spend at all; people on unemployment can only afford the necessities--clothes, food (mostly from Walmart or Target) and shelter (in the form of a high mortgage payment or an increasing rent payment).

Now, we get to the full-time employed people whose wages remain relatively stagnant to commodity prices--and that's a conservative estimate. With families, these people are trying to pay down debt. Without families, they are likely saving money with hopes of retiring someday.

These are the basic middle-class people whose spending behavior is unlikely to prop up any economy much less provide 70 percent of gross domestic product.

Then, there's the 1 percent to 2 percent of the population that is not only employed but has disposable income, no debt, a paid-off mortgage, plenty of income and the ability to buy high-priced items whenever they want to do it. They can spend all they want and contribute massive amounts of money to the economy.

The only problem is: they represent 1 percent to 2 percent of the entire U.S. population. That makes them unlikely to also represent 70 percent of GDP.

So, that's why employers have plenty of cash and are not hiring anyone. They still have productivity and less people. There's one other thing...

As for that measure of wealth we call a stock market, the Federal Reserve is printing money, giving it to "primary dealers"--a.ka. Goldman Sachs, Deutsche Bank, Morgan Stanley, JP Morgan Chase, etc. to throw into the New York Stock Market Exchange so that companies can cash-out stock and have more money. So, why hire when there is no demand and plenty of money?

This is another reason companies are sitting on plenty of cash and that 1 percent to 2 percent remain the wealthiest people in the U.S. They're also the ones who pay our Federal Government to make important decisions--like laws that we live by.

And, it's not just the U.S. All these countries are floating out funds, taking on debt, as they cross their fingers in hopes that the so-called consumer will spend whatever they have left without any thought toward future savings or paying down debt.

Meanwhile, that 10,800+ number looks awfully good for our future--until it drops. As they say, what goes up, must go down. It's gravity. It's science.

So, while you're enjoying the weekend, drinking a beer, watching football or just taking a stroll on a Sunday afternoon, try not to be discouraged by the fact that we have absolutely no control over how the Federal Government and lawmakers spend our tax dollars--Republicans and Democrats are in on the game, of course--and how Wall Street spins its wheel of fortune using our future savings rather than showing us gradual gains from solid fundamentals.

What goes up will come down and go back up again...As Blood, Sweat and Tears once sang, "Spinning wheels--got to go round."

But we don't have to like it.