As you know the credit crisis is creating problems for everyone.

Hopefull college students can not get student loans.

Any and all institutions are have much trouble raising capital for business purposes.

Municipalities already started the year with $48 billion in budget deficit shortfalls, and now some 15-20 states can not raise the proper funds to run local government and to conduct necessary services for its citizens.

Even worse some states like CA. are facing potential bankruptcy.

The link in the last sentence and in this one is to show you where my mind set was a while ago and where we go from here.

I have the ability to sit high upon a mountain top and see far out into the future. The problem is sometimes people think that I’m paranoid or speculating on something that does not matter.

Well it is time to say I fricken [sic] told you so!

 Luckily for me, this is where I live so I have activities that do not cost me much. Ten minutes down the road; I have spent very little coin and have found challenge, achievement, beauty, and a stress reliever from the fun house we call the stock market.

That is the point of this post. While DSB states we are “saved for now” I’m not so sure this will pan out so quickly. Since this is a global market place and Europe is probably 6 months behind us we may be suffering a clubbing every now and then from across the pond as well as here in our own market place.

While Friday’s action was the first time in a 18% beheading that we saw some potential of a bottom being found, I believe the absolute bottom is 5500 DOW to 7200 range. I expect to see this bottom put in place over the next two quarters. For now though I’m going to cross my fingers on the G~7 meeting aka retarded governors and hope for a short term bounce up to 8900-9400 DOW.

   

The point again, is to expect unemployment to rise quickly the longer this crisis ensues. I would not be surprised to see between 8-10%. Mind you that is a low to mid range target. I hope that I’m wrong here, but it is more than likely we will see a very deep recession and possibly a depression in this country.

If the credit freeze could end next week then I’d be willing to say we will just experience a mild recession greater than what we had in ‘01-’03 right up until we went to Iraq.

At any rate, no matter who becomes president you can always run a campaign on lower taxes. But the reality is taxes will have to go up no matter what they say now to take that coveted office.

Interest rates will have to go up. Im talikng minimum 8% fed funds rate over the next 3 years. We may even see the Volcker days again. Sky high that is. 15%+

In 3-6 short months we will realize that deflation was a momentary lapse of reason, IMO. Right now everybody and their mother is realligning portfolios to unwind risk, they are killing commodities and related companies since this is where the profits are to offset losses.

 So as the sun sets on this recent gilded age, we must look towards tightening our belts. The quicker you get out of debt, (thankfully I have none,) the more you realize what is important, the better off you will fair through potentially frustratingly hard times. No matter how rich you are there is someone wealthier than you and you could always stand to save more money.

To be frugal and to enjoy what is important with friends and family is paramount. It does not have to involve money you can not afford to spend. If you’ve got 12-24  months worth of expenses tucked away with no plastic debt then just ignore this. If you can not say that honestly, then it is time to batten down the hatches and prepare for one hell of a stretch.

by GW