Chain Reaction

As California Goes, So Goes the Nation?

As California goes, so goes the nation? We had better hope not, since the state’s economy is imploding so swiftly that it threatens to take cities and towns from Eureka to San Diego down with it. Consider the plight of El Monte, a city of 125,000 in Los Angeles County that recently cut expenditures to the bone in order to close a $9.5 million budget gap for the fiscal year begun in July. Working frantically against an inflexible deadline, local officials furloughed most of the city’s 375 workers, laid off 17 police officers and closed down an aquatic center for all but four months of the year. Then they got the bad news: Sacramento will not be sending them $2 million in gasoline taxes they were counting on. And that’s not all: The state will be taking even more revenues from El Monte, but the city won’t know how much until the legislators get their own house in order. “It’s devastating,” city manager Jim Mussenden told a reporter for the Wall Street Journal. “We’ve already worked very hard to reduce our budget, and now we will have to look at more cuts.”

More from Roger Wiegand's latest article entitled Gimme a Job.

Nine of ten CEO’s are selling mainstream shares. They have a clear vision of the future and see no future in their own companies. Otherwise they would be share buyers, or at least hold what they have. Can you imagine the impact on employment yet to come with all of these corporate failures?

4 Bed, 3 Bath, $75,000

Click to enlarge.

I ran across this on AOL today and wanted to pass it on. Even though I have been told by a friend in Las Vegas that it was getting bad, I didn't realize it was THIS bad. People leaving in droves and getting whatever they can get for their homes.

Here's a little snippet from Roger Wiegand of Trader Tracks Newsletter that gives a little more insight into the link between unemployment and the housing market. full story

Some states like those in the Midwest, and other formerly, faster growing Sunbelt states are being hit the worst. Michigan is now approaching 26% unemployed and the full brunt of the auto layoffs is yet to come. Since I am familiar with the state and the auto industry, I forecast 30-40% Michigan jobless within 18-24 months. The state budget is over $1 Billion in the hole with hope of balancing.

Watch for severe social problems and outbreaks of rioting this summer in larger American, European and Asian cities. China is suffering major violence each day. Chicago, Detroit and Los Angeles are next. We all know of the problems in France and Amsterdam. We got the worst of both worlds in Europe; religious fanaticism coupled with unemployment; a very bad combination.

Observers must not lose sight of California as a leading edge indicator of employment, state budgeting (that’s a joke) and the effects of foreclosures on NON-FORECLOSED NEIGHBORS dragging down entire neighborhood values. Even those working and paying house payments are hit with wide-spread home devaluations seeing equities drop beneath the cost of debt owed the bank. jobless neighbors are economically wrecking entire neighborhoods dragging down all area values.

When a homeowner loses employment, and his or her house value skids so far beneath the loan, many send in the keys (jingle mail) to the lenders and walk away offering a voluntary deed in lieu of foreclosure. In some locations this transactional failure does not appear on future credit reports.

In some parts of the country, the banks have so many houses in foreclosure that they are selling them at 25 cents on the dollar just to unload them now. They know even lower prices are on the way.

But you'd never know it from the talking heads on CNBC as most are saying the worst is behind us. Hahahaha. The "worst" isn't even on the radar screen yet, and you'd better store your wealth in something that will weather this coming storm.

Got gold?

Headlines for July 21, 2009

Continental Cuts 1,700 Jobs, Raises Fees - Raising fees at a time when consumers are already cutting back on travel is a recipe for disaster. Right now, corporate decisions are not made based on profit but on trying to minimize losses and stay afloat, hoping better times are around the corner.

This headline sounds positive, Texas Instruments Halts Sales Slide, but hidden in the article is the fact that "profits fell 56%."

Bailout Costs Could Reach $24 Trillion Don't forget that there is only $4 trillion of gold in the whole world. $24 trillion is $80,000 for every taxpayer. Once this debt is defaulted on, the world will dump dollars and flee to gold.

140 to 1

The latest statistic regarding physical versus paper gold is that there are 140 ounces of paper gold for every one ounce of physical gold. In short, if everyone that has a contract guaranteeing them an ounce of gold were to ask for their gold at the same time, 139 people would be left holding the bag. This is no different than a run on the bank, and in this case, should there be a run on gold..... the price would be in the tens of thousands of dollars an ounce.

Economy
I saw an ad on AOL this morning for NASCAR apparel starting at $5. Looks like the mighty are falling, but according to CNBC things are improving and the stock market should start going up now. LOL!