Angst in affluent America, Part 2 / Greenberg

the commercial is a must see.... unbelievable. could be one for fools day......but it was real.

der werbeclip ist wirklich ein muss...schwer zu glauben das der real und kein aprilschwerz ist

SAN DIEGO (MarketWatch) -- You may have seen that LendingTree commercial with a happy-go-lucky guy named Stanley Johnson, who brags about his big house, his new car and how, "I even belong to the local golf club. How do I do it?" he continues with a big, dumb smile, "I'm in debt up to my eyeballs." Lowering his voice, but still smiling, he adds, "I can barely pay my finance charges." The smile doesn't leave his face as he drives a riding lawn mower, saying, "Somebody help me."


Thanks to easy credit, many Americans have been living well beyond their means. But that credit picture is beginning to change. And when you think about where the U.S. economy might be a quarter or two from now, you have to wonder how many Stanley Johnsons are out there. This isn't the stereotypical subprime borrower, with a spotty credit history and low credit score, but instead people perceived by friends and neighbors to be living the good life, some even sporting good credit scores.

With the mortgage markets tightening, especially as certain types of adjustable-rate mortgages face a wave of forced refinancings, we will know soon enough. For a preview, all you really need to do is check with someone like R. Douglas Ley, a certified public accountant and certified financial planner in Macungie, Pa. Many of his clients live in a wealthy part of New Jersey. He was the-then anonymous CPA mentioned here last week, in a story that prompted an avalanche of e-mails and postings on my blog. See blog ( excellent comments http://tinyurl.com/2jh9r2 !)


"I am shocked," he said at the time, "by the bad and deteriorating financial condition of many of my clients."

Much of what Ley said was merely anecdotes. Still, such stories suggest there are more Stanley Johnsons among us than we may think. There are plenty of people who are doing just fine. In fact, it appears, based on reports from some CPAs, that many who created wealth in recent years through wise investments or high-paying jobs still are genuinely wealthy. But it is the tales of trouble that resonate for anybody trying to figure out whether the equity in overinflated homes really was a large driver of the economy in the past few years. Based on conversations with CPAs, mortgage brokers, financial planners and others from all parts of this country, there is little doubt it played an important role.


thanks to http://calculatedrisk.blogspot.com/
größer/bigger http://tinyurl.com/2jdlf6

No region is better represented with ready-to-tell stories than Orange County, Calif. That is where, until 2005, Donald Parker owned a large insurance agency. He recalls how low mortgage rates spurred business in late 2001 with refinancings and home-equity lines of credit that required proof of insurance. "It really became excessive by the summer of 2004," he says.

"That's when I started noticing that many of my clients had either refinanced or added a second mortgage or home-equity line of credit multiple times within the prior three years often doubling or in some cases tripling their mortgage balances."

He adds that it wasn't the expansion of mortgage balances that was so alarming. "It was all the new, expensive cars being purchased and added on to their auto insurance," he says. "Often people were calling to replace a Honda Accord with a new BMW or Mercedes. We were also receiving a lot of phone calls from our customers asking coverage questions: for instance, 'Is my new Rolex watch covered if I lose it on vacation in Hawaii?' "

If CPAs and insurance agents are among the first to spot the problems while they are occurring, divorce attorneys like Bruce Hughes, also of Orange County, are among the first to see the actual fallout.
"We see it as it happens," he says. "From industry to industry over the years, they come in groups when various industries go through turmoil. Now it's real estate's turn. I can't tell you how many mortgage brokers, builders, developers and others associated with the building industry have come in for a divorce in the past six months and it's increasing." Those not associated with real estate, but hurt by the false sense of financial security because of it, are no doubt next. Calling Stanley Johnson.

"you should never argue about a crazy market./ greenberg"

well said..... thanks herb!/ den nagel auf den kopf getroffen....danke herb!

Is it brains or a bull market?
Investors shouldn't lose sight that there are two sides to each trade

"It's said you should never argue with a crazy person. I'll add that you should never argue about a crazy market."

And that pretty much describes where we are - in a market that hangs by the thread of oil until it decides the risk of rising oil prices is irrelevant; in a market that hangs by the thread of the latest economic indicator, until it decides that indicator is irrelevant; in a market that one week is enthusiastic about the Fed's likelihood of cutting interest rates and the next week enthusiastic when it looks like a cut is less likely.

This is a market, as I've written previously, that lacks conviction and will fall in a vacuum on the whiff of something unexpected -......

Is the economy growing or is the economy slowing? YRC Worldwide , a trucker that should have its fingers on the pulse of the economy, says the latter.) Doesn't really matter because, as of today, the market sees both as good.

Not to worry: All that really mattes is "global liquidity," a catch-all to explain the inexplicable.

"Unnatural," is the way market strategist Jeff Saut of Raymond James explains this market in his latest missive. "....

He further marvels at how the SEC caved in to a New York Stock Exchange petition in mid-October to reduce margin requirements "for an already over-margined hedge fund community. And that 'mysterious surprise' gave the major market indices another leg up (read: re-rally)....Why in the world would one introduce more leverage into an already over-leveraged hedge fund community is a mystery to us!" (And to us!)

What about the value of the market relative to earnings? Everybody says it's cheap. Everybody, that is, but John Hussman, of Hussman Funds, who in his weekly commentary writes that at 18-times earnings the market is into its "third phase"( see labels!), ......."

There's no shortage of pundits who would disagree, of course. But that, dear readers, is what makes markets - inverted yields, consumer credit, shaky subprime-mortgages, the weak dollar, uncertain housing, financial leverage and complacency, be damned. Minyanville's Todd Harrison put it best in a column here the other day when he wrote, "For every risk, there is an offsetting reward. And those betting on a year-end ramp would be wise to remember that this is a two-way street." Amen, bro'.

another bearish statistic

havn´t heard of this indicator. but it makes sense and is one more idicator that the market is ....mot cheap.
but as long as liquidity is that high i think the markets can hang in ....

habe bisher von diesem indikator noch nie was gehört. das in verbindung mit anderen statistiken zeigt aber eindeutig das diser mark nicht ....billig ist. solange aber die liquidität weiter so hoch ist kann das ganze noch weiterlaufen.

dank geht an herb greenberg and kelly wright http://blogs.marketwatch.com/greenberg/

Also heard today from Kelley Wright, managing editor of Investment Quality Trends. "While we generally don't engage in forcasting," he said, "there are some troubling trends we are seeing in our internals that we track at IQ Trends.

"First, since 1966, we have tracked the percentage of stocks that make up each of our categories of value; Undervalued, Rising Trends, etc. When the percentage of stocks in our universe that are Undervalued drops below 17%, it has been coincident with major market tops. Currently our Undervalued category represents about 10% of our universe.

"Secondly, the number of stocks that meet our Criteria for Select Blue chip status only totals 300 stocks; significantly off our long-term average of 350 stocks. In fact, the number of stocks that meet our quality parameters has been declining steadily since 2004.

"It will be interesting to see if either of these indicators change their recent trends."

Indeed it will. Thanks for sharing, Kelley.