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Is it just me, or is the economy giving us mixed signals. The Dow Jones has recovered nearly 3000 points from it’s low, yet 84 banks have failed this year as of last week. That averages out to 2.5 bank failures per week. Ouch! There are still signs of things sinking, particularly in commercial real estate. Yet other signs show we are improving. Mix signals? As the only vice presidential candidate we’d wanna see in a centerfold would say, “you betcha!”

However, this is a little bit of silver to an otherwise dreary lining. Our recession is moving through its progressions, which equals progress.  Our markets are also clueing us in that the big picture ahead is looking brighter. Just remember that the markets don’t reflect our current reality, but our perceived future. We’re continuing to hit turning points, which is good news for our future.

Unfortunately for us laid off folk, future doesn’t fix the present.

But being laid off does have its advantages. Especially in a recession. This is the perfect time to step back and take stock in our life. Do we like where we were going being we were laid off? Should we change paths? Would furthering my education advance me, or should I look at another career. Some of us may be used to working in industries that routinely lay off and rehire (defense contractors and the like are notorious for this. My friend’s dad has been laid off and rehired between Solectron and General Dynamics for almost two decades, ouch!). Maybe this one stings a little bit more, and makes us realize we need to find something more stable.

So to all my fellow unemployed/underemployed persons, use this as your opportunity to start going in the direction you want to go. Although the “potential employee” pool is larger than normal, we now have the opportunity to make a move and shine. So take advantage,

As for me, I used this as my sign to go ahead and finish school. I was almost done with my associates when I was laid off (I graduated in July), but instead of taking time off before transferring to a 4-year, I took being laid off as my sign to go ahead and get it done with. I’m now in my first semester at UNCC, majoring in Mechanical Engineering and Physics, with a minor in Mathematics. I still have withdrawal pains from the job world, and it is still weird being the “old fart” around campus. yet it has already been challenging and rewarding, and I can now focus on everything a lot more. By the time we’ve mostly recovered from this recession, I will have positioned myself to be a strong candidate for anywhere I want to go.

So use this opportunity wisely, recessions don’t happen everyday.

Ken Lewis, CEO of Bank of America

Read an interesting article on the Dow Jones Newswire today. Of all of the criticism that Ken Lewis, CEO and former Chairman of the Board at Bank of America, has received, he got a bit of praise from an unexpected source: Barney Frank. Rep Frank commended Ken Lewis’ bold move to forge ahead with Merrill Lynch, and in doing so saving the markets from another fatal blow.

 

Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, said Lewis needs to get credit for acting in the broader public interest by going through with the deal.

“People say ‘What’s the matter with these financial executives? Why are they only thinking of their own narrow interest? What about the public interest?’” Frank said. “That’s what Ken did. It ought to be acknowledged.”

 

Now the shareholders seem to have a different thought, being upset that the public interest prevailed over the interest of the shareholders. Yet as a shareholder, you should also recognize that the public interest is YOUR interest too. And if we want to get technical, the people of the United States, by proxy of the United States Government, have a vested interest as well.

Unfortunately, shareholders look at the world via tunnel vision. Sure, they realize that things are happening, but their only concerns are their shares. I can understand that, I am defensive over my money too. While it is understandable, sometimes we need to take a step back and look at the larger picture. Merrill was perilously close to failing, and probably would’ve declared bankruptcy at the same time as Lehman Brothers. Lehman dying was bad enough, imagine the shockwave of Merrill went too. I highly doubt that the pain would’ve only been doubled; instead, I think we would be looking at EXPONENTIALLY worse issues. In other words, not an outcome we wanted to consider. To oversimplify it, things would’ve gotten much worse for all players involved.

But what would’ve happened if the Merrill deal wasn’t approved? Merrill, just reeling off of its $15 billion loss, would’ve been toast. Since September, Merrill was on life support, and if the bank had pulled the plug, I fear the markets would’ve gone into another painfully fast spiral. Bank of America would’ve been hurt too in the process, so don’t believe otherwise.

Instead, Ken Lewis and upper management did some questionable things, but ensured the deal went through. A large portion of Bank of America’s 1st quarter profits are a direct result of Merrill Lynch, and as the transition and cost cutting measures continue, I believe we will quickly see even more gains related to Merrill. Ken Lewis helped to avoid further disruptions in the market by snatching up Merrill, and provided the best value for the shareholders by getting Merrill before its reputation was marred with bankruptcy. You don’t hear the names Lehman Brothers or Bear Sterns doing business anymore, because those names are worthless. Merrill Lynch does have a longstanding reputation and incredible brand recognition, which is going to prove to be additional value down the road.

I was reading my latest issue of Conde Nast Portfolio, and in it they had a list of the Best 20 and Worst 20 CEO’s of all-time. Names like Henry Ford, Lee Iacocca, Warren Buffett, Steve Jobs, Bill Gates, John D. Rockafella, and Andrew Carnegie fit in the best, while names like Fuld (former CEO of Lehman), Lay (former CEO of Enron), and Pandit (CEO, Citigroup) filled up the worst 20. So what defined a great CEO over an average one? Most were defined by their innovations, but many were defined by their ability to make tough choices regardless of criticism during difficult times. Its easy to make decisions when things are going good. But when the economy is crumbling all around, and everyone is looking for a decision to be made, those who made those tough decisions and made them work, those were the guys who earned their right to be called a best CEO. I think Ken Lewis has done an outstanding job leading Bank of America, especially during these murky times. Only time will prove this, but I honestly believe that he has equipped the shareholders with the best tools to get through this recession, and to emerge a much more powerful, and valuable, investment on the other side.

A few months back, I read where they determined the 13 to 30 demographic to be recession proof. Two words: My ass!

In November, my wife (23) was laid off. She found another job in February, after having 2 solid interviews canceled hours before they were to happen. The cost? $26,000 a year less. Thanks to living below our means, we made it through. She also had received 8 weeks severance plus 1.5 weeks worth of vacation payout.

Then on Friday, I got the call I had been worried was coming. “Due to lack of work… you are being indefinitely laid off.” Just what I wanted to hear on a Friday. I had already left early because of lack of work, and still received this call before I should have gotten off. No severance, but I do get whatever vacation I had accrued. Which is probably nill. I wish I had used more.

So now what? For months, I had no plan B. I think I have one now, but we’ll see. Thankfully I’m a student, so I get to bypass the whole waiting a week bit from the Employment Security Commission. Now I have to look for work.

Every job I’ve found so far though, has been paying much less. Every time I have ever quit a job or was laid off I got paid more. I mean every single time since my very first job getting paid $5.85 an hour bagging groceries at Food Lion. And the last time I was eligible, I refused to apply out of pride. Not this time.

What gets me is the way they do it. I’ve been with them since June of 2007. I’ve been forced to withdraw from classes because of them. Have worked on three special projects, have done every way I know how to bust my ass for them. Yet they call me out of the blue on a Friday and just lemme go. No warning, no nothing. What a farce.

Honestly, maybe the government needs to modify the WARN act. Sure, it’s great. But far too many companies find their way around it, and we are left trying to deal with the bureaucracy of unemployment. We need modify it to give more workers a proper heads up. I don’t mind being laid off. I do mind being kicked out to the curb with lightning fast speed on a Saturday. At least I wasn’t like the guys in another department, who were told to go home in the middle of working on a Friday, Guarantee that none of my work would have been finished. I would’ve clockled 8-4 and then done. And bet that I’m clocking 8-4 Friday then done.

I really do understand that the economy sucks, and it is hurting businesses. Yet there is no excuse for being so rude to the employees that busted their asses and made those businesses successes when the economy was still good.

Quick screen shot of BAC this evening.. Feel the momentum?

Wow, you know, there are some days that the street can put you in a GREAT mood. Right now my aggressive buying of certain financials during it’s move into the pit are showing great promise. In fact, my financials alone are strong enough to overcome my modest losses and other sectors. My IRA is in the green for the first time since I started it (after my 401k lost 30%+ on the poor management of the funds).

So is this just another short term rally or a sustainable move? Well, we’ve been creeping up now for about a week. The fed’s aggressive purchasing of more securitized debt has definitely helped. The news that Citi and BoA, which some had considered good as dead, may actually post a profit for Q1 helps. Plus BoA’s news that it intends on paying off it’s TARP obligations by the end of 2009 or beginning of 2010 doesn’t hurt either. Seems opposite for a company in supposed dire straights. If it all pans out, amazing how I’ve been saying it all along. If you don’t believe me, just read through the posts. I’ve been buying up BoA like it’s candy when it was sub-$4. My only regret? I didn’t have enough money to buy as much as I wanted (like a few thousand shares). Average price for my BoA? $6.04, buying since it was $25 on south. it closed at $7.67 and is at $7.85 in after-hours trading.

So to those guys trying to get Lewis ousted: stick to what you know. You don’t run banks, you run funds, and there is a large gap. This man is large and in charge (ironic he’s short), and he’s the bank’s best bet to recovering and being a full force.

I also heard some disturbing news last night regarding the banks. Some in Congress are wanting to blame lack of proper anti-trust regulation as the cause of the recession. Hogwash. They also want to consider forcing some of the larger banks to break up. Honestly, this is horrible stuff. Their supporting evidence is flimsy at best. They have seen only what they want to see, and ignore the rest of the wide world.

And finally, an analyst on CNN I can agree with. I don’t remember who it was – I saw it eating a quick bite before evening Physics Lab – but someone they were speaking to on The Situation Room was fearful of the plan of the special tax on AIG bonuses. He agreed that they are trying to make up for the fact they dropped the ball the first time around by abusing their legislative abilities. When a government decides it wants to arbitrarily tax those it wishes because they don’t like what they are getting, that is when we need to be fearful people.

For a quick laugh though, an iReporter jokingly went with the whole pitchforks ready to to mob against AIG because of the bonuses. I’ll see if I can grab the video somewhere.

Housing starts unexpectedly jumped 22% in February

According to CNN, housing starts jump 22% in February, an unexpected surge. Housing starts were up everywhere in the country in fact, except for the west coast. That’s what happens when you get California dreams and build more houses than people. Building permits were also up 3%, another good sign.

Does this mean we are out of the woods yet? No, but we need every step in the right direction we can get. We’ll see if the trend continues in March.

Stocks are also trying to rally again, another good sign. The surge had been strong for several days, until yesterday, when the rally lost some of its fizzle. Things seem to be moving in the right direction again (up!), with finance and technology leading the pack. Hey, in this recession, we can only measure success 1 day at a time.

Neel Kashkari spoke before Congress on Wednesday

I have to applaud Neel Kashkari. His words were some of the first coherent thoughts in the Capital for quite a while. What did he say? He told Congress the truth, that Congress should not try and force the banks to lend. What?! Why not?! They are sitting there with tens of billions of taxpayer dollars, and we’re being told not to force them to lend?!

To think that way demonstrates an ignorance to the issue at hand. What brought about so many problems? Super lax-lending standards, risky loans being made to risky people, with the belief that the credit default swap would lower their exposure to that risk. Quick way to rake in profits, quick way to make your bank disappear too.

So now banks have gone back to a conservative lending position. All loans carry an inherent risk, but some are obviously more risky than others. All of this talk about credit tightening gets annoying. The banks are still lending money. The top 3 lent almost $300 billion dollars in the last quarter of 2008. But they are tightening up the requirements for the loans, which is shutting a lot more doors.

We are in the middle of a recession, and with people losing their jobs or having their pay cut, it is making more and more borrowers become a higher risk for default. If we were to force the banks to loan money out to people that they now deem too risky, the results could be disastrous.

The banks are currently writing down billions of dollars worth of loans. They have to loan money, however, since that is one of the primary ways a bank pays the bills. So let’s force them to make bad loans to make the senators happy. You think the TARP/TALF thing cost too much? Hah! If the government forced these lenders to make bad loans now that they are reeling, the government is going to wind up putting us, the taxpayers, on the hook for bailing them out. Not out of the banks’ mess, but the governments.

That is why governments do not run banks. You can say what you want too about corporate excess, but do not forget that the government eats pork 24/7. The last time they tried to audit the DoD, they gave up. We don’t need these people in our banks or in our businesses. And they do not need to be making decisions about how money is lent out. The banks have a right to be more cautious with their money, and they are still lending it out. So leave well enough alone and don’t force us into an even worse situation.

For the full article, it is available here on Yahoo! Finance.

This article is from The Wall Street Journal. Please be sure to check out the article on the WSJ.com site for any updates. This is an opinion article by Ken Lewis, CEO of Bank of America, and I think it paints a very accurate picture, one far different than what has been spewing from the politicized mainstream media. I’ll opinion on this at a later time – it’s 12:30 AM and I’m exhaust. 

Bank of America CEO Ken Lewis

Nationalization would undermine confidence in the financial system.

By Kenneth D. Lewis

The Wall Street Journal

(Copyright (c) 2009, Dow Jones & Company, Inc.)  

The story of our economic crisis mirrors every great market bubble in history. Clearly, banks were key participants, but they were not alone. Mortgage lenders, borrowers, regulators, policy makers, appraisers, rating agencies, investors and investment bankers all played a role in pushing economic excesses forward. The institutions that gave in completely to the frenzy are no longer with us. Those that balanced the need to compete with the need to lend prudently survive today and are helping to stabilize the system.

Amid the turmoil, it has become clear that banks need to make changes in the way they run their business, from risk management to expense control to compensation practices. Most banks are making these changes in a good-faith effort to adjust to new economic realities.

And what role should government play in this? Speculation is rife about whether banks need more capital assistance from the government or whether they need to be nationalized. Unfortunately, our current debate has been riddled with misinformation that will not help us understand our current reality, or help us decide on a sensible path forward.

I would like to provide some clarity on a few key claims that have been repeated so often they are now taken to be fact. They are not.

• The banks aren’t lending. This claim is simply not true. Yes, banks have tightened lending standards after a period in which standards were too lax. But, according to Federal Reserve data, bank credit has actually increased over the course of this recession, and business lending is trending up modestly so far in 2009. Also, mortgage finance volume is booming as a result of low interest rates. What’s gone from the system is the easy credit that got us into this mess, as unregulated nonbank lenders have disappeared, and the market for many asset-backed securities has all but dried up. Most banks are making as many loans as we responsibly can, given the recessionary environment.
• The banks are insolvent. In the past 18 months, we’ve seen fewer than 50 bank failures. That compares to about 2,000 failures or closings of commercial banks or savings institutions between 1986 and 1991. There may be more to come, but the vast majority of banks will weather this economic storm.
• The Troubled Asset Relief Program (TARP) hasn’t worked. Not true. Last October, when the TARP was enacted, systemic risk threatened our entire financial system and economy. The point of the program was to stabilize surviving banks, prevent a total meltdown, and enable banks to lend more. The TARP and other government programs have worked, and banks are making more loans as a result.
• Taxpayers have given the banks billions and won’t get their money back. TARP funds are not charity. Banks that received TARP funds will make about $13 billion in dividend payments to the U.S. Treasury this year. TARP funds are loans yielding anywhere from 5% to 8% interest. This is a win-win: Banks are getting the capital they need, and taxpayers are getting a strong return on their investment.
• The banks that caused this mess must be held accountable. In fact, while all banks participated in the bubble economy to some degree, the companies that did the most to cause this mess are gone. The managers and shareholders of those institutions have been held accountable by the toughest, most unforgiving master of all: the free market.
• The only way to fix the banks is to nationalize them. This is a misguided premise. The announcement of nationalization would undermine confidence in the financial system and send shudders through the investment community. Politicizing lending decisions and the credit allocation process would be destructive for the economy. Nationalization also would give the false impression that all banks are insolvent. We agree with Federal Reserve Chairman Ben Bernanke’s statement that nationalization of banks is not necessary to stabilize the banking system.

Getting our facts straight as we debate the important issues will help us rebuild a healthy financial services sector that can better support economic growth. I have two thoughts to help us get started.

First, our industry must continue to work in partnership with the government to solve our toughest problems. Congress and the administration have already taken several very positive steps. The Fed is providing sufficient liquidity and has helped lower mortgage rates. The $787 billion stimulus package will help boost economic activity. The Term Asset-Backed Securities Loan Facility (TALF) will help liquefy the credit markets. And the administration’s housing and foreclosure relief plan will be very helpful to both homeowners and banks as we work to stabilize housing markets across the country.

Second, one of our greatest challenges is balancing the need to extend credit with the need of households to pay down excessive debt. In an economy that became too dependent on debt-driven consumption to create growth, the prospect of household deleveraging is sobering. The answer, in my view, is to let competitive forces lead us back to responsible lending practices, not the type of indiscriminate lending that has created so many problems.

They did what?! Spent how much?! My curlers are about to pop out!

I came online today, to check the site and the news, and about fell out of my chair. In 1 post I matched nearly 2-3 weeks worth of visitors. I was floored.

Which article was it? Post Office Buys $1.2 Million Dollar Home - sourced from CNN. That tells me right off the back at how much people are outraged over this blatant excess. Further than that, people are outraged and blatant excess period.

You can see it all around. People complain about banks buying jets and stadium naming rights (even though naming rights are really and advertising move, and companies need to advertise). The lashing auto execs got for flying into Washington in private jets with their pockets hanging out and shaking their cup. The people who still have that coveted disposable income either not spending it or doing it in stealth.

We have a right to be upset though. Over 12 million Americans are unemployed, and millions of others are underemployed. Millions of people are struggling to make it through this time, while others are still living the life. It can drive a person mad. Why should we starve while they are jet-setting, making it with billions of taxpayer bailout funds? Can’t we get a break? Heck, whatever happened to philanthropy? When we need the charitable help the most, it all dries up.

It’s a sickening cycle, but we can’t let it get us down. We are defined not by our strength in the good times, but for our strength in the bad. I can attest to far too many sleepless nights worrying about what happens next. Everytime my manager tells me to meet him when I get in, I get the jitters and thoughts start racing through my head of what am I going to do if I get laid off. What scares me is I don’t really know, and I’ve always got a plan. I’d get through it I guess, which is the attitude I need to get by. Thankfully it is always him asking me to pick up some extra work. But my nerves can only stretch so thin.

Remember that we are only guaranteed 2 things in life: death and taxes. Everything else we have to work for, to fight for. And if it isn’t worth fighting for, it isn’t worth it.

Billboard during the Great Depression

12.5 million people are unemployed. 4.4 million of them since January of 2008. Wow. The unemployment level has hit 8.1%, and appears to still be rising. Maybe that stress test 10% worst case scenario may not have been strong enough.

So how can we compare how bad this is? Take into consideration that the author was less than 1 year old the last time unemployment levels were so bad. So when I say first in a lifetime, I mean it.

At least the loses have slowed down slightly. 651,000 people became unemployed in February, compared to 655,000 for January, and a staggering 681,000 in December. December’s job losses hit a 59 year high.

Now we are still no where near the levels of the Great Depression. That era saw unemployment levels of 25%. One-fourth of the country out of work. However, the considerations economists use today are different than in 1930-1940, so to draw a closer comparison, we need to take those changes into account. Most sources I’ve looked at believe that if we used the same method today, the unemployment rate would be about 18%. Staggering.

Regardless of what we want to consider as unemployed, the truth of the matter is the figure is high. If we can’t get a grip and turn things around somehow, our future is bleak for quite sometime. We’re in a prime position right now, on the fulcrum between depression and recovery. Hopefully we land the right way.

Dow Jones closed at 6594, a territory uncharted since 1997

Nasdaq on 6 year lows. Dow and S&P 500 taking out new 12 year lows. You know, it reminds me of another process of bleeding that’s anatomical in nature. “If it bleeds for 7 days and doesn’t die, don’t trust it.” So now here we are, with nobody trusting it, forcing it to die.

Citigroup managed to set an all time low at $0.97 a share (it closed at $1.02). I like values, and to think of a company size and breadth of Citi at under a dollar, you wonder if they are really that bad. I didn’t buy, so you can see where I stand. Some risks are just too risky.

Bank of America got beat up again as well, thankfully not to it’s 25 year low that was set a few weeks. But with the way the market has been slipping since mid-week, you never know. My finger has been playing with buy, but I think it’ll still move down more.

And a coalition of pension fund managers are crying for Lewis to be canned. Honestly, I’ve never had much for activist funds, trying to make their breed of changes on management. Maybe these guys would be better served by running after the hedge funds that have been a large part of the sinking stock price. Or maybe we need to look around and see everyone’s stocks are well down for the year, even the banks who are in decent positions. I’m not even going to get started on these guys, but I will be voting for Ken Lewis for CEO when the time comes. It’s at lost easier for fund managers to sit there and complain, given they don’t have to make the individual day to day decisions of running the companies they own.

GM was also another sore spot today.  It’s saying it needs more federal money, and that it is considering chapter 11. I think someone needs to come to grips with reality in GM. They obviously have done a piss poor job deciding how much they need to stay afloat. They seriously need to get a group of guys together, determine worst case scenarios, evaluate the risks of various positions, then come up with an actual amount. Although their step by step approach reduces the risk to the taxpayers, every time GM hits its “dire straights” again, the stock value plunges and takes the market with it. That’s the sign of an key national industry, when it can move a national market.

What have we learned from this week? We don’t know where the bottom is, and we can’t until we are able to look back. Bad news sells, and bad news is abound, so we are going to see the stocks get beat up. Once again, far too many undisciplined investors and greedy hedges funds, who either sell in fright or profit on short. The economy is bad enough, but it will only get worse while we allow these morons to keep it down.

For more information on the dismal performance of March 5th, 2009, you can check out these articles on CNNMoney and Yahoo! Finance.