It's Raining Bailout Money! The Banks are saved!

I for one really wish that all of those telling the world that the recession is over and that good times are around the corner were correct, that times are getting better, the contrary unemployment level gobbledygook notwithstanding. Some of the big financial centers may have had a good Thanksgiving but I fear many of the regional banks that are still afloat are starting to take on water.

I don't believe that the critical issues have been really thought out, or maybe they have been and nobody dares to tell anyone else.

The first is oil- Or the lack thereof. 35 years ago we were an oil based economy with then US oil and gas production satisfying somewhere around 65% of our energy needs. Alaska was pumping oil into Valdez through the Trans Alaska pipeline and life was good. Microchips were being developed and the personal computer was in its nascent stage. Microsoft wasn't even a household name at that point. GM, Ford and Chrysler were the three world kings of automobiles and muscle cars were still in high demand in spite of the 1973 oil crisis. Japanese cars sounded like sewing machines and rusted out in a few years.

Jimmy Carter at that time was preaching to the choir when he said that we must find alternative energy sources and reduce oil consumption. He was the only US president to really wave that flag up to that point. Car makers response? Build SUVs- Can't make 'em fast enough.

Well, here we are 30 years later and we are no longer an oil based economy- Lack of oil tells the story. Us car makers are going belly-up since they never retooled to supply a frugal oil consuming line of vehicles like the car manufacturers did in Germany, France, Italy and the rest of Europe. We pony up and pay the Arab nations and the rest of the oil cartel for the 70% of oil we consume that we don't produce at home. Anybody see a pattern here? T. Boone Pickens is attempting to rally an alternative energy focus instead of oil as the go to energy source. His big push is for natural gas to replace gasoline as it has in a good part of the world and then to heavily promote wind power as a long term solution. Go T. Boone!

Good thing our buddies the Chinese are willing to shovel a continuing supply of US Treasuries into the reserve closet even though they hardly pay any interest. If they didn't buy our treasury bonds we couldn't pay our bills. The ridiculous levels of leveraging are just starting to hit with a slew of banks biting the bullet every month. Are the bailouts over? I fear not. What we have seen so far is just the tip of the iceberg. Several research organizations this past week informed us that one in four mortgages are under water. Twenty-five percent of all mortgaged properties aren't worth the paper held by their lenders! Gee I wonder what happens in the event some of those unemployed are trying to pay back those mortgages.

The health care industry is getting messier all the time. It is true that we are the victims of our own technology- Tests that were only prescribed in dire cases are now on every doctors prescription pad. How could they not be? The doc that doesn't prescribe a test and something goes sour will be reading their name in the lawsuit lists. CAT scan equipment 10 years ago was only approved for a very few health centers. It seems that every medical practice has their own CT offices now. People that were considered on the fringe 15 years ago that promoted health care rationing are once again being listened to.

All this expense and the health care outcomes for US citizens aren't even in the top 10 nations anymore. This is world leadership? Check the World Health website for some real eye opening stats. It's true that we don't have to be on a long waiting list to have a procedure performed and we can't be refused medical care but the 20 some percent without health coverage almost certainly need to declare bankruptcy should a serious medical condition arise. You might say, "Let them buy insurance!" Shades of Marie Antoinette. Maybe these folks might be some of the newly unemployed that have underwater mortgages. Hmmm.

Boggles the mind. Economists estimate that it could take 10 years to reduce unemployment to pre sub-prime mortgage days. I'm not sure what happens to all those water logged mortgages in that scenario. What about the reduction in property taxes as a result of property values being lower? Does this mean a possible reduction in public services like police, fire, EMS, education, roads, parks and of course health care? Naw- Couldn't happen. Right.

As I started out writing this blog I said that I applaud the efforts of the soothsayers predicting all will be well in a year or so but I truly fear that they are whistling in the dark. Our standard of living will face severe trials in the next dozen years or so.

I don't think many of us will like that. Then again, maybe I'm too much of a pessimist.

More Energy! More Tinkering! More Dawdling

Oil at $136 a barrel ? Say what?

Even though oil is through the roof with no end in sight, why is it that many of the oil majors, have seen stock prices decline for the year so far? Even the drillers have marginaly higher stock values year to date. The exploration companies are quietly reaping the rewards. Exploration companies like Southwest Energy and Noble are making it in gas and oil exploration. China has just whet its ravenous appetite for energy. It's importing all the coal it can get- Makes for happy Aussies, and Petro China is maxed out in exploration/production so China is looking wherever it can for the black gold. Commodities like foodstuffs, fertilizers and metals are also in much demand from emerging markets like Brazil and Peru as well as China.

Chinese solar energy companies are promising growth of 30 to 75% a year for the next five years at least. These folks have been hard at work researching and improving their solar capabilities while we bemoan the fact that our gas prices are almost 2/3 what Europeans pay! There are a few small solar energy companies in the US and companies like Dupont are starting to supply some solar related material, but I don't see our leadership rallying around the flag for alternatives to our energy problems- No new policies- Unless you count begging the oil sheiks to increase production. This isn't the answer, folks. We are an oil based economy that's running out of oil- Except to import it. Our inflation will be a function of how much more money the government can print in order to pay the bill. Maybe we'll have another round of tax rebates- Yeah! That's the ticket! Our kids can pay the bill.

Presidential election year notwithstanding the market here may gyrate up as history promises it will in election years but the economy will have much pain for some time. There is just too much garbage debt to absorb. The clowns in the financial sector that brought this mess about should be in jail but I'll bet they probably got increases in their bonuses!

There is a strong move afoot led by Iran and Venezuela to cut loose from the US Dollar as the oil currency of choice. The US is pleading with the Saudis to keep the dollar as the official payment choice. Even the Saudis will run out of US stuff they can buy pretty soon. They have all the military toys they can spend US dollars on and are busy buying land and businesses in the Western hemisphere. The Fairmont Hotel empire was a recent Saudi purchase and condos in Colorado are hot. Right now the oil boys are our good buddies but when push comes to shove as it did in 1973-74 we could have better luck looking for oil in McDonalds restaurants rather than the Middle East.

Possibly with enough pain we as a nation and as (sometimes) world leaders would start a significant movement in the direction of alternative energy. Maybe $5 bucks for gas will be the tilting point. We had a move towards renewable energy under Carter but the Reagan administration let it die on the vine. After that the sense of immediate urgency dissipated.

Well, the sense of urgency is back. Fuel cells, solar energy, wind farms and geothermal projects may make even more sense now and may be approaching more feasible comparative cost levels. As a debtor nation that had the party with the inheritance, we must start the ball rolling, not just find a temporary relief that will put us back into complacency once more. Maybe the leadership will be there next year- I, for one hope so.