Foundations of Sand

July/25/2009 17:17PM
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Much of the news this week seemed positive and upbeat. Some just seemed like excessive spin or pure dishonesty.

President Obama, in yet another staged press conference on prime time intended to sell some version of “insurance reform” the president’s new label for Nationalized Health Care, based his entire case on the idea that without insurance care reform the economy will not recover. At the same time the the Congressional Budget Office, God bless them, issued a statement that none of the bills being considered for “insurance reform” being considered would reduce long-term health care spending. Someone is right and someone is wrong. You make the call.

The stock market went up on two big pieces of news.

First, existing home sales , meaning used home sales, went up for a third straight month. That pushed sales to the highest level since October. But, they are 10% lower then they were a decade ago when the population was smaller and before the housing bubble. Plus, if the entire story were told, many of these sales were foreclosures or houses that were distressed sales, many for less than the underlying mortgage. Families with homes on the market for months or years are cutting prices to get out from under the payments. You make the call.

Second, 76% of corporate earnings were higher than analysts forecasts , a new record eclipsing the old 74% set in 2004. But, the real number is the overall result is 25% lower than the earnings posted for the same quarter last year. And 80% lower than the same quarter in 2007. Over 70% of those earnings were not earnings but losses. They were just smaller losses than expected. Ford, for example posted a net income of $2.3 billion. Impressive. Until you see that the profit was the result of a $3.4 billion in restructuring accounting. Without that, Ford lost $1.1 billion. Keep in mind that September is historically the worst month for stocks and the crashes of 1929 and 1987 came in October.

In our instant gratification world and at a time when we desperately need good news, we tend to grasp a number and run with that, even more so if it is a positive number.

This is a time when we need to exercise caution. When we have a president who never seems to shy away from distorting data to his advantage, despite his own numbers experts refuting his data, we need to watch what we are told and do some work to draw our own conclusions.

To protect the scarce assets we have left in these times, we need to develop our own perspective of truth and facts. We can’t read the headline and accept it for fact. We have to read the whole story and other stories than may have a much different perspective on the same issue. We are accustomed to being misled by politicians. We tend to give media too much credence for doing their jobs and digging up the facts. We have a biased media supporting a political agenda that is unabashedly trying to force an aggressive agenda a warp speed to radically change our world. Almost paranoid suspicion is appropriate today.

A recent poll showed the vast majority of Americans reject the president’s position that insurance reform will reduce costs. For that reason only it will be stalled. But, they will be back with a new set of facts that may be as unreliable as these.

So much of what we read, hear, see and are told today by our leaders have reason for debate, never is the time better to have those debates. But, we get very little, if any, debate. Americans are tiring of the “trust me” theory, the stimulus bill fixed that. We are becomming wary of all of this. Of all the news this week, this is the best. We, as a country, aren’t buying the Kool Aid anymore. Except for those of you who might have bought stock based on the news of the housing market and corporate earnings. I hope you made a good decision.

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