Here are a few statistics that few people talk about:

There are 5 million listed american homes on the market.

There are 15 million unlisted american homes on the market.

The latest home stats by the government claim that there is a 15 month supply of unsold homes on the market. Hmmmmm

Consumer debt stands at about 97% of GDP. Everyone would need to work for a year without paying taxes or anything else to pay off all that is owed.

Federal debt stands at something between 65%-75% of GDP...getting tough to calculate this one as the debt numbers are exploding while GDP contracts.

Most economists expect the recession to end by the end of 2009 as they use their "average recession length" stats to prove their point.

The current value of all public and private US debt is around 65 trillion dollars (this includes the unfunded liablities for Social Security and Medicare)....which is more than the GDP for the entire earth.

As goes January so goes the year...this just might be accurate for 2009.  The stock market indices struggled to a 8% loss, the worst January ever. Commodities weren't much better but many held their year end level.  Oil and Natural Gas continued to slide down 10% and 25% respectively. Gold rallied 5%, and the grains were down slightly. The collective wisdom now is divided as to whether we are headed for a Spring rout to new lows in the market as the huge task of stopping unemployment from going to 10%, or halting the death spiral in the housing market, can actually happen.  Obama's administration suffered a big setback when he allowed the stimulus bill to show up as anything but an excessive wasteful spending bill that would hardly create anything like the 4 million jobs he has promised.  Many were surprised by this since his rhetoric had indicated a carefully crafted plan that would be hugely stimulative.  The stock market and currency markets spotted this immediately and we saw a hard S&P 500 sell-off and the dollar rallied strongly as investors try to wait out the pain in dollars.  The commodity world is perhaps a little too correlated to stocks right now but over the next few months I expect that to change. Gold remains a good place for money as interest rates are very low and as a store of value remains strong even with a higher dollar. The old highs of 1025 are now within site and I suspect there will be test of those highs within a few months.....that might just coincide with a new low in the stock market if current trends continue. The only hope to avoid a failure of the November lows would be for Obama to re-work his bill into a concentrated effort to help housing, firm up the banking system, stem foreclosures and create jobs......at this moment it doesn't appear that is happening so the January Effect may continue in February and beyond.  With the economy hemorrhaging a half million jobs a month, it doesn't give them much time either, as confidence in government and the banking system is null among investors. 

With December upon us one might expect it to be a month of "distribution" by hedge funds and mutual funds. That is, a parring of big positions by bleeding them out into rallies, raising more cash in preparation for end of year redemptions. Looking at commodity returns since highs made this summer, we can see the same is happening in that space:

Returns since highs made in summer:

Soybeans:      -50%

Wheat:          -50%

Corn:             -60%

Copper:          -64%

Gold:             -23%

Crude:           -70%

Dollar index:        +24%

Ten Year Note:    +13%

S&P 500 Index:    -40%

With over 1.5 million jobs lost since summer, one can hardly say that this recession has hit bottom. If things go well we could bottom as early as sometime in 2009.  Some are saying that quarter four GDP could be as weak as a -8% number. Based on the data that seems reasonable as the economy has essentially shut down but still, most are predicting something closer to -4% and then -1.5% in the first quarter of 2009.  If mortgage rates get to 4.75% in the first quarter of 2009, then we might see a real slowing in the rate of foreclosures and be able to see the light at the end of the housing collapse.....Obama seems ready to really focus on this issue so I suspect home prices will bottom in 2009, down some 40-50% from bubble highs set in the 2005-2006 time frame.  Calls for crude oil to go to $25/bbl seem extreme but nobody in america would complain about it as that would drive gasoline down to $1.00/gallon. We heard a lot about how bad deflationary spirals are, and now we know.....the speed of this thing is what scares me......the world has gotten a 50% haircut in 6 months.

          
          Lets take a look at the current government bailouts:
          
          
          Federal Reserve Programs:
         
          Commercial Paper:                                  $1.8 trillion
         
          Term Auction Facility:                             $900 billion
         
          Finance Co. Debt Purchases:                    $600 billion
         
          Money Market Facility:                            $540 billion
         
          Term Securities Lending:                         $250 billion
         
          Term Asset-backed Loan Facility:             $200 billion
         
          Other Credit Extensions:                          $729 billion
         
          Citigroup Bailout:                                   $291 billion
         
          Discount Window Lending plus
          Commercial Paper #2/Bear Stearns/:          $240 billion
          Overnight Loans/secondary credit
         
         
          Total for Federal Reserve:                       $5.6 trillion
         
          Total for FDIC:                                      $1.5 trillion
         
          Total for Treasury:                                 $1.1 trillion
         
          Total for FHA:                                       $300 billion
          
          

GRAND TOTAL:           $8.5 trillion!

Add to this Obama's stimulus package which will easily be $500 billion or more, we could get close to $10 trillion by the end of the first quarter of 2009. Simply amazing by any standards.
          
                                                        
              

Is it a wonder to anyone that in the midst of the credit mess that the market for securitized credit card receivables and car loans has completely shut down?  Now King Henry Paulson wants to address these areas with some Tarp money.  The following concept seems lost in all this government intervention....the US consumer is too levered and does not need more debt to service. They need to pay down debt! This will happen as credit card lines get pulled over the next few months to the tune of $2 trillion, crushing consumers who are light on cash. Also, there are people that want to buy new cars that cannot get a loan.....well, too bad, go buy a used car and pay for it with cash if you need it.  If you don't have cash then drive what you have now. This idea that things need to go back to the way they were in the US, with easy credit and 6 credit cards in everyone's wallet is precisely what will not be the case in the future.  Americans will need to get used to this, it will not be easy to get a loan for anything in the foreseeable future unless you have exceptional credit.  This is the price the country must pay for years of ridiculously easy credit and a lifestyle well beyond the means.  The government will do something for student loans...this would be an investment in our country's future as opposed to worrying about people who are levered to the hilt not being able to finance the purchase of a new car that they cannot really afford, or blow up their credit card balance another few thousand dollars on consumer staples.  Happy Holidays.