Dubai, Black Friday, The Economy, The Markets and more...

The markets were rocked last week on the news coming from Dubai that they needed a 6 month moratorium on a big chunk of their debt. The biggest news about this is that it came as a huge surprise and sent the value of the debt crashing. It is not clear who holds all the exposure at this point but it will be a huge hit for sure. Financial stocks performed poorly as they should have. The real question behind it is who might be next? What other surprises are lurking in the shadows? If you have been reading this blog for a while you know that I think this credit crisis is far, far, far from over. The first wave of losses came primarily from exposure to residential mortgage product, but there will be much more coming from commercial mortgages and other assets. For more from the FT on the events in Dubai click here.

Thanksgiving shopping. Early reports are that sales over the weekend came in only slightly ahead of last year. "ShopperTrak, which measures the number of people going into about 50,000 stores, estimated that shoppers spent $10.7bn on the day after Thanksgiving, only 0.5 per cent up from last year. In 2008, ShopperTrak estimated that post-Thanksgiving Friday sales rose 3 per cent, although seasonal sales overall last year slumped." ( as reported in the FT) With official unemployment above 10%, and all inclusive north of 15%, it is hard to imagine why we should see good strong numbers this season. I did my own due diligence this weekend and braved the malls and though it was busy, it was not crazy. People were definitely looking for deals and any store, with the exception of the Apple Store, where prices were full retail were empty. Sorry.. but it is likely going to be another disappointing year for retailers but I think the movement towards buying what we need is a good thing long term. In January 2008 I wrote "Sadly, there's no short and easy fix to the longer-term problems created by excessive borrowing combined with rampant consumerism....." (huffpo) and that is still true today. We cannot spend our way out of a problem created by too much spending.

The Role of the FED - Another must read from late last week was this oped written by Fed Chairman Ben Bernanke in the Washington Post. This is a big and important issue. Though there is lots of blame to push around as to who and what caused our current economic crisis, the FED has to be high on the list. Although I do believe in an independent yet accountable FED, one has to ask what is going to be different next time? With short term interest rates at zero for the forseeable future, one might ask if we are in fact planting the seeds for the next bubble. For more on the effects of zero rates read the latest from Bill Gross at Pimco. Click here

I have suggested many times that you subscribe to David Rosenburg's newsletters but if you have not, do it now. ( formerly chief strategist at ML now at Gluskin Sheff) David is brilliant and he writes at a level of detail and insight that I can only dream of.

It should be an interesting week for the markets - keep those seatbelts fastened.

The Women's Median Center, Jehmu Greene and Jane Fonda

Monday Evening I had the pleasure of attending a gathering in support of the Women's Media Center, and their incoming President Jehmu Greene. Jehmu's previously held post was at ROCK THE VOTE, the largest ever youth registration group. She is a delightful woman committed to using the media to build powerful social justice movements. What does the WMC do? It engages in media advocacy to push media to address and discuss sexism in their coverage. Additionally they create their own content, media train women and support SHESOURCE.org, a searchable database of over 500 women experts. Please click here to learn more and consider sponsoring this amazing organization.

The guest of honor for the evening was Jane Fonda, two time Academy Award winning actress, social activist and philanthropist. Around a dinner table we discussed why many young women cannot relate to the word feminism, how the media can be used to drive positive change, and so much more. After dinner Jane did a Salon style reading from her book "My Life So Far" and it was easy too see why this fabulous woman has won two Academy Awards.

Have a wonderful Thanksgiving. I am grateful for so many things, including my incredible family who loves and supports me. and especially for my mother, who is such a role model for me and is visiting from British Columbia, Canada.

Iceland, Women, Feminine Values and Audur Capital

Last week I hosted a lunch for two amazing women from Iceland that I met at the Deauville Global Women's Forum. They were in the US to talk about their business, Audur Capital, a money management firm they founded based on feminine values. I was going to write all about it but the Guardian did it for me. I was thrilled when this story popped up in my inbox today thanks to Naked Capitalism. I have included an excerpt below but be sure to read the full article. This two women are amazing, absolutely amazing. They are not only imagining what is possible for a financial services firm, but doing it. ( see an excerpt below)

"..Prominent among them are Halla Tómasdóttir and Kristin Petursdóttir, the founders of Audur Capital, who have teamed up with the singer Björk to set up an investment fund to boost the ravaged economy by investing in green technology. Petursdóttir, a former senior banking executive, and Tómasdóttir, the former managing director of the Iceland Chamber of Commerce, decided just before the crunch to set up a firm bringing female values into the mainly male spheres of private equity, wealth management and corporate advice.

Tómasdóttir says: "Our Björk fund is to focus on sustainable growth. Iceland was the first in the world into the crisis, but we could be the first out, and women have a big role to play in that. It goes back to our Viking women. While the men were out there raping and pillaging, the women were running the show at home.

"We have five core feminine values. First, risk awareness: we will not invest in things we don't understand. Second, profit with principles - we like a wider definition so it is not just economic profit, but a positive social and environmental impact. Third, emotional capital. When we invest, we do an emotional due diligence - or check on the company - we look at the people, at whether the corporate culture is an asset or a liability. Fourth, straight talking. We believe the language of finance should be accessible, and not part of the alienating nature of banking culture. Fifth, independence. We would like to see women increasingly financially independent, because with that comes the greatest freedom to be who you want to be, but also unbiased advice."

"If Wall Street Repents Can Main Street Forgive?"

Last Sunday I co-wrote a piece for the Daily Beast called "Can Goldman Find God?" asking Goldman to put their resources to work to fund job creation. This week they announced their "10,0000 Small Business Initiative." Given this news, the apology by CEO Blankfein, and more... we decided to write another article to follow-up. It is called "If Wall Street Repents Can Main Street Forgive?" If you feel called to comment please do so on the DAILY BEAST site and not on this blog.

I don't think it coincidence that the sermon this morning at church was how to change our culture. Our minister asked us to consider how, as a follower of Christ, do we impact our culture? He suggested three ways - outlove our culture, outthink our culture and outcommitt our culture. This is exactly what I am trying to do in writing about Goldman Sachs, about Wall Street, about Money, about Social Change, about Gender Equality and more. I feel called to leverage my background as a former partner of Goldman Sachs, and a Christ follower, to speak out. We NEED a new form of capitalism to go to work in this country - responsible capitalism, moral capitalism, socially responsible capitalism, enduring capitalism! We need our culture to change - the culture of Wall Street and the culture of Main Street.

I am so far from perfect, and the person I most want to change is myself. I want to live a loving and generous life. A life that honors God and honors others. This is what we are all called to do...

I also think this piece is worth a read "Stop Blaming Goldman Sachs."

Have a great Sunday.

Life's Lessons

I just received this in my inbox and it is too good not to share. It has been a busy and intense week with travel to Washington, a gathering of media powerhouse women to talk about advancing gender equality through the media, a meeting with two amazing women from Iceland who are reimagining financial services and so much more.... but for now, ponder what is below.

"Written By Regina Brett, 90 years old, of The Plain Dealer, Cleveland, Ohio"To celebrate growing older, I once wrote the 45 lessons life taught me.It is the most-requested column I've ever written.My odometer rolled over to 90 in August, so here is the column once more:

1. Life isn't fair, but it's still good. 2. When in doubt, just take the next small step. 3. Life is too short to waste time hating anyone. 4. Your job won't take care of you when you are sick. Your friends and parents will. Stay in touch. 5. Pay off your credit cards every month. 6. You don't have to win every argument. Agree to disagree. 7. Cry with someone. It's more healing than crying alone. 8. It's OK to get angry with God. He can take it. 9. Save for retirement starting with your first paycheck. 10. When it comes to chocolate, resistance is futile. 11. Make peace with your past so it won't screw up the present. 12. It's OK to let your children see you cry. 13. Don't compare your life to others. You have no idea what their journey is all about. 14. If a relationship has to be a secret, you shouldn't be in it. 15. Everything can change in the blink of an eye. But don't worry; God never blinks. 16. Take a deep breath. It calms the mind. 17. Get rid of anything that isn't useful, beautiful or joyful. 18. Whatever doesn't kill you really does make you stronger. 19. It's never too late to have a happy childhood. But the second one is up to you and no one else 20. When it comes to going after what you love in life, don't take no for an answer.21. Burn the candles, use the nice sheets, and wear the fancy lingerie. Don't save it for a special occasion. Today is special. 22. Over prepare, then go with the flow. 23. Be eccentric now. Don't wait for old age to wear purple. 24. The most important sex organ is the brain. 25. No one is in charge of your happiness but you.26. Frame every so-called disaster with these words 'In five years, will this matter?' 27. Always choose life. 28. Forgive everyone everything. 29. What other people think of you is none of your business. 30. Time heals almost everything. Give time time. 31. However good or bad a situation is, it will change. 32. Don't take yourself so seriously. No one else does. 33. Believe in miracles.34. God loves you because of who God is, not because of anything you did or didn't do. 35. Don't audit life. Show up and make the most of it now. 36. Growing old beats the alternative -- dying young.37. Your children get only one childhood. 38. All that truly matters in the end is that you loved. 39. Get outside every day. Miracles are waiting everywhere. 40. If we all threw our problems in a pile and saw everyone else's, we'd grab ours back .41. Envy is a waste of time. You already have all you need.42. The best is yet to come... 43. No matter how you feel, get up, dress up and show up. 44. Yield. 45. Life isn't tied with a bow, but it's still a gift. "

Goldman Sachs - "10,000 Small Business Initiative" - $500 mm

Well I would love to say that Goldman Sachs, after reading the CALL TO ACTION we sent out on Sunday on the Daily Beast, responded with this $500 million initiative, but this is clearly something they have been working on for some time. The“10,000 Small Business Imitative” was announced today will attempt an integrative and collaborative approach to address the barriers to growth for small business. ( read about it here on the GS web-site) The approach appears thoughtful and multi-faceted, much like their 10,000 Women Initiative, and appears to be a bold new step in corporate philanthropy. Only five times bigger!!!!!! The program highlights include:
- Business and Management Education
- Mentoring and Networking
- Access to Capital
- Advisory Council
I congratulate Goldman on this program and will look forward to reading a lot more about it. Clearly they are trying to respond to what they see as an urgent need, job creation and job security. And it is an urgent, urgent need.

We have to celebrate this. We have to. Why? Because the public has called them to do something, something big, and they did… and we want them and others to do more. Should we expect this from them? Yes we should. Let’s expect Goldman to be leaders in helping to rebuild our economy.

There is much that needs to be done around economic security, job creation, and financial literacy and let’s all use our creativity on how to make a difference in these areas. I am working on a proposal that would be PERFECT for a financial institution partner so if you are one of those, leave me a note! Women’s Funds around this country are “shovel ready.” By this I mean that money can have immediate impact as it is scaling up programs that are already in place and working. More to come on this…..

Goldman, Congrats. JP Morgan, Bank of America, Morgan Stanley, UBS, Blackrock, Fortress, and more ….. What are you going to do? The collective lack of leadership and responsibility of our country’s largest financial institutions played a role in creating and enabling this financial crisis and I would like to call you all to create your own “10,000 SOMETHING Initiative.” “To those to which much has been given, much is expected.”

Lessons Learned From the Financial Crisis

Bill Dudley, President of the New York Fed made further remarks on the causes of the financial crisis that I thought are worth sharing. (click her for the full report) Thanks to Naked Capitalism for highlighting it. "One clear culprit was the failure of regulators and market participants alike to fully appreciate the strength of the amplifying mechanisms that were built into our financial system." You can say that again. The reasons and learnings are pages long but what is really good is that there seems to be real learning happening that should result in some very positive changes in the industy. Much needed indeed.

Have a great day.

"God versus Goldman Sachs: A Former Partner Challenges Lloyd Blankfein"

Yes that it the headline this morning on the DAILY BEAST - one of the most viewed news sites on the net this Sunday morning. Almost two years ago I decided to throw myself out there and write publically about issues I care about. When I saw the article last week in the Sunday Times about Lloyd saying that Goldman is doing "God's Work", how could I not respond? Especially given that I am married to a pastor and we were both Goldman Partners.

Even though I left Goldman seven years ago, I will forever be a partner of the firm, and for that reason and many more I continue to care deeply it. For years I gave speeches on the firm's culture, the firm's structure, and actively recruited countless young people to 85 Broad Street. I was a corporate cheerleader to the utmost degree, and for that reason and my trading profitability, I was promoted. Becoming a partner changed my life forever, and that of my husband, because ultimately it gave us enough money to commit our lives to non-profit work and of course, our family. For us, what we recieved was enough, more then enough, and we will be forever grateful. My husband returned to school and to get his masters of divinity and is now an associate pastor at our church in New Canaan CT. In fact he just ran out the door as he is preaching this morning on change. He has worked passionately for nine years for our church, and because of GOLDMAN, can do so without getting paid. Thank you Goldman. My passion is for women and girls. I have written on this often on this blog but I as believe that a key factor in our world becoming a more just and equitable place is greater gender equality. I serve on many non-profit boards and increasingly have given speeches, appear on television, and write about why we need more women in positions of leadership and power. ( ... and more) Thank you Goldman. I can give you a very long list of other people that have 'retired' to serve the world BECAUSE, in part, of the culture we experienced while at Goldman.

So yes I had to write this piece, and I am so gratefuly that my friends Rev. Katharine Henderson, President of Auburn Seminary, and Rev. JC Austin could write it in partnership with me. Greg would have been up for the task too if he did not have to write his guest sermon this week. So Lloyd YES I am challenging you because I know you are up for the challenge. Goldman's reputation has been damaged and you need to do something about it, and something BIG. This in the best interest of your people and your shareholders. I suggested in a earlier blog post that it should be around job creation, economic security and financial literacy, and this "Virture Fund" could target just that. As the piece says, I expect more of Goldman Sachs because it is my recollection from my time ( 14 years) there that Goldman Sachs and it's people have always expected more of themselves.



So since it is Sunday, and we are talking about God, and I am a Christian I will end with a prayer, something I have not done on this blog before - "Dear Heavenly Father. The world is not a fair place, but we know that you are fair. So many people, your people, your children, are suffering and we pray you hear them and you comfort them. We pray today that you will help us all choose actions that will make this world better. We pray that you CHANGE our hearts to hear the cries of others, and that will drive our actions. We pray that you make us all generous people, because you are so generous with us. We know you expect a lot from us because you know what we are capable of. We know that you tell us that to those to which much is given much is expected. We know that it is in serving that we will find our peace and our joy. We pray this in your name - Amen.



Have a great Sunday.

Changing the World - Critical Mass

I have been thinking about this a lot this week, mainly because my husband Greg is preaching on change this Sunday at church. Can people change? How do people change? What is the process of change? Why do people change? We all have our opinions on this and I believe we all have our own theory of change, meaning how we think change can happen. For me I think about it a lot in the context of how can the world change to become more gender balanced. The Women's Funding Network has a model - The Five Indicators of Social Change - that I believe is truly brilliant. Here it is.


The Five Indicators of Social Change

A Shift in Definition - The issue is defined differently in the community or larger society.
A Shift in Behavior - People are behaving differently in the community or larger society.
A Shift in Engagement - People in the community or larger society are more engaged. Critical mass has been reached.
A Shift in Policy - An institutional, organizational, or legislative policy or practise has changed.
Maintaining Past Gains - Past Gains have been maintained generally in the face of opposition.

This is how you use this framework. Think about what you want to change and apply it to this framework. Take my passion - We need more women in critical mass in positions of leadership and influence in the financial services sector.

Definition - We need to make the case for why this is important. We need women because it leads to better decision making and a higher return on equity.
Behavior - Based on the above, boards of directors choose to add more women, CEOS starts walking the walk not just talking the talk. ( as examples)
Engagement - More and more companies do this, it becomes why aren't you doing this?
Policy - Companies broadly adopt a critical mass principle and more.
Past Gains - Advocacy continues and the business case is validated over time.

Think about what you want to change and put it in this framework. There are specific strategies within each one of these shifts which need to be employed - but that would be a very long blog entry indeed.

Goldman Sachs in the NEWS - again....

I sat down this evening to read this 7 page article " I'm doing 'God's work'. Meet Mr Goldman Sachs (The Sunday Times gains unprecedented access to the world's most powerful, and most secretive, investment bank) READ IT HERE. It is so detailed and covers so much ground that I honestly don't know where to begin but here it goes....

I left Goldman Sachs in 2002 after a 14 year career, a career I was very proud of. Like so many others that went on to make partner I started as an analyst, and worked my way through the ranks. I did not come from "money" not did I view my reasons for being to make it. In a survey Catalyst did on why people work on Wall Street the number one answer was in fact - challenging and meaningful work that allows one to use their intellect in dynamic ways. That was true for me and for the vast majority of people I came to know and respect at Goldman. Sure money was important, but it was not all about the money. In this article Mr. Arlidge clearly states it is.

Reading this piece I kept asking myself was he really talking about Goldman? Is the author just extremely biased, or has so much changed in the 7 years that I have been gone? Yes I did notice that over my tenure there the firm was becoming more money centered, and in fact that was one of the reasons I left, but if the firm is truly as money obsessed as he suggests I worry about the long term viability of the firm, and so dear shareholders, should you.

The authors main criticism is over outsized compensation and earnings. There is no doubt that compensation has skyrocketed over the past decade. The reasons for that have been written about extensively but cheap money created an explosion in the size of the financial services sector- and GS is the best there is in the sector. In the meltdown GS was smarter then the rest in not losing money, and because everything got cheap when the financial markets nearly came to an end, and GS got billions of free money, they loaded the boat and are now enjoying the benefits. Should there be a tax on that success because GS was saved, and yes Lloyd you were saved... not for me to decide but likely not. I mean really, how do you do that "fairly"? If you incrementally tax GS then you need to tax others than benefitted as well. ( and let us not forget they will pay a boatload of taxes which we desperately need ) The system needed saving and the government gave a lot of players the tools to do so, and GS did it better then most, but they are not the only players printing money.

That being said, GS should do something on their own, and do it fast, to benefit the common good. Why? Because it makes good long term business sense. ( Though I do wish the pastor they mention - and by the way my husband, an ex GS partner is one too - would speak to the management committee - as well as an external audience - about the ethics of how you can make much money and more importantly, what to do with your money when you make so much.)

So what should GS do with all that money? They could pay themselves less, and pay more out in dividends, which seems to be the most obvious thing to do, but a big charitable investment might make sense too. Yes they have done this already with the 10,000 Women's Initiatives, but it seems like it is time for something else, and specifically around job creation. Last week I sent a meeting request to a very senior person at the firm hoping to meet around this idea... but so far, nothing. In case I can't get that meeting I want to go on record as saying this - Goldman, use your resources to do something, something big, around job creation. This is the number one issue in America right now and we need your help! I do have ideas and will gladly wait in line to share them.

Why should they do this? Because at the core of GS business principles, which you can read here , is the protection and enhancement of the firm's reputation, and it is badly damaged right now.

Principle number two:

"Our assets are our people, capital and reputation. If any of these is ever diminished, the last is the most difficult to restore. We are dedicated to complying fully with the letter and spirit of the laws, rules and ethical principles that govern us. Our continued success depends upon unswerving adherence to this standard. "

You can read the rest but the principles are there to balance profit motivation with a sense of what is right and it does seem that GS is indeed out of balance. Yes Goldman exists to make money, but it does not only exist to do that.

In closing I spent 14 years at Goldman, my husband 15, and it was truly an exceptional place to work. Though we have been gone a long time, it breaks my heart to read stories like the one referenced here. I truly hope that GS responds to all this negative press in a positive way, and chooses to mobilize resources to help our country deal with the huge mess we are in. Why? Because that is what the firm's business principles calls them to do.

John Mauldin, Economic News ..... sorry, not good

I read a lot about the economy, and the one person who consistently talks about the issues that matter to me most is John Mauldin. If you have not already done so, please just sign up for his newsletter and get his detailed analysis sent to you directly. You can do that here....

It is a beautiful day and I am looking forward to spending some time with my awesome kids, but ... this is John's latest. ( excerpt below )

"Like teenagers, we as a US polity have made a number of bad choices over the past decade. We allowed banks to overleverage and, in the case of AIG (and others), sell what were essentially naked call options of credit default swaps, based on their firm balance sheets, far in excess of their net worth; and that put our entire financial system at risk. We gave mortgages to people who could not pay them, and did so in such large amounts that we again brought down the entire world financial system to the point that only with staggering amounts of taxpayer money was it brought back from the brink of Armageddon. We assumed that home prices were not in a bubble but were a permanent fixture of ever-rising value, and we borrowed against our homes to finance what seemed like the perfect lifestyle. We did not regulate the mortgage markets. We ran large and growing government deficits. We did not save enough. We allowed rating agencies to degrade their ratings to a point where they no longer meant anything. The list is much longer, but you get the idea.

Now, we are faced with a continuing crisis and the aftermath of multiple bubbles bursting. We are left with a massive government deficit and growing public debt, record unemployment, and consumers who are desperately trying to repair their balance sheets.

If present trends are left unchecked, we will need to find $15 trillion in the next ten years, just to pay for US government debt, let alone state, county, and city debt. And perhaps some loans for business will be needed? Where can all this money come from? The answer is that it can't be found. Long before we get to 2019 there will be an upheaval in the market, forcing what could be unpleasant changes.

We are left with no good choices, only bad ones. We have created a situation that is going to cause a lot of pain. It is not a question of pain or no pain, it is just when and how we decide (or are forced) to take it. There are no easy paths, but some bad choices are less bad than others. So, let's review some of the choices we can make........" - subscribe for more............

There has been a lot of activity in GOLD of late. My husband's favorite site for 'all things gold' is JSMineset.com

WFN, The Shriver Report, Joan Walsh and Economic News

I just got off the red-eye from San Francisco, returning from the best ever Women’s Funding Network Board Meeting. WFN is a network of over 140 Women’s Funds around the world. What is a women’s fund you might ask? Think of it as an investment model for philanthropy. Think about how you might hire a mutual fund manager to pick the best stocks for you, that are going to give you the highest return on your money, and that is what a women’s fund will do for you with your giving dollars. Their goal is to empower, serve, enable, lift up, and assist women, girls and their families by giving grants to outstanding organizations and leaders. It is so difficult to process all the charitable requests we get, and choose from the hundreds of thousands of non-profits that are out there, so I suggest that if you want to invest in social change with the goal of creating a more just and equitable world, take a look at Women’s Funds. A couple great examples are the New York Women’s Foundation, The Ms. Foundation, and the Global Fund for Women. By choosing to make an investment in all three, which is what I do with my philanthropic investment portfolio, you are investing locally, nationally and internationally across a very diverse portfolio of programs and initiatives. WFN is the networking organization that leverages the collective impact of these funds, and provides them with some tools to increase the effectiveness of the work they do.

This was a very exciting meeting as it truly is a pivotal time for the advancement of women. After years of little to no progress we are seeing amazing energy, insights, research and momentum around greater gender equality. The latest report is called the SHRIVER REPORT, and you can download all 500 pages of it here.

“This report brings together the relentless intellect of a Peabody and Emmy Award-winning journalist who pushed beyond statistics to fully reveal the complexity of women’s lives and the academic muscle of a progressive think tank that understand how to comb through data and illuminate the trends re-shaping the American Landscape.”

It is a most certainly a must read ( which i will start this weekend) as I believe with all my heart and mind that gender equity is the most important issue facing us today. I believe with all my heart and mind that gender discrimination and inequalities are at the root cause of so many of the big problems we face – poverty, violence, environmental challenges, HIV/AIDS, trafficking and more. It is not at gender equality will solve all our problems, but the evidence continues to mount that when women and girls have economic security, access to education, access to health care, can be free from violence, and enjoy basic human rights – the lives of their families, their communities, their countries and therefore the world is better. Investing in women is the key to global growth and sustainable.

For an insightful commentary on this report and reflections on where women are now and why, read this recent oped by Joanne Lipman. She says what I believe to be true, that despite all the headlines about us being in a woman’s world, the real conversation has yet to change. Read on…..

Last night I was honored to have dinner with Joan Walsh, the editor-in-chief of Salon.com. She is truly one spectacular women. We talked a lot about her appearance earlierin the year on The Bill O'Reilly talking about late term abortion and the Dr. Tiller murder. This is a must watch. The history is that Mr. O'Reilly had over time repeated called Dr. Tiller a baby-killer and when he was shot Ms. Walsh had this to say about it. For why she did the show read this. Bottom line we all have to be willing to stand up for what we believe in and engage in intelligent debate around it. Thank you Ms. Walsh for all you do and I will be a paid subscriber to Salon.com for a long time to come. As for Bill O'Reilly, I never watch him anyways and this is the best example yet of what I don't.

Lastly I have to make a brief comment about the economic news today.

Jobs - The unempoyment rate hit 10.2%. ( read more on Bloomberg) I have written about this a lot but until the job situation improves, how can anything else.

Fannie Mae - posts a loss of $18.8 billion in the third quarter. Again, I have written a lot about this disaster and it is already a long post but the problems with Fannie, Freddie, FHA are in the hundreds of billions. For those out there who are calling for government to take over financial institutions, think again.

"Catching Argentinian Disease" is a must read by my fav investment guru, John Mauldin. This is the arguement my husband, ex-emerging markets trader, has been making for years and is why we own GOLD.

GOLD

Gold is the favorite commodity in the Zehner household. No I wish it was because of all the lovely jewlery I have, but rather it is the investment/trade that my husband has embraced for a long time, mainly because of his negative views of the US dollar combined with his inflationary outlook. I have written about Gold before, but what is noteworthy this week is that it has hit new highs. I just checked the price it is at $1090. For all things GOLD check out JSMINESET . Here is what David Rosenberg has to say about recent performance -

"With the dollar soft, commodities are firming with oil breaking above $80/bbl and on its way for a third winning session in a row; the metals are following suit. Gold has broken out yet again and is up another 1% so far today as it begins to challenge the $1,100/oz mark (according to unofficial IMF estimates, the Reserve Bank of India bought gold at $1,045/oz. With the size of the purchase (8% of annual mined production) and at that price it certainly helps establish a floor! The fact that the yellow metal is accomplishing this with ongoing deflationary developments — Euroland PPI came out for September and showed a 0.4% MoM decline and a -7.7% YoY trend — suggests that other factors are driving bullion to new bullish heights. It’s called scarcity of supply relative to fiat currency. "

Are we still bullish? Yes.

Halloween, The Markets, The Economy.....

Well it seems that Halloween occurred a day early this year as something sure scared the life out of the equity markets on Friday! A “very volatile week ended with a 249-point drop” says the WSJ headline on Saturday. This despite a relatively good headline GDP on Thursday, but I guess investors had a chance to dig deep behind the number to see that the economy is not looking too rosy. Many a commentator were quick to say, and I would agree, that if it were not for government programs to pump up housing ( first time home buyer credit) and auto sales (cash for clunkers), the number would have much lower. Of course that was the purpose of the programs, but the problem is how much more of our children’s future will we spend today?

For a while it has seemed to be that the stock market and the economy are disconnected. While equities have experienced a glorious bounce, the economy (jobs, consumer spending, business investment….) remains in poor shape. Looking back, March prices were most certainly pricing in financial Armageddon, but the more important current question is: what is being priced in now? According to David Rosenberg, former ML pro now at Gluskin Sheff, PEs are way too high given the underlying economy.

Let’s take a quick look at the bad news, again. The employment situation remains dismal. The reported number continues to rise and the shadow number had been estimated to approach 17%. The consumer continues to increase savings at a record rate, which is good for them but bad for the US and global economy. Consumer spending accounts for 70% of our economy and it was reported down this week. We can remain hopeful that Christmas sales exceed expectations but honestly, do we really want people to buy stuff they don’t need, and that they cannot necessarily afford?

Can we all just face the reality that the party for the US consumer is over and the painful hangover is unavoidable? ( read this from last year ) The truth is there are only two choices, each more unpleasant than the other. The government can pull back on its stimulus measures in order to rein in the deficit which would cause a deflationary spiral leading to housing prices to fall even further, increasing foreclosures, increasing unemployment and further reducing consumer spending. Conversely, the government can continue stimulus and quantitative easing in order to inflate the economy reduce the real non-governmental debt burden and build support for housing. The problem with this scenario is that the deficit will continue to grow, the dollar will fall, and the purchasing power of the US consumer will decline. I am not sure we can navigate the middle ground between these two scenarios. It seems the government is choosing to spend now and deal with the consequences later, but there will be consequences indeed.

Of note is that CIT, a major lender to small business lender is set to declare bankruptcy, which is really bad news for small business and more broadly. The government has already given them big bucks ( $2.3 BB) and because they do not represent “a systematic risk” to the system they will not be rescued. They are the 5th largest bankruptcy in US history. Not good…..

pictured here - my two adorable children in their costumes! We need a reason to smile...