None of us bought tickets for the roller coaster ride we are all riding.   We’ve been going up and down and wondering if we are at the bottom yet.   I have words of encouragement for you.

We are near the bottom, but not quite there yet.   Before it gets better, it must appear to get worse.   The worse will come in this fourth quarter and the first quarter of 2009 when many economic government reports (employment, consumer price index, industrial production, business inventories, housing sales, new construction, interest rates),   and thousands of corporations report their quarterly results, including earnings reports ((There will be thousands of disappointing earnings reports.   For example, here is a short list of just next week’s report to come:   On Monday, Halliburton will report before the market opens, and Dow member American Express, SanDisk and Texas Instruments will be out after the closing bell.   Several Dow components will be out with results on Tuesday, including 3M, Caterpillar, DuPont and Pfizer, all of which report before the start of trading.   Tuesday’s late results will be headlined by Yahoo!, with E*Trade, Boston Scientific and VMware earnings also on tap.   Wednesday will bring another busy earnings day, with Dow components AT&T, Boeing, McDonald’s and Merck all set to report in the morning.   Also due early Wednesday are quarterly results from ConocoPhillips, EMC, Freeport-McMoRan, Philip Morris and Wachovia.   After Wednesday’s close, tech giants Apple, Amazon.com and Baidu.com will report, in addition to Sallie Mae and Amgen.   Thursday will bring earnings releases from Dow component Altria, Bristol-Myers Squibb and UPS in the morning, among others. After the close, Microsoft will headline the late reports.   Friday’s release calendar is considerably lighter, with Ingersoll-Rand and Ericsson   headlining the earnings reports. )), losses, and layoffs.   Meanwhile, there will be more companies going into convervatorships or filing for bankruptcy protection.

Let’s admit the obvious right now.   All of that news will be ugly.   We know it will be.   How does the stock market and consumer sentiment react to ugly reports from the public and private sectors?   Like a child in Kindergarten, the stock market always tanks with bad news.   I can guarantee this is true.   It always is.

And then, it comes back.   While I am not big on governement intervention, we do have literally trillions of dollars that governments around the world have committed to shore up threatened markets.   Many industries and segments of our economy will struggle, and some companies will be gone when the roller coaster comes to a stop, but we will not only survive, we will eventually be thriving again.

Be of good cheer.   We will be okay.   For now, you and I need to take a deep breath and say, “This too shall pass.”

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The experts are confused.   Bank presidents, University economics professors, CEO’s running multi-billion dollar International companies, large fund managers, execs of the federal reserve banks, and even our politicians are totally stumped by the chaos in the markets.   Exactly what is happening and why?   A brief chronological review of the fundamental facts actually helps to answer the why.

The mortgage market crumbled, the result of greed, lax standards for income verification, and sub-prime lending.   Partly because of that, but also being steered by it’s own forces, the real estate market hit the biggest speed bump in decades.   Foreclosures overwhelmed the capacity of institutions to handle the administrative nightmare.   FHA was tasked with the responsibility to handle foreclosure workouts but congress has refused to provide the $65 million FHA needs to hire staff.   Could it be congress is preoccupied with bigger problems at the moment?

In a parallel universe, but intimately connected to the mortgage market and the real estate industry, the banking industry started cracking under the pressure of massive miscalculations and mismanagement.   A small crack in the damn started to get wider–let’s call it the credit crunch.   (more…)

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