Capital Insights with Jack Kern: I’m Dreaming of a Bleak Christmas…


This is an unprecedented time, as far as I can tell. In the height of the holiday season, when thoughts usually turn to snow angels, twinkling lights and shopping deals, the reverie usually reserved for festive parties has been stolen and replaced by endless news about layoffs, failed federal policy responses and endemic fears about losing one's job. Recently it has come to light that the TARP initiative has failed to provide any modest level of relief for the property sector because the banks taking advantage of the funds haven't followed through on loosening credit standards to average borrowers. Although the TED spread has fallen a bit, indicating banks are starting to trust one another again, generally credit markets aren't in much better shape than when this mess got started.

I guess the only thing left to do is to laugh. What else is there?

The former Chief Economist for the National Association of Realtors (I won't embarrass him by mentioning his name here) recently admitted to being overly optimistic and spinning the realtors message so it wouldn't be so obvious that home sales were in the tank. I guess they didn't think the loss of 125,000 realtors in their ranks wasn't going to be noticed, any more than the complete lack of home sales in, well, the entire United States. At least he finally came clean on what had become an industry joke about their economic releases. Now, unfortunately his replacement is onto the same tact, spreading meaningless information based on their wishlist. It just makes you wonder.

Sam Zell, one of this country's most successful owner/developers announced recently that the housing recovery should begin by next spring. Well if Sam Zell said it, by golly it better happen. We all know how powerful he is and I'd to see what happens if it doesn't. I just imagine Sam selling his interest in the Chicago Cubs (I don't get the Cubs/Sox rivalry, but that's for another column) and then buying the National Association of Realtors. I'm sure he'd streamline that organization, get rid of the management bloat, and then figure out how to get home sales moving again. He's probably change to the name again, maybe calling it Equity Association of Realtors, but that's for him to decide. You can just imagine Sam's bear cub likeness, pointing his finger at you, like Uncle Sam (coincidence, I think not) as their new logo too.

Lastly, I wanted to talk about Ben Bernanke. Poor Ben, who has been beaten up pretty unceremoniously by the Congress, by the Treasury Department and now by the press. With people screaming about what the Fed should do, things are bleak. Well, the bag of tricks is empty and the magic smoke isn't working. It is likely that the Fed funds rate will be discounted again to it's lowest level in the history of the Fed, which makes us a lot like Japan, where deflation and the unwillingness to write down assets caused their economy to essentially collapse. In fact Japan still hasn't really recovered. So adding Fed liquidity to the markets isn't going to matter very much. I wonder what Ben wants in his stocking this year?

If you have time, buy a car. The deals are amazing right now and you can save a ton and help the economy at the same time. Sure, it's probable you won't be able to get parts or get it fixed, but I don't think you're in any danger of seeing a lot of same models in the future. And for as long as you can keep the thing running, you'll be feeling very patriotic! Who knows, maybe that GM or Ford will become a collectors item and you can make your investment back on ebay sometime in the future?
 
Jack Kern is the Managing Director of Kern Investment Research and planning to be out of town during the presidential inauguration, since 5 million people are going to descend on the nation's capital and wreak havoc with traffic, and all of the beer, pool and chili joints he likes to visit. He can be reached at jkern80124@gmail.com or 301-601-1900.