I was reading 'Someday' to Olivia the other night. Maddie protested, but still allowed it and climbed into her bed under the covers. When I had finished, Maddie looked up and she was sobbing. She continued to cry for another 15 minutes. Apparently, the concept of leaving home is too much for this five year old.

Last night we finished book 4, 'On The Banks of Plum Creek'. The girls couldn't even stay in the room while I read about the winter blizzards that stranded Pa in a snow cave when he got caught between town and home.

The summer before, the girls were equally upset to hear about the locusts that devoured their wheat crops, and the prairie grass leaving the animals thin with ribs sticking out.

When the girls jump on the bed, Maddie calls it 'Jongy Fun'.

I'm pissed off!

Everyone is saying that the recession is over. That must mean that the economy is ready for interest rates to return to their (non-manipulated) historical levels of 7-9%? We've gotten so used to cheap money that we now take it for granted. My assumption is that the Fed cheerleading is getting so intense because they've run out of 'silver bullets' and their warchest (and credibility) is wearing thin. I will be shocked if they actually stop buying bonds in October...

Not buying it.

Talk about 'hope and a prayer.'

The government is expecting that the worst is over and that a consumer led recovery will happen in the face of
1) The highest unemployment since the Great Depression. The rate is only going down if you don't count people have been out of work for a really long time.
2) A commercial real estate crash that is arguably only in the 3rd inning.
3) A mortgage crisis that has been little affected by government programs and is just now beginning to jump to prime and jumbo borrowers.
4) The 7th largest economy in the world (California) essentially in a Chapter 11 reorganization.
5) Rising interest rates as the economic outlook 'improves' and the Fed stops purchasing 10 year bonds this October. (1/2 trillion pur ...

US consumers and businesses have become used to cheap credit; it's what helped get us into this current mess. The government response has been geared towards making credit even cheaper. They've done that by bailing out the banks, buying residential mortgages, buying consumer debt and buying long term treasuries. Current 30 year mortgage rates are below 5% and may fall to almost 4% by year end.

Regardless of whether the measures the government has taken will stem the economic collapse, the end result will be inflation. Unfortunately, their options to contain inflation will be limited as raising interest rates is always politically unpopular and would put an added strain on any housing market recovery. Additionally, the Fed will have incentive to keep rates low to finance the monstrous debt that is being built up.

It's unfortunate that the current economic crisis hasn't been used as an opportunity to modif ...

"Should I buy gold?"

It’s probably not a bad idea. I’m working on the right way to play all this. Right now, it’s ‘put everything in t-bills’ as it’s only a matter of time before Citi and B of A fail and there still is a lot of uncertainty as to exactly how that will play out.

Looking 1-3 years out, the end result of all these bail outs is going to be high (possibly hyper) inflation. At that point, government bond yields will go up so they might not be a bad place to park longer term [safe] money. That should also be a good time to be back in stocks, property and commodities. As to the exact timing of all this, it’s hard to say, but essentially we have a slow motion train wreck happening. The first thing I’m looking for is any sign of a recovery in housing. Currently, prices are slumping at over 2% a month. With the 1.5 trillion in option arms and alt-a loan ...