If one listens to the press, all of a sudden the economic world that was in total free fall all of two months ago is suddenly not that bad.  So, which is it?  Is the world on the verge of total economic collapse or are we all living in a world where we just might make it out alive.

I don’t know, I’m not an economist, but I will point out a few things and let you decide.

Foreclosures continue to rise while property values continue to plummet.  Not fall, plummet.  Some areas of the nation are seeing property values falling by nearly half.

Bank or America, JP Morgan Chase, Goldman Sachs and Citibank have all reported better than expected results but there is significant discussion on how and when to release the bank stress test results.  Doesn’t that seem odd to you?

Both California and North Carolina have record unemployment

General Growth Properties, the second largest shopping mall operator in the world, declared bankruptcy due to unmanageable debt and a loss of contracts.

Venture Capital investments are at their lowest in 12 years, this means new ideas are now being fueled… new businesses are not starting….

The US has lost 4,197,371 jobs since February 2008 and the layoffs continue in waves

For some reason Ben Bernanke sees positive signs in the economic situation and is “fundamentally optimistic” about where we are doing.

So, what do you think?

Maybe Bernanke and company is looking at information unavailable to the rest of the public but all that I see is negative.  I want to see true signs of recovery, I want to see that the nation – and the world – is turning around but I simply don’t.  I simply cannot believe that things have turned for the positive.  If the banks were strong – truly strong – the stress test results would be released without debate as to how to do so.  If things were bottoming – let alone growing – the layoffs would not be continuing at such a large clip.

Bottom line, for me, I think the worst is yet to come.  GM and/or Chrysler will go into bankruptcy, major banks will go under or be nationalized, and unemployment will continue to rise – I still believe 10% is going to happen this year.

So, what do you think? Am I missing something?

As of this writing (12:30 PM central on 1/2/09) the DOW is up roughly 4.92% in the last 3 trading days – roughly a gain of 419 points.  In that time nothing has change in the economy, and actually, the news that continues to surface points to bad economic fundamentals.

Just take a look at what has come out in the last three days..

Ford expects an industry wide fall in auto sales of 35% in the month of December, year over year

Manufacturing orders hit a 60 year low

The manufacturing index drops to a 28 year low

Continuing Jobless claims rise in December, point to hard 2009

It is said by many that the stock  market looks forward roughly 6 months. That is to say the price today reflects the economic activity in 6 months.  With the news that is continuing to hit the market, there is no way one can reasonably expect such a quick economic recovery.  I would say that the stock market has moved too far, to fast on no positive data.

This may be due to the new year or because Obama will be taking office in a matter of days, no one can be sure for the 5% move, but I am very wary of such a large advance on no fundamental change in economic forecast.

Update at 3:15PM: The market closed up above 9K, up 6.1% in the last 5 days.  Is this the famed Santa Rally?  Also, Martin Feldstein, Harvard Professor of Economics, believes the economy will be worse off 1 year from now.

Let’s face it – you were not spending money this Christmas.  

You got your gifts for those you love, and you made sure everyone you wanted to have something was taken care of but you sure were not spending like you you have in the past.  Last Christmas I bough a flat screen TV for my parents, this year they got gift cards….

It’s OK to admit it, there is nothing wrong with making sure you have money when you are not even sure you’ll be employed in the next six months.

What we all know was finally confirmed by retails – traffic the weekend before Christmas fell 24% and sales fell 5.3% compared to last year.  That is the biggest drop on record and a major ouch for an industry that expects to pull in roughly 50%  of their sales during this period of the year.

Acts of God also impacted retailers before Christmas.  In the two weeks leading up to the holiday there were a number of major snowstorms in North America and temperatures dropped to almost 0 for days on end. While people sure didn’t have money to spend the weather didn’t help the cause either.  

So do we start the Bankruptcy watch on the retail sector?  Who is to go first?  

What a number of people seem to be ignoring, or simply not thinking through, but what happens when these retail companies go under?  Their locations are empty.  People are not running out trying to start businesses in this economy, so what will happen to the location that is sitting empty? To realistic options come into play.

1. The company going under will sell the property for pennies on the dollar simply to pay back creditors
2. The company that went under will have to break contracts with the real estate investment trust, the organization that actually owns the property, which will cut into the REITs cashflow. 

Depending on the financial strength of REITs specializing in retail property, we may know where our next wave of bankruptcies make take place. (After retail, that is!)