Chris Tomaras / Straight Talk / January 3, 2009

I believe that as we enter the New Year, in order to move forward we must first take a painful look in the rear view mirror. I have mentioned before that the definition of insanity is repeating the same mistake over and over expecting a different result. So as we go forward we need to make some serious changes. Does this mean that transitioning from 2008 to 2009, our problems are going to suddenly disappear?

As much as we would like that to be the case, I think the answer to that question is quite obvious. Does that mean that the way we approached and tried to resolve our problems in 2008 needs to continue in 2009? I hope the answer is no. In talking to many people following the election, they said I voted for Barack Obama simply because we need change. Well just know that the change that is going to be required to deal with our country’s deep-seeded problems goes far deeper than a new president. The same problems that reared their ugly head in 2008 are unfortunately still there as we move into the new year.

Economists, Wall Street analysts, corporate strategists, financial advisors and a majority of people in our society base success and happiness on money and the things that money can buy. We live in a culture where we are constantly competing with one another and the stress of succeeding monetarily, has created self-centeredness and a lack of love, concern and compassion for our fellow man. We live it, we teach it to our kids, companies pass it on to their employees and where does that leave us? Imagine ….. your loved one being trampled to death while entering a store because there is a sale going on. That certainly does not reflect well on our society to say the least, yet it is an ugly sign of things to come. We need to come to our senses.

The problem now is that the high powered money people are no longer insulated and are being seriously affected by the repercussions of the financial meltdown. It has made its way to the top of the socio-economic ladder. In order for these people to retain their wealth, they must rely on average Americans like us to spend money.

Don’t be misled or fooled by all of this so-called generosity on the part of our government and politicians and their bailout programs. While some of it is good-hearted and legitimate, a lot of it arises out of selfish motives which will create even much larger problems in the future.

Let’s begin by taking a quick look at the past year in review and to say it has been both a painful and an amazing year is an understatement.

In 2008, now we’re only talking about the past 365 days, in that time, the worldwide economy crumbled. Home prices plummeted, investment banks collapsed and credit froze. U.S. consumer spending plunged, pushing the nation’s automakers to the brink of bankruptcy. Growth in China and other emerging markets withered.

And, on this past Wednesday Wall Street closed out its worst year since the Great Depression after an unstoppable credit crisis, and a dreadful economic outlook has left investors questioning their faith in the stock markets.

A string of financial disasters culminating in the collapse of Lehman Brothers in the middle of the night this past September precipitated the third biggest percentage loss ever in the stock market..

By November 20, the S&P had hit an 11-year low, destroying more than a decade of returns for many Americans and wiping out memories of record highs reached just 13 months earlier.

When all was said and done, the S&P 500 had lost over $5 trillion from the previous year.

The bursting of the housing bubble began a long chain of events culminating in the worst credit crisis in a generation.
If you lost money in the stock market in 2008 don’t feel alone. Can you imagine that there were only two stocks in the Dow that ended higher for the year: Wal-Mart Stores and McDonald's Inc. Investors bet discounters like Wal-Mart and inexpensive fast-food restaurants would be the few places consumers spend scarce cash as unemployment soared and the economy crumbled.

The biggest decliner on the Dow was General Motors, which fell 87.1 percent for the year as the company was compelled, along with other automakers, to plead for funds from Washington in an attempt to avoid bankruptcy.
On the S&P, the biggest decliner for the year was insurer American International Group, commonly referred to as AIG, which fell 97.3 percent after agreeing to an $85 billion bailout from the Federal Reserve in exchange for government control.

Late Tuesday, the U.S. Federal Reserve provided clarity on its plan to reduce mortgage costs and set a goal to buy $500 billion in mortgage-backed securities by mid-2009, a move that surprised analysts in its aggressiveness.
By buying back the securities more quickly than expected, investors hope mortgage rates will fall at a faster pace and stimulate the beleaguered housing market.

My problem with all of this is that interest rates once again are being lowered into a vacuum as they were after 9/11 when the speculators leveraged the market to unrealistic levels. Now what we are facing are lots of people out of jobs, and the average person who would like to buy a home does not have the down payment or cannot qualify with enough income or a high enough credit score. So how can you absorb the enormous and continuously increasing supply of houses without 2 things happening, either speculators once again stepping in or foreigners buying up the market? Neither choice is particularly appealing in my estimation.

In the past year we have experienced a number of historic events including the following:

The election of our first Afro-American president

The US Senate and House of Reps are both now led by the Democrats.

The fed funds rate, the rate that the Federal Reserve lends money to its member banks is .25% pretty close to “0” no matter how you look at it. That means the fed is giving money away for free.

Socialism and big government is winning

We have seen the end of Wall Street as we knew it for decades.

FNMA, Freddie Mac, AIG and INDY MAC are now controlled by the federal government

Lehman Bros has gone bye-bye

JP Morgan owns Bear Stearns and WAMU

B of A owns Countrywide and Merrill Lynch

Wells Fargo owns Wachovia- all three crossing the limits of the anti- trust laws to set up major monopolies

Morgan Stanley and Goldman Sachs, former investment banking firms are now banks

The Big 3 automakers are close to bankruptcy

State budgets are in trouble looking for handouts

Unemployment is on a steep rise

Gasoline prices rose to over $4/gallon before collapsing

Commodity prices in 2008 plunged the most in five decades

The Gov of IL tried to secretly sell Barack Obama’s US Senate seat to the highest bidder.

Consumer confidence is at an all time low. Imagine that!

Our Government gave banks multi billions of dollars to stimulate lending – but forget to require them that they needed to lend the money

The Government and our banking system figured out making mortgage loans to those who could not afford to make their payments was probably not a good thing.

The Government and our banking system figured out making 100% loans for overvalued homes was probably not a good idea.

Foreign investors are extremely upset with the US for selling them securities made up of bad home loans.

The Government and the SEC figured out they should probably oversee and regulate the $55 Trillion credit default swap market especially since they found out it was a major contributor to the financial meltdown.

And all this stuff went on …. just because people bought houses they couldn’t afford

And by the way the Banks lent these people the money for houses they couldn’t afford

And by the way quasi gov’t agencies like FNMA and Freddie Mac and Wall Street firms like Lehman Bros and Bear Stearns, bought the mortgage loans from the lenders who made the loans to people who couldn’t afford to make their payments.

And then these same mortgage loans were packaged and securitized and sold into investment portfolios all over the world in such huge amounts that it is threatening the collapse of the entire world economy.

And the final culmination of events in 2008, the cherry on top of the hot fudge sundae so to speak– The SEC finally discovered after some 30 years of operation, Bernard Madoff and his $50B ponzi scheme.

Would you say that maybe things have gotten a bit out of control through over-indulgence, greed and this insatiable love of making money at any price?

Yet, government wants the pain to instantly go away by giving out money enabling us to continue to live in an artificial state of bliss and encouraging us to go out and buy things that we don’t really need.

If you remember on a previous show I mentioned that 30-40% of all jobs between the years 2002 and 2007 were related to the real estate market and the housing industry and they were created from a false euphoria during the leveraging of the housing bubble.

Now all the money people, the government and the politicians are trying to figure out how to get us back to where we were economically. Well, that’s going to be impossible unless we buy in to their false logic.

Did you ever think we would get to a point where government would be complaining that people are scared and saving money rather than impulsively spending and running up debt?

And just as an aside, have you ever noticed how people try to get rich by focusing on other people’s insecurities? They attempt to sell us all sorts of diet books, get rich quick schemes, high paying commission jobs requiring little or no effort, plastic surgery to look younger, infomercials advertising exercise gimmicks to make you look like a body builder.

Their purpose being to make people feel inadequate in order to sell them products that will quickly end up in their next garage sale.

Let’s hope and pray that we learn from the past that there are no quick fixes, there is no instant gratification, and that we are going to have to suffer the consequences of our poor choices.

2008 has been one of the most difficult if not the most difficult year in our lifetime.

So, what does all this mean for 2009?

It is important that 2009 be a year of honesty, reality, healing and healthy growth. It needs to be a time of getting back to basics.

It’s been a tradition in this country that people make new year’s resolutions starting out each new year. These resolutions are normally things in your life that you want to change or do better, so what I would like to do is give you my top ten suggested resolutions for 2009.

1) Think before you spend– save more and stop the impulsive spending – I promise you no matter how much you spend, it will not fill the empty hole and give you the long lasting joy you are seeking

2)  Do not go on a crash diet thinking you are going to lose weight and not gain it back. If you have a weight problem find the root cause of whatever it is triggering you to overeat.

 3) Live your life in greater moderation and enjoy the simple things that we take for granted and stop worrying about things you have no control over

 4) Stop letting money be your idol –which is our country’s greatest problem- the love of money has numbed our better judgment and is destroying lives. People that have idolized money are jumping out of buildings and shooting themselves. Is accumulating lots of money truly that important?

 5) Regularly hug your loved ones and tell them how much you love them- so that you are not looking back someday regretting and wishing that you had

 6) Try and find joy in whatever you do, including your job - I hear a lot of people constantly complaining about their jobs until they no longer have a job. Having a job is becoming a luxury.

 7) Have a servants heart and reach out to others – nothing is more fulfilling than to see the love and joy in someone else’s face when you have gone out of your way to help them.

 8) Turn off the TV commercials - If you look in the mirror and do not like what you see, begin by working from the inside out – I know many beautiful people who do not feel beautiful- true beauty starts from within

 9) Tear up your Wamu credit card or any other credit card – they’re addictive and lead to bad habits- if you don’t …they win – don’t let the banks suck you in

 10) Get your priorities in the right order beginning with your faith in God, followed by your family and good friends – realize that when the chips are on the line – and you’re lying on your death bed, money and all the toys you have accumulated are not going to seem that significant.

Addressing these resolutions can only happen one day at a time so as we wake up to each new day of the new year, I love Max Lucado’s inspirational thoughts from his book “Grace for the Moment”. In the book Max says we all have choices. Here are his choices and what he says about those choices:

We have the choice of Love, joy, peace, patience, kindness, goodness, faithfulness, gentleness, and self-control. To these choices I commit my day. If I succeed, I will give thanks. If I fail, I will seek God’s grace. And then when this day is done, I will place my head on my pillow and rest.

Nowhere does he say it is important that I make a lot of money so I can feel better about myself.

2008 was a terrible year for a lot of people walking this earth and the reason is that we have been overindulging in the wrong things for a very long time. We are now paying the price. We have an opportunity in 2009 to come together to change the world and make it a better place. It’s about family values, it’s about loving and caring about others and it’s about putting our faith where it belongs.  The question is will we have the guts as a nation to stand up for what is right and be able to endure the pain in order to change?

And that’s this week’s straight talk.