Economy--ITS NASTY OUT THERE!

It's getting nasty out there! Everywhere I look, everything I see tells me things are "different" then they were before. And not for the better. I can now get a seat on the Commuter Rail to NYC. I can get a coffee at Dunkin' Donuts at 8am, with NO LINE. My friends tell me their commutes are easier, their dry cleaning comes back to them faster. They are all telling me that layoffs are either imminent, or hitting their companies NOW. All of this does NOT bode well for the economy. I am not looking forward to the new Economic data for January. It seems like a TON of people have been laid off.

And the next two weeks will tell the tale. As public companies start releasing their 2008 financial results, this is THE time they will be announcing their plans to downsize, or sell parts of their business, or lower their guidance for the foreseeable future. I am starting to hear folks like Bill Gates, and Newt Gingrich say that this is a 4-5 YEAR problem, which would rival the Great Depression.

I have been trying to figure out what it will really take to get out of this morass. The truth is, I don't know. But here are some thoughts on the matter:

1. It won't get better for at LEAST 6 months--that is going to be the time that companies can assess the impact of their current downsizing. At that point, I am hoping, against hope, that companies start to stabilize, as they start to gain some clarity on their upcoming sales cycles. Keep in mind, this is BEST CASE.

2. Commercial Mortgage, and Alt-A securities still have a ways to go on the downside--this can be stopped, but not without some major financial pain. We may need some government intervention, perhaps pushing mortgage rates down to something unbelievable, like 3%?

3. Unemployed people + no job opportunities = desperate people--I am concerned about crime rates, bank runs, depression, failed states, increased terror risks. These are extreme concerns, to be sure. We aren't there yet. But we are getting closer.

4. Entitlement/Health Care Crisis--This is already here, but could become a full fledged nightmare over the next few years. 2011 is coming, and with it, the Medicare rolls start to swell. Social Security goes into the red. It all makes you wonder. "What were we doing to prepare for the storm all those years up until now?"

It's not a pretty picture. I am not going to suggest that we can't overcome each of these issues. But the first step is to consider the worst case scenarios, and take steps to avoid the potential doom.

To start, we need to take bold action. What is this bold action? Not sure. But half measures won't do. If we want to cut taxes, we need to be AGGRESSIVE! Cut Corporate Rates in HALF. Cut all income taxes 5-10%. Or give people a $3,000 per person rebate.

OR

Stimulate spending. BY A LOT. I am talking $2 Trillion here. Or bail out the banks ENTIRELY. At this point, I am getting less and less married to any ideology on what will work, and I am starting to become open to the idea of trying ANYTHING that sounds plausible.

These half measures have been tried. If you want to know how it turned out, ask anyone living in Japan. Oh, and ask them how they feel about their economy. Then duck.

Don't agree with me? Think I need to chill out? Just wait until we get the economic news for January, and the employment figures. I don't need the Fed to tell me what I see every day. It's getting NASTY out there!