Talking Points

"Sign, sign everywhere a sign. Blocking out the scenery, breaking my mind. Do this, don't do that, can't you read the sign?"

Five Man Electrical Band, 'Signs' 1970

On occasion, signs can be misleading. Most recently would be May's consumer spending numbers, an indicator that the economy is improving as we Americans are getting back to our old spending habits again. Since the consumer makes up more than 70% of the economy, this is great news. At last, the signs of the recession's end is near.

Not so fast. Many times the answer is in the message. However the message is cryptic so it requires a little more investigation.

We, as individuals, will go through many phases to reach acceptance.[1] Initially we are shocked (think the "itsy-bitsy-tini-weeni-yellow-polka-dot bikini"). We then begin to negotiate (Sweetheart, it's not so bad, if...). We then become apathetic (Is there really anything I can do about it now?). We move to acceptance (I can live with that).

In a more serious tone, we have also witnessed this with divorce in America and now, with home foreclosures. What was once appalling is now acceptable. On occasion, we are still flabbergasted. Maybe for you it was Tipper and Al or, for me, it was when my neighbors walked away from their home.

Today, more people are locking the door and walking away. But before they do so, AND should it be said, ruin their credit along the way, they do what they need to do: purchase those items they will need in the near future before their ability to do so is taken away from them. If you ponder this point for just a moment, knowing that one's mortgage is usually their largest monthly expense, it would not be unreasonable to surmise that the homeowner has known for months that they would no longer be able to afford their ever rising mortgage and they would eventually have to "walk away". Therefore it makes logical sense that they would stop paying their mortgage while they continued to reside in the home freeing up cash flow for other purchases.

Hence: an increase in consumer spending.

Keep in mind that these individuals will soon be foreclosed upon and will once again need to apply earned income to rent and when they do, consumer spending may again take a decisive drop.

Also, keep in mind that this housing boom really got into high gear in 2005. Many people took out 5/1 ARMS which means their five years are basically up. The early effects of this housing correction took place with people who simply could not afford the homes they purchased in the first place. This next phase is affecting neighbors like yours and mine.

The signs are always there. Some are cryptic and others are misleading. Worse, some are downright dangerous. Like the recent road sign I saw that read "Blasting Zone Ahead."

Thinking it through, I wondered, shouldn't that sign read, "Road Closed"?

"Come on everybody...we need to put our helmets on. There is a blasting zone ahead. Remember last year we lost little Timmy ..."

The signs are always there. How they are interpreted is left to us.