Row, row, row your boat

First, a belated Happy New Year to all our readers and I hope that you all were able to get away from the pressure cooker of the past year-and especially the past quarter-and enjoy the holiday season with your family. I wish you much success in 2009.

It is no doubt a tough time for many reasons, but let us hope that we will see the up{ick that we are all looking for in the next months. For no good reason, I suspect, I am hopeful that we will start to see the recovery late this year, although that optimism is ahead of where most people are thinking. My belief is that effective January 20 the national media will publish positive stories instead of all the negative ones that have been running for the last l8 months-miraculous-but it will start improving my mood instead of having to throw the remote at the tv every time I see my IRA take another hit. However, there is no easy way out now. There is still pain to come, and our industry and its participants will have changed dramatically before the turnaround comes.

At all levels in the channel. we are bracing for even tougher business conditions to start the year than we saw in 2008. The paring of inventories, employees, and the tightening of credit continues. Every day we are seeing notices of businesses closins. But we are also seeing a flow of new products being launched, the continuing of the green movement, and dealers developing new business straregies to ol-lset lois of business in other categories.

There is one issue that to me has not been dealt with effectively by government and is the key issue that will tum the economy around-stemming the tide of foreclosures. This epidemic, in light of the accelerating deterioration of the economy, will only get worse. No one is happy with supporting people who took on more than they could afford, and with the resulting banking crisis that created great wealth for mortgage brokers and banks from 2004 to 2006.

But we are cunently in an untenable situation and we have to find a way out of it soon. As I write, 3Va to 4Vo of mortgages are in foreclosure and l0% of mortgages are in default. About twothirds of all Option ARM mortgagees have negative equity. With all the current layoffs it takes no genius to foresee that in at least the next two quarters these percentages will grow. There are no new jobs to support all those who need one. So there needs to be a policy now to keep people in their homes, which in turn will give a boost to the defaulting mortgage-backed securities.

Taxpayers who did all the right things will be asked to foot the bill for problems they didn't create. It will also lead to fraud by those claiming they cannot pay and choosing to default anyway in the hope of receiving a writedown of their principal or a cut in rates. But that aside, unless we can set the housing market on an even keellit will be impossible to turnaround this economy and our industry. Our industry is key to the rest of the economy. vet falling housing prices have squeeied homeowners' ability to refinance leaving them without money to go out and fuel the rest of the economy. Along with large stock market losses that have affected our 40I/k and IRAs, we have also seen dramatic hits to our net worths that will take years to recoup. But the point is that until these problems are solved. don't expect to see an improvement in the housing market, the stock market, consumer and business confidence, and our industry.

I am not sure of all the technicalities. but the government will have to take action even if they buy up individual loans from at-risk mortgage holders, and even if taxpayers will inevitably have to take some losses. I hope that imposed conditions will allow recapture of prof,its once the houses are soldalthough this will entail more bureaucracy.

Lastly, has anyone questioned why gas is now at $1.50 versus the almost $5.00 we were paying only a few months ago. What has changed? No doubt the economy is down worldwide, but all that I read suggests demand for gas is down only 8Vo. There is a disconnect somewhere- very. very interesting-did someone start getting worried? This is not over!

Once again, I wish you the best for 2009, and look forward to meeting you on my travels this year.

SOFFITS

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