Tough times at the Barber Shop

Terry the barber reports people are spacing their haircuts further apart.

Terry cuts hair in downtown Portland, Oregon, in the basement of the local Wells Fargo headquarters. He's been around for a while and has a good client base. He isn't losing many customers (a few, but not many), but his business is down 20-25% and he attributes it to people letting their hair go a little longer between cuts.

He's philosophical. But he left my hair a little longer than last time. Maybe two weeks longer. No fool there.

Progress?

We may be seeing a few signs of progress.

New Realism. Only the politicians are still talking about getting things back to the way they were. Even with them, it is beginning to sink in that the People are Really Mad. You can get away with a lot when nobody's paying attention, not so much when they are. People are on the cusp of paying attention, and they don't like what they see so far.

Nationalization of the Banks. Even POTUS is publicly discussing the Swedish alternative for dealing with the financial crisis. He's giving the American people the choice of a Japanese or a Swedish outcome. He notes we have a different political culture and society than Sweden, but the last time I checked, the U.S. didn't look much like Japan, either. So, we'll be finding our own way, but with a due regard for the experience of others.

Socialism. Right now the social agenda of the new administration is completely on hold. Be interesting to see if health care reform gets lost in the shuffle. But if the public mood continues to shift, there will be a new focus of the strands in American culture that emphasizes collective effort, community action, fairness and equality, rather than those celebrating the free market efficiency, meritocratic individualism and personal freedom for anyone who is not a free-thinking pervert of color.

Remember the hung bridge loans of the LBO Boom?

They don't get much attention these days. This time last year, there was a school of thought that held that cov lite LBO financing posed a greater risk than structured finance product to the balance sheets of global capital markets institutions. Of course, this time last year, the SIVs and other off balance sheet arrangements hadn't been brought back onto those balance sheets.

Still, those loans were made, and they are sitting somewhere (in the case of Lyondell, on a bankruptcy schedule). But they aren't getting much attention, at least not publicly. I have to wonder if that's because they were quietly and successfully written down and placed while the media frenzy was focused on other issues, or if like landmines left over from some long ended conflict, they aren't still a lurking danger.

Tonight's prediction--this is going to be a long, variegated and unpleasant ordeal. The impact will fall unevenly, the sequencing of events will be uncertain (but interelated), and the closer you were to the point of impact the worse it will be for you.

In other words, for a change the American homeowner and the London investment banker are going to feel the impact more than the Japanese apartment dweller or the Brazilian shopkeeper.