Fourth of July weekend is a time for celebration and relaxation, but also reflection on the critical juncture our nation faces.

The U.S. has been on an "unsustainable cycle of buying and spending" that cuts across all strata of society, says TJ Marta, chief strategist at MartaontheMarkets.com.

The problem is that with everyone having a hand out -- from illegal immigrants to Wall Street to state and local governments -- the Federal government has now extended itself to the limits of its ability, and perhaps beyond.

Marta sees only two entities with the ability to bail out Uncle Sam - "savings glut countries" like China and the Federal Reserve, a private organization.

Both would-be saviors are getting cold feet, says the former RBC strategist...

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Citigroup this week joined Bank of America and JPMorgan in sharply raising fees on credit cards for late payments, balance transfers and the like.

The banks appear to be trying to raise rates before new consumer-protection rules go into effect. They're also putting the squeeze on the same U.S. consumers whose taxes pay for the industry's ongoing bailouts.

TJ Marta, chief strategist at MartaontheMarkets.com, sympathizes with the outrage but says there's more going on than just a craven effort by big corporations to take advantage of their clients.

"The banks are not healthy - more money has to go in," he says. "That's why rightly or wrongly we've seen these banks increase the credit card rates."

But the story goes beyond the banks, Marta says: "Everyone wants a piece of ‘Joe six pack's' money"...

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Stocks are falling today after employers cut 467,000 jobs in June, higher than the 363,000 expected by economists. Unemployment rose to 9.5%, a bit below forecasts but still the highest level since Ronald Reagan’s first term in office.

According to the government, 14.7 million Americans were unemployed in June; add in “discouraged workers” who’ve fallen out of the official survey and the figure rises to 19.6 million, according to T.J. Marta, chief strategist at MartaontheMarkets.com. What really troubles Marta is the rising number of unemployed who have little or no hope of finding a job. “Your ‘Wall Streeters’, your autos workers and your housing workers – those jobs are not coming back,” he says.

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From The Business Insider, July 2, 2009:

The rate of crash for real-estate prices nationwide has finally begun to moderate.  Specifically, it dropped from -19% a year in March to -18% a year in April.

No, that's not much to celebrate.  But it's a step in the right direction.

Of course, as your ever-optimistic neighborhood realtor will tell you, real-estate is a local business: Each market is different.

What does that mean? 

Well, in this case, it means that some markets are falling slowly, and other markets are falling like rocks. 

It also means that some markets are falling more slowly than they used to be (a good sign) and some are still accelerating into the depths (bad).*  The rate of collapse in some of the hardest-hit markets, in fact, is beginning to improve.  In more sheltered markets like New York, meanwhile, the decline is accelerating.

How's your market doing?  Here's a run-through of the trends in the 20 cities in the Case-Shiller index, ordered by current peak-to-trough collapse.

Click here to see how individual states are faring.

*Your realtor's implication here--that YOUR market is about to start SOARING--is almost certainly a hallucination.  What is remarkable about this real-estate crash is how synchronized it is: almost every market in the country rolled over at almost the same time. But if you're lucky enough to live in Denver, Dallas, or Charlotte, the collapse is indeed much less severe than it is in, say, Phoenix and Las Vegas.  But then you didn't have the bubble boom, either.

From The Business Insider, July 2, 2009:

Update: The market is tanking. Dow futures are off over 100. In addition to the top-line numbers, the internals are horrible. The work week is now down to 33 hours, the shortest its ever been since the data's been collected.

Original post: Analysts were looking for about 350,000 job losses, so this is definitely a miss.

On CNBC they're now talking about the "two-month" average, to justify how things are still improving.

Unemployment for June has hit 9.5%, compares to 9.4% last month. That subtle gain is the "good news" in the report.

Here's the release from the BLS:...

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More coverage from The Business Insider:

• The Manhattan real estate crashes
• Real estate crash: How's your city doing

It’s been more than a year since Bear Stearns imploded.  At the time, many Wall Street insiders thought that WAS the crisis.  Obviously, they were wrong.  So, what caused the crisis and what’s changed as a result?  That’s the basis of this segment with author and former investment banker, William Cohan.

Cohan argues the global financial system was brought to its knees by the people at the top.  The ‘House of Cards’ author says, “the decisions made by the executives at Bear Stearns over a long period of time” resulted in the firm’s collapse.  The same holds true for Lehman Brothers, Citigroup and the other financial firms that have either folded or needed government assistance to survive.

Cohan points out Wall street firms took great risk they would never advise their own clients to take.  Cohan’s book illustrates that point in great detail. And, just how fragile confidence and trust can be on Wall Street. In the days before its demise, Bear Stearns was borrowing $75 billion a day in the ‘repo’ market in order to fund its operations.  In return for that cash, Bear would use their assets and securities – largely, exotic mortgage-backed securities - as collateral.  Bear’s fate was sealed when their lenders lost confidence in the value of that collateral.  Within days the jig was up and the 5th-largest securities firm was forced to sell to JPMorgan Chase for $10 a share, a mere fraction of what it as worth just a few months before.

While that kind of risk and leverage may have faded for now, Cohan is confident this won’t be the last crisis on Wall Street.  “There’s not a whole lot of financial innovation going on right now... but I’m sure the seeds of the next great financial innovation are being sown already...and that means we’re well on our way to inflating the next bubble.”

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Despite a lousy finish, the Standard & Poor's 500 index rose 15% in the second quarter, its best quarter in a decade. For sure, Fed Chairman Ben Bernanke’s now famous 'green shoots' phrase helped fuel that rally. But "the economy is about to take back seat to corporate earnings and guidance," according to Dan Greenhaus, analyst with Miller Tabak’s Strategy Group. "You can only rally so much on 'less bad'."

While the economy may be getting less bad it’s time for corporate America to put up or shut up. "Some portion of the rally was based, not just on economic stabilization, but the idea growth will follow," Greenhaus says. "If you don’t get that second half of the story it’s going to be very hard to continue to rally equity prices."

Even if earnings and guidance do surprise investors, Greenhaus believes the days of 3% growth are gone; “that’s a fairly ambitious goal going forward,” he says, predicting..."

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From The Business Insider, July 1, 2009:

Six months into the Obama presidency and the New York Times is already running an autopsy analyzing how he could have been so wrong about the economy.

David Leonhardt's bottom line?  The administration was deluded by hope.

We doubt it.  We suspect Obama, Summers, Geithner & Co. just decided that they had to issue rose-colored projections about the unemployment rate and recovery or they would never have a hope in hell of ramming such huge spending increases through.  And if the forecasts proved optimistic?  Well, by then, maybe everyone would have forgotten.

They haven't.

At the time, we noted that Obama was taking a huge risk here: The collapse of the economy certainly wasn't his fault, and, no matter what, recovery was likely going to take years.  If nothing else, we thought, Obama should preserve his own credibility.

And now he has already blown it.

David Leonhardt: There are two possible explanations that the administration was so wrong. And sorting through them matters a great deal, because they point in opposite policy directions.

The first explanation is that the economy has deteriorated because the stimulus package failed. Some critics say that stimulus just doesn’t work, while others argue that this particular package was too small or too badly constructed to make a difference...

See also from The Business Insider:

• Obama's Economic Forecast Threatens To Destroy His Credibility
• Venture capitalists have their worst quarter since 1999 

From The Business Insider, June 30, 2009:

Every politician (except Michael Dukakis) has campaigned on some version of "no new taxes" and most ended up breaking that promise.

It's how we do things in America, and as voters we've come to accept how it works.  We're masochists. We like to be lied to.

Obama said he wouldn't raise taxes on anyone making under $250,000, a promise that's technically already been violated by new taxes on cigarettes and his pledge to sign cap & trade if it gets through The Senate. His aides would say those don't count.

But evens setting those aside, real tax hikes are almost certainly in the works, if only due to the massive amount of new spending (particularly on healthcare) this government has planned. The idea that it can all be financed on the (dwindling) $250k+ crowd is absurd.

Roger Altman of Evercore Partners and formerly of the Clinton administration writes today in the Wall Street Journal:

Only five months after Inauguration Day, the focus of Washington's economic and domestic policy is already shifting. This reflects the emergence of much larger budget deficits than anyone expected. Indeed, federal deficits may average a stunning $1 trillion annually over the next 10 years. This worsened outlook is stirring unease on Main Street and beginning to reorder priorities for President Barack Obama and the Democratic congressional leadership. By 2010, reducing the deficit will become their primary focus....

More coverage from The Business Insider: 

• Thank God cap and trade is a tax
• Obama vows to slam offshore tax loop shut

From The Business Insider, June 30, 2009:

The new hallucination for most strapped McMansion owners is that they'll "rent the house for a year and then sell when the market comes back." 

The happy theory here is that, yes, prices are temporarily depressed, but when the green shoots really take hold, we'll go roaring right back to 2006 levels again.

Most real-estate agents will be eager to tell you that they agree with this theory.  What they won't be able to tell you, as Mark Hanson of the Field Check Group points out, is why.

Even after a 30% fall from the peak, house prices are still too high.  Meanwhile, millions of homeowners are losing their jobs, consumers are still saddled with truckloads of debt, banks are still tightening credit, foreclosures and delinquencies are still soaring, mortgage-mods are a failure, there are still too many houses on the market, wages are declining, taxes are likely to go up, and the economy is likely to struggle for years.

In short, it's likely that house prices will now crash below fair value and remain below it for years.  So McMansion owners sniffing at current prices and planning to "wait until the market comes back" will likely be waiting a lot longer than they think.

Mark Hanson thinks the next segment of the real-estate market to crack will be the mid-to-high end (big houses in prime locations).  Why?  Because so far, those who forked over more than $1 million for their houses have resisted reality more successfully than the folks in lower-end housing brackets, where rampant foreclosures have driven prices down.  But that, Mark says, is about to change. 

More evidence for this view comes from southern California, where Jonathan Lansner has written up the latest sales figures for Orange County.  Note that inventories have shrunk considerably in the low- and mid-tier brackets, which is a good sign (it means the market in these segments is close to equilibrium).  And then note that months-supply for $1+ million houses is still a whopping 13 months--which means no one is paying what McMansion owners are asking.

Big price cuts on McMansions coming soon...

See Also from The Business Insider:

The New Homeowner Hallucination: "We'll Rent For A Year And Sell When The Market Comes Back"