Those of you working or not working every day have a different perspective. Many have gone to vote in primaries to reflect their feelings about the economy and how it has impacted their financial well-being. As I said in an earlier column in Jan. 2008:

More average people are coming out and being more concerned about their vote. Are they as expert as the economists with doctorates? They are when it comes to understanding their own situation. There is a huge disconnect when it comes to interpreting what’s happening on Wall Street, Main Street and my street.

As the economy continues to bounce up and down, have you heard of the new buzzwords that are out in the news? Does Robert Feinman’s “patchwork recession” mean anything to you? What about “ghost equity”? There are phrases of financing you should understand as you try to sort out this year’s economy.

What is a patchwork economy? Certain elements of the economy are really bad and others are totally unaware of the shortfalls. Some industries are doing well while others are doing poorly. Depending on where you’re at, you might think we are in bad shape or in great shape.

The economy has been splintered into so many smaller pieces. You might feel like the economy is doing well if you’re working in any industry supporting the war while your neighbor down the street who got laid off from a mortgage company thinks we’re in a recession already.

What is ghost equity? That’s when you think your house is worth $500,000 with $200,000 left on your mortgage only to find out that if you sold it today you would be lucky to get $375,000.

Where did the $125,000 of equity go? That’s ghost equity. You always thought that cushion of equity was there. You thought that was money that would supplement your retirement or pay for that new Maserati Quattroporte. Guess again. It’s gone.

Home equity was vaporized in the current real estate market. Maybe you pulled some of it out already or maybe you never did, but either way, it’s not there to use any more. Now is not the time to be trying to sell a house.

If you’re beginning to refinance your house to pull out some of the equity, you might find that your appraisal isn’t as good as what you thought it would be. This is becoming a common surprise as more who thought they were sitting on a good cushion of home equity are finding out it’s gone. It’s funny how property taxes are going up with the assumption that your property is worth more.

Other surprises include the tightening of criteria finance companies are using along with hidden fees they nick you with when you want to refinance.

Did you know Washington Mutual will hit you up for another $30 just to send you a payout letter? It seems like they have to collect some extra money wherever they can in order to pay bloated CEO bonuses. These bonuses should never be given out to executives in the mortgage industry who definitely haven’t performed well.

Are We in a Recession or Not?

While some are predicting a recession for the United States, that seems to be a mild word compared to what some are using. Home equity is eroding under people’s noses while other commodities (like gold and oil) are rising in price.

Have you ever heard of the retail analyst Howard Davidowitz? He thinks we’re in for an eminent collapse. He has appeared on various news shows. His expertise is in watching the retail area and consumer spending. He thinks there is a big tsunami of bad credit hitting the economy through poor payments of credit cards.

How many refinanced a home in order to pay off bills and credit cards? How many times can you pull that rabbit out of a hat? The latest reports say that home equity levels have dropped across the board. In some cases, people owe more on their house than what it is now worth. And commercial real estate is being looked as the next subprime debacle.

The U.S. isn’t the only country concerned about economic growth. Even South Korea is watching intently. This is from the Korea Herald in Seoul:

You don’t need a doctoral degree to understand why the Samsung Economic Research Institute recently revised Korea’s economic outlook downward. Global economic conditions are putting the brakes on the Korean economy. A lower growth rate spells trouble for President Lee Myung-bak.

The Lee administration will have to cut corporate taxes if it wants to help Korean companies invest more in work sites and equipment so they can gain a competitive edge. The administration will also have to reduce the tax burden on individuals.

Even economies that we might have thought were resistant to problems are showing slowdowns.

Crippling Combinations Are Adding Up

I wrote back in Dec. 2006 about skyrocketing foreclosures and many didn’t pay much attention. I wrote that there were several elements converging together: job erosion due to layoffs and outsourcing, foreclosures, slumping new-car sales and the lack of vision to see the loss of good jobs in the U.S.

Many didn’t see these same contributing elements acting together in a perfect storm. The rain is now coming down hard and few thought to at least buy an umbrella let alone a boat.

Carlinism: Tips for cutting costs in households better be given to the government as no one seems to be cutting costs there.