Market Recap

The two major stock-market measures – the Dow Jones Industrial Average and the S&P 500 Index – ended the week down big, putting both at levels unseen since mid-1996. In short, investors are expressing little faith in near-term economic prospects and even less faith in any of the proposed government anodynes.

The latest anodyne is President Obama's $75 billion homeowner rescue plan to pay lenders for altering troubled mortgages while reducing borrowers' interest rates. The plan is voluntary and is aimed at more responsible borrowers, because it requires applicants to document their income with pay stubs and tax returns and to sign an affidavit attesting to “financial hardship.” The idea is to curb foreclosures that have lowered property values.

Unfortunately, we could see an increase in “financial hardships” in coming months. The unemployment rate jumped 0.5% to 8.1%, in February, the highest since December 1983 and slightly above expectations for a 7.9% rate. Some economists think it could hit 10% by year's end, and by some broader measures, we are already there. When marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers reached 14.8% last month, up almost six percentage points from a year earlier.

Any plan to stem the foreclosure tide is worth listing to, but it is also worth noting how less pervasive the problem is than many people perceive. A recent study by USA Today and RealtyTrac found that more than half of the nation's foreclosures last year were in 35 counties, spread among a dozen states. Not surprisingly, most of the foreclosures were in Southern California , Las Vegas , Phoenix , South Florida , Washington , and recession-addled Detroit . Believe it or not, in more than 650 other counties – about one-fifth of the nation – the number of foreclosure actions actually dropped since 2006.

Any plan that will firm up real estate values is a good thing. And reducing the number of foreclosures is one way to do that – as is the slow but steady reduction in excess properties on the market as first time homebuyers take advantage of the new $8000 tax credit. Given this new credit (which is a true credit and does not have to be paid back) along with low rates and the property bargains to be had – now is an excellent time for many Americans to purchase their first homes.

A Simple Business Lesson

Mr. Buffett has rarely been wrong with his longer-term prognostications, so it is worth noting that he, like us, remains an optimist. “ America has had no shortage of challenges,” he says. “Without fail, however, we’ve overcome them.... Though the path has not been smooth, our economic system has worked extraordinarily well over time. It has unleashed human potential as no other system has, and it will continue to do so. America ’s best days lie ahead.” It might be hard to fathom at this moment, but Mr. Buffett will be proven right, and he'll be proven right because of all of us working to make it right.