Ooh la la! Now, Northwest Airlines has gone belly-up, too. Out of America's seven leading airlines, four are bankrupt.

What did airline executives talk about? Didn't they notice the obvious threat of rising oil prices? Were they stupid, or were they just unable to do anything about it?

We don't know. We would like to feel superior... to think that we wouldn't have made the same mistake. Yet, but for the grace of God, we might all go Chapter 11.

Sometimes each step you take seems like the right one; but before you know it, you are trapped in a swamp and then, it's too late. You are in a position in which any step you take will be difficult and painful.

This is true in business, in war, investments, and even love affairs. "How did I ever get myself in such a jam?" you ask yourself. Then, you can retrace your steps; they almost always lead all the way back to a few innocent little baby steps you took long ago. You began a harmless flirtation with the woman at the flower shop; the next thing you know you are shacked up with her in a hotel on the Left Bank!

Or, you began buying a few stocks...they rose. So, you bought more...they rose more. So, then you bought more on margin! Everything goes along just fine until you receive...
 
The margin call from hell!

"The market went down again last night," says the broker who encouraged you to buy the stocks. "Your position is underwater. You'll have to send another $50,000 or we'll have to liquidate it."

Now, your back is to the wall. Even if you have the money, you have to ask yourself an important question: Do you feel lucky? Well, do ya? You could put more money in, but it's a losing position. "Cut your losses, the pros tell you, "let your profits run."

In the last 12 months, comes the latest report, house prices in Southern California rose 17%. People feel lucky. In many communities, the average house is priced at $1 million or more. This means a gain of $170,000 in the year, or more than $14,000 per month for doing nothing. (More on doing nothing below) Good work if you can get it.

It's no wonder people are keen to buy more houses on margin. They are doing the right thing... letting their profits run. They put up a very small part of the actual selling price. They bank on further increases. Every step they take seems perfectly logical, sensible and even smart. But every step takes them further into a situation that will eventually be very awkward and unpleasant.

At some point, they are likely to receive a "margin call," but of a different sort. Prices will not rise; houses will not readily sell, even for lower prices. One expert, Robert Campbell, who writes something called the Real Estate Timing Letter, says his index for the California area has fallen 10 of the last 11 months. When prices fall, homeowners will still be making mortgage payments, while neglecting maintenance in the hope of unloading the property. Month after month the strain of carrying negative-yield property will increase. Eventually, like Delta and Northwest, they will have to give up.

What will they do? They will do what New Orleans residents did when their houses were underwater: Get in the car and leave.

*** What happened that was interesting this week? Stocks were dull...ditto bonds...ditto real estate. But look at gold! It rose to a 17-year high yesterday. Yesterday, the price of December contracts rose $5.60 to $459.30.

*** The Wall Street Journal begins to notice that America's competitive position is weaker than it thought. The Chinese save 40% of GDP, says the WSJ article. The figure is only 1% for the United States. The Chinese graduate nearly four times as many engineers. They have 20 million students at the university level and build 200 new research centers each year. As many as 20,000 new manufacturing facilities are put up every year in China. (When was the last time a single one was built in America?) But don't worry. America still has the world's most dynamic and flexible economy, right?

*** The average cost of a family health insurance policy has risen to more than $10,000, reports USA Today. Some experts think it is as high as $12,000. We wonder how people afford it.

Which reminds us of a routine by an English comedy group, in which one pretends to be an insurance executive... another pretends to know nothing about insurance.

"Here," says the executive. "I'll explain to you how insurance works."

"OK..."

"Well, you pay us money each month."

"Yes...and then what?"

"That's it. That's all."

"Oh...."

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.