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alstry (< 20)

Amazing Week of Destruction



September 12, 2008 – Comments (7)

In one week, we saw the equity of Fannie, Freddie, Lehman, and WaMu pretty much get destroyed.  We watched these four financial companies, which once had a combined equity value of over $200 Billion recently, pretty much wipe out shareholders.  $200 Billion dollars of equity gone.

To put that number in perspective, it would have been almost a 10% Total market correction about 15-20 years ago.

It is not only an amazing amount of money, it is an amazing number of important financial companies in such a short period of time.  If these four, who is next???  Most very large financial companies hold similar assets.  How much equity are we contemplating?  Isn't the stock market an equity market????

As a nation we are watching our wealth evaporate at the fastest rate in history while Wall Street is projecting over 20% earnings growth next year....who are they trying to fool?  Our home prices are crashing, so is our commercial real estate and business values.

There ain't much left after that.  Especially when the economy is so leveraged.  If home prices drop 40% more, ALL equity in the American home is wiped out.

When you build an economy on leverage.....deleveraging destroys the economy.  We are now well into that process.  Our housing is being destroyed.  Businesses are being destroyed.  Unemployment is skyrocketing and our municpalities are running out of money.

In this environment there are few "safe" places.  America's slowing will cause the world to slow as well.  The crazy part is that we are just in the early stages of this process. 

You will hear terms like adverse feedback loop and others simply describing a process that feeds upon itself.  Along the way, Wall Street will try to tell you we are at the bottom.  Until leverage comes into balance with revenues, there will be no bottom.

At this point, we are not even close and the decay is accellerating.  It seems like more and more are becoming aware of this fact.  How long it will take to play out is anyone's guess.  But as it plays out, expect to see lots more road kill along the way.....


7 Comments – Post Your Own

#1) On September 12, 2008 at 4:05 AM, DemonDoug (31.34) wrote:

Up next: NCC.

and hopefully for the love of all that is holy, SPF, which should have died a year ago.

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#2) On September 12, 2008 at 4:10 AM, alstry (< 20) wrote:

As a result of the above deteriorating economic conditions, we will see signifcant foreseeable social consequences including skyrocketing  unemployment and increased foreclosures.  Domestic crime will increase and our liberties will likely get curtailed.

A growing number of U.S. towns and cities are fighting escalating crime by imposing tough curfew ordinances.

Don't worry, we will be told that our liberties are being taken away for our own good and safety.  But in order to distract us from our domestic strife, expect our politicans to escalate foreign tensions through rhetoric and reactions.

We can already see it in South America with Bolivia and Venezuela kicking out ambassadors.  In the Caucuses with the Ukraine and Georgia.  More recently with Pakistan, Afghanistan and Iran.  And superimposing itself upon all of the above is Russia acting as the new policeman of the world as many Europeans have recently developed a very negative view of us not seen in many generations.

Add up the above, and we do not have many friends standing by our side when we might need them the most.  America's economic plight is no secret around the world.  It is mostly here that the people remain in the dark.  Notice none of our politicans are addressing how to solve our problems...they are only making empty promises.

The question now is how does America, as a nation, wake up and start to address the issues destroying 200 years of economic progress?

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#3) On September 12, 2008 at 5:41 AM, Donnernv (< 20) wrote:


Real world protection.  Glock 19 and Mossberg 590.  I have them in each home.  Rather have and not need than need and not have.

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#4) On September 12, 2008 at 7:47 AM, alstry (< 20) wrote:

In the environment we are contemplating, it is doubtful guns will be helpful nor will they likely be permitted as laws will likely be changed for our own protection.

Remember, there are fewer and fewer American industries making any profits any more.  Autos, airlines, and construction are so deep in debt they must restructure.  Same with banking.  Evidencing this is the stress for retailers and restaurants and rising commercial vacancy rates.

Since we can't raise wages due to international constraints, bankruptcy/restructuring is the only way to go.

Since government needs tax revenues to operate.  And taxes are a product of do you suppose government will raise taxes if few are making sufficient income?

Right now the government owns Fannie/Freddie and the portfolio of mortgages.  Each time a house gets foreclosed, the government owns that house.  What is next?  The autos, airlines, banks, retailers......????

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#5) On September 12, 2008 at 9:44 AM, dinodelaurentis (83.46) wrote:


i see your glock 19 and mossberg 590; raise you an AR-15, two navy SEALS and 36 years of martial arts.

God helps those who help themselves.


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#6) On September 12, 2008 at 2:25 PM, jegr5347 (< 20) wrote:


I believe you mentioned once you were a lawyer. Is corporate/bankruptcy your specialty? Are you looking for any accounting guy to assist you?

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#7) On September 12, 2008 at 5:01 PM, Donnernv (< 20) wrote:


I didn't want to look like a nut, but I'll add to the list two Bushmaster AR-15s, a Kimber 1911 .45, a Dan Wesson .357 magnum and an S&W .38 Police Special.

Not quite as nutty as it sounds.  Split between two houses and my wife likes to shoot too.

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