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alstry (35.28)

America Shutting Down!!!!!

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11

July 29, 2008 – Comments (6)

Bennigan's declares Chap 7.  Thousands of Jobs Lost and Hundreds of Retail Locations Dark.!!!!!!  Mervyn's Declares Chap 11.  Expect lots of closings...especially in California.

Now Chrysler stops leasing cars.  Ford and GM are making it more expensive.  All three companies are laying off tens of thousands of workers and shutting down plants around the country.  Do you think ending lease programs and making it more expensive is going to stimulate auto sales?

MER is selling billions worth of mortgage assets at $0.20 on the dollar.  Hundreds of Billions of similar paper is listed as assets on the books of Banks, Insurance Companies, and retirement accounts.  What is going to happen when those assets get written down.  How are banks going to replace the income they made over the last seven years from selling toxic paper?  Who are they going to lend money to:

Auto Companies, Airlines, Builders, Developers, Restaurants, Retailers, Mortgage Companies?????? 

Paying interest on deposits without making loans is not a good business model.  Expect many more banks to shut down in upcoming days and weeks as they are forced to mark their assets to market and loans keep defaulting.

At this point, the business model of the following businesses are simply broken and unprofitable:

Airlines, Automotive, Banking, Commercial Development......just these four industries alone direcctly or indirectly account for about half our economy.  Now, healthcare and technology are beginning to suffer.  Very successful salespeople I know are reporting pipelines are drying up.

It is simply amazing how few really understand where we will likely be in just a few months as the rate of debt defaults increases.

America has much more debt than equity......if values drop much further......there will be very little equity left anywhere.

Remember, in order to shut down sales don't neet to stop.....they simply need to slow to the point where fixed costs and debt can't be serviced.  Right now there are many many business that are right at the breaking point.  If sales slow any further.....they will be forced to shut down.

Between Bennigans and Mervyn's alone, we are probably contemplating around 25 million square feet of retail space.  Add in Steve and Barry's and now we are up to 50 million square feet of retail space. 

Who will finance Chrysler.....now that revenues are going to contract further?  What about Ford and GM with about 3/4 of a Trillion in debt? 

We havn't even started to address the Trillions in Commercial Real Estate Debt that is deteriorating.

You will know the SEC is panicing if they try to tighten the rules on shorting.  If stock values are based on earnings.......earnings are evaporating completely in certain industries.....in others, earnings are shrinking rapidly.

You don't think officials are concerned??????? 

6 Comments – Post Your Own

#1) On July 29, 2008 at 5:55 PM, alstry (35.28) wrote:

PENSION ASSETS ARE CRASHING IN VALUE!!!!!!!!!!!!!!!  A HUGE percentage of pension assets are in debt and real estate....those were supposed to be the "safe" asset classes.

Housing:  Falling at the fastest rate in history...pension funds hold a bunch of mortgage paper

Commercial Real Estate:  Vacancies Skyrocketing...in the last ten years pensions have invested heavily in commercial real estate and now prices are imploding

Debt:  Mortgage Debt selling for $0.20 on the dollar......Corporate Bond prices crashing over the past 30 days....debt is a huge percentage of pension assets.

Folks, the total value of debt is much much higher than the value of the stock market....then if you add in housing and commercial real estate.....we are probably looking at over 4X the value of the market.

With Debt and Real Estate crashing....this is why I say America is getting poorer everyday......pretty soon there is will not be much to sell to raise cash. 

What is going to be crazy is when our pension funds start marking the value of their assets to market.  CALPERS alone is about to write off a Billion on one land development deal.  Imagine how many deals there are out there.

Up until the last few days, there was a bunch of wiggle room in marking value.....now that there have been actual transactions.....there is no more jiggle in the wiggle.

What happens if our pension system defaults???

Just ask those in the airline industry.

 

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#2) On July 29, 2008 at 6:40 PM, blake303 (29.27) wrote:

Faux Irish Bars + Jordache + PT Cruisers = Good Riddance! 

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#3) On July 29, 2008 at 6:42 PM, blake303 (29.27) wrote:

Faux Irish Bars + Jordache + PT Cruisers = Good Riddance! 

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#4) On July 29, 2008 at 7:54 PM, DemonDoug (82.77) wrote:

alstry, does this mean we are finally, finally seeing some capitulation?  Based on today's stock movements, I can't see that.  I agree with all your assessments about business contracting, but the house is creating more funny money to keep the game going.

And add into this contracting economy, a dollar that continues to be more and more devalued every day by the actions of the Fed, Congress, an White House, you have a recipe for even more pain and misery.  Get ready for 5 dollar bread, 10 dollar milk, 2 dollar cans of beans.

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#5) On July 29, 2008 at 8:25 PM, alstry (35.28) wrote:

Demon,

This is where you and I part ways.....all the money being created is simply replacing defaulted EXISTING debt.....very little if any is going to new credit to stimulate the economy.  Saving key banks from insolvency at any cost seems to be the primary directive vs. stimulate the economy.

Further, based on my calculations.....debt is defaulting at a much faster rate than money is being printed creating a net decrease in money supply.

To me, that is deflationary if Money equals deposits plus credit....actually very deflationary.

This out tonight from CB Richard Ellis:

“Our second-quarter 2008 results were affected by a notably weakened market environment,” said Brett White, president and chief executive officer of CB Richard Ellis. “As we had anticipated, the leasing business turned down from the strong first quarter, especially in the Americas and the U.K., reflecting weak economic activity and decreasing business confidence. Investment sales activity remained quite soft due to a broadening of the credit market turmoil and a continuing gap between buyer and seller expectations of property values. Decreased investment volumes have now become evident in all parts of the world.

 

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#6) On July 30, 2008 at 1:43 AM, debtRichQuick (< 20) wrote:

Alstry,

 I think me and you think differently as far as the outcome of this situation. The death spiral you're describing is basically a Great Great Nuclear Depression....I don't see that...

 In fact, I think we will be right back on top of another bubble in 5-7 years...this time a new group of 18-23yr old "investors" will be giving you stock tips and calling themself green consultants.

Reason I don't see a great depression...Well, as the rest of the world slows, we are still just about the only game in town. We are.  This should give strength to the dollar as money makes it's flight back to safety. What other economy can take the trillions of global liquidity at once and in a productive manner?  Most global economies are two small to handle a serious dose of liquidity.

Problem I see right now is there is no direction. Obama or McCain. You can lose big money betting the wrong way. So why not wait? It's gonna be another 8 year run anyways...

Buffet and Volker? HELL YEAH!! Obama is clearly a leader and with these two mentoring and consulting him on strategic positioning for the US, we are outta here. Plain and simple man!

The thing is, the bust is because money had no direction. It was spent on unproductive sectors of the economy (bombs and houses) and hence wages and other productive based components didn't rise (after all we weren't producing). It will be different with Obama. Who, I'm hoping gets elected...You see, wealth is a created perseption. If you don't believe me just look at housing. It was a perseption that was created...problem was it's not a productive perseption....just like burying money under your mattress to keep it safe isn't a productive perseption. So here's the deal, once money knows the direction, the perseption of how to get wealthy and what creates economic value will change. It was guns, bombs, houses, and oil....soon it will be green energy, non ommition materials, and zero waste products. The world is talking about it...from Africa, to Asia, to Europe, to Argentina...everyone is talking about global warming, smog, the cost of energy, and waste. Just like everyone from Spain, to France, to Nigeria, to Austrailia, to China, to Canada, to Chile was talking about real estate. Don't under estimate people. There is a lot of power behind value based expectation.

The collapse is sure to happen, but won't be to the extent that you're installing bars on your windows and buying a 50 cal to protect that laptop  of yours that you love so much.

About Chrysler ending leases. It doesn't pencil for them accounting wise. That is why they are dropping it. The leases are no longer an asset when resale value plummits on their crappy products like it does. Those goofs need to make a minivan that can go over a 100K miles and gets over 20mpg before leasing will make them money again.

"Chrysler LLC said Friday its financial arm will get out of the auto leasing business by the end of the month because economic conditions have made leasing more expensive than buying, for both consumers and the company."

It would be nice to debate/discuss with you the next big thing sometime starting within the next 18months...after a really good market shake out.  I mainly hope you become optimistic within the next 18 months because it's really going to suck to have to logically drag someone of your intellect over to where the next game is being played. I'll do it, but I'd much rather you just come with.

 

 

 

 

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