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alstry (35.03)

Are We Blind???? Time to OPEN your eyes!!!! No one else seems want to tell

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April 19, 2008 – Comments (3)

Foreclosures exceeding sales in California.  Debt defaulting at an alarming rate.  Billions and Billions, Hundreds of Billions being written off by banks.  AND THE DEFAULTS ARE ACCELLERATING!!!!!!!!!!!!!!!!

Rising commercial real estate defaults.  Rising business defaults.  Rising Municipal defaults.  Rising credit card defaults.  Rising auto loan defaults.  Rising student loan defaults.  Defaults are rising accross practically every debt class.

Because of the defaults banks are tightening credit and business shutting down.  Jobs are being lost by the hundreds of thousands.  For those that are leveraged, once they lose their job they are likley to default on their mortgage and other debt causing more defaults.

Defaults beget Defaults!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! A business shuts down the landlord doesn't get rent and defaults to the bank.

And analysts are predicting a second half recovery?  Folks as defaults keep rising, more inventory comes to market.  More inventory of office space.  More inventory of houses.  As fear sets in, people pull back and spending slows.  SPENDING IS SLOWING EVERYWHERE AND THE SLOWING IS ACCELLERATING.

Just ask the Governors of California, Florida, and New Jersey....they are wondering where their tax revenues are going.  I am sure a bunch of other governors are wondering as well.  Corzine describes it as fighting a rolling stone.

RISING INVENTORY AND SLOWING SPENDING IS A TOXIC COMBINATION.  IT HURTS EVERYONE.

The problem is sooooo many are FULLY leveraged and are dependent on current high incomes or additional debt to avoid bankruptcy.  Now that credit is being curtailed, spending is slowing, incomes are falling, and defaults are EXPLODING!!!!!!!!!!!!!!!!!!!!!

The March numbers for forclosures were unprecedented......and filings are RISING indicating much more foreclosures as we move forward.  The economy slowed further in April also indicating more defaults.

The trends are terrible and gettng worse!!!!!!!!!!!!!!!!!!!!!  For many forms of debt.  Commercial vacancies are skyrockteting.....and thousands of additonal retailers are scheduled to close.

The data this past week as horrible!!!!!  The outlook is even worse!!!!!!   Rising inventory with slowing demand....huge job losses......exploding foreclosures.....banks charging off billions just as we enter into the slow down............can you imagine the charge offs as the year progresses?

The home builders will start reporting data through March.  We are now pretty much finished with the important Spring selling season.  With thousands of foreclosures falling in the same communities that these builders sell, trying to move homes going forward is going to be very difficult when your competition is the bank.  Further, how enthusiastic will your buyers be when the see weeds growing around the neighborhood and unsure whether they will have a job.

You think the bankers are going to want to keep supplying builders with capital when the builders are a key source for the bankers foreclosure REO?  So let's give the builders some additional carrybacks so they can provide a fertile ground for supplying even more foreclosure inventory.

As long as defaults keep rising, more and more businesses, cities, and people will go bankrupt.  As bankruptcies rise, there will be more defaults.  This is what happens when one unwinds a bubble.  And oh my, what a bubble this is!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Welcome to the unwinding of the BIGGEST bubble in human history.  There is no easy out. We must decrease the debt to the point where income can service the debt payments.  As defaults rise, expect interest rates to rise(lenders will demand more for increased risk) exacerbating an already ugly problem.  Check out what Libor did the past few days.  Get ready for some adjustments on adjustables.

American (only the Federal Government enjoys a printing press) incomes must be able to service its debt.  Right now we are a long long way off.  The only solution is to increase income or decrease debt.  Witih wages constrained by international pressures, it looks like decreasing the debt is the way we are going....especially if lenders demand higher and higher interest rates.

We are already starting to see the evidence kicking in.  Rapidly slowing sales.  Jobs being cut by the thousands each cut.  Five airlines shutting down a few weeks ago.  Retailers shutting down.  Commercial vacancies rising.  Foreclosures skyrocketiing.  Hundreds of billions being written off by banks.....and we are still at the early part of this. 

Remember Paulson and Benny said everything was fine just a few months ago.  As the effects of the job cut backs and business shut downs really kick in, expect to see some significant pressure on out government.  You may want to warn your local politician right now....but I doubt they will listen.....they are pretty worried themselves.

Get ready for the delveraging of America.  We are just starting the process and the effects will accellerate.  We are likely to see more bankruptcies in the next 24 months than we have seen in the last 24 years. 

We are a resilient nation.  We have never faced anything quite like this before.  Never have so many been so leveraged and so many others depended on that leverage for their livelihood.  As we unwind, America will learn to live on what it produces......it may be a lot less than many currently think. 

You think the analysts who are tying to sell you "investments" are going to tell you this?  Just take a look at homebuilder MTH perspectus for its upcoming offering (they just paid off their bankers so they could get money from you?....if things were so good, why not just borrow from the bank at a low interest rate and not dilute current owners?), I am sure FloridaBuilder will be the first in line with his order.

Good luck.

 

 

3 Comments – Post Your Own

#1) On April 19, 2008 at 12:14 PM, abitare (58.10) wrote:

FYI - Sinchiruna has a found a great video on youtube
Mr Mortgage on Alt - A 

Informative YouTube Video on Looming Alt-A Mortgage Crisis - Bigger than Subprime!

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#2) On April 19, 2008 at 1:00 PM, EScroogeJr (< 20) wrote:

alstry, why panic? After all, you can make as much money on a falling market as on the rising market. For example, you believe the stock market will collapse? Fine. Sell all equity holdings in your 401K, get into bonds, wait for Dow 7000, and buy the double amount of stocks for the same money. Think home values will drop like a stone? Sell your house, rent for a while, buy back when the dust settles. Better yet, short the Case-Schiller index, ride it down, make $$$, and buy a second house at a price that will be even more attractive than today. If you play your cards right, you should be able to enjoy the coming collapse just as much as you would enjoy a secular bull.

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#3) On April 19, 2008 at 1:39 PM, dwot (97.03) wrote:

Yes, this is a calm before the storm.

 

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