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alstry (35.09)

How bad will things get????

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July 30, 2008 – Comments (5)

DETROIT -- General Motors Corp. is looking to cut its U.S. salaried headcount by 15%, or around 5,000 workers, by Nov. 1 as part of a plan to trim $10 billion in annual expenses, according to people briefed on the plan.

Bennigans lays off 9000.

Aiming to lower labor costs, Nissan Motor Co. offered buyout packages to 6,600 workers at two Tennessee plants, in the latest sign of declining wages in the U.S. auto industry.

Sealed Air cut its annual earnings outlook and said it plans to eliminate 5% of its work force.

We havn't even started to discuss the job cuts from state and local governments.  Things are just starting to perculate in this arena.

For anyone thinking that there is a recovery in commercial real estate....CB Richard Ellis pretty much ended any thoughts in that direction today.

So let's think about this, the outlook for Airlines, Autos, Banking, Residential Real Estate, Commercial Real Estate, Retail, and Restaurants is terrible and the market goes up almost 500 points in a couple days.......

5 Comments – Post Your Own

#1) On July 30, 2008 at 8:37 PM, alstry (35.09) wrote:

If you think the residential mortgage problem is BIG....just wait until Commercial Real Estate loans start souring.  Regional and Local Banks have very significant percentages of their loan portfolios centered in commercial real estate.

From CB Richard Ellis Today(edited on CalculatedRisk):

CB Richard Ellis blamed the decline on slowing economic conditions and the widening credit crunch, "which initially began in the U.S. and has now spread worldwide."

"I can best describe the current environment as being very challenging and still having a high probability of getting worse before we see improvement," said Chief Executive Brett White during Wednesday's conference call.

very challenging and still having a HIGH probability of getting worse????????????????

Now we have many many spec office buildings sitting vacant around the country.  As this debt defaults, expect many bank failures to follow.

 

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#2) On July 30, 2008 at 8:52 PM, alstry (35.09) wrote:

I really don't think many people get the problem....the vast majority of assets on banks and insurance companies books is residential and commercial real estate debt.......many banks have loaned out a lot more to commercial real estate alone than their total deposits.

Much of the debt was written in the last five years.  A significant and increasing amount of BOTH residential and commercial real debt is NOW defaulting.

What the hell is the value of the assets on our banks balance sheets right now?????

This from Denninger:

Let me see if I have this right - I may have it wrong, but I don't think so.

Two weeks ago Merrill "valued" some securities on their books in their earnings report and conference call at ~$11 billion.

Yesterday, suddenly, they're worth $6.7 billion, and is cited as the reason to sell a whole bunch of stock and massively dilute the firm's stockholders.

I suppose Merrill expects me (and everyone else) to believe that these "assets" decreased in value by nearly half in less than two weeks?

I mean, c'mon guys. 

As an aside, 3/4 of the purchase price was financed with non recourse debt...thus one could argue that MER sold the debt for less than $2 Billion.

Remember, it was just last year that Big Benny was telling you the subprime problem was a $30 Billion dollar issue....we are already climbing above half a trillion.

At this point, we really don't know how many banks are insolvent but we know conditions are deteriorating rapidly.

Next week, Chrysler needs refinance $30 Billion on rapidly declining sales.  CA and NY are running HUGE deficits along with a bunch of other states at the same time.  Our Federal deficit is on track to be the largest in history.

Everybody needs money at the same time.  It will be interesting to see how high interest rates go when supply starts flooding the market.

You think we are the only ones feeling this:

British consumer confidence hits lowest level since the survey began in 1974.

 

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#3) On July 30, 2008 at 9:16 PM, Imperial1964 (97.77) wrote:

And on top of that I hear Cramer called a bottom.  We're in for more pain.

But don't lose your head, either.  When the market declines I'm going to start buying, maybe even on the next big decline, if it goes low enough.

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#4) On July 30, 2008 at 9:34 PM, LordZ wrote:

Imperial you'll probably miss the boat waiting.

Alstry, we are over a year into the so called credit crisis, the sun still rises and sets, the skies are blue, and i'm making money hand over fist....

Bush is leaving the white house, what more can a fool want ?

 

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#5) On July 30, 2008 at 9:41 PM, alstry (35.09) wrote:

Lordy, 

Not if you are IndyMac, BearStearns, Bennigans, Steve and Barrys, Mervyns, one of the millions of mortgage and construction workers who are unemployed and can't find a job, we could go on and on....

and the visible pain is now just beginning.

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