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alstry (35.28)

Just One BIG Ponzi Scheme!!!!!!!

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August 23, 2008 – Comments (4)

``The fear is that we really may be in a long, continuous financial crisis,'' said Stephen Lieber, who oversees $9 billion as co-chief executive officer of Alpine Woods Investments in Purchase, New York. ``When you have no sense of certainty as to what will happen tomorrow, it's nerve-racking.''

The above from Bloomberg.

Mr. Lieber, you should have a sense of certainty.  Revenues are evaporating.  More loans are going to default.  More companies are going to lose money and go out of business.  More people are going to be unemployed.  That is what happens when there is too much debt and too little income to pay it back.  Just like a Ponzi scheme, you borrow from the many to pay the few until you can't borrow any more.

Now Ford, GM and Chrysler want to borrow $50 Billion dollars????  You gotta be kidding.  In the last quarter alone Ford and GM lost $25 Billion.  How far do you think $50 Billion will go to developing new technology when they were even borrowing billions selling gas guzzlers at enormous profits a few years ago? 

The entire American auto industry has been a Ponzi sheme for the past 20 years.  If they couldn't make ends meet selling huge numbers of very profitable SUVs, how do you think they are going to cash flow selling scooters for a fraction of the profit margin????????

The total cost of the Chrysler bailout in 1980 was $1.5 Billion.  Today, just the interest payments of the Big Three is probably over $50 Billion per year....discounting any pension liability.  Can you imagine how much money these guys have borrowed since 1980 just to make ends meet.

Sure let's lend the big three another $50 Billion so they can make one more year of interest payments.........what about next year.......another $55 Billion?

Until the Big Three are restructured, debt brought into line with revenues, they will never be able to compete with their more efficiently capitalized foreign competitors.  By loaning money under current conditons, we are only fertilizing a much bigger problem next year while putting our country and businesses into even more  debt.

If we are going to lend $50 Billion, let's make sure all of it goes into new technology.......the only way this will happen is if we restructure our auto companies and eliminate much if its debt.

The Big Three are simply the most obvious example of Ponzi sheme financing Wall Street has utilized to make big profits over the past seven years. 

The housing industry with its toxic debt is even larger.  Sure, we will loan you money so you can go out and pay twice as much as the house is worth.....then we will package it up and sell it to your pension fund for a BIG profit. 

As long as people could keep borrowing, they kept spending, builders kept building, and prices kept rising creating more and more leverage.

Just like a ponzi scheme where the scam keep working as long as you can lure in new players, leverage without income keeps functioning as long as you can tap new credit. 

Now everyone is realizing that few are really making anything and making much of productive income.  In the recent past, many were simply borrowing and paying each other......its just few really saw the picture.  Once credit started drying up.....so did revenues....but the debt remained consuming a bigger and bigger percentage of revenues.

It is not much different than a Ponzi scheme.  As long as you were in early and got your money out.....everything was fine....but if you were one of the many at the end......the entire pyramid collapses upon you.

Now people are finally waking up and asking where is the money.  Savings is running out.  People, business, and government are tightening up and office buildings and retail centers are being vacated faster than a teenager and his first fantasy.  Good luck trying to sell your commercial space today.  Same with your corporate debt or multi million dollar vacation home.

Pretty soon people will start to unload their stock porfolios........the question will be will there be anyone to buy with the DOW's trailing 12 month PE now nil and a negative outlook going forward?????

Until we restructure America's debt quickly, just like unwinding a Ponzi scheme, the distress is only going to get worse for the foreseeable future.

4 Comments – Post Your Own

#1) On August 23, 2008 at 3:12 PM, alstry (35.28) wrote:

FINALLY SOME HONESTY!!!!!!!!!!!!!!!!!!

Long road ahead for U.S. economy

Feldstein, other Jackson Hole participants worry about outlook

(MarketWatch) -- There is a palpable sense here at the Federal Reserve's exclusive retreat that the road to recovery will be a very long one for the U.S. economy.

A slowdown in the third and fourth quarter is widely expected, but many economists see a long stretch of stagnant conditions.

"I am worried," Martin Feldstein, a Harvard University professor, and leading economist, said in an interview.

"I think the downward spiral of house prices could be a very serious problem to the economy. There is no evidence that is going to stop," he said. The danger is that this spiral becomes self-reinforcing -- with foreclosures leading to lower prices leading to more foreclosures, he said.

Although the Federal Reserve's latest forecast sees a rebound next year, Feldstein questioned what factors are behind the forecast.

"It is not clear where the lift will come from," Feldstein said.

Alan Sinai, chief global economist at Decision Economics Inc, forecast that the U.S. will soon slip into a recession lasting as long as any in the post-War history.

"What is daunting now is that we've got a lot to go. We now have a weak consumer and after some amount of time, we'll have a weak business sector and a major global slowdown in growth. All of this will reverberate back into the economy," Sinai said.

"And the big wild card is how long does it take to deleverage, consolidate, squeeze down costs and then have some liveliness in the business of financial service,?" he added. http://www.marketwatch.com/news/story/long-road-ahead-us-economic/story.aspx?guid=%7bF8FC9F1B-5362-44A8-9F84-FA7FBC2C7458%7d&print=true&dist=printMidSection

And this is what Wall Street is selling you:

But it is also true that economists at major Wall Street firms are not as pessimistic as Feldstein or Sinai.

"I think the most likely scenario is by early next year things start to work themselves out," said Lewis Alexander, chief economist at Citigroup.

"I don't think we're likely to get a very robust recovery ... but I don't think a more disastrous scenario is the most likely case either," Alexander said. Mickey Levy, chief economist at Bank of America, agreed.

"I think six months from now we will start to see the light at the end of the tunnel of the housing crisis," Levy said.

Hmmmmmmmmmmmmmm.  Isn't that what they were saying six months ago???????????????

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#2) On August 23, 2008 at 4:05 PM, alstry (35.28) wrote:

HOMEBUILDERS SHUTTING DOWN!!!!!!!!!!!!!!

UNFINISHED BUSINESS

In the northeast, Centex Homes and KB Home have stopped construction at a pair of contiguous tracts immediately west of City in the Hills.

Two incomplete model homes baked in the sun Thursday on the south side of Paladino Drive, west of Vineland Road.

No markings indicated this was the Castellina tract of Dallas-based Centex, which announced the new neighborhood’s opening in October.

Unfinished tract walls, utility hookups and tiers of graded lots stretched into the distance south and west of the unpainted model units.

“Because of current housing market conditions, we have stopped operations in Castellina,” said Centex spokeswoman Julie Callahan in an e-mail response to a phone message. “In the meantime, we will maintain the site appropriately.”

A county tract map recorded last September indicates the 48-acre site is slated for at least 99 homes.

“We’re continuing to evaluate our options for moving forward with this property,” Callahan’s response continued. “We don’t have anything further to add at this time.”

PROMETHEUS UNBOUND

Immediately east of the Centex site, KB Home’s partially constructed Olympia neighborhood is home to an abandoned construction trailer.

Dumped outside the trailer’s locked door — where three faded business cards are wedged, one from a county code compliance officer — are blueprints, engineer’s reports and a heap of new homeowner’s binders.

Streets named for ancient Greek mythology icons, including Hercules, Aphrodite, Poseidon and Prometheus, run through the tract. Neat green lawns abut empty brown lots.

In all, 174 houses are planned for 40 acres, tract maps show. Property records indicate the empty lots are owned by GMAC Model Home Finance LLC, a Minneapolis-based financial company.

Last month, the Los Angeles headquartered national homebuilder sold a different northeast parcel for $765,000 — about $2.5 million less than it paid for the land in 2005.

The move helped fuel rumors KB Home is pulling out of the local market.

“We continue to evaluate all our options regarding our Bakersfield-area land holdings,” said Craig LeMessurier, regional spokesman for KB Home, said in an e-mailed response.

BLOWOUT SALE

In Arvin, meanwhile, K. Hovnanian Homes has apparently stopped new construction at its Azul and Brisa neighborhoods.

The New Jersey-based national homebuilder said earlier this week the Arvin project was moving forward after confirming it had stopped construction at two City in the Hills neighborhoods.

But Lupe Chavez, the on-site sales agent for Azul and Brisa, said a blowout sale held over the weekend was in preparation for shutting down the office by the end of September. Existing inventory and model homes are being sold off before new federal laws take effect that will cut a down payment assistance program that has been key to the tract’s first-home clientèle, she said.

About 128 of the tract’s planned 325 homes have been built.

“I’ll be out of a job,” Chavez said with apparent good humor, adding she was ready for a short break after 12 years of selling houses.

Joseph Manisco, K. Hovnanian’s chief legal officer at the company’s Southern California regional office in Ontario, did not return calls seeking confirmation of the stoppage Thursday.

But on Friday, K. Hovnanian’s chief legal counsel said the Arvin tract is not necessarily terminating new construction.

“No decision has been made to close our Arvin communities,” said Joseph Manisco in an e-mail. “Any comment to the contrary would, presumably, be based on speculation as a result of the challenging real estate market in which we currently find ourselves. As long as our customers tell us they want homes in Arvin, we will be building them.”

NORTHERN DISAPPEARANCE

Another national builder with a local presence, Atlanta-headquartered Beazer Homes, formally pulled out of Fresno in June, as well as recently leaving Colorado.

Kern County property records indicate the company owns more than 225 lots here in at least three tracts, though the company’s Web site shows only one active neighborhood in Bakersfield.

A spokeswoman at Beazer’s regional office in Valencia did not return a message left Thursday afternoon asking about the company’s plans for its Bakersfield holdings.

http://www.bakersfield.com/137/story/530684.html

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#3) On August 23, 2008 at 8:25 PM, dwot (61.86) wrote:

Time for the auto makers to fold and their salvageable parts to be sold to the highest bidder and start anew...

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#4) On August 24, 2008 at 1:09 AM, daayoo (< 20) wrote:

Just watch "Who killed the electric car" and It will tell you everything you need to know about American auto industry and how backwards they are.

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