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alstry (35.03)

March Madness CRASH?

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March 07, 2008 – Comments (6)

Jobs getting slashed by the TENS of Thousands.  Oil flying through the roof.  Homes getting foreclosed by the hundreds of thousands.  Our cities running out of money.  Companies and Investment Funds liquidating billions and billions of assets.  Banks losing billions and billions.  Homebuilders losing billions.  Auto companies losing billions.  Food costs getting much more expensive.  Insurance profits sliding.  Dollar falling through the floor.  Profits evaporating everywhere.  Commercial RE vacancies keep going up.  Commercial RE prices falling down down down.  Retailers shutting stores around the country.  Retail sales falling for many retailers.  State sales taxes falling.  Personal bankruptcies jumping way up.  Loan defaults up up up.

The crazy thing about this implosion is that it is hitting the assets the rich own first:  Commercial RE, Corporate Bonds, Municipal Bonds, Expensive Homes, ect.....but the stock market has generally hummed along while asset values crashed around it.  Oh good we can all rest easy.

But now jobs are being slashed.  This could be the straw that breaks the camel's back.  The world is leveraged into RE.  Many banks have 100%, 200%, 300% or more of the bank's assets loaned out to RE.  Many of those loans are starting to fail.  I was just negotiating a RE workout yesterday.  The bank had a bunch of them on the books.  Just as those loans are failing, so is the bank's investment portfolio of bonds.....a very toxic combination for anyone that has their money in a bank.

Next week we get the CPI.  With the dollar crashing and inflation hot hot hot.....can we afford to cut interest rates any further?  $5 a gallon gas anyone? If cutting interest rates is not an option, then what?   CRASH???????????????????????????????????????????????????

Mommy, why are all those people jumping out the window......aren't we on the concierge level?

6 Comments – Post Your Own

#1) On March 07, 2008 at 5:26 PM, alstry (35.03) wrote:

BANK FAILURE UPDATE:

 SAN FRANCISCO (MarketWatch) -- The Federal Deposit Insurance Corporation said late Friday the Commissioner of Missouri's Division of Finance closed Hume Bank in Hume, Mo., with FDIC named as the receiver. Hume Bank's insured deposits will be assumed by Security Bank, in Rich Hill, Mo. As of Dec. 31, Hume Bank had assets of $18.7 million and total deposits of $13.6 million. Security Bank agreed to assume $12.5 million of the failed bank's insured deposits for a premium of 4.26%, FDIC said.

I know one little teeny tiny bank does not make a trend.......yet.

I will update future failures as I see them.

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#2) On March 07, 2008 at 5:30 PM, alstry (35.03) wrote:

INFLATION ALERT!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

From MarketWatch this afternoon:

According to Citigroup, which based its research on AC Nielsen data, food categories with the biggest price spikes for the 12 weeks ended Feb. 23 were: Cheese, up 14.1% Yogurt, up 8.3% Ground coffee, up 7.1% Frozen pizza, up 5.5% Food makers have been boosting product prices to offset the surging cost of ingredients. Corn, wheat, soybeans and cocoa are all trading at or near record highs.Anyone want to calculate what the annual rate of increase is on the above?  Next weeks CPI could be very very very very interesting. Report this comment
#3) On March 07, 2008 at 5:39 PM, alstry (35.03) wrote:

KEEP BUILDING SPECS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

 

CHICAGO (MarketWatch) -- More foreclosure records were broken in the fourth quarter of 2007, the Mortgage Bankers Association reported on Thursday.The rate of mortgages entering foreclosure was at it highest level in the history of the MBA's quarterly national delinquency survey and the percent of loans somewhere in the foreclosure process also hit its highest level. Report this comment
#4) On March 07, 2008 at 6:28 PM, EScroogeJr (< 20) wrote:

The more foreclosures, the better news for TOL if you take the long-term view.

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#5) On March 07, 2008 at 6:40 PM, Tastylunch (29.54) wrote:

I don't know if we can afford to cut rates further, but I don't think our lack of ability to afford rate cuts will stop the fed from doing so. I'm guessing the pain to come in late April after people make their IRA contributions, but truthfully like everyone else I don't really know when.

This isn't going to be your average recession. 

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#6) On March 07, 2008 at 6:52 PM, alstry (35.03) wrote:

MORE HOMBUILDER SHUTDOWNS!!!!!!!!!!!!!!

KB Home on Thursday informed employees in New Mexico, Chicago and its Mid-Atlantic divisions that it would be closing down operations there once all communities under construction are completed.

Remember,  it is all about going to dirt and cash.  Since building a home is a money losing operation these days, the best option is to simply liquidate and rope a dope. 

If you can liquidate your assets and convert to cash and slow operations to wait out the storm you will be OK.  But if you liquidate and still have a lot of debt and spend obligations......turn out the lights.

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