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alstry (36.06)

Tens of Millions of Americans Broke or Going Broke!!!!!!

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May 16, 2009 – Comments (15)

It is amazing...we debate whether unemployment is U3 at 9% or U6 at 16% or closer to respected economist and statistician John Williams from ShadowStats.com's 20%....but after this week and numerous conversations with others.....my guess is when you really peel the skin off the onion.....there are millions upon millions of families in America silently suffering and not counted in the statistics by anyone.

These people would include:  Attorneys, Architects, Airline Workers, Builders, Carpenters, Dentists, Plumbers, Electricians, Engineers, Salespeople, Hairdressers, Waiters, Waitresses, Graphic Artists, Financial Workers.....and I could go on and on and on.....

It is incredible the amount of people in America who have seen their wages reduced in the past two years.  Can you believe the starting salary for a commuter airline pilot is now under $20K?......My buddy who flies for major international airline has seen his salary cut by about 40% in the last few years....how many of you could sustain your lifestyle on a 40% reduction of income???

Architects and Engineers that I am speaking to are scared to death because after this Fall, they have no work and there is little in the pipeline for construction projects.  Attorneys have seen their work loads cut in half or more....

Believe it or not...a close friend of mine who is a top hairstylist has seen his income drop dramatically because his clients can no longer afford to see him or are cutting back on visits.  When I querry waiters and waitresses, generally I get a response that tips are down from the past.

The constrution trades...capenters, plumbers, electricians and laborors have seen incomes drop drmatically as well......

once you add it all up, we are likely contemplating tens of millions of Americans who have seen their incomes evaporate over the past few years but NOT COUNTED AS UNEMPLOYED OR UNDEREMPLOYED as they are still working full time.

The problem is many of these people levered up their lifestyles though 2006 when they were earning much higher incomes and expected incomes to keep rising going forward.  You can pass whatever judgment you like....regardless of your position......we are dealing with a HUGE segment of our society who are homeowners, parents, taxpayers, and charitable givers engaged in many aspects of our economy.

Due to declining incomes and relatively high leverage, many of these people are going broke at different rates.  These are people the Institute of Alstrynomics calls the functionally un/underemployed.  From the outside all looks fine, but behind the scenes, they are silently suffering as we Americans are proud people who try to put a good front on despite personal difficulties.

Evidencing this is credit card defaults are now at record levels.  Even higher end American Express has exceeded a 10% default rate for the first time in history.  Home foreclsoures are at record highs and there is no end in sight for rising defaults as we proceed through the Summer.

As a result of the silent suffering cutting back...it is destroying the incomes of those they used to patronize.  The effect is the inverse of a snowball rolling down the hill sometimes called an adverse feedback loop.  Alstrynomics forecasted this years ago and called it Concentric Contraction and more recently identified and diagnosed the pandemic called the FU virus.

My guess is that 50% of the American population will be diagnosed with the FU virus in the not too distant future....we could see credit card defaults exceed 15% by the end of the year and foreclosures, short sales, and deeds in lieu grow parabolicly.  There are many neigborhoods in across America where homes for sale or vacant homes are more common than occupied homes.... this decaying condition is growing week by week now spreading into more affluent communities.

Based on the evidence observed and conversations had this week....it is clear that the FU virus is now becoming an uncontrollable pandemic.  It has spread to a large number of occupations and now infecting government and healthcare.

I have to tell you...it has spread much further than Alstry anticipated and Alstry anticipated a LOT!!!!!  It is now clear that we are on the edge of a crisis of historic proportions.....a crisis that will likely impact America much more significantly than the great depression due to a number of factors including pervasive leverage and much higher standard from which we can fall.  The social and economic implication are massive.

At this point....things have progressed so far that I am not sure there is much most can do....but CAPs members have the benefit of Alstry and the Institute of Alstrynomics collecting clear and concise data creating a concentrated case for collective change.

A number of others here on CAPs provide excellent insight....but be wary of anyone who tries to tell you things were great in 2006.  Things are much worse than they portray.

Prepare...Deleverage...Save....Play

15 Comments – Post Your Own

#1) On May 16, 2009 at 2:03 AM, neumann101 (93.95) wrote:

I guess that I am an FU unemployed because I really would like a job. I am an engineer, a physicist,and a math teacher,because I have enough money so that I don' t have to work,  and unless someone comes to me, I will indeed say FU... Did I mention that I am white and over 50?

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#2) On May 16, 2009 at 2:08 AM, therebuilder (< 20) wrote:

I think you'll appreciate this:

http://www.realitysandwich.com/money_and_crisis_civilization

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#3) On May 16, 2009 at 3:40 AM, Seano67 (27.34) wrote:

Well, we as a nation have been living far beyond our means for decades now, hogging up the lions share of the earths resources as if that were our birthrite. So pretty much it was an inevitability that this day would come, really it was just a matter of when. We may very well have to learn to accept a lower standard of living in order to become more competitive globally and more 'whole' economically, but that's not necessarily the end of the world, it's just more in line with reality. We lived like kings for a long time, but now that party has come to a grinding halt. Again, that's just more reflective of true reality and the way things *ought* to be. The reality is that middle class, suburban Americans don't need to be driving around in Hummers and buying up 500K homes, I mean our level of materialism had gotten to the point where it was almost obscene.

It's a painful and wrenching process, but Americans are an innovative and resourceful people, and we have been through much harder times than this. We can and will adapt to whatever changes are coming. I have no doubt of that.  Have a little faith, Alstry.

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#4) On May 16, 2009 at 8:00 AM, alstry (36.06) wrote:

Seano,

Alstry has lots of faith.....as a matter of fact he is generally optimistic about the future.......sorta like the period when a patient is going through chemo but is confident he will make it through the end.

Don't you think it is important to tell the patient the side effects of the chemo and offer a bit of herbal tea?

After all, Alstry is the Dr. of Alstrynomics and he has taken the Alstrynomic oath.

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#5) On May 16, 2009 at 8:36 AM, alstry (36.06) wrote:

therebuilder,

That was very good....and if I may quote a small part:

A collapse is coming, unavoidably; indeed, we are in the midst of it. The first government response, the bailout, was an attempt to uphold a tower of money that is far beyond the total value of real goods and services it promises to redeem. Predictably, the bailout was a miserable failure. The next response, Obama's massive stimulus package, will fail for a different and much deeper reason. It will fail because we are "maxed out": maxed out on nature's capacity to receive our wastes without destroying the ecological basis of civilization; maxed out on society's ability to withstand any more loss of community and connection; maxed out on our forests' ability to withstand more clearcuts; maxed out on the human body's capacity to stay viable in a depleted, toxic world. That we are also maxed out on our credit only reflects that we have nothing left to convert into money. Do we really need more roads and bridges? Can we sustain more of them, and more of the industrial economy that goes along? Government stimulus programs will at best prolong the current economic system for two or three years, with perhaps a brief period of growth as we complete the pillage of nature, spirit, body, and culture. When these vestiges of the commonwealth are gone, then nothing will be able to stop a massive inflationary surge and currency collapse on a global scale.

Alstry's role is simply to document the facts as the contraction moves forward.....that said, it is truly amazing how may can't see the storm they are currently swimming in.....

CAPs has been a very interesting social experiment.

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#6) On May 16, 2009 at 8:40 AM, alstry (36.06) wrote:

rebuilder,

If I may add this:

Various pundits have observed that the Bernard Madoff Ponzi scheme was not so different from the financial industry's pyramid of mortgaged-based derivatives and other instruments, which themselves formed a bubble that, like Madoff's, could only sustain itself through an unceasing, indeed exponentially-growing, influx of new money. As such, it is a symbol of our times -- and even more than people suppose. It is not only the Wall Street casino economy that is an unsustainable pyramid scheme. The larger economic system, based as it is on the eternal conversion of a finite commonwealth into money, is unsustainable as well. It is like a bonfire that must burn higher and higher, to the exhaustion of all available fuel. Just as fire breaks existing chemical bonds and frees heat, so does our economy break the bonds of community, nature, and culture, liberating free energy -- called money -- in the process. Only a fool would think that a fire can burn ever-higher when the supply of fuel is finite. To extend the metaphor, the recent deindustrialization and financialization of the economy amounts to using the heat to create more fuel. According to the Second Law of Thermodynamics, the amount created is always less than the amount expended to create it. Obviously, the practice of borrowing new money to pay the principal and interest of old debts cannot last very long, but that is what the economy as a whole has done for ten years now.

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#7) On May 16, 2009 at 9:05 AM, OneLegged (< 20) wrote:

FU is running rampant.  My business is (construction related) is down 92% from last year and has actually been declining since 2006.  As a self-employed contractor I am not counted in any of the unemployment statistics.  All of my friends/colleagues are suffering slowdowns in work of at least 65%.  My savings is half gone with no end in sight.  Last year this county issued 211 building permits.  This year so far the county has issued 6.  The countdown has begun.........

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#8) On May 16, 2009 at 9:11 AM, crystlz (66.65) wrote:

Alstry,

 1 rec from me.

I'd like to make a pitch for BAC's unsustainable business model. My wife opened a small CD a few months back and in order to obtain a "special rate" opened a $100 checking account. Now she is being charged $20/month service charge on this account. The CD has a term of 8 months so I suspect they will continue charging the $20/month fee to the interest of the CD. Also her BAC credit card rates were raised with no late payment on her part. My take on this is that to attempt to create an illusion of profitability BAC is consuming it's small depositors at an unprecedented rate. I think the second law of thermodynamics is in play her in Ozark, MO pop.+or- 10,000.

Also, this week 2 Chrysler dealerships were closed after being assured that there would be a consolidation of the two businesses. Once again my wife, who believes what people tell her, now has to travel much further to have her warranty service performed. In addition the warranty fee at the new location seemed, suddenly, much higher than I would have expected. The point here is that  in a population of 10,000, the loss of 80-100 jobs is a significant hit.

I love my TA charts and researching individual companies, but just driving around and looking at shuttered businesses can really be an eye opener.

Perhaps one does not need a weatherman to tell which way the wind is blowning.

peace bro 

 

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#9) On May 16, 2009 at 9:43 AM, OneLegged (< 20) wrote:

10,000 people here.  Last month 1200 lost their construction jobs. 

 More Local News

Property taxes are up 32% on top of a 23% increase in 2008,food going up, gasoliine has crested $2.60 per gallon,  vehicle registration fees increasing by as much a 1/3, police services being cut, tax revenues down by 38%.  Only the wealthy will weather this storm.

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#10) On May 16, 2009 at 9:47 AM, alstry (36.06) wrote:

What we are witnessing now is simply Concentric Contraction accellerating as the FU virus pandemic spreads further and further.

With an economy that is 70% consumer based....we all need others to function in one way or another so we can function.  If the consumer dies....the economy dies and the entire ship goes down with most of us on it.

At this point, there is no doubt the ship is sinking.....and Alstry has known this for a while.  The role of Alstry and The Institute of Alstrynomics is to determine where are the life boats...if any actually exist.

It is a mathematical equation that many have the aptitude to solve, but few have the capacity for creative thought or persistence to perservere against the popular flow.

If I can help a few along the way to avoid some of the pitfalls, that is great.  If you guys can stimulate me and help me find a lifeboat...even better.

It is clear that we are about to go through a period we have never experienced before.  Many nations will go through a similar experience.  The problem is our nation's people are soft....we have lived a relatively affluent lifestyle for many years that is abruptly coming to an end....but this experience will strengthen us......and prepare us and our children to compete in world economy down the road.

Many rich people in America will go broke....many already have.....what was perceived as wealth in the past will not be in the future....such as real estate, ownership in many corporations that go bankrupt, homes that are taxed to practically no value, etc......

The question now is what will be value in the future...my guess is intellectual talent will always be prized.....but what will be the store of value????

I have my doubts about metals.  I think real estate will be practically worthless.  Most current valuations in equity will evaporate and currency will likely collapse.....all of this is a by product of concentric contraction and the FU virus pandemic.

Will the world change in a manner few can currently see???  Absolutely. 

Will most be economically destroyed as a result of it???  No doubt. 

Will fear and panic spread around the world???  That is easy.

Will things eventually work out???  For sure.

Will the world be a better place in the end???  I think so.

But what will be the store of value???

That my friends is the $64K question.

Prepare....Don't Fear.

 

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#11) On May 16, 2009 at 12:20 PM, DarthLordZ (< 20) wrote:

Personally I am cheering for the F U virus go virus go...

The planet is overpopulated by fools who work meaningless jobs ~ well now fewer people have jobs ~

But hey lets credit Alstry and his Alstrynomics for simply stating and reprinting bearish common day newsprints and than having the conceit to claim that he had / has predicted this when in fact he or she had not.

The planet is overpopulated by fools killing themselves to go to jobs they really don't need to further fund idiotic politicians who like cancerous tumours eat away at these earnings used to buy things that we really don't want or need to further fund the evil machine that is our institutions.

I say to you who has bought that large house that you really didnt need on credit you really didnt understand or to you who has bought his or her fourth car when you only have a 3 car garage and only have 2 drivers; I say you reap what you sow.

Those who paid zero down and took out loans to enjoy a ridiculous lifestyle from the ridiculously large loans begotten on overpriced real estate and the returns on legacy assets.

I say F to U

Your all screwed, :) 

Keep up the good work Alstry....

Watch out for the chicken flu....

Salvation will not come at no costs.

 

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#12) On May 16, 2009 at 1:23 PM, crystlz (66.65) wrote:

btw

In the spirit of not losing my focus as the world around me deteriorates I have no debt, rent a house I can afford, garden organically, do home repair and remodelling work, and generally try to be a contributing member of my local economy. I suggest that, perhaps, the greatest store of value may be in the small communities of people who are ready, willing, and able to adjust to life that is not totally dependent upon corpotate control of all products that we consume. My wife is involved with alternative healthcare. It is my opinion that mainstream medicine can not deal with all of my generation that is nearing retirement age. We will all have to take responsibility for our own health or lack thereof.

Having said that, my brother is taking a different tack as a banckruptcy attorney and, quite uncharacteristically, is having some upgrades down to his home. There is more than one path through the fog.

One more observation; one of my clients(net worth +100M) is receiving more family guests this summer at the Lakehouse as family members trained as architects are now searching for new career paths by going to workshops. Even the very wealthy can not support their extended families in the manner they have become accustomed to. 

for what it's worth 

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#13) On May 16, 2009 at 1:51 PM, ikkyu2 (99.23) wrote:

Alstry, how can real estate become 'practically worthless'?  When has that ever happened before?

I always think of Gene Hackman as Lex Luthor in the original Superman movie:  "Son, stocks may rise and fall, utilities and transportation systems may collapse. People are no damn good, but they will always need land and they'll pay through the nose to get it!"

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#14) On May 16, 2009 at 3:45 PM, alstry (36.06) wrote:

ikky,

As far as I know it hasn't...at least not to the extent that I am forecasting.

In Detroit right now....there are thousands of homes available for sale under $10K....many under $5K.

In Fort Meyers, FL...homes that were selling over $200K a few years ago can be purchased in distressed situations for under $50K.

The big unknown is how much is the government going to raise property taxes to meet budget shortfalls.  In my neighborhood, property taxes generally range from about $10K to over $50K per year.

Lately we have been seeing a larger number of higher end homes going up for sale....what is interesting is that there is a common theme among the sellers....the desire to lower their monthly nut due to income deterioration.

And the crazy part is most of these homes are paid in full.....

Most people, even if you gave them the house for free.... couldn't afford to pay the property taxes and mainenance on a higher end home...as time goes by and fewer are making large incomes....in might be difficult to even give away what  are currently very expensive homes simply due to prohibitive upkeep.

The wild card now is how much is government going to tax private ownership of property....my guess right now is much higher than many think.

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#15) On May 17, 2009 at 1:32 PM, OneLegged (< 20) wrote:

This is plain and simply : Rape.  I just this second opened my county's "2009 Real Property Notice of Valuation".

 

Residence:  Value for June 2009 vs. Value for June 2008 -  26% increase

Vacant Lot puchased for Speculation Purposes 2009 vs 2008 - 80% increase

2nd Vacant Lot purchased  for Speculation Purposes  2009 vs. 2008 - 159% increase

 This is a town of 125 people.  All the streets here are dirt.  Literally 25% of the land and houses in town are for sale.  The last piece of real estate to sell here was in March of 2008.  But yet values have increased by 26-156%?  Remember some thing is only worth what someone else is will to pay for  it.  No one is willing to pay anything, but values have skyrocketed.  Its ploy by the count to make up for the 35% drop in sales tax.  With real estate they (the county commissioners) have you by the short hairs.  They have 100% power.

 My business is down by 92%.  Game over.

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