Use access key #2 to skip to page content.

alstry (36.22)

TOTAL MELTDOWN SOON???

Recs

20

March 30, 2008 – Comments (9)

On Friday, UBS finally marked down municipal debt.  Canada is finally accepting commercial paper defaults and mark downs.  Residential mortgage defaults have reached historic levels.  Commercial RE defaults are rising rapidly, espeically condo loans.  Consumer revolver default is also reaching new highs.  Many classes of debt in America are under stress.  Debt is over a $40 trillion dollar asset class with counterparty obligations and supported by collateral or income.

Against the above, asset values are crashing and ncomes are evaporating.  BANK DEPOSITS ARE FLYING OUT THE DOOR as people and business spend down their savings or pay off debt.  Banks loan at 10X to 1 so when a dollar goes out in can impact $10 worth of loans.

So have we have finally arrrived to the day many of us saw were coming?

Outstanding debt is now much higher than the assets covering it.  Income streams are not enough to cover the debt payments and NOW INCOME STREAMS ARE FALLING!!!!!!!!

This time it is not just one segment of the economy, or one geographical region, it pretty much covers the whole playing field.  Banks, Real Estate, Municipalities, Individuals ect......

WHAT HAPPENS WHEN THERE IS TOO MUCH DEBT AND NOT ENOUGH INCOME TO COVER THE OBLIGATION?  TO THROW FUEL TO THE FIRE, INCOMES ARE DECLINING (AT ALL LEVELS-GOVERNMENT, CORPORATE, AND INDIVIDUAL) AND ASSET VALUES ARE CRASHING AT THE SAME TIME!!!!!!!!!!!!!!!!!!!!!!!!!

NOT ENOUGH ASSETS TO COVER THE DEBT AND NOT ENOUGH INCOME TO SERVICE THE DEBT?  BASICALLY MANY SEGMENTS OF THE ECONOMY ARE BANKRUPT!!!!!!!!!!

And things are deteriorating rapidly as credit contracts, incomes decline further and assets continue to implode.  WE are all subprime because the system is BANKRUPT.

In the past, the system always had enough income to service the debt because we were a growing economy at the productive level.  In the past seven years, the catalyst for growth was DEBT!!!!!!  Productivity was shipped overseas as we started servicing each other....it you know what I mean.  We would like to believe that exports can make up the difference but relatively it is like bailing out the titanic with a spoon.  Asia has most of the exports and they are beginning to service each other.

Once you tap yourself out, that is pretty much the end of the road.  Savings are being depleted and incomes are evaporating rapidly.

Many segments of the economy are CURRENTLY tapped out.  Municipalities, States, Real Estate, Individuals, Banks, and Brokerage Firms.  Even Health Care is getting squeezed.

You think concealing a few hundred billion dollars in defaulted debt is going to solve a $40+ trillion dollar issue? 

We were able to service the above debt because we extended more debt.  The problem is not about defaulted debt, THE PROBLEM IS MUCH BIGGER.  It is about how do we service the debt without new debt to cover it?  Remember, incomes are declining!!!!!!!!!!!!!!!!!

Think about where we are today and where things will be in just 90 days as our prune shrivels into a raisin.  Sorta like taking a penny a day and doubling it.  The head of the NY Fed decribes the problem like trying to unscramble an egg.   If you live in a city, put your money in a bank or maintain insurance, or own any assets, you will likely be affected.

 

9 Comments – Post Your Own

#1) On March 30, 2008 at 11:32 AM, alstry (36.22) wrote:

PANIC POSSIBLE?

When America finally realizes the problem is about falling income and not defaulting debt.....expect a shocking reaction from our nation.

As income keeps falling, more and more people will become subprime.  More and more cities will become subprime.  More and more business will become subprime.

Until we figure out a way to raise income to meet debt service, hundreds of billions of debt will keep defaulting causing even more debt to keep defaulting and so on and so on.

In the end we must drive more dollars to the people, businesses and municipalities or continue watch the whole system implode.

If we continue down this path, it could reach a point where people will pay you to take RE off their hands so they simply won't have to pay maintenance, taxes and insurance.

For the past eight years, since about 2000, we have been masking fallling productive income with rising debt, now that the mask is being forcibly removed, we might not like the result.

Think about your current friends and acquaintances....what would happen if their incomes got cut in half?  How would their lifestyle change? Could they still spend and pay taxes?

It has already happened to many:  Airline pilots, flight attendents, auto workers, real estate sales people, mortgage finance workers, ect......Now it is falling upon teachers, firefighters, and police officers.  Guess who is next?

As our wages continue to level against the rest of the world, expect American incomes to continue to decline.  The leverage will only accellerate the decline.  The debt party is over and we must now fact the consequences of borrowing too much.

Payback can be a b*tch.

It is now time for Alstry to take a break.

Report this comment
#2) On March 30, 2008 at 11:51 AM, alstry (36.22) wrote:

YOU THINK I AM JOKING ABOUT PAYING YOU TO TAKE REAL ESTATE????????

“The crowd filed in to the large white tent behind the Bahia Mar resort for Friday’s real estate auction organized by Sotheby’s and Daniel DeCaro Auctions as a four-piece jazz band played a peppy rendition of ‘I Feel Good.’ Only a handful of the properties would be selling absolute, where any bid would be accepted. The rest carried a non-disclosed reserve, or minimum bid. The auction, which was anticipated to take four to five hours, wound up clocking in at barely two.”

“The first property out of the gate was not a good omen: auctioneer Daniel DeCaro tried opening the bidding for 1850 South Treasure Drive in Miami Beach, a waterfront lot, at $1 million. There was no response.”

“He then tried to get something started at $500,000, but again, no dice. $250,000? Still dead air. $100,000? Silence. At that point, DeCaro threw in the towel and passed the property by.”

“‘Please come see us afterwards,’ he told the crowd.”

“By the time it was over, 67 of the 99 properties on the block had no bids. ‘This was a disaster,’ said Fort Lauderdale broker Paul Merlesena following the auction. ‘They’re basically going to have to give them away now.’”

http://www.heraldtribune.com/article/20080329/REALESTATE/803290640/1537/BUSINESS

Maintenance on RE can be upwards of $1 to $2K per month simply for taxes, insurance, utilities and repairs.  If you don't have the income to maintain the residence....you don't have the income to keep it.....even if it is fully paid off.

Report this comment
#3) On March 30, 2008 at 12:40 PM, abitare (35.79) wrote:

Good post, good find. The market melt down began in August 07. Take a look at my post:

Shouldn’t The Stock Market Be Down A Lot More Than It Is? It should – and it is. 

March 26, 2008 

Report this comment
#4) On March 30, 2008 at 5:51 PM, motleyanimal (53.87) wrote:

http://www.lifeandlibertyministries.com/archives/Tom%20photo%20for%20tract.JPG >

Report this comment
#5) On March 30, 2008 at 10:37 PM, dwot (39.39) wrote:

My goodness, are we having a panic attack?

I think pensions will probably take the biggest hit. 

Report this comment
#6) On March 31, 2008 at 10:00 AM, FourthAxis (< 20) wrote:

"40+ trillion dollar issue"  Care to cite?

Report this comment
#7) On March 31, 2008 at 5:23 PM, ATWDLimited (< 20) wrote:

Come visit the The Official Dollar Report, for important information regarding the coming collapse, income and wages were actually hurt by free trade, its rather simple. Visit my blog on Debt as well.

Report this comment
#8) On March 31, 2008 at 8:35 PM, hbshorty2008 (< 20) wrote:

Alstry, did you see this deceptive headline all across the wires:

 "Centex sells properties for $455M - "

Then u read to the fine print which says: "Centex said its proceeds include the $161 million purchase price and an anticipated $294 million tax refund."

They say in the article the land was on the books for $550M, so you think ok they got $450 for it. not a huge loss ($100MM). But that tax loss means they lost 2x $294 or they lost $600 million on this!!!! Or 6x how they represented it.

 So basically they make it sound like they got 3x as much $ for it. They sold if for $.30 on the $1, but make it sound like they sold it for $.80 on the $1. Unbelieveable and the media spreads these lies. Watch the lemmings bid this up in the morning.

Report this comment
#9) On April 01, 2008 at 3:26 AM, klemenv (99.65) wrote:

Where these huge tax credits are comming from? I mean, will CTX get similar tax credits on future sales, or they have exhausted it?

Report this comment

Featured Broker Partners


Advertisement