The latest “good idea” to come out of DC regarding solving the housing crisis and credit crisis would be to allow a government fund to buy troubled mortgages from the banks.  Funding would be done jointly from Uncle Sam and Vulture/Hedge Funds.  Thus, rewarding those entities for taking the risk and effort to recover value and make fortunes on the backs of the troubled homeowners!!!!

No one is a bigger capitalist and supporter of the free markets than me, but the perversity of the ideas coming out of DC and celebrated by those still with cash is absurd.

A Wall Street Journal article this week indicated that these funds would by the mortgages at $0.05 to $0.20 on the dollar of “face value” thus putting a market value and theoretically some liquidity into a market that has had a dearth of players (folks willing to buy or sell at a mutually agreed upon price).  The thought is that by adding government dollars and some guarantees against loss to these vultures and speculators, that things would then get better for all!

This is inane!  Once again, the most aggressive investors/institutions will be treated as rolyalty and “protected” by those suffering under situations created to make money from them!

The best idea still and one that I have discussed in the past and will continue to support is the following:

Allow the borrowers to buy back their outstianding mortgages and outstanding credits at the same rate as Uncle Sam is proposing they be sold to Vultures.  Provide government financing and guarantees to allow the refinancing of the principal and accrued interest at “pennies on the dollar” to those suffering, with deferrals on payments until income levels have rebounded to facilitate repayment of the reduced amounts.

Why should the Government entice vultures to buy on the distress of the public, and then profit on their further distress?  Why not have the Government be the instrument for settlement of the sources of distress?  Why not have the individual families receive the benefit from their own recovery?  Reduce the levels of sources of profit to 3rd parties and institutions?  Foster a benevolent solution, rather than dumping the paper in the hands of vultures and collection agencies to further harass those facing hardship and eviction?

Enough raping of the populace by the Wall Street Titans and Banking Giants!!!  We have see that quarterly profits and earnings for shareholders rewarded by temporarily higher stock prices is a recipe for disaster!

A change is needed. A reason for hope!  Let us hope the new administration sees the light and makes positive things happen for our society!

Also check out http://alphainventions.com/ a great website for all new posts!

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<a This is the coolest dragon picture I have ever seen!!!!
href=”Photobucket“>

Sorry that this is not even close to the subject of the blog, but I thought it cool enough and a great distraction from the chaos of the world!!!

The New York Stock Exchange reduces its listing requirements from $25 million in minimum market capitalization to $15 million. They call it temporary, but how long is “temporary”?

The new Secretary of the US Treasury Master Geithner and boss of the boss of the IRS intentionally underpaid his taxes for a series of 4 straight years, and when he was caught on two of the years, properly paid for only two of the four years. Only when he was in the nomination process to be Secretary did he make good to the IRS for the balance he underpaid. (Oh, by the way, he must have perjured himself under oath in saying “Oh, I forgot.” But that is a story for another day.)

Not to beat on Master Geithner but, Master Geithner, even before earning the Senate’s blessing to carry on the irrational and inconsistent policies of the Goldman Sachs Governmental Programs (aka Paulson and Friends), has begun a new WAR with China. He has explicitly stated verbally and in writing that China is manipulating their currency. Meaning that He and Our New Fearless Leader President Obama believe that the Yuan is undervalued relative to the dollar, as China has stepped in over the past year and stopped its long-term appreciation against the dollar. Any Econ 101 C grader or better knows that it China did not brindle its Yuan, then the value of their US $ investments would fall, their appetite for US Treasuries (at a time when we desperately need them to buy $3 trillion USD of our bonds) would collapse. Their banks would become troubled and their economy, rather than being on a growth mode and trying to stabilize would be thrown into a state of chaos, not dissimilar to that of out own. WHY WOULD HE TRY TO TAKE THEM DOWN WITH US? WHAT IS THE BENEFIT?

China is considered one of the global leaders in capitalism!!! With the recent and further steps in US Socialization and Nationalization of Companies, Industries and Spreading of Wealth, China is better looking than we are. (Unless the mirror we use is warped, fogged and scratched!)

NY State’s new Senator to the US Congress is a Democrat with Strong Republican traits (oh, I almost wrote “taints”.) A committed member of the NRA, advent opponent of gun control, an anti-fan of the GLBT and others groups, and an ardent “non-compromiser”. At least she we know she won’t be toeing any party lines as she goes in!

Russia can shut down its gas pipelines supplying Central and Western Europe and hold them at ransom, as we saw over the past two weeks.

Unofficial underemployment in the US is at an all time high in excess of 20% currently and projected to hit 28% before this thing turns.

Detroit will stop building and designing cars for car buyers but instead to please their political owners and our new industry/political czars or dictators.

After the worst year in the stock markets’ history, the US markets continue to plunge in the first three weeks of the new year. So much for the optimism from a new administration and “Hope and Change”.

Mortgage rates on the conforming 30 year have increased almost 0.5% even though Uncle Sam and his family members have been talking about moving it lower. (What, are they now powerless? Or are their capabilities limited or muted?)

Please help me out. Add some additional ideas, as I know I have only touched on the tip of an iceberg.

Also check out http://alphainventions.com/ a great website for all new posts!

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Ge, which had for all intents and purposes closed down GE Capital, its finance division, in November, has finally announced layoffs.

Back in November, GE very quietly announced that it would not be doing any financing through GE Capital, except to only the highest rated credit risks. They completely killed their Senior Bank Lending programs, their Health Care Financing, their trade financing and reviewing of most new deals.

Their announcement came as a surprise to Wall Street investment bankers, who had come to rely on GE Capital as the leading source for Senior Bank Debt when doing M&A. With GE out of the market, hundreds of deals died on the table in the 4th quarter.

GE had inidicated they would review their position re GE Capital and new lending in the first quarter. They had made some remarks in a news release, but it was very unclear as to what steps they were taking.

With the layoffs announced today, comprising of 11,000 highly paid financial professionals (15% of the employees of GE Capital), GE’s intentions and expected operations are quite clear.

GE Capital, which had once generated approximately half of GE’s net income, will be no more as we knew it. Thus, GE’s earnings, as we knew them, will be no more.

The main questions that still exist have to do with the level of potential write-offs that exist on GE Capital’s balance sheet.

Also check out http://alphainventions.com/ a great website for all new posts!

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In his article, which you can read at http://www.forbes.com/manufacturing/forbes/2009/0202/031.html?story_url=http%3A%2F%2Fwww.forbes.com%2Fforbes%2F2009%2F0202%2F031.html&username=MoneyAssistant&email=dijana.howard%40gmail.com&title=General+Manager

you will note that he is very optimistic about the future of the industry. He firmly believes and I agree with him that 10-15 years from now, there will be more auto companies, rather than less. He believes that though the changes are traumatic, the ultimate outcome will be beneficial. The future industry will be stronger, more diverse, offer a greater variation of vehicle with various energy sources, and greater flexibility in environmental compatibility.

I agree, we have much to look forward to. After, we get through the current economic storms.

See layoffs for the month of January, by the largest US employers, at:
http://www.forbes.com/2009/01/09/january-layoffs-fires-lead-cx_kk_0109january09layoffs.html

Also check out http://alphainventions.com/ a great website for all new posts!

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Thanks for reading and feel free to comment and link to this blog for more great insight!

Amazingly, the US Department of labor reported only 524,000 jobs were lost in December. The market was almost overjoyed, as they had expected a number in the range of 650,000 to 750,000. The 524,000 did not include the “revision” to the prior months numbers downward by 154,000. Thus, adding the 154k to the 524k, one may come to a sum of 678,000, right in line with the nightmare expectations.

There is also further distortion due to a “birth-death” quotient applied by the Department of Labor, but we will not get into that here, except to say that it is currently making the reported numbers look better than they really are, rather than worse.

Other very weak numbers not reported in the headlines include:

Average workweek has declined to 33.3 hours among all employed workers in December. This is the lowest number of hours worked since Uncle Sam started watching these numbers in 1964. (Some economists anticipate that this number will correlate to another 500,000 job losses in the coming months.)

Since January 1, nine calendar days ago and 6 business days ago, major employers (those with 5,000 plus employees each) have announced job cuts of more than 30,000. On a daily basis this is an average run rate of 5,000 per day, or annualized rate of additional 1.1 million of job cuts!

Some may say that the run rate of 1.1 million is less than half of the newly unemployed of 2.5 million fellow Americans in the US during 2008, but there are numerous other facets as well.

Keep in mind, when an unemployed worker takes a job at because they must at 30%, 50% or 75% of their former compensation, they are no longer statistically unemployed.

Key numbers to continue to watch includes average compensation per hour, average numbers of hours worked, and the U6 unemployment numbers which reflect a much broader and economically relevant calculation of the unemployment levels.

Also check out http://alphainventions.com/ a great website for all new posts!

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Thanks for reading and feel free to comment and link to this blog for more great insight!

It is amazing of late to watch the news wires and see the number of successful business people who are committing suicide due to the “Red Plague” and its economic chaos.

Yesterday, we read the Steven Good of the Sheldon Good Real Estate Auction house committed suicide.

The day before we read that Adolf Merckle, one of Germany’s wealthiest men, committed suicide as his business conglomerate began having finance problems brought on the the credit crisis and the global economic slow down.

There have been hedge fund managers in the US and England who have given up hope and have left their families, as well as Rene-Thierry Magon de la Villehuchet, a private investor and aristocrat who trusted Madoff with his family fortune and the fortunes of his clients.

All these men have been successful, powerful, professionals with years of experience, as well as diverse skill sets.

The question is “Is the situation so dire as there is no escape, no hope, no solution?” We should hope and pray not.

If these men, at apexes in their careers and industries, have no hope, what about you and me? What about those folks being forced from their homes? The unemployed, the folks with credit way over their heads, the people whose life is more of a daily struggle than a “success story”.

Each should be thankful. Irregardless of how dire seems appear, there are always solutions, answers and ways of resolving things, without “escaping to the next world”.

This will get better, they always do. This time is no different in that regard. There will be opportunities ahead. Staying alive is important to future success!

Today’s Wall Street Journal had a small article buried within the paper which once again demonstrated how screwed up our American Government/Financial Systems are.

See http://online.wsj.com/article/SB123094029211850265.html

Fannie Mae announced on Monday that it is raising its fees to lenders for guaranteeing or buying certain mortgages. The article notes that the fees will increase to 3.25% of the loan amounts after April 1st, from the current 1.25%.

At a time when our Federal government is spending billions to buy up mortgage paper with the effect of lowering market rates for conforming mortgages, the two agencies now under conservatorship have the gaul to raise the fees. This has the same impact of adding 2 points to a mortgage or stepping the rates back up.

The Federal Housing Agency spokesperson has stated that they will review the public’s objections to the rate increase.

Crazy, but believable…………… Help us Barney Frank!!!!


Congrats to Chip for taking such a dire subject and injecting a sense of humor and a bit of hope.

From our perspective at MoneyAssistant.org there is a ton of pain ahead. In addition to expected spikes in unemployment and further underemployment, tightened credit and higher interest rates, and expected deficits at all levels of government, housing and other asset values are continuing lower.

With an expected $2 trillion of consumer debt defaults over the coming year, many of us will either be in various modes of workouts with our lenders, creditors and governments.

There is much to fear out there in the business community. This is evidenced by continued severe tightness of credit markets, recent bond issues by some fairly solid companies at rates between 13% and 16%, the bond markets pricing in default levels of 12%+ (more than 1 in 10 large companies are expected to go bust), and corporate valuations that are at 60% of values just 12 months back.

Thankfully, Uncle Sam has put bailouts, restructurings, recapitalizations, and HOPE into the current language of our economic chaos (I refer to it as the Red Plague.) If they will expand the circle from Wall Street, Banks, Detroit, to include Main Street and its small businesses and the consumers/homeowners, we may all survive and be in better shape at the end of this ordeal.

See http://guruatmoneyassistant.wordpress.com for additional comments and thoughts.
Refer to http://www.moneyassistant.org for resources and additional information
More on Economy
Read the Article at HuffingtonPost


Great article.
Lots of risk and parallels, but fortunately (hopefully) different due to FDIC protection of depositors and fast government intervention.

See additional thoughts at http://guruatmoneyassistant.wordpress.com
Read the Article at HuffingtonPost

Two Wall Street Journal columns jump from their website today.
After Dow’s Collapse, Guarded Hope

After the U.S. stock market’s third-worst year in more than a century, many investors are hoping for a turnaround in 2009. But considering the pain that has continued for more than a year, they are reluctant to bet on it.

Stimulus Versus Recession

The U.S. is preparing massive efforts to battle the twin threats of deep recession and deflation in 2009. The results will affect the investment climate for years to come.

These two observations are right on target, but the impact and implications so grand, that the folks at the WSJ should be shouting from the building tops in Manhattan, Greenwich, The Hamptons, and DC.

First, it should not be understated but the International Monetary Fund had estimated financial security losses in the range of $1.4 trillion as of this past October. To date, US institutions have only written off less than $800 billion! The IMF estimates were before the $50 billion evaporation of Madoff assets and the severe financial market declines of late October and November.

Additionally, there have been several estimates in the area of $2 trillion for the total losses to be expected by the inability of the “two pillars” of homeowners/credit users and small businesses to obtain any lifelines quickly and without “strings” of steel to further sink them. The lifelines are not appearing on Uncle Sam’s drawing boards at the moment, which means that we should not count on them in the near future. Uh, oh!!

Current LIBOR based mortgage rates are in the area of 2.25% currently for up to $2 million!!! The rates are less than the average yield of a local CD for a few months. Fixed rate conforming mortgages are at less than 5% for 30 years. We can expect mortgage rates to further decline as the Fed continues to intervene in the market for Fannie and Freddie securities. (They have billions of $ in their pockets to manipulate the market and lower the rates further.) Unfortunately, other than the variable LIBOR loans, jumbo fixed mortgages are still in the range of 8% or so. Because the government is ignoring this sector of the market, there has been only increases in the rates as the riskiness of the credits have increased.

Banks are demanding more collateral, rather than less. In a time of declining asset values, with collateral worth less, fewer and fewer are able to meet the stricter lending requirements. Where is Super Paulson and our Hero Bernacke when we need them???????? Will HOPE and CHANGE help? Or should we turn to God as our only salvation?

Today’s WSJ made the analogy of an individual escaping from a very painful marriage. The journalist stated that this individual would be very likely to resist remarrying. The journalist paralleled the experience to a stock investor during 2008 and their fear of buying stocks in 2009. I thought this very appropriate.

In a world of great interconnection, with great uncertainties, the need for faith and confidence in systems and governments, unified and coordinated efforts are crucial. Given all we have seen from our government over the past year and years, can we have confidence? Should we have hope?

Given the way America has been raped and brutalized by Wall Street, can we have faith in the Heroes of Capitalism to save us?

Please share your thoughts and ideas………

Check out the referenced article of 30 Money Sites to check out in 2009:

Highly recommended and lots of good information.

Thanks Thursday Bram!!!

According to a press release, “The Federation of Small Businesses is . . . calling on the Government, the banks, local councils and consumers to play their part during the year by providing support to small businesses in fighting regulation, accessing finance and maintaining cash flow to buck the increasing trend of business closures.”

The Federation for Small Businesses needs to do more than just issue a press release.

The government has financed the banks, protected Wall Street and back stopped the auto industry, but government and our political and financial leaders have ignored the needs and potential catastrophic impact of the small business failure.

Limiting interest rates is just one limited step. Encouraging banks to lend, promoting a major SBA program similar to “HOPE for Homes”, encouraging lenders to extend credit rather than reduce amounts available, are but a few of the many steps they could take.

The FSB is to be commended, but at the same time must call upon the communities across the US to mobilize and lobby Uncle Sam to work to protect our small businesses, their employees, and the core of the American Economy.

As a small business owner suffering from a reduction in income levels due to the recession, I am very familiar with the shortage of credit for small businesses. It impacts the small businesses directly, as credit cards and other signature loans are their liquidity lifeblood. Also, customers and clients rely on credit to purchase services and products and with credit levels being reduced and credit needs not being fulfilled, consumption and purchase levels are down significantly.

Much comes back to the Federal Government and their missteps regarding the TARP and providing capital to our banks. One would think that the government bailout would have helped the small businesses indirectly, but then again, nothing has been as “one would have thought” over the past 6 months.

Today’s Wall Street Journal cites the anticipation of looming “mortgage cram-downs”, as a result of the failure of government’s steps to cease the increase in foreclosures.

The article notes that there are 7.5 million homes underwater currently and that foreclosures are expected to exceed 8.1 million over the next four years!!!! It also notes that Congress was hoping to help 400,000 homeowners through its latest program, “Hope for Homeowners”, but only 357 have applied for the program to date.

Sounds like one of the pillars we discussed yesterday on this blog is still not being secured!!! Unless action is taken, we will see the Red Plague sweep the homeowners and consumers downriver, like the banks and Wall Street firms were washed away this past year.

Unfortunately, the free market and refinancing will not solve the liquidity crunch paralyzing the homeowner/consumer pillar and the small business pillar.

Some insight and real hope are desperately needed. And fast!

Now that the government has bailed out Wall Street, the Banks, the insurance companies, the auto makers, and countless others, the real question is “Is it enough?” What needs to be done to get our economy back on track? Are we on the verge of being “back on track”?

The latest Forbes magazine refers to the “Depression on the Fourth Quarter” and is cautiously optimistic about improvements possibly already underway. They refer to their Chirps Index and are hopeful.

See http://www.forbes.com/forbes/2009/0112/037.html

The index referred to above is a great index. Its optimism is refreshing and encouraging. We all hope that things get better from here.

After all the government assistance and economic support, there are two pillars of our economy which are still faltering. One pillar is comprised of the over-leveraged homeowners and consumers who have no option to refi their mortgages at today’s attractive rates due to excessive declines in the values of their homes or in their credit scores.

The other pillar that has seen no support from political or economic leadership is the small business owners. Millions of small businesses were decimated in the Mini Depression of the 4th Q, due to revenue fall offs of 10-90% and the drawing down or elimination of available credit by those “saved” by Uncle Sam. Many of these millions of small businesses, employing between 1 and 10 employees are on the verge of closing their doors, filing personal and corporate bankruptcy and becoming wards of the economic state. As the US economy and its economic growth over the past 20 years has been powered by our small businesses, their mass genocide due to the economic environment will be costly and painful.

There is an estimated $2 trillion of potential defaults and write-offs that could result from further deterioration of the remaining two pillars.

Hopefully, new leadership in DC will force the hand of the beneficiaries of the government’s handouts and cheap money to assist (1) the homeowners and consumers and (2)the small businesses of America.

If these two pillars falter then the “Chirps” the new index is hearing are just echoes of chirps from the past.

On December 15, 2008, Peter Zeihan wrote “Falling Fortunes, Rising Hopes and the Price of Oil”. See it at:

Stratfor is the world’s leading online publisher of geopolitical intelligence. Thus, it is an amazing source of real news and analysis.

Mr. Zeihan’s article begins: Oil prices have now dipped — albeit only briefly — below US$40 a barrel, a precipitous plunge from their highs of more than US$147 a barrel in July. Just as high oil prices reworked the international economic order, low oil prices are now doing the same. Such a sudden onset of low prices impacts the international system just as severely as recent record highs.” Please see it at the link for the full article.

My thoughts:
I would emphasize the tremendous risk economically, politically, and globally that severe volatility (both on the upside and downside, of valuations for energy, currency, food, labor and more) can and will present to the US and all global economies and cultures.

Though economically, the US will benefit from significantly lower energy costs and many, many other commodities which have inflated over recent years due to the the rising energy costs and the great speculation/investing in “hard assets”, the risks to our way of life and our economic vitality are potentially greater.

The article describes the potential impact on governments and regimes, and the possible instability that will likely ensue, given human nature. Interestingly, I have been pounding the table with my equity investor clients on the reasons to purchase stocks in defense oriented companies, due to these very reasons. This article, plus the recently announced government spending plan, fully supports the strength of the sector and the essential need for continued development, irregardless of our incoming government’s timetable for Iraq.

Interestingly, our financial leaders are extremely concerned about the potential for spiraling deflation. They have defined deflation as the deferral of purchases in anticipation of lower prices. From my vantage point, the deflation that we are currently experiencing is more of the reversal and undoing of inflation of past years. Additionally, in the economic studies I have read recently, the decline in current consumer spending has not been due to “waiting for lower prices” but due to the lack of money to buy goods and services within neighborhoods and communities throughout our country and in many places in our interconnected world. The volatility economically and emotionally of having significant access to money (through savings or credit) to having little or no discretionary spending capability should be an area of focus for our national and global leadership.

In this holy season, as well as this season of new beginnings, we all must be optimistic about tomorrow and at the same time pray for political, economic and social stability locally, nationally, and globally .

All the best for the New Year!

The following was written by a friend. I thought it unfortunately appropriate for this holiday…………

Christmas eve… All the presents are wrapped and hidden from the kids. All, meaning one for each kid. For me, I hope I do not get anything. Not that I do not want anything, but because I know the money would be better spent on food or gas or books for the kids over the next week or two.

This is the first Christmas without money, without credit, without cash…. It feels horrible. I know we are not alone. That helps a bit, but still…. It is Christmas, a time for gifts and joy.

Holiday sales are a great opportunity to buy some gifts, but only if I had spare money. The money I have I need for food and necessities, not toys and games and things to throw away. As I look through our local paper this morning, I see many advertisements for 50% to 75% off. So what…. Even if it were 90% off, I would not buy do to the reasons noted above. Yeh, they can give it to me for free, but I am not a charity case, just someone impacted by the economic collapse of 2008 and the credit crunch.

I am sure tomorrow will be filled with joy and Love. The kids will really appreciate the few gifts they receive. Maybe even more than in past years, as they now understand how tight the money is.

We do have much to be thankful for, and that is really what we will focus on… Fortunately, good health, smart and good kids, a regular paycheck (though it is way too small), and health insurance…. plus much more, I am sure.

It has been a very different holiday season, and tomorrow will be a very different Christmas. It is all part of life. Struggles, success, failure, agony, money, no money, abundance and famine, etc… I am hopeful for the future, not necessarily tomorrow, but maybe the proverbial “day after tomorrow”. We can only be hopeful, and also thankful…..

God bless.

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2007 and the first half of 2008 were marked by hyper inflation, on a global scale.  Is this all but forgotten?  There were fears the world would run out of oil and gas and market prices reflected those fears.  All the corn in the world was being consumed by the soda makers and the ethanol refineries, leaving no corn left for food.  Because of the corn prices skyrocketing, the price per pound of beef, pork and fish bounded higher.  The global effects caused rice prices in Asia to move higher by 150% and the prices of bread in South Africa rose to beyond the reach of the typical laborers.

About the same time, the fear that there was not enough copper, steel, cement and investment bankers forced pricing on a global scale higher and higher.  The US dollar was devaluing because the US did not produce anything that was to be needed by a commodity hungary world, but for our corn and ethanol, and investment bankers.

How the world has changed in less than 6 months!!!!!!!!!!!!! Pricing on all commodities, except gold, has crumbled.  Oil is trading at less than 30% of it’s July pricing.  Prices of copper, steal, wood, cardboard, and other commodities have stumbled.  Mergers are being called off.  Capital expansion plans cut.  Factories closed and layoffs announced, daily.

The global movement of capital, the life blood of economic vitality, has ceased.  All  that follows the flow of capital has ceased as well.  Demand for goods, not only in the US but around the globe, is off by 20+%, forcing prices down further.

All that capital is looking for homes and has found it in the US Treasuries, for the time being.  Thus, the yields on Treasuries has crashed to unheard of lows.

We went from the cycle of fear regarding inflation to the publicized fear of deflation.  The Fed is afraid.  The media is afraid.  The world has become afraid, and PE Obama and his team are afraid.

The fear is that consumers will defer purchases, as they await further reductions in pricing.  This has been documented today as “already occurring” per the Wall Street Journal.  The percentage of ordinary folks who state they are done holiday shopping is down from last year.  People claim they have been waiting for more sales and lower pricing.

I can tell you what people have been waiting for.  It is the same reason US (and foreign) car sales have plummeted since September.  It is the same reason people are eating out less.  It is the same reason that the wealthy are drinking only one expensive bottle of wine at dinner, rather than three!

People do not want to spend money.  They are deferring spending out of fear, not waiting for lower prices.  People are waiting for money before they spend (a) what they do not have, (b) what they have lost in the markets, or (c) what they have lost to theft, fraud or incompetence of the Treasury, Wall Street, Madoff, Peterson, the Greenwich Hedge Funds, or Dubai real estate.

People are not waiting for lower prices!!! They are waiting for money!!! They are waiting for credit! They are waiting for some positive economic news! News that indicates the worst is behind us.  News that the markets will get better.  News that the ranks of the unemployed will go down, that compensation will go up, that layoff are a thing of the past.

We are seeing in pockets of real estate markets, no matter how low the price goes, inventory is not clearing.  Condos that in Naples, Florida, for example, once sold at $350,000, went to market at $250,000, were reduced to $150,000 and the owner would gladly sell it at $100,000 to relocate to see her grandchildren.  That’s not happening though.  No takers.  There are six other units in the same building with similar stories, and other stories like it from Miami, to NY, to LA and Michigan and everywhere in between.

People do not want to spend.  Many people can not spend.  Many must wait to spend.  It is not a question of pricing, they are not looking to get more for less, they are looking to buy something only when absolutely needed, and when they have the excess $ to purchase.  Otherwise they will go without………………

The Road Will Be Long, With Many (a) Winding Turn(s)………..

The Red Plague spreads further.  The virus embeds and morphs…………………

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If the world is literally flooded with dollars, why is it near impossible to refinance a home or refinance and restructure outstanding consumer credit?

Merrill Lynch is offering a Libor based adjustable rate mortgage for up to $2,000,000 for the current rate of 2.375% with NO POINTS!!!! How many are applying? Very few.

Why? Loan to Value requirements have dropped by on average 20% while appraised home values have tumbled as well. Additionally, if the home is located in a state where the values are declining, then the penalty box of “declining market” is applied and the LTV limits are reduced further.

Credit card companies continue to reduce available credit. Analysts expect that the US will see credit line reductions of $2 trillion dollars in 2009. They also expect credit card rates to continue to sky rocket rather than decline in parallel with the Libor, prime and the Fed funds rate.

Hence, headlines may be deceptive.

With the further expected declines in employment levels and compensation, as well as further tightening of credit and increases in cost of consumer credit, there likely is significantly more pain to come for the consumer-class and homeowner-class ignored to this point buy the bailout plans and liquidity programs of the wealthy rulers in DC and their Wall Street financiers.

Happy Holidays!!!

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With the skyrocketing unemployment, there are many out there espousing the need for the government to provide tax credit to employers, encouraging employment….

Unemployment is only part of the issue. Underemployment is the full issue. As part and parcel to the Red Plague of losses, credit freezes, staffing cuts and cost reductions, compensation levels at all levels of the employment chain are falling for 70% of the populace. Over time is being cut, bonuses eliminated and spending allowances and benefits slashed.

Many of those who have not lost jobs, do not fear unemployment. They instead fear significant reductions in their incomes.

Thus, supporting staffing levels and compensation levels, as well as spending levels, are all needed in the grand scheme of supporting consumerism and halting the spread of the Red Plague.

New release this morning that the real unemployment, including actual unemployed, those off unemployment due to duration of being out of work and those taking part time jobs because full time is not available, has reached a post depression high of 12.5%!!!!!

Who told you this first in my earlier blogs???????????

Interestingly, my read of these new numbers leaves out another 5% or more. Thus I am now estimating that the current unemployment numbers (based on compensation being earned) is closer to 17.5%. This includes those folks employed, but facing significant cuts in compensation due to commissioned sales, compensation based on productivity and volume, etc.

Share your news and thoughts………………….

With credit lines continuing to be cut, banks not negotiating outstanding loans, and new loans only being extended to those who do not need the money, there is but ONE QUESTION: WHERE IS THE MONEY?

How can $340 billion have not have any impact? How can Paulson and Congress let the greed of the banks and institutions destroy whatever remaining confidence Americans had in the government?

As Dr. Michael Savage has said, the US has just witnessed the greatest legal theft of $340 billion in the history of the world. The only beneficiaries have been the creditors, shareholders and CEOs of those institutions receiving the $. Please show me examples of the Americans and Main Street who have benefited!!!!!!!!!!!!

Paulson, Bernacke, Bush and our favorites Pelosi, Reid, and VP Cheney are all to be blamed. The should be held accountable for the fraud they have perpetuated on the American Taxpayers. We have been duped.

Those without jobs, those who have lost and will lose their jobs and credit, will pay. Pelosi, Reid, Cheney, Bush, Bernacke and Paulson can continue to dance all day until the sun sets and beyond, while we all suffer from the Red Plague they have contributed in spreading!!!!!!!!!!!!!!!

Tell me your thoughts…………

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Yesterday’s Wall Street Journal reported that the number of miles driven in America had fallen by 8.9 billion miles or 3.5% in October 2008 versus October 2007.  The Department of Transportation reported that this was the largest decline for the month of October since 1971.  They noted that this decline came despite the fact that gas prices have declined from above $4 per gallon to less than $2 over the past 4 months.

The Federal Tramsportation Secretary, Ms. Mary Peters, was quoted as follows:  “The fact that the trend persists even as gas prices are dropping confrims that American’s traveling habits are fundamentally changing.”

What??????????? Since when do a few months when the world is in a state of economic and social chaos make a “trend”?  What about other factors besides “Americans’ Passion to Drive”?

Does Ms. Peters know and understand that unemployment levels across the country are tremendously elevated?  Has she read or heard anywhere that many hundreds of thousands and more are threateden with job loss?  Has she been informed by her brilliant staff that the volume of new car purchased have crashed?  That the equivalent of more than 2 million cars are being retired off of the American roads?

Has she heard the pundits and “talking morons” saying “The American People have voted.  And, they have voted they do not want GM, Ford and Chrysler vehicles?”

Has she thought about the connection between consumer credit and vehicle usage, whether for personal enjoyment purposes, business travel, or shopping?  With available credit lines being reduced cumulatively by hundreds of billions of dollars and interest rates on cards rising to up to 35% per year, might these things have an impact on driving patterns?

Would one (with any clue) conclude that with all these changes going on in the economic and cultural climate, that the use of one’s car and the miles driven may be impacted?  Would one consider these changes permanent (which in my mind is defined as “set forever”)?

I think not.  But then again, I am not in DC and nor am I a “leader”.

Maybe President-Elect Obama will select his DC Leaders based on intellect, ability, reading comprehension, and their understanding of the area they are to oversee?  Would that be asking too much?  Might that have a positive influence on the future of America?

May God help us!

Unemployment Claims Higher than Expected by 50,000.  The details behind the numbers…..

The figures that get published are the “weekly initial jobless claims”.  This figure represents the number of new people who have filed for unemployment benefits in the last week.

Now that you know what the number represents, would you believe that the figure this past week was 573,000!!!!!  Last week’s number was 515,000.  So simple math shows that 1.1 million people have become unemployed in the last 2 weeks alone!!!!

The number of people continuing to get unemployment benefits, excluding the 573,000 new people, was 4.4 million people.  Keep in mind that people become ineligible to collect benefits after being jobless for a period of time.  Thus there are many more jobless out there, it is just that they can not get benefits……..

There are also countless millions who have jobs and are not unemployed, but whose incomes are down 10-80% from last year due to how their compensation is calculated and whether they are commission or volume based, or paid based on profits, etc.

With the ranks of the unemployed growing by 1 million people every two weeks, it will not take long for many, many to be out of work.

Will this lead us to depression?  I think not, but we do face a tremendously painful recession that is still in the early stages.

Your thoughts????  Leave a comment.

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The equity markets have recovered more than 20% from their recent lows. Some companies are up as much as 50% or more. The markets generally are six months ahead of the true news, so should we be optimistic? Is the light at the end of the tunnel? Should we be excited about the prospects of $500 billion of government projects and an additional $2 trillion of liquidity?

As noted by Davis Berman on his blog: “As the Wall Street Journal’s MarketBeat noted on Tuesday, the auction on three-month Treasury bills on Monday yielded a mere 0.005 per cent – the lowest yield since 1941. But here’s the really wacky part: Traders noted that the yield on three-month bills dipped into negative territory on Tuesday afternoon, as in below 0 per cent.”  http://www.theglobeandmail.com/servlet/story/RTGAM.20081209.WBmarkets20081209143427/WBStory/WBmarkets

So great optimism on the equity side of the equation and absolute fear on the side of bond investors……

A friend mentioned today that he heared murmers that gas may go as low as $1 per gallon.  When was the last time we saw that??? What does that mean about our economy???? What will our labor be worth??  What will the price of milk and eggs be?    How bad will the overall global economy have to be to allow gas prices to fall so low???????????  I am afraid to speculate? What do you think???

Will the market retest lows?  Is there sufficient cause for optimism to have the markets hold steady and rise through Inaugeration Day?

Will unemployment continue to rise?  Will housing prices continue to fall?

Will Washington really save Detroit?

Did Washington really agree to absorb approximately $300 billion in losses at Citigroup?

Is this sane or insane?

Help me!!!!! I am confused.  Leave your comments…..

There are some out there who have said, “The American people have spoken, and they have said they do not like GM, Chrysler and Ford autos.”

It is absolutely more accurate to say, “The American people have spoken, and during the past three months demand for new cars has dropped, like a rock.”

The current run rate of new car purchases calculates to the annual removal from the road of approximately 2 million cars per year.  This is the first time that there has been a net decline in autos on the road in the history of the auto!

America has run out of credit.  America has run out of cash.  America is unemployed.

The 2 million car number is very close to the 1.9 million of newly unemployed workers since the start of the year.

Mystery?

If 1.9 million less people are going to work each day, how many less cars are needed?

Please share your thoughts and comments…..

The biggest banks that have received the biggest free giveaway of American taxpayers’ wealth, are now stealing the life blood of every household and the economy and our government is either blessing the theft or ignoring it.  The Red Plague of losses, illiquidity and falling values and prices continues.

Traditionally, interest rates on credit cards were competitive and set based on one’s credit ability, payment history, and market rates.  Today, credit card companies are bumping their rates up to 30+% because they want to.  This is in the face of the 10 year Treasury bond below 3% and the billions in free dollars they have received to stimulate the economy from our dear Uncle Sam.

At these rates, the amounts due will double over less than 3 years. These rates are userious, abusive and immoral.  But, Mz. Nancy and Mr. B Frank ignore the issue.  This is an issue that can not be ignored.

If outragious mortgages are reset, foreclosures abayed, and homeprices attempted to be stabilized to protect the American citizens’ balance sheets and financial solvency, the system will collapse around the explodign levels of consumer debt.

The average American with outstanding balances will get eaten in userious rates and ensuing fees.  Bankruptcy and further financial chaos of the American financial system, banks, Wall Street and Main Street can not be too much further behind.

God help America from the Death Wish of America’s Financial System and Greed (and the Blindness and Ignorance of the regulators tasked with protecting us)!!!!

The news is that half a million Americans lost their jobs in November and more than 1.9 million jobs have been lost since the start of chaotic 2008!!!!  The worst news though is that many, many of those who are still employed are on commission, or paid based on business volumes or other variable payments.  Their incomes generally are down significantly, extremely down!

Thus, the wammy is significantly worse than the statistics show.  Not only is unemployment skyrocketing with no end in sight, but average household income levels are dropping even faster and further!

The incoming Obama administration is talking about new infrastructure projects to create 2.5 million new jobs over the next 24 months.  Lead economists say that we need more like 5 million more jobs.  I say we need 5 million new jobs, but not necessarily in building, bridge and airport construction.  I am sure there are many construction and engineering workers out of work, but equally as many bankers, realtors, mortgage people, and other sales and service and skilled manufacturing people.  I am not clear on how new bridge projects, bigger and better airports and improved school buildings will help these folks.

If the thought is that all will benefit from the “trickle down effect”, we have much to pray for!

What are your thoughts??

Remember hearing that our brains have 100 billion neurons when we are born, and that with every glass of wine or cigarette we kill 10,000?  Didn’t 100 billion sound like an amazing amount?  I always wondered how I could have 100 billion connections inside my little brain……

I just participated in a discussion with a leading neurologist who cited the 100 billion number.  The first thought that came to my mind when I heard him say it, was “huh, 100 billion is not so much.”  I then thought, if 100 billion is not so many, what would be an amazing number?  700 billion, 800 billion, 1 trillion??????????

When our dear Uncle Sam can throw around 35 billion $, or 350 billion $, or 700 billion $, or another 800 billion $, is it really not such an amazing number?

How our perspectives have changed!!!! When 100 billion is no longer an impressively large number, and our US deficit for 2009 may well be $2 trillion!!!

The markets today gave up all their gains of last week!  Though the Black Friday numbers were much better than expected, the economic numbers regarding economic activity and future activity were horrendous.

The official group that announces recessions, announced today that the recession started December 2007.  Brilliant!!! It took them 12 months to figure it out???  Just look at any economic indicator and it is abundantly clear!

But, now that we are officially in a recession, it will either good worse or get better.  Its like alcoholism.  To be treated, first you must acknowledge the problem.  But, of course, it is not that simple.

Typically the Fed will lower rates and the lower cost of funds will encourage lending and capital investment.  The lower rates would also boost home prices through more affordable mortgages and refinancings.  This time, banks are not lending, companies cutting back on investing, and people generally unable to refinance due to the significantly reduced values of homes!  What’s Mr. Bernacke to do?

He will continue to reduce rates and flood the channels with money.

There is an old saying “Don’t fight the Fed.”  That is definitely going to be the case.  The question is how soon?

The reduced rates will ultimately make stocks more attractive.  The government bailouts, forced refinancing, numerous programs, etc.  will make things look better.  People will start feeling a bit better.  But, not until some more pain is incurred and fear speads like the Red Plague……

So, it can go lower.  It can go much lower.  It likely will retest lows over the next few weeks and then rally through inaugeration.  From there, it is the new administration’s problem, and ours………………

Leave it to Donald trump to come up with a unique reason why HE does not need to stand behind a $40 million personal guarantee made to Deutsche Bank regarding HIS hotel in Chicago.  He has claimed that the “force majeure” clause has become effective due to the economic chaos and world financial crisis.

Normally force majeure refers to catastrophic events, natural disasters, war and acts of G-d.

Fortunately the courts have rejected his absurd claim.  Unfortunately they did not penalize him for adding to the economic and financia chaos!

“Negative Redlining” – marketing disproportionately to minorities – is the accusation being made against two of three leading Wall Street “ratings agencies”.  Ratings agencies, like Moody’s, S&P, and Fitch, are hired by bond issuers to rate a bond, i.e. to quantify the likelihood of the bond not being repaid, and thus give it a letter grade.  Because ratings agencies are paid by the issuers to do the rating, they are absolutely not independent of the process.  They obtain the information they use from the issuer and the higher the rating, the greater the profit to all Wall Street parties involved in the issuance.

The National Community Reinvestment Coalition in their legal complaint alleges that Moody’s and Fitch knew that the mortgages were designed to fail, though the rating issued did not reflect this.  The complaint indicates that Moody’s and Fitch knew that the payment terms were unfair and that the borrowers’ income levels were too low to support the expected future payments.

In my humble opinion, there are many parties to blame.  The ratings agencies have the deepest pockets, so the attorneys have started there.  If my memory serves, mortgage brokers and their agencies are regulated at the respective state level.  Mortgage products, thus, are also regulated at the state level, either directly or indirectly.  Thus, where were the government agencies with the responsibility?   Those issuing the mortgages should have been at risk too, with their own capital on the line.  The underwriters, in agreeing to represent the sale of the securitizations, should have a legal responsibility also.  The list is a lot longer than this one paragraph……

Who is ultimately responsible in the world of Sir Paulson, Sagely Bernacke, and Mz Nancy Pelosi?  The American Citizens!!!!!!!!!!!!!!  You and me and my mother and our cousins, our elementary school teacher and our doctors, etc.  are responsible.  It is now our problem.  I forget if this is the definition of democracy???? It is definitely not the definition of capitalism………………………

Share your thoughts…. What happens tomorrow is always dependent on what happens today…

Share the word, share your knowledge.  Help save America for its citizens.

It is a certaintly that as the economy settles lower and lower and the Red Plague spreads, the crime rates and rates of thefts and scams will skyrocket further!  Unfortunately, it is only human nature based on Maslow’s documented Hierarchy of Needs.

We all must be judicious for ourselves, our neighbors and our families.  Many scams will look and smell sweet, seem innocent and be presented by apparently trustworthy souls.  Caution is the watchword.

The tales of woe I hear generated from folks in the jaws of foreclosure and bankruptcy are heartwrenching.  Tales generally go something like this: Scammer will buy your house and then promise to payoff the mortgages.  Sounds great.  Unfortunately, they do take title to the victim’s house but they do not pay off the outstanding mortgages.  Thus, the poor victim has gone from a bad situation to a worse situation!

Other similar scams have to do with putting money up first, for the “lender” to assist!

I have heard that no, I repeat NO real foreclosure counselors (if they are real) will take money upfront.  (Take a look at the resources pages on http://www.moneyassistant.org   http://www.moneyassistant.org/index.php?option=com_content&view=section&layout=blog&id=9&Itemid=27    )

Also scams are becoming common place with annuities being sold door to door, by unprofessional scammers.  They can have the victim complete paperwork to make an investment or move an existing annuity investment, and the scammer can then change paperwork to benefit themselves or another party, rather than the investor.

Simple steps to take to help guard against getting ripped off include:

  • Do not make investments into annuities or stocks, etc. with a cash payment.  Always make the payment with a check and be sure to receive a detailed receipt.
  • Only deal with an advisor who works out of an established office.  It is too easy to rent an office for a day or to no have an office at all, to make fake cards, and to scram with the money….
  • Ensure you receive a copy of your annuity contract, statements, confirmations, etc. on a timely manner, direct from the insurance company or main office of the investment company.  (We have all heard too many stories of advisors printing statements on their PCs and printers!)
  • Always read statements and notices received.  Follow up immediately if it seems a payment has not been received or something is not clear.   Make sure you get good answers for your questions.
  • Keep copies of all paperwork.
  • Do not sign blank forms.
  • All insurance companies and investment companies have compliance offices and fraud offices.  If you suspect anything, call immediately.

Be judicious and cautious.  You have worked too hard for your money to give it away to a stranger, against your will.

Feel free to share your stories or comments!!!

This past short week was remarkable. The Government, lead by General Paulson, promised to cover more than $300 billion of liabilities of Citigroup. Thus, once again, demonstrating that those controlling America’s money, are protected from their own stupidity and risky behavior. Those who had bought C stock last Friday almost doubled their money by betting on Paulson. After he screwed Lehman bondholders and the buyers of the Fannie and Freddie preferred shares, this guru is being smart by not trusting in the benevolence of irrational leadership!!!

General Paulson on Tuesday announced an $800 Billion plan to add capital to the consumer finance markets, student loans, auto loans and small businesses. Once again, it only benefits those finance companies that took risk during the economic expansion, who are looking for someone to buy assets they no longer wish to own!! Sir Paulson’s rational was that by selling these assets, these financiers will begin to lend again. Most others, including this humble writer, believe that they will behave like the banks under TARP. They will take the money, and not take any risks with it. They will hold it, or use it for bonuses, or to buy companies of friends, or buy Treasury bills and bonds, or FDIC guaranteed issuances from other financial institutions.

To assume they would use this money for lending, would be like the Sir Paulson’s team buying a home on the verge of foreclosure, and assuming that the seller would take the proceeds and use it to buy a new real estate investment.

President Elect Obama has promised new spending and infrastructure projects to jump start the economy. I do not know any bridge builders, airport construction workers , or road builders, so I do not know anyone who will benefit directly. Hopefully , those wearing ties to work, and those in the manufacturing sector will benefit as well.

In these times, with all the volatility, risks, threats and uncertainty, we must all stop and say THANKS for all the good we have, for our families and friends, for health and our prosperity, irregardless of how limited it may seem at the moment!!!!

Give Thanks, have faith, and strive to make the world better, without taking unneeded risks.

Have a great day!!!!

Excluding the rally in the last hour on Friday that drove the markets up by 4-5%, the past week was dismal and full of horrific news, statistics and activity.

We saw that the beautiful morphing of Sir Paulson’s plan into a help any entity that could form a nationally chartered bank or buy an existing bank.  He has protected large conglomerates, GE, Goldman Sachs, Insurance Companies, and numerous others, but he let Congress send Detroit pied pipers home (via individual private jets) with responses that absolutely did not sound like yes.  If American cars were made in California, I bet the response would have been different.  (But don’t get me started on Mz. Nancy….)

While Detroit burned, folks at Citi started jumping from the roof and windows, those that still had jobs and company stock.  As the price per share stumbled to $3.10, it looked like the world was going to end.  Did it?  Will it? We will find out soon, or not so soon……

The government closed and took over more banks this past week than they have any other week!!!!

Based on a very informal survey of professional New Yorkers, it seems that unemployment in the Big Apple will be skyrocketing, if the unemployed actually go and claim unemployment compensation.  How much do you get if you are laid off from a $300,000 job????   Somebody let me know….

Folks in our town started to celebrate when they started to be able to buy gas at less than $2 per gallon.  They got more excited when food prices started to fall and when turkey went on sale for less than $1 per pound.  They then realized that unemployment is at 16 year highs and only beginning to move higher.  That labor prices also follow the basics of economics pricing, based on supply and demand.  They heard about the government workers in some towns and cities taking a 15% pay cut to help balance the budget and looked at their friends who are paid not based on hours worked but on values of production or levels of sales, etc.   They then realized that incomes in general have started to go down.  They realized that if their income does not go down, likely their neighbors’ will, or their spouse or brother of cousin, etc….

People are beginning to realize (if they have not already) that the economic future of tomorrow is highly uncertain.  This is a mindset we have not seen in the US since the 30’s.

Let me tell you the story of a society without any hope for economic future…..  In the mid 1990’s I was blessed to have the opportunity to work in the countries of the former Yugoslavia’s.  This was a region going through war, economic upheaval, hyper inflation, supply shortages, complete non-existence of credit, and barriers to trade and travel.  It was amazing how families, with no incomes, and needs of food, drugs, etc. would “find” money.  The economy went from controlled behind the cash registers and through the payment systems, to cash, to barter, to personal exchanges.  People congregated on corners, not to socialize in the sense that we know, but to problem solve for themselves and their families.

Between the hyper inflation, which caused each unit of curreny they had saved to become worthless, and the bankruptcy of their banks, people literally and figuarively had nothing but a pot or ceramic basin to piss in….  College students went to school, because it was free and they could get financial support from the government, but they had not hope for the future.  They did not understand what it meant to work hard, get promoted, accomplish something, get financially rewarded and “move forward”.

Our children can face this risk of the lack of motivation.  They can get stymied by the layoffs and economic losses of those around them.  They can get stuck and just live for the day…. and not save and build for tomorrow…    This is a major risk.

What will happen to our childrens’ vision of tomorrow if our confidence in the economic system becomes trashed?????????? Share your thoughts……

Thankfully loan modifications are up!! Unfortunately there are no golden standards.  Luck and who the servicing agent is plays a tremendous role in how the modifications are made and what they are based on.

I encouragage readers to comment or link to relevant blogs addressing ways to modify loans and helpful hints, etc….

Popular modification options include:

  • Lower rates
  • Reduction in principal amounts
  • Models to reduce payments to 28% of total annual income
  • Reducing principal payments but maintaining the total amount owed so banks do not need to take losses on a temporary decline in the house value now.

Remember, the government and the banks want you to stay in your home.  In foreclosure they lose a lot more money.  Thus, now, they are trying to avoid foreclosure.  They want the houses lived in, maintained, and ideally sold at a later date when values have recovered (which they will, it is just a question of when.)

If you are facing a modification or foreclosure situation, let us know.  Share your experiences.  We will also share with you our latest news and findings.  I encourage you to use local resources, like your Legal Aid office, Chamber of Commerce, and any of the hundreds of task forces which have emerged around the country.

Investor groups are forming to assist homeowners and relieve the banks of assets they do not want.  The potential returns are modelled to be 8-10% per year plus significant potential profits on the monetizing of the interest in the property five years out. Reach out to me at guru@moneyassistant.org if you have an interest in learning more.

As always, share your ideas, thoughts and experiences.

The WSJ yesterday highlighted changes in credit card terms that I have been speaking of for weeks.  Terms are getting very difficult for the typical user of credit.

The following summarizes some of the changes highlighted.

American Express: Raising rates and fees for advances, purchases, late payments and defaults.

Bank of America: Lowing credit lines and closing accounts with $0 balances.  Repricing individual accounts.

Capital One: Changing its minimum payment calculations, resulting in increased minimum payments required.  Raising rates.

Chase: Raising rates and fees.  Raising minimum payments from 2% to 5% on some customers, adding a $10 monthly service fee on some accounts.

Citi: Raising rates on select customers.

Discover: Removing the cap on balance transfer fees.

Bottom line:  Credit is getting more expensive, more restrictive, and more punitive for usage!

Buyer and friends beware!

If you know of any good alternatives, please share them as a comment!!!! Thanks.

Today, while Paulson and Bernacke were defending themselves and their actions, while Congress dickered about with leaders of the Detroit Three, Wall Street continues its persuit of gravity as the primary driver!!!!!!

Even with the billions being pumped into America’s banks, the 2 trillion dollars of injected liquidity, the stock and bond markets are telling us that these efforts will fail!  Citi Group and Bank of America led the decline.  Why?  Because investors believe that they can and will go lower.  That their problems are beginning, rather than ending.  That things will only get worse!!!!!!!!!! Wow, worse?

Defaults on consumer credit are just beginning.  Credit balancing (moving $ from one source to another) is now exhausted. No new credit is being issued. Existing credit is being reduced.  Interest rates charged are jumping to the hi 20’s to 30’s, with limited notice to the borrowers!!! Thus, unless they pay off the balances, the interest charges will continue to grow exponentially!!!!   If new cash flow, profits, etc. can not pay down the balances, and the balances grow exponentially (which we are already seeing), the only outcome will be massive defaults.

With structural changes being implemented by the banking system.  With credit in full crises, mass defaults and bankruptcies is the only out come.

I hope I am wrong.   Please tell me what I am missing….. Leave a comment.

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Currently, mortgages are traded between banks and financial institutions like (as) securities, generally in large bundles, but still traded.  The current market prices that these trades are taking place at is currently between $0.18 per $1.00 of face loan amount and $0.28 per $1.00.  But yet, if I or you wanted to pay off the mortgage, we would have to pay the face loan amount plus interest.

Here is the BETTER IDEA.  Let the mortgagees (the homeowners) buy back the mortgage at the current market price of the mortgage. Let them buy the mortgage at 18 to 28 cents per dollar of loan amount.  They can thus cancel the loan that the now owe to themselves and they can then refinance that amount with a full recourse loan, rather than a non-recourse loan, or maybe even a loan guaranteed by Uncle Sam.  This would keep people in their homes, allow a fair playing field, and help the banks monetize their balance sheets.

There are several countries that have programs like this (no I am not a genius) and none of them are facing the situation like the great US of A is facing today.  We must use the markets to solve the problem and this does exactly that!

Spread the word!!!  Let me know what you think….

Six months ago the world was facing a tremndous threat of global inflation.  So much so, the EU Central Bank, in their wisdom, raised their Interest Rate for all of Europe!  This, at the same time, was when the US had already cut rates substantially to abate the market’s collapse.

With the global economy collapsing, demand for raw materials to finished goods has fallen flat.  The basic equation of price being set at the intersection of the supply curve and the demand curve has produced current prices. Demand dropped, supply increased and prices generally have plummeted.  Risk aversion in the markets (whether currency, commodities, securities, energy or eggs) has increased drastically.  Values per unit can change by 2-10% in any given day, either following the direction from the prior trading session or setting a new direction.  Thus, the number of players in these markets have declined.  Too much inventory is spead throughout the supply chain, with each sector of the chain trying to push it off to the next.

Prices have dropped and now the greatest threat is global deflation!  Deflation could spiral as less capital is available, values of assets held declines, and the buyers patiently wait for values to fall further.

The demand for stocks has dried up , as investors fear that valuations will be forever changed (to the downside.)  Retail sales are down as people wait until they truly need something before they buy it.  Unemployement numbers are skyrocketing and with that average labor costs will come down, as people price themselves competitively to enter back into the work place.  And last, and most important, housing values will continue to fall, as credit becomes scarcer, incomes lower, and supply of available units increase.

WATCH OUT FOR FALLING PRICES!!!! THEY COULD CRUSH US ALL!!!

What do you think?  Share it here.

It is a wonderful thing when America’s largest bank gets free money from Uncle Sam so they can increase lending in America, and instead take $7 billion in cash and put that money in China!!!!!!!!!!       What are they thinking!!! Why is the US government and Congress letting US businesss leaders make a joke of the government’s attempt to help Main Street.

Somebody please explain this to me…………………

Three interesting articles worth looking at regarding the Red Plague and its impact on your neighbors and cousins.
Downturn Drags More Consumers Into Bankruptcy
By TARA SIEGEL BERNARD and JENNY ANDERSON Published: November 16, 2008
With their credit cards drained, the latest bankruptcy filers are deeper in debt than those in previous downturns.

http://www.nytimes.com/2008/11/16/business/16consumer.html?partner=permalink&exprod=permalink

______________________

Here Comes a Bankruptcy Boom

November 11, 2008 10:26 AM ET | Rick Newman

http://www.usnews.com/blogs/flowchart/2008/11/11/here-comes-a-bankruptcy-boom.html

________________________

RESIDENT EXPERT

Daniel McGinn

Focusing On Foreclosures

Now that the election’s over, is relief in sight?

http://www.newsweek.com/id/167932

Citi yesterday agreed to “cramdowns” for resetting mortgage amounts and rates for troubled borrowers.

Politicians all across America declared that this was a breakthrough, etc.

One would not think it at all surprising though, given the $45 billion pumped into Citi by our great Uncle, and our Uncle’s willingness to absorb more than $300 billion of future Citi losses.

Socialism clearly has some benefits. With a tight leash (like Citi is on), the master can dictate many things.

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