The next shoe to drop

In my neighborhood there's three places in foreclosure and one upside down and about ready to walk away from it. Which got me to thinking about commercial properties so I did a little research.

I was looking around the area at all the business that has gone out. It's strange in a way. Some places had been around for years while some places were just built in the last two years and sit there empty never having been leased. There's a 76 story office building in Seattle that's about 40% leased and now in default. There was a time when the Seattle skyline was filled with construction cranes. Now building lots are empty and plentiful. In researching all this, which was no easy task. I find commercial real estate is like the onion similar to the residential mortgages. They did the same thing. Bundled good and bad commercial loans into packages that were sold everywhere. You may recall them touting REITs (real estate investment trusts) some years back as a great investment. I considered such an investment for about two seconds and since they're nearly impossible to understand without some kind of real estate background I thought otherwise. I knew the residential loans were a joke when they offered 125% loan to value and interest only loans. What's in store for commercial loans the coming years?

Defaults expected

The financial side contains even greater risk. Fitch Ratings said it expects defaults to surpass 11 percent this year on commercial mortgage-backed securities. If that sounds like the kind of "innovation" that mushroomed the housing bust into a financial panic, it is. We just don't know the full exposure or interconnectedness of these derivatives. Or whether, as Fed Chairman Ben Bernanke once put it, the damage can be "contained."
(reported by Jon Talton Seattle Times)

Lastly there's 1.4 billion in commercial loans and about 1/2 are upside down which as everyone knows means that they own more than what the buildings are worth. And like it or not the taxpayer is going to get stuck with the bill. That's because of the bad paper that was sold to other banks bringing them to bankruptcy. The FDIC took possession of this paper when a bank folds effectively laying the burden on us the taxpayer. And I suspect that that is the reason congress won't separate the banks from from the investment firms because if they did they effectively kill the whole company in the process. Because as we all know they're still selling derivatives like junkies that need just one more fix.

Thanks for the links Oso but they didn't help there was only residential foreclosures on those sites.

How much is enough?

Tiger returns to sex.
I'm sure that will make all the bimbos happy. Now they get another chance to milk him for extortion money. Raises the question how much is enough sex? I'll let you ponder that one yourself.

Oil companies make billions. We know the reason for this but our only choice is to drive less.
Insurance companies make billions while dropping laid off workers and saddling those with coverage with the bill or should I say ever increasing profits.
Banks are flush with cash and don't seem motivated to lend money to business even after we bailed them out.

Contrary to what Gordon Geko said Greed is not good. In watching a documentary about where our tuna comes from I saw first hand about things we don't give a second thought. The worker who caught that fish made about 1 cent for the effort. The worker who cleaned and boned it made less than a penny. Their average income per day is between $5 and $7. Even in a country with a very low standard of living that is a very small amount barely covering food and shelter. They work 10 to 16 hours a day for those meager wages. And I can just imagine how the CEOs wonder just how they can cut those costs by a penny or less so that they can make yet more in bonuses and look good at the next stockholders meeting.
And there we stand at the fridge door wondering if we'll have the fish, the chicken, the beef or maybe order out. We sit there watching the latest trinkets, gizmos and thingamabobs plastered across our oversized flat screen TVs and just must have the latest and greatest because you can make 3 easy payments and if you act now they'll double your order. Then when it sits in the closet collecting dust you'll pull it out give it to a relative or friend or charity and the process will start over. But gee it was so neat when I first saw it. But we never think about the poor shmuck who has to sleep on the ground or on the floor of the factory (yea they let them do that over there). And they get to work long hours in hot factories just so you could have some cheap dodad that you won't use anyway.

But I digress, this is about enough. How many homes does a CEO need? And how is it that a CEO makes 400 times what the average worker makes while in other countries that figure is more like 4 or 5 times. But they weren't satisfied with having all that loot. They've taken over our government to prevent competition making it near impossible to even get on the ladder. They've raped our educational system cornered the market on insurance and bet on company failures to make even more. Our jobs went overseas so they could make yet more.

But you haven't seen anything yet. When the underlings were defeated and robbed of their jobs and retirements the big boys will have no choice but to turn on themselves. Conditions are now being set for that to happen. We saw it first hand with residential subprime mortgages. Now you'll be seeing it with corporate real estate loans. Right here in the Northwest we have a 76 story building that's 20% vacant. It won't be long before their mortgage won't be covered and just like with a home the place will go on the auction block. And the vultures will swoop in and buy up the leftovers of dead or dying companies and properties becoming bloated with yet more cash and assets.

So how much is enough? In my opinion only a bit more than is necessary and not massive profits of assets or cash. Anything more is just plain greed a lust for things and money that never ends well.

(In looking for a graphic for "lust for money" up popped pics of womens clothing shoes and purses)

Keep hold of your drums you might need a place to live.

If you thought credit card reform was bad

Hold on to your wallets folks. In addition to getting health care reform done our government is working on energy policy as well as consumer protection. From what I've heard the consumer protection legislation is getting whittled down to an agency run by those we need protection against. Sen. Dodd is working with Sen. Corker (R Tn) and by the sound of it Dodd is doing nothing short of a reach around to pander to Corker.
As for the energy bill I know big oil and coal were greasing the pockets of congress as far back as last summer when the teabaggers were screeming at town halls. Gas is expected to be over $3 a gallon if it isn't already. Wonderful. Now we get screwed in every orifice and they don't even leave a mint on the pillow.
Now for all those of you who thought they'd escape the mayhem, let's say you're retired on fixed income, there's a bunch of things in store for you too. First no cost of living increase this year. They tried to give grandma $250 extra this year but you know which party who put the kibosh on that. Did I say "Party"? Seems they get the party. We get to pay for it and clean up afterwards.
And if you're on Social Security you might want to check your old records for any old government loans you might have forgotten about like a student loan or gov backed business loan because the IRS is going after all you forgetful souls.
And don't forget the new taxes on cigs, candy and bottled water here. It's either that or a .3% sales tax increase. I have no real objection to taxes but when you're not working or have no control over what you get to live on it's a different story. Property taxes just went up 30% last year even though property values went down by 30%. So you'd think the amount would come out about the same. Nooo. They valued it at the old rate so if you want relief you'll have to fight for it. I'll need to file an appeal just to prove something I'm sure they already know.

Oh and I forgot to mention that consumer protection bill covers loans purchases and even retirement funds. Great now they can Madoff you and get away with it. If only Bernie could have held out a bit longer his buddies in congress would have let him get away with it. :-(

The senate no jobs bill

Went and read the no jobs bill being proposed. Nothing like putting the fox in charge of guarding the chicken coop. The bill does little more than give business and the rich more tax breaks. Gee I thought we voted the republicans out the last election and yet here they are riding rough shot over legislation. Seems once again the spineless balless Dems are caving again. Here's the short version of what the bill does and make note that the money for business is borrowed while money for jobs was already in the general fund. So like some Abbott and Costello bit we get the money that was already there for our benefit while business borrows from us a couple of times. Like saying here's your $10 now loan me $30 and we'll call it even.

The bill gives business a tax break of up to 6.5% of the FICA tax (up to $125K or earnings). In addition they get $1000 for each worker they hire who stays 52 weeks. Add to that they get to write off up to $250,000 for equipment they buy this year without having to depreciate it over several years which is standard.
The problem As we know three quarters of the American economy is based on consumer spending therefore there's no motivating factor for business to spend money or hire anyone if there's no demand for products. As Billy might say we'd need more empire builders out there spending. But if people aren't working they aren't going to spend and those that are are afraid they'll be the next ones to hit the unemployment line. Business doesn't expand or even try to expand unless they know for sure they'll have a good cash flow and even then it's usually after the fact. As in oh my god we've got too many customers we'll need to hire more people.
That was the $30 part of the joke now for the $10 part. The jobs they say they'll be creating are part of the Highway Trust Fund. The fund ran out of money at the end of the year. But stop to consider that this is money that comes from gas taxes and was already in the general fund and was scheduled to be put in the fund anyway. Sooo. nothing like giving you something you already had and making it look like a gift.
Sorry guys I'm not that stupid and I don't buy it.

Anyhoo until later keep your drums upright. And remember when somebody tells you they have a "free" gift for you it's usually not.

Update Update: I forgot in my hasty reading of the bill (yes I'm one of those geeks that actually reads the whole thing) our wonderfully honest senators decided to go after all that cash corporations have been storing in offshore accounts hiding it from the taxman. So what are they going to do with all that loot? Create jobs? Guess again. They're going to give most of it back to the companies in the form of tax breaks and hiring incentives. Nothing like robbing a bank and when you get caught you get to keep the money eh?

Busted!

Looks like the IRS is going to be flush with cash by Jan 1 if this program keeps going. The Swiss were about to turn over some 4500 names of people who have cash stashed overseas to evade taxes. This is in the billions of dollars. And the republicans keep telling us there isn't enough money for health care. There would be if their buddys didn't have it hidden away. Now I hope they'll go after all the companies that have phoney off shore front companies. You know one small building that houses 23,000 companies. Give me a break. And notice how only one guy went to jail and that was only because he told the SEC he did it. It's like the Wall Street police are too busy eating dougnuts drinking coffee and reading the paper to be bothered. Oh! is something wrong? (as the economy collapses)

The party's over

Collapse - the post Bush years

Like spitting in the ocean the problems we face are insurmountable or at least appear that way. Where to begin? What area wasn't touched by the Bush cabel the last eight years and turned to poop?

!. Banking - It's now easier to walk on water than it is to get a new mortgage even if your credit is A 1. Unless you already have a line of credit forget trying to tap into your home in the event of emergency. Comforting news should you need open heart surgery. In other credit news banks and credit unions have been jacking up their rates to near finance company levels. Sorry Christopher Dodd you were too late with your freeze on credit card interest rates.
2. Forclosures - Goes hand in hand with banking, continues but may or may not be slowing. I feel bad for those that live in Detroit where 9000 homes were put on the auction block yet the forclosure vultures didn't bite even with $500 minimum bid. Hey that guy on late night "Lazy man's way to wealth" told me I could make a killing in real estate right now. He forgot to mention that I'd need an AK47 and pitbull guard dog even to fix the place once I kicked out the squatters.
3. Wars - No immediate end in sight on those fronts (pardon the pun) as we continue to dump billions more cash and lost soldiers lives that we don't have. And there's Dracula Cheney wanting us to stay there 100 years or more. He must awaken to the smell of napalm. Just wonder how much he gets from his Haliburton retirement plan. Loves blood and guts as long as they're not his.
4 Jobs - What jobs? Worst employment numbers it 26 years. Senate is voting on an extension tomorrow. I'd gladly have a job rather than an extension any day yet I have no choice but to hope this passes because there is no alternative. This would make the 5th extension for those counting.
5. Wall Street - I laugh when I look at the figures. The Dow hits 10,000+ and all the financial talking heads say how rosey things are for them. It's all an illusion boys and girls. The market at one time was at over 14,000 before people woke up and realized that it was all an illusion. Like my home being worth 1/4 million ha ha ha yea right.
6. Health care - We have the best health care in the world. Yeah if you're a senator or congressmen. For the rest of us it's getting close to the worst. We rank 50th on the world scale and one person dies every 12 minutes for lack of insurance. Those with insurance are finding the rates going up and what they get going down, higher premiums and less coverage. And yet insurance companies say they aren't making enough profits while they're spending $1.4 million in lobbying efforts, per day!

I could go on and on and on but you get the idea.

Lying with statistics

Call it what you will my father was a numbers cruncher statistical anaylist statistical engineer bean counter. He always said you could make numbers say anything you wanted to. I see the numbers for new unemployment claims dropped this week and you'd think that was a good thing but the way numbers are kept I wouldn't be so sure. On the surface it might look good but then there's the underlying factors that they never seem to talk about. You'd think that the rise in unemployment is slowing. What they don't tell you is how many fell off the rolls because they ran out of unemployment.They aren't counted you know. And there's ones that couldn't get quite enough hours to reapply and of course the temp workers that fall through the cracks or could be considered underemployed. So they say the national unemployment rate is at 9.4% when in actuality it's more like 15 or 16%. I've also heard of some small towns at 25 or 30%. And of course you have Michigan that's been well over the national average for quite some time
So how does this all end? What will happen that will be the turning point. To know that is to look back at what happened. This is in many ways a repeat of the 1930s. Greed and speculation took hold. The rules were eliminated so that leverage was the king for a day but then fear set in and the great financial house of cards collapsed. So where are we now? The banks got a nice bail out but rather than use the money to get things going they went out like a teen with his first pay check and blew it. They bought other banks in hopes of being king of the hill when it was all over. Consumers aren't spending for fear they may be the next to hit the unemployment line so they're saving like never before. All that cash is being parked in the banks that still won't make very many loans so the banks are busy making the next bubble. The only thing keeping the economy going at present is the government but even the bulk of its' spending won't kick in until next year. That should give the banks plenty of time to become bloated to the point where they have no choice but to lend again. Even the federal reserve is playing along by keeping rates at near zero. So with one foot on the brake and one on the gas it should be interesting next year when the brake is released.
Now if you'll excuse me I need to get on the phone to some potential employers because I just love hearing those three magic words "No work here".

How many people will die?

I hear a figure of 18,000. What am I talking about? Not some mass bombing. Not some invasion of a country. Not even the number of annual traffic fatalities. I'm talking about the people of this nation who will die because they have no health care coverage and the ones who do have coverage yet get denied what they were promised. These people who did nothing wrong other than be a living creature born and working in the U.S. People who have paid their taxes and paid their bills who now face a medical emergency. But it isn't really a medical emergency as much as it's a financial emergency. Most of us could easily face an operation, proceedure or treatment but it's the bill that does the most damage. Just one trip to the ICU and an overnight stay can wipe out any savings, cause the loss of a home and tear a family apart.
Rather than fixing the system and niping medical problems in the bud before they become expensive burdens on not just the poeple involved but to the taxpayers as well,some would leave the system as is. What they fail to realize is that the system can not stay the same. With the boomers set to retire even Medicare as it is right now can not continue. When a patient can't pay there's bankruptcy and the price must be covered but with no assets the burden falls ultimately on the taxpayer and to the nation as a whole.
As I see it the health care system will go the way of the auto industry with the costs and prices going beyond what anyone except the very wealthy could afford. At that time the burden will fall on the entire nation in terms of more money going to pay for the mess and a loss of GDP. We've waited so long that we can not afford to kick the can down the road any longer. The tipping point is now upon us.

This one just blew me away

You remember last summer when gas was $4 a gallon? It was an unusual thing considering demand had plummeted and there were overflowing storage tanks not just here but around the world. What was driving such high prices? Speculators looking for the next bubble. And now they're looking for their next bubble but this time it's going to be food but to get that food they will need land and that is exactly what they are doing now. Aquiring land like something not seen since the land rushes of days gone by only this land grab makes the ones of the past pale by comparison. Large tracks of land in Africa and Asia in of course poor nations are being bought up at bargin basement prices with the lion's share of the crops leaving the country. The land is being bought right out from under poor farmers who will see little to nothing in return.
I saw a similar situation in Brazil where European nations are backing soy farms for animal feed. The local farmers have been pushed off the land and must rely on handouts from the government that is when the government is feeling generous which isn't too often.

Land grab

Inflation?

Invictus has a good post over at Bondad's about those worried about inflation. I keep hearing the rightards trying to throw the fear cards at us once again about prices that will hit the roof and you'll need a wheelbarrow full of money to buy a loaf of bread. That won't happen for several reasons as he points out with his graphs and charts. The simple answer is this: Demand. With babyboomers poised to hit the gold watch crowd they tend to down size and hold the line on spending. That is based on the nagging fear in the back of their minds that they'll run out of money long before they take a dirt nap. You also must remember that these were the same folks who when they were in their 30s and 40s were able to pull us through the last economic downturns. They went from the beater cars they had in their 20s to the upscale sedans and SUVs to haul the spawn to soccer games. The boomers are downsizing and doubling up or worse trying to split the rent with their parents that is if Ma and Pa didn't move to a retiremnt community in Az. If the spawn didn't find a career path then they're comming back home to either share with the bills or worse become a fungus on Mom and Dad. That is if Mom and Dad didn't split before the meltdown hit. If they didn't they can't do it now and are stuck with each other.

So inflation? No. People have come to realize that they can get by just fine without all the junk. What didn't get sold at the garage sale either gets donated or thrown out.

Inflation? computer says no

Update: Seems somebody is skeptical about my analysis. Well don't trust me then take it from an award winning economist.

From Paul Krugman Pop through some of the links in this article. He gives some very simple explainations that even a simple guy like me can understand.

Economic melt down II

This is banker beaver (killing two beavers with one stone so to speak)

I was watching the Frontline program on the financial crisis of 08. Then was reading the great news from Bank of America and Citi. I think you want to keep a close eye on those two companies. While both posted record profits as of late you need to dig a little deeper to see the storm brewing. Citi just made it's big profits by selling off Smith Barney. A good move but there are still underlying factors at work there that still make Citi a bad investment. One is that they still haven't dealt with the underlying problem they face those bad loans and defaults in the credit markets. I see where housing starts have surged ahead as builders seem more confident. On the face of it that would be good news but I just read yesterday that foreclosures have also surged ahead. I haven't checked as of late about the supply of housing that's still on the books but around here I'm not seeing houses selling in short order and I live in one of the better markets.
Then ther's the 800lb Gorilla hiding in the wings that nobody talks about. That would be the Alt-A loans that are about ready to hit in force come fall and early next year. And if you think the sub-prime thing was a mess you ain't seen nothin yet. So as I said keep your eyes peeled on BofA because they have their tentacles in so many parts of American business. They are the largest bank in the U.S. and if they fail they could well bring the whole thing crashing down.
All I can say is Obama must have a real love for crisis management because we know McCain could never have been able to handle this and god forbid Palin ever got her hands on the reigns. Just be a good girl and keep catchin the fish.

Where do we go from here?

A thought had occured to me many years ago. I think I was discussing this with one of my college profs and that was some time ago. What happens when robots and automation take up the lions share of the work force? What will the rest of the population do to make the money to buy food clothing and housing? An interesting situation to say the least.
What's happened in the last thirty or forty years with our workforce and company philosophy to get to where we are right now? At one time it was a rare thing to change jobs even once during a working lifetime. Now it seems that people change jobs as often as they change socks. That in itself created a stalmate for moving forward. People moved sideways in their careers never being in one place long enough to gain much of a pension. So while the top 1% had their income surge ahead the middle and lower class lost about $2000 and that was just in the last 8 years. Employers focused more on answering to shareholders than they did to their workers or customers. As a result jobs moved overseas to cheap labor and higher profits. By chasing cheap labor and costs they effectively cut out the American market. It's rare that you'll see a building built these days made from American steel. Why should it when we loaded up entire steel mills and shipped them to Korea where labor is cheap and the environmental laws lax. With less costs companies made tons of money for their shareholders and execs looked like heros and were well rewarded. In fact the boards of directors saw to it that they are now rewarded to the tune of several thousand times what any CEO in any other nation earns. All of this at a great cost to the worker. GM is now a shell of it's former self. And where will the workers go who spent the better part of their lives finally making a living wage after working their way up the pay scale? For many this was the only way to get to the American dream of owning a home and raising kids. One could with a basic high school education make a comfortable living and retire knowing that you'd be cared for in old age. That's nearly all gone now. It went with steel in the 80s and textiles about the same time.
Then there's agriculture. Once there were thousands of family farms. But with the start of factory farms the old family farms were bought up and turned into production jugernauts. Colombines are now huge beasts that can do in a few hours what used to take days. And to think that we only produce about 25% of the crops that we consume. The rest is imported from around the world. Produced by cheap labor and no regard for the environment. DDT is still used in most other countries even if it is banned here.
This reminds me of an old Pogo comic strip. Two characters are standing by farm fields and in the bubble it says "this is where I don't grow corn and that field over there is where I don't grow beans" All of that was under the heading of farm subcities. It almost seems the same with American industry only there's no subcities only empty factories and closed businesses.
No, if management doesn't change it's thinking then there will be no choice but to turn America into something communist. They will get exactly what they hate the most because there will be no other choice.

As I recall FDR spent quit a bit of money building this country and we didn't go broke. He rebuilt farming by changing methods. When the cattlemen faced disaster he bought their cattle and let them keep their herds. He built dams, roads and our present day electrical system. All of these things need replacing now but the republicans are worried about debt. Well I don't seem to recall getting a bill for what FDR did when I was growing up.
Congress (McCain in particular) is worried about earmarks. I'll tell you what the biggest earmarks is. That would be war. Where else can you spend trillions of dollars and get absolutely nothing in return other than some families who won't be seeing their sons and daughters again?

Yes I'd say a second stimilus package is in order only this time don't bother with the unemployment extentions. Use the money to actually provide jobs. There's a ton of work that needs to be done. It'll just take a bunch more money to get it going. We will come back. Maybe not the same but it can be done if we put our minds to it.

Where are we now?

It appears that I'm at my last extention for the unemployment and now the state agency that doles out the checks would like me to "try harder". Strange what a few years make. Prior to the Bush debockle I never had to worry about being on the out of work list. In fact I think I was only on it one other time prior to the end of 07. If I needed work I could just make a call to a former coworker or supervisor and they would steer me where the work was. In fact most of the time I'd be up to my eyeballs in some job and others would call wanting to know if I could work for them. Not so any more. I was working at the airport in 07 when I got this epiphany. Like a punch to the stomach and the sudden realization that dark days were ahead. As if you were watching a favorite movie when all of a sudden the screen goes black and no sound. You wait for the projectionist to fix the problem but nothing. So here we sit in the dark in our seats and try to amuse ourselves until the popcorn and one litre pop runs out.
I made some calls to a couple of companies yesterday as required by the unemployment agency. There's another story in itself. They've become a prime example of what Kafka was talking about in his novel "The Castle". Maybe they used the book to restructure their agency some years back. But anyway all the companies called were having a hard time keeping their regular people working. It almost sounded as if those on the other end of the line were sitting there doing nothing but try to justify their own existance. I think one of them I talked to was the actual owner.

A relative called amongst my being busy to inform me that her husband's company was being shut in a few weeks. She also informed me that another relative who had just bought into a retirement community one of those areas with dues and rules just discovered that the developer went bankrupt and with several foreclosures they'll have their dues raised. All is not good. There seems to be only two members of the family left working and even their positions are shakey. But again I digress. The real reason for the post was to give an indication of what's going on in the rest of the country from comments I found on one survival site. Now I'm not one to go to a survivalist site. They've been around as long as I can remember and to date I've never seen an armed uprising of the masses in this country ever. I don't expect one this time round either. But on this web site the author asks a simple question about how things are going around the country. You may reply in the comments was the request. So here it is:

A general report on the state of the nation

I realize that this is but anecdotal but I think you get the point. Rather than some talking head tell you how rosey things are it's nice to get it first hand from those who are going through it. Notice how we aren't seeing tent cities on the 6pm news anymore, but I'm sure we'll be seeing more of them in the next few months. Let's call them Bushvilles if you will because I'd like to leave a true historic legacy to George W.

Are we in a depression yet?

A look at the jobs numbers this morning shows that we're slipping again. I know Obama is trying his best but it looks like that's not quite enough. 467,000 jobs were lost last month putting the unemployment rate at 16.5%. We're beginning to see an increase in crimes such as bank robberies and break ins. I see an increase in business fires and wonder if they're not intentionally set making sure it looks like an accident.
As I've reported before even those working are having their hours cut. So at what point do we declare this a depression? Ah oh I said the D word. Would it be 20% or 25% as in the last "great depression"? We now have an entire state that may go (is) bankrupt. IOUs aren't going to pay the bills. The contractors and subcontractors who do business with the state can't pay their bills. Wonder if they'll just hand out IOUs instead of pay checks? Wish I could pay my bills with IOUs.

The link

Not so fast boys Time to pay up

Obama wants to have companies that have offshore accounts to start paying up. Now to all those out there who think that this is some kind of tax increase on business think again. A person making $50,000 pays a tax rate of 25%. A corporation making $500,000 has a tax rate of 35% but with the little loophole of having a PO box in the Cayman Islands or other tax haven and someone there to forward mail back to corporate headquarters the corporation pays no taxes. Corporations say they pay taxes to the foreign government while telling the foreign government that they pay the U.S. taxes. The end result is that the individual taxpayer pays thousands while the corporation pays nothing. This will be interesting when they start auditing the books and checking the declared taxes corporations say they pay.
It's estimated that $21 billion is lost from this corporate tax evasion. Here's an idea let's have the IRS audit their books for the last 7 years and make them pay the same penalties and interest that they charge the little guy. Then maybe we'd see that CEO pay and bonuses start to look realistic.

I see the stock market went up by a couple hundred points today. I have a theory about that. It isn't because the economy has bottomed out. It's because the short sellers are looking for a good time to dump their positions. There's no way corporate profits are going to go up anytime soon if Chrysler is basically finished and GM is not far behind. That's over 200K workers out with no prospects. Think what that will do for consumer demand. There's so many companies calling it quits or cutting back I can't count the empty store spaces any more. The only places with even half full parking lots are the food stores and even shoppers there are buying less.

Cram down? Not so fast

Most people out there have a sense of fair play and when we see our neighbors in trouble wouldn't think twice about helping out. The current legislation to help homeowners facing foreclosure is a very sticky situation. Senator Dick Durbin wanted to put an ammendment to permit judges to change the valuations of mortgaged property as well as the interest rates on those mortgages. This is called "Cram Down". While this sounds like the fair thing to do considering our present economic situation nobody considered the other side of the equation here. That would be that money for mortgages comes from investments and where do those investments come from? A whole bunch comes from retirement and pension funds invested long term providing monthly checks to grandma and grandpa along with a lot of other retirees. Could you imagine the banks having to send a letter to grandma telling her that because mortgages had to be restructured and the interest rates lowered that her monthly pension check will now have to be less as well? You could just imagine the uproar.

Cram Down

So what's the solution. My guess if this works out even close to fair would be that homeowners can get a new mortgage yet the terms may be gradually changed. The banks will have to write off more of their losses and bondholders will have to take a bit of a bite and tax payers will need to wait for any return. Everyone will just have to give a little. The alternative? Foreclose on all the bad loans. Demo the house. Tell the investor he's lost. Close the bank and watch as the entire economy hits rock bottom.

Watching the crumbling

Went in to get stabbed today. That's what I call a blood draw. Have to do that more than I'd like but that's another story. Running a few errands I took note of the every expanding empty stores springing up. Circuit City gone. Joe's (We knew it as GI Joes a sporting goods store) gone. A Futon furniture store, an Arco gas station, a Thi restaurant and several others with no signs and not knowing what they were gone. Maybe I could get a job making for sale or for lease signs I'd make a killing. Oh and I forgot to mention the neighbors on both side of me are in foreclosure. The one neighbors always were deadbeats and didn't pay their bills. The other guy works for the government and is about ready to retire. The restaurant nearby is loosing business. Their parking lot used to be packed. Now it's about half full most days. There was a Dairy Queen up the street that hadsn't been there for a couple of years. The building was made into one of those overpriced retro burger joints. You know the 50s theme Happy Days type. It lasted about a year and then has sat empty ever since. Then there was the excersize place for old women. I don't think that lasted a year. I guess older women aren't into working out.
There's the cofee stands. You think the jokes about Starbucks are just kidding? We have five of them on the main road here. I don't think you can drive more than 200 yards without hitting one. And if you don't like Starbucks there is five others on the same road. You think we pee coffee around here? You'd be right. Wonder how many of them will go out in the next few months.
It reminds me of being a kid and walking past a vacant house. First the yard gets overgrown. As the months pass the windows get broken. Slowly the elements wear down the structure and the walls start to collapse. I've worked on such houses in my later years. They're not fun. Roofs so waterlogged that your weight punches your leg up to the hip. There's usually some left behind stuffed toys moldy now from the rain.
So here I sit and watch the collapse and wonder when it will turn around. I have a few ideas about that. It will come back when business gets money from the recover act which isn't scheduled to start to kick in until July. That's just the first part of it. The rest won't come until next year. Why they waited so long is beyond me. We could be getting back to work right now. That would be putting money back in the banks and coming back to fill the tax coffers. We have roads to repair, bridges to replace and an electrical grid that's 60 years old. Yes here I sit watching the crumbling

Stress Tests Leaked

I don't even think I can comment on this situation. I had somehow stupidly assumed that maybe 1/3 of the nations top banks were in trouble. I had no idea that it was this bad. It appears that all but a few are ready to fail. I think maybe I'll save a copy of this article in case they decide to pull it. Go read: Stress Tests

The Treasury is refuting this article and Time is saying that everything is just ginger peachy. However when a congressman told his wife last October to go to the bank and pull as much money as she could it makes you wonder. It's as if the building is on fire but nobody wants to mention it least the panic starts and people are trampled heading for the exits.

The Time spin on Think butterflies and fuzzy kitties

CDS

Digging through the history of the financial debacale trying to do a postmortum I discover that the banks and investment houses are like a large ball of string tangled to such an extent that it makes you want to just throw it all away and get a new one. But we know that will never happen. These behemouths have grown their tentacles into every facet of American life. To pitch them aside like some sandwich wrapper would spell total ruin. The powers that be will be forced to maticulously unwind this knotted ball. Funny how we pride ourselves in being so modern always looking for new and more efficient ways of doing things yet there are some things best left alone. Just after the "great crash" of 29 laws were passed to prevent what has just happened. It was all there. Nothing complex that even an average person couldn't understand. But no, the banks and investment houses weren't satisfied with being just what they were. They just had to be something else. That glaze look of greed came over their eyes. How to make more? How can we con the government into changing the laws to our favor? That's what it was a con job. Logic and common sense were thrown out the window. It was easy but like boiling a frog it took some time. The first rule to go was the one that said a bank couldn't sell investments and investment houses couldn't be a bank. That I'm sure was an easy thing to eliminate. "Senator wouldn't it be nice if you could do your banking while you're here at our investment house." But no it didn't happen that way. It happened in the background by investment houses and big banks stretching the rules and getting into areas they had no business getting into. Like the two year old inching his way to the cookies after mom told him to stay away the financial institutions did exactly what they were told not to do.
These people were not satisfied with a set amount of return or business. They just had to have more like a drug profits and comissions could always be bigger. I've seen this in business. A company that grows to a certain point and when they reach a good percentage of market share aren't satisfied. It drives younger people in the company to look for more profit without thinking of the rules. We'll just call a product something else even if it violates the laws. We'll just make it so complex that it can't be regulated. And that's what they did. CDOs, hedges and derivatives became the savior of the time. Financial instruments so complex that I'm sure even those who sold them at times didn't understand or could value what they were selling. And the real beauty was that there were no rules, no SEC filings, no accountability. What a great playground for financial disaster.

Credit default swaps

Those wonderful little insurance policies that brought down a nation and possibly the world of banking.

( I'm not going to proof this there was just too much reading and research. So call me lazy)

Here's some scary stats

For the last couple of years I've been following these financial gurus (I hate using that term with these guys since they have been spot on about the economy unlike what we're heard on the boob tube). Invictus, Bondad and the not so technical Monkeyfister have given me a better insite into the markets than any financial cheerleaders from CNBC or even Bloomberg. While the TV talking heads were touting how we wouldn't see a recession or if we did it would be a mild and short lived event, my guys via Blah3 were telling us to find a mountain to hide under. While Cramer (Mr. pump and dump) was telling us to buy buy buy (insert your own sound effects) the Blah three guys were saying sell sell sell and find safer ground for your nest egg. So while those of the upper crust were loosing their life savings to clowns like Bernie Madeoff (I call him that because he sure did made off with the money) a bunch of us little guys have our funds stashed in safe places. That is unless the whole system goes down in which case we're all screwed.
With the above introduction Invictus (hat tip to him) gave the charts below for your consideration via the Fed:






Sad to report that things will not get better no matter what the cheerleaders of CNBC want you to believe. The firings will continue until like the bumblers that they are realize that they've shot themselves in the foot. That they have fired their own customer base and no one will be running to their doors to buy products they really don't need unless it's food. Even the wealthy are lowering themselves to poking their heads into WalMart.
So where does all this info leave the average guy? After reading most of the stimilus bill I'd say there"ll be a slight uptick in the economy by mid July followed by more bad news until spring of 2010 at the very earliest. But as anyone knows a lot can happen between now and then.

Until then keep your drums upright.