April 02, 2007

The Knockout Blow: “If you think this is bad, imagine what it’s going to be like in the middle of the crisis.”

I like the "we've hit bottom" crowd, even though that field is getting smaller. Folks, now the the REIC is in full meltdown mode, and millions will eventually lose their jobs (including the illegals), all that does is speed up the crash even faster. The meltdown is just starting. And people think it's bad already? Man, just wait.


Throw in the inability of millions to get new loans, or refi their old toxic loans, and the writing is on the wall.

The Great Unwinding is here. What happens to a country who has lost it's manufacturing base, and the only thing left that they still build - houses - stops too? We'll now find out...

The housing market and the related construction industry is one of the biggest, if not the biggest driver of the economy.

The ability of “anybody with a pulse” (and probably their dog too) to get a loan is what drove the real-estate market.

The ability of people to refinance and cash-out home equity also fueled consumer spending and the economy.

But now a huge segment of prospective home buyers can no longer qualify for a mortgage to purchase a home, and home prices are stagnating and falling in many areas.

It’s going to be a disaster for many people who don’t have a clue about what happens when a real-estate bubble pops,” said Rogers.Think of this as “the leading edge of the storm,” says Lou Ranieri, who is considered by some to be the father of the mortgage bond market.

“If you think this is bad, imagine what it’s going to be like in the middle of the crisis.”

22 comments:

Anonymous said...

Ya gotta love it....

From Bloomberg this morning:

BlackRock Inc., Fisher Investments Inc. and Schroders Plc, which manage about $1.4 trillion, say stocks are inexpensive relative to bonds. Profit of companies in the Standard & Poor's 500 Index, the benchmark for American equity, is growing faster than shares, and represents a yield of 6.53 percent compared with 4.65 percent for 10-year U.S. Treasury notes.

These guys live in the proverbial myopic rich man's bubble. It seems apparent to me that the "huge growth" in profits has been from cutting labor costs by 90% and cutting prices by 20%, leaving you a 70% uptick in net profit. Add to that the ATM HELOC and the Visa credit spree and yeah, you've got profits, extremely vulnerable, myopic profits, but hey, the EPS doesn't lie.

I guess in some ways it's easier to get the view from down here. I just need to listen to the people I spend 40 minutes on the bus with every morning, they aren't money savvy, but they know something is amiss.

I guess you don't get that type of feedback strolling around upscale Connecticut.

David said...

In fall 2007, the market will be tanking. Big Time!

Anonymous said...

"strolling around Connecticut"

Greenwich, Connecticut
Median home price $1,129,000

Hartford, Connecticut

"Several indicators point to Hartford's problems," "The poverty level is substantial.
"Hartford holds the worst score among the nation's 245 large cities, indicating that its stress level is the heaviest."

http://www.bizjournals.com/specials/2005/economic_stress/stress_cities.html

Anonymous said...

Hmmm. Not sure that's a credible news source. thetrumpet.com is a bunch of bible bashers.

Anonymous said...

W R O N G

We make loads of financial instruments known as derivatives.

Anonymous said...

Flash: Breaking Reality News.

What you're seeing is the last bubble a production-diminished country tried to inflate which failed.

This is it. That last fake-out the U.S. had to play suckers fizzled.

The U.S. will now enter a depression which will require us to actually produce to recover from.

We return you now to your regularly scheduled fantasy.

bozonian said...

I cashed out my CountryWide puts last week for some good money but I had to buy more this morning!

Just in time to catch their next leg down.

Easy money.

Nice.

tmaioli said...

CnnFn reporting:

"Sub-prime lender New Century Financial files for bankruptcy, Reuters reports. Story soon."

The tremors are getting more and more powerful, the ground is shaking, people put your ear to the ground, that is not a train that is a vocano!

Mark in San Diego said...

New Century just went belly up. . .guess that was expected, but I am still waiting for Wells and WaMu to "warn" about lower profits. . .

Mark in San Diego said...

ORANGE COUNTY = Ghost Town - New Century to layoff 3400!!!. . .anyone for beachfront property in Newport??? Fire Sale prices soon.

JAFO said...

Anon @ 2:40 PM,

What exactly do you propose that we produce to work our way out of a depression. Our manufacturing base is already decimated. Corporations are rapidly fleeing America for cheap labor and fat concessions from foreign governments. This is why I am more and more convinced that something really big is coming to distract us from our own collapsing infrastructure. A war with Iran might do it but the present political climate here makes that an unpopular choice. However, a nuclear or biological attack on an American city by persons or groups unknown would serve nicely to rally the people and give them something to focus on besides their wallets and portfolios. Plus, a draft would certainly solve a lot of employment problems now wouldn't it.

JAFO

Anonymous said...

So now the crash will be in Fall 2007 eh?

Hmmm last spring the crash was supposed to happen in Fall 2006. Then in Fall 2006 it was supposed to happen in Spring 2007.

What happened?

Oh I know what happened. You reting fools were wrong again and again and again.

Anonymous said...

Holy crap! JAFO's right!!!

borkafatty said...

Well Anonymous if this is not a crash of some kind, can you please enlighten us as to what it is?

And no i do not rent I own, but I did not fall for the bullshit..

Anonymous said...

The illegals can just go home, take all the skills they picked up while working here, and start new lives where they come from.

I wonder what all those real estate agents, pr people, and other useless skilled but highly paid people will do next?

Imagine 20 million Americans all jumping into Internet Marketing at the same time, trying to sell useless products to each other.

LOL!!!

a.creampuff said...

And I feel fine.

Anonymous said...

JAFO-

I don't think we'll have quite the doomsday showdown. No WMD on American soil.

Here are my thoughts:

1. Should the liquidity/equity bubble shatter, where will China/Greedy American Companies dump their cheap products?

2. Should the dollar plunge into Chaos, hyperinflate or recorrect; what will the oil nations, china, taiwan and japan do with their dollars reserves and dollar backed financial instruments?

What everyone seems to ignore is that the American Empire won't implode in a vacuum. If and/or when it does, it will bring the rest of the world down with it.

Then what? Well, America will do what it always has....become more slf sufficient. We are a resilient people. Will this create issues down the road? Yes. Will we need to become more of a manufacturing country again? Yes.

Anonymous said...

What companies would you start shorting today?
jbwvegas

JAFO said...

Memo to the rest of the planet. The only things we have to offer are debt and war. Stop financing our debt and we'll bring you a war.

PS: please stop switching your oil purchases from dollars to euros, or else....

Anonymous said...

So, did they ever find the Anthrax Killer?

I hear OJ's looking for him too.

Dick Cheney says that not buying a new home means that the terrorists win.

Anonymous said...

Warren Buffet’s two rules of investing:

(1) Don’t lose money.

(2) Don’t forget rule number one.

borkafatty said...

Dick Cheney says that not buying a new home means that the terrorists win.

------------

Tell you what "Dick" fork over some of those Millions you have tucked away in Foreign Banks and I would be more than happy to Buy another home...maybe 2....but not on my tab...yours you Bat Fig.