Take the following two cases of debtors being sued by creditors:
Second Case: Ruth M. Owens, a disabled Cleveland woman, was sued by Discover Bank in 2004 for an unpaid credit card. Ms. Owens offered a defense, sending a handwritten note to the court.
“After paying my monthly utilities, there is no money left except a little food money and sometimes it isn’t enough,” she wrote.
Robert Triozzi, a judge at the time, heard the case. He found that over a period of several years, Ms. Owens had paid nearly $3,500 on an original balance of $1,900.
But Discover was suing her for $5,564, mostly for late fees, compound interest, penalties and other charges. He called Discover’s actions “unconscionable” and threw the case out.
Going to court is no guarantee of victory, of course. Consumers who do go are sometimes intercepted by collection lawyers, who press them to sign papers settling without a trial.
These settlements may be against the interests of debtors, but they sign anyway.
“We’re signing off on a lot of settlement agreements where we shake our heads and ask, ‘Why is this person settling to this?’ ” Judge Lipman said.
Second Case:
For the working poor, losing a lawsuit can mean disaster.
The case of Sidney Jones shows how punishing the system can be. In January 2001, Mr. Jones, 45, a maintenance worker from California Crossroads, Va., took out a $4,097 personal loan from Beneficial Virginia, a subprime lender now owned by HSBC, the big bank.
He fell behind, and Beneficial sued. Mr. Jones did not appear in court.
“I just thought they were going to take what I owed,” he said.
By default, Beneficial won a judgment of $4,750, plus $900 in lawyers’ fees, with the debt accruing interest at 27.55 percent until paid in full. The bank started garnishing his wages in March 2003.
Over the next six years, the bank deducted more than $10,000 from Mr. Jones’s paychecks, but he made little headway on his debt.
According to a court order secured by Beneficial’s lawyers last spring, he still owed the company $3,965, a sum nearly equal to the original loan amount. Mr. Jones, who did not graduate from high school, was baffled.
“Where did all this money go that I paid them?” he said. Dale Pittman, a consumer law lawyer in Petersburg, Va., took Mr. Jones’s case without charge, and found that all but $134 of his payments had gone toward interest, fees and court costs.
“It’s a perfectly legal result under Virginia law,” Mr.Pittman said.
***********************************************************************************
So, which way will you go? Lay down like a dog and get run over or stand up and defend yourself?
If you need help, contact me, Bill Young. I am a former bank loan officer and have many clients who have been able to Beat the Banks!
Call for a free consultation on your situation.
Bill Young, Personal Financial Consultant
646-961-3818
MORE FROM NYTIMES.COM
Current DateTime: 09:22:23 02 Apr 2010
LinksList Documentid: 22528754
BusinessDealBook BlogSmall Business News
A 1968 federal law exempts 75 percent of a worker’s wages, or 30 times the minimum wage per week, from being taken in garnishment — whichever is less. But increases in the minimum wage have failed to keep up with inflation.
As federal law stands now, just $217.50 a week is exempt from seizure. (A few states set higher cutoffs.)
The working poor “have difficulties maintaining payments on life’s necessities with their full paycheck,” said Angela Riccetti, a lawyer with Atlanta Legal Aid who represents indigent clients whose wages are being garnished.
“You lose 25 percent of it and everything folds.” For Leann Weaver, the woman at the grocery store, Capital One’s lawsuit made a bad situation worse.
After being evicted from her apartment, she moved in with her grandparents. Without them, she might have ended up on the street or in a shelter, she said.
Capital One declined to comment on Ms. Weaver’s case.
“We encourage anyone facing difficulties meeting their financial obligations to contact us right away,” Tatiana Stead, a bank spokeswoman, said in an e-mail message.
Ms. Weaver said she repeatedly asked Capital One for more time to pay her $2,470 debt, but last year the bank filed suit.
She failed to show up in court, and a judgment was entered against her, swollen by $1,800 in interest and lawyers’ fees.
Then the garnishment began, almost $500 a month, or a quarter of her pay.
“I can’t even look at my paychecks any more,” she said.
This story originally appeared in the The New York Times
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12 Comments TotalCOMMENTSRadical_1 | Apr 2, 2010 12:37 PM ET
Just proves the point "at least show up for Court". While you might not win at least you'll leave knowing how bad you're going to get screwed, where if you don't go at all, you have NO IDEA what happened, or how bad the Court ruled against you. One thing is guaranteed in a Court of Law, if you don't show up you'll NEVER WIN.
Report Abuse
mcleert | Apr 2, 2010 01:05 PM ET
But it is ok for the same banks to not pay down their toxic debts and get a free % loan from the government to do as they please !!!!
Time for a national consumer law suit against all
the too big to fail banks.
Report Abuse
WaitForTheRevision | Apr 2, 2010 02:37 PM ET
Over the next six years, the bank deducted more than $10,000 from Mr. Jones’s paychecks, but he made little headway on his debt.
According to a court order secured by Beneficial’s lawyers last spring, he still owed the company $3,965, a sum nearly equal to the original loan amount. Mr. Jones, who did not graduate from high school, was baffled
LOL "who did not graduate from high school" Why throw that in here? Reporter "So Mr. Jones you seem to be uneducated would it be safe for me to ASS-U.M.E. that you didn't finish H.S.? Ahhh.. Haaa I knew it! LOL. It sounds like a simple BK filing would have saved these people cash. But yet here they are paying 500 percent more than they should and still have balances and bad credit. Credit is a scam that is sold to us and used for control. Pay cash it's better.
Report Abuse
magnets | Apr 2, 2010 02:52 PM ET
Laws have been written to declare what is owed and to demand interest and fees as well. Then people can be harassed as long as possible and perhaps additional monies can be obtained.
Unfortunately during the process a lose-lose situation is turned into a lose-lose-win situation. The debtor still loses, the original creditor still loses and the only possible winner is a third-party that wears the debtor and the system down just to collect as much as possible on their original small bet - paid to the original creditor by the third-party.
Report Abuse
magnets | Apr 2, 2010 03:18 PM ET
Let's see, the ADULT in the room should be the judge. Neither Democratic nor Republican judges seem to understand that. (Yes, politics is unfortunately now well embedded in the court system.)
People have no respect for the system. And why should they? They know they owe the debt. They would love to pay off the debt if they could. The reason they have the debt in the first place is because it was easy - not because they could afford it. They assume the judge will be fair. Unfortunately they do not know that the judge demands respect in order to be fair. You have to show up. No wonder people have no respect for the system.
Credit Card companies should raise and lower limits on a monthly basis. 20% usage is OK. 80% usage and the card gets rejected the next time use is attempted. Fixing the problem early might mean the third-party never needs to get involved.
Which would creditors rather have in the economy, people buying things or people paying penalties and fees they can not afford? Politicians should prefer consumers over debt collectors.
Report Abuse
curlqgurl | Apr 2, 2010 04:52 PM ET
I lost my job and offered Captial One 15 percent and $100 per month on a bill of $1300.
THEY REFUSED.
Report Abuse
RayRock. | Apr 2, 2010 04:56 PM ET
Show up and ask to see the original documents that prove a debt exists and that they’re authorized to collect on it. If they cannot do that then ask the judge to order them to compensate you for your time and to find in your favor and order them to cease pursuing the claim and to prohibit them from selling the debt to anyone else. It may or may not work, but it never hurts to ask.
On another note though I see this as just the beginning as soon we’ll see lenders with foreclosed homes on their hands suing those who defaulted. The lenders will scrutinize the loan documents and if there are any lies I expect lenders to sue for fraud and probably file criminal complaints as well in the very near future.
It’s about to get ugly for debtors and it’ll take years for the cases to work their way through the courts.
Report Abuse
RUOK2 | Apr 2, 2010 05:40 PM ET
Very Very Sad, that Banks were bailed out, rescued by the Taxpayers...while the banks then increased interest rates on credit, stop making loans, and play all types of accounting games to make their book look good....and what does the consumer and small business person get....SCREWED......revolt against monster banks like Citi Group , Bank of America, JP Morgan Chase.....Put your money in a local community bank that cares for the community, and WAll Street and stock prices.......Its all very sad...
Report Abuse
gliding | Apr 2, 2010 06:02 PM ET
No court should ever allow usurious interest rates in such cases, whether the defendant shows up or not. More than 10% is questionable. More than 18% is outrageous.
And if the defendant doesn't show up, then the plaintiff should pay the legal and court fees of bringing the suit, for it poses a disincentive for abuse.
Report Abuse
HLJ63 | Apr 2, 2010 06:35 PM ET
Some people think that ignoring the problem will make it all go away, like there is this kind fairy out there who waves a wand and poof! All of your debt is gone. Sorry but that fairy only appears for the Big banks who are able to tuck away their toxic assets and debt as if they don't exist.
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Showing posts with label banks. Show all posts
Showing posts with label banks. Show all posts
Friday, April 2, 2010
Monday, January 25, 2010
Big N.Y. Housing Complex Is Returned to Creditors! Why Are You Still Struggling to Pay Your Underwater Mortgage!
Quote from the NY Times, 1-25-10: "This month, the partnership headed by Tishman Speyer defaulted on $3 billion in debt on the properties." (Stuyvesant Town) 110 buildings, over 11,000 homes (apartments)
Did you get that? The owners defaulted on #3 Billion dollar mortgage, 110 buildings and "Returned them to creditors", sent the keys to the bank?
But didn't they have a "Moral Obligation" to pay their legally contracted debt?" Are they not "Immoral Speculators" according to former Treasury Sec Paulson? How naughty, seems the loss of money was too important to them.
And how about you? Are you are still struggling to pay off your underwater mortgage, throwing your children's college future, your retirement security, the money you need to maintain your lifestyle under the bus, driven by the craven, greedy, immoral bankers who created your living hell in the first place?
But you love your house and don't want to lose it? You lost it either when you signed the contract that you were never meant to be able to repay or when Lehman Bros went bust, kicking the lid off the rotten financial garbage that was festering under the Wall Streeters who produced it, spewing all over and contaminating the entire financial system.
Oh, your credit rating...? Well, if you want to be one of people with the highest credit scores living under the viaduct when you eventually lose your home, once your 401(k) runs out, I guess you should keep on paying your mortgage.
In reality, your credit rating will rebound, even enabling you to buy another house in a few years. Buy that new car Before you default on your mortgage!
A more serious matter is that in most states, the banks can come after you for the amount of money you owe them that they do not collect from the sale of your home. This is called a deficiency judgment.
If this amount will be great, suggest you declare bankruptcy before defaulting on the mortgage. This will prevent the banks from coming after you as well as the IRS, which, ironically can levy a income tax against you based on the amount of money you Did Not pay your lender. Seems the joke is that the IRS figures since you still have that money in your possesion, they tax it as income to you!
In some, so-called, non- deficiency states, the banks cannot come after you for any deficiency betwen what they collect at the sale of your house and the remaining balance on your mortgage. These states are:
Alaska
Arizona
California
Connecticut
Florida
Idaho
Minnesota
North Carolina
North Dakota
Texas
Utah
Washington
You may still have to deal with the IRS as far as taxes on the unpaid mortgage balance goes, which requires a bankruptcy to avoid.
Think about it. How much could you rent a comparable property for? One half your mortgage payment, one third your mortgage payment?
How much money are you underwater? $50,000, $500,000? Homes will never appreciate the way they did during the boom in our lifetime. It could take decades before the values increase to cover your mortgage.
You may not be aware, but we are in the eye of the mortgage typhoon. The subprime mess was the leading edge, the massive defaults of option arm adjustable mortgage defaults, most of which are prime borrowers; the trailing edge of the storm will hit later this year and blow away another big chunk of your equity!
Another possibility, and one that we suggest all our clients explore, is the possibility of recouping a good part of your down payment, the money from your 401(k) or even amassing a grub stake to start over, by simply stopping your mortgage payments, but remaining in your house!
This will not work in states like Texas, where trust deeds are used. They can have you thrown out of your house in 90 days!
However, most states are mortgage states and the process is far more convoluted and delay prone. We have shown people how to game the system and remain in their homes for up to 3 years, while banking their mortgage payments!
There is also a good possibility, we believe that voluntary defaults will become so common that the banks will have to capitulate and reduce the balances on their mortgages to more realistic market levels. If you are still in your home when this happens, say in 2012, a Presidential reelection year, and you have some money to make a lump sum settlement, you may even be able to keep your home.
Obviously, this is a complicated issue, but the wrong answer can mean financial ruin for you and your family. It, as Tishman Speyer demonstrated to the tune of $3 Billion dollars, not a moral issue, just plain old dollars and sense!
So, you won't get a gold star in your bank book! So what?
If you would like a free consultation to discuss your specific situation, do not hesitate to give me a call.
Bill Young, Personal Financial Coach, Former Bank Loan Officer for the Dime Savings Bank of Brooklyn.
646-961-3818
billyoung222@gmail.com
Did you get that? The owners defaulted on #3 Billion dollar mortgage, 110 buildings and "Returned them to creditors", sent the keys to the bank?
But didn't they have a "Moral Obligation" to pay their legally contracted debt?" Are they not "Immoral Speculators" according to former Treasury Sec Paulson? How naughty, seems the loss of money was too important to them.
And how about you? Are you are still struggling to pay off your underwater mortgage, throwing your children's college future, your retirement security, the money you need to maintain your lifestyle under the bus, driven by the craven, greedy, immoral bankers who created your living hell in the first place?
But you love your house and don't want to lose it? You lost it either when you signed the contract that you were never meant to be able to repay or when Lehman Bros went bust, kicking the lid off the rotten financial garbage that was festering under the Wall Streeters who produced it, spewing all over and contaminating the entire financial system.
Oh, your credit rating...? Well, if you want to be one of people with the highest credit scores living under the viaduct when you eventually lose your home, once your 401(k) runs out, I guess you should keep on paying your mortgage.
In reality, your credit rating will rebound, even enabling you to buy another house in a few years. Buy that new car Before you default on your mortgage!
A more serious matter is that in most states, the banks can come after you for the amount of money you owe them that they do not collect from the sale of your home. This is called a deficiency judgment.
If this amount will be great, suggest you declare bankruptcy before defaulting on the mortgage. This will prevent the banks from coming after you as well as the IRS, which, ironically can levy a income tax against you based on the amount of money you Did Not pay your lender. Seems the joke is that the IRS figures since you still have that money in your possesion, they tax it as income to you!
In some, so-called, non- deficiency states, the banks cannot come after you for any deficiency betwen what they collect at the sale of your house and the remaining balance on your mortgage. These states are:
Alaska
Arizona
California
Connecticut
Florida
Idaho
Minnesota
North Carolina
North Dakota
Texas
Utah
Washington
You may still have to deal with the IRS as far as taxes on the unpaid mortgage balance goes, which requires a bankruptcy to avoid.
Think about it. How much could you rent a comparable property for? One half your mortgage payment, one third your mortgage payment?
How much money are you underwater? $50,000, $500,000? Homes will never appreciate the way they did during the boom in our lifetime. It could take decades before the values increase to cover your mortgage.
You may not be aware, but we are in the eye of the mortgage typhoon. The subprime mess was the leading edge, the massive defaults of option arm adjustable mortgage defaults, most of which are prime borrowers; the trailing edge of the storm will hit later this year and blow away another big chunk of your equity!
Another possibility, and one that we suggest all our clients explore, is the possibility of recouping a good part of your down payment, the money from your 401(k) or even amassing a grub stake to start over, by simply stopping your mortgage payments, but remaining in your house!
This will not work in states like Texas, where trust deeds are used. They can have you thrown out of your house in 90 days!
However, most states are mortgage states and the process is far more convoluted and delay prone. We have shown people how to game the system and remain in their homes for up to 3 years, while banking their mortgage payments!
There is also a good possibility, we believe that voluntary defaults will become so common that the banks will have to capitulate and reduce the balances on their mortgages to more realistic market levels. If you are still in your home when this happens, say in 2012, a Presidential reelection year, and you have some money to make a lump sum settlement, you may even be able to keep your home.
Obviously, this is a complicated issue, but the wrong answer can mean financial ruin for you and your family. It, as Tishman Speyer demonstrated to the tune of $3 Billion dollars, not a moral issue, just plain old dollars and sense!
So, you won't get a gold star in your bank book! So what?
If you would like a free consultation to discuss your specific situation, do not hesitate to give me a call.
Bill Young, Personal Financial Coach, Former Bank Loan Officer for the Dime Savings Bank of Brooklyn.
646-961-3818
billyoung222@gmail.com
Friday, January 8, 2010
Underwater? Stop Paying Your Mortgage, Stupid!
University of Arizona law professor. Brent White agrees with my recommendation to those who owe more money than their home is worth! (Underwater)Stop Paying Your Mortgage, Stupid!
I have been arguing for more than a year as I saw people's lives being destroyed by using their retirement funds, college funds, etc to pay on a mortgage on a house that is worth less than the loan. Invariably, when the funds ran out, they lost the house anyway, leaving them totally destitute. This makes no financial sense. Corporations and businesses don't play by these rules. Case in point: Maguire Properties Inc., one of the largest commercial landlords in California, walked away from seven prime office buildings in Los Angeles and Orange counties last year, defaulting on loans worth more than $1 billion. "The deal no longer made financial sense!"
Tishman Speyer walked away from a $3 Billion mortgage on 110 buildings in NY's Stuyvesant Town after property values fell to half of the purchase price.
Sunshine Properties, a major hotel owner let a string of Hyatt's, Hiltons and other marque properties go back to the lender when their values fell.
Morality? Please! What would Ben Bernanke, or Tim Geitner do if they were in such a dire situation?
We are under no obligation to adhere to any moral standards that are different from the banks who made the immoral loans that brought down the financial system. They knew what they were doing, but only saw the dollar signs generated by the lending frenzy.
Then, when the inevitable defaults happened, will they write down the balance of your underwater mortgage so that you can pay it off? You mean the banks taking a real loss, are you kidding? They even strong armed the government, (you and me) to pay off their paper losses! They have totally forfeited any moral claims on borrowers, in my estimation.
As a former bank loan officer myself, I will show you how to stay in your home for 12-36 months without ever making an additional mortgage payment, allowing you to recoup some of your lost money so you can accumulate a nest egg for your future.
So, if you are underwater in your home, get over it. Think of the money, like a business person. The house has been lost due to the financial schenanigans of the banks. Save your money, prepare to find a cheaper rental. It is even possible that you will be able to buy another, similar or better house in the future at a much better price.
Your credit may be bad for 7 years, so buy that car or whatever before you do this but think about it, do you really want to be the one with the highest credit score among your homeless mates living in a card board box under the viaduct?
If you would like to know how you can stop paying your mortgage and remain in your home for 12-36 months, contact me.
Bill Young, Personal Financial Consultant
I have been arguing for more than a year as I saw people's lives being destroyed by using their retirement funds, college funds, etc to pay on a mortgage on a house that is worth less than the loan. Invariably, when the funds ran out, they lost the house anyway, leaving them totally destitute. This makes no financial sense. Corporations and businesses don't play by these rules. Case in point: Maguire Properties Inc., one of the largest commercial landlords in California, walked away from seven prime office buildings in Los Angeles and Orange counties last year, defaulting on loans worth more than $1 billion. "The deal no longer made financial sense!"
Tishman Speyer walked away from a $3 Billion mortgage on 110 buildings in NY's Stuyvesant Town after property values fell to half of the purchase price.
Sunshine Properties, a major hotel owner let a string of Hyatt's, Hiltons and other marque properties go back to the lender when their values fell.
Morality? Please! What would Ben Bernanke, or Tim Geitner do if they were in such a dire situation?
We are under no obligation to adhere to any moral standards that are different from the banks who made the immoral loans that brought down the financial system. They knew what they were doing, but only saw the dollar signs generated by the lending frenzy.
Then, when the inevitable defaults happened, will they write down the balance of your underwater mortgage so that you can pay it off? You mean the banks taking a real loss, are you kidding? They even strong armed the government, (you and me) to pay off their paper losses! They have totally forfeited any moral claims on borrowers, in my estimation.
As a former bank loan officer myself, I will show you how to stay in your home for 12-36 months without ever making an additional mortgage payment, allowing you to recoup some of your lost money so you can accumulate a nest egg for your future.
So, if you are underwater in your home, get over it. Think of the money, like a business person. The house has been lost due to the financial schenanigans of the banks. Save your money, prepare to find a cheaper rental. It is even possible that you will be able to buy another, similar or better house in the future at a much better price.
Your credit may be bad for 7 years, so buy that car or whatever before you do this but think about it, do you really want to be the one with the highest credit score among your homeless mates living in a card board box under the viaduct?
If you would like to know how you can stop paying your mortgage and remain in your home for 12-36 months, contact me.
Bill Young, Personal Financial Consultant
Tuesday, July 28, 2009
What to Do if You Can't Pay Your Mortgage!
I am a Personal Financial Coach. I got burned in the last housing bubble in the 80's and learned my lesson. I did not participate in this bubble and in fact called the end of this lunatice housing bubble back in June 2005, right at its height, (The Coming Collapse of the Housing Bubble!)
Bush and Obama, and our entire Federal Government, are pawns of the Fed Reserve and the Banks which own it. They are the ones who created and are profiting from the creation and destruction of the housing bubble.
The government cannot or will not do what needs to be done to save millions of homw owners, which is to have the Government buy the criminal loans foisted on homeowners from the banks at today's loan values, not the original amount of the loans and reissue them on terms the homeowners can afford.
This is exactly what was done during the First Great Depression and it saved millions of homes. The Fed refuses to even entertain this idea because it would require the banks to take actual losses they could not hide with accounting tricks.
Their attitude is the Banks are too big to fail and main street is too small to bail! They are not going to offer any meaningful help to desperate home owners.
Therefore, I recommend to my clients and to you if you are in this situation, DON'T waste your retirement money, your children's education money or life savings trying to keep your home which you will then in most cases, lose anyway. I advise you to Stop making payments on your mortgage but do Not move out!
Particularly in mortgage states,as opposed to trust deed states, you will probably be able to stay in your home for 1 1/2 to 3 years before you are forced to move, if you follow our program. We have even had some cases where the bank Paid our clients to move out!
Use this time to replenish your savings and be ready to start anew. Will this hurt your credit rating? Absolutely, but would you really want to be the only family living in the homeless shelter with a 700 FICO?
Contact me for a free,private consultation to se if your situation qualifies for our program.
Bill Young, 646-961-3818
Bush and Obama, and our entire Federal Government, are pawns of the Fed Reserve and the Banks which own it. They are the ones who created and are profiting from the creation and destruction of the housing bubble.
The government cannot or will not do what needs to be done to save millions of homw owners, which is to have the Government buy the criminal loans foisted on homeowners from the banks at today's loan values, not the original amount of the loans and reissue them on terms the homeowners can afford.
This is exactly what was done during the First Great Depression and it saved millions of homes. The Fed refuses to even entertain this idea because it would require the banks to take actual losses they could not hide with accounting tricks.
Their attitude is the Banks are too big to fail and main street is too small to bail! They are not going to offer any meaningful help to desperate home owners.
Therefore, I recommend to my clients and to you if you are in this situation, DON'T waste your retirement money, your children's education money or life savings trying to keep your home which you will then in most cases, lose anyway. I advise you to Stop making payments on your mortgage but do Not move out!
Particularly in mortgage states,as opposed to trust deed states, you will probably be able to stay in your home for 1 1/2 to 3 years before you are forced to move, if you follow our program. We have even had some cases where the bank Paid our clients to move out!
Use this time to replenish your savings and be ready to start anew. Will this hurt your credit rating? Absolutely, but would you really want to be the only family living in the homeless shelter with a 700 FICO?
Contact me for a free,private consultation to se if your situation qualifies for our program.
Bill Young, 646-961-3818
Saturday, May 9, 2009
If You Were Planning a Dive to 1500 ft in a Sub, Would You Accept One Rated to 1,000 ft?
Well then you would not accept the bank's stress test results either. Did you know the institution administering the "Stress Test" are the banks themselves? Many were allowed to "Modify" the stress applied to themselves!
Their "Worst Case Scenarios" used as the benchmarks, such as unemployment hitting 8.9% are already upon us, with no real end of the economic Tsunami in sight.
Just more Government Bullshit!
Their "Worst Case Scenarios" used as the benchmarks, such as unemployment hitting 8.9% are already upon us, with no real end of the economic Tsunami in sight.
Just more Government Bullshit!
Friday, May 8, 2009
20% of Homes Underwater? Think Again!
Zillow.com the real estate industry's barometer of home prices, today reported that 21.8% of all homes in the US are "Underwater." That means that the house is worth less than the mortgage. That amounts to about 20 million homes.
The facts are worse than the news. If 20 Million is 21.8% of all homes, there are approximately 100 million homes in the US. However, 1/3 of them do not have a mortgage. Therefore, 20 million means that actually 1/3 of all homes with mortgages are underwater!
Think of that. What does that mean for the housing market, the banks, the economy?
A sizable number of those homes will be lost to foreclosure. What incentive does a homeowner have to keep up with his payments if an emergency comes up? Will they pay their mortgage or their doctor bill, or their exploding credit card bills, etc.
This means a continued increase in the amount of homes foreclosed on and a continued drop in prices as those foreclosed homes are dumped on the market at fire-sale prices.
Typically, regional bank reserves are about 50% in home mortgages. If 1/3 of them are underwater, what does that do to the value of the bank reserves? For every $1 loss in reserves, the bank will have to cut $10 in lending, adding to the drying up of credit.
How about the big, money center banks sitting there with Trillions in housing derivatives? "Normally" losses of 1-3% in the value of the mortgages underlying the security is projected. What happens to the value of the security when those losses approach 30%? Again, the value of the reserves is dramatically slashed, further choking off credit.
Unfortunately, we are in worse condition than the mainstream media and the government wants you to believe.
If you want to learn more about the reality of our situation and what you can do to protect yourself and your family from economic ruin, read the other posts in this blog.
Bill Young, 646-961-3818
The facts are worse than the news. If 20 Million is 21.8% of all homes, there are approximately 100 million homes in the US. However, 1/3 of them do not have a mortgage. Therefore, 20 million means that actually 1/3 of all homes with mortgages are underwater!
Think of that. What does that mean for the housing market, the banks, the economy?
A sizable number of those homes will be lost to foreclosure. What incentive does a homeowner have to keep up with his payments if an emergency comes up? Will they pay their mortgage or their doctor bill, or their exploding credit card bills, etc.
This means a continued increase in the amount of homes foreclosed on and a continued drop in prices as those foreclosed homes are dumped on the market at fire-sale prices.
Typically, regional bank reserves are about 50% in home mortgages. If 1/3 of them are underwater, what does that do to the value of the bank reserves? For every $1 loss in reserves, the bank will have to cut $10 in lending, adding to the drying up of credit.
How about the big, money center banks sitting there with Trillions in housing derivatives? "Normally" losses of 1-3% in the value of the mortgages underlying the security is projected. What happens to the value of the security when those losses approach 30%? Again, the value of the reserves is dramatically slashed, further choking off credit.
Unfortunately, we are in worse condition than the mainstream media and the government wants you to believe.
If you want to learn more about the reality of our situation and what you can do to protect yourself and your family from economic ruin, read the other posts in this blog.
Bill Young, 646-961-3818
Wednesday, April 22, 2009
New Housing Numbers!
From Housing Wire:
Residential: -
"All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47% over the period, the FHFA said. "
"However, prime loans 60+ days delinquent increased by 69.6% while non-prime loans increased by a significantly lesser 23%."
"Reasons for default: 34.1% of homeowners cited curtailment of income as the main cause of default, 19.8% reported excessive obligations, 8.1% said unemployment, 6.5% said illness and 3.5% cited marital difficulties, such as the loss of a spouse’s wages. "
C'MON GUYS! Can't you just be honest and admit it is UNEMPLOYMENT that is "THE REASON?"
How about the government's mortgage relief plans to help homeowners?
"In January 8,953 loan modifications were completed compared to 8,688 in December and the prior 3-month average of 7,926, the FHFA reported. This represents a 3 percent increase in loan modifications by Fannie Mae and Freddie Mac from December 2008 to January 2009."
WOW, 8,953 loan modifications out of 1,229,051 delinquent mortgages! Unfortunately, that will probably be the high water mark for loan mods. The government, quiet as it was kept, on April 9th agreed that bank's did not have to report the losses sustained in its residential mortgages!!!
These losses were the primary drivers behind the banks willingness to consider modifications, short sales, etc. That has been removed!
On the commercial side, we had a hush hush collapse of the 2nd Largest owner of shopping malls in the US! I did see the bankruptcy of General Growth Properties mentioned on CNBC (24 hr Infomercials for Wall St!) and a passing mention on MSNBC.
THE 2ND LARGEST OWNER OF SHOPPING MALLS DECLARED BANKRUPTCY and the stock market went up about 122 points!
Is this amazing or what? Do you really think we are getting the real picture of what is going on with the economy?
This is stunning news, but the worst is yet to come! There are 5 other behemoths in this category as well that will probably be gone by the end of the year!
My sources estimate that up to 30% of all commercial loans will go bad in this Depression!
What will that do to banks and especially insurance companies that are big lenders to commercial real estate? What will it do to the value of the CRMBS, the Commercial Real Estate Mortgage Backed Securities held by municipalities, benefit funds, retirement funds?
The one thing you can count on is that the Fake Reserve Bank, the Government, Wall St and the Mainstream Media will keep the bad news hidden from you, no matter what the cost!
Check out my Tuesday radio broadcast where I bring you up to speed on what is really happening in this economy: http://MyMoneyShow.com
Residential: -
"All loans 60+ days delinquent increased from 834,831 as of November 30 to 1,229,051 as of January 31, representing an increase of 47% over the period, the FHFA said. "
"However, prime loans 60+ days delinquent increased by 69.6% while non-prime loans increased by a significantly lesser 23%."
"Reasons for default: 34.1% of homeowners cited curtailment of income as the main cause of default, 19.8% reported excessive obligations, 8.1% said unemployment, 6.5% said illness and 3.5% cited marital difficulties, such as the loss of a spouse’s wages. "
C'MON GUYS! Can't you just be honest and admit it is UNEMPLOYMENT that is "THE REASON?"
How about the government's mortgage relief plans to help homeowners?
"In January 8,953 loan modifications were completed compared to 8,688 in December and the prior 3-month average of 7,926, the FHFA reported. This represents a 3 percent increase in loan modifications by Fannie Mae and Freddie Mac from December 2008 to January 2009."
WOW, 8,953 loan modifications out of 1,229,051 delinquent mortgages! Unfortunately, that will probably be the high water mark for loan mods. The government, quiet as it was kept, on April 9th agreed that bank's did not have to report the losses sustained in its residential mortgages!!!
These losses were the primary drivers behind the banks willingness to consider modifications, short sales, etc. That has been removed!
On the commercial side, we had a hush hush collapse of the 2nd Largest owner of shopping malls in the US! I did see the bankruptcy of General Growth Properties mentioned on CNBC (24 hr Infomercials for Wall St!) and a passing mention on MSNBC.
THE 2ND LARGEST OWNER OF SHOPPING MALLS DECLARED BANKRUPTCY and the stock market went up about 122 points!
Is this amazing or what? Do you really think we are getting the real picture of what is going on with the economy?
This is stunning news, but the worst is yet to come! There are 5 other behemoths in this category as well that will probably be gone by the end of the year!
My sources estimate that up to 30% of all commercial loans will go bad in this Depression!
What will that do to banks and especially insurance companies that are big lenders to commercial real estate? What will it do to the value of the CRMBS, the Commercial Real Estate Mortgage Backed Securities held by municipalities, benefit funds, retirement funds?
The one thing you can count on is that the Fake Reserve Bank, the Government, Wall St and the Mainstream Media will keep the bad news hidden from you, no matter what the cost!
Check out my Tuesday radio broadcast where I bring you up to speed on what is really happening in this economy: http://MyMoneyShow.com
Thursday, April 9, 2009
Economists Agree, Bailouts Suck Money From Taxpayers to Fed!
We have been saying that the major banks and AIG are insolvent, that the securities they carry on their books are wishfully overpriced, even if they have gotten the Accounting Standards Board to go along and ease up on the Mark to Market valuation requirements.
These banks and others like insurance companies and AIG, despite what Bernanke says (what would you expect the Fed to say?) are zombies, or more accurately, Parasites, Sucking up taxpayer dollars which are Graciously loaned to us by the FED to be paid to the banks that own the FED! Talk about double dipping.
In other words these Parasites are draining their host, the American taxpayer, while enriching their owners; the European bankers that own the Fed, the ones responsible for the coming 2nd Great Depression.
Here is what several prominent economists from Harvard and Princeton are saying:
April 9th 2009:
Many prominent economists--including such diverse types as Anna Schwartz and Paul Krugman--have taken with this official view, saying the government was mistaking a solvency crisis for a liquidity crisis. This latest paper effectively demolishes the "fire sale" view. It draws three important conclusions.
* Many banks are now insolvent. "...many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities."
* Supporting markets in toxic assets has no purpose other than transferring money from taxpayers to banks. "...any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities." (the owners of the FED!)
* We're making it worse. "...policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen – the day of reckoning."
You can read the whole paper by Harvard's Joshua Coval and Erik Stafford and Princeton's Jakub Jurek here: http://www.businessinsider.com/insolvent-banks-and-imaginary-fire-sales-2009-4 Warning, it is an Academic paper!
The striking conclusion is that the low prices of toxic assets actually reflect the fundamentals,In short, the government cannot save the banks by improving liquidity or changing mark to market rules because the problem isn't illiquidity or accounting.
The problem is that highly leveraged financial firms own assets that are worth far less than they thought they would be, and the firms are insolvent as a result.
This is why the latest bailout plans secretly give huge subsidies to banks--because the only way to keep the insolvent zombies afloat is to transfer billions of dollars to banks, bank stockholders, and bank creditors.
The alternative--allowing the insolvent banks to fail, seizing the assets, wiping our shareholders, giving bond holders a serious haircut--is still not on the official agenda. (And will never be, as long as the Fed can hold out!)
See also: http://silverpros.blogspot.com/2009/04/what-would-happen-if-your-life.html
These banks and others like insurance companies and AIG, despite what Bernanke says (what would you expect the Fed to say?) are zombies, or more accurately, Parasites, Sucking up taxpayer dollars which are Graciously loaned to us by the FED to be paid to the banks that own the FED! Talk about double dipping.
In other words these Parasites are draining their host, the American taxpayer, while enriching their owners; the European bankers that own the Fed, the ones responsible for the coming 2nd Great Depression.
Here is what several prominent economists from Harvard and Princeton are saying:
April 9th 2009:
Many prominent economists--including such diverse types as Anna Schwartz and Paul Krugman--have taken with this official view, saying the government was mistaking a solvency crisis for a liquidity crisis. This latest paper effectively demolishes the "fire sale" view. It draws three important conclusions.
* Many banks are now insolvent. "...many major US banks are now legitimately insolvent. This insolvency can no longer be viewed as an artifact of bank assets being marked to artificially depressed prices coming out of an illiquid market. It means that bank assets are being fairly priced at valuations that sum to less than bank liabilities."
* Supporting markets in toxic assets has no purpose other than transferring money from taxpayers to banks. "...any taxpayer dollars allocated to supporting these markets will simply transfer wealth to the current owners of these securities." (the owners of the FED!)
* We're making it worse. "...policies that attempt to prevent a widespread mark-down in the value of credit-sensitive assets are likely to only delay – and perhaps even worsen – the day of reckoning."
You can read the whole paper by Harvard's Joshua Coval and Erik Stafford and Princeton's Jakub Jurek here: http://www.businessinsider.com/insolvent-banks-and-imaginary-fire-sales-2009-4 Warning, it is an Academic paper!
The striking conclusion is that the low prices of toxic assets actually reflect the fundamentals,In short, the government cannot save the banks by improving liquidity or changing mark to market rules because the problem isn't illiquidity or accounting.
The problem is that highly leveraged financial firms own assets that are worth far less than they thought they would be, and the firms are insolvent as a result.
This is why the latest bailout plans secretly give huge subsidies to banks--because the only way to keep the insolvent zombies afloat is to transfer billions of dollars to banks, bank stockholders, and bank creditors.
The alternative--allowing the insolvent banks to fail, seizing the assets, wiping our shareholders, giving bond holders a serious haircut--is still not on the official agenda. (And will never be, as long as the Fed can hold out!)
See also: http://silverpros.blogspot.com/2009/04/what-would-happen-if-your-life.html
Wednesday, February 18, 2009
Obama Blinked!
Although the so called Bankruptcy Cramdown provision; the ability of BK judges to reduce the amount of loans on property in the course of the BK, is extended for the first time to first mortgages on principal residences; the fact that there is no general across the board principal reduction for home owners will keep the bill from solving the housing crisis.
Giving "Incentives" to unscrupulous lenders to cooperate and lower mortgage payments will not work. It hasn't worked in Hope or Hope for homeowner plans as we have seen.
There are simply too many considerations and limitations; who owns the mortgage or part of the mortgage? Who is servicing it? Do you know that some well known mortgage services eagerly purchase defaulting loans and make huge profits by adding fees and foreclosing on them? What are the mortgage owners or their investors contractual obligations toward modification or principal reduction, etc.
Only a Federal Law could cut through those considerations and force action by the lenders.
I believe Obama knows the answer is principal reductions on home mortgages down to 80-90% of CURRENT market value is the most powerful answer to the foreclosure crisis.
This would allow the 20% or so of all mortgage holders who are underwater, whose mortgage is more than the house is worth, to reset to payments they can afford. If these people are not relieved, they have ZERO incentive to sacrifice their life savings or retirement savings to keep paying their mortgage.
Perhaps in a few months Obama can say, we tried everything else and it did not work, so we are now going to force lenders to reduce principal on all loans to affordable levels. He probably felt it would be too radical and face too much opposition from the Know-Nothings, like Eric Cantor; and getting something passed now was better than getting nothing passed.
However, the hour is late, perhaps too late to put the housing monster back in its cage. It is already sucking up the scarce money homeowners need to service not only their mortgage but their credit cards, auto and student loans, which will cause massive defaults in those areas, hurting the banks even more.
There is even more carnage just over the horizon as I point out in an earlier posting.
There is already baked-in to the forecasts by Credit Suisse about 6 Million more foreclosure over the coming two years because of massive, Trillion dollar defaults in Alt-A and Option Arm loans.
Already 60% of Option Arms are underwater and more than 80% of borrowers are paying less than the interest owed on each payment, thereby Increasing the amount of principal owed with every payment!
Also, something I have not seen discussed is that even Prime loan defaults will probably skyrocket in the next 2-3 years. Historically their defaults peak 3-5 years after they are issued.
That means that the Trillions of dollars in prime loans written at the peak of the boom, 2005 and 2006 and therefore have suffered the sharpest home value drops,will enter peak default periods in 2008-2011. Already, Prime loans are entering default stage at a higher rate than sub prime in some areas!
Finally, the Know Nothings are crazy if they feel that an overall mortgage default rate of 10% is acceptable!
This is fully 10 Times the normal mortgage default rate! Many banks have about 50% of their capital in residential mortgages. A 10% default rate on their assets would reduce their lending capacity by 10-20x that amount. Such a blow to their lending and therefore earning ability would cripple them.
The Know Nothings are now, predictably, so consumed with the fear (they love to spread fear, remember the Yellow and Orange Alerts during the 2004 campaign?) that a homeowner who cheats, obviously a minority of all borrowers gets bailed out?
What about the banks and Wall St where All of the big banks and brokerage houses, rating agencies and others who created this mess in the first place? Aren't they being bailed out regardless? Oh, I forgot, the banks are too big to fail, but the homeowner is too small to bail.
In summation, I believe Obama's Home Rescue Plan is too little, too late, especially after the Know Nothings get finished savaging it. Will he get a second chance to make it better? Will it matter?
Giving "Incentives" to unscrupulous lenders to cooperate and lower mortgage payments will not work. It hasn't worked in Hope or Hope for homeowner plans as we have seen.
There are simply too many considerations and limitations; who owns the mortgage or part of the mortgage? Who is servicing it? Do you know that some well known mortgage services eagerly purchase defaulting loans and make huge profits by adding fees and foreclosing on them? What are the mortgage owners or their investors contractual obligations toward modification or principal reduction, etc.
Only a Federal Law could cut through those considerations and force action by the lenders.
I believe Obama knows the answer is principal reductions on home mortgages down to 80-90% of CURRENT market value is the most powerful answer to the foreclosure crisis.
This would allow the 20% or so of all mortgage holders who are underwater, whose mortgage is more than the house is worth, to reset to payments they can afford. If these people are not relieved, they have ZERO incentive to sacrifice their life savings or retirement savings to keep paying their mortgage.
Perhaps in a few months Obama can say, we tried everything else and it did not work, so we are now going to force lenders to reduce principal on all loans to affordable levels. He probably felt it would be too radical and face too much opposition from the Know-Nothings, like Eric Cantor; and getting something passed now was better than getting nothing passed.
However, the hour is late, perhaps too late to put the housing monster back in its cage. It is already sucking up the scarce money homeowners need to service not only their mortgage but their credit cards, auto and student loans, which will cause massive defaults in those areas, hurting the banks even more.
There is even more carnage just over the horizon as I point out in an earlier posting.
There is already baked-in to the forecasts by Credit Suisse about 6 Million more foreclosure over the coming two years because of massive, Trillion dollar defaults in Alt-A and Option Arm loans.
Already 60% of Option Arms are underwater and more than 80% of borrowers are paying less than the interest owed on each payment, thereby Increasing the amount of principal owed with every payment!
Also, something I have not seen discussed is that even Prime loan defaults will probably skyrocket in the next 2-3 years. Historically their defaults peak 3-5 years after they are issued.
That means that the Trillions of dollars in prime loans written at the peak of the boom, 2005 and 2006 and therefore have suffered the sharpest home value drops,will enter peak default periods in 2008-2011. Already, Prime loans are entering default stage at a higher rate than sub prime in some areas!
Finally, the Know Nothings are crazy if they feel that an overall mortgage default rate of 10% is acceptable!
This is fully 10 Times the normal mortgage default rate! Many banks have about 50% of their capital in residential mortgages. A 10% default rate on their assets would reduce their lending capacity by 10-20x that amount. Such a blow to their lending and therefore earning ability would cripple them.
The Know Nothings are now, predictably, so consumed with the fear (they love to spread fear, remember the Yellow and Orange Alerts during the 2004 campaign?) that a homeowner who cheats, obviously a minority of all borrowers gets bailed out?
What about the banks and Wall St where All of the big banks and brokerage houses, rating agencies and others who created this mess in the first place? Aren't they being bailed out regardless? Oh, I forgot, the banks are too big to fail, but the homeowner is too small to bail.
In summation, I believe Obama's Home Rescue Plan is too little, too late, especially after the Know Nothings get finished savaging it. Will he get a second chance to make it better? Will it matter?
Wednesday, February 11, 2009
Now, the Fed Swoops in to Pick Up the Spoils!
CNN, 11 Feb 2009 "Administration officials committed to flood the financial system with as much as $2.5 trillion — $350 billion of that coming from the bailout fund and the rest from private investors and the Federal Reserve, making use of its ability to print money." (Money it creates out of thin air, but charges interest on. )
We have seen this play before, The First Great Depression in the 1930's among other debacles.
First, the Fed funds an enormous bubble in some asset class, real estate, stocks, Oil, etc.
That kicks off an irrational exuberance, eg. The Roaring Twenties.
The Fed and its minions stubbornly declare that all is well, there is no reason to worry, the economy has entered a new phase. Gone are bad old recessions once and for all.
Remember as late as 2004 Alan "Double Bubble" Greenspan, Fed chairman said, "Bubble? What Bubble, it is impossible to have a National Bubble in real estate since each market is local!" He also famously said, just a few years prior, A Bubble in the Stock Market? No Way!
Eventually, of course the Bubble implodes, (no tree ever reaches the sky!) resulting in astronomical losses, especially to the poor schnubs who came late to the party.
Public money, (loaned, gratiously by the Fed) is needed to clean up the mess and save Wall St, or the banks from collapsing.
What to do with all those failed assets that people bought for outrageous prices at the height of the boom, with money borrowed from the banks? (read FED)
Well, they must be liquidated, so they set up a Public/Private partnership to get rid of them.
Whether it is the Reconstruction Finance Corporation from the First Great Depression, the Resolution Trust Corporation of the 1980's or whatever Official sounding term they will tag on this one, the result will be the same.
Assets that exploded in price, rank speculation fueled by the Fed, gobbled up investor's funds as their prices soared into the stratosphere. Fun, riches, good times for all!
What the average man did not realize however was that the knowledgeable investor was Selling while he was buying! They made enormous profits.
However, once the inevitable crash took place and values plumeted, the banks that financed the investors had to be saved from all the loans on their books that were now in default!
This called for a tremendous influx of tax payer money. Tax payers took the losses, while the private sector took the profits.
Now, what to do with all of those worthless assets? Let's set up a Public/Private partnership and dispose of them. Back come the bank funded (read Fed) money men to pick up
the troubled assets at fire sale prices! The SCARFF plan. (You know, like the college kids scarff down beer and burgers?)
Here is a real life example:
In 1989, the nation faced a financial crisis caused by the collapse of hundreds of savings and loan associations, who had taken advantage of loosened regulations to invest aggressively in real estate and other ventures, many of which went sour.
We have seen this play before, The First Great Depression in the 1930's among other debacles.
First, the Fed funds an enormous bubble in some asset class, real estate, stocks, Oil, etc.
That kicks off an irrational exuberance, eg. The Roaring Twenties.
The Fed and its minions stubbornly declare that all is well, there is no reason to worry, the economy has entered a new phase. Gone are bad old recessions once and for all.
Remember as late as 2004 Alan "Double Bubble" Greenspan, Fed chairman said, "Bubble? What Bubble, it is impossible to have a National Bubble in real estate since each market is local!" He also famously said, just a few years prior, A Bubble in the Stock Market? No Way!
Eventually, of course the Bubble implodes, (no tree ever reaches the sky!) resulting in astronomical losses, especially to the poor schnubs who came late to the party.
Public money, (loaned, gratiously by the Fed) is needed to clean up the mess and save Wall St, or the banks from collapsing.
What to do with all those failed assets that people bought for outrageous prices at the height of the boom, with money borrowed from the banks? (read FED)
Well, they must be liquidated, so they set up a Public/Private partnership to get rid of them.
Whether it is the Reconstruction Finance Corporation from the First Great Depression, the Resolution Trust Corporation of the 1980's or whatever Official sounding term they will tag on this one, the result will be the same.
Assets that exploded in price, rank speculation fueled by the Fed, gobbled up investor's funds as their prices soared into the stratosphere. Fun, riches, good times for all!
What the average man did not realize however was that the knowledgeable investor was Selling while he was buying! They made enormous profits.
However, once the inevitable crash took place and values plumeted, the banks that financed the investors had to be saved from all the loans on their books that were now in default!
This called for a tremendous influx of tax payer money. Tax payers took the losses, while the private sector took the profits.
Now, what to do with all of those worthless assets? Let's set up a Public/Private partnership and dispose of them. Back come the bank funded (read Fed) money men to pick up
the troubled assets at fire sale prices! The SCARFF plan. (You know, like the college kids scarff down beer and burgers?)
Here is a real life example:
In 1989, the nation faced a financial crisis caused by the collapse of hundreds of savings and loan associations, who had taken advantage of loosened regulations to invest aggressively in real estate and other ventures, many of which went sour.
Fearing both the size of the bill if the troubled institutions went under (too big to fail!) and the damage such a meltdown might cause to the economy at large, Congress and President George H.W. Bush in 1989 created the Resolution Trust Corporation to take over troubled thrifts, as the banks were known.The mission of the corporation was to dispose of the assets as quickly as possible for maximum value.
In swooped the Fed financed investors who made out like bandits when the economy returned to normal (waiting for the Next bubble!)
So you see the Fed loves economic Panics, as they were called in the last century, they make money when the economy goes up and when it crashes! Is it any wonder they are so keen on causing Panics, Recessions and Depressions?
Wednesday, January 21, 2009
A Quick Update on Where We Stand...
How about housing? New, luxury condos in Manhattan now loosing air too with new Battery Park condos selling for up to 56% off! Homes in Detroit and Cleveland being dumped by the banks for $1,000 each. 10% of all mortgagors late on payments, 15% of all homeowners with a mortgage owe more than the house is worth. The new restrictions banks are putting on potential home buyers, such as 30% cash for downpayment, closing costs and mandated bank reserves, has closed about 50% of willing buyers out of the market.
Mass unemployment spreading to every sector, 34,000 more from Circuit City bankruptcy alone. If you count unemployment the same way they did during the Great Depression, and there is no reason we shouldn't, our unemployment rate is really 16%
We are looking at an unstoppable avalanche of bankruptcies: US Airways, Saks, Best Buy, Kmart, BN Furniture store, Bronx, NY etc are all on the brink. Circuit City was just the first big name. Retail is moving to the Internet, just like travel. There is no need for the big overhead of a physical location in many instances. Half of all electronic purchases are now made over the Internet.
US Government will wise up later than sooner that they can not continue to save everyone. The big banks and financial institutions are already dead, the only thing keeping the lights on is tax payer money and that will soon come to a halt. Citi, Bank of America, AIG have already had several hits on the public tit and will need more. Just in: "Friedman, Billings, Ramsey analyst Paul Miller made waves Tuesday by suggesting that Bank of America Corp. (BAC: 5.78 +13.33%) needs more than $80 billion in new common equity capital. The bank begins the year with $61.7 billion of tangible common equity, supporting $2.4 trillion of tangible assets, Miller’s note said according to a MarketWatch report. That’s well below the 6 to 9 percent ratio that Miller believes is needed." Can the bank earn the Billions it needs? It just lost $1.7 Billion in the 4th qtr. Earnings are headed the other way, down, not up.
Consumer delinquencies will destroy entire industries: housing, credit card (banks), autos, etc.
Commercial real estate will soon join the party. You don't need Malls if the customers cannot afford to buy. Just in: "Suggesting that capital markets turmoil is now affecting multifamily apartment owners and developers, the National Association of Home Builders suggested Wednesday morning that apartment developers are finding it difficult to fund future projects."
Obama will have no choice but to devalue the currency to provide enough inflated dollars to pay the Trillions of debt we have and are continuing to build up. A deficit of over $2Trillion is very likely this year.
Internationally, the Chinese economy is heading for recession too. Plus, they see the growing recklessness with which the US prints money to prop up failed financial institutions. This means that they will stop, sooner than later, buying US Treasury Bonds. This will extinquish the last real estate bright spot, low interest rates which will be yet another stake in the real estate market's heart.
What about gold and silver, you ask? The current deflation has beaten down gold and silver by 30-40% in the last year. prices of gold and silver have been d
The baby has been thrown out with the water. Their prices, especially those of silver, have been hammered in the past 14 months and I expect they will continue to trend down as the deflation persists. This makes it an IDEAL time to buy gold and silver at such deflated prices. As the only real money in the world, people will stampede to these metals once the economy crashes.
Oh, yes, stocks. I predict that within the first qtr, 2009, we will see a Dow of around 5,000. The current deflation is sucking the life out of businesses. No financing for businesses, failure of more major financial institutions, bankruptcies of major retailers, no sales, dropping corp profits, possibly rising interest rates all point toward a crippled stock market in free fall.
Anyone ever hear of the Amero? Google it!
Mass unemployment spreading to every sector, 34,000 more from Circuit City bankruptcy alone. If you count unemployment the same way they did during the Great Depression, and there is no reason we shouldn't, our unemployment rate is really 16%
We are looking at an unstoppable avalanche of bankruptcies: US Airways, Saks, Best Buy, Kmart, BN Furniture store, Bronx, NY etc are all on the brink. Circuit City was just the first big name. Retail is moving to the Internet, just like travel. There is no need for the big overhead of a physical location in many instances. Half of all electronic purchases are now made over the Internet.
US Government will wise up later than sooner that they can not continue to save everyone. The big banks and financial institutions are already dead, the only thing keeping the lights on is tax payer money and that will soon come to a halt. Citi, Bank of America, AIG have already had several hits on the public tit and will need more. Just in: "Friedman, Billings, Ramsey analyst Paul Miller made waves Tuesday by suggesting that Bank of America Corp. (BAC: 5.78 +13.33%) needs more than $80 billion in new common equity capital. The bank begins the year with $61.7 billion of tangible common equity, supporting $2.4 trillion of tangible assets, Miller’s note said according to a MarketWatch report. That’s well below the 6 to 9 percent ratio that Miller believes is needed." Can the bank earn the Billions it needs? It just lost $1.7 Billion in the 4th qtr. Earnings are headed the other way, down, not up.
Consumer delinquencies will destroy entire industries: housing, credit card (banks), autos, etc.
Commercial real estate will soon join the party. You don't need Malls if the customers cannot afford to buy. Just in: "Suggesting that capital markets turmoil is now affecting multifamily apartment owners and developers, the National Association of Home Builders suggested Wednesday morning that apartment developers are finding it difficult to fund future projects."
Obama will have no choice but to devalue the currency to provide enough inflated dollars to pay the Trillions of debt we have and are continuing to build up. A deficit of over $2Trillion is very likely this year.
Internationally, the Chinese economy is heading for recession too. Plus, they see the growing recklessness with which the US prints money to prop up failed financial institutions. This means that they will stop, sooner than later, buying US Treasury Bonds. This will extinquish the last real estate bright spot, low interest rates which will be yet another stake in the real estate market's heart.
What about gold and silver, you ask? The current deflation has beaten down gold and silver by 30-40% in the last year. prices of gold and silver have been d
The baby has been thrown out with the water. Their prices, especially those of silver, have been hammered in the past 14 months and I expect they will continue to trend down as the deflation persists. This makes it an IDEAL time to buy gold and silver at such deflated prices. As the only real money in the world, people will stampede to these metals once the economy crashes.
Oh, yes, stocks. I predict that within the first qtr, 2009, we will see a Dow of around 5,000. The current deflation is sucking the life out of businesses. No financing for businesses, failure of more major financial institutions, bankruptcies of major retailers, no sales, dropping corp profits, possibly rising interest rates all point toward a crippled stock market in free fall.
Anyone ever hear of the Amero? Google it!
Friday, December 5, 2008
Stag/Deflation?
This is a term coined by one my gurus, Dr Rubini, of NYU. What it describes is a nightmare scenario of a Stagnant economy caused by lack of demand. It is inherently different from its similar sounding cousin, StagFlation, which is a Stagnant economy caused by an intemperate increase in the money supply.
We are probably hip deep in StagDeflation right now. Unemployment is ballooning (533,000 lost jobs last month, November, 2008) because business is stagnant due to lack of demand. Imported cars are piling up on the docks because dealers will not accept them because no one is buying them.
High unemployment leads to less demand, which leads to more unemployment, which leads to less demand...You see the problem.
In deflation, the value of everything goes down due to lack of demand. Look at oil prices, which are poised to go below $40/barrel in the next few days. Look at gold and silver, down approx 30 and 40%, respectively in the last 6 months.
The value of the stock market has plummeted 40% this year as well.
Of course the banks and financial institutions are being battered by the drop in their capital due to the loss of value of their reserves, mainly their investments in real estate derivatives. This situation is forcing them to curtail lending which again hits demand, denying credit to businesses and individuals, depressing consumption further.
The only thing going up in this environment is the lowly dollar, since the supply i8s contracting, the very opposite of what happens in an inflation.
During this period of Stagflation and collapse of the banks and financial institutions, your best money strategy is to get out of your investments and into cash, since "things" are losing value and dollars are gaining value.
You will have a great opportunity to buy back your financial assets and real estate at the bottom of the StagDeflation cycle at pennies on the dollar!
However, with banks failing on a weekly basis and hundreds of them in danger of collapse, you want to keep your money in Treasury Only money market funds. FDIC insurance is for suckers! The fund does not begin to have anything approaching enough capital to guarantee anything like the amount of losses they are likely to face if even a fraction of the banks on the Bad list fail.
Treasury only money market funds can act as both business and personal checking accounts as well as money market funds. Your money cannot be safer. The government has Never defaulted on Treasuries, not in the Civil War, not in the First Depression, not in WW2.
Now, the answer to Deflation, is Inflation, printing money and pumping it into the economy, as the government is doing to recapitalize the banks as well as to jump start consumer spending. There is usually a lag of about a year between the growth of the money supply and the onset of inflationary prices.
As gold and silver prices will rocket upward as inflation sets in and their prices are depressed now, you will want to convert some of those Fat dollars to gold and silver now. You have about a year before their prices will start excellerating at which time the dollar will drop like a stone.
Recommendation: Sell deflating financial investments, real estate. Hoard cash, invest 20% in gold, silver: http://SilverSnowball.com/964
We are probably hip deep in StagDeflation right now. Unemployment is ballooning (533,000 lost jobs last month, November, 2008) because business is stagnant due to lack of demand. Imported cars are piling up on the docks because dealers will not accept them because no one is buying them.
High unemployment leads to less demand, which leads to more unemployment, which leads to less demand...You see the problem.
In deflation, the value of everything goes down due to lack of demand. Look at oil prices, which are poised to go below $40/barrel in the next few days. Look at gold and silver, down approx 30 and 40%, respectively in the last 6 months.
The value of the stock market has plummeted 40% this year as well.
Of course the banks and financial institutions are being battered by the drop in their capital due to the loss of value of their reserves, mainly their investments in real estate derivatives. This situation is forcing them to curtail lending which again hits demand, denying credit to businesses and individuals, depressing consumption further.
The only thing going up in this environment is the lowly dollar, since the supply i8s contracting, the very opposite of what happens in an inflation.
During this period of Stagflation and collapse of the banks and financial institutions, your best money strategy is to get out of your investments and into cash, since "things" are losing value and dollars are gaining value.
You will have a great opportunity to buy back your financial assets and real estate at the bottom of the StagDeflation cycle at pennies on the dollar!
However, with banks failing on a weekly basis and hundreds of them in danger of collapse, you want to keep your money in Treasury Only money market funds. FDIC insurance is for suckers! The fund does not begin to have anything approaching enough capital to guarantee anything like the amount of losses they are likely to face if even a fraction of the banks on the Bad list fail.
Treasury only money market funds can act as both business and personal checking accounts as well as money market funds. Your money cannot be safer. The government has Never defaulted on Treasuries, not in the Civil War, not in the First Depression, not in WW2.
Now, the answer to Deflation, is Inflation, printing money and pumping it into the economy, as the government is doing to recapitalize the banks as well as to jump start consumer spending. There is usually a lag of about a year between the growth of the money supply and the onset of inflationary prices.
As gold and silver prices will rocket upward as inflation sets in and their prices are depressed now, you will want to convert some of those Fat dollars to gold and silver now. You have about a year before their prices will start excellerating at which time the dollar will drop like a stone.
Recommendation: Sell deflating financial investments, real estate. Hoard cash, invest 20% in gold, silver: http://SilverSnowball.com/964
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