May 18 2010

5 ways that Wall Street and the U.S. Government punish the American saver – Artificial low interest rates, understating inflation, pushing people into the stock market casino, and destroying yield on traditional safe investment vehicles.

The only savers in the U.S. seem to be the investment banks.  Four of the big banks on Wall Street turned out a perfect quarter as they have managed to leverage the zero percent funds from the Federal Reserve into government securities.  At the same time, middle class Americans would be lucky to get 0.1 percent at a bank on their savings account.  Then you have Social Security coming out stating that there will be no cost of living adjustment since inflation is supposedly under control (except for food, healthcare, and other daily use items).  Americans are being punished if they are savers and prudent with their finances.  The current system is based on turbo capitalism and the fuel that runs this system is debt.

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May 17 2010

Shadow inventory sales for years to come – 1.6 million distress sales in 2010, 1.6 million in 2011, and 1.5 million in 2012. By summer of 2011 REO pipeline will rise to 536,000.

Wall Street as usual enjoys denying facts until they become so obvious to the common person on the street.  By then, it is too late to react.  For example, subprime wasn’t a problem until it lit the fuse that set the global economy into a downward tailspin.  Analysts at Barclays Capital are now coming out giving full attention to shadow inventory in the markets.  Even though their report states that the pipeline for shadow inventory may be topping out, we have such a large number of distress properties in the pipeline that we won’t see any draw down of distress sales until 2012.  And ultimately the sales end is what keeps prices lower because distress properties sell for less.

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May 15 2010

Solving the massive debt problem with more debt. American consumers carry as much debt as annual U.S. GDP. Credit card debt declines but auto loans and student loans go up?

The Federal Reserve has come to the aid of bailing out Greece.  I wonder how many Americans even know that billions of U.S. dollars are going to prop up a failing European country in Greece that got into the mess they are in because of too much debt.  In the end, the Euro is still crashing down because Greece is merely one country out of many with massive debt problems.  Middle class Americans don’t need an extensive lesson in economics to understand this.  If you take on too much debt, at a certain point you will end up paying the piper.  This doesn’t matter if you spend too much money on clothing by charging up your credit card or buying a home that you clearly couldn’t afford.  In the end, a bill comes due.  Unlike Wall Street who operates the Washington D.C. purse strings, you are small enough to fail in their eyes.  If you purchase a home that is too expensive, you will either have to pay the mortgage or end up in foreclosure.  Giant amounts of debt have ruined individuals as well as countries.

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May 13 2010

California state budget and fiscal year problems assure a weak housing market and poor employment conditions for another fiscal year. $3 billion miss in April tax revenues, selling electronic freeway ad space, and 80 percent of income from volatile sources.

The state of California is entering the new fiscal year budget wrangling period.  What the legislature in Sacramento was hoping for in April with generous tax revenues actually turned out to be an absolute bust.  The California housing bubble bursting is still having deep ramifications for the future of the state.  Unfortunately what we are now finding out is Sacramento put blind faith behind the federal government bailing out the state and overly optimistic revenues in April.  None of those have come to fruition and now the hard budget work will begin once again.  In this election year, you’ll be hard pressed to find any politician backing any tax hikes.  So more cuts seem to be in store for the state but those calling for massive cuts fail to connect the dots that unemployed people will not be buying homes or spending freely.  In other words, the economy of California is in trouble for at least the next fiscal year.

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May 11 2010

The ambiguous financial state of housing – 3 issues repeating the housing bubble mistakes; Real estate psychology, down payments required, and bring back lending responsibility to immediate areas.

The overwhelming evidence of what went wrong to create the housing bubble is irrefutable.  It is clear that allowing buyers to purchase a home with little to no documentation was a bad idea.  So why continue doing this today?  It was abundantly obvious that zero down or low down mortgages was a recipe for disaster.  Yet we are still encouraging low down payment loans today.  It is also clear that allowing Wall Street free reign on the housing and credit markets has created the largest credit bubble in history.  Then why allow them to continue as usual as if nothing has happened over the last decade?  The reasons for the housing market are clear to most Americans for obvious reasons.  Manias usually cloud judgment and get the better of those who are blinded by greed.  But typically, after a mania lessons are learned and new enforcement is placed in the market.  None of that has occurred even in the middle of our Great Recession.

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