Jul 5 2010

American middle class slowly disappearing under mounds of debt – How Wall Street and government sucked working and middle class Americans into perpetual debt serfdom.

People quickly forget about the nearly 1,000 point “flash crash” brought on by glitches in the Wall Street casino machinery.  Still no sensible explanation has been given but today the stock market now stands below the flash crash moment.  The middle class is witnessing the largest wealth transfer in history take place and it is all happening because of the Wall Street infrastructure and the government’s lack of respect for the working class of the United States.  Even last month as we lost 125,000 workers the unemployment rate actually went down because over 500,000 Americans simply dropped out of the workforce.  In other words people simply threw their hands up in exhaustion and gave up.  The government is literally not counting tens of thousands of Americans.  What does this tell you about how much they value the middle class?

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Jul 1 2010

Commercial real estate transactions collapse 90 percent from 2007 to 2009. The next taxpayer bailout in the $3.5 trillion CRE market. From $522 billion in sales to $52 billion. CRE market over 4 times the size of the entire credit card market.

The massive commercial real estate market is already plaguing the weak balance sheets of banks.  It is the case that each Friday, we are likely to see one U.S. bank fail because due to high levels of commercial real estate (CRE) debt on their books.  This market is likely to cause the failure of hundreds of banks and put the economy down into another real estate funk.  The amount of commercial real estate transactions shows no sign of recovery in this market.  And why would there be any recovery?  This is an area for hotels, strip malls, condos, and other projects that usually reflect a healthy and growing economy.  We do not have that and the problems embedded in CRE are going to stifle any growth for years to come.

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Jun 29 2010

Stock market volatility reflects a weak economy and the end of a generational bull market. S&P 500 back to 1998 levels. Middle class thrown to the wolves in this stock market.

The economic crisis has ushered in the end of a generation long bull market.  Most average investors ignore the fact that heavy market volatility is a sign of an unhealthy stock market.  The stock market since the lows reached in 2009 has been on an unstoppable bull run.  Yet the real economy where most Americans work and spend money has not reflected any of this irrational exuberance.  The S&P 500 has rallied 53 percent from the lows reached in early 2009 and that is including the current retracement back.  On Tuesday the stock market pulled back on data showing consumer confidence plunging from what analysts had expected.  Outside of Wall Street the economy is walking on eggshells.

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Jun 27 2010

34 states saw tax collections decline in the first quarter of 2010. State budget deficits projected well into 2010 – Plunging tax revenues reflect a weaker economy dragged down by pervasive unemployment and underemployment. $112 billion in state budget gaps for fiscal 2011.

Big states with dismal budget short falls like California and New York have been making the news for the last couple of years.  Yet the problems with state budget deficits go beyond the big and mighty.  The banking system has been stabilized at a very high cost to average Americans but state budget deficits reflect a deeper underlying problem.  States generate revenue through a variety of taxes; these show up through payroll taxes, sales taxes, property taxes, and other fees.  As a metric for the economy, these are a good way of measuring the health of economic activity.  Looking at current massive budget deficits states are mired in expenses with revenues falling.  For the next fiscal year of 2011 states will face a combined $112 billion in budget short falls.  California’s current budget deficit is $19 billion (current plus next fiscal year).  But things can and may get worse.

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Jun 24 2010

Current state of the American housing market. What foreclosures and distressed borrowers tell us in hidden data. 2010 on path to having 4 million foreclosure filings. HAMP call center data at record levels while loan modifications dwindle.

Trying to get honest data from the banking industry regarding the current state of housing is a monumental task.  We are left using multiple data sources to get an accurate picture of the current state of the American housing market.  Even then, we are left trying to piece together data that is largely incomplete.  For example, we now know that banks are delaying foreclosure filings so these don’t show up in monthly reports.  Next, we have another group of home owners that have stopped paying their mortgages as a strategy.  These points are important but are buried deep in reports.  Yet we can still try to garner information from other sources that will provide a better perspective on the U.S. housing market.

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