Jun 7 2010

Bankruptcy filings reflect a weak economy – 9 percent jump in bankruptcy filing in last month of data. Bankruptcy map shows Nevada and South have highest filing rates per capita. $79,000 income and $11 million in debt?

Bankruptcies are still plaguing this country and show deeper strain in the fabric of the economy.  Average Americans are still very much dealing with the challenges of a deep and profound recession.  Filing for bankruptcy is usually the end of the financial line for many Americans.  Yet in the last month of data for March of 2010 we saw the highest number of bankruptcy filings in the entire fiscal year.  Instead of the rate dropping it has actually increased.  Keep in mind that these filings are coming at a time when bankruptcy laws have become tougher and stricter on most Americans.  Yet there is only so much you can squeeze out of someone who has entered the last stage of their financial options.  This is why even programs that focus on mortgage adjustments don’t help because they don’t drill deep enough into the core of what is happening in our economy.  Without a job or adequate income, most will simply default whether it is in bankruptcy or through foreclosure.

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Jun 5 2010

FDIC massive problems ahead with smaller bank failures. 105 banks hold 77 percent of all banking assets. $10 trillion held in too big to fail while 775 banks appear on the FDIC problem list.

The FDIC went ahead and closed another handful of banks this Friday.  It really is a rare day to see 400,000+ jobs added and the market retreat so significantly.  A large part of the gains came from temporary Census hiring which peaked last month.  If the economy were really recovering banks wouldn’t be failing on a continual basis.  Part of the issue the FDIC has is the concentration of troubled assets in too big to fail banks.  105 banks hold 77 percent of all banking assets.  The impression we have is the Federal Reserve and U.S. Treasury will do anything including destroying the U.S. dollar to keep these banks propped up.  On the other hand, you have banks that are dealing with massive amounts of bad loans including commercial real estate loans and the FDIC deposit insurance fund is running in the negative.

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Jun 2 2010

The growing condo shadow inventory – CityCenter in Las Vegas and Lexington Park in Chicago. The shadow inventory that is crushing commercial real estate.

There is a massive amount of vacant inventory sitting across the United States.  A good portion of this is viewable to the public but a large amount of this inventory is simply hidden from data scrutiny.  Last week we talked about the commercial real estate bust coming to the most expensive region in California of San Francisco.  The fundamental problem was the complex had no way of cash flowing on the apartments with current market rates.  So it is no surprise that the giant San Francisco project now enters into another precarious situation.  Banks do not move quickly on commercial real estate problems because who is going to buy a multi-million or even billion dollar piece of real estate?  In this market the pool is tiny and the pool of those willing to lend is smaller.

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May 30 2010

The great American debt purge – Americans more stressed out about debt. Mortgage, credit card, student loan, and auto loan debt up to $13.5 trillion. Average debt per household at over $120,000.

Every man, woman, and child would owe an average of $43,000 if we divided up mortgage, credit card, student, and auto debt in the United States.  Of course, this is based on the current population of 309 million.  But we know this isn’t exactly accurate since an infant really didn’t charge up a credit card or take out a HELOC.  We should break this down to each individual household.  If we average this figure out over all U.S. households the amount comes out to over $120,000 per household.  When 1 out of 3 Americans have no savings, how do you think many will be able to pay off their debt?  For decades, the model has revolved around servicing debt and not necessarily paying the initial balance off.  But many American families are feeling the deep psychological strain of an economy largely built on debt.

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May 27 2010

Most over valued region in San Francisco gets a taste of the commercial real estate bust. $3 trillion in loans starting to implode at a faster rate. Why commercial real estate will plunge FDIC insured banks into closure. Bought for $415,000 per apartment unit.

The commercial real estate bust is in full swing.  This $3 trillion mortgage market is standing to push hundreds of banks into failure and adding additional strain to the embattled FDIC.  Commercial real estate (CRE) is a good indicator of where things are heading economically because it is a reflection of what revenues are being brought in by certain properties.  For example, a strip mall owner will lease out space to clients that ideally will earn more money each month to cover their rents.  That is typically how CRE deals went down.  But for the past decade people invested in CRE with the implied notion that they could always sell the underlying CRE for a higher price irrespective of the actual revenue stream the real estate could produce.  For CRE this is sin number one.

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