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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May 25 2010

Why buying a home today makes little financial sense. 3 reasons why taking on a mortgage in today’s market is deep in speculation. Are homes still over valued? Tax benefit not as big as you would expect.

It is hard for many to believe that home prices in many of our largest cities are still overvalued.  Part of this distortion has to come from living in a decade long housing bubble that has adjusted the perception of value and price.  But in many areas home prices are still much too high relative to the income of local families.  When disconnects occur here, bubbles are produced.  The stock market is experiencing this since price to earnings ratios are still much too high for what businesses are drawing in through revenues.  The housing market is off by 30 percent from its 2006 peak and weakness is now appearing once again now that the tax credit has expired and the Federal Reserve is finished with their mortgage backed security buying campaign.  It only took a few weeks once artificial measures were taken off the table.

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May 22 2010

America’s wealthiest 25 percent of households own 87 percent of all U.S. wealth. How the middle class face growing income inequality in the new era of the psychopath corporatocracy.

A true measure of economic vitality is measured by wealth.  We can look at incomes or other measures of productivity but real wealth is measured by net worth.  Who controls wealth in the U.S.?  According to a study from the Joint Center for Housing Studies the top 25% of U.S. households control 87% of all wealth in the country.  That number comes out to a nice hefty sum of $54.2 trillion.  If we look even closer at income distribution, we will find that the top 1 percent in our country control 42 percent of all financial wealth.  By all measures being able to acquire a piece of financial wealth was the hallmark of the middle class of previous years.

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May 20 2010

FDIC next government trillion dollar bailout? Since January of 2000 to October of 2007 we had 27 bank failures. From January 2008 to May 2010 the FDIC has closed down 237 banks. Why 1,000 bank failures will occur before the Great Recession is over.

The Federal Deposit Insurance Corporation (FDIC) will be the next billion and possibly trillion dollar government bailout.  We have the FDIC that insures over 8,000 banks with an insurance fund that is in the negative.  From 2000 to October of 2007 only 27 banks were closed down by the FDIC.  Nearly eight full years and 27 banks were shut down in the face of epic gambling from the banking industry.  Since the recession started, the FDIC has closed down 237 banks with more to come.  Without a doubt, given the enormous amount of bad debt and commercial real estate loans we will have 1,000 bank failures by the time this recession is over.  Is this so hard to envision?  In April, 17 banks were closed and so far in May, 15 banks have seen their doors shut.  The rate of bank failures is increasing.

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