Posted on 04/22/2009 10:31:49 AM PDT by FromLori
The Commercial Real Estate Time Bomb has gone off but it has been lost in the euphoria of economic cheerleading and bottom calls based on dubious (at best) earnings reports from banks. Here are a few headline items from the past week or so to consider.
Malls shedding stores at record pace
CNN Money is reporting Malls shedding stores at record pace
(Excerpt) Read more at globaleconomicanalysis.blogspot.com ...
Yup. Here it comes, and the sheeple will stand there looking doe eyed once again....... Should make for a good turn out for the next tea party though. We need it to dribble out every few weeks, keeps the fires stoked.....
It’s where O is gonna put all his yoots.
Sounds like a talk buddy of Peter Schiff :)
Ahem, a little more critical version:
I got out of commercial real estate funds awhile ago, but still not soon enough :(
The next fund I’m concerned about is one that is more conservative in these times - invests in government bonds and gold. The gold is okay, and according to my broker, the bonds are safe “as they are backed by the full faith and credit of the Federal government”. I laughed at him. I don’t think he liked it. But, for awhile longer I think it will be okay.
And like he said, “Well, if the government defaults, everything is screwed”.
I think the credit cards and banks will be the next thing to fail before the government finally does.
And my building is in much better shape financially than the retail portions of our company. I changed the locks on two more retail spaces yesterday.
Buildings are leasing very nice office space at rates that don't even cover the cost of operation just to slow down the hemorrhaging.
We are on financial stress overload. There’s only so many stressing things one can react to before additional ones become just one more thing.
People have been talking about this, plus the looming credit losses from the rise in unemployment for months, and it shouldn’t be a surprise to anyone.
I remember before all of this started, there was an economist on the Fox Business channel saying our economy was going to collapse because of the sub-prime mess. The anchors who were interviewing him laughed at him and shrugged him off. Now, when they do that to guests, I tend to pay more attention to what they’re saying.
That was such an important piece blam we should put it on here so people know how horrible it really is...
ust so you have a short list of what’s at stake if Washington DC doesn’t change policy here and now (which means before the collapse in equities comes, which couldstart as soon as today, if the indicators I watch have any validity at all. For what its worth, those indicators are painting a picture of the Apocalypse that I simply can’t believe, and they’re showing it as an imminent event - like perhaps today imminent.)
All pension funds, private and public, are done. If you are receiving one, you won’t be. If you think you will in the future, you won’t be. PBGC will fail as well. Pension funds will be forced to start eating their “seed corn” within the next 12 months and once that begins there is no way to recover.
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All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. Some of these firms are dangerously close to this happening right here and now; the rest will die within the next 6-12 months. If you have other insured interests with these firms, be prepared to pay a LOT more with a new company that can’t earn anything off investments, and if you have a claim in process at the time it happens, it won’t get paid. The probability of you getting “boned” on any transaction with an insurance company is extremely high - I rate this risk in excess of 90%.
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The FDIC will be unable to cover bank failure obligations. They will attempt to do more of what they’re doing now (raising insurance rates and doing special assessments) but will fail; the current path has no chance of success. Congress will backstop them (because they must lest shotguns come out) with disastrous results. In short, FDIC backstops will take precedence even over Social Security and Medicare.
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Government debt costs will ramp. This warning has already been issued and is being ignored by President Obama. When (not if) it happens debt-based Federal Funding will disappear. This leads to...
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Tax receipts are cratering and will continue to. I expect total tax receipts to fall to under $1 trillion within the next 12 months. Combined with the impossibility of continued debt issue (rollover will only remain possible at the short duration Treasury has committed to over the last ten years if they cease new issue) a 66% cut in the Federal Budget will become necessary. This will require a complete repudiation of Social Security, Medicare and Medicaid, a 50% cut in the military budget and a 50% across-the-board cut in all other federal programs. That will likely get close.
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Tax-deferred accounts will be seized to fund rollovers of Treasury debt at essentially zero coupon (interest). If you have a 401k, or what’s left of it, or an IRA, consider it locked up in Treasuries; it’s not yours any more. Count on this happening - it is essentially a certainty.
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Any firm with debt outstanding is currently presumed dead as the street presumption is that they have lied in some way. Expect at least 20% of the S&P 500 to fail within 12 months as a consequence of the complete and total lockup of all credit markets which The Fed will be unable to unlock or backstop. This will in turn lead to...
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The unemployed will have 5-10 million in direct layoffs added within the next 12 months. Collateral damage (suppliers, customers, etc) will add at least another 5-10 million workers to that, perhaps double that many. U-3 (official unemployment rate) will go beyond 15%, U-6 (broad form) will reach 30%.
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Civil unrest will break out before the end of the year. The Military and Guard will be called up to try to stop it. They won’t be able to. Big cities are at risk of becoming a free-fire death zone. If you live in one, figure out how you can get out and live somewhere else if you detect signs that yours is starting to go “feral” - witness New Orleans after Katrina for how fast, and how bad, it can get.
Trust no one who makes a living on your money....
http://www.freerepublic.com/focus/f-news/2235021/posts
Now this one is gonna hit hard. All those small businesses going under coupled with chain stores and overbuilt areas. Karl Denninger has been speaking of this for a while now at market-ticker.
Scariness ping!
I noticed. This is going to get even uglier.
It's my fault.
Granddaughter moved to California and I can't take her and my Visa card to the Mall any more :^(
I do hope post 11 is wrong!!!
My son=in=law managed, what was, a very high end lucrative business in Portland. Two weeks ago the owners shut it down. It was located in a fairly new, upscale, outdoor mall. His was the fourth business to close shop. He’s got a business degree, but job hunting so far doesn’t look good.
I wish him the best it is so sad for people who have nothing to do with creating this crisis. There is more on closing of commercial real estate in this article.
http://bluelori.blogspot.com/2009/04/follow-money-banks-are.html
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