Better Keep Hoping
Following excerpts from US News...
The Nattering One muses... Those who are deluded enough to dream that a recovery is under way...
Better keep hoping that these things DO NOT HAPPEN... all things that we have warned and nattered about, at length, in the past...
if any of them do, its lights out and the party is over. Addressing the bold points above... This generation of consumers will never be rational.
With what little credit can be obtained, they have already started to spend on more crap they don't need.
The US Debt Crisis has China, Japan and others trapped into providing a false bottom for the $8 Trillion in dollar debt, they now own.
China receives over $100 million per day on their holdings. That's right, 100 million potentially worthless dollars, PER DAY...
Needless to say, they will not allow those dollars, to become worthless.
Stocks and housing crash again? Some investors that scooped up seeming stock and housing bargains on the way down, are already, underwater.
With no durable economic recovery in sight, the next wave of margin calls and foreclosures based on joblessness, will make the first, pale in comparison.
Freddie & Fannie? On their own, neither will survive the next wave down. The FDIC is on the verge itself.
TBTF? Too Big To Fail? Bank on more agency issued MBS being subsidized by taxpayer bailouts.
The safe haven? Aside from gold... REITS holding large amounts of agency (FNMA, FHLMC) paper. High yield dividend's and government guaranteed subsidy.
Buckle up and get ready folks, we are in for some really bumpy weather.
Fannie & Freddie?
The only problem with an upbeat prognosis is that large chunks of the U.S. economy remain addicted...
to financial painkillers or dependent upon dysfunctional institutions like Fannie and Freddie.
The two mortgage-finance firms failed as spectacularly as AIG, the poster child for finance-gone-wrong...
with the combined Fannie-Freddie rescue totaling about $111 billion so far--the biggest bailout of all.
The big problem: They underwrite about three quarters of all the mortgages issued in the United States.
Housing tanks all over again?.
It's hard to believe the housing market could get any worse, with prices already down by more than 30 percent from their 2007 peak.
In addition to subsidizing the entire mortgage market via Fannie and Freddie, the government has also stepped in to buy billions in mortgage-backed securities...
replacing private investors who are sitting on the sidelines--to keep money flowing to consumers.
Most forecasts call for a spike in foreclosures and further price declines in the first half of the year...
But it's far from clear what will happen when the government aid dissipates. Will that remove one leg from the chair? Two? Three?
If the private markets don't fill the void left when the government backs out...
it could trigger a fresh crisis that inflicts more collateral damage on the emasculated remains of the economy.
Stocks crash again?
An epic bull rally since the lows of March 2009 has probably been the single biggest contributor to the so-called recovery.
While stocks have been surging, jobs have continued to disappear, and this divergence between Wall Street and Main Street must end.
What if the moribund job market exerts the stronger gravitational pull, dragging down stocks again? If so, buckle in for a double-dip.
The U.S. debt crisis?
The Bush administration and Obama bailouts have left America with a $8 trillion public debt, which amounts to more than half of our total annual economic output.
The markets might decide that America is heading toward bankruptcy and dump the dollar...
forcing the world's biggest debtor nation to pay higher rates on its securities, slash spending, and hike taxes.
Consumers finally become rational?
Given the painful transformation of the U.S. economy, Americans ought to be saving like crazy and buying nothing they don't need.
The savings rate has crept up to about 5%, still lower than the long-term average and far lower than you might expect after a collapse like the one we've endured.
If savings continue to go up, consumer spending will come down, leaving a hole in the growth of our gross domestic product, with little else to fill it.
So hopes for a vigorous rebound rest on spendthrift consumers being as materialistic as ever. Now there's a strong foundation for success.
The Nattering One muses... Those who are deluded enough to dream that a recovery is under way...
Better keep hoping that these things DO NOT HAPPEN... all things that we have warned and nattered about, at length, in the past...
if any of them do, its lights out and the party is over. Addressing the bold points above... This generation of consumers will never be rational.
With what little credit can be obtained, they have already started to spend on more crap they don't need.
The US Debt Crisis has China, Japan and others trapped into providing a false bottom for the $8 Trillion in dollar debt, they now own.
China receives over $100 million per day on their holdings. That's right, 100 million potentially worthless dollars, PER DAY...
Needless to say, they will not allow those dollars, to become worthless.
Stocks and housing crash again? Some investors that scooped up seeming stock and housing bargains on the way down, are already, underwater.
With no durable economic recovery in sight, the next wave of margin calls and foreclosures based on joblessness, will make the first, pale in comparison.
Freddie & Fannie? On their own, neither will survive the next wave down. The FDIC is on the verge itself.
TBTF? Too Big To Fail? Bank on more agency issued MBS being subsidized by taxpayer bailouts.
The safe haven? Aside from gold... REITS holding large amounts of agency (FNMA, FHLMC) paper. High yield dividend's and government guaranteed subsidy.
Buckle up and get ready folks, we are in for some really bumpy weather.
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