VISTA
The credit market is in the porocess of imploding as I see it. I tell people it is like snami's coming and the first one was the sub prime real estate.The "lagoon" has emptied and we have this "sense" of calm just before the next 2 and it will make the sib prime look likes child play. Now you have credit card and commercial credit. 76% of all commercial loans come due in the next 24 months and these people have no where to go. What is happening now is the pundits are doing their best to convince you we have turned the corner and real estate has bottomed out. Real estate will sink another 20-30% to get to its "real value" and it will be another 18-30 months to bottom out. It will then take another 5-7 years to "flush out" the existing over supply before new property is broght online. The best economy in the nation will be the area from Yakima Washington to Richland Washington IMO.
3,000 of the 8500 banks need to be shut down. They are over leveraged and they have only closed 60 for the year. I think we should see an acceleration of consolidation coming.
I have some real good statistics I can post, but the files might be too large and most people simply do not want the truth, because they can not handlle the truth.
Banking leverage over the past ten years has risen from 19% to 50% versus tangible equity and is currently about 45%. In England it is 55%. UK bank assets are 5 times GDP, whereas they are 2 to 1 in the US.
U6 unemployment minus the birth/death ratio is 20.5%. Job losses are now equal to or greater than at any time since WWII. All job growth since 2002 has been totally wiped out. The average workweek is 33 hours as more and more companies request employees to take unpaid leave. That government says amounts to more than 9 million people, or 5.8% of the workforce. Those figures are greatly understated as factories work at 65% of capacity utilization. The average length of official unemployment is 24.5 weeks, the longest since stats began in 1948.
While all of this does not bode well for the economy, I think it creates huge opportunity in the market for thinking people.
People are out of cash and banks are rolling back credit lines on even business with good credit and payment history. I work with a company that had a 8mm line of credit, bank rolled it back to 1mm. He sold off inventory for 65-70 on the dollar just to get the cash to pay the bank line into compliance. These fire sales were to future customers of his products. This in turn robs him of profits now as well as future profits as these customers filled their needs early and created a "sales void".
At this point in time, book debt means little as most creditors are running around with their "Monte Hall" hats on and want to make a deal for 20-30 cents on the dollar or better...they simply need the cash.
Just a few thoughts off point.
If you want some more info off topic, but about economy, would love to share my thoughts...Did I tell you I am an optomist.
Brad
