this nyc 'new construction starts' news is a good sign. in fact it's great vs last year at the same time:

 

 

"At $2.04 billion worth of new construction starts, May's total is roughly equal to the first four months of 2009 combined and far greater than the $712 million in construction starts in May 2008."

 

http://www.buildingcongress.com/outlook/

 

 

 

 

 

 

 

 

^

 

From what I've read, it seems construction is down, but not completely out.  Maybe off 35% or so, but I'm not seeing/hearing of a wholsale stoppage of construction.

 

A big part of that, of course, is that construction has a large lead time.  I am hearing of a number of projects put on hold or cancelled, so we can expect construction to be muted going forward for some time. 

 

Muted, but not stopped.

 

Right now in metro Cincy they are still building lots of houses, still putting up commercial buildings, distribution centers, and some retail restaurants (passed a Chipolte's under construction in Fairfield area last night).

 

While construction is definetly down, I'm seeing a switch in what is being constructed.  Lower entry prices on houses vs McMansions.  Stand-alone retail (including drug stores) instead of massive 'life style' projects, etc.

 

Around here, we seem to have switched to a 'build out what we've started' (be it residential subdivision or retail-zoned areas) vs. tear up large chuncks of farm land.  Of course, enough farm land was torn up in the past 5 years to keep builders busy for the next 10 years, albeit at a more normal pace.

this nyc 'new construction starts' news is a good sign. in fact it's great vs last year at the same time:

 

 

"At $2.04 billion worth of new construction starts, May's total is roughly equal to the first four months of 2009 combined and far greater than the $712 million in construction starts in May 2008."

 

http://www.buildingcongress.com/outlook/

 

 

 

 

 

 

 

 

 

I wouldn't use NYC (or Tri State NY) as a gauge.  NY real estate is in a world of it's own.

^ AS a quick example of the 'build out what you've started' approach..

 

Most people know I live between Lebanon and Monroe, 15 miles north of Cincy (of I-275). This is prime sprawl area for SW Ohio.

 

Near me, the big lifestyle center at I-75 & sr 129 has been cancelled.  The mega housing district outside Lebanon called 'San Margel' has not moved forward like promised.  So no ground torn up for these projects (some for the road infrastructure, but not for the projects themselves.)

 

But they are still building out the Shaker Run subdivisions near me.  Probably a dozen homes under construction at any one time.  And the outlet mall at Monroe is nearing completion, but the out-lots are now heavily advertised as available and the new roads in the area are under construction.  There is little doubt that small outparcel buildings will go up soon.  It may take awhile to fill them, but they will go up.

 

This is the change I'm seeing around my place.  With the leap-frog development that takes place here, there is always build-out taking place.

this nyc 'new construction starts' news is a good sign. in fact it's great vs last year at the same time:

 

 

"At $2.04 billion worth of new construction starts, May's total is roughly equal to the first four months of 2009 combined and far greater than the $712 million in construction starts in May 2008."

 

http://www.buildingcongress.com/outlook/

 

 

 

 

 

 

 

 

 

The NYC construction news is very bad. In the first 5 months of 2008 $11.12 billion of new construction was started vs the first 5 months of 2009 with a total of $4.45 billion of new construction. That is a major drop (about 60%). Residential development is also taking it hard. For the first 4 months of 2008 an average of 2,700 units were started per month, in 2009 that average dropped to only 460 units per month. NYC had up to this year been different, but it is now on a fast track to join the rest of the country. The job losses and falling residential prices are increasing rapidly.

^ yeah but that was the first months. the above sez it turned around in may, which was even better than last may.

 

we'll see what happens, but hopefully it's a bit of a sign that credit is easing up.

^ yeah but that was the first months. the above sez it turned around in may, which was even better than last may.

 

we'll see what happens, but hopefully it's a bit of a sign that credit is easing up.

 

I marked the page. I think it will be very interesting to see what the next few months do. Unless construction and residential surges even higher than it did in May for the next several months, the year is going to be 50% or more down from the previous year. With the job loses growing and another big boy on the edge (CIT) I am not convinced NYC is about to make a turn around any time soon.

^ yeah but that was the first months. the above sez it turned around in may, which was even better than last may.

 

we'll see what happens, but hopefully it's a bit of a sign that credit is easing up.

 

I marked the page. I think it will be very interesting to see what the next few months do. Unless construction and residential surges even higher than it did in May for the next several months, the year is going to be 50% or more down from the previous year. With the job loses growing and another big boy on the edge (CIT) I am not convinced NYC is about to make a turn around any time soon.

 

Agreed!  Also, NYC although you may not believe it is could be losing population.  the region has gotten to expensive and with massive layoff, people have to move to more affordable areas.

well, of course 2008 was a record year at the end of a major building boom run -- i dont think anyone expects a turnaround to pre-fall 2008 in ny...or anywhere else for that matter. it's just a hopeful sign that after the crash and a long bad streak the most recent month was a good one. it could end up a blip, but hopefully credit is loosening up a bit.

well, of course 2008 was a record year at the end of a major building boom run -- i don't think anyone expects a turnaround to pre-fall 2008 in ny...or anywhere else for that matter. it's just a hopeful sign that after the crash and a long bad streak the most recent month was a good one.

 

and on top of that existing housing prices are falling like bricks in NY.  However, even at the new price, the homes are still unaffordable to 80% of the population.

housing prices are another issue. they were way, waaaay overpriced pre-fall crash. so really its a natural correction. and thats not just in ny thats everywhere. in fact prices should continue to correct even more in nyc, but all the richy rich owners can afford to wait it out here longer than in most places. yet even they are cracking too and its happening.

housing prices are another issue. they were way, waaaay overpriced pre-fall crash. so really its a natural correction. and thats not just in ny thats everywhere. in fact prices should continue to correct even more in nyc, but all the richy rich owners can afford to wait it out here longer than in most places. yet even they are cracking too and its happening.

 

You don't have to tell  me.  trust i know.  :(

Just came across some more NYC information. NYC has been fairing better than most, but the economic damage is starting to show its ugly face in the big apple.

 

Manhattan Storefronts Hit Highest Vacancies Since ‘01 (Update3)

 

"Manhattan shopping strips from the Upper East Side to SoHo are flooded with empty storefronts. The borough’s second-quarter vacancy rate rose to 12.4 percent and now stands at the highest since 2001 as rising unemployment and the recession curb spending, according to data compiled by Faith Hope Consolo, chairman of the retail leasing and sales division at Manhattan- based Prudential Douglas Elliman Real Estate.

 

“The consumer just stopped shopping,” Consolo said.

 

More than 15 percent of the 185 stores on Madison Avenue between 57th and 72nd streets are vacant or about to lose tenants, according to New York-based broker Cushman & Wakefield Inc. In SoHo, 11 percent of the 551 stores are listed as available for lease. About 9 percent of the 265 stores on the Upper West Side are without tenants or soon will be.

 

Rents may fall as much as 23 percent by the fourth quarter from a year earlier and may continue dropping through 2010 given the pace of unemployment and consumer demand, according to Sam Chandan, chief economist at research firm Real Estate Econometrics in New York."

 

"New York City’s unemployment rate climbed to 9.5 percent in June, the highest since July 1997, the state Labor Department said yesterday."

 

"Times Square availabilities reached 10 percent in the second quarter, up from 7.3 percent a year earlier, Cushman reported."

 

"Fifth Avenue between 42nd and 49th streets has the highest vacancy rate in Manhattan at 15 percent, Prudential said. The rate is 13 percent in the Meatpacking district, the cobble- stoned area of trendy nightclubs where Cupertino, California- based Apple Inc. has a store."

 

For the complete story here is the link.

http://www.bloomberg.com/apps/news?pid=20601110&sid=aBA.h.FWiVbE

 

And this is just a great article:

 

Anti-capitalism chokes the engine of growth

...snip...

 

There is also the question of whether America, even with a plan of long-term fiscal discipline, can grow out from under its massive deficit. We did after World War II, but that was after four years of pent-up demand followed by an unprecedented optimism. By contrast, consumers today are in a gloomy period of long-term deleveraging. American households have been bludgeoned collectively to the tune of $12 trillion. Future U.S. potential growth rates are likely to be modest.

 

With the consumer sidelined, that leaves business investment as the only engine to provide robust growth for deficit reduction while making America an attractive global investment and savings target. ...snip...

 

Easy.  To reduce the fiscal deficit, we must expel the idea that we have to keep funding Cold War programs to the tune of hundreds of billions of dollars per year.  Obama is seriously planning to reduce the nuclear weapons arsenal to 1200 warheads.  We could retire most of the bombers and missiles.  Further, we don't need a fleet of ballistic missile submarines.  Their role was retaliation of a massive Soviet strike.  Well, there is no Soviet Union any more--and modern Russia has absolutely no reason to nuke us.  We are no longer two rival empires.

^Lockheed Martin is already announcing layoffs. The era of unchecked, no-bid defense buildup is over. America has been shocked back to reality.

 

While the longer term reduction in cost to the US can be health for the financial state of the country, this reduction in military spending will result in a lot of high paying job loses.

While the longer term reduction in cost to the US can be health for the financial state of the country, this reduction in military spending will result in a lot of high paying job losses.

Weapons spending is, by its nature, inflationary.  It takes goods and resources out of the economy and drives up prices for the rest of the economy.  Hence, it weakens our economy immediately and in the long term.

While the longer term reduction in cost to the US can be health for the financial state of the country, this reduction in military spending will result in a lot of high paying job losses.

Weapons spending is, by its nature, inflationary.  It takes goods and resources out of the economy and drives up prices for the rest of the economy.  Hence, it weakens our economy immediately and in the long term.

 

If those resources are put to use in a different way. I am not currently convinced that there is another industry(s) waiting to employee many of those resources (human capital) that will be reduced from the defense industry retraction.

Here is a great article about how the government 'collects' employment data. I know this has been a subject that's been discussed several times on this thread. It definitely shows how the 'assumptions' are keeping the picture more rosy than it really is.

 

Nine Reasons the Economy is Not Getting Better

Jobs data paint a discouraging picture of more pain to come

By Mortimer Zuckerman

Posted July 13, 2009

 

"We are now looking at unemployment numbers that undermine any confidence that we might be nearing the bottom of the recession. The appropriate metaphor is not the green shoots of new growth. A better image is to look at the true total of jobless people as a prudent navigator looks at an iceberg.

 

What we see on the surface is disconcerting enough. The estimate from the Bureau of Labor Statistics of job losses for June is 467,000. That increases by 7.2 million the number of unemployed since the start of the recession. The cumulative job losses over the past six months have been greater than for any other half-year period since World War II, including demobilization. What's more, the job losses are now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all employment growth from the previous business cycle.

 

That's bad enough. But here are nine reasons we are in even more trouble than the 9.5 percent unemployment rate indicates.

 

...

 

http://www.usnews.com/articles/opinion/mzuckerman/2009/07/13/nine-reasons-the-economy-is-not-getting-better.html

I don't know if Goldman will every be truly questioned or held accountable, but it would be wonderful to watch.

 

Is grousing about Goldman reaching critical mass?

Commentary: Questions are reaching the point where something might happen

By Peter Brimelow, MarketWatch

 

"NEW YORK (MarketWatch) — I’m amazed: Grousing about Goldman Sachs, and fury at the financial sector, is actually reaching the point where something might happen — maybe even answers to questions we’ve been asking for a while.

 

As Jim Bianco of Bianco Research just noted in his News Clips/Daily Commentary service: "The amount of bad news that is generating with its record earnings is incredible. We cannot remember a company that has received so much scorn for making money."

 

Bianco linked to critical stories in the Economist and the New York Times, and a scathing op-ed column ("The Joy of Sachs") by Paul Krugman.

 

...

 

http://www.marketwatch.com/story/is-grousing-about-goldman-reaching-critical-mass

Meanwhile, back at the ranch, the Conference Board peers into the Magic Economic 8-Ball. 

 

Leading Economic Indicators

 

The Conference Board LEI for the U.S. increased for the third consecutive month in June. Most of the components contributed positively to the index this month except real money supply* and manufacturers' new orders for nondefense capital goods*. The six-month change in the index has risen to 2.0 percent (a 4.1 percent annual rate) in the period through June, up substantially from - 3.1 percent (a –6.2 percent annual rate) for the previous six months, and the strengths among the leading indicators have remained balanced with the weaknesses in recent months.

 

...prognosis:  slow recovery starting either late this or early next year.  Won't help those bad job numbers noted by Zuckerman, which will probably are locked-in for some time. 

 

 

 

 

 

While the longer term reduction in cost to the US can be health for the financial state of the country, this reduction in military spending will result in a lot of high paying job losses.

Weapons spending is, by its nature, inflationary. It takes goods and resources out of the economy and drives up prices for the rest of the economy. Hence, it weakens our economy immediately and in the long term.

 

If those resources are put to use in a different way. I am not currently convinced that there is another industry(s) waiting to employee many of those resources (human capital) that will be reduced from the defense industry retraction.

If the money was left in the taxpayer's "pockets", the invisible hand of the marketplace would find a more productive use for it.  Families could spend it on clothes, cars, home improvements, or for education.  That will stimulate the economy and advance the progress of our people.

Its an old lefty dream to drastically cut the military, and Boreal pretty much outs himself as one of these leftys.

 

It aint gonna happen to the extend you guys want.  Cutting back on the F22 made sense as that was too expensive, but it will end there.  What will happen with the defense budget is that it will be redirected to strategy and tactics leanred in Iraq and Afganstan...both force structure and technology.  The militry is also keeping an eye on China as the next threat/competetitor. 

 

Thanks for the compliment, Jeffery (lefty).  But what I am citing is Economics 101--it was covered in my first Sociology/Economics course.

 

The horror is that weapons systems are selected by defense contractors, not by "military planners".  The weapons makers make allies in Congress and reward them with campaign contributions.  It is a degenerate cycle.  At this time, Senator Saxby Chambliss is trying to get a few more F22s built because the airplane is made in "his" state of Georgia.

 

(This post has been spell-checked.)

 

 

^

That's a good interpretation of the military industrial complex issue that Eisenhower warned about, and kudos to you for getting that, as a lot of people misunderstand what Ike was talking about. 

 

The F22 issue could be a textbook example of this.  Bob Dornan and the B1 would be another.

 

 

Commercial real estate falling fast

Post a commentPosted by: Agnes Crane

 

"Moody’s Investors Service, which keeps tabs on the commercial real estate sector by way of a traffic light color scheme, has very little in the way of good news about the market that many view as the second shoe of the credit crisis.

 

The rating agency reports that for the first time in six years, none of the seven property types tracked in its quarterly survey scored a green rating, or the strongest category, with full service and limited service hotel sectors still at rock bottom of its scoring system.

 

The overall commercial real estate market scored 34 (out of 100), putting it at the weakest shade of yellow. New York and Los Angeles, the two largest markets supporting commercial real mortgage-backed securities, saw double digit drops in their scores to just 36."

http://blogs.reuters.com/commentaries/2009/07/21/commercial-real-estate-falling-fast/

The period after Labor Day is going to feel really ugly. Hopefully it won't be a repeat of last year. If we are lucky, we'll get it out our system by Halloween and the mood will be decent enough heading into Christmas that we don't start talking about a winter of discontent.

^ many people are expecting "another leg down" for both the economy and the stock market (although you wouldn't expect it based on the DOW lately).

 

My points as of late is that the economy can't realy contract much more.  We're getting down to mostly government workers and 'essential for life' employees working.

 

So why do you say the post-Labor Day period will be so ugly?  Are you talking about the economy?  commercial RE?  the stock market?

 

Once we reach the level of 'minimal employment', there isn't much to cut.  Doesn't mean we will add to that employment level much for the next several years, though.

 

We have nothing else to produce. Automobiles are out, Machine tools are out. What's left to produce? Webpages??? Green windmills will not be enough.

^ I think the US still leads the world in overall manufacturing.  It's our consumption that got out of balance.

 

But regardless, if we have nothing left to produce, then we can't cut more jobs in that sector, can we?  That would suggest a floor of some sort.

 

I agree that the economy is not good.  And I don't see anything to propel the nation forward economically in the near future.

 

As I see it, the US went into a recession in 2001 and has never come out of it.  The RE bubble and its corresponding 'fake equity' spending mearly disguised the recession.

 

But I think the US is near a bottom as far as overall GDP, but will stay in that deep ocean trench for some time.

 

Remember, the overall population is still growing about 1%/year.  Household formation has been cut in half (from 1.6m/yr to about 700k/yr) but is still growing none-the-less.

 

A lot of what goes into the GDP is productivity non-elastic (at least in the short-run).  That means that as the population grows, the number of grocery stores must also grow.

 

Most employers I've seen have spent the past decade not hiring employees.  They just don't have any room to easily cut and still get operations done.  Sure, there will be a lot of small stores that close up shop, but the major employers have already gotten down to fighting weight.

couldn't you have put those three post in one?

As I see it, the US went into a recession in 2001 and has never come out of it.  The RE bubble and its corresponding 'fake equity' spending mearly disguised the recession.

 

Based on those employment numbers I ran for Dayton and Ohio (I think I posted them here?) that was the situation here.  Employment dropped after 2001 and either plateaued or kept dropping (depending on the sector).  I think medical was the only sector show job substantial increases in the past decade.

 

 

 

So since 2001 where are all those college graduates working now?  Took over peoples jobs who retired or working odd jobs for 8 years???

^

They could have left the state.  I ran some numbers for Montgomery County based on the 1990 and 2000 census, and the largest drop was the young adult cohort in 1990...people who were 20 somethings in 1990.  That group declined the most by 2000, when they would have showed up as the 30 somethings.

 

That wasn't the decade we are talking about, but you can see the trend, even in a "good" decade like the 1990s. 

 

But also it was what college grads did that helped them...the sectors that were growing, like medical and proffessional, scientfic, and technical jobs, would have absorbed college grads if they had the right degrees, as well as filling in retiree jobs.

 

 

 

 

 

 

 

My argument for another leg down is that there are a bunch of folks who have been laid off that are currently spending down their severance packages, unemployment insurance, and trying to live on credit cards (though I think there is less of this than in 01-02). Come end of summer a lot of that support will dry up. The negative fiscal effect of the state budgets will hit hard (though the fed stimulus is only now gaining strength). I also think there is a natural cycle to the economic psychology. Spring brings renewed optimism, while fall brings a more jaundiced eye.

I personnally don't buy the "another leg down" theory. For the recession to continue, the GDP has to go down, meaning things are getting worse. While I don't expect a significant recovery for years to come, I don't see a strong enough reason why things would get worse. I'm guessing the recession will officially be over with the 3rd quarter, but I doubt we'll see major improvements in unemployment till next summer. Then again, maybe I'm just in an optimistic mood today.

 

And as I've said earlier, government must lay off across the board if they want to avoid civil unrest. People working 60 hours a week at minimum wage without health insurance aren't going to be happy knowing their tax dollars pay for someone and their ridiculous benefits who works half as hard. There's plenty to cut in the public sector that we don't need. If private sector goes to bare minimum, so should the public sector.

The problem with this is, the state and most local governments have already cut back significantly, I think it would be hard to convince our leaders that they haven't done enough already.

 

And when it comes to the Federal Government, it's hard to get anything major done in a hurry. By the time congress acts, the president agrees to it, and something actually happens, the recession will be over.

The market is over 9000!

^ "The market is over 9000!"

 

I happened to be a home during lunch today and turned on CNBC for a few minutes.

 

CNBC is generally a big cheerleader for the markets, and their guests tend to hold the channel's view (with the occassional contrarian on there to keep it lively).

 

Well today, about 1/2 of their guests were saying that the market was WAY ahead of the economy and they expect the market to correct (to the downside) this fall. Corporate revenue is coming in under forecasts, and the only way the companies can meet or exceed profit is on the cost-cutting side.

 

So if CNBC presents more than a token negative view, you know things are headed for a big drop.  (lol)

 

I agree with dmerkow's explaination for the economy's next leg down. (I agree with a great deal he/she posts.).

 

During this transition to a lower economy, a lot of people have been surviving on savings, unemployment, and living rent-free while waiting for the bank to process their foreclosure.  A lot of small buisinesses have been pulling out every trick they have to survive financially, even though the writing is on the wall.  And bigger companies have been expecting a rebound, so they have held off on the last round of layoffs.

 

We are pretty certain that unemployment will rise another full point or more.  We are pretty sure employers are not going to hire any of those laid-off folks for some time (at least not with a healthy paycheck). 

 

I think the current stock market euphoria and current 'green shoots' euphoria will give way this fall to reality, which is that the economy has taken a permanent decline.  Small business will capitualate in record numbers.  Larger employers will pull the trigger on the last rounds of lay-offs when it becomes apparent that top-line revenue is not going to grow.  The stock market will pull back nicely when investors realize the same thing.

 

So I see a second leg down this fall as all this reality becomes apparent to people.  They will probably overshoot the layoffs and the stock market as well. 

 

I've argued on this thread that there isn't much room to cut more employees and therefore, the recession may have bottomed out.  I still think that there isn't much room for most bigger companies to cut, but other sectors (gov't, small business owners, medical, education, defense) still have room. 

 

I think a lot of what will drive the next leg down this fall will be psychological factors resulting from a recognition of the cognative dissadence between the market/expected corporate profits... and the reality of a permanent retreat of top-line revenue and profits.

 

I agree that another leg down is coming. Corporate earnings don't support the dow at this time, unemployment will continue to grow, and the next big wave of resets are going to drive housing down even more and drive foreclosures even higher. This is not over and when it is over the bottom is were we will sit for some time. I think it pays to look at all the underlining economics that are taking place and will take place (resets, etc...) to get a good picture of the next several months. None of them point to a recover except happy talk, and pump and dump on wall street so Goldman and others can make a quick profit off of others pain and foolish loses.

 

I also agree with C-Dawg Njaim, if oil an other commodities shot up in the near future it will crush the US economy and quickly revert any recover efforts.

I agree that another leg down is coming. Corporate earnings don't support the dow at this time, unemployment will continue to grow, and the next big wave of resets are going to drive housing down even more and drive foreclosures even higher. This is not over and when it is over the bottom is were we will sit for some time. I think it pays to look at all the underlining economics that are taking place and will take place (resets, etc...) to get a good picture of the next several months. None of them point to a recover except happy talk, and pump and dump on wall street so Goldman and others can make a quick profit off of others pain and foolish loses.

 

I also agree with C-Dawg Njaim, if oil an other commodities shot up in the near future it will crush the US economy and quickly revert any recover efforts.

Commercial real estate is taking a beating.  There are reports of several large hotels/resort going into foreclosure, like the St. Regis (yes, the st. regis) Monarch beach.

 

This is far from over.

I agree that another leg down is coming. Corporate earnings don't support the dow at this time, unemployment will continue to grow, and the next big wave of resets are going to drive housing down even more and drive foreclosures even higher. This is not over and when it is over the bottom is were we will sit for some time. I think it pays to look at all the underlining economics that are taking place and will take place (resets, etc...) to get a good picture of the next several months. None of them point to a recover except happy talk, and pump and dump on wall street so Goldman and others can make a quick profit off of others pain and foolish loses.

 

I also agree with C-Dawg Njaim, if oil an other commodities shot up in the near future it will crush the US economy and quickly revert any recover efforts.

Commercial real estate is taking a beating.  There are reports of several large hotels/resort going into foreclosure, like the St. Regis (yes, the st. regis) Monarch beach.

 

This is far from over.

 

Agreed,

I can tell you from my field of work that the conversations about commercial real estate heading for a big fall is not a joke. It is going to be very ugly. Be prepared to see a lot more unfinished projects and businesses go under.

On the other hand, the sources of new growth are usually surprising until one gets a year or two away into the rebound and everyone can't believe how they missed it and would have been rich if only. 

this article today on MSN Money talks about the relationship between commercial loans and regional banks.

 

http://articles.moneycentral.msn.com/Investing/SuperModels/regional-banks-on-the-brink.aspx

 

Regional banks on the brink

 

 

from the article...

 

While the market and the White House are distracted by matters like health care reform and Wall Street pay, some industry experts fear that these banks -- the backbone of credit distribution in smaller towns around the country -- are headed for a sequel of the winter crisis.

 

The story of the second half of 2009, in fact, may be this problem bursting into the public consciousness again, as the cash-flow problems besetting troubled lender CIT Group (CIT, news, msgs) fan out into the broader banking community. "I think there is clearly more bad news to come," said Michael Diana, a veteran banking analyst at Noble Financial Capital Markets, this week.

 

As a result, it's hard for banks even to know how much risk they face from commercial real estate. The worst-case scenario, actually under way now, is that they are simply blindsided by loan partners that are slow to come to grips with the reality of their setbacks.

 

The reason: Until regulators force them to acknowledge the depth of their problems, regional banks are lengthening the payment process for delinquent customers in the hope that eventually strength will return and they will have no problem paying debts -- a process critics call "pretend and extend." Whether the companies end up acquiring enough new capital to absorb the losses and maintain adequate capital bases is going to be a major question hanging over the sector

 

On the other hand, the sources of new growth are usually surprising until one gets a year or two away into the rebound and everyone can't believe how they missed it and would have been rich if only. 

 

Agree in general, but not sure this time.  Care to venture any guesses on what those new grow areas will be?

 

To take the bad news about CRE and regional banks back to the past, remember that the crushing blow of the Great Depression was 31-33 with famous bank holiday coming in March of 1933 a full 3.5 years from the '29 crash. On the other hand, I remain confident that the feds will prevent a run on the bank like the 30s had. I could see us with 10 essentially national banks, but the system will be sustained.

 

To the grow, I actually think investment in passenger rail would be an excellent place to see growth. Capitalism requires creative destruction, the new opportunities and changing investments that widespread investment in the passenger rail system could kick start some local real estate markets, the manufacture of equipment including big industrial products like steel, and would probably shift the locales of investment in ways that could show growth. And investment in rail doesn't screw up everyday life like throwing a bunch of money at the highway/road system does.

My argument for another leg down is that there are a bunch of folks who have been laid off that are currently spending down their severance packages, unemployment insurance, and trying to live on credit cards (though I think there is less of this than in 01-02).

 

Just to highlight this, look at the AK Steel lockout in Middletown about 3 years ago.

 

The company locked the union out of the plant when the contract expired.  The lockout continued some 12 months, more or less. Eventually it was settled and the union workers returned.

 

I'm not sure what kind of assistance the workers got during the lockout.  I suspect there was some union 'strike fund' help, but probably not a lot.  A number of workers got other, (much) lower paying jobs to help pay the bills.  But in general, the workers lived off savings, selling toys, credit cards, and any house equity they had.

 

About 3 months after the lockout was settled and the workers were back at work drawing regular, only slightly reduced paychecks, my RE friend in Middletown reported that employee houses were coming on the market in droves.

 

I expressed surprise at this.  I expected the housed to come on the market during the lockout, but with regular paychecks coming in, I would expect mortgage payments to be regular. 

 

She said that employees had gone thru all their savings and got so far in debt to survive the lock-out, that they dug themselves so deep a hole that even with the return of paychecks, they just could not climb out of debt.

 

All this took place during the so-called "boom" years.  Imagine this scenario played out across the nation during a major recession.  Most new laid-off employees will get more severance/unemployment than the AK Steel workers got, but when it runs out, how much money can they raise in today's market by selling toys?  How much equity can they get from their houses/retirements?  How much savings do they have ? (probably a lot less than the AK Steel workers had living in such a low cost-of-living city and getting fat paychecks).  What kind of job can today's lay-offs get to hold them over until a good job comes?  How long until a good job comes?

To the grow, I actually think investment in passenger rail would be an excellent place to see growth.

 

Are you talking local rail (intra-city/urban) mass transit?  Or are you talking inter-city rail service (like an expanded, upgraded Amtrac) ?

I think both. It obviously requires a lot of gov't money which is in short supply, but inter-city rail can more effectively serve moderate distance traffic than the collapsing airline industry - new growth potential across the country there - and local rail would eventually shift the foci of development - TOD and all.

Spitzer: Federal Reserve is a Ponzi Scheme and an Inside Job

 

The former Governor of New York Eliot Spitzer and the former “Sheriff of Wall Street”, when he was Attorney-General, believes that the Federal Reserve is a “ponzi scheme” and an “inside job.”

 

In an interview on MSNBC’s Morning Meeting, Mr. Spitzer was discussing the Federal Reserve and Texas Republican Congressman Ron Paul’s HR 1207, which is a bill to audit the Federal Reserve. This legislation has received majority of support in the House of Representatives with 276 Congressional co-sponsors and 19 Senate co-sponsors.

 

Mr. Spitzer said in the interview, “The Federal Reserve has benefited for decades from the notion that it is quasi-autonomous, it’s supposed to be independent. Let me tell you a dirty secret: The Fed has done an absolutely disastrous job since [former Fed Chairman] Paul Volcker left. The reality is the Fed has blown it. Time and time again, they blew it. Bubble after bubble, they failed to understand what they were doing to the economy.”

 

The former Governor resigned in March 2008 due to a prostitution scandal in

which he paid $1,000 per hour with a New York City call girl.

 

...

 

http://www.digitaljournal.com/article/276533

Client 9 trying to slowly return to the spot light.