Remember when policymakers at the Federal Reserve told us in 2007 and 2008 that the credit problems were "contained" to the subprime mortgage sector? Or when then-Treasury Secretary Henry Paulson spouted the same line? Oops.
We've already established how those guys were dead wrong about home loans. Indeed, the delinquency rate on U.S. mortgages surged to a record 9.12 percent in the first quarter of this year. Late payments rose in ALL categories, including prime fixed-rate loans, the absolute "cream of the crop" in the mortgage world.
Now, it's clear they were dead wrong about the entire credit market! Credit losses and delinquencies are rising anywhere and everywhere, and I've got the numbers to prove it.
In the first quarter of this year, the credit card delinquency rate shot up to 6.6 percent ... a record high. RVs ... HELOCs ... Personal Loans — Borrowers Can't Pay Back Anything! Get a load of these hot-off-the-press figures from the American Bankers Association (ABA). In the first quarter of 2009 ...
•Home equity loan delinquencies increased from 3.03 percent in the fourth quarter of 2008 to 3.52 percent.
•Home equity line of credit delinquencies rose from 1.46 percent to 1.89 percent.
•Credit card delinquencies rose from 5.52 percent to 6.6 percent (measured on a "percentage of dollars outstanding" basis).
•Direct auto loan delinquencies increased from 2.03 percent to 3.01 percent.
•RV loan delinquencies increased from 1.38 percent to 1.52 percent.
•Mobile home loan delinquencies increased from 2.96 percent to 3.70 percent.
•Personal loan delinquencies increased from 2.88 percent to 3.47 percent.
The home equity loan delinquency rate is a record high. The home equity line of credit rate is a record high. The credit card delinquency rate is a record high. And so is the level of the aggregate consumer credit delinquency index that the ABA has been putting together since 1974!
What about CORPORATE credit quality? Any "green shoots" there? Nope.
-The default rate on junk bonds has almost quadrupled to 9.5 percent from 2.4 percent a year earlier, according to Fitch Ratings.
-A University of California economist just predicted that a whopping 20 percent of hotel development loans made in the U.S. may default over the next year and a half.
-Standard & Poor's just said it's planning to slash ratings on more than $235 billion worth of commercial mortgage-backed-securities. Loose underwriting, falling asset prices, slumping rents and rising vacancy rates are wreaking havoc on the entire commercial real estate sector.
What's the Problem? We Had the Biggest Credit Bubble of All Time, That's What!
Slumping rents and rising vacancy rates are wreaking havoc on the entire commercial real estate sector. Americans simply borrowed and spent way too much during the halcyon days of the early-to-mid 2000s. They were counting on ever-rising home values to bail them out from high-risk loans.
The lending industry actively egged them on, as did policymakers at the Fed, who kept interest rates too low for too long. The insanity spread to commercial real estate ... to corporate buyout loans ... to virtually every corner of the credit market!
Now, we're all dealing with the hugely negative consequences of this massive credit bubble. What a shame! I can only hope that borrowers, lenders, policymakers, and regulators behave more responsibly in the future.
In the meantime, I continue to suggest the following: Stay away from sectors vulnerable to deteriorating credit quality, tighter lending standards, falling home values, and falling commercial property prices. That includes banks, insurers, home builders, and REITs.
And what about all the talk out of Washington on how these companies are just fine, how the economy is recovering strongly, and how happy times are here again?
Plug your ears and lash yourself to the mast! These guys didn't get the mortgage crisis right. They didn't get the credit crisis right. And they sure as blazes aren't getting the economy right, either. Consider: Just a few weeks ago, politicians on Capitol Hill and policymakers at the Federal Reserve were tripping all over themselves to discuss the "green shoots" in the economy. Now, they're openly admitting they screwed it up.
Joe Biden spilled the beans when he announced that the administration had "misread the economy." Vice President Joe Biden said last weekend that the administration "misread the economy." Their hopelessly optimistic projection that unemployment would peak at 8 percent — has been thrown in the trash. The unemployment rate has instead climbed to 9.5 percent ... and double-digit levels are right around the corner.
Heck, you now have key officials, like Obama adviser Laura Tyson and House Democratic leader Steny Hoyer, talking about the possibility of a SECOND economic stimulus package. That's a tacit admission that the $787-billion package enacted in February is failing to get the job done.
Again, this should come as no surprise to you. Unlike the ivory tower economists in Washington, we live in the real world. We know how bad things are, and how serious the risk is that they'll get worse — MUCH worse. So we've been warning you constantly to avoid risk, and batten down the hatches for a worsening economic storm.
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
Showing posts with label real estate investing. Show all posts
Showing posts with label real estate investing. Show all posts
Friday, July 10, 2009
Wednesday, June 10, 2009
What the Dramatic Turn in the U.S. Saving Rate Could Mean to You
During the past few weeks of exciting "green shoot" news, a very important economic statistic has been ignored: The U.S. saving rate.
U.S. citizens have been saving less and less since the early 1980s. And the saving rate even turned negative during the height of the real estate bubble. But in April, the personal saving rate in the U.S. surged to 5.7 percent, a 15-year high. That represents a massive trend change and has important consequences for the future. But before I address them, I want to remind you of ...
The Formula for Prosperity
Let's start with an example of a very basic economic thought ...
By following the simple formula of "save and invest" over long periods, individuals —and nations — grow wealthy.
You can use the results of working at your job in two distinct ways: Either you consume, or you save. If you consume all the results of your work, the whole story ends immediately, no wealth is generated.
However, if you sock away some money, the savings are invested — either directly or indirectly by using an agent such as a bank. In other words, as long as you don't hide your savings in your mattress, the money is being put to work someplace else.
The goal of investing is to have more money in the future than you have now, so that you are able to consume more in the future than you can in the present. This is the very definition of wealth generation. And by following the simple formula of "save and invest" over long periods, even over generations, individuals — and nations — grow wealthy.
Bottom line: Saving is the precondition to wealth generation. There is no way to short cut or fade this economic law. And this formula does not work backwards, meaning that it is impossible to consume or to borrow one's way to prosperity.
Wealth Personal Saving Rate Plunges ...
During the second half of the 1990s, the U.S. saving rate started breaking down. That's because Alan Greenspan's stock market bubble kicked in, and people had the illusion of wealth generation without the need to continue saving.
In 2001 the saving rate hit the zero mark for the first time, and then got even worse! Reason: Greenspan's monetary policy started the biggest real estate bubble of all time, and people were further lured away from the concept of saving. They took on debt like never before. They relied upon rising stock and real estate prices to take care of their future prosperity.
To make matters worse, this absurd idea was massively promoted by the central bankers who never called the bubble for what it was. They even tried to rationalize it instead of issuing appropriate warnings.
The rest is history: The bubble burst and together with it the dreams of millions of people. And the worst financial and economic crisis since the 1930s started to evolve.
Thanks to the Current Crisis, It Seems as if Americans Have Finally Come to Their Senses!
Over the past few months the situation has changed dramatically. The wealth illusion, which was fostered by the Fed-induced dual bubbles, is finally gone.
The Baby Boomer Generation, some 78 million strong, has realized that planning on rising stock and real estate prices to meet their future needs has led to huge losses.
This wealth destruction has unveiled a massive gap in retirement provisions. All of a sudden many Baby Boomers have started to worry about how to finance their old age. They've suddenly realized that consumption and indebtedness are not the way to prosperity. Consequently, they've started to cut back spending and save more.
In fact, shortly after the recession started in late 2007, the personal saving rate surged from zero to 5 percent. A short pullback followed. But then what looks like a new and healthy uptrend developed.
The U.S., world capitol of the "buy now, pay later" attitude, is undergoing a huge shift. Saving is making a real comeback.
This change in attitude is in all likelihood just the beginning of a long-term trend that will be with us for many years to come. In fact, I expect a lasting return to the country's former saving rate of roughly 10 percent.
The Consequences, Both Good and Bad ...
To close the gap between their current assets and their retirement needs, Baby Boomers will have to save more and spend less. Saving is the precondition for a better future. And finally Americans are abandoning the track of more and more indebtedness, which unquestionably leads to decline and poverty.
So long term, a rising saving rate is very positive. It's laying the foundation for future growth and prosperity. In the shorter term though, this trend has rather unpleasant implications, particularly in the area of consumer demand for goods and services.
As I already mentioned, Baby Boomers are now facing retirement and don't have much time left to close the gap between their current assets and their retirement needs. So they will have to cut back their spending, which does not bode well for the economy or the stock market.
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
U.S. citizens have been saving less and less since the early 1980s. And the saving rate even turned negative during the height of the real estate bubble. But in April, the personal saving rate in the U.S. surged to 5.7 percent, a 15-year high. That represents a massive trend change and has important consequences for the future. But before I address them, I want to remind you of ...
The Formula for Prosperity
Let's start with an example of a very basic economic thought ...
By following the simple formula of "save and invest" over long periods, individuals —and nations — grow wealthy.
You can use the results of working at your job in two distinct ways: Either you consume, or you save. If you consume all the results of your work, the whole story ends immediately, no wealth is generated.
However, if you sock away some money, the savings are invested — either directly or indirectly by using an agent such as a bank. In other words, as long as you don't hide your savings in your mattress, the money is being put to work someplace else.
The goal of investing is to have more money in the future than you have now, so that you are able to consume more in the future than you can in the present. This is the very definition of wealth generation. And by following the simple formula of "save and invest" over long periods, even over generations, individuals — and nations — grow wealthy.
Bottom line: Saving is the precondition to wealth generation. There is no way to short cut or fade this economic law. And this formula does not work backwards, meaning that it is impossible to consume or to borrow one's way to prosperity.
Wealth Personal Saving Rate Plunges ...
During the second half of the 1990s, the U.S. saving rate started breaking down. That's because Alan Greenspan's stock market bubble kicked in, and people had the illusion of wealth generation without the need to continue saving.
In 2001 the saving rate hit the zero mark for the first time, and then got even worse! Reason: Greenspan's monetary policy started the biggest real estate bubble of all time, and people were further lured away from the concept of saving. They took on debt like never before. They relied upon rising stock and real estate prices to take care of their future prosperity.
To make matters worse, this absurd idea was massively promoted by the central bankers who never called the bubble for what it was. They even tried to rationalize it instead of issuing appropriate warnings.
The rest is history: The bubble burst and together with it the dreams of millions of people. And the worst financial and economic crisis since the 1930s started to evolve.
Thanks to the Current Crisis, It Seems as if Americans Have Finally Come to Their Senses!
Over the past few months the situation has changed dramatically. The wealth illusion, which was fostered by the Fed-induced dual bubbles, is finally gone.
The Baby Boomer Generation, some 78 million strong, has realized that planning on rising stock and real estate prices to meet their future needs has led to huge losses.
This wealth destruction has unveiled a massive gap in retirement provisions. All of a sudden many Baby Boomers have started to worry about how to finance their old age. They've suddenly realized that consumption and indebtedness are not the way to prosperity. Consequently, they've started to cut back spending and save more.
In fact, shortly after the recession started in late 2007, the personal saving rate surged from zero to 5 percent. A short pullback followed. But then what looks like a new and healthy uptrend developed.
The U.S., world capitol of the "buy now, pay later" attitude, is undergoing a huge shift. Saving is making a real comeback.
This change in attitude is in all likelihood just the beginning of a long-term trend that will be with us for many years to come. In fact, I expect a lasting return to the country's former saving rate of roughly 10 percent.
The Consequences, Both Good and Bad ...
To close the gap between their current assets and their retirement needs, Baby Boomers will have to save more and spend less. Saving is the precondition for a better future. And finally Americans are abandoning the track of more and more indebtedness, which unquestionably leads to decline and poverty.
So long term, a rising saving rate is very positive. It's laying the foundation for future growth and prosperity. In the shorter term though, this trend has rather unpleasant implications, particularly in the area of consumer demand for goods and services.
As I already mentioned, Baby Boomers are now facing retirement and don't have much time left to close the gap between their current assets and their retirement needs. So they will have to cut back their spending, which does not bode well for the economy or the stock market.
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.
Thursday, May 14, 2009
Home Foreclosures are Souring
Just out...
Home foreclosures are soaring: RealtyTrac reported that home foreclosure filings skyrocketed 32 percent to a new all-time record high in April, making the March-April period the worst two-month surge in foreclosures ever with a record 682,000 homeowners receiving notices.
And as if that news isn’t disturbing enough, they’re also warning that the greatest surge in foreclosures of this crisis is still ahead.
Conclusion: The housing bust that lit the fuse on this economic crisis is nowhere near ending.
Home foreclosures are soaring: RealtyTrac reported that home foreclosure filings skyrocketed 32 percent to a new all-time record high in April, making the March-April period the worst two-month surge in foreclosures ever with a record 682,000 homeowners receiving notices.
And as if that news isn’t disturbing enough, they’re also warning that the greatest surge in foreclosures of this crisis is still ahead.
Conclusion: The housing bust that lit the fuse on this economic crisis is nowhere near ending.
Thursday, January 1, 2004
Welcome to PropertyVestors
Welcome to PropertyVestors Blog. For those of you that do not know me, my name is Sarah Barry and I am the Founder of PropertyVestors.com.
PropertyVestors, is a successful real estate investment group that offers access to three smart real estate strategies. We help you achieve double- to triple-digit returns on your real estate investments.
We pride ourselves on education and buying power and our foundation is based on four important components including:
1. Network
2. Analysis and Information
3. Diversification
4. Ease of Engagement
You'll learn much more about these four components as we get to know one another better. Start off by signing up for our official newsletter, "InvestingSherpa" and receive our 25 page eBook, "Capitalizing on Real Estate in Today's Economy". Once you have an opportunity to read our eBook, register for a free webinar before making a decision of becoming a Premier Member to get the inside scoop on all that we do at PropertyVestors.
We work extremely hard identifying the best deals around the nation and are in the process of expanding internationally in countries such as Canada, Ireland, Germany, Holland, Norway, Denmark and now Australia. We are quite excited as you can imagine. So keep us in mind when you think of real estate investing, sign up for the free newsletter and see where it takes you. We do hope that if you become interested in making your first investment or your 100th, you'll think of us and become a Premier Member at http://www.PropertyVestors.com/.
In the meantime, I look forward to your feedback and hope you can grow our group.
To your success,
Sarah Barry
Founder, PropertyVestors
Smart Strategies for Real Estate Success
invest@propertyvestors.com
1-877-90 BUYER
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