This Friday was a black Friday for the employment news. 48 states recorded higher rate. Six states broke the previous records. Only luckier ones were Nebraska and Vermont. California and Nevada went up the hill with 11% or more, highest in 25 years. The salt on the wounds is the prediction by the Chairman Ben Bernanke that the improved economy will not help. The companies would not rush to hire immediately. How many of us know the unemployment picture is not the whole truth? I remember the government during Regan era changed the way it calculates the unemployment rate just to look it good for them.It does not count those who gave up the job search after six months!!! My friends, We do not know the bottom. If you think you are through with these numbers consider the following.
Commercial Mortgages worth $ 171 Billion will be due this year. Many will end up in foreclosures. Why? First, most properties have lost 20-25% in values. There fore it will not meet loan to value ratio. Second, Most lenders have lowered their loan to value ratio that throws off even good performing properties out of box. Add to that increased liquidity ratio, stricter credit requirements and financial worthiness of the borrowers.Gone are the days of 80-90% LTV financing. Hotels are expected to run into rough weather after this summer for a period of 2 1/2 years. There is lots of smart-vulture money sitting on sidelines waiting for the food.
Lastly, There is an estimated debt of one trillion dollars in credit cards. With unemployment ratio over 10%, expect 25-30% of unsecured debt to go bad. That is $ 250 billions.Banks have already started to cancel credit cards or limit the credit lines. Another bail outs for the Bankers?
What will be the spill over effects of these cyclones on the foreclosures? The temporary moratoriums imposed on the foreclosures are about expire in few weeks.
The greatest transfer of the wealth is about to take place in 2010. Are ready to defend your turf or take advantage?
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