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United States Heading towards a Depression?

Discussion in 'Politics & Religion' started by decoyjames, Dec 27, 2007.

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  1. earlpearl

    earlpearl Well-Known Member

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    #2961
    A few notes on the economics of big financial businesses:

    This article describes the evolving woes of theNew York City real estate market and the financial firms that inhabit it

    The article describes a 1 million square foot office building that now has 3 big financial firms each offering about 100,000 square feet for sublease.

    It appears that each of the firms leased this space toward the height of the real estate market in NYC, each paying above $100/square foot of space, possibly well above that for the upper floors.

    For the 100,000 square feet, that is $10 million/year. They are all going to take big baths on that space. None will get out for free. If they ultimately sublease they'll lose big time. The leases are all for probably 10 years or longer. That is a lot of corporate money, or financial institution money down the drain.
    SEMrush
    Met Life leased 400,000 feet. They decided to move from $30/foot space to this $100+/foot space. That was a corporate decision to increase "overhead" expenses by probably somewhere around $28 million/year. Now it will cost them more, since they'll take a financial bath on trying to sublease the space they are giving up.

    It brings to mind the $400,000+ junkets by AIG after the bailout...and they still need more help.

    I don't know anything about the other two firms.

    As far as bailouts, I don't have a qualm about trying to save the economy, shore up the financial system so it doesn't melt down.

    What I would do is apply serious cost cutting into any company that gets help. I don't know all about the rules, red tape etc. but I do know these companies can cut expenses in the millions and ten millions, or if big enough hundred of millions if not billions if someone puts their minds to it.

    Meanwhile, the main thrust of the article was about the building itself.

    If lots of businesses bail in Manhatten and elsewhere, its going to leave a lot of empty space and a series of bankrupt buildings around the country.

    Meanwhile I do know there are real estate "vulture funds" ready to buy up at deep discounted prices.

    Just another little picture of the evolving view of the tough economic times.
     
    earlpearl, Nov 12, 2008 IP
    SEMrush
  2. giorgioarmani

    giorgioarmani Well-Known Member

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    #2962
    You'd be surprised to know how little mankind learns from past mistakes

    Chances are slim?

    http://www.google.com/search?hl=en&oi=definer&q=define:great+depression&defl=en

    A depression is all about economic collapse and high unemployment. How are current chances slim of that occurring? Just look at the billions of dollars lost from companies around the US (and the globe!)

    Those posted losses will effectively result in people laid off, which will in turn mean less spending - in turn affecting the economy...
     
    giorgioarmani, Nov 12, 2008 IP
  3. smatts9

    smatts9 Active Member

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    #2963
    Current chances? Thanks for quoting me from a year ago. What were you thinking a year ago?

    A lot has happened since then, like massive government intervention which makes everything worse.

    Instead of looking backwards why don't you make some future predictions, there is no money to be made in the past. Amuse me.
     
    smatts9, Nov 12, 2008 IP
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  4. giorgioarmani

    giorgioarmani Well-Known Member

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    #2964
    Didn't realise you posted that a year ago... My bad.

    As for future predictions... Well one thing is for sure, the facts today are pretty clear cut. If on top of that you add on 50% (the media never report the whole truth, politicians always downplay crisis, etc.), then in that case the future doesn't look good. The fact that the US and most countries around the globe are hugely interlinked (economically, politically) anything could happen - a depression is definitely not far fetched in current times.
     
    giorgioarmani, Nov 12, 2008 IP
  5. bogart

    bogart Notable Member

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    #2965
    Great article. A lot of the properties that I've looked at don't meet The 1% rule where you try to get 1 percent of the purchase price per month in rent.

    Most sellers can't reduce prices to market levels due to the fact that they owe the bank.

    I believe its going to take another year for the forclosure process to correct the market in the New York metro.

    Things are getting tough.

    Foreclosures spike 25 per cent year-on-year. New report reveals 84,000 properties were repossessed in October. More than 279,500 U.S. homes received at least one foreclosure-related notice in October, an increase of 5 percent over September, according to RealtyTrac Inc.

    http://www.msnbc.msn.com/id/27687154

    The Labor Department on Thursday reported that jobless claims last week increased by 32,000 to a seasonally adjusted 516,000. That nearly matched the 517,000 claims reported seven years ago, and is the second-highest total since 1992.

    http://news.yahoo.com/s/ap/20081113/ap_on_bi_go_ec_fi/jobless_claims
     
    bogart, Nov 13, 2008 IP
  6. Firegirl

    Firegirl Peon

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    #2966
    I saw a demotivational poster yesterday that summed up this whole mess:

    Government - If you think the problems we create are bad, just wait until you see our solutions.

    Man, I'll have to get that poster....
     
    Firegirl, Nov 13, 2008 IP
  7. earlpearl

    earlpearl Well-Known Member

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    #2967
    Bogart: I keep suggesting that you focus on the disposition officers. It ain't their properties. Their job is to move the problems off their desks.

    Be their best buds. The interesting thing I got out of that article is that the buyers referenced are sweeping up properties in devastated regions. Its not that bad in the NY region yet. In the DC area the big buying surge in December on houses was in one of the areas that took a residential bath. Nothing much was happening elsewhere.

    The folks w/ problem loans can't sell as low as the institutions.

    @Firegirl:

    As bad as govt can be they aren't the only ones that f*ck up. That is why I posted above with regard to the NYC commercial real estate and the mistakes that MetLife made.

    We don't normally see the mistakes that corporations and businesses make. We do see them in times like this where businesses are going under.

    Lehman Brothers bet wrong....and bingo they went under. Corporations/businesses make mistakes all the time. I calculated MetLife's mistake at MINIMUM of $28 million/year for at least 10 years. I'm sure its much bigger. Its tiny for them; they are roughly earning $9 billion/quarter and spending $8 billion.

    But the other 2 companies referenced in the link: IStar Financial and Centerline are also on the line for something in excess of $10 million/year in rent....and they gotta be lots smaller. Its the kind of thing that can help take them down.

    We are all capable of making huge costly mistakes. Its not just govt.
     
    earlpearl, Nov 13, 2008 IP
  8. earlpearl

    earlpearl Well-Known Member

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    #2968
    Meanwhile, to speak out of both sides of my mouth....:rolleyes:...and to try and track what the US govt is doing.....

    Paulson is reversing course and saying the US won't buy troubled real estate assets from the institutions. Wham....he is totally reversing direction and wants to put money toward expanding consumer credit.

    Some $200 + billion has been spent. The banks are not facing meltdown, for the time being...but they aren't lending.

    Consumer lending is tough. While auto sales are definitely down, and credit needs are far higher for auto loans....I heard of a regional bank that recently rejected over 60% of auto loan applications.

    Its no wonder Ford and GM are going down.:rolleyes:

    Meanwhile I noticed this thread is getting close to one year old. I would never have believed condtions could get so bad so fast.

    Meanwile.....Walmart had excellent profits last quarter.

    It pays to be the low cost operator and the low cost store.
     
    earlpearl, Nov 13, 2008 IP
  9. smatts9

    smatts9 Active Member

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    #2969
    Goldman and Morgan are now commercial banks, there is not a single investment bank left.

    C and GM continue to not disappoint.
     
    smatts9, Nov 13, 2008 IP
  10. korr

    korr Peon

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    #2970
    Some good calls there!

    All this reminiscing got me looking back into the older posts, too. I see I spent a lot of time arguing that deflation was inevitable which must have sounded really crazy when oil was on its way from $80-$140.

    Well, we get some deflation now!

    Then again, the big bailout won't really start to affect things for another five or six months. Could be a year to see the full development of the bailout money injection but I really wonder if the U.S. dollar can handle the government's debt auctions much longer...

    There's going to have to be a huge round over a trillion dollars, and by 2011 we'll have another massive wave of mortgage resets. Ugly, ugly, ugly.

    I'm sticking to my "strong buy" rating on Canned Food, Guns, and Bullets.
     
    korr, Nov 13, 2008 IP
  11. rochow

    rochow Notable Member

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    #2971
    I sure hope so. Last thing I want is for the exchange rate to move... I like it where it is right now, when converting to AUD I get 40%-50% more, which also allows me to compete on projects that used to be too cheap back when I only got 10% more, so I not only make more money, I can get more projects and make even more money in that respect :)
     
    rochow, Nov 13, 2008 IP
  12. bogart

    bogart Notable Member

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    #2972
    That's a great tip. Thanks.

    The article you posted had a great tip on that rent should be 1% of the selling price of a home.

    If you can't generate income than all you have is speculation.

    Something like 30% of all homes are in negative equity. The only way for some prices to correct are the foreclosure process. The homeowners are locked into selling prices that are in some cases are a few 100k above the market.

    The job situation is really tough. We are going to see a lot more job losses in the coming months.

    George Bush has said today that we face a greater depression than the Great Depression.
     
    bogart, Nov 15, 2008 IP
  13. LogicFlux

    LogicFlux Peon

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    #2973
    http://www.upi.com/Top_News/2008/11/15/Bush_credits_governments_financial_moves/UPI-19501226770503/
     
    LogicFlux, Nov 15, 2008 IP
  14. bogart

    bogart Notable Member

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    #2974
    bogart, Nov 15, 2008 IP
  15. domainer_10

    domainer_10 Peon

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    #2975
    In other words from that quote he is saying without intervention it would have been WORSE than the great depression. So does that mean WITH intervention it only means it is EQUAL or only a slight less as bad as the depression? That almost seems to be what he is saying.


    According to roubini who is pretty smart and I believe used to be a tresury secretary or something, he calculates that the negative GDP cumulative will be worse than any recession since the great depression, even worse than the 57-58 depression, which had the worst cumulative negative in GDP over its span.
     
    domainer_10, Nov 15, 2008 IP
  16. LogicFlux

    LogicFlux Peon

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    #2976
    Inflation or the other stuff? Most experts seem to agree that inflation is not something to be worried about right now. What's more important now is curtailing a massive deflation and then inflationary consequences will just have to be dealt with later. Maybe Volcker will still be around to take care of it for us again. :)
     
    LogicFlux, Nov 15, 2008 IP
  17. domainer_10

    domainer_10 Peon

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    #2977
    Id rather have deflation than inflation. At least than Ill be able to afford buying some things since I got a bit of money saved in the bank account, unlike many people who are in debt. If your in debt or stock market or real estate than deflation is bad. If you got money saved in your bank account for a rainy day than deflation is good especially for the middle class and poor. Gas prices are going down due to deflation forces and gas is a big part of what people spend their income on in the lower and middle class. That is unlike the rich who get hurt in deflation because unlike the poor, their money is in the stock market and real estate and things like gas and food represent only a small portion of their spending.

    Deflation is great for the poor and middle class. Horrible for the rich. Inflation is great for the rich and bad for the poor, which is why the government tries to hard to ward off deflation cause they are a bunch of fat cat idiots looking out for the rich ultimately.
     
    domainer_10, Nov 15, 2008 IP
  18. LogicFlux

    LogicFlux Peon

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    #2978
    Deflation is good for savers. Americans aren't savers so it's hard to say it's good for most regular Americans. But hopefully it will teach some a lesson. In a way a good dose of deflation may very well do us a lot of good in the long run.
     
    LogicFlux, Nov 15, 2008 IP
  19. domainer_10

    domainer_10 Peon

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    #2979

    Your right. Im correcting my post right now.
     
    domainer_10, Nov 15, 2008 IP
  20. bogart

    bogart Notable Member

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    #2980
    Inflation will hit the middle class hard unless you have hard assets.

    A house in bought in 1977 for $50,000 increased in value to $200,000 by 1987.

    Home prices will probably come down another 20% in 2009. I was thinking that we will bottom at 2003 prices. But now I believe that we may see prices bottom at 2001 levels. 30% of people that bought homes 6 months ago are already in negative equity.

    The New York metro is still around 2005 in prices. Not really a good deal like you will find in other areas.
     
    bogart, Nov 15, 2008 IP
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