It appears to me that I am watching the chasm that is between the economy and our stock “markets” growing exponentially. While the stock indexes continue their unlikely rise the economy continues to crater at an increasing speed. While the number-crunchers do their best to put lipstick on the economic pig the headlines certainly contradict the narrative put out by those “in charge”. It appears to me that all the numbers put out and then regurgitated by the compliant mainstream media are done to keep the majority of us unaware of how precarious our financial and economic position really is.
Day after day I hear “experts” crowing about how strong our economy is. If that is truly the case, why is it that we are seeing massive layoffs, bankruptcies exploding higher and defaults growing?
I am writing this on July 19th. Just today I read on Zerohedge about two major defaults in commercial real estate. Starwood Capital did not refinance or pay off a $212.5 million mortgage on an office tower just north of Atlanta. There was a 30-floor office tower in Baltimore that was sold for 63% LESS than it was purchased for in 2015. Just a couple of weeks ago I read about Brookfield Asset Management, Ltd. And Park Hotels and Resorts both walking away from properties in San Francisco. This should come as no surprise as vacancy rates are up- meaning less rental income and interest rates are up- meaning higher carrying costs. Since many commercial real estate loans are non-recourse, it is easy for anyone underwater to just walk away- leaving the bank holding the bag. As Bloomberg reported “Most CMBS financing is non-recourse, which means owners can walk away from properties without exposing themselves to further financial damages”.
Update on 7/20/2023 The Baltimore Business Journal reports that another building at 1 E Pratt St just sold for $25 million. It was purchased in March 2018 for $80.1 million. OUCH!
Yellow, one of the largest and most important trucking companies, may be only weeks away from bankruptcy. The union representing their employees are threatening a strike over a $50 million contribution to the health and welfare and pension funds for June and July that has not been made. (Todd Maiden of Freightwaves) In an email Deutsche Bank analyst Amit Mehrotra stated “Even if these payments are cured, it would significantly reduce the company’s cash balance. This is perhaps the most tangible example of why we think it’s more likely than not that YELL will go out of business, as we’ve said before”.
Why is this all so important? Because debts and deficits are in, what I believe to be, a blow-off top. What this means is that debt is growing exponentially and if it were to stop the entire debt-based system could be at risk. The reason I believe that this is coming at us like a freight train is that while the debts are growing exponentially the ASSETS that are securing that debt are starting to crumble. That means that the collateral (ASSET that secures that debt in the event of default) is falling in value- making the value of the promise to repay that much weaker.
We are seeing in real time what happens when the value of a property falls and you owe more than it is worth what any rational person or entity would do- WALK AWAY. It happens with real estate but also happens with auto loans and any other debt that is higher than the asset that the loan is being utilized for. You can conjure up UNLIMITED amounts of cash that produces NOTHING but the world has finite resources. Many have said to me “What makes you think they can’t just keep doing this (“printing money”) forever?” You are seeing the answer play out now. Prices have become so high that homelessness is exploding, crime is rising and even people with high incomes are struggling with bills.
You are seeing major retailers like Bed Bath and Beyond, Buy Buy Baby, Christmas Tree Shops, and MANY others close forever. While on-line shopping has not been a positive for them it is not the main reason why they are struggling. It is that consumers are having to pay more for the necessities of life and are spending less on goods that are not necessities.
I can’t say it enough. If you are in debt- pay it off if it is at all possible. Anyone who has a $500,000.00 home with no mortgage won’t care if the price collapses to $200,000.00. They live there. If that same person is carrying a $300,000.00 mortgage that is getting hard to service the paradigm changes. The biggest problem then becomes where do I go from here.
I really hope that, as I write these articles, it becomes apparent that having ASSETS that have real VALUE rather than debt- based assets going forward makes a lot of sense. Whether those assets are real estate, art, precious metals, energy holdings, food, water or companies that produce necessities I believe it is imperative to not place all of your trust in assets that are debt-based and are contingent upon someone else’s promise to repay.
Not only do the debt numbers imply that there is NO WAY to pay off our debts with our currency retaining anywhere near its perceived value but in looking at the moral character of our country and most of the developed world I am FAR more comfortable owning an asset than counting on others promises.
I often say that we have to watch the banks and central banks. It is important that we watch what they do and not what they say. They say “gold is a barbarous relic” while buying in record amounts. There have been many recorded instances where major banks have been caught promoting certain stocks that they were actually selling at the time.
Manipulation has been around since the beginning of time but right now the level of deceit has never been so high and those carrying it out have never been so brazen- almost like they know that nobody will be held accountable outside of some fines and that it is just a cost of doing business. Unfortunately for us the rot at the top will eventually kill the host (me and you) and the system will have to be reset. That day, I believe, is near.
Be Prepared!
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