Real Estate/Credit Deflation 15: The Mother of All Margin Calls
The further we get into this developing quagmire, the more people (or their lenders) will find themselves forced to sell whatever they have to try to keep afloat. This includes everything one might consider to be an asset (yep, commodities too) as liquidity continues to dry up, loans become due or go into default, and lenders seize assets to sell for cash under less-than-ideal circumstances. The further our economy sinks -- led by the accelerating decline in real property values -- the bigger the fire sale will be, and Bear Stearns provides the blueprint/slash/foreshadowing for Americans near and far who edge ever closer to owing far more than they're worth: "I know what your assets were worth 14 months ago," the creditors will say, "but they're not worth that anymore so we have no choice but to sell them for whatever we can get". In other words, beware the coming "Mother of All Margin Calls."
As Gary North penned on www.LewRockwell.com,
Stock market optimists who have lost money all year want to believe that
the FED can achieve the following with a new program:
1. Overcome the liquidity crisis
2. Overcome the solvency crisis
3. Overcome sinking residential real estate markets
4. Avoid the imminent fall in the commercial real estate markets
5. Restore bankers' confidence in other bankers
6. Restore confidence in the credit rating services' credit rating services
7. Reverse the dollar's slide
8. Reverse the falling stock market
And then some.
Fittingly, I'm heading over to Japan for a week (home of the U.S. deflationary depression's older, much tinier sister) but one of our readers suggested I put together a list of recommended writers and/or websites to track as the post-triple-bubble economy continues to unravel. After giving it some serious thought, the list below, in my opinion, does just that. If time allows, bookmark and read these offerings each week and you'll fill in some of the numerous cracks my columns exhibit. Meanwhile, you'll know what's going on as we enter the top of the second inning in the real estate/credit/asset deflation game. Here goes:
Mike Whitney's stuff is up there with oxygen in terms of importance, and at this point he's an every week must-read. Some day I hope to grow up to be just like Mike: http://www.marketoracle.co.uk/UserInfo-Mike_Whitney.html
Mike "Mish" Shedlock's Global Economic Trend Analysis. Ditto for Mish, who approaches it from a slightly different angle. His reader comments can be interesting, too: http://globaleconomicanalysis.blogspot.com/
Doug Noland's Credit Bubble Bulletin is a Friday night must-read, particularly the wrap-up essays in his weekly bulletin. If you're a nerd like me, you'll read the weekly bubble roll call, too, before the essay: http://www.safehaven.com/archivedetails.cfm?id=2
Paul Lamont, Lamont Trading Advisors. Paul features an ongoing timeline; kind of a periodically updated "You are Here" roadmap as the post-triple-bubble economy unfolds: http://www.safehaven.com/archivedetails.cfm?id=299
Peter Schiff writes a weekly column, too, and he's worth a look. I don't agree with his prognosis (hyperinflation first) but I still find his takes to be important: http://www.safehaven.com/archivedetails.cfm?id=162
M.A. Nystrom ("Bull Not Bull") rounds out my list of writers, and his site features other relevant articles, as well. Make sure you scour the site carefully enough to find his essays: http://www.depression2.tv/d2/
Ponder This..., a Forum for Independent Thought (our humble site), especially our "Six Packs" of articles and commentary: www.ponderthis.net, and some guy named Moyer's archive: http://www.safehaven.com/archivedetails.cfm?id=186
Also, Bull and Bear Wise's continually updated index of economic and market indicators for you statistical types: http://www.bullandbearwise.com/
Talk to you guys when I get back.