Let us turn back to the big picture. This from the Financial Times…
“‘The mortgage black hole is, I think, worse than anyone saw,’ said Tony James, president of Blackstone, the big private equity firm. ‘Deeper, darker, scarier. [The banks] are now looking at new reserves and my sense…is they don’t have a clear picture of how this will play out and confidence is low.’”
It looks to us as if there has been a big sea change in the world’s markets. Yesterday brought more evidence…
Housing prices in Southern California have now fallen back far enough to erase the last two and a half years worth of gains, says the LA Times.
In Atlanta, 5,244 houses are going on the auction block next month…already, 53,365 houses have been auctioned this year…a total that is rising at about 36% per year.
And the Chicago Tribune reports on a study by the Center for Responsible Lending that predicts a ‘foreclosure hit’ equal to US$223 billion.
A hundred billion here…a hundred billion there…pretty soon you’re talking real money.
Americans are the world’s biggest spenders – with a 20% share of total global consumption. They are the world’s biggest users of oil. They are also the most indebted people in the world. And now, Americans are running out of money. Their houses are sinking in value. Their wages are stagnant or falling. Their dollar is so depressed it can’t get out of bed in the morning.
Again, Wednesday, the buck took a beating. When is it going to get a break?
On Tuesday, it looked like a correction had begun…gold and oil were going down…stocks and the dollar were going up. But then, Wednesday came. The Dow went down 93 points. Oil rose nearly US$3. And gold added more than US$15…putting it back over US$800 .
Not much of a correction, in our opinion…not enough of a correction. We would expect a bit more.
The Daily Reckoning Australia