Financial Crisis: Next Shoe to Drop

[Mike 03]

Some people have suggested credit card defaults would be the next shoe. I agree that credit card defaults are important and will arrive fairly soon, but my second fear all along as been commercial real-estate mortgages. This article is from CNN:


No. 2 mall operator warns of bankruptcy
General Growth Properties blames weak retail sales and a credit market freeze



http://money.cnn.com/2008/11/11/news/companies/general_growth/?postversion=2008111115

This is why I honestly believe this situation is going to get much worse before it gets better. And there are more shoes than even CC and CREM to drop. This will take time.

[mrreowwr_kittty]

1. They're both going to drop

People will have less credit, which will lead to less spending, which will exacerbate the problems with commercial real estate.

[pscot]

2. Retail is way overbuilt

Has been for years. Time to turn some of these malls into condos.

[demnan]

4. Too many condos

not enough parks

[FarCenter]

6. The mall owners have spent too much on architecture and amenities

Which raises their costs and will result in their not being able to compete with the big box stores and online retailers during the depression.

[Warpy]

3. They'll both drop, but the next shoe will be

the jumbo and Alt-A mortgages that were issued in the waning days of the pump and dump housing market, in 2006. They're going to set throughout next year, peaking in midsummer.

The situation will get worse before it gets better. However, think of this as 1929. We won't have to wait four more years to get a Democrat in office and turn this mess around.

[SoCalDem]

5. A BRAND NEW Circuit City opened here two weeks ago, and

and now has a Bankruptcy sale banner plastered on the front windows..right alongside the "Grand Opening" pennants & signs..

Another Circuit Cirty moved to a new location and left a big building sitting empty...right next to the empty Staples building (also moved), and across the street from Mervyns (going out of business sale in progress)..and the only grocery store in that center, Ralphs, is also closing..

That whole "shopping center" is or soon will be D E A D ..and nothing but empty buildings left behind, for MY TAX DOLLARS to be wasted on, via security issues that our police will have to address...

[FarCenter]

7. Issuers are probably charging off well over 7 percent of credit card receivables annually

From http://biz.yahoo.com/ap/081017/credit_cards_moody_s.html

"The August charge-off rate -- which measures the amount of balances written off as uncollectable as an annualized percentage of total loans outstanding -- surged 48 percent to 6.82 percent, compared with 4.61 percent during the same month a year ago, Moody's said in a report. It was the 20th consecutive year-over-year increase in the charge-off rate."

It is probably a good bit higher than 7% by now, even though issuers are clamping down on balances and watching payment history more carefully.

[OnceUponTimeOnTheNet]

8. K&R We are in the Economic Hand~Basket to Hell, & most do not realize this.