peter d schiff , page-24

fss

we have 2 more types of mortgage instrument in the US to fall over into rampant defaults - Alt-As and Option Adjustables - they were initially given to home owners at very low interest in the realms of 1% good for a couple of years or so - well they will be resetting to much higher interest rates starting about mid 2009 - throughout most of 2010 a good bulk of these will be resetting and into 2011 - this will lead to further waves of defaults, leading to further distressed sales, leading to further write-downs on bank balance sheets, also leading to the triggering of CDSs and problems with a multitude of CDOs - all very bleak

in the meantime the commercial/retail property sector in the US has started to cry in pain recently - this will get louder - developments can't complete for want of buyers, or due to a lack of further financing, and we are also seeing the momentum start to gather pace with leaseholders who can't afford to stay within their commercial properties, so they are wanting to walk away

credit cards in the meantime are being used as a means of liquidity of last resort - ratings agencies have already started to circle to big card providers as default rates have started to increase at an alarming rate - AMEX started a campaign nearly 2 months ago where they have been unilaterally informing many card holders that their credit limits have been reduced and telling them to no longer use their cards for cash advances - while credit card companies are seeing the uptake in the derivative instruments they use to sell credit card debt not being subscribed to due to the issue over the rating that should now be ascribed to them - on this front the Fed has stupidly waded in and is trying to lend support in the face of a wave of expected defaults by card holders...

meanwhile the banks are not lending, nor will they for most of 2009, particularly while the assets on their balance sheets are being devalued further with each passing day, meaning they have to hold more cash reserves in order to meet holding requirements - otherwise with the expected rash of bankruptcies to come next year which bank in the right mind would be eager to lend in this environment? - none...

these are some of the fab stories developing and emerging in the US right now and for the foreseeable future

nothing in anyone's bag of tricks can turn this over leveraged, de-leveraging, over-burdened with debt monster around any time soon - this thing has now got a momentum that has to play itself out because it has infected every other major economy

the story above is also occuring in a similar fashion with europe, asia and of course our little neck of the woods

suffice to say, I can only see a lot more of this story to unfold

it's just going to be a real long story


good luck