Friday, January 21, 2011

Fraud its not better...its worse than ever

As I indicated many times, real estate prices can not stabilize without access to healthy amounts of credit and therefore, will continue decline as long as available credit is inhibited. The essential basis for price increases in real estate of over the last 30 years is the abundance of policy and credit vehicles created by the government and fed. Ironically, the same reasons that education costs have increased as well.

Credit has continued to contract, unless ofcourse you are a primary dealer, fed shareholder or want to buy inflationary assets in the socialized markets. Below is a very interesting graph from Case Schiller and Barry L. Ritholtz's blog of what may be about to happen to the increased leverage that the banks have taken via legalized frauds that have been regulated into being and that allow banks to lower loan loss reserves - counting them as earnings, and also to reflect assets that are worth 5 cents on the dollar at close to par. Keep in mind that IF you believe the banks and take them at their word regrading their assets on their books and the health of their loan portfolio, they are still leveraged much higher than in 2007 in addition to being bigger. But we should not worry, the institutions are much too big to fail now, bonuses are right around the corner and Obama is waiting in the wings with open arms. So, lets just not bother to recognize that banks are nearly universally lying about and overstating asset values and data regarding loan performance/reserve requirements.

So, what happens when a credit fueled rally in real-estate prices is not implemented in the real estate markets? Another 50+% decline in prices, even in Coral Gables Florida and New York, New York and a actualised insolvency of the entire financial and banking system in the US and Europe.

Size and concentration of the banking and financial system...(courtesy:
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