The United States got caught in a "triple witching" that shook it almost to its financial foundations.
With the banking collapse hooked to credit default swaps which were hooked to the mortgage industry the market had no place to go but down.
When the "new" old way of doing business in the mortgage industry dried up, replacing the traditional way when people could get mortgages for what they actually qualified for, many who used their homes as revolving credit and figured they could for years to come found themselves in a mountain of debt with no way to refinance.
Then when the banks said "no" they began to say "no" to even qualified buyers and home prices took a dive.
This further exacerbated the banking crisis.
As went home prices so went people's desire to finance a new car and the auto industry, already under a mountain of debt and historical costs, went into a tail spin.
The three problems were and are so closely tied together that the Obama administration figured it had to tackle all three at the same time.
History will decide whether or not this was a smart position to take.
To be sure a few things are showing signs of improvement.
The housing market and accompanying prices seems to be bumping along the bottom, as least for single family homes.
The mortgage re-organization plan seems to have stalled foreclosures, but they are still at an all time high.
Bank stocks have risen, but that may be due to the money the government poured into them and the stalling of mortgages made and the number of mortgages in a new "status quo" environment.
The auto industry sales numbers looked good for a short time, but no one knows how they will hold once the "cash for clunkers" program runs out and whether or not people will still continue to buy.
All of this brings us to the present, but what about the future? At least for the U.
S.
it may be shaky for some time to come.
Consider that for every one job lost directly in the auto industry an estimated six to ten are lost in a ripple effect.
The auto plants do not directly make every part on a vehicle.
There are countless feeder plants and industries that live by the vitality of the car industry.
At the same time, many of the jobs recently lost were white collar jobs that paid more, offered their benefactors a higher standard of living and from which many lived or retired in multiple condo units.
Commercial units, it is feared, may well be the next great mortgage crisis in America simply because buyers are no longer interested in a second home and commercial builders cannot sell them.
Therefore association dues (fees paid by occupants that are spread across all occupants to keep services and maintenance at condos and office parks functioning) have sky rocketed to fewer residents which makes condo and commercial units less attractive still.
We can begin to see that each cog of the wheel can take down an intertwined economy and the U.
S.
is not out of the woods yet.
What does this mean for the investor? Aside from a few markets that seem to be riding up on either new offerings or pent up B2B demand (such as the tech markets), the U.
S.
markets will have very little traction for some time to come.
(We have not even considered inflation and debt fears that many are now warning us about.
) It therefore will not be the U.
S.
that leads us out of this recession.
It has too many inherent problems that are yet to be resolved.
The wheels are just going to spin and it could be quite a while (many are now saying 2014) before we get anywhere on any definable course.
In order for the investor to catch any sort of upward swing with any staying power he or she would be wise to look outside the U.
S.
at areas that were sheltered from the effects of the last debacle.
Places that were not reliant on the auto industry, did not take part in either faulty mortgages or the insurance that backed them up, and therefore countries whose banks remained strong will be the next "great".
It will be the less traditional places in the world that launch us into new possibilities.
Places like Brazil, Australia and possibly China could be the new roads for investors looking for trends with any traction.
But don't look for the U.
S.
to lead the way.
With the banking collapse hooked to credit default swaps which were hooked to the mortgage industry the market had no place to go but down.
When the "new" old way of doing business in the mortgage industry dried up, replacing the traditional way when people could get mortgages for what they actually qualified for, many who used their homes as revolving credit and figured they could for years to come found themselves in a mountain of debt with no way to refinance.
Then when the banks said "no" they began to say "no" to even qualified buyers and home prices took a dive.
This further exacerbated the banking crisis.
As went home prices so went people's desire to finance a new car and the auto industry, already under a mountain of debt and historical costs, went into a tail spin.
The three problems were and are so closely tied together that the Obama administration figured it had to tackle all three at the same time.
History will decide whether or not this was a smart position to take.
To be sure a few things are showing signs of improvement.
The housing market and accompanying prices seems to be bumping along the bottom, as least for single family homes.
The mortgage re-organization plan seems to have stalled foreclosures, but they are still at an all time high.
Bank stocks have risen, but that may be due to the money the government poured into them and the stalling of mortgages made and the number of mortgages in a new "status quo" environment.
The auto industry sales numbers looked good for a short time, but no one knows how they will hold once the "cash for clunkers" program runs out and whether or not people will still continue to buy.
All of this brings us to the present, but what about the future? At least for the U.
S.
it may be shaky for some time to come.
Consider that for every one job lost directly in the auto industry an estimated six to ten are lost in a ripple effect.
The auto plants do not directly make every part on a vehicle.
There are countless feeder plants and industries that live by the vitality of the car industry.
At the same time, many of the jobs recently lost were white collar jobs that paid more, offered their benefactors a higher standard of living and from which many lived or retired in multiple condo units.
Commercial units, it is feared, may well be the next great mortgage crisis in America simply because buyers are no longer interested in a second home and commercial builders cannot sell them.
Therefore association dues (fees paid by occupants that are spread across all occupants to keep services and maintenance at condos and office parks functioning) have sky rocketed to fewer residents which makes condo and commercial units less attractive still.
We can begin to see that each cog of the wheel can take down an intertwined economy and the U.
S.
is not out of the woods yet.
What does this mean for the investor? Aside from a few markets that seem to be riding up on either new offerings or pent up B2B demand (such as the tech markets), the U.
S.
markets will have very little traction for some time to come.
(We have not even considered inflation and debt fears that many are now warning us about.
) It therefore will not be the U.
S.
that leads us out of this recession.
It has too many inherent problems that are yet to be resolved.
The wheels are just going to spin and it could be quite a while (many are now saying 2014) before we get anywhere on any definable course.
In order for the investor to catch any sort of upward swing with any staying power he or she would be wise to look outside the U.
S.
at areas that were sheltered from the effects of the last debacle.
Places that were not reliant on the auto industry, did not take part in either faulty mortgages or the insurance that backed them up, and therefore countries whose banks remained strong will be the next "great".
It will be the less traditional places in the world that launch us into new possibilities.
Places like Brazil, Australia and possibly China could be the new roads for investors looking for trends with any traction.
But don't look for the U.
S.
to lead the way.
Source...