Housing Concerns and Unemployment: Expect a Prolonged Recovery

Housing and unemployment remain major concerns and despite the efforts that are being made, investors should prepare for a long recovery period.

It will be very difficult for us to see some normality returning to the financial markets unless we manage to see the stabilization of mortgage related troubles. Unfortunately, the housing situation looks very fragile: not only are we facing excess supply but a worsening of the economic situation with a higher threat of unemployment is hanging over us. Furthermore, due to the deterioration in the overall economy, it looks like the problem is now spreading from residential to commercial real-estate.

In terms of unemployment, investors should keep a close eye on what is going on with the Auto industry. If one of the auto manufacturers ends up in bankruptcy, this could really have tremendous consequences for the overall unemployment rate, sparking a chain reaction that could see us moving incredibly close to a double digit unemployment rate…

We continue to move in unchartered waters…

Comments

[Mad Hedge F...:]

Here is a novel plan put forth by a hedge fund in Florida, Derivatives Bridge, LLC. Securities backing performing mortgages worth 100% are being sold for 20% because there is no market for these securities. Have the government buy these securities for 60%, rescuing the banks, and then sell them back to the original homeowner. The homeowner then is able to refinance his home, see his mortgage principal drop by 40%, restoring his net worth, and purchasing power. The cost to the taxpayer is zero. This is already possible in some countries like Denmark. If someone offered me a deal like this I’d take it in a heartbeat, even if I had to clean out the sofa cushions and raid my kids’ piggy banks. They say necessity is the mother of invention.

Feb 26 08:25 AM

[Enterprisin...:]

unfortunately we depend on the politicians.... but the issue is quite complicated. On the one hand, it is clear that the automakers are not competitive (and haven't been for quite some time) but on the other, the consequences of a bankruptcy could be really disastrous...

Mar 10 02:18 PM