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NNN0LHI Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 10:55 AM
Original message
GM's woes one more blow to housing bubble
http://moneycentral.msn.com/content/P111845.asp

Low interest rates from the failed Fed let GM's finance arm offer cheap loans that helped owners use homes as ATMs. With rates rising and its own troubles, that party is over.

By Bill Fleckenstein

To state the obvious, General Motors' (GM, news, msgs) bleak first-quarter forecast last Wednesday was the big news of the day, the preannouncement heard 'round the world. But in our own "what, me worry?" market environment, people seemed unwilling (or unable) to connect the dots. So I will.

Along with Fannie Mae (FNM, news, msgs), GM is a significant cog in the financing of the housing ATM (which I have discussed often, including in my March 7 column.) Why does that matter? Because last Wednesday, the yield on GM's debt widened to 454 basis points (4.54 percentage points) over Treasurys. In my opinion, it won't be much longer before that debt is downgraded. GM has been trying to finance autos, homes and second mortgages at record-low interest rates, but it's hard to see how the company can continue to do so.

This will also continue to tighten the noose around Fed chief Alan Greenspan's neck. He must raise rates to maintain the pretense of addressing inflation concerns and weak-dollar issues. But Easy Al is in a box (along with the whole country) because of his policies and the ways folks have behaved.

more
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Mari333 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 11:09 AM
Response to Original message
1. Easy Al and the crooks he shills for
have set the US up on a course to third world status. Maybe, with our borrow borrow borrow lifestyles, along with Al's fabrications to ensure Bush another 4 years, we will, as a nation, finally sink in our own recession, and perhaps a few people will wake up when their house is foreclosed on, their job is in India, their grama is eating dog food for dinner, and they are one paycheck away from homeless shelters..I guess its going to take some hard hard times before the US wakes up and realizes they are being reamed..
The top 1% will be fine, of course.
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nolabels Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 11:26 AM
Response to Reply #1
2. That 1% will even help manage the spin down to the bottom
Just like they have been doing all along. The only other answer for them is start a war somewhere and refocus attention. What do you think they will try to do?
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Mari333 Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 11:39 AM
Response to Reply #2
4. Hire expensive security guards
to protect them in their gated communities, when the poor rise up.
Of course, it didnt work for Marie Antoinette.
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acmejack Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 11:39 AM
Response to Reply #1
3. It is just unbelievable
It is willful ignorance on the part of many. The ever popular "if you ignore it long enough, it will just go away on it's own" theory. As we enter the era of real competition for oil, the real impact of our situation will finally be acknowledged. This likely will occur when OPEC decides to peg oil to the Euro.
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Media_Lies_Daily Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 12:07 PM
Response to Reply #1
8. I think that the NeoCons knew this was coming and.........
...getting the major tax-cuts for the wealthy was their first step in the process. They're following that up with attempts to destroy Social Security and Medicare.

What they didn't count on was the continuing major resistance in Afghanistan, which we no longer hear anything about, and Iraq. Those abominations are not only costing the lives of tens of thousands of people, perhaps as many as a hundred thousand, but they are also proving to be major financial black holes.

My Dad lived through the Depression...he thinks the coming misery will be much worse because so few people live off the land anymore. 95% of all Americans live in cities and towns...and they will need food and water to survive.
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UpInArms Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 01:17 PM
Response to Reply #1
16. here's Meanspin's speech regarding home equity loans
Remarks by Chairman Alan Greenspan
The mortgage market and consumer debt
At America’s Community Bankers Annual Convention, Washington, D.C.
October 19, 2004

excerpt:

Despite the recent high debt-to-income ratios, at least some of which is more statistical than real, the ratio of households’ net worth to income has risen to a multiple of more than five after hovering around four and one-half for most of the postwar period. Taking into account this higher level of assets, all in all, the household sector seems to be in reasonably good financial shape with only modest evidence of an increased level of household financial strain.

what a freakin' hack :puke:
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loritooker Donating Member (376 posts) Send PM | Profile | Ignore Mon Mar-21-05 11:40 AM
Response to Original message
5. Got a great mortgage rate from GMAC 18 months ago; now that's history. nt
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4dsc Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 11:48 AM
Response to Original message
6. Wait till oil prices start rearing its ugly head
inflation is about to release its ugly head because of high oil prices and its not to going to be pretty..

I have a neighbor starting a garden for the first time because he's tired of paying the every increasing prices at the store(and they tell us there's little or no inflation)..

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salin Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 11:55 AM
Response to Original message
7. Not doing any personal financing - so I wasn't aware
of how "diversified" GM was regarding financing (mortgages, second mortgages, etc.)

last paragraph - telling:
"The use-your-house-as-an-ATM-to-live-beyond-your-means stimulus is finished, thanks to the recent de-leveraging/crackup in the bond market. The refi game and the bull market in housing it created postponed the consequences of the largest stock-market bubble in history. Though the Fed and the rest of the government succeeded in postponing the fallout from the massive misallocation of capital that took place in the mania, they have also succeeded in compounding and exacerbating those consequences. Even more leverage was created in the system, as we attempted to speculate our way to prosperity.

Always thought the push to "consume" to boost the economy out of recession was a double edge sword as it required many people to go further and further into debt. So yippie - those big spenders helped "save" the economy - and now lets reward them for their irresponsible behavior that was encouraged by bush and al - with bankruptcy reform!
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TexasLawyer Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 12:17 PM
Response to Original message
9. Great article-- Important reading
Thanks for posting.
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TexasLawyer Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 12:22 PM
Response to Original message
10. The house o' cards


An article from earlier this week.

Street Patrol
GM's woes are just beginning
advertisement

The automaker cut its profit outlook, and ratings agencies could push its debt to junk status. All this means that investors should stay away from the stock.

By Robert Walberg

General Motors' (GM, news, msgs) stock slumped 14% Wednesday after the company forecast a first-quarter loss and slashed its 2005 profit outlook. It would be a big mistake for investors to see the decline as a chance to buy a blue chip. The automaker is by no means a bargain.

Earnings are spiraling downward and visibility is very murky. Toss in the probability of a debt downgrade to junk status, and the possibility of a dividend cut, and the news cycle for GM is likely to remain bad for at least another three to six months.
A few weeks ago, I wrote that GM was unlikely to meet its earnings projections of $4 to $5 per share for this year, and that if it continued to disappoint the Street, the stock would be in for a crash. The company, which had expected to break even in the first quarter, now projects a per share loss of about $1.50. Management also slashed its full-year earnings estimate to $1 to $2 per share from $4 to $5.

http://moneycentral.msn.com/content/P112408.asp
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salin Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 12:28 PM
Response to Reply #10
11. omg that is Serious
possible downgrade of debt to junk status. Not good at all.
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unblock Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 12:35 PM
Response to Reply #11
12. look for a chrysler-esque bailout
gm = "too big to fail"

besides, under shrub, the treasury always has more money for poor corporations who are innocent victims of events beyond their control, such as their own lending practices and risk management strategies.
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salin Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 12:36 PM
Response to Reply #12
13. I suspect that it is just but one
am getting a wary feeling that we are about to see several more corp implosions in the coming months - too many for bailouts.
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unblock Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 01:10 PM
Response to Reply #13
14. aw c'mon. look how many s&ls poppy bailed out
shrub's gotta out do poppy on that score as well, ya know.
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salin Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 01:15 PM
Response to Reply #14
15. you do have his number...
have to out do poppy

bigger deficits and cummulative debt
more expensive and fatalities via war
longer recession and slower economic recovery
more cummalative job losses
more corporate implosions
bigger scandal than iran contra (lying about wmds)

so ya... it would have to be bailing out the banks who have been indulging in risky corporate financing (first made transparent to the public in the Enron implosion -when the disclosure of multple schemes - backed by big banks such as JPMorganChase- funded (way on the margin) by the banks... practices which reportedly have continued on) - so that it could be a much bigger and grander deal than that pesky s&l bail out (and save of son Niel).
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JackD76 Donating Member (220 posts) Send PM | Profile | Ignore Mon Mar-21-05 01:33 PM
Response to Original message
17. Down With GM!
The sooner the better.
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mia Donating Member (1000+ posts) Send PM | Profile | Ignore Mon Mar-21-05 10:00 PM
Response to Original message
18. So now it's not a good idea to get a home loan with Ditech (GMAC)?
Does anyone know?
I'm about to buy a home and have a Ditech contract right in front of me to sign. It's 3/8 of an inch thick.

What happens if GMAC goes out of business?
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