Crash Market Stocks: An Introduction To This Site

By definition, recession means "a contraction phase of the business cycle." Although, in early stages, most economists dodged that word by saying we were a "slowing economy," I am pretty sure that all agree that the recession is here. The plan is to hopefully put it off until the economy is back on the upswing and we can look back and call the time a recession. No one likes to admit that we are currently in one. However, I believe if you can recognize it, prepare for it, you can come out of it more successful than you are today.

Signs of the Times
We first began to feel the heat on the economy when the sub prime market fell out in early 2007. This began a ripple effect which halted the purchasing of new homes, then lead to a surplus of houses on the market, then leading to a decline housing prices throughout the country. This resulted in new housing projects to be put on hold or cancelled.

Losing equity in your house is usually the biggest influence on a person's disposable income. Hey, you've always got your house, right? When you've lost 30-50% value in your house in 2 years, you tend to tighten the belt a bit. National retailers banked on new growth areas and a booming economy to sell their inventory which they pay for after they sell.

As a result, we have retailers like Linen's & Things, Starbucks, Circuit City, Mervyn's and many more, who then make the decision to either file for Chapter 7, or close several stores to prevent bankruptcy. In 2007, commercial real estate owners should have realized it was only a matter of time until the same problems that plagued the residential market would eventually come to the commercial side. What is that problem? No Lenders.


CMBS Market
From 2000 to 2005, CMBS financing became very popular by offering new financing terms that had never been seen. CMBS can be explained by taking a group of different loans and packaging them into a bond rating (ie AAA, BBB) depending on their strength of credit. These rated bonds would then be traded on wall street and sold to investors depending on their credit rating. This in turn allowing lenders to provide very competitive interest rates and terms.

However, the underwriting standards became sloppy and banks were being loose with their lending. This in turn led to the eventual collapse of the CMBS market all together. In short, the banks were lending out AAA money to CCC properties which artificially pushed property prices into the roof. Buying buildings for $400 per foot in secondary and tertiary markets was unheard of. It became a reality.

It was only a matter of time until this bubble popped. Now with the turmoil of the banks (Lehman Brothers, Freddie and Fannie, AIG), this has stepped up the crisis one more notch. Not too mention the oil crisis, weak dollar, inflation, commodity scarcity due to global economy, and the upcoming election. All of these elements combine to provide the vehicle into maybe one of the worst economical positions the US has seen since the Great Depression.

Goal Of This Site
Knowing the signs, you can prepare for the worst, but hope for the best. Living within your means is the key. In this site, I will provide the tools, warnings, strategies, and vehicles that have helped me to weather these storms. Living in a land that promotes "free economy," we must live with a Cyclical Economy. There is no way around it. The goal is to know when the cycles are coming and change our lives accordingly.

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