From now on, I'm going to use the analogy of the United States as a comatose patient on life support and the U.S. Government as the life support system. That's the fact because without the Fed dollars propping up this economy--banks, Fannie Mae, Freddie Mac, automakers--the U.S. would flatline. Can we all agree on that? If not, then we're trillions of dollars in debt for no reason, and we should have a health care plan that covers ALL Americans (I agree on the latter anyway, but that's just my opinion).
So, if the U.S. is a comatose patient on life support, I can only quote a line from the comic in "Defending Your Life," the Albert Brooks movie, where a comic tries to find out how long a dead man was in a coma by asking him if Elvis is living or dead. The man said living. The comic said to Art, the dead man, "Long coma, Art...long coma."
I say the same for the comatose U.S. economy kept on life support by the U.S. government. "Long coma." Here's why just based on TODAY's STATISTICS. I don't mean "today" as in the current environment. I mean, literally, TODAY.
First, a headline from the Wall Street Journal:
• The Kansas City Missouri School Board voted on Wednesday night to shutter nearly half of its schools in an effort to avoid going broke.
That’s not the top story—but one of the top stories.
Half of a major city's schools are closing so it will not go broke. I know education is the first to go being the values that they are in this country, but that’s ridiculous.
And, with declining tax values and no replenishment of funds, when will the second half shutter? The decay of our education system within states and municipalities going broke.
Not to mention first-time unemployment claims continue above 460,000 today--a 6,000 claim improvement from the previous number.
I saw an unemployed engineer of 35-years the other day standing next to the subway with a cup in his hands—and we’re still on government life support.
These are the early signs of decline for the supposed wealthiest country in the world.
Not a sermon, just a rant.
Also today, Marketwatch.com said retail stocks fell, led by Bed, Bath & Beyond Inc. after the home-furnishings retailer was cut to underperform from market perform by FBR Capital Markets.
Men's Wearhouse Inc. declined 5.2 percent after the men's clothing retailer reported worse than expected fourth-quarter sales.
The children's clothing retailer Gymboree Corp. rose 7.3 percent after its fourth-quarter profit topped Street expectations and its first-quarter outlook also may exceed estimates, Marketwatch said.
Here's the deal--Bed, Bath & Beyond anchors alot of retail centers and if that goes dark, it's just not a good sign that retail real estate investment trusts in debt are going to get their rent to pay their debt. That means those commercial real estate loans in those commercial mortgage-backed securities and those collateralized debt obligations will not be able to receive their payments. That means investors will lose money on those securities. That means banks, insurance companies, other companies and individuals that made these investments will lose money as billions and billions of CMBS dollars mature from 2015 to 2017--assuming nobody replaces Bed, Bath & Beyond as an anchor retailer.
Do you see anybody opening large new stores anywhere in your area anytime soon?
Do you see people spending on discretionary items anytime soon?
Even Men's Wearhouse, a clothing store for men, is doing poorly.
Retail has not even started to show delinquencies--yet. Hotel remains at the top of CMBS defaults, followed by multifamily and then retail. Keep in mind that CMBS special servicers are doing all they can to extend these loans. However, why would anyone in their right mind invest in the CMBS market with current fundamentals? Unless of course, it was the Fed giving money to banks to make these investments.
All fine...except--as we know--it costs money...lots of money to keep an individual on a life support system. Just think how much it costs the Fed (the taxpayers) to keep the U.S. on life support. That's all well and good, except the patient isn't getting any better.
Real estate values continue to fall in residential and commercial real estate; oil prices are rising--meaning gas prices increase and higher payments for consumers; consumers are saving and still paying off debt; unemployment remains high. When do we get back to consumer spending by way of 2005-2007. How about the 12th--the 12th of never--as Earth, Wind and Fire sang.
Slow recovery, weak fundamentals, higher savings, trillions of debt and major CMBS fixed-rate maturites in the tune of more than $180 billion from 2015-2017. That's like saying that even if the patient goes into remission, gets off of life support and begins to walk tomorrow, the U.S. will not be out of the woods completely for another seven years.
"Long coma, Art. Long coma."
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