Thursday, November 20, 2008

The next phase of the financial crisis is here.

This crises falls in phases, and the next one is starting today.

The next phase is commercial real estate blowing up and all the CMBS (mortgage-backed securities on commercial real estate) collapsing as people figure out that CMBS are worthless. Investment groups which own shopping malls are trying to hold on until after Christmas, but they may not even make it that far. You're about to see mall owners default on their debt.

Just like people got stupid in lending mortgage money to people with no jobs and no income, they did the same thing with commercial real estate by lending "pro forma" hoping that businesses will perform at a certain level in the future. Their not performing, and those loans won't get paid back as planned. We're not at a bottom -- we're at the beginning of the next phase.

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