Monday, June 9, 2008

It's a conspiracy!

I was thinking about this driving home from work today right after hearing a program on NPR about how the rest of the country is now catching up to the high gas prices we in California have been paying for awhile.

Now that the housing market is tanking and it's harder to get a loan, effectively there are less people able to buy homes because there are less people with good enough credit than there are people with glitches in their credit AND on top of it, less people who make enough money each month to even afford a mortgage payment, let alone have a down payment because when you are out of work and the unemployment insurance has ran out, you hit up the savings and the credit cards next to eat and pay bills. (And you've already heard that the next great national financial crisis will be a massive wave of credit card defaults.)

Because of all the greedy, bad brokers (not all of them are bad, mind you) there were a lot of loans made to people that wanted to reach for the American dream of owning a home, but in all honestly, that dream was out of reach. There were many bad loans made because brokers lied and the investment banks finally realized this once they slowed down enough to perform due diligence on the loans they bought. This created a wave of uncertainty in the investment market and home values dropped when people began to loose their jobs and defaulted on their mortgage loans. I'm almost positive that a quarter of a million people in the mortgage industry alone lost their jobs within the last two years at some point or another. Investment banks lost money, big money, because the average consumer began a wave of loosing their homes during foreclosure, too. The investment grade securities went down the tubes because homes were over valued.

But think about this... most homes have more than one licensed driver (sans some specific New Yorkers who for generations many not need a drivers license because of a better public transportation system there than in most states.) And the same investment banks that lost all that money on the housing crisis also have commodity divisions that speculate on future prices for fuel and food.

And guess what we are now paying higher prices on because the investment banks cannot sustain their ABS, MBS and CDO Secondary markets like before which is based on housing? That's right... fuel and food. The people that still have jobs will be forced to buy the high priced fuel to get to work. Everyone has to eat, so they will pay higher prices, too. And in order to distribute food throughout the country, trucks need fuel to get it to the stores you shop at. If the trucking companies have to pay higher prices for fuel, then they will pass that cost onto the consumer.

Have you noticed the prices for meat and vegetables lately? Higher aren't they... Yeah, cattle and grain are commodities, too, just like oil.

Do you get the picture? It's a conspiracy! The same investment banks that cannot make money off of the homeowner like before has tapped into every single American consumer for the food that they must buy and every one that drives for the gas they require to get from point A to point B.

Watch the investment banks and all the profits they make by the end of the year... Assets will tank while commodities will soar.

No comments: