Warren Buffett makes his bets (on GE and Goldman) and provesonce again in tough times cash is king -- he's in a position tomake what could be big scores. On the other hand if you are in adebt driven business or have used a lot of leverage on yourinvestments you are more likely to be flat on your back. TheWashington rescue/bailout package may prevent systemic collapse inthe credit markets, but won't change dramatically the gloomyoutlooks for folks who had been playing the debt game. Necessarydeleveraging will take time and deeply pain investors who borrowedtoo much and surviving lenders who ramped up volume at the expenseof underwriting discipline.
And despite the significant damage already suffered across thecredit sector, commercial real estate has yet to take most of itslumps. Appraisers characteristically have been gazing in the rearview mirror. Just a few weeks ago, a well-known appraisal honchowas telling me about how income numbers were holding up in mostinstitutional portfolios "through June 30." Well, how about lookingat the next few months. Let's hope the credit scare abates, but noone should expect the lending spigots to flow again as unemploymentramps up and the government comes to terms with the fact that thecountry is essentially busted. The scary thing is that so manyAmericans have been living (large) off credit. The home equitylines, attractive car financing, the credit card deals --it's allover. Now what does everybody do to keep going when they are in thered and lenders out of self preservation start to turn thescrews?
As previously noted, more retailers will be toast. Office rentswill decline. Warehouse activity sinks. And housing...please. How many people will have enough equity to buy homesin this environment under normalized (stricter) lending guidelines?Not enough to spur any rebound.
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