If a "bailout" of some sort isn't approved, I predict 10% unemployment by Jan 2009, and this may be conservative. With lending completely frozen, small businesses will be put through the grinder. The resulting layoffs are going to be tough, but will happen, make no mistake. But, thank God we "stuck it" to Wall Street and their "greed". Other predictions?
I predict that 66% of the people on this particular board will erroneosly feel "intellectually superior" to any person who believes in God. I predict that fewer than 3% of the posters on this board would ever actually change their vote from one party or candidate to the other regardless of the bailout situation or any other issue that has arisen since say...2 years ago, although 10% of the posters will "claim" that they switched sides after "so and so" did something really stupid in an effort to degrade the opponent of their candidate. I predict Texas 35 - Colorado 20. I predict only one of these predictions will have a measureable conclusion. I predict that I will remain employed. And I will pray for those who don't.
New unemployment numbers come out Friday. Why not predict that number, rather than speculatively gaze into an alternate future (alternate because a bailout/rescue is inevitable at some point before the election)? August - 6.1% September - my guess: 6.3%
Lending is not frozen. I can walk into my bank or credit union tomorrow morning and get a loan. Same thing with small businesses that have good credit. The big change is that it will be much harder for people with marginal to poor credit to get loans. They will have to save money and put some of their own cash into the deal. The 100% loans for cars or homes are not going to happen for higher credit risk applicants. There is going to be a recession regardless of whether Goldman, Morgan, and co. get cash. The recession will be directly tied to the tightening of credit standards around home mortgages, HELOC's, and credit cards. The days of easy credit to anybody that can fog a mirror are over.
Bingo - we will have a recession regardless. It will last longer and possibly be more costly if we bail out wall street.
I predict that credit will contract, not freeze. This will mean that people making 40 grand a year will have a hard time buying 4000 square foot homes. I predict that these people will have to find homes that they can actually afford.
There are roughly 100 million taxpayers. The bailout is projected to cost 700 billion to one trillion dollars. That's 7 to 10 thousand dollars per taxpayer. Whip out your checkbook, OUsuxndallas.
It's funny how few people seem to understand the necessity of credit and credit lines in small business and in particular, in growing small businesses. Carrying recieveables is the life's blood of small business, that want to grow. And yes by the first of the year the very same folks who think that the credit crisis is something for "other people" will be staring at small businesses in their community sutting down. UNLESS THERE IS A MAJOR INTERVENTION. Friends trying to sell their homes to generate cash and pull out the equity, but amid falling home prices because of a lack of buyers able to qualify. Think of Texas in 82 where the malls were empty, restaurants were closing right and left, and there were very, very few well paying jobs available. The same folks that called their GOP congressmen saying don;t vote for this Wall Street bailout will be crying like babies begging for congress to do something anything. 6.3% for this month is probably about right slightly up from 6.1% in august, Probably actually closer to 6.25 since I don't think the numbers from Lehman, AIG, Wachovia etc will show up yet on the report, Will they? I know that it varies from state to state how fast you can file, and whether you can file if you have a severance package.
Suvarov - Have you actually tried to get a loan for a small business lately? I have, and it's been next to impossible. I have a brand new company that is turning fairly substantial profits immediately and banks won't even TALK to me. All three owners of the company have good-to-great credit. I've talked to a number of banks. None of them want a piece of this profitable business with zero overhead. So no, you can't just waltz in and get a loan if you have good credit and/or a good business. I wish you could, because we could use some liquidity.
Of course things have tightened up, even for qualified people. But these banks are still banks and need to lend to stay in business. Johnny, I wouldn't suggest you are unqualified, but this is your problem...
Yes, I know our biggest problem is that we're new. All I am saying is that the credit crunch is real and it's hurting real people with real businesses. I know because I am one. I just don't want anyone out there saying that credit really isn't an issue when I'm experiencing first-hand that it IS an issue, and a big one.
I operated a small business for 5.5 years without ever borrowing a dime. We actually saved up to generate a mountain of cash to tide us over through the rough times and put 30% of profit away every month to add to the cash reserves. I don't think borrowing is necessary to run a small business- if you think it is then I would suggest that you have a flawed business model. However, I know it was SOP for many and these businesses are not "failures" so I can see why a bailout is necessary. I don't want that business to fail b/c it has a line of credit that it relies upon. I would, however, suggest that you should not rely on a line of credit to operate your business. Save up and pay cash. Stash cash for the bad times. Manage your payroll. Manage your expenses. Send out your invoices in a timely manner. Make sure your customers pay their bills. There is a lot of stuff that can be done before heading down to the bank imo. But, I don't think it's good, systematically, for a contraction of credit. Credit is more or less what separates us from the bananna republics and has fueled the rise of the middle class and upper middle class. With that rise in living standards comes a rise in anxiety level when people worry about how they are going to pay their student loans, house notes, car notes etc.
My son is a VP of a small $14 billion bank. They are out trying to recruit new clientele to loan money to. In fact he was in a banker's conference in Senator Cornyn's DC office earlier this afternoon discussing all this. When he walked out he almost bumped into Obama. I told him to check to see if he still had his wallet.
Credit default swap spreads on GE Capital have blown out to 680 bucks per 10,000. Buffett gashed GE in his 3 billion dollar deal. When even GE is having trouble getting credit, things are tight. Thats a helluva lot more significant than HELOCs getting pulled, which is also happening all over the place. If the credit market stays locked up, unemployment will be in double digits in the next six months. Book it.
And right on cue, GE opens down 9% today. I always wondered when that stock would be called to the mat for all the Level III garbage they had. Even if they pass a bailout the patient is still pretty sick.
True, credit is only tighted, not frozen. However, that is just for the time being. There is still a substantial amount of capital to be loaned, and the banks are only going to loan it to the guaranteed bets. However, once that is gone, it's all gone.
