- So, where are we in the Kondrateff Cycle? Still more from cyclepro.com:
- Civil unrest is a distinct possibility, but not just over the next few months or years. Think decade - at least to 2018.
- We already discussed the Option-ARM, Alt-A, and commercial real estate mortgage defaults coming up -- when you have people both dispossessed from their homes AND umemployed unrest will be an even greater threat.
- Couple this with a financial system that is already weakened from sub- primes last year, 2009 seeing nary a recovery (except from media shills and cheerleaders), and then the 2010 wave hits these weakened banks, and followed on with the 2011 wave which hits even weaker banks.
- The subprime event taught us something about how the rest of the economy responds to it. We saw credit freeze, loan applications denied, reduced business profits, a wave of layoffs, consumers cutting back on spending, yada, yada. And stocks performed a little dance for the devil (at SPX 666).
- Next year there will be another wave of mortgage defaults as Option-ARM and Alt-A rates get reset. Sometime along the way commerical real estate may see some major defaults. Because of continued economic and unemployment drag, residential prime and agency defaults are likely to increase as well. The tally of FDIC bank failures are likely to be in the 4 digit range after these wave hit the banking system. The 2011 wave of residential defaults is likely to be the real back breaker of the economy.
- Mid-2012 is when the last major wave of mortgage defaulters will be completing the foreclosure process and be physically removed from their homes. Of course the Fed may change the rules of foreclosure protocol, but that will only prolong the reckonning.
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