Credit Cards are next Next!/Market update

Good afternoon!

Blood continued to flow through Wall St. as the DOW continues to sink. We actually got below 12,000 on the DOW before settling down over 100 points at 12029.

This news just hit the wires.

"LOS ANGELES (Reuters) - Two former hedge fund managers at investment bank Bear Stearns are expected to be indicted following a federal criminal probe into the funds' collapse, a person with knowledge of the situation said on Wednesday.

NPR said in a report on its Web site on Wednesday that a grand jury was expected to sign indictments for the two men as early as Wednesday and that the indictment would be unsealed on Thursday, when Cioffi and Tannin could be arrested or opt to turn themselves in"

Here come the cops!

Its about time. Both of these pigmen have a cellmate that's eager to meet them. Expect to see more indictments as the cops begin to hone in on how this $400 billion fraud was committed. The total tab could be several trillion dollars.

How could the bankers think they would get away with this?

It may take some time, but many will take the fall as justice starts to prevail. Hopefully, this will help send a message to the next group of pigmen that fraud will not be tolerated. We should be ashamed that our regulators ever let this happen!

Mortgage Rates rise to 6.57%!

This is only going to make our housing problem worse.

Rates are rising in the bond market which is forcing interest rates up. Its hard to buy a $500,000 McMansion crapbox when rates start rising up over 6.5%. Think we might see a few price drops?

I talked to a stressed out homebuyer the other day that paid $500,000 for a crapbox in Chicago.

He can't believe that his mortgage and taxes are now over $3500 a month. Meanwhile he is probably $100,000 in the hole because he bought at the peak in 2006, and he is now nervous about his job because his customers tell him they are struggling with higher costs.

Any renters that avoided this disaster should rejoice!

Your house will be much more affordable in a couple years after all of the excesses are worked out of the system.

Credit Cards are Next!

Here is a great read from the USA today explaining why credit cards are the next financial disaster.

"By raising credit limits to encourage borrowers to pile up more debt and then urging them to pay that debt off with home equity, banks put card customers on a "lucrative hamster wheel," says Joseph Ridout, a spokesman for Consumer Action, an advocacy group.

In theory, paying off high-rate card debt with lower-rate home equity is wise, says Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling. But the reality, she says, is that many who did so during the boom just "re-debted," running up more card and mortgage debt.

Industry analysts, consumer advocates and lawmakers are starting to fear that some of the $461 billion in card debt that the Fed says was sold as securities to Wall Street investors could unravel, just as a sizable chunk of the $6.5 trillion in mortgage-backed securities is now doing."

Final Take:

They better be worried because credit card debt is unravelling right now. As described in the article above, Credit card default rates are at a 6 year high and worsening.

The home always goes first because god forbid our credit cards get taken from our binging consumers. They just have to buy that 58" HDTV. Forget the house!

The banks knew what they were doing whenthey were giving out credit cards like candy. Our consumer was weak and vulnerable and an easy prey. Shame on them for taking advantage of it. They got what they deserved in my eyes. Maybe those billions in credit losses will make you think next time before they take advantage of people.

Hold on tight folks, the news gets worse everyday!