What's scarier than the grisly crime drama and 2008 Academy Award best-picture winner "No Country For Old Men"?
The gruesome thriller playing out in the world's largest economy; in this one, the United States has become No Country For Old bull market mania.
Here we have the opening scene: The "deal" between the Credit Industry and the U.S. consumer has been busted. The aftermath is stomach-churning: A desert wasteland of broken down, abandoned homes with caved in roofs and boarded up windows; vandalized buildings; and the dangling severed arms of banking giants written down by low-grade loans gone bad.
The question: How much has the marketplace lost in the "coin toss" of high-risk mortgages? Try $400 billion (globally) and counting.
The quest: In the film "No Country," a truth-seeking, serial-killing hit man is sent in to find those to blame for losing the money and bringing them to justice: i.e. violent death by cattle stun-gun.
In its financial equivalent, the hired hands of every federal regulatory agency and state government are now on a mission to hunt down the guilty parties responsible for the housing and credit blood bath. The name beneath the face on their Wanted poster: Subprime Lenders and the Banks that backed them.
Like the contract killer Anton Chigurh, they take no prisoners. Their punishment -- whether by prosecution or persecution -- is thorough. Case in point: Since 2003, more Cleveland, Ohio residents have been displaced by repossession than all the victims of Hurricane Katrina rendered homeless in 2005.
Now, Cleveland's mayor is suing the world's biggest banks: Citigroup, Goldman Sachs, HSBC, and on. In his own words: These lenders "acted like organized criminals, financing the sale of products they knew could do nothing but harm. Subprime mortgages proved as bad as drugs in the destruction they have wrought." (Times Online, UK)
Whether you agree or disagree, the fact is: the subprime mortgage industry was a marked man the moment it went mainstream. Specifically, by the end of 2005, hybrid-adjustable rate mortgages made up 42% of home financing versus 1.9% in 2001. That year, the July 2005 Elliott Wave Financial Forecast foresaw its inevitable transformation from poster boy to whipping boy. In our words:
"There's no mistaking who the Enrons of the bust phase will be. They will be the firms now peddling adjustable-rate, no-interest, nothing down and assorted other types of subprime mortgages."
Now that the crusade against the banking "bad guys" is underway, however, a double-edged sword emerges: The more failures and finger pointing that go on, the tougher become the lending standards at ALL banks: big, small, for business or pleasure.
The trend toward "greater down payments, higher credit scores, and more documentation" has taken off full speed ahead, writes one recent news item. The result: It's now harder than ever to acquire the only thing keeping the U.S. economy afloat: CREDIT.
Here again, our library of original material served its purpose: In his 2002 best selling book Conquer the Crash, Robert Prechter Jr. explains:
"In boom times, banks become imprudent and lend to almost anyone. When lending officers become afraid, they call in their loans and slow or stop their lending no matter how good their clients' credit may be in actuality. Instead of seeing opportunity, they see danger."
At one point, "No Country's" assassin poses this question to thief of the stolen drug money: "Let me ask you this. If the rule you followed brought you to this, of what use was the rule?"
Consider: If the mainstream advice you followed brought you to see the current economic downturn AFTER the fact -- what use what the rule?