Recently in SeekingAlpha, the noted trend tracker of the financial markets, we see a variety of troubling signs that things are starting to snowball, in a negative direction. Are they real or are they just red herrings? This post is an attempt at an academic, objective overview. What do you think? How do you read the tea leaves? 

I. Commercial Real Estate Imploding There has been lots of news about commercial real estate in the past few weeks. None of it is any good. Let’s take a closer look. U.S. mall vacancy rates rise as economy slides

• The vacancy rate at U.S. strip malls rose to the highest level since 1996 in the first quarter of 2008, while that for big malls reached levels unseen since 2002, research firm Reis said on Friday.  
• The amount of space occupied by retailers fell for the first time since Reis began tracking the sector in 1980.
• Strip mall vacancies rose 0.2 percentage points from the preceding quarter to 7.7 percent.
• By the end of the year, the rate likely will reach or surpass 8 percent.  
• The vacancy rate for big regional malls was the highest since the fourth quarter of 2002, the report said.

II. Sub-prime Losses Concentrated At Large Banks, Commercial Real Estate At Smaller Banks

A.M. Best Special Report: Subprime Losses More Prevalent Among Largest Institutions

• Regional credit issues are emerging that is reminiscent of the real estate crisis in the mid-1980s.
• When disregarding the largest 200 banks, commercial real estate risk is the leading contributing factor to overall credit risk for mid-size and small banks.
• Smaller Banks Face Growing Commercial Real Estate Risk: The credit risk may quickly be beating a path to the door of smaller regional and community banks.

Late payments on US consumer loans at 16-year high

• Credit and debit card delinquencies rose to 4.38 percent from the third quarter’s 4.18 percent, following four straight quarterly declines.
•  Housing wasn’t spared. Delinquencies on home equity loans rose to a 2-1/2-year high of 2.39 percent and on home equity lines of credit rose to 0.96 percent, matching a level last seen in the fourth quarter of 1997.
• Losses tied to mortgages, credit cards and other consumer loans are expected to hurt quarterly results at large lenders such as Citigroup Inc (C), Bank of America Corp (BAC) and Wachovia Corp (WB), and at more specialized lenders such as GMAC LLC, the auto finance and mortgage company. 

III. Consumer Blues

• That last article might not seem to be related to commercial real estate at first glance, but it strikes at the very heart of the matter: Consumers are tapped out.
• Stores are going bankrupt at an increasing rate. I talked about this recently in Bankruptcies: The No. 1 Growth Area For 2008.
• Now we see Linens ‘n Things Expected to File For Bankruptcy. Linens ‘n Things Inc., a home-furnishings retailer with 590 stores, caught by an increasing debt load and shrinking housing market, is expected to file for Chapter 11 bankruptcy-court protection by Tuesday, marking one of the first major retailers to seek bankruptcy protection in this economic downturn.  

IV. The Cycle

Weaker consumer spending >> Leads to layoffs >> Layoffs >> Lead to weaker consumer spending

Bernanke is attempting to break the cycle by lowering interest rates. However, lowering interest rates cheapens the U.S. dollar and especially harms those on fixed incomes depending on interest on savings to help them get by. In addition, the weak dollar policy of the Fed is one of the factors behind rising gasoline prices.By now, according to some, it should be clear the Fed Is Incompetent And Dangerous.

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