C’mon. Let’s all take a minute to catch our breath. There’s way too much hyperventilating going on.

I myself have been torn through this process. My day job is tied directly to the automotive industry, and although my background and attitudes are firmly on the side of free-market laissez-faire economics, a part of me has secretly been pulling for the loan package to be approved. Because it would be easier.

Because it would be easier.

If ever there was something that explained society today in the US it’s that. We want ease. We want simple. We want Judge-Judy type scenarios where everything gets decided pretty neatly for us in a half hour.

We don’t want long and difficult transitions. And we certainly don’t want pain.

But with Ron Gettlefinger’s inexplicable decision yesterday to reject the notion of any more concessions – kind of like a man on the deck of the sinking titanic thinking that he is still in control of his destiny – all we have left to look forward to is a difficult transition. And probably lots of pain.

But now that the notion of a loan package looks like it’s dead, and with it the “easy way out”. Can we finally talk turkey? Can we take the gloves off and talk truth and not hyperbole?

Good.

And truth is this – that bankruptcy IS the way to ensure the survival of this industry into the future. Period. Let’s face it – the bridge loan packages were simply stopgap measures to buy them more time to restructure. But these companies need a massive restructuring focused on slashing hourly labor and retiree costs though, and the ONLY way to do that is through a bankruptcy action.

You need look no further than the UAW’s action yesterday to see why bankruptcy is necessary. After all these years the UAW still doesn’t get it. And because of that I don’t believe for one second that any restructuring action without bankruptcy would have been successful. And so while the bridge loan scenario would have been easy, it would also have started the final death spiral for the manufacturers, and probably for this area.

So now that it looks like we’re heading down that path, can we stop all the chicken-little talk about nobody buying from a bankrupt company? It made for a nice, visible, and dramatic argument when we were looking for the easy way out. But the fact is, it’s simply not true.

In fact, I propose that we stop talking about bankruptcy completely. It’s unproductive. And it sends the wrong message.

All of us in this area have a huge vested interest in this RESTRUCTURING of the automotive industry. And through this RESTRUCTURING this area will bounce back stronger than before. We have always bounced back. And I’m confident that we will again this time.

And I’m putting my money where my mouth is – I’m closing on the purchase of another investment property this afternoon, and I have three more that I’m looking at.

So let’s use all of our considerable communication powers and channels to talk about all the great things that are going to come out of this RESTRUCTURING. The pain is now going to happen no matter what.

It’s up to us to choose how to react to it.

Panic and uncertainty – uncertainty and panic. The twin towers of turbulence that are causing all sorts of commotion in our financial markets.

Sure there are real problems. But these two mischief makers are making things a lot worse than they need to be.

So much so that we are seeing interest rates approaching zero. Read on for the story.

Investor fear drives US Treasury yields to near zero

Dec 7 06:50 PM US/Eastern

The panic in global financial markets has sparked an unprecedented rush into safe US Treasury securities, driving yields on short-term government notes down to almost zero.

Due to stampeding demand for safe short-term investments, the US Treasury’s four-week and three-month bills on Friday yielded an effective rate of 0.01 percent — down sharply from 1.515 percent and 1.785 percent, respectively, in early September.

Other Treasuries are also showing record low yields. The 10-year bond yield fell as low as 2.505 percent and the 30-year bond yield slid to 3.005 percent at one point on Friday. The six-month bond yielded a mere 0.20 percent.

The low yields reflect a surge in demand for these instruments, seen as the safest in the world during times of turmoil.

“Investors seem to be content to sell stocks and park into the bonds for now,” said Greg Michalowski of the financial website FXDD.

Analysts say the fear factor has pushed up demand for Treasuries, since investors are virtually certain the US government will not default.

Other factors include worries about deflation and the overall trend in interest rates, with the Federal Reserve having cut its base lending rate to a historic low of 1.0 percent, and further reductions possible.

But Bob Eisenbeis, analyst at Cumberland Advisors, said the unprecedented low yields are a sign of “dysfunction” in markets.

Eisenbeis said US municipal bonds are paying upwards of 6.0 percent tax-free and corporate bonds even more, but that fears of default and a lack of knowledge about underlying bond quality have led investors to shun these alternatives.

One reason for the surge in demand for Treasuries, said Eisenbeis, is the Federal Reserve’s decision to flood financial markets with liquidity including through other central banks.

Many central banks and commercial banks are reluctant to use this cash for traditional lending, and are buying Treasuries to ride out the storm, Eisenbeis added.

A big question for the market is whether the Treasury market has become a bubble that will burst.

Although the low rates allow Washington to borrow money cheaply, Eisenbeis said such a scenario could be perilous for the economy and the dollar.

“When you have this huge flood of liquidity into the marketplace, that can’t last forever,” he said.

A bursting of this bubble could mean a rush out of Treasuries, forcing the government to pay higher rates on an unprecedented amount of debt.

“We would have huge increases in our costs and people wouldn’t want to hold Treasury obligations anymore because of the capital losses,” Eisenbeis said.

“You could have a huge switch in interest rates very quickly.”

Mike Larson, an analyst at Weiss Research, says the long-term bond market could be “the biggest bubble of all,” worse than the dot-com and real estate bubbles.

“Treasury bonds almost never move this far, this fast. And interest rates, which move in the opposite direction of bond prices, almost never fall this far, this fast,” Larson said.

Larson said the yield on the 10-year Treasury bond plunged from a mid-October high of 4.08 percent to nearly 2.5 percent this week, “yielding lows not seen since the mid-1950s.”

“There are lots of reasons to believe this Treasury rally is unsustainable, and that a day of reckoning is fast approaching,” he said.

Sal Guatieri, economist at BMO Capital Markets, acknowledged that “investors are throwing money at Uncle Sam with the same conviction that they bought houses and dot-com stocks in their heydays.”

But he argued that if inflation is quashed and investors retain confidence in the US government, the dangers have not yet hit a boiling point.

“While Treasuries may be overpriced, they probably are not yet in a bubble,” he said.

Copyrighted by the author.

I just read an article that said that treasury bill and bond rates of returns are approaching ZERO. (I’ll post it tomorrow) So it’s clear that everyone with investable funds is looking for higher returns at least in a portion of their portfolio. Residential real estate, including apartment buildings, offer those types of returns with risks that are substantially lower than the stock market.

Hat tip to @Eric_Urbane and @mbrewer on Twitter for the heads up on this.

Report Rates Apartments as Best Investment Opportunity in 2009

Source: MULTIFAMILY EXECUTIVE News Service

Publication date: November 3, 2008

By Rachel Z. Azoff

This is an article that ran in the Financial Times yesterday. It seems that some deep pockets in China think that we’re near the bottom here, and they’re ready to jump in and start buying.

I happen to agree with them.

That’s the voicemail that I received yesterday afternoon while we were out cutting down our Christmas trees out near Holly.

My intrepid resident maintenance man at my recently acquired apartment building called to tell me that a set of tenants had moved out unexpectedly and that the people across the hall were complaining about a really nasty smell coming from the unit.

He didn’t have a key and he didn’t really want to go inside it anyway.

Well as you can imagine a thousand thoughts ran through my head as I drove over there last evening (I wasn’t in any rush to get over there – if it really was a dead body is certainly wasn’t going anywhere).

My mind raced – who do I call? The police? The coroner? An exorcist? How much paperwork would there be? How much would it cost to clean up the mess, and most importantly – how the hell long would it take to get the unit re-rented?

To add to the drama, the tenants (of course) had not paid the electric bill and so the power in the unit had been shut off.

So I arrive at the building in the driving rain, get the keys, and head over to the unit.

I enter the building and as I stand in the hallway outside the unit I don’t smell anything more foul than greasy food cooking.

So armed with my maglite flashlight I knock then let myself into the unit.

What I saw inside in the pitch dark was absolutely shocking.

The place was clean and almost ready to re-rent as is.

No dead body. No smell. Nope. Not even much of a mess. The outgoing tenants had even borrowed the carpet shampoo machine that we keep at the building and had cleaned the carpet.

But no drama. And that’s the way that I like it. Vacancies I can deal with. Drama is another story. I’m going to have a chat with my maintenance person.