Behind on their check-ins, the popular budget hotel chain defaulted on $367 million worth of mortgage debt. It's the the latest hotel casualty since Extended Stay Hotels filed Chapter 11 a month ago.

Along with the rest of the sector, numerous commercial hotel REITs are now staring into the same abyss that dimmed Red Roof's lights. In other words, Misery will be having plenty of company.

In a preview of what's to come, Red Roof's owners missed scheduled payments on four mortgages with 131 Red Roof Inns pledged as collateral.  Meanwhile, the chain is heavily weighed down by nearly $1.2 billion in debt, including mortgages, mezzanine loans, and other notes.

The culprit, naturally, is the economic downturn which has put a major league crimp in hotel revenues, since both businesses and consumers tighten up like clams and rethink their travel plans.

As a result, occupancy at Red Roof's properties — which averaged 62% at the market peak — has fallen to 50.7% this year. That matches the downturn of the U.S. budget hotel industry, which registered a 9.7% decline in occupancy in the first five months of this year from the same period last year, according to Smith Travel Research.

That has created a cash flow crunch and left the chain unable to meet its debts. When that happens, bankruptcy is not usually far behind.

Commercial Hotel REITs Teeter as Customers Check Out

Unfortunately, Red Roof Inns is hardly alone. Money is getting tighter everywhere.

"Cash-flow performance issues and default concerns in 2009 have extended themselves to that of budget-priced, limited-service hotels," said Frank Innaurato, a managing director of Realpoint, in a recent interview. "We would expect to see more instances of this type of default as borrowers continue to struggle with diminished cash flow from their properties in the not too distant future."

The growing problems for commercial hotel REITs, however, are two fold.

First is a shrinking RevPar, which only exacerbates the cash flow issue of lower occupancy. RevPar, or revenue per available room, is the metric used by the industry to indicate the overall financial performance of a property.

Not surprisingly, RevPar has taken a beating this year.

In fact, according to the most recent data, while the industry's occupancy fell 11.5% year-over-year, revenue per available room decreased by 20.5% as room rates fell.

As expected, it will get worse before it gets much better.

"The good news is that the bottom of the current cycle for the U.S. hotel industry is soon to arrive," R. Mark Woodworth, president of Atlanta-based PKF Hospitality Research, said recently. "The bad news is that 2009 will be the weakest year on record for the domestic lodging industry, and 2010 is going to be disappointing as well. If you are wondering when we'll start to see actual growth in RevPar, then you'll have to wait until 2011."

However, aside from a shrinking RevPar, property valuations in the industry are also taking a nose dive.

For example, earlier this month, Sunstone Hotel Investors Inc. revealed it planned to walk away from its 258-room W. San Diego property, turning the hotel over to its lender, Gatehouse Capital Corp.

Meanwhile, in a national telephone conference call, Sunstone president and CEO Arthur Buser told hotel industry analysts that other Sunstone properties may also be deeded back to various lenders if they fail to modify loan balances.

But here's where it gets really interesting. . .

Buser also said even though Sunstone had enough cash to make the June 1, 2009 mortgage payment, he decided to walk away from the W. San Diego property after the market value of the hotel today fell below the $65 million due on the note.

Of course, that is considerably less than the purchase price in 2006, when Sunstone bought the hotel for $96 million. So, they basically handed the keys over to lender, even though they could presumably service the debt. Three years later, Sunstone said no deal.

Meanwhile, Sunstone owns 43 other hotels totaling 14,755 rooms that are generally operated under nationally recognized brands such as Marriott, Hilton, Hyatt, Fairmont, and Starwood. However, given the circumstances, you would have to wonder how attached Buser is to any one of them.

Since then, the news within the hotel industry has only gotten worse.

Welcome to the Hotel California

In that regard, I bring your attention to a story that was published just last week in Hotel News Now. Aside from a massive budget shortfall, the hotel industry in the Golden State is also struggling to stay afloat.

The story was entitled California to see record number of hotel foreclosures.

It read:

The number of California hotels in default or foreclosed on jumped 125% in the last 60 days. The state now has 31 hotels that have been foreclosed on and 175 in default, according to California-based Atlas Hospitality.

Initially, the wave of distress in California was seen by the smaller, non-flagged hotels in secondary and tertiary markets. As the hotel economy worsened, we have seen it impact all property types. The properties range from the luxurious St. Regis Monarch Beach Resort in Dana Point to the more economical Extended Stay and Red Roof Inn chains.

No market or brand is immune in this downturn. In reviewing the hotels in default or foreclosed on, we found that over 75% of the loans originated from 2005 to 2007. During this period, over 2,500 California hotels either refinanced or obtained new purchase loan financing.

Unfortunately, based on today's market values, we estimate that none of these hotels have any equity remaining. The unprecedented decline in room revenues (California is down 21.5% year-to-date) combined with the jump in cap rates has resulted in a massive loss in values.

We estimate that values are currently 50-80% lower than at the market's peak in 2006-2007. (Emphasis mine.)

Now, if that doesn't spell trouble for commercial hotel REITs, nothing does.

As for the state of California, all I can say is I'm haunted by something a teacher said to me a long time ago. . .

"Steve," he said, "if you want to know what's going to happen next, just keep your eye on California."

"Everything," he warned, "happens there first."

That's why I believe this is a trend that is just getting started as "jingle mail" now moves into commercial real estate.

By the way, my Hawaiian contact tells me that hotels on the Big Island are running at about 25% occupancy, which, if true for all the islands, would be devastating. Meanwhile, just last month, the Sheraton on the Big Island went into foreclosure after the resort's owner defaulted on its mortgage.

Your bargain-hunting analyst,

Steve Christ, Investment Director

The Wealth Advisory

P.S. Struggling hotel REITs are only one part of the rickety tower in commercial real estate these days. Unfortunately, it's only a matter of time before the whole sector comes tumbling down. But that doesn't mean you have to be just a bystander to it all. I've identified 4 ways to earn big profits as it happens. To learn more about these opportunities, click here.

It seems like every day we hear calls from the leaders of India, Russia and China to create a new world reserve currency to replace the weakening dollar.

Will it happen?

Nobody knows.

But I do know this: America is printing so much money, and it's going into so much debt, there’s absolutely no way the US dollar will rebound anytime soon.

And for the morons who think that Obama knows what he’s doing by spending trillions of dollars to jump start the economy, just remember this: Bush started this spending spree. In terms of the economy, Obama is no different than Bush.

In the article below, the newest member of the Angel Publishing team — Alex Koyfman — explains why the dollar may never return to its status as the world’s reserve currency.

Enjoy,

Brian Hicks
Publisher, Wealth Daily

______________________________________

The US government and Federal Reserve would like you to believe that the US dollar has inherent value. . . that it's stable. . . that it's a store of value. . . that it is, and will always be, the world's preferred currency.

But, as more and more people are learning everyday, that is all just a fairytale. . . a fantastic misrepresentation of reality. The truth is. . .

The Value of the US Dollar is Gone

A 1928 $1 Silver Certificate

A dollar, once redeemable for physical gold or silver, is only backed today “by the full faith and credit of the United States government.”

That means the US dollar is given credit and strengthened by the government's ability to levy taxes or borrow from a separate entity, like the Federal Reserve or a foreign government.

Think about that for a minute.

First of all, no entity, not even one as large as the United States government, has unlimited credit.

The American government, just like you or me, is limited by how much it can borrow. And with the national public debt already approaching $11.5 trillion — and growing by an astonishing $3.8 billion per day — the nation must be quickly reaching its credit limit.

Perhaps more frightening is the government's guarantee to back the US dollar through its ability to tax the American people.

If you don't pay your taxes, you may be fined, your paychecks may be garnished, your property may be seized, and you may even be thrown in prison. . . federal prison!

In other words, the government's guarantee of the dollar ultimately rests on your fear of incarceration.

What once derived its value from gold now takes its strength from state-sponsored intimidation.

It's true, we've fallen quite a ways from the days when the greenback meant something. And what's really scary is that. . .

The US Dollar's Value Has Eroded in Just a Few Decades

At the close of WWII, with just around 5% of the world population living in the US, the nation nevertheless produced 75% of the manufactured goods consumed globally.

It was an astounding achievement that set the stage for what many historians dubbed “America’s Century.”

That century is now over, literally and figuratively.

Although our economy was once responsible for a constant flow of steel, cars, ships, high-tech equipment, and all varieties of household goods. . . although our nation once fought off the Nazis and supplied the Allies with the goods and capital required to defeat the forces of evil and build the modern world up from the ravages of global war. . . today, America's number one product is debt.

And the mountains of debt we accumulate on a daily basis will only keep growing because our industry and exports simply cannot keep up.

We've all felt it, from the common citizen to the biggest corporations.

Unfortunately, the Fed’s main tactic for combating this mounting crisis is adding to the money supply, which they’re doing at an unprecedented rate today.

Economist and executive editor of Shadow Government Statistics John Williams began tracking the total supply of money in circulation after the Federal Reserve refused to continue publishing the figures in 2006. Today, Williams estimates the total supply of US dollars — including large time deposits, institutional money-market funds, short-term repurchase agreements, and other larger liquid assets — is approximately $15 trillion.

This is a shocking 250% increase to the supply of US dollars in the past 15 years alone!

Of course, you know the result of this approach. . .

Every dollar the Federal Reserve prints, when not supported by an equivalent growth in productivity, just leads to a devaluation of every dollar in circulation. That includes all those dollars you’ve slaved to put away for your household improvements, your kids’ college fund, and your retirement.

Inevitably, as the Federal Reserve's hunger for capital increases, and the individual value of each dollar decreases, the taxpayer — the true backer of the US Dollar — will be coerced into paying ever-increasing chunks of precious income to keep the machine alive.

Eventually, something will have to give: either your ability to earn or Uncle Sam's ability to take it from you.

You make the call which will outlast which.

There is a way out, however. You can still salvage your savings and secure the value of your assets, as they're valued today, before it’s too late.

But for that, you’ll have to return to the antiquated practice our national economy dropped back in the early 1970s.

You can take your faith out of the future prospects of the US economy and put it back into something inherently valuable. . . something that maintains and even increases its worth just by existing.

The political machine that has ravaged our economy has had its chance, and has blown it every step of the way. Take your financial future into your hands today and learn why now is the best time in American history to invest in the metal that was once the backbone of an empire. . .

Gold!

Good Investing,

Alex Koyfman
Contributing Editor, Gold World

P.S. Let's face it, the only place to keep your money safe is in gold. But today's market offers investors new ways to hedge against a falling US dollar and profit handsomely in the process. Last week, I took a much closer look at Greg McCoach's latest gold investment recommendation, which yields 2x the profits made by gold. It turns out that every time gold goes up 1%, you're paid 2%. . . or every time gold goes up 10%, you're paid 20%. It's a pretty sweet deal any way you cut it. To learn more on how you can profit from Greg's new investment vehicle, just click on this link: http://www.angelnexus.com/o/web/13592

______________________________________

From Gold World's Gold and Guns blog...

Banks to Stop Accepting IOUs from California
...as early as Friday!

Last week, the state of California began issuing IOUs — or “individual registered warrants” — to hundreds of thousands of its creditors. State Controller John Chiang said that without IOUs California would run out of cash by the end of this month.

But now a group of the biggest US banks — including Bank of America, Citigroup, Wells Fargo, and JP Morgan — say that they will stop accepting California's IOUs as early as Friday, adding pressure on the state to close its $26.3 billion annual budget gap.

Meanwhile, Fitch Ratings dropped California's bond rating from A to BBB amid the budget deadlock.

We'll keep you posted as the story develops...

— Luke Burgess

Here's the latest on the state of U.S. consumers.

Not surprisingly, they're still struggling to keep it all together as job losses mount.

From Bloomberg by Margaret Chadbourn entitled: Delinquencies on U.S. Home-Equity Loans Reach Record

"Late payments on home-equity loans rose to a record in the first quarter as 18 straight months of job losses and a slumping economy left more borrowers unable to pay their debts, the American Bankers Association reported.

Delinquencies on home-equity loans climbed to 3.52 percent of all accounts from 3.03 percent in the fourth quarter, and late payments on home-equity lines of credit climbed to a record 1.89 percent, the group reported today. An index of eight types of loans rose for a fourth straight quarter, to 3.23 percent from 3.22 percent in October through December, the group said.

"The number one driver of delinquencies is job losses, which we've seen build and build," James Chessen, the group's chief economist, said in a telephone interview. "Delinquencies won't come down without a dramatic improvement in the economy and businesses will have to start hiring again."

The U.S. economy lost an average 691,000 jobs a month in the quarter, and more than 6.5 million positions have been shed since the recession began in December 2007. The economy this year will shrink the most since 1946, according to a Bloomberg survey of 61 economists last month. President Barack Obama predicted last month unemployment will reach 10 percent this year. The rate was at a 26-year high of 9.5 percent in June.

Delinquent bank-card accounts jumped to a record 6.60 percent of outstanding card debt in the first quarter from 5.52 percent in the previous period, a signal unemployed borrowers are relying on cards as falling prices erode the equity in their homes. More borrowers are using cards to meet daily expenses after losing their jobs, the ABA said."

The ABA's survey tracks data from 300 banks, monitoring late payments on eight types of closed-end loans that are used as a benchmark for typical consumer delinquencies. The composite index rose to the highest level since the group began collecting data in October 1974. Loans are considered delinquent when a late payment is 30 days or more overdue.

Of the closed-end accounts, delinquencies rose on five: home-equity loans, direct auto loans, recreational vehicle, mobile home and personal loans, the group said. Auto loans are 45 percent of all consumer closed-end loans, the ABA said."

Ouch.

By the way, here's a great video on the state of the markets from CNBC's Art Cashin. An old hand, Cashin has seen it all in his days working the markets. That makes what he has to say worth watching.

Roll the tape....

Great stuff Art.

Related Articles:

Warren Buffett says the economy is in a 'shambles'

Condo zombies haunt Miami

The U.S. housing market's 800 lb gorilla

Credit Card Companies Say "Let's Make a Deal!"

Prime Mortgage Delinquencies Double

To learn more about Wealth Daily click here

I'm referring to those who question the validity of renewable energy. . . those who think it's government-sponsored. . . who think it's not scalable.

Or even worse, those who think it's not profitable.

If you're one of them, you're wrong. Plain and simple.

Let me explain...

Biggest Banks in the World

I had the pleasure of sitting in on a finance forum held at the Waldorf Astoria a few weeks ago.

One by one, representatives of the smart money took to the podium to talk about their renewable energy investment strategies.

These weren't socialists or greenies. They were hardcore capitalists. And they love renewable energy.

In the panel titled Global Financial Markets, the heads of the largest investment banks in the world lined the stage and praised renewable energy for its business sense, not for its environmental stewardship.

Ray Wood of Credit Suisse said:

It's a phenomenal time to be involved with renewable energy. We actually have several titles for it within our firm and one of them is alternative energy. I'm very much looking forward to the day, which I think is coming soon, where the alternative part will be misrepresenting how important it is in terms of utility scale. And we think we're getting very close to that day.

And the other banks were just as sycophantic, rattling off their green investment expertise one by one.

Citi's Vice Chairman boasted they've advised on 8 of the 10 largest green mergers and acquisitions since 2008, including the largest wind transaction ever between EDP Renewables and Horizon Wind — worth $2.9 billion.

Jim Metcalfe, the Global Head of Power and Utilities at UBS, boasted his company is "the leading global franchise in advising and raising capital for renewable energy companies." And he had the chart to prove it.

This chart represents IPOs, M&A, Follow-on offerings, and Convertibles:

Nearly $8 billion worth of deals come from UBS alone. And that's without the other $30 billion coming from other global banks.

And the bragging didn't stop there.

Kevin Genieser, Managing Director at Morgan Stanley, had the following to say:

We look at this as a global business. We have been extremely active all throughout the various markets around the globe, whether it be Europe, Latin America, North America, or even parts of Asia.

We have been doing different types of transactions. It's been everything from early stage private placements through IPOs through follow-on offering, project finance and, in particular, M&A. And based on the number of transactions we have been extremely active even in this down period.

We've done things in solar. We took First Solar public. We've done things within the smart grid having taken EnerNoc public. We just last night filed the IPO for A123 so hopefully we'll be kicking off, once again, the clean technology space with regard to IPOs.

But it wasn't all about the past.

Looking to the Energy Future

It was mentioned during the panel that since 2007, over half of new energy capacity additions have been renewable-based.

Think about that. For every two new megawatts of power capacity added in the last two years. . . more than one came from a renewable resource.

According to the panel, that's because of simple economics. Not because of policy. Not because a greener earth makes them feel all cozy. But because, according to Parker Weil of Bank of America, "It comes down to unit economics. It is obvious that if you — for wind and solar, very capital intensive — invest the initially high capital to displace fossil fuels you will make a very profitable return on invested capital. Returns well in excess of invested capital."

That sentiment echoed throughout the room.

Each bank executive continually pointed to the growing external costs associated with fossil fuels. Some of them have ceased funding new coal plants altogether.

And they all said capital is ready, once again, to flow in all forms. But after having just been burned by a financial crisis, they are being more selective about potential deals, mostly waiting for federal agencies to release stimulus funding rules before they proceed.

As that happens, they are still pursuing investments in less-capital-intensive cleantech arenas. One of them happens to be the smart grid. Smart grid companies reach profitability sooner because many don't need large production facilities or the capital required to build them.

There was much talk about taking advantage of these opportunities now, before the release of stimulus rules and dollars shift the focus back to energy production technologies like solar and wind.

Make no mistake, the smart money is flowing into clean technologies. The largest and most well-capitalized banks in the world are chomping at the bit. And they are increasingly viewing long-term fossil fuel-related investments as liabilities.

If you haven't starting investing in cleantech yet, you're part of shrinking — and increasingly less wealthy — minority.

Call it like you see it,

Nick

P.S. The banks aren't the only ones looking at smart grid plays. I knew they'd do well when capital was tight. Three triple-digit gains in the sector have already proven me correct, but there are still more to come. Click here to learn all about the smart grid and the money you're leaving on the table by not investing.

P.P.S. If you're interested in learning more on the burgeoning renewable energy market, I highly recommend becoming a member of the free Green Chip Review e-letter. It's the original green investment publication, with a readership of over 150,000 profit-hungry subscribers. Simply follow this link to sign up, and we'll immediately send you our newest research report: Investing in Next-Generation Solar Power Technologies.

"Don't leave home without it" became the slogan for Amex cards, too. And over the decades, Americans took it to heart — credit cards are now second only to the housekey in joggers' shoes, they're the first option for paying for birthday gifts, and they'll get you out of a jam if you need to book an expensive flight, quickly.

And while China may lack a pop-culture touchstone for credit cards, Olympic hero Liu Xiang is helping to push them:

And consumers among the 1.3 billion-strong population are making more and more use of the powerful plastic they can put in their pockets. . .

There are more than 150 million credit cards now in use in Communist China.

Now, consider the fact that the raw number is only one aspect of a powerful electronic spending trend. . .

One that investors in international electronic payment companies like VeriFone (NYSE:PAY) can take advantage of.

Don't fret, though. . . You can make money off of increasing credit card usage in China without worrying about individual or bank balance sheets.

Playing China with NYSE:PAY

China's card usage rates are growing fast — the same PBOC report logged a 43% year-on-year jump — but Americans still have 39 times as many. The gap is narrowing, and industry organization China UnionPay has led the charge for more Chinese to charge their purchases.

China UnionPay has agreements with VeriFone (NYSE:PAY), a California-based electronic commerce company, to bring Chinese credit card terminals in line with international standards and to make sure Chinese credit card users can easily wield their purchasing power abroad.

Regards,

Sam Hopkins

International Editor

P.S. Ian Cooper's Options Trading Pit service has readied readers all over the world with a hawk's-eye view of credit card markets. Ian knows what companies to invest in and which ones to avoid. He's already led OTP subscribers to double-digit gains by combining news-based analysis with top-notch technical indicators. You can read more about Ian's service here: http://www.angelnexus.com/o/web/13511

There's always one somewhere. And rest assured, we'll find it.

In fact, if you pay attention to President Obama long enough, he'll lead you to the opportunities himself.

Check out LED technology, for example, which "just got a bit brighter" thanks to the President. (Pardon the pun.)

You see, in announcing the latest energy efficiency efforts, Obama said one of the new steps is to set new efficiency standards on fluorescent and incandescent lighting. "Now I know light bulbs may not seem sexy," said Obama, "but this simple action holds enormous promise because 7 percent of all the energy consumed in America is used to light our homes and our businesses.

"Between 2012 and 2042, these new standards will save consumers up to $4 billion a year, conserve enough electricity to power every home in America for 10 months, reduce emissions equal to the amount produced by 166 million cars each year, and eliminate the need for as many as 14 coal-fired power plants.

"And by the way, we're going to start here at the White House. Secretary Chu has already started to take a look at our light bulbs, and we're going to see what we need to replace them with energy-efficient light bulbs."

And that sounds like an LED push to me.

But to understand why it'll pay to be bullish on LED technology stocks, we have to go back to December 2007.

That's when President Bush inked an 822-page energy measure that included a future ban on 100-watt incandescent bulbs by 2012.

It was intended to make way for bulbs that use 25% to 30% less energy, lop an estimated $18 billion off annual U.S. electric bills, and cut consumer electricity usage by 60%.

Even American Technology Corporation CEO Richard Prati agreed, saying LED technology would grow "astronomically" in coming years. He even believed LED technology would proliferate like Internet companies did in the 1990s, and that LED could save consumers up to 90% on energy bills.

And we're not talking about small industry growth either. In 2005, the LED industry was valued at $205 million. By 2011, it could be valued as high as $1 billion — 388% growth in six short years.

There'll be plenty of demand, and possibly tight supply, which will benefit LED companies. But if we name the companies here, we risk "jacking" prices too high.

However, you can find more information and the names of two LED companies (on radar) in the latest alert from Pure Asset Trader.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. In case you missed any of our top stories from Wealth Daily and our sister publications, we've included them here:

Renewable Energy Finance: The Best of Times, The Worst of Times
"It's never been better and it's never been worse." That was the line ACORE President Michael Eckhart used to open the sixth annual Renewable Energy Finance Forum Wall Street.

U.S. Consumer Credit: How to Profit from the "Recovery"
You don't see Nouriel Roubini on the financial news much lately. Could it be his views are spot on and too scary for CNBC to report to the naïve believers of Cramer's "bottom" theory?

Prime Mortgage Delinquencies Double: Home Prices Continue to Slide
This may be starting to sound a bit like a broken record, but please, don't shoot the messenger. I don't make the news. I just report it. And while I'd much rather write something positive for a change, I also know that recognizing the negative is just as vital. It is what is — even if I come off as something of a Debbie Downer.

Commercial Real Estate Fears of Fallouts and Failures Are Overblown?
Reis Inc. - an impartial provider of commercial real estate performance data - says vacancy rates at strip malls, neighborhood centers, and regional malls are increasing at rates not seen in 30 years. "We've never really seen deterioration of this order in occupied space since 1980. We don't see much in expectations for improvement throughout the rest of this year and next year." 

Why Hasn't This Market Already Exploded: Government's Last-Ditch Efforts to Prop up This Domino Are All Doomed to Fail.
First it was housing. . . then the banks. And after that, the automakers came crashing down. Next up is a commercial real estate crash.

Insiders Sell the Rally: Green Shoots, Huh?
Green shoots or yellow weeds? That's the battle being waged on Wall Street these days. However, for the people who should know the answer to this eternal question, the verdict is already in. According to the "insiders," now is the time to sell stocks — not buy them.

Cap and Trade Legislation: It's Not Just a Climate Change Bill
In the ensuing media onslaught since the House passed the "Climate Change Bill," one thing has been forgotten: It's not just a climate change bill, it's also an energy bill. Initially, at least, this was supposed to be advantageous to the bill's passage. It has proven anything but.

Did the Royal Canadian Mint Get Ripped Off for $13.2 Million?
The Royal Canadian Mint, which has been touted as one of the most secure facilities in Canada, may have been the victim of a $13.2 million (CDN $15.3 million) gold heist, an audit concluded Monday.

Ontario Nuclear Development: Safety Concerns Slow Ontario Nuclear Development
The Canadian province of Ontario announced yesterday that it has suspended a plan to build two new nuclear reactors. The reason?

Since the markets are closed today and I have a date with a beach and a cold beer, I thought I publish a rerun of last year's 4th of July story.

After all, it's as true today as it was 12 months ago.

It read....

If you ask practically any American today about their country they will likely tell you that it is the greatest nation on earth.

In fact, I would even take it a step further by saying that the United States is the greatest country there is, ever was, or ever will be. But then again, I bit of a homer.

Maybe it was all those World War Two movies I watched when I was kid with my great uncle. He was an old sailor that was big on Admiral "Bull" Halsey and by extension so was I.

Or maybe it's just because I'm much older now, and I realize just how dark and brutish the world would be without her. That much I am sure of.

But what I love most about my country is that it was founded on the idea all men are created equal and are born with unalienable rights, among them are life, liberty and the pursuit of happiness.

Now that is something worth fighting for.

Of course, Thomas Jefferson put down those words much better than I ever could on this day some 233 years ago when he penned the Declaration of Independence.

And along with some other great men and their ragtag militia they defeated the greatest power of the day and founded a nation the likes of which the world had never seen. A nation that gave us men like Halsey, Patton, the boys of Pointe Du Hoc, and so many others too numerous to mention.

And while I know that no nation is perfect, I also know that America at least tries to get it right. That's good enough for me.

Here then is how it all began, when 56 men sat down and pledged their lives, their fortunes, and their sacred honor for a cause called freedom. I hope you enjoy it as much as I did. Happy Birthday America!

You've got to feel for Dennis Kneale... foot in mouth disease is horrible.

Could it be that bearish views from the likes of Nouriel Roubini are too spot on, too scary for CNBC to report to the naïve believers in Cramer's, Kneale's or Kudlow's abysmal "bottom" theories?

Could be.

If you listen to Kneale, who awkwardly took on bloggers last night, our recession is over. Yep, the same guy that once asked "What's a VIX?" is telling this to a national audience. 

Even a strategist at Barclays Capital, for example, recently said that the economy appears "to be in the sweet spot of a recovery" and that the recession may have ended [in April]"

Huh?

According to Roubini, "recent data from the U.S. and other advanced economies suggest that the recession may last through the end of the year. Worse, the recovery is likely to be anemic and sub-par. . . The recession is not going to be over today. It's going to last another 6 to 9 months."

Unemployment is worsening. Housing woes are far from over. And banking troubles are far from being solved. "I see the risk of a double-dip, W-shaped recession. . . towards the end of next year," added Roubini.

But how?

• First of all, they fail to see a very important thing Brian Hicks, publisher of Wealth Daily, mentioned last week: "The U.S. economy can't bottom until banks and financials bottom. . . and banks and financials can't bottom until housing prices bottom." And with home prices expected to fall another 14%, according to Deutsche, recovery is a ways off.

• Second, unemployment is still getting worse. Most economists now believe unemployment will hit 10%. . . with some, according to Hicks, predicting 12% and higher. Couple that with the fact that U.S. consumers are swimming in debt, and what you're left with is a destructive downturn. That means consumers could still struggle to pay bills and be forced to dip into savings just to get by. And, as Peter Schiff will attest, savings are the "lifeblood of a healthy economy."

• Third, the credit card crisis bubble continues to expand. In fact, credit card charge-offs just ballooned to a 20-year high, as Americans battled job and home losses, lost 401k value, and amassed mountainous debt. Revolving credit is about $1 trillion, up about 60% since 2000. The charge-off rate - which measures card loans the banks don't expect to be repaid - hit 10.62% in May from April's 9.97%, according to Moody's. And some expect that rate to surpass 12%.

I could go on, but there's another blog out there called The Market Ticker, which just published a brilliant piece called To Dennis Kneale: You're an Idiot that you should check out. Enjoy.

Since Dennis saw fit this evening on CNBC to "go after" bloggers who in turn had gone after him, yet he omitted The Market Ticker, I'll go ahead and put a full-on dredge out behind my stern and slow to 3kts.

And Dennis, if you would like me on your show, I'll be happy to appear.  Phone is fine.  And I'm not anonymous, nor do I want to be - CNBC already has has my full bio, my full name, and my CNBC-standard disclosure document back with a digital signature affixed.  You can also "whois" this domain and get my full name and address.  Good enough?  Several employees of NBC Universal are on my forum and a CNBC producer has my direct email address - just ask around and I'm sure you can obtain it, and if you do email me I'll be happy to call you at your convenience.

OK, now on to the facts - your idiotic and utterly unsupportable "the recession is over" call.

There are two types of recessions, if you happen to know more about economics than you knew about options a year ago, when you were caught asking on the air "what's the VIX?"

The types of recessions are inventory driven recessions, the most common, and credit driven recessions.

The last material credit driven recession was in the 1930s.  We called it the "The Great Depression."

Inventory-driven recessions are primarily about excessive industrial capacity for demand.  That is, manufacturers and suppliers of services get too bullish about prospects, build too much capacity and inventory, and wind up engaging in a destructive price war in an attempt to "win".  This drives down profits and ultimately forces the weaker firms out of business, ergo, recession - GDP and employment decline.  Having cleansed itself of the excess, the economy recovers.   The trigger for these recessions is often (but not always) an external shock such as the oil embargo in the 1970s or the collapse of the Internet fraud-and-circuses games in 2000.

You can read more here.

Great stuff. I think I just found my next favorite blog... well, in addition to mine.

And to those of you that celebrate, have a very happy and healthy July 4^th weekend... except you Kneale (kidding).

That being said, what goes on in the store after folks pass the greeter tells us more about the state of Consumerville than any other piece of data. That's how important the king of the big box has become to the U.S. economy over the years.

In fact, the Bentonville-based company is now so big that it's the 6^th largest Chinese importer and the world's largest grocery chain. And that doesn't even take into account the fact that it is also the largest publicly-held U.S employer.

So, when the CEO of the discounter talks about the state of the economy, people tend to notice. And through it all, shares of Wal-Mart Stores stock rise and fall with these same economic tides.

Wal-Mart's Economic Outlook

However, when the CEO of Wal-Mart Mike Duke took out his crystal ball two months ago, green shoots weren't anywhere in it.  

Battered consumers, according to Duke, were buying cheaper cuts of meat, spending more on vitamins to avoid trips to the doctor, and buying flat-panel televisions instead of taking vacations.

"In talking to our customers all across the country," Duke said, "I think there is still a lot of stress." Moreover, the CEO predicted, "It's not a V recession, where we'll just bounce out and come back. This is one that is going to take a sustained change in the way that families live."

Duke, who took charge of the world's largest retailer on Feb. 1, also said Wal-Mart shoppers are buying in cycles, spending more when they get paid and cutting back when money runs low. On top of that, he said more customers are using cash, which supports the recent uptick in consumer savings.

So, welcome to the new frugality.

In case you haven't heard, it's all the rage these days, as consumers even skimp at the big box with the smiley face.

That has cast a cloud over the retail giant, leaving investors to worry how Wal-Mart's sales will measure up. It's always about winning the expectations game on Wall Street.

And in a new, free six-page report, The Wealth Advisory research team has broken down the tech giant, answering the question on every investor's mind these days. . .

Is Wal-Mart Stock (WMT) a Buy, Sell, or Hold?

In this free report, Wealth Daily subscribers will receive:

·         The results from The Wealth Advisory's proprietary scoring model

·         A buy, sell, or hold recommendation

·         A 12-month Price Target along with a current Stop/Loss

·         A technical and fundamental analysis of the company's share price

·         And much more. . .

To receive a free download of this report and our Buy, Sell, or Hold recommendation for Wal-Mart Stores Inc., click here.

I hope you enjoy your free Wal-Mart Inc. stock report. I'll be publishing many more of these in the weeks to come. . .

By the way, according to the data released on Tuesday, U.S. consumer confidence took an unexpectedly steep slide in June. The index fell to 49.3 in June from 54.8 in May, while economists were expecting a healthier reading of 55.0 for the month.

Meanwhile, even the President has predicted the unemployment rate will be north of 10% this year.

So much for the idea that the recession will be ending anytime soon.

Your bargain-hunting analyst,

Steve Christ, Investment Director

The Wealth Advisory

P.S. Given the deteriorating state of the consumer, Wal-Mart isn't the only retailer staring down slower sales. In fact, the entire commercial real estate sector is on the verge of the abyss. To learn how to protect your portfolio as these businesses go belly up, click here.

Enjoy,

Brian Hicks, Publisher

"It's never been better and it's never been worse."

That was the line ACORE President Michael Eckhart used to open the sixth annual Renewable Energy Finance Forum Wall Street.

ACORE is the American Council on Renewable Energy, a well-respected member-based organization that has been pushing renewable energy in DC for nearly a decade.

It was the perfect line to convey the current market climate.

The REFF Wall Street

Whenever I return from a conference, I always like to pass on what I've learned.

This is my third year attending the REFF, and it's grown to be one of my favorite cleantech events. Not because I learn about public companies—there are only a few there, and the conference is about finance—but because I walk away with a clear picture of the internal state of the industry from top to bottom.

Ormat (NYSE: ORA) and SunPower (NASDAQ: SPWRA) were there, but only to talk about access to capital from the public perspective. It's really all about where we are now, where we need to be, and where the hell all the money is going to come from to get us there.

Here's what I learned.

The Best of Times

There's a new, clean energy focused administration. Finally.

Green sentiment is growing to a boil both at the consumer and corporate level, with even behemoths like Wal-Mart greening their supply chain and giants like GE, Google, and IBM leveraging their know-how to get in on the action. This thing is real. We knew that.

The American Recovery and Reinvestment Act (the stimulus) has dedicated $56 billion to clean energy and efficiency via grants and tax benefits, and offered clear tax policy guidance for the industry.

There is meaningful and significant energy and climate legislation in front of Congress (passed the House since writing). For possibly the first time ever, the energy bill at hand seriously considers its environmental implications.

Indeed, for those of us with skin in this game, much ground has been covered in just a short time. It wasn't long ago when we were distraught over whether or not the investment tax credit (ITC) and production tax credit (PTC) would be extended.

Now, as was noted at the forum, that seems like ancient history. And we have much bigger issues than whether or not we're going to get tax break extensions.

Yes, the congressional majority and president are on our side. Yes, the stimulus money is going to help out in a big way. Yes, it looks as though the social sentiment is finally starting to shift.

But more importantly, with banks still unwilling to lend, where, exactly, is the money coming from to build the next solar plant? To get the financing for the next wind farm?

And for Green Chip investors, how is that going to affect the valuations of stocks?

The Worst of Times

Financial crisis. Recession. Withdrawal of lending. Loss of tax equity. Slow closing of deals. Stimulus money not being spent yet.

For all the things going for us, there are an equal amount going against.

For starters, banks are unwilling to lend until the government releases detailed guidelines about how the stimulus money is to be spent, because included in that money are loan guarantees.

The rules for those loans are still being written, and the financing structures and mechanisms still being devised. And the banks aren't willing to lend until all that's figured out.

So you can see the stalemate emerging. The banking industry is counting on government guidance before it lends to clean energy energy projects. This is because the government has thrown so much money out there that it's now a de facto lender, and its actions must be taken into account by banks when financing projects.

Neil Auerbach of Hudson Clean Energy Partners had the following questions, just to name a few:

• Do grant proceeds count as equity?

• Will grant proceeds serve as security?

• Can project developers use both grants and loan guarantees for construction financing?

• Can one JV partner in a clean energy project apply for a loan guarantee and not the other?

And his sentiment was echoed by top brass from numerous other global banks. They had many other questions like these revolving around senior debt, subordinated debt, tax equity and how the government's stimulus spending rules will affect lending practices.

So here's the concern. The procurement and construction timeline for cleantech projects can be long: 4-6 months for rooftop solar, 6-10 months for utility scale solar, and 9-15 months for wind.

The rate of new projects has already slowed dramatically because of current capital restrictions. Is the industry going to be able to survive the wait while the government hashes out lending details? How long can the industry tread water while capital continues to be choked off?

With several government officials in attendance, there were more than a few calls to speed the process or risk dying on the vine.

Cautious Optimism

From Under Secretary of Energy Kristina Johnson to Senior Advisor to the Secretary for the Recovery Act Matt Rogers (the man in charge of spending energy stimulus dollars), bureaucrats in attendance recognized the need for urgency and assured they are doing their best to speed the spending of stimulus funds.

By all accounts, Q4 2009 is looking like the release of government rules for treasury regulations and DoE loan guarantees from the stimulus. Financing and procurement for clean energy projects can resume in a big way at that time, provided the rules meet the needs of all parties. Q1 2010 to Q3 2010 is looking like the construction period for the resultant projects with operation seen in Q4 2010.

It's fair to say that a significant clean energy stock recovery will not happen until the capital begins flowing and investors see increasing revenue on the horizon.

Here's how members of the Alternative Speculator have been combating the conditions facing the clean energy market.

For starters, we're locking in easy gains. This helps keep our total portfolio buoyant while freeing up cash for the next play. We've closed 27 winning positions so far this year by using broad market volatility to pick-off familiar stocks.

We're also building positions in less capital intensive industries that can expand without access to large amounts of capital.

And the smart grid fits right in this sweet spot because most of the solutions are software driven. Companies that pursue demand response, like Comverge (NASDAQ: COMV) and EnerNOC (NASDAQ: ENOC) can make innovations with the click of a mouse, not with construction of a new turbine or panel production facility.

Perhaps that's why smart grid stocks have been on such an aggressive path recently:

It's certainly why I've been intensively covering them for the past month or so.

If you haven't taken a position in the smart grid yet, this report will show you how to get started. Not only will these stocks prosper while capital remains tight, but the sector is also slated to receive a good chunk of stimulus dollars when they start flowing.

It's a win-win.

Call it like you see it,

Nick

This may be starting to sound a bit like a broken record, but please, don't shoot the messenger. I don't make the news. I just report it.

And while I'd much rather write something positive for a change I also know that  recognizing the negative is just as vital. It is what is—even if I come off as something of a Debbie Downer.

But denial is tens times as dangerous as the truth.

In that regard, Case-Shiller released their monthly look at exisiting home prices today and they were awful yet again. The closely watched gauge of U.S. home prices, continued to post declines in April.

In all, real-estate values in 20 major cities decreased by 18.1 percent for the month from a year earlier. The only good news is that it was the smallest decline in six months.

However, that wasn't the only bad new on the day because by comparison the Case-Shiller news was kind of tame.

Instead, the worst news of the day came in a Bloomberg story on skyrocketing delinquencies in prime mortgages.

It was written by Margaret Chadbourn entitled: Delinquencies Double on Least-Risky Loans, U.S. Says

"Delinquency rates on the least-risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.

Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.

"I'm very concerned about the rise in delinquent mortgages and foreclosure actions," Comptroller of the Currency John Dugan said in a statement with the report. President Barack Obama's plan to create "sustainable, payment-reducing modifications is a positive step that should show significant benefits in the coming months," Dugan said.

Obama's program, unveiled Feb. 18, aims to help as many as 4 million homeowners by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their houses are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has shed about 6 million jobs since the recession began in 2007.

"Job losses have mounted and even those with good credit that were able to get a prime mortgage are having a harder time making monthly payments with a loss of income," said Celia Chen, an economist at Moody's Economy.com in West Chester, Pennsylvania.

Serious delinquencies on prime loans, which account for two-thirds of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report. Overall, mortgages 60 days or more past due rose 88 percent from last year, the report said.

Mortgages modified to help struggling borrowers stay in their homes fail within nine months more than half the time, the report said. About 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months; 63 percent were in default after a year. "

The good news is this is the last of the dominos. After prime mortages there nothing left to fail. Unfortunately, this is the biggest domino of them all.

Someday, this war has got to end.

The downward spiral continues....

Until then, here's a chart listing the individual declines in the 20-city index. Phoenix takes top honors with a 35% decline. Ouch.

Related Articles:

Warren Buffett says the economy is in a 'shambles'

Condo zombies haunt Miami

The U.S. housing market's 800 lb gorilla

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To learn more about Wealth Daily click here

Could it be that his views are spot on, too scary for CNBC to report to the naïve believers in Cramer's "bottom" theory? (You can't really depend on Cramer, in our opinion. When the market is up, he's bullish; when it's down, he's bearish.)

Could be.

You see, according to Roubini, "recent data from the U.S. and other advanced economies suggest that the recession may last through the end of the year. Worse, the recovery is likely to be anemic and sub-par. . . The recession is not going to be over today. It's going to last another 6 to 9 months."

Oil is quickly rising. Unemployment is worsening. Housing woes are far from over. And banking troubles are far from being solved.

"I see the risk of a double-dip, W-shaped recession. . . towards the end of next year," added Roubini. If by next year oil is heading towards a hundred US dollars per barrel, and the budget deficits are not controlled, "that could tip the global economy into another kind of relapse."

We do, in fact, see a silver lining to the economic disaster over the next two years. But it's impossible to ignore the talking heads that'd have you believe the recession is over and that economic recovery is under way.

Even Christina Romer, a senior White House official, is "more optimistic" that the economy is stabilizing. Others believe we'll stop contracting by Q3 or Q4 2009.

But how?

• First of all, they fail to see a very important thing Brian Hicks, publisher of Wealth Daily, mentioned last week: "The U.S. economy can't bottom until banks and financials bottom. . . and banks and financials can't bottom until housing prices bottom." And with home prices expected to fall another 14%, according to Deutsche, recovery is a ways off.

• Second, unemployment is still getting worse. Most economists now believe unemployment will hit 10%. . . with some, according to Hicks, predicting 12% and higher. Couple that with the fact that U.S. consumers are swimming in debt, and what you're left with is a destructive downturn. That means consumers could still struggle to pay bills and be forced to dip into savings just to get by. And, as Peter Schiff will attest, savings are the "lifeblood of a healthy economy."

• Third, the credit card crisis bubble continues to expand. In fact, credit card charge-offs just ballooned to a 20-year high, as Americans battled job and home losses, lost 401k value, and amassed mountainous debt.
• Revolving credit is about $1 trillion, up about 60% since 2000. The charge-off rate — which measures card loans the banks don't expect to be repaid — hit 10.62% in May from April's 9.97%, according to Moody's. And some expect that rate to surpass 12%.

Yep, it's bad. And bank charge-offs could near $100 billion this year alone, cutting into loan-loss reserves and sending the financial community into a whirlpool of hardship. And it'd leave little room for losses on housing and commercial loans.

Check this out: if unemployment rates hit 10%, defaults could explode. At American Express and Capital One, for example, about 20% of the credit card balances are expected "to go bad this year and next."

As for Bank of America, Citigroup, and JP Morgan Chase, we're talking about 23%.

And the last thing the financial sector needs to feel is further squeeze, as Americans have accumulated some $970 billion in revolving consumer debt since the end of September 2008, up 3.4% from the close of 2007.

Sure, the credit card industry is typically resilient during our economic slowdowns, thanks to pricing flexibility. And the traditional thinking is that as the economy sours and consumers become late on payments, credit companies can boost earnings through late fees and higher interest rates. But that's no longer the case.

The jig is up.

Defaults are growing. Charge-offs have been pushed well beyond expectations. And losses are far out-pacing what companies were hoping to account for with extra card fees and higher interest rates.

And as a consumer-driven economy that has trouble saving money, coupled with the lack of available credit, the economy can do nothing but collapse.

But it won't just hit the financial community. It'll hit retailers hard, too, with many of them switching to survival mode.

So tell me, where's this economic recovery going to come from?

Again, we may sound economically pessimistic, but we're going to tell you how it is. We're not going to pretend everything is okay and have you invest your life savings into a recovery pipe dream. I can say that we do see recovery. . . but it's about two to three years off.

Right now, the best way to profit from this market is to be short financial stocks like the banks and credit cards. . . even the XLF, high-end retailers like Coach (COH), and credit card stocks, such as Capital One (COF) and American Express (AXP).

The talking heads will continue to tell you every thing is fine. But it's not, at least not for the next two to three years. Fortunately, we'll be honest with you and safely show you how to make money even in these challenging times.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. Think fears of commercial real estate fallouts and failures are overblown?

Reis Inc. — an impartial provider of commercial real estate performance data — says vacancy rates at strip malls, neighborhood centers, and regional malls are increasing at rates not seen in 30 years. "We've never really seen deterioration of this order in occupied space since 1980. We don't see much in expectations for improvement throughout the rest of this year and next year."

But that Reis forecast assumes positive job growth and an increase in consumer spending. So, even Reis may be a bit off, as unemployment could continue to rise.

Truth of the matter, the problem could get much worse. Between now and 2011, for instance, about $814 billion in commercial real estate loans will mature, and will need to be refinanced — an issue that could make commercial real estate the next shoe to drop in this decline.

Be there when Options Trading Pit pulls the trigger on two commercial real estate put options this week.

Green shoots or yellow weeds. That's the battle being waged on Wall Street these days.  However, for the people who should know the answer to this eternal question the verdict is already in.

According the "insiders" now is the time to sell stocks-not buy them.

That's because according to InsiderScore.com, CEOs, directors and senior officers have accelerated their sales to the highest level since June 2007, two months before credit markets froze.

In fact, insiders of S&P 500 companies have been net sellers of their own stock for the last 14 weeks even as the broader markets have delivered the biggest stock rally in 71 years.

"If insiders are selling into the rally," Joseph Keating, the chief investment officer of RBC Bank said, "that shows they don't expect their business to be able to support current stock-price levels." Instead he told Bloomberg, "They're taking advantage of this bounce and selling into it."

That is something to keep in mind as you break out the magnifying glass to search for those green shoots.

After all, to quote an old Englishman, lilies that fester smell far worse than weeds.

Related Articles:

Buffett: Economy is in a "Shambles"

Roubini Sees Significant Risk of a "Double-Dip" Recession

Prechter: U.S. to Lose AAA Rating

Green Shoots? Not According to Richard Russell

To learn more about Wealth Daily click here

"Art Laffer of Laffer Associates has some very good perspectives on why he sees 20 year of hell coming up for the US economy. With thoughts like "never heard of anyone spending themselves into prosperity" he is, of course, correct. One of the best non-partisan critiques of our economic collapse. Must watch video."

Enjoy.

• Greenhouse gases mus be cut by 17% by 2020, and by 80% by the time 2050 rolls around. The government will also issue limited numbers of one ton permits every year, which companies must have if they want to emit greenhouse gas.

• Twelve percent of power from electric utility companies must come from renewable sources by 2020.

• New office buildings must be 30% more efficient by 2012.

• And, according to the Congressional Budge Office, the current bill should cost U.S. households another $175 a year and higher.

But while Democrats are partying like its 1999 over the Friday passage through the House, don't expect immediate action. It now goes to the Senate where it could get tied up with the health care bill.

Here's more from The Business Insider:

"John Boehner tells the Hill that he spent over an hour reading excerpts of the massive climate bill during Friday's debate because "people deserve to know what's in this pile of s...."

Now it goes to the Senate, but don't expect immediate action.

Speaking on "This Week" Obama adviser David Axelrod told George Stephanopoulos that the Senate will focus on healthcare, not the climate bill. He says the climate bill will be shelved until the fall.

That means the fate of the climate bill is tied to the healthcare bill. Any gains Democrats make on the healthcare legislation will come at the expense of the climate bill.

We imagine this pisses Boehner off even more. If the Senate isn't waiting for the bill, why did the House push it through so quickly?

Don't expect the House GOP to stop fighting. Republicans think they have a major issue to seize upon:

The Hill: Even though Sen. Majorty Leader Harry Reid (D-Nev.) holds the bill's fate in his hands, House Republicans intend to hammer Speaker Pelosi's signature climate-change measure over recess.

And GOP Conference Chairman Rep. Mike Pence (Ind.) said "we have only just begun to fight" as he left the Capitol Friday night.

Pence encouraged GOP rank-and-file lawmakers to hold energy summits in their districts over the Independence Day recess. In the recess packets sent home with members, he even included directions on how to organize energy summits.

The goal of holding an energy forum is to "educate your constituents about the Democrats' national energy tax legislation and let them know what 'all of the above' solution you support.""

So you can see, the U.S. is behind the curve even among our NAFTA partners... at least when it comes to moving goods from west to east. And importers will continue to choose the Canadian and Mexican freight options over the U.S... in terms of both time and cost.

As such, the head honchos at West Coast U.S. ports are asking for a lifeline in pending multi-billion-dollar spending plans.

Tens of Billions of New Money for Rail

Congressman Jim Oberstar is the conductor of federal transportation funding these days. The Democrat from Minnesota wants $500 billion in new highway, high-speed rail, and public transit funding for the Surface Transportation Authorization Act.

That's on top of billions in stimulus money already allocated for infrastructure.

Oberstar balked on saying whether the fresh spending would require a gas tax increase, but the bill suggests a hike may be in the offing.

Port heads don't mind. They convened last week to ask Oberstar and others for their chunk, and they'll probably get it.

That's because port operators are only the latest voices in a growing chorus calling for rail infrastructure improvements.

The fact is the U.S. railroad system — the cutting-edge way to move products and people in the mid-1800s — is being seen as a potential locomotive for economic growth and vitality again.

In Wealth Daily's sister publication, Green Chip Review, we've prepared a special report detailing how money is moving back into rail in a big way.

You can access the report free by clicking here: Getting Back on Track

Look for more on the half-trillion-dollar transportation bill to come, as we track the money from D.C. all the way to the NYSE.

Regards,

Sam Hopkins

International Editor

Revolving credit is about $1 trillion, up close to 60% since 2000. The charge-off rate - which measures card loans the banks don't expect to be repaid - hit 10.62% in May from April's 9.97%, according to Moody's. 10%!!!

And some expect that rate to surpass 12%, as Americans battle job losses, home losses, 401K lost value, and heavy debt load.

Yep, it's bad. And bank charge-offs could near $100 billion... this year alone, cutting into loan-loss reserves, and sending the financial community into a whirlpool of hardship. And it'd leave little room for losses on housing and commercial loans.

Check this out. If unemployment rates hit 10%, defaults could explode. At American Express and Capital One, for example, about 20% of the credit card balances are expected "to go bad this year and next."

As for Bank of America, Citigroup, and JP Morgan Chase, we're talking about 23%.

And the last thing the financial sector needs to feel is further squeeze, as Americans have accumulated some $970 billion in revolving consumer debt since the end of September 2008, up 3.4% from the close of 2007.

Sure, the credit card industry is typically resilient during our economic slowdowns, thanks to pricing flexibility. And the traditional thinking is that as the economy sours and consumers become late on payments, credit companies can boost earnings through late fees and higher interest rates. But that's no longer the case.

The jig is up.

Defaults are growing. Charge-offs have been pushed well beyond expectations. And losses are far out-pacing what companies were hoping to account for with extra card fees and higher interest rates.

And as a consumer-driven economy that has trouble saving money, coupled with no available credit, the economy can do nothing but collapse.

Here is a great clip from CNBC that gives further light to what I wrote about two weeks ago in a story entitled: How the Invisible Hand Moves the Markets

In the video, every single member of the panel admits that the government is skewing the markets to the upside on purpose-even Steve Liesman.

Unfortunately, buried beneath it all is the faulty premise that the free market still exists, which as we now know it does not.

Of course, what happens to the markets when the government hand is taken away is another story entirely.

As for the video, it's a great look at what is moving the markets today and trader Larry Levin absolutely nails it.

Roll the tape....

Related Articles:

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Warren Buffett says the economy is in a 'shambles'

How the Invisible Hand Moves the Markets

There Is No Free Market in America

To learn more about Wealth Daily click here

But there is somewhat of a silver lining.

You see, when it comes to an "improving" housing market, you can just about ignore the mainstream press and Wall Street hot shots who would have you believing in a bottom or the illusion of strength.

Jim Cramer, who has constantly called for housing bottoms since the market topped out in 2005 and continues to declare that "Housing Has Officially Bottomed," should be ignored. Heck, his August 2008 prediction of a Q3 2009 bottom is still laughable.

Alan Greenspan is wrong, too... having alerted us that the decline in the U.S. housing market "may be bottoming" and that it's "very easy to see" financial markets continuing to improve.

But what they fail to see is the very thing Brian Hicks, publisher of Wealth Daily, mentioned this week: "The U.S. economy can't bottom until banks and financials bottom. . . and banks and financials can't bottom until housing prices bottom." And with home prices expected to fall another 14%, according to Deutsche, recovery is a ways off.

Worse, according to Steve Christ this week, 22% of all Americans are underwater on their mortgages. And, "according to Fitch, home prices will fall an additional 12.5% nationally and 36% in California, with home prices not exhibiting stability until the second half of 2010. . ."

Tell me, where's the economic recovery going to come from, as ARMs reset over the next 24 months, and higher unemployment results in surging prime mortgage defaults? The only things we'll see more of are foreclosures and declining home values. And that doesn't sound like bottoming to me.

But as I said, there is a silver lining. It'll take some patience, though, as it's about three to four years off.

But as soon as resets begin to level off, then we can call that housing bottom. Any predictions from the Street before that are just guesses. Patience, though, will be rewarded.

Good Investing,

Ian L. Cooper
http://www.wealthdaily.com

P.S. In case you missed any of our other top stories of the week, we've added them here:

The U.S. Housing Market: Lower Prices Accelerate the Downward Spiral
Unfortunately for the green shoots crowd, the trend in residential real estate continues its downward spiral.

"Indeflation" and "Compartflation": Have We Reached an Inflection Point in Economics History?
A fierce debate now rages among economists, investors, pundits, and the puppetmasters of fiscal policy: What's next, inflation or deflation?

Why Hasn't This Market Already Exploded:Government's last-ditch efforts to prop up this domino are all doomed to fail.
First there was housing... then the banks. And after that it was the automakers that came crashing down. Next up is a Commercial Real Estate Crash.

The Outlook for Precious Metals Mining Stocks: Waiting for the Next Big Wave in Precious Metals Mining Stocks
The market is building a foundation for the next major wave in both the precious metals and junior mining stocks.

Detroit Fuel Economy: The Value of Detroit Fuel Economy
According to a new University of Michigan report, a successful turnaround for Detroit automakers could hinge on a rapid cultural transformation. What does that mean, exactly?

Credit Card Companies Say "Let's Make a Deal!": Tough Times For Lenders
As my old pal Ian Cooper has been writing about for some time, credit card companies now have one foot on the edge of the abyss and the other on a banana peel.

Prechter: U.S. to Lose AAA Rating: Analyst Sees Another Leg Down
On Monday, Technical analyst Robert Prechter said he sees the United States losing its top AAA credit rating by the end of 2010, as he stuck by a deeply bearish outlook on the U.S. economy and stock market.

Foreclosures Were Bad Last Year?: It's Going to Get Worse
It's not just subprime and Alt-A that we have to worry about any more. It's prime, too.

Here is the beginning of a blog post I wrote some time ago about the oversupply of condos. It dealt with an impending condo collapse in Miami.

It reads...

"Ah condos. Don't you just love them?

I mean what with all of that concrete and blacktop what's not to love?

Throw in the elevators, the creepy hallways, and that collection of busy bodies otherwise known as the condo association and its hard to see why we don't all live stacked up on one another in a neat little box.

It kind of makes you wonder how the condo market could be so down these days. After all if a 1200 sq ft condo isn't worth at least 500K what is?

In fact, as hard as it is to believe, things have gotten so bad in Miami lately that a local bank has "blacklisted" 191 new condo projects there, refusing to make any loans in any of those buildings.

Of course, if you were one of the unfortunate folks that bought one these units before the bank pulled up the ladder you're probably going to have the pool all to yourself now.

That's because it won't be long now before all of the other banks follow suit, and when they do you'll have the place all to yourself, sort of like Jack Nicholson did in "The Shining."

But at least you can solace in this as you race around the empty halls on your Big Wheel—-your losses will be nothing compared to what the banks that funded these empty towers are going to lose now.

After all, how can they possibly get all of those millions back now if nobody else will make the loans needed to sell all of those units?

That's why commercial real estate is pretty much the next shoe drop in this mess."

I bring it up because 17 months later, my sarcasm has turned out to be pretty close to reality.

From the Miami Herald by James H. Burnett III entitled: Condo dwellers finding empty buildings

"Joshua Hamann jokingly compares himself to the last human in a city overrun by zombies. He's not suggesting his neighbors are zombies. The problem is, he has no neighbors.

Hamann dwells in a newly opened condo. And in the six weeks since moving into the gleaming new Everglades on the Bay in downtown Miami, he has felt pretty lonely. Hamann occupies one of only about 50 sold condos in his 49-story tower, out of 409 units.

A couple miles north at Midtown Miami, Alisha Marks knows the same feeling. ''It was pretty much a ghost town when I got here,'' she says.

It's an odd time for South Florida's condo market. Over development compounded by the credit crunch and a sluggish economy created an abundance of condo units.

So, what is life like for the few residents whose lights are on?

''Weird,'' says Hamann, a 28-year-old project manager for a window shading company, who rents the $400,000 one-bedroom, one-bath unit on the fifth floor. Everglades on the Bay opened in April and offers residents great views, clean white walls, spotless carpets, stainless steel appliances, a well-equipped gym, a pool, and even party rooms. Hamann moved in immediately.

Since then, he has one neighbor on his floor. It took two weeks before his first experience of sharing an elevator ride with a neighbor. ''He didn't know how to react,'' Hamann notes.

''I'm a sociable guy, but you can't socialize with what isn't there,'' says Hamann, who commutes on weekends to the Gulf Coast where his wife lives. He jokes that before he moved in, he saw brochures featuring smiling ''crowds'' hanging around the pool.

On a recent Friday morning, Hamann encountered exactly three people over the course of several hours — two security guards, and a concierge.

Several stops in the fitness center? Empty.

Several visits to the pool? Empty.

Several visits to the laundry room? Empty.

The building is emptier than the cheap seats during a Marlins game at LandShark stadium.

''This is how it goes every day,'' Hamann said, adding that he interacted with more neighbors growing up in rural Kentucky, where farms were spaced a mile apart."

You just can't make this stuff up.

I wonder if Josh has taken the Big Wheel out for a ride lately.

Have a great weekend.

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