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Today’s financial and economic tribulations were a long time in the making. Many people ask, “Why didn’t someone see it coming?”

But a New York …

With vacation season ending in the Northern Hemisphere, we’ll start to see analysis rooted in experience and common sense driving stock prices. Through much of the summer, trading has been dominated by “quant” funds that are prone to “garbage in, garbage out” decision systems. You can see it in the tick-by-tick movements and in Level 2 quotes. These quant funds typically use backward-looking data on the U.S. economy to drive trading decisions, rather than assess how the outlook for the global economy has changed in the wake of last fall’s panic.

Consider this likely scenario: The heavy retail investor inflows into corporate bond funds last spring (far in advance of the peak in defaults, by the way) undoubtedly helped push corporate bond spreads down. The quant funds’ models detected this movement, concluded that the recession might be over, and proceeded to buy stocks that are highly sensitive to future U.S. consumer

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Investors in common stocks tend to ignore warning signs coming from the credit markets, often at their peril. Right now, the credit markets are broadcasting the following warning: The equity of overleveraged REITs is at risk of elimination or permanent impairment.

Yet the stocks of real estate investment trusts (REITs), which are popular among income-oriented retail investors, are still trading at high enough levels that discount just a garden-variety recession in commercial real estate. REITs were designed to invest in portfolios of rental properties, and generally pay no corporate income taxes if they distribute at least 90% of their profits as dividends to their shareholders.

REITs were designed to thrive in an environment of steadily rising property values and rents. But in this ice age for commercial real estate, the REIT business model will cease to function properly; a REIT’s tax-free status doesn’t allow it to retain much excess

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Investors in common stocks tend to ignore warning signs coming from the credit markets, often at their peril. Right now, the credit markets are broadcasting the following warning: The equity of overleveraged REITs is at risk of elimination or permanent impairment.

Yet the stocks of real estate investment trusts (REITs), which are popular among income-oriented retail investors, are still trading at high enough levels that discount just a garden-variety recession in commercial real estate. REITs were designed to invest in portfolios of rental properties, and generally pay no corporate income taxes if they distribute at least 90% of their profits as dividends to their shareholders.

REITs were designed to thrive in an environment of steadily rising property values and rents. But in this ice age for commercial real estate, the REIT business model will cease to function properly; a REIT’s tax-free status doesn’t allow it to retain much excess capital during lean

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In a long, analytic article about commercial real estate, The New York Post points out that the debt backed by commercial real estate in the US has hit $3.5 trillion. The paper writes that “about $1.4 trillion in real estate debt is set to mature over the next four years, with some $204 billion coming [...]div class="feedflare" a href="http://feeds2.feedburner.com/~ff/YourFinancialFuture?a=Sh7r8Pok9t8:yuA-em8AE-Y:yIl2AUoC8zA"img src="http://feeds2.feedburner.com/~ff/YourFinancialFuture?d=yIl2AUoC8zA" border="0"/img/a a href="http://feeds2.feedburner.com/~ff/YourFinancialFuture?a=Sh7r8Pok9t8:yuA-em8AE-Y:F7zBnMyn0Lo"img src="http://feeds2.feedburner.com/~ff/YourFinancialFuture?i=Sh7r8Pok9t8:yuA-em8AE-Y:F7zBnMyn0Lo" border="0"/img/a a href="http://feeds2.feedburner.com/~ff/YourFinancialFuture?a=Sh7r8Pok9t8:yuA-em8AE-Y:7Q72WNTAKBA"img src="http://feeds2.feedburner.com/~ff/YourFinancialFuture?d=7Q72WNTAKBA" border="0"/img/a a href="http://feeds2.feedburner.com/~ff/YourFinancialFuture?a=Sh7r8Pok9t8:yuA-em8AE-Y:V_sGLiPBpWU"img src="http://feeds2.feedburner.com/~ff/YourFinancialFuture?i=Sh7r8Pok9t8:yuA-em8AE-Y:V_sGLiPBpWU" border="0"/img/a a href="http://feeds2.feedburner.com/~ff/YourFinancialFuture?a=Sh7r8Pok9t8:yuA-em8AE-Y:qj6IDK7rITs"img src="http://feeds2.feedburner.com/~ff/YourFinancialFuture?d=qj6IDK7rITs" border="0"/img/a a href="http://feeds2.feedburner.com/~ff/YourFinancialFuture?a=Sh7r8Pok9t8:yuA-em8AE-Y:l6gmwiTKsz0"img src="http://feeds2.feedburner.com/~ff/YourFinancialFuture?d=l6gmwiTKsz0" border="0"/img/a a href="http://feeds2.feedburner.com/~ff/YourFinancialFuture?a=Sh7r8Pok9t8:yuA-em8AE-Y:gIN9vFwOqvQ"img src="http://feeds2.feedburner.com/~ff/YourFinancialFuture?i=Sh7r8Pok9t8:yuA-em8AE-Y:gIN9vFwOqvQ" border="0"/img/a /div

Even though it just posted its third-highest annual profit ever, investors hammered shares of U.S. industrial giant General Electric Co. (GE) last week on a triple play of bad news: Its first dividend cut in 71 years. Speculation over a possible credit-ratings downgrade. And growing worries that the once-unthinkable was becoming possible - a corporate bankruptcy that would put GE on the growing list of onetime Corporate America heavyweights that are now taking government bailout money. GE’s biggest worries revolve around the company’s gigantic financial-services unit, GE Capital Corp., and whether it has adequate capital to counter an expected rise in delinquencies on its loans. Investors are also concerned about GE Capital’s accounting methods and how the company is valuing its vast real estate portfolio. "Probably the biggest controversy surrounding GE right now is what the fair value of (GE Capital’s) ...