As you probably know, last Thursday and Friday the Dow Jones Industrial Average slid almost 600 points to finish off the 5th worst week in market history by some measurements. There were 3 proximate causes for this disastrous rout, one of which is of particular concern for credit millionaires and those who are trying to be.
Thursday morning was supposed to see announced the leveraged buy-outs of Daimler Chrysler and Boots, the largest drug store chain in the United Kingdom. Instead, it was announced that both deals had been scrapped because the respective investor groups were unable to raise the credit needed to close the deals.
The amount of money needed was well over 500 billion for the two deals. Now that sounds like a lot, right? It is, but neither is it an unheard of amount. And it’s not a guy off the street trying to raise it, either. These deals were being shepherded by two of the largest venture capital groups in the world, partnering with two of the largest banking conglomerates in the world, and they were UNABLE to find the credit needed. It just wasn’t there.
Now deals fall through all the time for a lot of reasons, but these two are significant. I see these as the first signs of serious belt-tightening in the mergers and acquisitions credit market, which does not want to find itself in the same situation as the sub-prime mortgage credit market we have all heard about this year. This drying up of credit will absolutely ripple out and down into all sectors of the economy, hitting even the consumer credit markets by the end of the year.
2008 will be a rough year for the unprepared. Interest rates will rise. Those with adjustable rate mortgages are going to take it in the teeth. Annual percentage rates will go up across the board. In short, all forms of credit are going to get more expensive. We have a 4 month window to get our credit houses in order before it will become harder to do so.
Join the credit millionaire team and position yourself to take advantage of the tightening credit market. Remember, a difference of a few-score points on your credit report can make a difference of many thousands of dollars on your next big-ticket loan. Be ready, so you can continue with your…
Bountiful Borrowing,
Donna Fox, Credit Millionaire
6 Responses to “Dow Collapses Because of Bad Credit??”
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I have a upper case uno card that has approximately a $12.00 amount charged monthly from a company I do business with. If this is my only charge, can is it ok to keep the card open? I won’t use it for anything else!
Hi James,
If you had read the Credit Millionaire System, you’d know that closing credit accounts is the #1 piece of bad consumer advice out there! Don’t do it
Hi Donna:
As you know, fixing credit is of the utmost importance, as is developing additional streams of income. Too many people are buying into the brainwashing that their job is all they can earn. Nonsense!
Today, if you’re relying on your job , you’re in for a bumpy ride, unless you’re in the 7 figure income bracket.
I’ve devoted the past several months creating a program to teach people how to start creating multiple streams of income because I feel it’s that important.
You’re doing great work. Keep it up.
Hi Donna,
You’re right but the hits from CONSUMER CREDIT are happening already. I personally have received two notices from different companies on raising the rates since the dow debacle as I call it.
What can a person now do to protect their own ass-ets? Do you see more bankruptcies happening and is it still possible to get credit in the millions without signing your children away?
Ok, that’s a three part question but, well there it is. Thanks for the heads up and I am always reading your information. Oh, great webinar last night by the way. Good comeback last night.
Your friend, Jorge
Jorge,
Wow, that was fast. I expected a little more lag time on the rate increase from the dow debacle (I love that name)
I expect that we’re going to be in a period of credit tightening. That is, that the availability of funds will decrease and the cost of funds increase. It’s simple supply and demand at work.
One thing we need to remember is how good we had, and will still, have it. The cost of funds in the US is still dramatically lower than anywhere else in the world. We’ve been spoiled.
I’ve said that in the period from 1996-2001 a monkey could have made a fortune in real estate. It was easy. Properties were plentiful, real estate was cheap and interest rates are low.
Now is the time that separates the “serious investors” from the “get rich quick” seekers.
So, first, what do I see in the future?
Well, as Las Vegas, formerly the land of opportunity for investors because of the new construction, has become the #1 city in the nation for foreclosures from those very same investors, I think level heads will prevail.
Those who got into the game and paid retail expecting double digit appreciation have gotten out of the game (or they are being forced out now) and are licking their wounds.
Investors that sought out forced appreciation (but distrssed sell retail) are still in good shape. They aren’t making as much money that they did per deal, though, so they will need to develop some automated systems to allow them to do more by doing less (enter http://www.RealEstateBackOffice.com )
Will it still be possible to get credit in the millions? Yes. Will the process be different? No. Will the requirements be different? absolutely.
Look for higher credit score requirements, lower LTVs and higher personal and deal-based cashflow
And now, more than ever, is the time to highlight your multiple streams of income to give lenders confidence.
Donna
Hi Donna,
Thank you for this heads up. And, thanks for your great credit book.
Joy,
Jeanette