Interest expense for 3 months ending June 30, 2008 was $312,943,000.Net Income for 3 months ending June 30, 2008 was $34,082,000 Earnings per share from continuing operations was $.01 Earnings per share from discontinued operations was $.12 If the cost to refinance $18 billion were to rise to 8.0%, interest expense would rise by 50% to a whopping $469,414,000 per quarter. Even 7% would be a killer based on the numbers presented above.
Given that the Shopping Center Economic Model Is History and credit is tightening everywhere, General Growth Properties is going to be in deep trouble if credit conditions remain as they are, or even if they improve slightly. I expect credit conditions to worsen.
13. Consumer and business confidence is shot. Consumer confidence is at multi-decade low levels. Small business confidence is also at historic lows. Small businesses do most of the hiring in the U.S. Consumers and businesses are correct in their assessment of the situation. It is our political and corporate “leaders” that are in denial.
In conclusion, the gathering storm has arrived. It will be long, painful and destructive. Those who prepared for the storm by not taking on excessive debt and living above their means, will ride it out unscathed. Those who built their house on sand by leveraging up and living the “good” life, will see their house swept out to sea. The storm will pass and we will rebuild. Our country is resilient. The purging of this massive debt will result in the creative destruction that is the hallmark of American capitalism. New opportunities, new technologies and a new attitude will put us back on course.
There has been and will be resistance to the inevitable deep recession that has arrived. The American consumer is not cutting back willingly. They are being dragged kicking and screaming towards the joys of frugality. The “material generation” needs to dematerialize. My biggest concern is that our politician leaders and their cronies running our government will continue to try and reverse the normal capitalistic course of recession and expansion. Companies need to fail, housing needs to find its bottom based on supply, demand and price. Those who gambled must be allowed to lose and suffer the consequences. If the government attempts to shift the losses to those who lived lifestyles of thrift, an angry uprising will ensue. Government intervention in this natural process could lead to a decade long depression. Let’s hope that reasonable heads prevail.
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