Jim Sinclair’s Commentary

As the real economy begins to suffer significantly, as such are the direct implications of the potential bankruptcy of CIT, bankruptcies year to year will exceed a 50% increase.

This does not make for increased auto sales as GM comes out of paper shuffling into the real world of sales.

Bankruptcy Filings up 33 Percent over a 12-month Period: Total 12-month Total of Bankruptcy Filings 1.2 Million. In last Report, Filings up 27 Percent in one month.

Bankruptcy filings are soaring in the United States. In the last data point, we had 134,282 bankruptcy filings for the month of March 2009. Bankruptcy data usually lags 3 or 4 months but the trend is ominous. For the last 12 months some 1.2 million bankruptcy filings have occurred. Much of this is linked to the26,000,000 unemployed or underemployed Americans being unable to pay their bills or even service their debt. What is more telling is the amount of Chapter 7 bankruptcies occurring since these are straight liquidations and not like a Chapter 13 restructuring.

Let us examine the most recent data for bankruptcies that highlight this troubling trend:

What you’ll notice is a significant spike in the March data point. This monthly jump was enormous. This was the largest number of quarterly bankruptcy filings since December of 2005 when many were rushing to beat the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Yet even with the law making it harder for people to file bankruptcy, most are being forced into austerity and it is hard to squeeze anything further out of a turnip. What this tells us is that for average Americans there is still a significantly large amount of pain in the real economy. The unemployment rate is understated by the 9.5 percent headline number.

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