Isn’t it a bitch when everyone ‘diversifies’ into the same thing? 
Considering that and that politicians are ensuring us all is well I think it’s time to get really worried …
Yes.
I hope it won’t be a long time impact.
Considering that and that politicians are ensuring us all is well I think it’s time to get really worried …[/quote]
Will the politicians pay close attention to this crisis when the election is coming …?
Aw c’mon, where’s your nerve? BUYing opportunity.
HG
Yes, that is likely what you tell all the salesman.
Regards,
Shrinking Violet
I’ll be mighty annoyed if the government goes to great lengths to prop the housing market, lenders, or owners of bad debt paper up. My wife and I have watched for the past few years as friends have thrown all into crap suburban houses with a high loan ratio and then turned around and borrowed more money on them to continue spending in the belief that the value of their homes won’t fall. We’ve rented and kept our powder dry in index and money market funds with the belief that the bubble won’t just stop growing, but will indeed deflate if not pop. We’ve politely remained quiet when otherwise sensible friends back in the US have preached in choral-like unison that going up to their eyeballs in debt on their houses is a sure bet. I think it’s about time for them to get theirs and for us to get ours.
I am curious that how many people will have courage to invest more in a bad timing(that most of people think it is) ?
And how many people that have really buought the opportunity?
Is the market moving up or down?
HG
Well, I for one follow the old investing rule of, buy low, divorce high.
Buying low is the basic rule that people follow.
Those experts assumed subprime loan crisis will last for 6 months.
I don’t know how people judge when it is the time for buying low?
[quote=“wisher”]Subprime mortgage affected the world’s stockmarket.
That made many countries ’ central banks had to do something.
In Asia,we have no the problem of subprime mortgage .
So the impact seemed weaker littlt by little.
Have we passed throgh "the worst "yet?[/quote]
Don’t expect to see any markets climbing to record highs anytime soon just a lot of volatility even for those not directly impacted by the subprime fiasco (well except maybe China). The sub-prime thing is going to be with us for some time to come, then you have un-winding of leverage, end of the yen carry trade, people becomming less risk adverse, add to that redemptions periods in some hedgies forcing them to unload stocks which have performed well and there is going to be a net sell in the market.
I guess great if you are a day trader…
[quote=“Huang Guang Chen”]So basically it’s all good for anyone not in the property market as yet, with stable and strong income flow out to the next few years. I figured I’d missed this cycle around a year ago. Time to get the deposit together, methinks. Hopefully the unwinding of these crap loans isn’t going to bring down the economic environment too badly.
[/quote]
Also think it is not too bad for those already in the market if you are looking to move upwards… and you have some cash or the income to do it.
So we’ll will loose a little capital in the property as prices drop, but it will move the rungs closer together making the next steps more affordable. Sort of like averaging down. Looking at from one perspective the amount of capital in your property means nothing as you are always going to need a roof over your head so it is a wash.
I would also be very annoyed if there was a bailout.
I am very much against investing in suburban property. Usually of poor quality and low resale value. Though house ownership IS a good thing if it is done wisely and that’s the main point of this discussion…many folks didn’t do it wisely.
Putting money back into a house is good but again it must be done wisely. You always get your money back from money invested in kitchens and bathrooms. Borrowing money to buy lawn ornaments is not good. I spent $10,000USD to replace 41 windows from the original 1913 ones to dual pane. I got $1,000 back in a tax break and have cut energy costs by 50% and the windows add value in the house in terms of any new owners would not have to replace the windows. Fixing up the basement and redoing the kitchen downstairs bathroom are the next projects. Even in this time of uneasy housing markets I feel pretty comfortable throwing money into those projects.
What I think may happen is that the lenders are going to wake up one day and realize that it is in their best interests to redo the terms across the board of homes in risk of foreclosure. I’m sure they would rather have cash coming in rather than an empty home on their hands. On course, some property will have to foreclose but lenders need to help those “on the brink”.
Is it time to buy? It all depends on what you want to do with the home. Either buy to rent or buy to live in. I learned the hard way that it is usually a bad idea to to rent out a home you someday plan to live in. And again, where to buy? Should be in an area with low crime and good education. There must be industry around to support growth.
I do not think that after “X” amount of years is going to be the best time to buy. I am looking at the situation as if I find a listing that meets whatever parameters I set and is good value then I will by. Look at value rather than time.
I vaguely recall that when you include closing costs that you need to own a home about 7 years to break even with renting. Average home ownership in teh US is what…4-5 yrs…so go figure. 
This excludes the fact that you are holding an underlying asset that has risk and is semi-illiquid.
I’m not sure now is the time to buy…yet…I feel there may be more downside to come as higher classes of debt become increasing insolvent.
Keeo in mind that the cycle is a long one if you get it wrong. After 1986, how long did it take for property values to recover? 9-10yrs?
It isn’t going to happen.
When I stared this thread I was talking about how fine minds had turned mortgages into another investment vehicle; ala, the infamous fat man, Lewis Ranieri, who I first read about in Michael Lewis’ book, Liar’s poker
Here some more on those mechanisms, and Ranieri. A good read to aid grasp just what this is all about: Excuse the length, it’s a subscription site.
[quote]COMMENTARY
Our Subprime Fed
By GERALD P. O’DRISCOLL, JR.
August 10, 2007; Page A11
In recent years, monetary policy has created an expectation that the Federal Reserve will bail out investors when asset bubbles deflate. The recent crisis in the subprime mortgage market is at least partly the outcome of this new approach to monetary policy. That crisis has already had widespread ramifications for homeowners and investors.
[Our Subprime Fed]
In February 2007, the popular press discovered subprime mortgage loans when two major originators of such loans, HSBC Holdings PLC and New Century Financial, disclosed increased loan loss provisions. HSBC is a globally diversified financial company. While it was a large lender in the market, the aggregate amount of its subprime loans was not a significant portion of its total portfolio.
New Century Financial fared much less well because of the concentration of its lending in this risky category. Its stock price collapsed after problems surfaced on Feb. 8, 2007 and the company eventually declared bankruptcy.
Other lenders in the subprime market experienced difficulties. Fears of a housing collapse and even an economic recession grew as investors gauged the size and extent of the problem in the mortgage market.
The crisis was foreseen – for more than a year before the bust, bankers, analysts, and even regulators knew they had a mess in the making. And once the mess became clear, it wasn’t hard to see what was wrong. Lending practices in the subprime market were “shoddy and absurd,” said John Makin of the American Enterprise Institute in March of this year. Lewis Ranieri, former chairman of Salomon Brothers, echoed those comments in this newspaper when he observed: “We’re not really sure what the guy’s income is and . . . we’re not sure what the house is worth. So you can understand why some of us become a little nervous.” Mr. Ranieri helped pioneer the bundling of mortgages into marketable securities (“securitization”), so he should know!
The collapse of the subprime mortgage market is the latest in a series of financial bubbles whose existence reflects, at least in part, moral hazard in financial markets. At one time, deposit insurance was a major culprit. For example, in an October 2002 speech to economists in New York, then Fed Governor Ben Bernanke described the savings and loans crisis of the 1980s as “a situation . . . in which institutions can directly or indirectly take speculative positions using funds protected by the deposit insurance safety net – the classic ‘heads I win, tails you lose’ situation.” After an intellectual and political battle of more than a decade, the deposit insurance loophole was sealed.
Today, monetary policy is fostering moral hazard. Monetary policy can generate moral hazard if it is conducted so as to bail investors out of risky and otherwise ill-advised financial commitments. If investors come to expect that the policy will persist, then they will deliberately take on additional risk without demanding commensurately higher returns. In effect, they will lend at the risk-free interest rate on risky projects, or at least at a lower rate than would otherwise be the case. Too much risky lending and investment will take place, and capital will be misallocated.
The new moral hazard in financial markets has its source in what can be best described as the Greenspan Doctrine. The doctrine was clearly enunciated by Alan Greenspan in his December 19, 2002 speech. Mr. Greenspan argued that asset bubbles cannot be detected and monetary policy ought not to in any case be used to offset them. The collapse of bubbles can be detected, however, and monetary policy ought to be used to offset the fallout.
Two months earlier, Mr. Bernanke endorsed the Greenspan Doctrine, arguing against the use of monetary policy to prevent asset bubbles: “First, the Fed cannot reliably identify bubbles in asset prices. Second, even if it could identify bubbles, monetary policy is far too blunt a tool for effective use against them.” Since Mr. Bernanke is now Fed chairman, it is reasonable for market participants to assume that the Greenspan Doctrine still governs current Fed policy.
The two men were surely asking and answering the wrong question. They were implicitly treating bubbles as solely the consequences of real shocks or disturbances. (An example of a real shock is a technological innovation leading to productivity gains and higher future expected profits in a sector.) They asked whether monetary policy should be used to offset the effects of real shocks, and concluded that it should not. The latter is the correct answer to the question they each posed.
A different question would be to ask whether monetary policy should be conducted so as to create or exacerbate asset bubbles. The answer to that question is surely “no.” Consider Mr. Bernanke’s apt characterization of moral hazard in the context of the deposit insurance crisis: “When this moral hazard is present, credit flows rapidly into inelastically supplied assets, such as real estate. Rapid appreciation is the result, until the inevitable albeit belated regulatory crackdown stops the flow of credit and leads to an asset-price crash.”
He could have been talking about the subprime mortgage market. The Fed pre-announced that it will take no action against bubbles, but will act aggressively to offset the consequences of their collapse. In effect, the central bank is promising at least a partial bailout of bad investments. The logic of the old deposit insurance system is at work: Policymakers should protect investors against losses, no matter their folly. Or, in Mr. Greenspan’s own words: Monetary policy should “mitigate the fallout [of an asset bubble] when it occurs and, hopefully, ease the transition to the next expansion.”
In the present context, the “next expansion” could also be rendered as “the next asset bubble.” If the Fed promises to “mitigate the fallout” from “irrational exuberance,” then it is rational for investors to be exuberant. Investors may be at risk for some loss, as with a deductible on a conventional insurance policy, but losses are still being mitigated.
The Bernanke Fed has confused matters for investors by not yet cutting interest rates in the face of the recent crisis. There are two possible (not mutually exclusive) reasons for its not doing so. First, it may not view the current crisis as serious enough. Second, current price inflation is above its comfort zone, and the Fed may feel it has no room to maneuver. Time will only tell which is at work.
The Fed cut the Fed Funds rate sharply after the bursting of the stock market bubble in March 2000. In the eyes of many, the Fed cut rates too far and held them down too long, fueling not only a vigorous economic expansion but also the housing bubble. In his December 2002 speech, Mr. Greenspan was at pains to deflect any argument that the Fed was inflating a housing bubble. “To be sure,” he acknowledged, mortgage debt was high relative to household income (remember the date) by historical norms. But “low interest rates” were keeping the servicing requirements of the mortgage debt manageable (emphasis added). “Moreover, owing to continued large gains in residential real estate values, equity in homes has continued to rise despite very large debt-financed extractions.”
How wrong the Fed chairman was! If Mr. Greenspan was not worried about interest rates resetting, however, why should mortgage bankers and homeowners worry? It would have been reasonable to read into the chairman’s musings an implicit guarantee of continued low rates. A homeowner is certainly entitled to bet his home on the come if he wants. Should the central bank encourage such behavior, however?
A monetary policy of substantial stimulus will have a number of real consequences, including asset bubbles. These asset bubbles have real costs and involve misallocations of capital. For example, by the peak of the tech and telecom boom in March 2000, too much capital had been invested in high-tech companies and too little in “old economy firms.” Too much fiber-optic cable was laid and too few miles of railroad track were laid.
By 2002, worried about the possibility of price deflation, the Fed introduced a strong anti-deflationary bias. A tilt to stimulus was understandable at the time. A continued bias against deflation at any cost, however, will produce a continued bias upward in price inflation. With the bursting of each asset bubble and the fear of deflationary pressure, Fed policy must ease. The Greenspan Doctrine prescribes a stimulative overkill that begins the cycle anew. The Greenspan-era gains against inflation will then prove to be only temporary. His doctrine will be the death of his legacy, a legacy that already includes a housing bubble and its aftermath.
Mr. O’Driscoll, a former vice president with the Dallas Fed and a former director of policy analysis at Citigroup, is a senior fellow at the Cato Institute.[/quote]
HG
It seems to affect the “yen carry trade”,too.?
Absolutely.
Have you ever opened a golf ball and watched the elastic unwind? Looking like that now.
HG
This is complete fucking bullshit.
[quote]Feds outline plans to help borrowers
WASHINGTON - Offering federal aid for strapped mortgage holders, the White House outlined proposals Friday to help borrowers hard hit by credit problems and the housing slump.
The initiatives, being unveiled by President Bush, were intended to help homeowners with risky mortgages keep their homes.
[/quote]
http://news.yahoo.com/s/ap/20070831/ap_on_go_pr_wh/bush_housing_slump
These borrowers should be allowed to crash and burn. :fume: All this is going to do is encourage more profligacy and cause a later crash rather than an earlier hard landing.
If 25% of mortgage holders crash and burn, I don’t think the USA economy can recover effectively.
I’ll reverve judgement till I see more details about the bailout.
But I think it is also reflective of how much CDO (collateralized debt obligations) are out there in the market base on these subprime mortgages.
Some people in the credit derivative markets are only just now beginning to realise their products were exposed.
Crap month all around.