Subprime loan policy may need more advanced improvements and reviews.
And the subprime downturn has spreaded and affected the international economy.
I think Bush and Bernanke really have to do something.
Yesterday Dow was up 119 (0.9%).
Bush and Bernanke ignored the previous warning (by someone) and let the subprime went worse
Now,how much can they do ?
I am curious ,though.
I did some reading yesterday about this issue on a nudge from HGC.
VERY interesting schtuff out there.
One thing being said: that if this bubble does pop, it might take a big swing at Asian markets, which may fall 30%. That, though, is a good thing, as Asia is being seen as “very bullish” and this would be a huge buying opportunity for asian stocks.
I like the sound of that.
As for those folks in the US, with adjustable mortage rates…they may end up being royally farked.
[quote]
The impact is sharpest for the borrowers who took out supbrime loans, and the lending firms that financed them (generally not traditional banks). But most homeowners nationwide are taking a hit.
Many recent buyers, those who purchased since 2004, had to pay artificially high prices for their homes, thanks to the easy credit conditions and a rising tide of speculators who fueled the home-price surge at its peak. Now their home equity may be lost amid the current credit squeeze.[/quote]
So the housing boom ran up prices that weren’t deserved, then people get caught with their pants down when the prices return to Earth, THEN, they get hit with rising monthly mortages.
but,[quote]
For all the bleak news, American homeowners and consumers can take comfort on several fronts:[/quote][quote]
Most owners are still above water, with a cushion of equity that outweighs the current price drop. Many owners have fully paid off their mortgage.
•The performance of home prices varies greatly by region. California, Michigan, and parts of Florida are among the biggest decliners. Prices are still rising in Charlotte, N.C., and Seattle. In more than 40 states, prices are not far out of line because they have tracked the growth of personal incomes, says Karl Case, a housing expert at Wellesley College in Massachusetts.
•Most owners don’t have to sell, and the market should be more stable by the time they do.
•Most economists don’t predict recession in the coming year, although they say the risks have risen and the pace of growth is below normal.
•For potential buyers, the housing shakeout promises to make homes more affordable in some overheated markets. [/quote]
csmonitor.com/2007/0831/p01s03-usec.html
I don’t know folks. I just am not surprised by any of this. How dumb do people have to be to think an expensive house is somehow affordable if the adjustable mortage rate starts out really really low? I mean some of these guys were paying 2-3% when they bought their home. Now, as I read yesterday, it may go into double digits.
CNN reporting that sales of station wagons and sleeping bags have gone up sharply…
[quote]
Bush and Bernanke ignored the previous warning (by someone) and let the subprime went worse
Now,how much can they do ?
I am curious ,though.[/quote]
I’m not sure I want them to do anything. Say no to bailouts. If anything get some of those new US States’ attorneys to go after the banks who led such irresponsible lending schemes. dicks.
[quote]New York - Millions of homeowners around the nation are now getting the news in the mail: The interest rate on their home loans is going up, possibly to double-digit levels.
The hardest hit are expected to be people who have less-than-stellar credit and cannot afford to make the new payments. An increase of several hundred dollars a month will force them either to get relief or to default.The prospect of significant and growing losses has already rocked Wall Street and shaken up the broader mortgage markets. And, concerned about the human suffering, policymakers are already searching for ways to help people out.
“The meltdown in the subprime market is the biggest threat to the housing market and the broader economy,” says Mark Zandi, chief economist at Moody’s Economy. com. “It is at the vortex of the problem.”
Over the next several months, banks will be changing the “teaser rates” that homeowners received two years ago.
The peak for resetting loans will be in October, when the rates on some $50 billion worth of mortgages are likely to rise by 2 percentage points or more. This could mean a rise of several hundred dollars a month for many borrowers.
For example, on a $210,000 loan balance (the average subprime amount in 2006), the additional 2.5 percentage point increase on the interest rate adds about $4,560 a year, or about $380 a month, estimates James Kragenbring, senior investment officer at Advantus Capital Management in St. Paul, Minn. [/quote]
csmonitor.com/2007/0830/p01s04-usec.html
I sure hope people know how to file for personal bankruptcy protection.
I was waiting for someone to bring that one up. Much more to come!
Or so I’ve been told.
Anyway, I still see markets like HKG uo in a year’s time.
[quote]
Although all this falls far short of providing an “all-clear” signal for the economy, it allows some breathing room as the world’s central banks work to restore order in credit markets. The risk of recession remains very real, economists say, and they expect the Federal Reserve to act accordingly by cutting interest rates at a policy meeting Sept. 18.[/quote]
[quote]
The danger: that there will be a “contagion” effect from investor worries about the collapsing value of debt securities that are linked to tottering subprime loans. Already, in recent weeks, big investors have grown less willing to buy mortgage-backed securities or the short-term “commercial paper” debt issued by financial-service firms. Big banks, facing their own reappraisal of portfolios, have been less willing to provide short-term credit to one another.[/quote]
[quote]
improved productivity numbers give the Fed even greater leeway to cut interest rates, since inflation is less of a worry when rising output covers employers’ cost of wage increases.[/quote]
[quote]
A key risk to the economy is the twin impact of an ongoing slump in the housing market and the new shock of tightening financial conditions. If falling access to credit adds to the downward momentum of home prices, the Fed could find itself fighting deflation and recession, not inflation.[/quote][quote]
So far, a full-fledged credit crunch hasn’t arrived. Businesses can still issue investment-grade bonds. Stock shares haven’t plunged into bear-market zone. Home buyers with good credit can still get loans, albeit by paying higher interest for jumbo mortgages over $417,000.
But stress has persisted for several weeks in short-term lending markets for so-called commercial paper. Many banks have grown less willing to make overnight loans to one another – something generally taken for granted.
That explains why the Fed and other central banks from Europe to Japan have shifted abruptly from inflation watch toward vigilance against a potential financial crisis.
Fed officials say they don’t want to bail out individual firms that are in trouble. And they skipped a congressional hearing this week to avoid any appearance that political pressure might influence their Sept. 18 interest-rate decision. But most economists see little argument against a rate cut.
“With inflation so low,” Mr. Yardeni says, “there’s no reason for the Fed to let a recession happen.”[/quote]
csmonitor.com/2007/0907/p01s02-usec.html
Does that help any of you sleep better?
jdsnoozes
Can’t be arsed to read all of this but… Savings and Loan crisis anyone? Salomon Brothers 1986 anyone? Asshole-backed Securities? Multi-tranche interest-principal-split mortgage junk? Early-redemption risk-adjusted negative equity bollocks @ ten-a-penny? I’ll take six. Anyone who didn’t see this coming is either profiting from it, dead, or about to go bankrupt. Or all of the above (if he’s got a good financial planner).
Next Repetition of History coming up on the CNCBC MSN Investing for Naive Greedy Twats Who Think They Know About Stuff Channel right after the break.
All the bankers will walk away millionaires.
in a nutshell: “Fed officials say they don’t want to bail out individual firms that are in trouble.”
blublublub
Michael Lewis’ latest, a real laugher:
bloomberg.com/apps/news?pid= … refer=home
I, too, am flush in cash and not a drop of sympathy for any subprimer up to their necks in debt.
We’ll all have a chance to buy a house in [fill in your city, country] in about 2-3 years. Everyone here just needs a little patience. Don’t buckle under and buy unless your price is a 30-50% cut on your dream home.
And don’t get me started on Sir(ly) Greenspan and how he created this mess.
Dropping rates to 1% after the Internet Bubble blew, I mean c’mon. Was like giving out free cocaine. All involved (homebuyers, banks that lent the money, investment banks that packaged the loans in CDOs, ABS) just put their noses on the table and breathed in as much as they could.
Like all pyramid schemes, it’s the ones left holding the can that lose.
HG
The problem is do you want to live there. Chances are neighborhoods like that are probably the worst. I think best become a “slumlord” and become the next Donald Trump in a situation like that.
The problem is do you want to live there. Chances are neighborhoods like that are probably the worst. I think best become a “slumlord” and become the next Donald Trump in a situation like that.[/quote]
Slumlord in an upstate college town sounds good. Offcampus housing.
Slumlord, it sounds like a bad thing, and yet slumlord’s bitch just sounds so much nastier.
HG
The problem is do you want to live there. Chances are neighborhoods like that are probably the worst. I think best become a “slumlord” and become the next Donald Trump in a situation like that.[/quote]
Slumlord in an upstate college town sounds good. Offcampus housing. [/quote]
Students are No Income, No Job, No Assests…NINJA tenants.
Not only do you have to deal with 3 month vacancy rate due to summer break, but good luck chasing down Out of State deadbeats.
Down side is that real estate value is wholely dependent on the performance of the university, which is quite frankly entirely out of the control of the slumlords.
The plus side is that they have to be there 9 months out of the year.
I don’t think towns like Ithica and Syracuse are going to get hit that hard around the campuses. Buffalo, hmm, maybe some opporutunities, but I suspect around the campus the local university economy will prevent those properties from becoming a bloodbath.
Silly kids - you ask the parents to co-sign the lease. They’ll ensure you get paid just to protect their rating.
Elegua,
Still sounds like a pain in the ass, chasing down out of State co-signers. You have to report them to 3 credit bureau to really ding their parent’s credit. In the end you’re still out the rent, the legal fee, the collection fee, and the reporting fees.
Unless you are dealing with people who actually know the rules, all you have to do is threaten. Also, the rental premium usually includes these costs.
Even better, since some schools have expanded beyond the means of their dorms, you rent the dorm rooms to the school. There are some landlords who’ve made a mint a Philthydelphia with something like this.
If you rent to an institution like the university or a charter of a Greek society, you reduce your exposure a bit.
They’re pissed off now!
[quote]Hedge Fund Managers March on Washington - Largest Chauffeur-Driven Protest in Capital’s History
Demanding further intervention from the Federal Reserve to protect their endangered fortunes, thousands of the nation’s leading hedge fund managers marched on Washington today.
Dubbed “The Million Mercedes March,” the protest was said to be the largest chauffeur-driven demonstration in the capital’s history.
Limousines started jamming the streets of Washington at approximately ten in the morning as irate hedge fund owners converged in front of the Federal Reserve building to demand stronger action to protect their imperiled riches.
Chanting “No Rate Cut, No Peace,” the furious money managers were pepper-sprayed by police as their protest threatened to take a violent turn.
Tracy Klujian, a hedge fund manager from Greenwich, Connecticut, said that simmering anger in the hedge fund community was “a powder keg” waiting to explode.
“We have yet to see the ripple effects of this crisis,” Mr. Klujian said. “When these guys have to freeze their trophy wives’ shopping allowances, there’s going to be hell to pay.”
Mr. Klujian’s words seemed almost prophetic as a mob of angry trophy wives looted a Ralph Lauren boutique in East Hampton, New York later in the day, stripping the establishment of its entire fall collection.
If the Fed fails to intervene, Mr. Klujian warned, an ugly situation among the nation’s wealthiest money managers will only get uglier.
“A lot of these guys are mad as hell right now,” he said. “But wait until they’re down to their last billion.”
Elsewhere, FEMA announced that it would commemorate the second anniversary of Hurricane Katrina by returning phone calls from 2005.[/quote]
HG