Posted on 06/26/2007 10:02:06 PM PDT by djf
There is a crisis, and it is already baked into the cake. There’s no getting away from it now, unless ARM rates were to drop down to 2004 levels and prevent a wave of defaults and foreclosures.
The problem here isn’t the number of unsold homes. It is the house of cards that was the debt market from 2003 to 2006. Those loans are already written, the houses already sold. The default rate among those buyers is taking Wall Street and banks by completely surprise. Here’s a little tidbit for you: which do you pay first, if you’re short of cash?
Your credit cards, or your mortgage?
Well, the credit-worthy culture of the last 50 years would automatically answer “Your mortgage. You never get into a situation where your mortgage goes unpaid.”
Guess which the majority of recent sub-prime borrowers pay first? Credit cards.
The number of first-payment and “early payment” (first six payments) defaults on 2/28 sub-prime ARM’s is blowing through lender expectations completely.
Those are a lot of homes that will be repo’ed and resold. Add to that the homes the homebuilders will continue build, and we’re gonna see quite the glut. Now, factor in the tightening standards for lending as a result of the sub-prime and Alt-A defaults making banks look simply stupid for loaning money to people who shouldn’t be lent a bad idea, and what you’ll have is a huge glut of houses, with a shortage of credit-worthy buyers.
That’s gonna be a problem.
“Things like this has forced me to come to the realization that these events are brought on by the Fed, not prevented by them, as the Fed’s propaganda would have us believe.”
Today’s action on point. Looks like they are going to ramp it up and distribute at the top to bail out the hedgetarians.
It looks awfully much like distribution to the JP6’s if they can run it up high enough.
I bailed three weeks ago and intend to sit until I see which way the wind blows. I’m afraid to go long and afraid to short. No puts, no calls, no options.
I’m gonna go to DisneyWorld!
Oh well.....let the good times roll mama. When she gets into office, Hillary gonna save us all.
I agree. I’m also largely out of the market, but thinking of putting a strangle on the QQQ’s or SPY’s. The one sure thing I can smell coming is volatility - either up or down.
I don’t believe in debt. They screwed themselves, tough for them.
Good summary.
Throw in a declining job market, and the S will really hit the F.
Say, for instance, 20 million new low wage paid earners?
I don’t believe in debt either. I’m a truly rare creature in this world: I’m a free man. Bank’s various offers and credit apps are used to fill the trash here.
I’m perfectly happy to let the sub-prime borrowers and lenders screw each other. The situation with the Bear hedge fund, however, shows much larger than previously admitted exposure of investment banks, lenders, pensions, etc into this sub-prime area through derivatives, CDO’s, etc.
“...ARM rates were to drop down to 2004 levels...”
Bet the Fed stays pat tmo. I think the today’s action was a reflection that the Fed does nothing tmo. The gap down in the durable goods report today seems like a nonstarter.
It’s the disconnect between what you know of economic theory, and what is the reality of the market. Not much of it makes any sense anymore.
~Like they CAN do something at this point. I think the Chinese are calling some of the shots for Uncle Benwa and Paulsen.
Most of the bad news in the durable goods report today was aircraft orders. All that has to happen there is for Boeing to have a lull in 787 orders and we see it show up as a pretty alarming top-line number on the DGO report.
When you dig down on the report, factor out the aircraft, it wasn’t that dire.
A lot of people made a lot of money from the current real estate bubble. And a lot of people will make a lot of money from the wreckage.
I have 4 children who are Gen X'ers
My children can barely save themselves, I don't see how they can save a nation.
Believe me, I taught them well, they are simply soft and used to life being very easy.
I hope you are right
Uh, okay.
Do you imagine that the system, such as it is, works like a machine that pumps out “nice incomes” for a lot of people at a steady pace indefinitely?
The tech bubble was very good for a lot of people. It paid for $5 million apartments and island getaway homes and trusts that will sustain many, many generations of their heirs in a very nice lifestyle. The same is true for the real estate bubble.
You have a lot to learn about how our government works.
The higher taxes you are talking about aren't going to be all income taxes, after all you guys will be the ones voting in mass telling your congresscritters how unfair it is for you to support us old farts.
They are going to raise taxes to cover SS shortfalls from the retirement portfolios being hit hard when they are liquidated. There are trillions of dollars out there untaxed assets in 401 (K) funds just waiting to be taxed.
What will stop the government from raising those rates to cover SS
As far as I see nothing
So we Bommers will support all the new millions of illegals and ourselves so you Gen Xer's can continue to live in the lifestyle you are accustomed to
Yes, I am poking fun at you Xer's
My wife and I are in an identical situation, and I feel exactly as you do.
I'm sure there are many people just waiting to sell their homes at a loss so they can bail out the credit racket.
You forgot "The Children."
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