HousingPANIC - The Housing Bubble Blog with an Attitude Problem, 2005 - 2008: BUBBLETALK - New thread to talk about the mortgage meltdown and housing collapse

August 17, 2007

BUBBLETALK - New thread to talk about the mortgage meltdown and housing collapse

Keep it clean, don't post full articles, use tinyurl.com for long links, let me know what I missed, talk about general stuff here, and have a good chat

281 comments:

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Unknown said...: Anonymous said...
S&P500 up for the day.
Up for the week.
Up for the year.

Some crash.

DOPES!!

_________

Fasten your seat belt, and just watch.

You'll be proven the real dope many times over. If you're still not getting what's happening and why, you must have the econ IQ of a preschooler.; August 11, 2007 6:40 AM
Unknown said...: THE PERFECT FINANCIAL SH*TSTORM HAS BLACKENED THE SKY. HEAD FOR THE HILLS. TAKE WATER, FREEZE-DRIED FOOD, GOLD AND AMMO.; August 11, 2007 6:42 AM
Anonymous said...: 116 major U.S. lenders have "imploded"

http://ml-implode.com/; August 11, 2007 7:08 AM
Anonymous said...: O.k., it's just the credit cycle unwinding folks...nothing to worry about...let's make this an orderly exit now...come on, form a single line...one-by-one...don't run now...

Holy shit, what was that?

RUN FOR YOUR LIVES PEOPLE!!; August 11, 2007 7:09 AM
Anonymous said...: I've noticed something odd.
While we have in the past dislcosed our incomes, our professions, what amount we pay for rent/mortgages, our savings amounts, our investments; I can't remember a single account of someone saying how their mortgage has adjusted. Does everyone on this site rent, own f&c, or have a fixed 30?
I can't imagine that no one here is the midst of an adjustment. AND I don't remember in the last 6 months or so anyone confessing to stated income or such in procurring a loan. It's always someones brothers uncles friend....

What gives?
Kieth can we get a new survey?

Maybe if we sign what we are just for a sense of whats what....

Turdly F&C [free and clear]; August 11, 2007 8:18 AM
Anonymous said...: "quant" funds (it is short for quantative)

I've recetly done an experiment.
The word 'slunt' makes women I know laugh and literally roll on the floor/pee a little.
Somehow the word 'twant' sure doesn't have the same effect. I'm at a total loss concerning this.; August 11, 2007 8:28 AM
Anonymous said...: As you read news article about mortgage brokers boosting about way to find a loop hole, one wonder why is the Federal Reserve bailing these mortgage brokers out.

The Federal Reserve should send in the FBI to investigate for fraud, instead of trying to save these scam artists.

http://www.mercurynews.com/
realestatenews/ci_6590986

Some banks still offer jumbo loans. But they charge such a high rate that the loan effectively disappears, said Guy Schwartz, manager of CMG's Walnut Creek office.

"The bank prices it so high that they're sending a signal: They don't want to do the loan at all," Schwartz said.

As a result, loan officers and home finance brokers have been forced to fashion new loan products that would be feasible for borrowers and palatable to nervous banks.

Plenty of alternative kinds of loans are being floated by loan agents, said John Holmgren, principal owner of Oakland-based Holmgren & Associates and president of the East Bay chapter of the California Associate of Mortgage Agents.

"Fully half of the loans that we had in process had to be massaged in some way," Holmgren said.

Among the workarounds: Holmgren suggests that borrowers obtain loans with fixed interest rates of five to 10 years. Or they could find a co-signer. Or they could provide a larger down payment.

"We are just starting to come up with some solutions," said Kris Raman, president of American Funding Solutions in Dublin. "This whole thing only started a few days ago."

Raman has proposed that borrowers obtain a first and second loan that together would total as much as $600,000.; August 11, 2007 8:53 AM
Anonymous said...: Why are central banks delaying the process of insolvencies.

How will pouring more good money over bad money going to help borrowers who did not qualify with their CREDIT WORTHINESS problem.

It is only going to delay the foreclosure process and make it worst.

The only thing a Federal Reserve bail out does is reward more bad behavior.

http://ftalphaville.ft.com/blog/
2007/08/10/6492/
roubinis-verdict-this-is-worse-
than-ltcm/?source=rss

Roubini’s verdict - this is worse than LTCM

We paraphrase. Nouriel Roubini, of RGE Monitor, actually thinks that this current market turmoil is “much worse” - not just worse - than the liquidity crisis experienced in 1998 following the LTCM episode.

Why? Insolvency versus illiquidity.

A liquidity problem occurs when a household, firm, country, etc is still solvent, but faces a sudden crisis, where a creditor is unwilling to refinance their claims for example. An insolvent debtor does not only face a liquidity problem, but could not pay the claims upon them over time, even if there were no liquidity problem. One, broadly, suggests sound fundamentals; the other very much not so.

LTCM, says Roubini, was mostly a liquidity crisis:

The US was growing then at 4% plus, the internet bubble had not burst yet, we were in the middle of the “New Economy” productivity boom, households were not financially stretched and corporations were not financially stretched with debt either….

Today we do not have only a liquidity crisis like in 1998; we also have a insolvency/debt crisis among a variety of borrowers that overborrowed excessively during the boom phase of the latest Minsky credit bubble.

[Minsky modelled asset bubbles driven by credit cycles whereby periods of economic and financial stability lead to a lowering of investors’ risk aversion and a process of releveraging. In this process, you’ll have sound borrowers, speculative borrowers, who can service only their interest payments and need refinancing to service their principal, and “Ponzi borrowers”, who can service neither and are banking on rising asset prices to keep on refinancing their debts.]

The real factors at stake in this unfortunate situation are, says Roubini:

* “You have hundreds of thousands of US households who are insolvent on their mortgages. And this is not just a subprime problem: the same reckless lending practices used in subprime….were used for near prime, Alt-A loans, hybrid prime ARMs, home equity loans, piggyback loans.”

* “You also have lots of insolvent mortgage lenders - not just the 60 plus subprime ones who have gone out of business - but also plenty of near prime and prime ones.”

* “You will also have - soon enough - plenty of insolvent home builders. Many small ones have gone out of business; now it is likely that some of the larger ones will follow in the next few months.”

* “We also have insolvent hedge funds and other funds exposed to subprime and other mortgages.”

Moreover, the recent widening in corporate credit spreads, says Roubini, is not a sign of a liquidity crunch. It is a sign that investors are realising that there are serious credit/insolvency problems in some parts of the corporate system.Low default rates, he says, have been driven in part by corporate profitability and robust balance sheets but also by easy credit. When the ‘hot money’ departs, historical patterns of default should reassert themselves.

This is not just liquidity crisis like in the 1998 LTCM episode. This is rather a liquidity crisis that signals a more fundamental debt, credit and insolvency crisis among many economic agents in the US and global economy…

… We are indeed at a “Minsky Moment” and this recent financial turmoil is the beginning of a much more serious and protracted US and global credit crunch.

The risks of a systemic crisis are rising: liquidity injections and lender of last resort bail out of insolvent borrowers - however necessary and unavoidable during a liquidity panic - will not work; they will only postpone and exacerbate the eventual and unavoidable insolvencies.; August 11, 2007 9:12 AM
Anonymous said...: CREDIT WORTHINESS

The problem is not about LIQUIDITY it is about INSOLVENCY.

http://realestate.aol.com/article/
investing/_a/
a-mortgage-broker-reveals-the-
tricks-of/20070412175009990001

A Loan with Just One Hitch
One of the most disturbing loan trends he talks about became very popular between 2001 and 2005. It's called a negative amortization loan. This is when a borrower can't afford a high interest rate because the monthly payments are too high. To close the deal, the loan agent comes up with a monthly payment and interest rate that satisfies both the borrower and the lender. There's just one hitch.

"They give the borrower a lower monthly payment based on a 1 percent or 2 percent annual interest rate, but the rate on the actual overall loan is much higher," says Victor. "So let's say the real rate is 7.5 percent, but their monthly payment is based on a 2 percent annual rate. The 5.5 percent interest they are not paying each month goes onto their balance, which means the total loan amount keeps getting bigger. So in a short amount of time, you're upside down." You can easily see why this leads to trouble. If the price of your house is not going up, but your mortgage balance is rising … it's a matter of time before you owe more on the house than it's worth. That is, unless you refinance or take on a higher monthly payment.

Victor says a lot of loan brokers, "prey on the ignorance of the consumer. The consumer is like, 'Oh gosh, I'm getting a 1 percent or 2 percent loan.' They don't understand there are no free lunches. Every month, they are losing equity. These loans have been around since the early '80s, but it wasn't until recently that the loan values were 95 percent of a home's value, compared to tougher standards like 80 percent loan to value."

What's making matters worse now is that the people caught in these negative amortization loans are finding it tougher to refinance as banks have become more conservative with their lending practices and interest rates have gone up. "The agents that were really doing it a lot were people who just got into the business. These were new loan officers. It was easy to sell people on the monthly payment alone. They would never really go over the consequences down the road." Victor also points out that many of the people who signed up for the negative amortization loans were not sub-prime borrowers, but people with good credit known as A-grade borrowers.

Sub-Prime Lending Equals Big Money
The real money to be made by loan agents is with sub-prime borrowers. These are people with collections, car repossessions and bankruptcies on their record. Because of their poor credit ratings, they can't qualify for prime interest rates. If the sub-prime borrower does get a loan, his or her interest rate will be above the prime rate. "A lot of inexperienced loan brokers rushed in to make quick money. The sub-prime guys can make anywhere from $5,000 to $10,000 on a loan. On the 'A' deals, they could make maybe like $2,000. I saw new people come in and make a ton of money on sub-prime, but now the market has changed. Lenders are being much safer and they want the borrowers to be cleaner."; August 11, 2007 9:27 AM
Anonymous said...: Have you all seen the internet troll bruno and his insane youtube rants againts STR's? (sold to rent's)

http://tinyurl.com/2yjygv

oh man i just found him im dying loling. wow. hes actually a retard for REAL listed to him speak.; August 11, 2007 9:41 AM
Anonymous said...: BWA HA HA HA HA

BWA HA HA HA HA

You morons didn't really think the fed would let markets unravel did you? Oh you did. But you also think renting all your life and invesing in 5% CDs is the way to great wealth.

Good luck with that.; August 11, 2007 12:42 PM
Anonymous said...: Anon said:"Sad that this thing insanity has killed off a friendship. Any else lose friendships over your views"?

Interesting, my friend called me last summer. He said he had a feeling he should call me to see how I was doing. I ended up warning him about what was developing right where he lived and what was coming for the economy.

I think he was helped with a big heads up. Luckily for him he also bought several years ago. He lives in Gilbert, Arizona.; August 11, 2007 1:11 PM
Anonymous said...: Friday's after close bombshell:

Fannie Mae and Freddie Mac WILL NOT BE ABLE TO INCREASE THEIR PORTFOLIOS...

meaning

Those with sh*tty loans are stuck with them.

B00M monday morning.; August 11, 2007 3:08 PM
Anonymous said...: Dr. Martin Weiss Discusses Housing Bust and Mortgage Meltdown in Latest Issue of Money and Markets

Martin Weiss, Ph.D. examines the real estate bust in the U.S. and discusses the major reasons behind it. Dr. Weiss takes a closer look at the relationship between the housing market and rising foreign currencies.

The housing bust is causing a mortgage meltdown, which is creating an acute, nationwide credit crunch that is so bad it's beginning to impact the economy.

Japan is now enjoying its most enduring growth since World War II. And Japan's trade and investments with China are booming.

Japan's real estate values are moving higher, with land prices surging 8.6% last year alone, five times more than in 2005. And, its economic expansion, now in its 66th month, is the country's longest in sixty years.

Unlike the late 1980s, when Japan's economic boom created one of the greatest bubbles of all time, this time around the growth is steady, healthy, and building a solid base.

Most important, especially for Japanese youth, is the fact that their many hard years
dedication to education are finally paying off: Japan's jobless rate just fell to its lowest level in more than nine years, and major companies are snatching up young recruits well before they finish college.

Japan's coming out of 11 years of start-and-stop recession and have built a solid platform for expansion precisely the opposite of what is being seen in the United States, where individuals are just beginning to suffer the consequences of one of the greatest speculative bubbles of all time.

One of the main reasons why this is happening is foreign currencies, the Japanese Yen have been rising but the U.S. dollar has been plunging.

The Japanese yen started the year with a decline, but its slide was mostly contrived. The Japanese government was anxious to keep its exports cheap and did everything in its power to keep the yen down.

But now, with more confirmation of Japan's robust economy, the Bank of Japan has little choice but to let the Japanese yen rise. And very soon, it may have to raise its short-term interest rates, giving the yen an even bigger boost.

When that happens, it could be like ripping the lid off a pressure cooker, unleashing an explosion in the yen.

The yen has been forcefully depressed for so long, it will have to surge by leaps and bounds just to catch up with the rising euro, not to mention catching up with other major currencies.

This is no trivial matter. Nor is it a sideshow to the drama unfolding in the U.S. credit markets. Quite to the contrary, it's of vital importance, and it must not be underestimated.

The day of reckoning is here, the housing bubble nurtured by foreign money has burst. The cheap and easy credit, largely financed by foreign money, is disappearing and the foreign money is not coming any more or it's actually leaving.

Now, the Fed's major trade-weighted index of the dollar has plunged to its lowest level in its history and foreign currencies are surging to their highest levels in decades.

Corporate bond prices are tumbling, even on higher quality issues. And the S&P 500 Index has begun to break down, sinking through a key trendline in its chart with the August 3rd 39-point plunge.

"It's too soon to say what the final outcome will be. But it's safe to say flatly that the consequences of complacency could be catastrophic.

Look for every opportunity to move money from investments that are most vulnerable to the mortgage meltdown to those that are most likely to benefit from continuing global growth," advises Dr. Weiss.

http://www.prweb.com/releases/
2007/8/prweb545952.htm; August 11, 2007 6:04 PM
Anonymous said...: A small portion of a larger article.

http://www.lewrockwell.com/
north/north559.html

WHICH BUBBLE SHOULD THE FED POP?

Cramer thinks that the FED can and should lower the FedFunds target rate. The problem is, the FED cannot do this at zero cost. So, it’s a question of who takes the hit: Cramer’s buddies or the mortgage market.

If the FED lowers rates in a stimulative way, i.e., by creating more fiat money subsidies for the U.S. Treasury, then this will send a signal to investors: "Inflation ahead." Rational investors will then refuse to offer to invest in 30-year T-bonds at today’s low rate, around 5%. They will ask themselves: "Why lend today’s money in order to receive depreciated dollars for the next 30 years?" They will demand a higher rate of return. This will force up long-term interest rates.

The mortgage market will match every increase in the T-bond rate. So, what Cramer is calling for will have negative effects on the housing market.

The housing market has been a bubble. This bubble is ending nationally. We see this in the 40% to 50% decline in the share prices of home builders. In the midst of a crisis in the mortgage lending markets, rising mortgage rates would be another sledgehammer blow. Yet this is what Cramer’s recommended policy would produce.

Can you see why the FOMC decided to leave the target FedFunds rate alone? It did not want to send a signal:

"Increased monetary inflation ahead. Raise those mortgage rates."

Cramer and his cronies are investors in the stock market. He is famous as a perma-bull regarding the stock market. He has staked his reputation on a rising stock market. Rising short-term rates threaten the stock market, given the bubble created by the Greenspan era’s FED. But Greenspan’s FED also stimulated the housing bubble by persuading buyers that the economy would boom forever. Buyers borrowed money to buy homes, based on their confidence that the economic boom was permanent.

Now the FED faces a dilemma.

1. If it follows tight-money policies, it will pop both bubbles and the boom.
2. If it inflates short term, it will stimulate the stock market bubble but threaten the housing bubble.
3. If it inflates long term, it will undermine the purchasing power of the dollar.

We are in a transition phase. The FED has slowed down the expansion of the monetary base, and there has been no crash. The economy is still expanding. The stock market has not crashed – just dropped. The housing bubble has not popped in most markets, just slowed. So far, so good.

BUT IS CRAMER CORRECT?

Yes, he is. He has diagnosed the symptoms correctly. He just doesn’t understand the solution.

It’s not just his buddies who are threatened. It is the entire capital structure of the U.S. economy. The fiat money policies of the FED since the capitulation of Paul Volcker on August 13–15, 1982, reversed a tight-money policy that would have let the economy stabilize with much less monetary inflation. But the Mexican government 25 years ago launched a game of chicken. It threatened to default on its debt. It also threatened to nationalize all foreign banks in the country. Volcker blinked. So did all the other central bankers, who were meeting together in Canada that weekend. (Nice timing, Mexico.)

Greenspan followed in Volcker’s post-1982 footsteps.

Bernanke is trying to call to a halt a 25-year policy of monetary expansion.; August 11, 2007 6:17 PM
Anonymous said...: TV show cleared in house price crash row

A high-profile RTÉ television programme exploring a possible crash in the property market was today cleared of charges it was reckless and dishonest.

The Broadcasting Complaints Commission (BCC) rejected accusations by a construction boss that Future Shock: Property Crash, broadcast in April, was biased.

The television and radio watchdog ruled the programme-makers were fair and impartial in their examination of the prospects for the country’s housing market.

David D’Alton, the managing director of a house building company employing around 90 workers, alleged the one-off RTÉ special was sensationalist and endangered construction jobs.

The show, presented by journalist Richard Curran, attracted controversy for airing views that house prices could plummet by as much as 30% if the bubble burst.

A permanent tsb/Economic and Social Research Institute survey published today showed the average price of a home fell by 2.6% this year.

Builders, developers and estate agents were incensed, with many turning on RTÉ to complain about the contents of the show.

But the State broadcaster stressed that it was never stated in the programme that a hard landing was inevitable – just that it was a possibility.

It told the BCC there were opposing contributors arguing for both a hard landing and a soft landing included in the programme.

The broadcaster insisted there was a public interest to examine and consider the worst-case scenario.

The broadcasting watchdog accepted RTÉ’s arguments and ruled that the programme was entitled to explore the issue .

“The programme-makers ensured that there was balance of opinion by providing sufficient airtime to experts who did not foresee a hard landing,” it said.

“The subject matter was treated fairly.”

http://www.eveningecho.ie/news/
bstory.asp?j=14857494&p=
y485754x&n=14857582; August 11, 2007 6:22 PM
Anonymous said...: Finance crisis can affect borrowers

Homeowners with little or no equity who have already been burned by variable interest rate mortgages could be hurt more by turmoil in international financial markets, local economists say.

If the crisis continues past next week, the possibility of a domino effect on the construction and financial industries grows, they said. And that could have a lasting impact on the national and local economies.

"All of a sudden, nobody wants to buy anything that's even remotely got some risk to it," said King Banaian, professor of economics at St. Cloud State University. "Banks don't want to take in your money right now because they don't know where to lend it out to."

The likely cause of the wild financial ride in the last few days?

Fallout from the nation's burst real estate bubble. That has put mortgage lenders who offered lots of subprime and adjustable-rate mortgage loans that are now in default under the gun.

Their problems caused what Banaian refers to as a "short-term credit crunch" that might be over, now that the Federal Reserve Bank has poured billions into the nation's banking sector to keep interest rates stable.

The Fed pushed $38 billion in temporary reserves into the system Friday, on top of a similar move the day before.

Similar steps have been taken by the European Central Bank, which injected $83.9 billion into its banking system Friday, a day after it provided $130.8 billion. It was the bank's biggest infusion ever. And the Bank of Japan said it injected $8.39 billion into money markets Friday.

If that's not enough to settle things down, however, Louis Johnston said the international financial system would be in some danger of "seizing up."

"Right now, it looks like banks in general have a lot of cash on hand," the College of St. Benedict/St. John's University economics professor said. "But if one or two aren't as strong, we'll rapidly see how interdependent banks are on each other. If one bank sneezes, you could see a lot of other banks catching a cold."

What it means

The tumultuous financial roller coaster isn't going to help local or national real estate markets pick up in the short term, Banaian said.

For people who bought more house than they can afford, expecting they could sell it quickly for a profit, that means more bad news.

"If you have a lot of equity in your home, I don't think this affects you much," he said. "If you have a mortgage taken out in the last couple years and you don't have any equity but you can wait it out, you're fine, too. But if you need to get out of that house, you're going to have to pay to do it."

http://www.sctimes.com/apps/
pbcs.dll/article?AID=/
20070811/NEWS01/108110020/1009; August 11, 2007 6:28 PM
Anonymous said...: US CREDIT-Some corporates may risk wider spreads on ABCP hedging

Credit default swaps on some companies that sell asset backed commercial paper (ABCP) may weaken if resistance by investors to take on new paper sparks hedging on the companies.

"Instability in the ABCP market is the new concern of the week," analysts at Barclays Capital said in a report.

Asset-backed commercial paper conduits are vehicles that issue short-term securities to investors in order to finance mortgage assets for originators until these assets are ready to be securitized. Banks typically provide liquidity facilities against the ABCP issuance.

"For specific credits, an interruption in commercial paper access would likely result in a technically driven widening of credit default swap spreads because the banks that have backstopped those commercial paper programs would probably want to hedge," Barclays said.

The inability to roll a commercial paper program could also lead an issuer to fund themselves with new debt in the corporate bond or loan markets, which could also send their default swap spreads wider.

However, "although they currently are facing high spreads, including a 20 basis point jump in yield on Thursday, broadly speaking, corporates have been able to roll their commercial paper during this recent period of credit dislocation," Barclays said.

Units of American Home Mortgage Investment Corp. AHMIQ, which filed for bankruptcy on Monday, Luminent Mortgage Capital Inc. LUM and hedge fund Aladdin Capital Management all exercised options this week that allow them to delay repaying commercial paper.

http://today.reuters.com/news/
articleinvesting.aspx?type=
bondsNews&storyID=2007-08-
10T210138Z_01_N10612848_RTRIDST_
0_MARKETS-CREDIT-ANALYSIS.XML; August 11, 2007 6:35 PM
Anonymous said...: Here in hawaii we are behind by about a year, but! with no loans and 9 months of inventory prices are bound to come down which will hopefully let us back into the market. We make almost 90K/ year and are pretty much bought out right now.; August 11, 2007 6:45 PM
Anonymous said...: Why don't people call the root cause of the problem what it is lack of CREDIT WORTHINESS.

The world is flooded with global excess liquidity thanks to BOJ. Therefore the problem is not with liquidity.

Currently, yen carry trade investors are being prudent and only borrowing that money on buying asset that are of high credit worthiness.

Look at the SWAP spread on asset tied to mortgage back securities, why would anyone want to take on that kind of risk.

It got as high 500 points or paying as high as $500,000 to protect $10 million.

Were is the profit in that?

So Many speculators and hedge funds with allot of mortgage back securities to sell are saying why not let the Federal Reserve take on that risk, besides in the end the only people that get hurt is the one holding US treasury.

Many speculators and hedge funds are gambling that China won't dump US treasury because that will threaten China ability to sell their goods to the US consumers.

Therefore they are gambling that China will not mind losing their money to save these speculators and hedge funds who are struck with so many bad mortgage back securities.

http://www.lewrockwell.com/
north/north559.html

Today, Bernanke’s FED is keeping the monetary base growing at about 2% per annum, which is low. Month after month, the FED doesn’t announce a lowering of the FedFunds target, which stays at 5.25% – lower than in 2000.

Short-term T-bills pay about 4.6% (5% when he launched his tantrum). With price inflation (Median CPI) at maybe 2.1% per annum, the real rate of return for T-bill investors is 2.5% per annum. On this, they will pay income taxes of maybe 30%. That’s a real rate of return of 1.4% (1.75% when he threw his tantrum). Wow!

Yet Cramer wants the FED to lower the FedFunds target rate. That anyone should get a real rate of return of 1.75% a year by purchasing the debt of the United States government appalls him. He goes on national TV to scream that the FED’s willingness to accept this proves that Bernanke is an academic moron.

THE CHINESE THREAT

Meanwhile, there is a move in Congress to hike tariffs against Chinese imports. In response, a Chinese official warned this week that China in retaliation would start selling T-bills, thereby driving up U.S. interest rates. In other words, China is threatening to adopt the strategy that works best in games requiring cooperation: tit for tat.

The stock market ignored this warning. It rose.

Think of Cramer’s tantrum from the point of view of a central bank which holds hundreds of billions of dollars in U.S. Treasury debt. If the FED were to adopt Cramer’s suggestion and lower the FedFunds rate, along with the T-bill rate, China will suffer a loss of income. It holds debt, not equity.

If the FED pushes down interest rates on debt in order to fire up an economic boom that we are assured by most Economists is doing just fine, this action tells central banks: "Your interests will be sacrificed to the interests of Jim Cramer’s buddies of 25 years, who misforecast the market and are now in dire straits."

Investors think the Chinese are bluffing. Well, the Chinese may be bluffing. They have pursued a policy of modern mercantilism, exporting goods and buying Treasury debt with newly created yuan in order to hold down the value of the yuan and sell more goods abroad. But protectionists in Congress are upset with this policy. They want to pursue mercantilism, too. They want U.S. exporting firms to be subsidized by government policy. So, they threaten to impose tariffs on Chinese goods.

On the one hand, the Chinese central bank is subsidizing the U.S. Treasury, so that the Treasury can sell its debt at what would constitute below-market rates, were the Chinese central bank not a buyer. Congress loves the effect of these low rates: economic investment, rising consumer debt, and a rising stock market.

On the other hand, Congressional mercantilists now propose to penalize the Chinese export sector for the exchange rate effect of the central bank’s policy of subsidizing the U.S. Treasury.

Then a Chinese official says, "You don’t like our subsidy? OK, we will end it." Investors call this a bluff. Why do they think this is a bluff? Because the U.S. economy would contract, and U.S. consumers would buy fewer Chinese goods. This is an accurate assessment. But undergirding this assessment is an assumption: "The Chinese central bank is trapped by its own policy of mercantilism through monetary debasement. It dares not stop buying T-bills, no matter what Congress does to restrict Chinese imports."

In the short run, the Chinese central bank does have a huge problem. If it ceases buying U.S. Treasury debt, short-term U.S. interest rates will rise. But the People’s Bank of China can then buy Chinese government debt instead. This will lower short-term interest rates in China. Chinese industries that export to America will suffer losses, but companies selling to Chinese consumers will be subsidized.

China’s central bank does not have to subsidize the U.S. Treasury in order to stimulate economic expansion in China. It can subsidize the Chinese Treasury instead by purchasing its debt. A subsidy is a subsidy, no matter who gets it. The main economic problem is the subsidy itself, not who gets it.

The economic boom created by monetary expansion in China is artificial. It is the product of below-market interest rates. It will end either in the destruction of the yuan through mass inflation (the crack-up boom) or in a Chinese recession. But this is true whether the central bank buys U.S. Treasury debt or Chinese Treasury debt.

China’s central bank has been willing to load up on Treasury debt that pays low interest rates. The Treasury can sell its debt at low rates precisely because of China’s purchases. The quid pro quo is free trade. The Chinese central bank is subsidizing China’s export sector by way of subsidizing the U.S. Treasury. If Congress changes the rules and blocks Chinese imports, then the Chinese can find a market which will not impose tariffs. That market is China’s domestic market. "You Americans want to block our goods. Very well. We shall buy our own goods."

It is not the FOMC which is following idiotic policies. It is the protectionists in Congress. These people expect to block imports from China, yet they also expect the Chinese central bank to keep buying and holding U.S. Treasury debt which it purchased in order to stimulate Chinese exports to America. They think the U.S. holds all the cards in this high-stakes game. But it is the Chinese who are exporting wealth, not the United States. China is running the $200+ billion dollar annual trade surpluses with the U.S. The U.S. sells official promises to pay. China sells products.

In the long run, it is easier to sell products than it is to sell government promises to pay in a currency which the government’s agent controls. It is also more expensive to manufacture goods than promises to pay. Manufacturers in the U.S. have found it too expensive to compete with the Chinese. These two facts point to a day of judgment. "We have decided to purchase no more T-bills."

Cramer will go ballistic, of course. He will lash out at the idiots who run the People’s Bank of China, who are threatening the livelihood of his buddies. But the directors of China’s central bank will not notice. They do not watch CNBC. They do not even watch "Today."; August 11, 2007 7:03 PM
Anonymous said...: My guess is that Mr. rcochran is being paid for posting his messages.
I cannot see any reason for someone to post these messages repeatedly and that frequently without offering much of logic.
If this is the truth it is easy to understand why and by whom.; August 11, 2007 7:12 PM
Anonymous said...: Dollar-Yuan FX Swap Fwd Discount Widens Sharply On Subprime Woes

The U.S. dollar's discount against the yuan in China's foreign exchange swap market widened sharply Friday as banks rushed to meet their funding needs due to tighter dollar liquidity arising from the U.S. subprime mortgage crisis.

The discount on one-year dollar-yuan forwards widened to as much as 3,980 pips Friday morning versus 3,480 pips at Thursday's close, marking the price's single biggest one-day movement, traders said. The discount was quoted at 3,800 pips at 0900 GMT.

In an FX swap, two parties exchange currencies at the spot rate and agree to reverse the transaction at a future date based on the forward rates, which in turn reflect the gap in interest rates between the two countries. In the case of dollar/yuan, the party that agrees to hold yuan receives a premium since Chinese rates are lower than those in the U.S.

However in China, FX swaps have instead become a popular funding tool in the past few months thanks to a government policy to cut foreign borrowing by banks that has led to a severe dollar supply shortage onshore.

The State Administration of Foreign Exchange announced earlier this year that by the end of March 2008, all Chinese banks must slash their short-term foreign-currency borrowing by 70% from last year's levels, while foreign banks and nonbank financial institutions in the country have to cut their borrowing by 40%.

As a result, the dollar borrowing cost has soared in China's interbank market in recent months, prompting banks and financial institutions to raise funds via cheaper FX swaps. Aggravating the dollar funding squeeze has been the spreading subprime mortgage crisis that has also made the greenback more expensive to borrow in global markets due to growing risk aversion.

The overnight London Interbank Offered Rate, or Libor, jumped to 5.86% Thursday from 5.35% Wednesday marking its highest level since the start of 2001.

"Overnight dollar funding was fairly expensive, but this morning, yuan funding was still relatively cheap," said a Shanghai-based dealer with a foreign bank. "So you had a lot of banks trading forex (swaps) to meet their funding needs."

He said if the subprime crisis deepens, the dollar's forward discount against the yuan could widen further in coming sessions, edging closer to the even wider discount for the offshore dollar/yuan non-deliverable forwards, or NDFs. The one-year dollar/yuan NDF discount was quoted at 4405 pips late Friday.

However, another trader cautioned that prices could head in the opposite direction if China's central bank decides to hike interest rates again later this month to cool the country's red-hot economy and rising inflation.

http://www.fxstreet.com/news/
forex-news/article.aspx?StoryId
=8d21bff6-13b9-4177-aa25-
8568501e21d5; August 11, 2007 7:45 PM
Anonymous said...: You own a house it not like stock what could go wrong.

Then after last week turmoil in the stock market you started hearing about the weird world of mortgage-backed securities -- pools of homeowner loans for the financial markets, a.k.a. MBS.

What does it have to do with the humble homeowners? In a word, everything.

http://www.sfgate.com/cgi-bin/
article.cgi?f=/g/a/2007/08/10/
carollloyd.DTL

You know what they say about Bay Area real estate: They aren't making any more of it. It's so gorgeous, people will always want to live here. The population is growing but we're not building enough housing to meet demand. And, unlike 100 shares of Google stock, if you don't want to live in your home, you can rent it.

For years, I've nodded along to the bromides of our real estate obsessed citizenry: the self-assured homeowners, the eager buyers, the agents and loan brokers and contractors. As the owner of my own humble patch of San Francisco soil, I've bought into all these warm and fuzzies about keeping home and hearth in one of the most expensive real estate markets in the country. So many high-IQ individuals can't be wrong, right?

Beyond these facile truisms about the market (which aren't always true), there are unseen forces at work that most of us never contemplate, much less comprehend. Behind the proverbial bricks-and-mortar curtain, backstage machinations have been unfolding, and until a couple of months ago went mostly unmentioned in the ubiquitous real estate rap sessions.

Backstage, the housing market has a shadow life in the world of investing. I'm not talking about flippers buying Florida condos or developers overreaching with acres of McMansions in Tracy. This is the world where the debt from your home lives on long after you have bought it.

It's analyzed, bought and sold like a pork belly, repackaged into-ever-more inventive financial products. Your housing debt and the interest you are projected to pay inspires insurance products, allowing those who have bought your debt to hedge against it as well.

For instance, to resell pools of subprime loans, investment companies separate them into distinct investment products called Collateralized Debt Obligation Tranches, which each take on different levels of risk.

The "equity" tranch takes on the highest level of risk and pays the highest interest. If any of the homes in a pool of loans is foreclosed upon, this tranch absorbs the losses first.

The "mezzanine" tranch absorbs all the losses after the equity tranch has gone under and pays a slightly lower interest rate.

Finally, the third tranch absorbs only losses from default after the equity and mezzanine tranches -- thus offering a cushion against the risk of default. This least-risky tranch pays a lower interest rate but it's designed to earn a triple-A investment grade rating from credit-rating agencies such as Standard and Poor's and Moody's, making it far easier to sell.

But even with this cushion against risk, this third tranch didn't turn out to be such a safe investment.

"How do you create something that is junk but call it triple-A?" asks Christian Hviid, director of asset allocation for Gen Worth Financial Asset Management, a company that has been betting against housing for some time. "There was risk out there, but they were pricing things like they had no risk.

At the heart of their miscalculations was failing to notice that people are treating their homes differently than they have in the past.; August 11, 2007 8:06 PM
Roccman said...: "THE PERFECT FINANCIAL SH*TSTORM HAS BLACKENED THE SKY. HEAD FOR THE HILLS. TAKE WATER, FREEZE-DRIED FOOD, GOLD AND AMMO."

Bring it.

While the rest of the world was pounding out reasons why this would not happen...I dug in.

Don't cha just hate a "know it all"...won't have to much longer...the dieoff is about to commence ...then you will go away.

Cheers; August 11, 2007 8:53 PM
Anonymous said...: Keith,

I have mentioned many times that you have saved me from financial disaster and that I would not buy a home until you think it's safe.

People can laugh all they like about that, but I fully understand how close I came to disaster . That said, prices in my area have come down quite a bit and a home I love will be coming onto the market in October. What are your thoughts? Is it still too soon?; August 11, 2007 9:40 PM
W.C. Varones said...: Orange midget Angelo Mozilo makes the front page of the Wall Street Journal.

Check out the dot pic.

http://wcvarones.blogspot.com/2007/08/fortuitous-timing.html; August 11, 2007 11:20 PM
Anonymous said...: Here is a question... I haven't totally thought my personal answer through, but share your thoughts. Why don't all of these lenders who have the loans that are going to default simply lower the interest rates on said loans. Take, for example, if someone had an 3/1 ARM that has adjusted from 5.75% to 9.75%, and now they are suddenly having trouble making payments. It seems fairly obvious that if they lowered the rates to a much, much more reasonable rate of 6.5% or even slightly lower, they can still make a little money themselves and most importantly give their customers at least a chance to keep making payments. It wouldn't have any up front costs for them since they have already originated the loans...just lower the rate, lower the customer's payment, and maybe, just maybe, they can keep out of foreclosure.; August 11, 2007 11:55 PM
Anonymous said...: hombre,

you gotta update the comments more than once a day, this sucks; August 12, 2007 12:05 AM
Anonymous said...: What is everyone so freaked out about? Don't worry folks, the newly minted billionaires will be fine. Don't worry about them, the hundred million dollar babies will be fine too. Oh yeah, and the investment banks will get a bailout too. Quit worrying, the wealthy money grubbing maggots already got theirs, nothing to see, move along or I will tear gas this mob.; August 12, 2007 1:06 AM
Anonymous said...: Iowa straw poll delayed to cook the numbers up in this bogus poll for loser canidates; August 12, 2007 2:23 AM
Anonymous said...: It's *way* too soon.

October ARM re-adjustments will
bring prices down even further.

Resistance by sellers is being
replaced with resignation as house
prices come inline with market values.

~~~~

HP fan said...
Keith,

I have mentioned many times that you have saved me from financial disaster and that I would not buy a home until you think it's safe.

People can laugh all they like about that, but I fully understand how close I came to disaster . That said, prices in my area have come down quite a bit and a home I love will be coming onto the market in October. What are your thoughts? Is it still too soon?; August 12, 2007 6:24 PM
Anonymous said...: Annual rental-income x 10 will provide a fairly accurate value
for the actual market value of homes across our country.

We have a long-long way to go before housing prices make sense again.; August 12, 2007 6:43 PM
Anonymous said...: "Anonymous said...
Here is a question... I haven't totally thought my personal answer through, but share your thoughts. Why don't all of these lenders who have the loans that are going to default simply lower the interest rates on said loans. Take, for example, if someone had an 3/1 ARM that has adjusted from 5.75% to 9.75%, and now they are suddenly having trouble making payments. It seems fairly obvious that if they lowered the rates to a much, much more reasonable rate of 6.5% or even slightly lower, they can still make a little money themselves and most importantly give their customers at least a chance to keep making payments. It wouldn't have any up front costs for them since they have already originated the loans...just lower the rate, lower the customer's payment, and maybe, just maybe, they can keep out of foreclosure. "

Thanks You!!! That is the most painfully obvious part about this whole debacle. I have been wondering that myself for a long time. The best answers I can come up with are:

A. The banks still are delusional. They have some risk table somewhere that tells them that it is better to get 9.5% of 0.00 with a foreclosure cost of $58000.00 than to make 6.5% on a current loan of $300,000. Especially when the home is only worth $225000. Keep in mind the bank will have to hold the property for months after foreclosure - negative return plus loss for bank/Investor. Bad credit and possible 1099 for borrower. Stupid

B. Because of the way these stupid loans were sold off so many times, the servicer can't even figure out who the investor is, and therefore can't advise the investor he/she/it is a stupid moron for foreclosing in this market - although they have to send the payments somewhere so I think that one is just an excuse from the servicer / bank.

C. They are hiding these losses still on the books, and don't want to mark to market. They would rather have the whole thing collapse, and everyone homeless than to take a ligitimate loss not being able to continue to claim they are making 9.5% on the loan. Sure there is no real person paying 9.5% and instead the invested dollars just lost $58000.00 to attorneys, then the market will punish some more for another $100,000 loss.

I can tell you this. If I was a bank with the loan in my portfolio, or an investor in Mortgage Securities, I would be telling the servicer - you modify these loans right now, and keep them in the house and paying - period. The long term pain will be the investor that thought he would make 9.5% and instead is getting half his principle back. Although that is probably ultimately the same people that were foreclosed in the first place (401K, Retail stock holders, Money Markets, Fixed Income funds etc.) So I guess the "public" is getting fleeced both ways....

As usual, just like the Bubble itself, this can be fixed with common sense and rational thinking. Both of which have been in short supply since about the 1970's when our money was untied from gold reserves.; August 12, 2007 7:21 PM
Anonymous said...: It is a mistake to give fraud merchants and thieves a "get out of jail free" card. Not only that, the actions of the government directly punish fixed income retirees and tells people who saved to attempt to purchase a home they deserve on the rebound from crazy greed pricing that they were the fools over the last few years for not running up their debts and taking out 5% down mortgages on their overpriced home. WHY ARE WE LETTING THEM GO? WHY ARE WE BACKING THE VERY PEOPLE WHO CAUSED THIS PROBLEM?; August 12, 2007 7:34 PM
Anonymous said...: Ron Paul got 9% in Iowa after being there for only a week and spending a piddly amount.

Tom Tancredo got 13%. He had been campaigning in Iowa for much longer, but regardless, it shows how P.O.'d Americans are over illegal immigration.

Mitt Romney throw away money right and left, but got 31%, whereas Huckabee and Brownback got in the teens.

McCain and Giuliani got slaughtered, with the 1-2% of the vote that "everybody" knows RP always gets, along with Duncan Hunter and Fred Thompson. Tommy Thompson should be going home after finishing behind RP.

The big winners are the common-sense pair of Paul and Tancredo, who together got 22%, whereas the mainstream media knew they would probably get 4% between the two if they were lucky. [points finger at mainstream media] DOPES!!!; August 12, 2007 10:08 PM
Anonymous said...: I have noticed here in Alameda, CA homes with "sale Pending" are not progressing to "sold". It's taking so long in fact, the adhesive is actually causing the sticker to fall off! Some are stuck in limbo land for way more than a month.

These are 569K townhomes that I'm talking about - so if sales are frozen at these prices, how can someone try to sell at 759K?; August 13, 2007 2:39 AM
Unknown said...: Why don't all of these lenders who have the loans that are going to default simply lower the interest rates on said loans

because the entire purpose of the teaser rate was to hook the borrower into shackling themselves into a lifetime (well, 20+ years) of debt servicing at the back-end rate(s).

Plus once the loan goes into a MBS the originator/"lender" loses control over it to the MBS trustee.

Quite an intersting doomsday device they invented. S&L, LTCM, Japan's LTCB . . . these will be forgotten, but one third of our GDP mortgaged in sucker financial instruments . . . one for the history books; August 13, 2007 8:11 AM
Anonymous said...: Can anyone else confirm the rumor that there is no Federal/State Highway work left anywhere in the country after six weeks? Companies have been calling around looking to pick up anything. Apparently there is nothing available and no schedule of work is posted. In six weeks all major construction companies will be out of any Federal/State work. Is this true?; August 13, 2007 1:58 PM
Anonymous said...: Worlds first country song about Subprime CDO investing!!!

http://www.youtube.com/watch?v=LtcnXLDnXvs; August 13, 2007 3:13 PM
Anonymous said...: For another example of bubble in So Cal, see this investigation in Sunday's Orange County Register.
http://www.ocregister.com/news/loans-camile-percent-1806121-subprime-loan; August 13, 2007 4:24 PM
Unknown said...: Southern California's bursting bubble was detailed Sunday in an investigation by the Orange County Register at http://www.ocregister.com/news/loans-camile-percent-1806121-subprime-loan; August 13, 2007 4:34 PM
Unknown said...: What are your thoughts? Is it still too soon?

_____

Way WAY too soon. This thing has not started to snowball the way it's going to. We're just getting started, tip o' the iceberg. Do NOT try to buy a house now.; August 13, 2007 6:38 PM
Anonymous said...: Agreed. Although you have to wonder about the logic on Wall Street now that they have discovered that the borrower will not be shackled, they will walk and rent. Good for me as a long time RE holder, but not too good for the a-holes that wanted servitude for the masses through that garbage paper.; August 13, 2007 8:16 PM
stuckinthecity said...: because the entire purpose of the teaser rate was to hook the borrower into shackling themselves into a lifetime (well, 20+ years) of debt servicing at the back-end rate(s).
---

Not nec. The point of the teaser rate was to keep the gravey train moving.

It ran out of coal on 02-03. 04+ introduced the ARMs to mainstream-you-did-not-miss-the-boat speculation.; August 13, 2007 9:08 PM
Anonymous said...: No One Has Learned Anything
Monday August 13, 10:41 am ET
By TradingMarkets Research

http://biz.yahoo.com/tm/070813/16177.html?.v=2

Next...I must mention Bernanke and Wall Street. All I heard over the weekend was how Bernanke has performed so admirably...and that the Fed has been terrific the past few years. Yes...and Pacman Jones should get the Man of the Year award. What am I missing? The same people who gave you subprime lending...who enabled subprime lending...who enabled trillions in derivatives...who told you they were good for the economy...who told you there wasn't a problem...who have been calling a housing bottom every 2 weeks...who waited and waited to the problem bubbled over...are now being complimented by Wall Street...and for what? Spending a crapload of money to save the day? Who are they now bailing out? Yup...all the mutthounds that leveraged themselves into oblivion. Oh yeah...and for those calling for a housing bottom, why am I finding insider selling in a couple of homebuilding names AFTER a monstrous drop?; August 13, 2007 10:05 PM
Anonymous said...: It is amazing to me that the big money guys Hank Greenberg and Eli Broad would bail out the Goldman Sacs hedge fund but not an Los Angeles hospital (King Drew Medical Center). Folks we need a big change.

Goldman hedge fund gets $3B bailout
August 13, 2007: 09:03 AM EST

Aug. 13, 2007 (Thomson Financial delivered by Newstex) --

NEW YORK (AP) - Goldman Sachs Group (NYSE:GS) on Monday said a group of investors that includes Eli Broad and Hank Greenberg will sink $3 billion into one of its biggest hedge funds that has seen its value plunge amid market volatility.

The investment bank said its Global Equity Opportunities fund 'suffered significantly' as global markets sold off on worries about debt and credit. The fund lost as much as 14 percent of its value during the past 12 month, according to media reports, and is currently worth about $3.6 billion.

Goldman Sachs Group Inc. will lead the group of investors to help bail out the hedge fund, which relies on computer-driven trading strategies. Other investors include Broad, Greenberg's C.V. Starr & Co., and Perry Capital LLC.

In addition, the investment bank said that two other hedge funds it manages -- Global Alpha and the North American Equities Opportunities Fund -- have also suffered during the market dislocation. Goldman said it 'reduced risk and leverage' in the funds to stem losses.

'At their current levels of equity capital, we believe the funds are positioned to actively pursue market opportunities,' Goldman said in a statement.

Goldman, one of the world's premiere financial companies, joins Bear Stearns Cos. (NYSE:BSC) and France's BNP Paribas (OOTC:BPRBF) in revealing that its hedge funds have been slammed by the credit market crisis. There is some $2 trillion believed to be held in hedge funds globally.

Bear Stearns earlier this summer disclosed that two of its multibillion dollar hedge funds were wiped out because of heavy bets on mortgage-backed securities. BNP Paribas said last week it would freeze three funds invested in U.S. asset-backed securities.

Quantitative funds like Goldman Sachs' that rely on computer models to make investments have taken a beating because of triple-digit swings on Wall Street during the past few weeks. Other financial institutions are also expected to reveal to what extent their funds have suffered as well.

Britain's Barclays PLC (OOTC:BSCJF) (NYSE:BCS) (NYSE:GBB) , in the midst of a takeover battle for Switzerland's UBS (OOTC:UBSLF) (NYSE:UBS) , may be among the banks that is having troubles. Barclays Global investors is one of the world's biggest fund managers, with some $2 trillion in assets under management.

Goldman Sachs was to hold a rare conference call Monday to update investors about the plight of its hedge funds.

Shares of Goldman Sachs closed at $180.50 on Friday, and rose 2.1 percent in premarket electronic trading.

Copyright 2007 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.; August 13, 2007 11:12 PM
Anonymous said...: Interesting read
http://tinyurl.com/2wfv8u; August 14, 2007 12:09 AM
Anonymous said...: k.w. - southern ca.

Thank you so much for your kind advice, it is deeply appreciated!

Everyone who takes the time to offer sound advice should go to bed knowing that while some of us seem dense, we are listening. Honestly, many are very grateful that you take the time and effort to comment.

I, for one, am so deeply grateful.; August 14, 2007 1:28 AM
Anonymous said...: some crash

LA county prices same as a year ago

SF prices higher than 2006

SD and OC down 5%

all this after prices more than doubled since 2000

what a crash

not DOPES

not MORONS

IMBECILES!!

keep renting the 1 bedroom shit holes; August 14, 2007 3:01 AM
Anonymous said...: http://tinyurl.com/2metns

Webster Tarpley's long and quite good article about this and other themes.

He's not a big Ron Paul fan, I will say that...; August 14, 2007 4:00 AM
MyRealtorOnTheRadio said...: Let's Talk Real Estate, the housing market is well underway with it's morphing into a market place we have never seen before. I dealt with a ton of short sales in the 90's as a real estate lender and navigated gracefully through the banking back doors since I knew "lender Speak" and also knew what they wanted in terms of qualifying. This time around I am currently up to 100% of my pipelineis either sellers in default of their mortgages, have notice of defaults filed or on their way to trustee sale and most of them have zero equity and all of them have first and seconds. Add to this the existing homeowners who are selling for other reasons and there is from 8 months to as high as 33 months of inventory in Southern California.
Interesingly the prices have not tumbled down. Listen to what I am saying, prices have not tumbled down. There seems to be a resistance to bringing prices down. And I am hear to tell you that the sellers are not the problem! It's the scardy cat realtors who are afraid to tell the sellers the truth or are to ignorant to do their homework and pull the actual data to determine a realistic price. I have sold houses in 6 days, and under 60 days routinely. Now I have also had a property sit on the market because I can't get my seller to give access to the home. So we could be giving the house away (we actually tried that by dropping the price by 200k and we got an avalanche of offers) but then the seller took three weeks to allow me to review them all with him. So, beware, price isn't everything. I continuously tell my sellers, buyersm, agents and banks you have to have the factors that affect the marketability of a home in balance. If you don't have all three in sync, the property sits. And those factors are, the price of the home has to be just under the last comparable sale, the access to the home has to be wide open sunrise to sunset and lastly the commissions need to grab the attention of the buyers agents who sell 82% of all the properties sold. Contrary to popular belief, the commissions paid to the buyers agent are not just commissions. It's part of the formula we listing agents use to manipulate the exposure to the property. Right now we have a vast number of properties for sale and many are with discount commissions to the buyers agents. The first thing an agent does when they pull up 250 + homes that fall into the criteria their buyers says they want is pull up only those homes that compensate 3%+ and even then the search often times gives us about 100 homes, still to many to manage.
When you have that many homes you need to market to buyers (what's in it for them) something about the home needs to make it stand out in their mind. Anything! Next the property needs to stand out in the mind of the buyers agent. That way both parties of the same team are eager to see the subject property.
Marketing of homes aside, the credit crunch we are facing in the banking industry is really cause for concern. However with such a big down side, it also brings a huge opportunity for others who have the ability to purchase in these times. There is no shortage of money in the US. We have people like Angelo Mozilo who is liquidating millions of dollars in Countrywide stock. I wonder where he is investing it? I am sure it's not under a mattress.
What we basically have is a shift of wealth in this country. Those people who refuse to change and adapt with the market will obviously not survive it. Those who accept the change and adapt to it and Choose to focus on the opportunities; trust me there are plenty of opportunities you just need to look for them; will succeed. It is going to be interesting to see how long this sellers market cycle lasts. I think it will take about 48 months to turn around. Right now I see everyday in my office lenders who hold seconds on homes who are completely getting wiped out either through trustee sale auctions or shortsales. It still baffles me but I accept that it's where our market has brought us.
My favorite axiom is "better to ask and get a no, than never ask and never know" and more than ever we need to ask lot's of questions.
For more information on our foreclosure market you can reach us at www.exitbeachcitiesrealty.com
and 714-847-3454 x 307
lillianWalker@verizon.net
We will be hosting Foreclosure seminar Saturday 11-3-07 and how you can profit with Steve Dexter the Author of Real Estate Debt can make you rich as seen on Fox News, Harvard Busines school and Kiyosaki's radio show plus many,many more.; August 14, 2007 11:12 AM
oneclickplus said...: Keith posed the question about a week ago ... are we in "panic" mode yet? I believe the concensus was that "fear" was still predominant. Now, a short week to 10 days later with the FED jumping into the fray ... Bear Stearns and Goldman Sachs throwing Billons at their problem ... I believe PANIC is in full swing. Pass the popcorn please.; August 14, 2007 12:47 PM
Dan said...: Pizza Giant Chuck E. Cheese Joins Fed to Fight Subprime Mortgage Crisis

http://www.thespoof.com/news/spoof.cfm?headline=s8i23297; August 14, 2007 5:29 PM
Anonymous said...: Blame Congress for the Foreclosure Mess

http://tinyurl.com/2lul48

In an effort to determine why mortgage foreclosure rates are so high, advocacy group Common Cause recently completed a study, and in turn a shocking report. According to the group's findings, a large portion of the blame may lie with the mortgage industry, which spent a total of $210 million on lobbying and campaign contributions in an effort to deter new lending laws....
The money has helped to successfully block Congress from restricting lending abuses that led to the foreclosure crisis....
So what did they get for their buck? According to Common Cause, the money encouraged Congress to turn a blind eye to the shady practices that were becoming the norm among many lenders.

Congress was warned repeatedly--as early as 2000--that the new mortgage products being offered by lenders were dangerous to borrowers. There were also warnings by real estate appraisers in 2001, who asked for hearings to examine what was becoming a growing trend in the mortgage industry: lenders asking for inflated appraisals. Congress, however, did not act on any of these warnings.

"Congress should have stepped in years ago to pass comprehensive pro-consumer mortgage legislation to curb mortgage lending abuses," said Jon Goldin-Dubois, executive vice president of Common Cause. "The fact is, the subprime mortgage lending industry was able to escape scrutiny for so long in part because of its generosity to federal policymakers and its lobbying clout."

In 2001, the Mortgage Banker's Association organized a meeting with eight major subprime lenders and several other trade associations in an effort to develop a "unified battle plan."
They hired a powerful public relations firm to spin a campaign and a positive national message. They also hired a 'SWAT team' of lobbyists to speak with mayors, city councils, and other entities who were contemplating further lending regulation.; August 14, 2007 8:03 PM
Anonymous said...: NEWS FLASH * * JUST IN...

BOOM!! BANK CRASH!!!!!!!!

Aug. 14, 2007) -- Sentinel Management Group Inc., the Illinois-based firm that manages $1.6 billion, said it asked regulators for permission to freeze client withdrawals because credit-market turmoil made it impossible to trade.

(bloomberg)
+ + + + + +

Do you know what that means trolls???

It means this HUGE bank is asking the gov to stop it's clients from withdrawing their own money!!!!!

BWAAA!!!!!!!!!!!!!! TSHTF!!!!!; August 14, 2007 8:53 PM
Anonymous said...: Hello Renters in your rancid 1 BR shit shacks. How's that gold polishing going?
I can only recommend that you read Anonybrain's post August 14, 2007 3:01 AM
He's got it right!!!
Way to go!
Happy renting iditos!; August 15, 2007 12:40 PM
GordonSBernstein said...: Fort Lauderdale Real Estate has seen some of the most dramatic drops over the past 2 years in the entire country. Aggressive loans, underqualified buyers and shady business practices have made Fort Lauderdale slow to bounce back and prices are still dropping.; August 15, 2007 2:04 PM
Anonymous said...: I don't think that the general public is even to the "fear" stage . . . much less "panic."

The mainstream media - MSM - is just now starting to report the problems.

Is see no fear or panic yet among the public-- maybe in the financial and mortgage worlds. And that is what we post here.

Does anyone agree ? Friends, family and colleagues seem oblivious. No fear yet. No panic.
(But, I agree that it will come.)

Orlando, Florida; August 15, 2007 4:53 PM
Anonymous said...: 12:40 = flipper in melt-down mode.; August 15, 2007 7:07 PM
Anonymous said...: "bank says no withdrawls! said...
NEWS FLASH * * JUST IN...

BOOM!! BANK CRASH!!!!!!!!"

Sentinel Management Group is not a bank. They are an investment management firm that trades in securities, bonds, etc. They are not a regular bank. They are however heavily weighted in the "Money Market" so I would imagine that the recent problems will impact them. But it will not be an FDIC bailout situation. Besides, I am not sure why they would have to ask permission from the CFTC (Commodities Futures Trading Commission). But that may come out in the next few days.

I must agree though that because of this issue, there is a run on Wall Street, and I am getting to buy a lot of good stock on sale. I also think that the Equity funds that actually have cash on hand could make some real money in the future buying good quality paper at the current spreads. They also will be wise to buy good stocks (Oil Services, Consumer non-cyclicals etc.) while all the hedge funds are forced to sell stock because of margin calls. Ah, Warren Buffett must be having the time of his life right now. I can just see it "I'll take 50,000 of that, 200,000 of that 1,000,000 of that....what your begging, fine I'll take it for .20 on the dollar...."

Buy low sell high....; August 15, 2007 7:30 PM
Anonymous said...: Countrywide credit-default swaps soared 225 basis points to 600 basis points, according to broker Phoenix Partners Group. That means it costs $600,000 a year to protect $10 million of Countrywide bonds from default for five years.

http://www.bloomberg.com/apps/
news?pid=20602007&sid=
aZM2xLIBTjAg&refer=rates; August 16, 2007 8:24 AM
Anonymous said...: 121 major U.S. lenders have "imploded"

http://ml-implode.com/; August 16, 2007 8:28 AM
Anonymous said...: Just a reminder of bigger things to come

http://www.boston.com/business/
globe/articles/2007/08/16/
money_man_bet_wrong____and
_lost_16b/

Sowood Capital Management LP abruptly foundered in turbulent debt markets.

His loss of $1.6 billion of investors' money is the biggest hedge fund collapse this year. Much of it occurred during a few frantic days in July, when a meltdown in the subprime mortgage market triggered a shock wave that caused the values of many debt securities, such as those held by Sowood, to drop sharply. Larson suddenly did not have enough money to repay his lenders, and he was forced to dissolve the fund. He sold off the remnants and closed Sowood on July 30.

Larson's sudden fall has left investors, colleagues, and friends wondering how a prudent Midwesterner from River Falls, Wis. (population, 14,000), -- who came East and starred as a highly paid investment manager for Harvard University until he launched Sowood three years ago -- could have miscalculated so badly.

A former Macalester classmate who stayed in touch with Larson, Minneapolis lawyer David Bolt, said he was shocked Larson's carefully-conceived investment strategy proved to be so vulnerable.; August 16, 2007 8:35 AM
Anonymous said...: “All of a sudden the carry trade is frightening and a big sell. What a difference a few weeks make,”

Some analysts say the scale of the correction in the yen has now reached levels that have raised fears of the liquidation of larger, longer-term positions.

The gloomiest of these analysts worry the yen could appreciate on a scale last seen in 1998, when the near collapse of the Long Term Capital Management hedge fund sparked an unwinding of yen-funded carry trades and drove the dollar from Y130 to Y112 in two days.

http://www.ft.com/cms/s/
dfc994e4-4b5e-11dc-861a
-0000779fd2ac,_i_rssPage
=08373e22-506b-11da-bbd7-
0000779e2340.html; August 16, 2007 8:39 AM
Anonymous said...: 42 US synthetic CDO tranches on negative watch after July month-end run - S&P

The negative watch placements reflect negative rating migration in the respective portfolios and synthetic rated overcollateralization ratios (SROC) that had fallen below 100 pct at the current rating level as of the July month-end run

http://money.cnn.com//news/
newsfeeds/articles/newstex/
AFX-0013-18927604.htm; August 16, 2007 8:53 AM
Anonymous said...: Brilliant piss-take on Cramer's "Nuts They're All Nuts":

http://tinyurl.com/25tt3z

"Armageddon is in foreclosure ... We're going to lose an arm and a legeddon!"; August 16, 2007 2:08 PM
Anonymous said...: This is still the "Fear" phase. Things look pretty grim, but everyone is thinking that some external force will set things back to rights. The Fed, with a few more billion dollars, or some sort of huge official bailout. Maybe the tooth fairy will leave 300,000 dollars under everyones
pillow this weekend and all the bad scary debts will get paid. "Panic" will kick in when the hope of a rescue fades away. Then the great fire-sale will begin. I find it very funny the trolls point to anything as proof this is not happening. "My friend sold his house, and I bought a iPhone, so the fact CFC is bankrupt and Wachovia filled warnings with the SEC means nothing." WTF people, for the love of God turn off Fox News for a day and just look around.
As far as buying a house, wait for the new year. A huge fraction of all sub-prime and Alt-A will reset between Oct. and Dec. Give those people a few months to go bankrupt and then pick over the wreckage.

-Snow; August 16, 2007 2:26 PM
Anonymous said...: "...keep renting the 1 bedroom shit holes..."

Heh.

Like anybody pays the slightest bit of attention to scared, up-to-their-necks trolls typing this horsesh1t. (__*__); August 16, 2007 4:44 PM
BrianM said...: Statshot on the ONION "How are we paying off our subprime mortgages?"

ONION Link; August 16, 2007 6:00 PM
TNloanguy said...: Afternoon all, have been in the mortgage business nearly 14 years. Have seen similar " slow downs" before. However this one is really getting serious. Investors closing doors, slashing available programs etc. It all stems from what WAS an easy sub-prime market. Joe Smith with terrible credit could buy a home with no money down or Jim Smith used a MTA Arm loan to buy his lavish $ 1,000,000 home on the beach which carried a neg. AM payment of only a few grand...SURPRISE...adjustment period. Defaults are out of control. An attorney friend of mine in Florida is handling 150 foreclosures per month. Take a look at mortgageimplode.com.....lists all companies that have GONE under or are in process of going under....as of 8/13/2007...116 lenders on list. Rates are still decent for decent borrowers, just have to be able to prove you can afford that house now or have a substantial down payment if going stated income....RIDE THE STORM OUT...SUNNY DAYS AHEAD; August 16, 2007 7:44 PM
Anonymous said...: Wow ... all I can say is pure bullox regarding the global housing market.

So much fighting about property, so much self-interest, no wonder it's a mess.

At sometime when housing starts to make sense, people should only then consider house debting again.

Right now, there is just too much greed and ego associated with housing that's it's best to stay clear of it for awhile until the market corrects itself.; August 16, 2007 8:22 PM
Anonymous said...: It is only just desserts to send back to China toxic mortgages in exchange for toxic toys.; August 16, 2007 10:41 PM
Anonymous said...: There was a chirpy little story on local Portland NPR today that said the Northwest seems to have dodged the bullet on the housing mess. The data says we had a YOY appreciation. The funny part was how Salem Oregon "led the pack" with a 10% increase. If you've ever been to Salem you'd know that it was spec money seeking a cheap place to invest (and lose). It's not a nice place.

Was hilarious and will make the crash here even more fun.; August 17, 2007 3:20 AM
The Editor said...: Disturbing insights from CA. In speaking to client's and prospects throughout the week a great many "investors" have 10-15 homes on I/O or neg-ams and are scrabling for financing that has disappeared. They want new financing but who lends on a money losing deal? This inventory will hit the market in a few months. Lots of SFR's in Los Angeles and Riverside especially.
http://thegreatloanblog.blogspot.com/; August 17, 2007 5:02 AM
Anonymous said...: Another one bit the dust today.

Arizona Daily Star
Tucson, Arizona | Published: 08.16.2007

First Magnus Financial Corp. announced this morning that it would substantially cut its workforce, after announcing to its employees late Wednesday that it would stop writing loans today.

http://www.tiny.cc/4uRyZ; August 17, 2007 5:33 AM
Anonymous said...: 127 major U.S. lenders have "imploded"

http://ml-implode.com/; August 17, 2007 7:47 AM
Lost Cause said...: some crash

LA county prices same as a year ago

SF prices higher than 2006

SD and OC down 5%

No more jumbo loans...rates shot up, and non-conforming loans are unavailable. That is going to make it tough for anybody who needs a loan for over $417k. You can't even buy a condo for that around here.; August 17, 2007 7:47 AM
Anonymous said...: Countrywide downgraded to near-junk bond status

http://ca.news.finance.yahoo.com/
s/16082007/2/
biz-finance-countrywide-financial
-s-credit-woes-force-borrow-
billions.html

Countrywide said it borrowed the cash from a group of 40 banks so it could keep making home loans. The announcement sent its stock tumbling about 11 per cent and prompted one credit rating agency to downgrade its rating to near-junk bond status.; August 17, 2007 7:49 AM
Anonymous said...: S&P lowers ratings on 2.312 bln usd worth of US CDO of ABS transactions

http://www.forbes.com/afxnewslimited/
feeds/afx/2007/08/17/afx4029122.html; August 17, 2007 7:51 AM
The Editor said...: http://thegreatloanblog.blogspot.com/

Jumbo Mortgage Market Meltdown Freezes Luxury Housing.; August 17, 2007 8:46 AM
The Editor said...: http://thegreatloanblog.blogspot.com/

Jumbo Mortgage Market Meltdown Freezes Luxury Housing.; August 17, 2007 8:46 AM