Housing Bubble Bursting?

[rcsone]

TAXMAN-------cometh and taketh..........from sales, property, indirectly through insurance, and all the other direct and indirect taxes from refinance/purchase/repurchase activities......

 

[Marcia Langley]

When the bubble began to deflate this huge sum of paper equity wealth simply disappeared into thin air.

Some of that wealth never existed in the first place. After squeezing everything possible out of Joe Blow, the financial people just started making it all up.

Junk was hidden deep within pretty packages and labeled AAA and they were selling that crap to each other (including foreign investors).

The last few thousand of the DOW average never existed in reality in the first place. You can't lose something you never had. The big investors knew what they were buying from each other (nothing) but rich boys like their games. This was a global game of musical chairs and the unlucky are left holding.

The last two thousand run-up in the DOW occured over a span of about two months. Who really believed the economy was expanding that fast?

But Joe Blow will pay, again, in loss of jobs, loss of equity, and loss of pension plans. When the government allowed corporations to reduce the funding of pension plans because the "investments" were expected to make up the difference, the employees were already screwed. It's just taken this long for the logical conclusion to occur.

And some still think it is a good idea to privatize social security.

-----

The Texas state employee pension plan knew exactly what they were buying. They made the state budget look better by not needing to fund the pension plan realistically.

 

[rcsone]

All of these games have been viewed and reviewed before....bait 'em with greed and then kill 'em while they have their heads buried in the trough.........some will kill themselves by swallowing and breathing all this "point of a point" of increased yield while they are trying to deprive another of their "share".......the dumb require you to drown them; the smart, if tempted correctly, will drown themselves by exchanged imitations...........wonder where their "magic" of reclaimation will move next? food?????

 

[Austin]

Don't forget forks that all that refinanced takeout equity (cash out hard cash) went into consumer spending. Someone posted a video of a Hispanic neighborhood in LA yesterday and that is a macrocosm of which I am speaking, the end result of which will be a mammoth decrease in GDP and a long period of economic stagnation with little if any economic growth. Or worse. Depreciation is an interest concept. The paper equity never was there true, but cash outs is hard money from to the investor to Wal-Mart.

 

[Randolph Kinney]

Contagion is here

Austin,

This "phenomena" of credit and real estate is going to end like what happened to Japan. Contagion is here.

Here are some of this mornings news:

Japanese banks including Mitsubishi UFJ reported losses from subprime exposure on Wednesday, while the Financial Times reported Bank of America and Countrywide Financial have refused to lend money when hedge funds use mortgages, collateralized debt obligations and subprime securities as collateral. Countrywide also was cut to sell from buy at Merrill Lynch, with the broker citing concerns about liquidity in the mortgage sector. In pre-open trade, Countrywide dropped 6%.

 

[Randolph Kinney]

Banks are refusing to lend to hedge funds

Downgrades flow, banks tighten with hedge funds

NEW YORK (MarketWatch) - Financial stocks are set for another day of declines Wednesday amid a flood of analyst downgrades and a report that some U.S. banks are no longer accepting certain hedge fund credit assets as collateral.

The Financial Times reported that various hedge funds said several banks in recent days had cut off lending to funds that use credit portfolios, including mortgages, collateralized debt obligations and subprime securities, as collateral.

That leaves the highly leveraged funds heavily reliant on their prime brokers for borrowing, the report added.

That could cause problems for all sorts of financial companies who trade with hedge funds, if the funds are unable to raise cash to meet margin and collateral obligations with them.

 

[Randolph Kinney]

ALT-A mortgages can't be funded - lenders are "impacted"

Impac Mortgage says no longer funding Alt-A loans

BOSTON (MarketWatch) -- Real estate investment trust Impac Mortgage Holdings Inc. said it has suspended funding on so-called Alt-A loans due to liquidity problems in the mortgage markets.

"At this point, the company is only funding loans that are eligible to be sold to government sponsored agencies," Impac said, adding that it has cut costs by reducing staff and closing some operations.

 

[Restrain]

News reports that Thornburg Mortgage (parent of Adfitech - see other posts about Adfitech) and a major lender, lost 46% of its value yesterday. NYSE had to halt trading in the company due to the free-fall.

Another one about to bite the dust?

 

[Restrain]

CNBC announces that Fed to inject more money into the system after holding up over-night due to technical issues. Stocks had risen thinking the worst was over. More free-fall?

 

[Randolph Kinney]

CNBC announces that Fed to inject more money into the system after holding up over-night due to technical issues. Stocks had risen thinking the worst was over. More free-fall?

Since banks have stopped lending to hedge funds, it will take the FED to purchase mortgages directly from hedge funds or lenders directly to provide the money to satisfty redemption demand or new money to loan out. Short of that, it is a domino chain; one falls into another as the effect ripples through.