Housing Bubble Bursting?

[Dee Dee]

... was there a bubble in the housing market?:new_all_coholic:

This video is a hoot, and pretty much reflects the attitudes and opinions we've seen here on the forum.

http://www.youtube.com/watch?v=yoZV5jt9puc

 

[Austin]

The only thing we have to fear is fear itself. Another 1929 is no longer possible. We have to many safeguards in place in these modern times. Your government that destroyed racism and poverty in our generation while paying off the national debt has their finger on the pulse of this blip so not to worry. Look at the bright side-if the economy collapses green house emissions will drop significantly. Isn't that what we all really want anyway?

Just look at how much things have improved in just the last week! Based on this trend line, in 12 weeks the stock market will be at 500. Twelve weeks? Let's see now: 3 more weeks in November and 4 in December should work out to about the about February of 2008.

 

[Randolph Kinney]

This video is a hoot, and pretty much reflects the attitudes and opinions we've seen here on the forum.

http://www.youtube.com/watch?v=yoZV5jt9puc

That is a hoot! I like the expert who proclaims there ain't no problem because the mortgage delinquency rate is sub one percent of all mortgages. How does he rationalize the 100's of billion dollars of financial losses that have occurred and will be occurring in the future?

IndyMac was saying much the same thing, quoting a loss rate in the hundredths of a basis point. Judging from their last reporting statement, and their stock price, they can't take much more losses on these loans before they are taken over by the FED in receivership.

 

[Randolph Kinney]

A flight to quality around the world as subprime losses mount

Bonds Rise on Signs Credit Losses Widening; Yields Are Lowest Since March

European government notes gained this past week, pushing yields to the lowest in eight months, amid speculation banks' losses from the collapse of the U.S. housing market will spread, boosting demand for the safest assets.

The difference in yield, or spread, between two- and 10-year German debt widened to the most in four weeks as concern the U.S. subprime market turmoil will crimp growth fueled demand for short-dated notes. Bonds extended gains yesterday as shares of Barclays Plc, Britain's third-biggest lender, fell as much as 9 percent and Wachovia Corp., the fourth-largest U.S. bank, said it set aside $600 million for loan losses this quarter.


``The Barclays story is pointing to wider problems in the whole credit market and is leading to difficult markets,'' said Matthias Huth, a fixed-income strategist in Stuttgart at Landesbank Baden-Wurttemberg. ``Investors will buy more and more bonds because of safety.''

 

[Couch Potato]

The only thing we have to fear is fear itself. Another 1929 is no longer possible. We have to many safeguards in place in these modern times. Your government that destroyed racism and poverty in our generation while paying off the national debt has their finger on the pulse of this blip so not to worry. Look at the bright side-if the economy collapses green house emissions will drop significantly. Isn't that what we all really want anyway?

Just look at how much things have improved in just the last week! Based on this trend line, in 12 weeks the stock market will be at 500. Twelve weeks? Let's see now: 3 more weeks in November and 4 in December should work out to about the about February of 2008.

So glad to read that Austin. I was a bit worried after seeing this video.

 

[Riick]

Credit Crisis to Credit Crunch
"Just when it felt like it was safe to get back in the water, a second and potentially much meaner version of this summer’s credit crisis has reappeared...."

This gentleman (John Mauldin) is worth a read

http://www.frontlinethoughts.com/pdf/mwo110907.pdf

 

[Randolph Kinney]

Credit Crisis to Credit Crunch
"Just when it felt like it was safe to get back in the water, a second and potentially much meaner version of this summer’s credit crisis has reappeared...."

This gentleman (John Mauldin) is worth a read

http://www.frontlinethoughts.com/pdf/mwo110907.pdf

Retail sales are signaling recession. The FED is going to have to cut the funds rate big time come December. And so goes the dollar.

 

[MARK JOLLIFF]

I shortedthe S&P on Wednesday and am up 3.5%. After reading Mauldin, tomorrow I'm shorting the Dow 30 and maybe the Nasdaq. Thanks Randolph for the mention of ETF'S the other day. Very useful tool for shorting the indexes! Sadly enough I'm more optomistic about the markets going down than I was about them going up over the past few month's. Kinda sad in a way but then again emotion should have no place in investing. Especially guilt.

 

[Randolph Kinney]

Why banks are in trouble with defaulting loans

Countrywide may be in trouble but so are many other lenders

Among the fashionable new products were so-called affordability loans, like adjustable-rate mortgages (or A.R.M.’s), interest-only loans and reduced documentation mortgages. In addition to helping Countrywide win market share, those loans generated enormous profits, both in the commissions that borrowers paid and the premiums investors paid when they bought them as pools placed in securitization trusts.

Investors were willing to pay significantly more than a loan’s face value for A.R.M.’s that carried prepayment penalties, for instance, because the products locked borrowers into high-interest-rate loans with apparently predictable income streams.

COUNTRYWIDE kept pursuing aggressive loans until summer of this year, well after the subprime mortgage meltdown got going in earnest. As recently as July, for example, Countrywide sales representatives were approved to lend $500,000 to borrowers rated C-minus, the second-riskiest grade, and with credit scores as low as 500. (The top score is 850.) As long as the loan represented no more than 70 percent of the underlying property’s value, Countrywide would lend — even if the borrower had been 90 days late on a current mortgage payment twice in the last 12 months, had filed for personal bankruptcy protection or had faced foreclosure or default notices on his or her property.

This article is about Countrywide and how it grew making "new" product loans.

However, take note of the graphic showing risky loans and where IndyMac rates. IndyMac has $1.6 billion of capital and $20.6 billion in pay option ARMs. That represents a 45% + increase in 2006. You will note that the stock price of IndyMac is lower than Countrywide. Does that translate into a market reaction to risk of failure?

 

[Riick]

I shortedthe S&P on Wednesday and am up 3.5%. After reading Mauldin, tomorrow I'm shorting the Dow 30 and maybe the Nasdaq. Thanks Randolph for the mention of ETF'S the other day. Very useful tool for shorting the indexes! Sadly enough I'm more optomistic about the markets going down than I was about them going up over the past few month's. Kinda sad in a way but then again emotion should have no place in investing. Especially guilt.

FWIW (For What It's Worth)

You might have a look at "ProShares Ultra Short Dow 30" (AMEX: DXG)
Set to "correspond to twice the inverse of the daily performance of the Dow Jones Industrial Average Index."
http://www.etfconnect.com/select/fundpages/etf_funds.asp?MFID=162963

Another interesting index (for a Put) is "Consumer Discretionary Select Sector SPDR Fund" (AMEX: XLY)
Covers industries such as: automobiles & components, consumer durables, apparel, hotels, restaurants, leisure, media and retailing.
http://www.etfconnect.com/select/fundpages/etf_funds.asp?MFID=50828


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