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thepeel
Joined: 08 Aug 2004
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 Posted: Tue Nov 20, 2007 5:46 am Post subject: |
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Clearly, what he have is somebody who doesn't understand this topic.
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| Mortgage rates have been low in the past but never produced the run up we've seen recently. Why is that? |
It is the excessive expansion of liquidity WORLD WIDE which caused asset bubbles and changed the fundamental risk structure of finance. You do not understand. What happened in "sub-prime" housing is about to happen to commercial estate and then "sub prime" credit cards and then sub prime car loans and then sub prime lines of credit. The bubble, dear huff, extends FAR beyond housing. Look at equity markets around the world. Housing bubbles in Singapore, Spain, Ireland, Australian, Alberta, Hong Kong and China. Off the top of my head. These problems are global in scope but simply more strong in the USA.
When you increase the supply of credit to far you get asset bubbles. Forever and always, amen.
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Doesn't a greater money supply also equal more money in people's pockets? Plenty of ordinary people made money off of the housing boom. |
This is the point where I want to stop discussing this with you, as it demonstrates your level of ignorance. However, I'm sitting in an office compiling research on this very topic and will be until late, so I've got the time.
Expanded credit means more "money" in the pocket of some people but the value of that money adjusted for PPP is what is important. Hell, why not print 300 million dollars and make everybody a millionaire in the USA? By your logic, this would be an increase in wealth.
Unfortunately not. Property prices in the United States will likely fall up to 50% (that is, back to 2001 or 2002 levels) in the next two years. Also, the extra money that was printed was spent by American consumers on electronics and those little green pieces of paper are now under the Chinese mattress. When those dollars are invested or otherwise consumed by the Chinese (6-700 billion of them), at whatever rate they choose, the American PPP will decrease accordingly.
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| But you keep bad mouthing the Fed as though it's an inherent problem. |
No, I think that Greenspan and Bernake are an inherent problem. I think that the deep connections between investment banks, HF's, PE and others to the Fed are very problematic. Goldman's wanted a cut, and got one. The Fed system is ONLY AS GOOD AS THE HUMAN RUNNING IT. Got that?
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| So we're ignoring your "perfect world" scenario? I thought you would at least attempt to explain and defend your "alternate system." But I guess not. |
I'd prefer private asset backed currencies that compete with each other for credibility and legitimacy. In a perfect world.
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| And how are you being "raped" by the Fed's actions. You should be happy. You've got a 1:1 loonie now and you can go back home to Canada. |
For me, who will work in finance/economics, a dollar at parity can be a very good thing. For others, namely the rest of my country, it is a mixed bag. A highly valued currency isn't NECESSARILY a good thing. It depends on the structure of your economy, the time between it being a cheap/expensive currency and many other factors. We live in a globalized world.
I think Dodge has done a fairly good job in Canada. It is hard to balance a country that has one area producing a massive windfall of forex and 9 areas doing next to nothing. Those situations need a different policy and he has done as well as can be expected.
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| I'll try to take better notes next time. Obviously I'm not caring enough (as if not at all isn't already too much) about what you say from one day to the next. |
Human institutions are as good as the humans running them. While I don't think the system of fiat cash the best, I can live with it just fine. Shall I make it my signature?
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| And where has such a system ever been implemented and worked successfully? |
I am not aware if it has. It is a theoretcial argument. I believe medieval Iceland has a similar system for a time.
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| Another good reason not to trust him. |
I'm sure the people who the great huff votes for a perfect and without any flaw. We bow in front of your pretend universe. |
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huffdaddy
Joined: 25 Nov 2005
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| Posted: Tue Nov 20, 2007 6:36 am Post subject: |
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| thepeel wrote: |
| Clearly, what he have is somebody who doesn't understand this topic. |
Hey, that's what you get for sticking around on a forum for English teachers. Maybe you should have made some friends in your Econ department.
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| I'd prefer private asset backed currencies that compete with each other for credibility and legitimacy. In a perfect world. |
I can only begin to imagine the nightmare that'd be.
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| And where has such a system ever been implemented and worked successfully? |
I am not aware if it has. It is a theoretcial argument. |
I'd suggest that maybe you and your theoretical economic cronies find a smaller economy to play around with before trying out your ideas in the major leagues. Work out the kinks and get back to us with the results. Maybe then we'll consider it. |
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thepeel
Joined: 08 Aug 2004
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| Posted: Tue Nov 20, 2007 9:16 am Post subject: |
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Hey, never deviate from the status quo when speaking with a true believer, eh? Ideas are ideas and reality is reality. I'm willing to accept the situation as it is while at the same time pondering something else.
I've noticed that right-wing Americans get upset when you criticize their leaders and left-wing Americans get upset when you criticize their institutions. As The Economist says "Republicans fall in line and Democrats fall in love". Too true.
Feel free to criticize the hell out of Canada. Institutions or leaders. I won't get offended. |
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huffdaddy
Joined: 25 Nov 2005
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| Posted: Tue Nov 20, 2007 2:46 pm Post subject: |
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| thepeel wrote: |
| Hey, never deviate from the status quo when speaking with a true believer, eh? Ideas are ideas and reality is reality. I'm willing to accept the situation as it is while at the same time pondering something else. |
I've pondered your ideas and determined there are untested and unnecessary.
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| I've noticed that right-wing Americans get upset when you criticize their leaders and left-wing Americans get upset when you criticize their institutions. As The Economist says "Republicans fall in line and Democrats fall in love". Too true. |
Who's upset? I just think multiple currencies is a stupid idea.
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| Feel free to criticize the hell out of Canada. Institutions or leaders. I won't get offended. |
I couldn't feign enough interest to get past one post. All the Canadians in this forum can't even sustain a thread about Canada. |
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Kuros
Joined: 27 Apr 2004
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| Posted: Tue Nov 20, 2007 2:56 pm Post subject: |
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| thepeel wrote: |
I've noticed that right-wing Americans get upset when you criticize their leaders and left-wing Americans get upset when you criticize their institutions. As The Economist says "Republicans fall in line and Democrats fall in love". Too true.
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Culture shock, eh?
I once met a wise ex-pat (American) in China who cautioned against going to a country with high expectations. When I began in China, I had no special interest in the country. My expectations were quite low. I was surprised by how much I came to enjoy the country at the end. I realize in hindsight that when I entered Korea, I had similarly low expectations. |
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scottinseoul
Joined: 13 Oct 2006
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| Posted: Wed Nov 21, 2007 3:48 am Post subject: Market meltdown |
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| Thepeel pretty much sums up the predicament. |
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keane
Joined: 09 Jul 2007
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| Posted: Sat Nov 24, 2007 4:36 pm Post subject: |
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Forecast: U.S. dollar could plunge 90 pct
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RHINEBECK, N.Y., Nov. 19 (UPI) -- A financial crisis will likely send the U.S. dollar into a free fall of as much as 90 percent and gold soaring to $2,000 an ounce, a trends researcher said.
"We are going to see economic times the likes of which no living person has seen," Trends Research Institute Director Gerald Celente said, forecasting a "Panic of 2008."
"The bigger they are, the harder they'll fall," he said in an interview with New York's Hudson Valley Business Journal.
Celente -- who forecast the subprime mortgage financial crisis and the dollar's decline a year ago and gold's current rise in May -- told the newspaper the subprime mortgage meltdown was just the first "small, high-risk segment of the market" to collapse.
Derivative dealers, hedge funds, buyout firms and other market players will also unravel, he said.
Massive corporate losses, such as those recently posted by Citigroup Inc. and General Motors Corp., will also be fairly common "for some time to come," he said.
He said he would not "be surprised if giants tumble to their deaths," Celente said.
The Panic of 2008 will lead to a lower U.S. standard of living, he said.
A result will be a drop in holiday spending a year from now, followed by a permanent end of the "retail holiday frenzy" that has driven the U.S. economy since the 1940s, he said. |
Have we seen [worst] of mortgage crisis?
New Wave of Mortgage Failures Could Create a Nightmare Economic Scenario
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...JOE BEL BRUNO
AP News
Nov 24, 2007 01:34 EST
...In the months ahead, millions of other adjustable-rate mortgages like Colombo's will reset, giving them a higher interest rate as required by the loan agreements and leaving many homeowners unable to make their payments. Soaring mortgage default rates this year already have shaken major financial institutions and the fallout from more of them, some experts say, could spread from those already battered banks into the general economy.
The worst-case scenario is anyone's guess, but some believe it could become very bad.
"We haven't faced a downturn like this since the Depression," said Bill Gross, chief investment officer of PIMCO, the world's biggest bond fund. He's not suggesting anything like those terrible times � but, as an expert on the global credit crisis, he speaks with authority.
"Its effect on consumption, its effect on future lending attitudes, could bring us close to the zero line in terms of economic growth," he said. "It does keep me up at night."
Some 2 million homeowners hold $600 billion of subprime adjustable-rate mortgage loans, known as ARMs, that are due to reset at higher amounts during the next eight months. Subprime loans are those made to people with poor credit. Not all these mortgages are in trouble, but homeowners who default or fall behind on payments could cause an economic shock of a type never seen before.
Some of the nation's leading economic minds lay out a scenario that is frightening. Not only would the next wave of the mortgage crisis force people out of their homes, it might also spiral throughout the economy....
The subprime wreckage could dwarf the nation's last big banking crisis � the failure of more than 1,000 savings and loans in the 1980s. The biggest difference is that problems with S&Ls were largely contained, and the government was able to rescue them through a $125 billion bailout.
But this situation is far more widespread, which some experts say makes it more difficult to rein in.
"What really makes this a doomsday scenario is where would you even start with a bailout?" housing consultant Lawler asked... |
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Kuros
Joined: 27 Apr 2004
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| Posted: Sat Nov 24, 2007 5:47 pm Post subject: |
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| It looks pretty bad right now. |
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keane
Joined: 09 Jul 2007
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| Posted: Sat Nov 24, 2007 6:22 pm Post subject: |
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| Kuros wrote: |
| It looks pretty bad right now. |
C'mon, Kuros, aren't you one of those who has been saying I'm full of crap on this issue? |
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blaseblasphemener
Joined: 01 Jun 2006
Location: There's a voice, keeps on calling me, down the road, that's where I'll always be
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| Posted: Sun Nov 25, 2007 3:34 am Post subject: |
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Just wondering,
Why don't the lenders just leave the rates alone, instead of adjusting them? Isn't that preferable to having millions of vacant homes that can't be sold? I keep hearing of people who have made their payments, but can't meet the higher rate. |
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thepeel
Joined: 08 Aug 2004
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| Posted: Sun Nov 25, 2007 4:06 am Post subject: |
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| blaseblasphemener wrote: |
Just wondering,
Why don't the lenders just leave the rates alone, instead of adjusting them? Isn't that preferable to having millions of vacant homes that can't be sold? I keep hearing of people who have made their payments, but can't meet the higher rate. |
If you mean the adjustable rate mortgages, the reason is that the loans are given to consumers as adjustable rate and then chopped up a thousand times (..securitized), packaged together with other tools of similar/dissimilar content and sold off to institutional investors (and others) with certain ratings. If you start messing with the structure of some of the origional tools then the whole of the securitized credit industry will unwind and need to be repriced/rated/valued. This would be massively difficult. Maybe even impossible. I think. |
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thepeel
Joined: 08 Aug 2004
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thepeel
Joined: 08 Aug 2004
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keane
Joined: 09 Jul 2007
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| Posted: Sun Nov 25, 2007 7:56 am Post subject: |
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Some nice info on Freddie and Fannie
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| ...The index shows collectively, that mortgages GSE�s (Fannie (FNM) and Freddie (FRE)) guarantee are selling at .70 cents on the dollar. Freddie's $120 billion and Fannie�s $42 billion of exposure to GSE-qualified mortgages means a write-down of over $30 billion and $10 billion respectively. Given that both outfits have about $1 billion in excess capital, they are now technically insolvent, especially when the ABX index is showing no signs of reversing. Freddie has hired Goldman Sachs and Lehman Brothers as advisors to help it raise capital in the very near term, but our take is that no sane institution will lend money to Freddie. If left to their own devises by the government, Fannie and Freddie are doomed... |
Also, watch the vid. Funny, but far too true! |
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keane
Joined: 09 Jul 2007
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| Posted: Sun Nov 25, 2007 8:14 am Post subject: |
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I very much appreciate people who can speak simply, but lucidly. They often know what the heart of a problem is. The silver lining in all of this? A major contraction will help with pushing down consumption - if it is world-wide - which will push peak oil production back a bit and maybe assist with CO2 emissions. The negative in that is less funding for solving both problems.
John Hussman: Financial Markets 'At a Critical Point'
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As Jim Stack of Investech recently noted, a market drop of even the recent -7.1% following a third discount rate cut has happened only 3 times in the past 80 years: February 1930, July 1982, and March 2001. In each case, the economy was already in recession (or worse).
Those are not the kind of odds that make one feel comfortable in today's uncharted waters.
...In short, the financial markets are at a critical point. ...my impression is that in the weeks ahead, investors will be forced to recognize that recession risk has tipped...
...Overall, however, the return/risk profile on both stocks and the economy as a whole appear increasingly lopsided toward bad outcomes. |
A Who's Who of Awful Times to Invest
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December 1961 (followed by 28% market loss over 6 months)
January 1973 (followed by a 48% collapse over the following 20 months)
August 1987 (followed by a 34% plunge over the following 3 months)
July 1998 (followed abruptly by an 18% loss over the following 3 months)
July 1999 (followed by a 12% loss over the following 3 months)
December 1999 (followed by a 9% loss over the following 2 months)
March 2000 (followed by a 49% collapse in the S&P over the following 30 months)
The defining characteristics of these instances were:
1) price/peak-earnings multiple above 18
2) 4-year high in the S&P 500 index (on a weekly closing basis)
3) S&P 500 8% or more above its 52-week moving average (exponential)
4) rising Treasury and corporate bond yields
Depending on how we define the interest rate trends, we can include two additional historical instances of these conditions: October 1963 and May 1996, both closely followed by 7-10% corrections.
One more instance completes the list: July 2007.
...What I do know is that certain factors have reliably identified egregiously bad times to accept market risk, and that every historical instance similar to the present has been a disaster. |
Expecting a recession
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...I expect that a U.S. economic recession is immediately ahead.
This conclusion is based on the combined weight of several classes of indicators, including asset prices, reliable survey measures, and measures of labor market activity. One way to understand this change in outlook is to examine our 4-indicator "rule of thumb"
...The 4-indicator composite I defined several years ago used the following definitions:
1: Widening credit spreads: An increase over the past 6 months in either the spread between commercial paper and 3-month Treasury yields, or between the Dow Corporate Bond Index yield and 10-year Treasury yields.
2: Moderate or flat yield curve: 10-year Treasury yield no more than 2.5% above 3-month Treasury yields (this doesn't create a strong risk of recession in and of itself).
3: Falling stock prices: S&P 500 below its level of 6 months earlier. Again, this is not terribly unusual by itself, which is why people say that market declines have called 11 of the past 6 recessions, but falling stock prices are very important as part of the broader syndrome.
4: Weak ISM Purchasing Managers Index: PMI below 50. |
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