I agree that the worst drops are yet to come. Investor psychology is slow to change and will require a much longer period of time to manifest itself than in the stock market. However, I think the amount of leverage, new exotic mortgage products and level of speculation will increase the speed at which this bubble deflates relative to the early 1990s. Blogs and websites like this improve the transparency of the market and will increase the speed at which prices change.
I have a question regarding the FDIC guidelines. I think this is probably one of the most important variables that will determine how rapidly this cycle plays out, but I always have difficulty finding reseach on the topic. Does anyone have a website that is tracking this piece of regulation? I am curious to hear a lenders candid assessment of what this will do to their business. I know several “professional” MBS/ABS/CMBS investors who know almost nothing about these guidelines. Kind of scary when people responsible for a multi-billion $ portfolio of MBS don’t have this on their radar screen. It’s not suprising then when you look at MBS spreads and realize they are trading near multi-year tights. Granted vol is low, but the MBS market as a whole does not seem concerned about a deterioration in credit quality.
