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GoUSC.
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April 30, 2007 at 10:07 PM #8967April 30, 2007 at 10:32 PM #51497
LookoutBelow
ParticipantBy far the best description of this absurdity we are now facing….most of what we have all been saying all along…A highly recommended read !
April 30, 2007 at 10:52 PM #51498Anonymous
GuestGood read. Thanks for the link. I had no idea subprime and alt-A loans total $2.5 trillion–and 20% are in serious trouble.
May 1, 2007 at 5:45 AM #515024plexowner
Participant“The Greatest Price Decline in Housing since the Great Depression”
4plex: 1998 prices here we come!!!
“Derivatives numbers are staggering. The Bank for International Settlements estimates that the notional amount of derivatives traded on regulated exchanges topped a quadrillion dollars last year and that the outstanding unregulated off-exchange (called over-the-counter – OTC) amount stood at $370 trillion in June 2006. Because the OTC market is composed of endless strings of bilateral transactions – the systemic risk is unknown.”
4plex: The global economy does about $40 trillion in real business every year but we have a “derivatives economy” that is $1,370 trillion in notional size – ie, the amount of derivatives is 34 times the size of the annual global economy – can you say, “Golly, gee, Beev, that’s a lot of leverage – isn’t there some risk?”
“In fact, a recent survey showed that only 1 in 7 Americans believe that house prices will go down. Even now, very few people grasp the underlying issues or the potential for disaster. We’re on a treadmill to oblivion and they think it’s a merry-go-round.”
4plex: I love that quote! “treadmill to oblivion and they think it’s a merry-go-round” – at least here in San Diego they get to enjoy the gorgeous weather while they slave away on the treadmill
“None of the bailout plans are large enough to make any quantifiable difference. The numbers are just too big.”
4plex: Yes, I agree wholeheartedly. And even if the bailout numbers were bigger, Mish (http://globaleconomicanalysis.blogspot.com/) made an excellent point recently about the fatal flaw in ALL the bailout plans. That flaw is this: all the bailouts keep the FB in the house AT THE HOUSE’S INFLATED VALUE. Let’s say I’m an FB and I get bailed out so I can continue to service my $400K in mortgage debt on the house I bought for $360K and then used like a piggy-bank. A year or two passes and houses like mine are now selling for $285K. That bailout isn’t seeming like such a great deal now – I’ll be working for the rest of my life paying for this albatross – they must think I’m stupid – should I mail the keys or just leave them on the kitchen counter?
May 1, 2007 at 6:49 AM #5150323109VC
Participantall this bail out talk makes me think i should go buy a mcmansion with an ARM and then cry for help and get the gov’t to offer me a new low rate fixed loan wtih no costs….
what frickin BS
May 1, 2007 at 8:12 AM #51510eccen in esc
Participanteccen in esc
I think it’s interesting that only 1 in 7 Americans think prices will come down. They don’t read what we read. When I make comments about the market people look at me like I am crazy. They say things like, “no, I heard on the radio that house sale prices were up last month”. That’s the mentality that we are dealing with. Also I am seeing a lot of rentals on Craigslist where I think owners are renting out their houses until the market gets better. If they only knew the horrible truth! As far as realtors, I am sure they are scared and that is why they keep listing houses at ridiculous prices. They want to pretend that the market is fine. Just don’t let me succumb and buy. I hate renting.May 1, 2007 at 9:37 AM #51523Bugs
Participant4plex,
Most bears don’t go that deeply into the underlying fundamentals when they talk about these problems. They don’t have to. Just the stuff that’s laying around on the surface is scary enough. When we dig a little deeper the potential downsides are so big they dwarf the consequences we speak of using the more “conservative” lines of analysis.
In other words, we usually understate the downsides so as to not look foolish, because digging a little deeper leads to numbers that basically defy comprehension.
In 2001, nobody could have grasped what 2005 prices would eventually look like – those increases were beyond what anyone would have believed because it was without precedent. We can’t know for sure at this point, but there is the possibility that the same “can’t believe it” could happen in reverse.
May 1, 2007 at 12:06 PM #51537ParticipantBugs – I go back and forth between trying to be conservative and trying to wake people up with shocking numbers
Neither one seems to make much difference – I am starting to believe that the 95% of the human race that is asleep will always be asleep
It is disheartening to see my country being ruined by a small group of corrupt, power-driven people while most of America sleeps and watches American Idol when they aren’t asleep …
May 1, 2007 at 6:03 PM #51572GoUSC
Participant“They want to pretend that the market is fine. Just don’t let me succumb and buy. I hate renting.”
I am in the same place as you. I rent a house in Baypark but make a good income and have a sizable DP. I could go out and buy an $800k house and be okay but when I run the rent vs. buy calculator the result is so stunningly in favor of renting that I just keep telling myself hold on and you’ll be able to buy that much BETTER of a house for that much LESS.
If you want to run the numbers yourself go to:
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