Pulling a Rabbit out of The Hat ??

[one_muggle]

sdnativeson, I am confused by your statement about internal Chinese debt. They hold about $1Trillion US, are you saying they have loaned out nearly all of it? And to whom is the bad real estate debt, US or internal?

$1 Trillion really is a chunk of money (no kidding ;^) )
To put the amount in perspective, one article (I believe in the Economist), said that the Chinese could use the money to buy US RE–but they would need to purchase ALL sellable land in 5 or 6 midwest states to use up the cash. It certainly puts into perspective the nearly $1 Trillion in ARM resets predicted for 2007 AND 2008.

A trillion here, a trillion there, eventually it all adds up to real money.
-one muggle

[sdnativeson]

As I am posting this in a forum with lots of members far more learned and sophisticated in the financial world than myself, I want to say I am not attempting to pass myself off as any sort of expert or authority on the issue. I read a lot (maybe too much) and like everyone else, I have a vested interest in trying to get a grasp as to the direction of the economy and what variables I should focus on, pay attention to and those that aren’t so critical.

Anyway, the article, the first one I read, was in the WSJ, then more in businessweek the atimes and more. The estimated bad debt loaned internally is/was approximately 991 Billion US. Just because they have lots of cash due to massive foreign investment and trade surpluses doesn’t mean their unperforming loans aren’t cause for concern. The companies set up to start handling this debt are government owned and are being criticized for shuffling the debt from entity to entity. As the government controls the banks and the markets it isn’t readily transparent but eventually these loans if not settled in some way can cause a domestic bank crisis. Similar to the S&L crisis here.

O_M you mentioned the article in the Economist..when I read your paraphrasing I couldn’t help but think of Japan buying Real Estate like crazy here in the 80’s, I believe that was mostly disastrous for them in the long run.

So, I can see where they might/will buy Euros but they will stll keep a healthy chunk of it in US dollars.

I’ve babbled enough for now..back to work.

[NeetaT]

It seems as though the deflationary scenario never plays out. I have been invested in cash for a long time and have gotten burned in a since that I have not cashed in on lower prices be it real estate or otherwise. All I ever see is prices going up thus eating away at my buying power. I do hope home prices plummet, but I am not counting on it. People are able to borrow money too easily and in turn drive up prices. I always here about the economy being in bad shape, if this is so, why can I not find a place to park at shopping malls and why can I not get into restaurants due to overcrowding?

[Anonymous]

Fun poem, PD.

C’mon, Perry; the Chinese helpful to us? In Korea, maybe, only because they don’t want the superior (militarily, technically, economically, politically, morally) Japanese to rearm. The Chinese helpful in regard to Iran? Yes, they are; helpful TO Iran, shipping them Silkworms (antiship missles) and the like.

I agree with sdns: China is heading for a big fall due to its wobbly banking system and the upcoming fall in demand (e.g., from the U.S.) for its products.

My sense is that India, with its British-bred democracy, will overrun China as the emerging power of Southeast Asia.

[no_such_reality]

I’ve been thinking about what rabbit will save the market, or at least delay the market long enough to make everybody doubt the overvaluation of the market.

We’ve made a fairly big stink about the borrowers that are going to get pinched on their exotics, and while the MBS market is starting to get rocked, exotics and refinancing hasn’t slowed.

At the same time, the banks are in denial about the softening of the marketing in terms of pricing and are readily approval appraisals at still or near peak pricing.

Combining the two, is it possible that we will have seen a large spike in refi’s of people that originally bought in 2003, 2004, 2005 in in Q1 ’07 since rates are soft?

The buyers in ’03,’04,& ’05 can probably all claim paper equity if they haven’t already refi’d it out. If with neg equity due to an option loan, a broker that wants the deal could probably make the appraisal and loan for the ’03 & ’04 buyers and maybe the ’05. In 2005, only 1 in 9 people refi’ing did it to get cash.

SD is in worse shape than LA/OC, I’d suspect most in La/OC could still refi even if they’ve gone neg-equity since their loan due to the market “holding up”.

Could the readily available refiance ability combined with the deluded market perception, be the rabbit that allows the genie to stay in the bottle for another 3 years?

Does anybody have relible stats for 2006 mortgage and refi activity either nationally or SoCal local?

[The-Shoveler]

Nor_LA-Temcu-SD-Guy

You guy’s got to Listen to this, it’s funny and enlightening at the same time.

http://www.yieldsz.com

Have fun !!

[DaisyDuke]

I am going to die . . .

I just read that Dodd is trying to bail out all of those people who made this stupid mistake and all the greedy people behind them WITH OUR TAX DOLLARS !!!

http://www.globaleconomicanalysis.blogspot.com/

Is this where we write our congressman now !!

[Anonymous]

Overly optimistic – a term that could easily describe investors prior to the dot com crash, the professionals who told us that 2006 would be another banner year for housing, and those who are calling the market bottom already. American’s are overly optimistic to a fault, preferring to be entrepreneurs rather than lawyers in their analysis of the housing market. Instead of asking ourselves what could go wrong, we prefer to ignore the possibility of anything going wrong and push forward with fire in our eyes and God on our side. Have the professionals truly factored in the liklihood of an economic slow down? Have they fairly factored in the effects of sub prime loans going bad on the overall economy? If history is to be their judge, then they likely have not.

[lindismith]

To write Dodd, go here:

http://dodd.senate.gov/index.php?q=node/3128&cat=Opinion

I know it sounds odd, but believe it or not, writing a letter really does help.

[kicksavedave]

I sent Dodd an email… don’t know who will read it, but I feel better. I basically told him to “stop interferring with the natural market dynamics and let those people who bought properties that they couldn’t afford, go back to renting.”

[hipmatt]

They are proposing that tax payers bail out the sub prime and thus housing….
http://www.bloomberg.com/apps/news?pid=20601087&sid=a1x64z58hsB4&refer=home

[no_such_reality]

I wrote Dodd, Feinstein, Boxer and the whitehouse. In Dodd’s note, I basically told him he was abetting a crime against the American taxpayers.

[DaisyDuke]

I also wrote Dodd an email, actually two of them. Guess I better start writing other folks as well in California and elsewhere.

Thank goodness for this site — I have some intelligent words/concepts to use to help me get that point succinctly across!

[Author]

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