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September 6, 2007 at 10:22 AM in reply to: Is the U.S. Gov going to BailOut documented FRAUD?? #83570
cr
ParticipantIs it me or are these moves by the FED accomplishing the following:
– Throwing good money at bad
– Forcing liquidity into a tapped out market
– Further enabling people to spend money they don’t have
– Increasing inflation
– Artificially propping up home prices
– Continued devaluation of the dollar
– Allowing banks to continue to buy/sell bad mortgages
– Trying to prevent toxic MBS from becoming completely worthless
– Spending tomorrow’s money on today’s problemsI must be missing something; i.e. the benefit.
cr
ParticipantLost Cat, I think you have the right concept but your timing is skewed IMO. Here’s why, and I don’t mean to be contentious:
You’re comparing the turn around time of a stock bubble with an asset (housing) bubble. Stocks can be sold, go up, go down, or be purchased in a single day, sometimes multiple times. Physical assets like a house take months to do the same if not longer.
With inflation rising, i just can’t see today’s prices looking out of touch or even expensive in 5 years from now.
No doubt inflation is rising, but inflation is a measure of costs, not ability to pay for those costs. For that you have to look at incomes. Incomes have been stagnant if not down for the past 3 years where economic growth has been at all time highs. The translation there is wealth is not filtering down into the middle class. There’s an MSN article today on CEO’s making 364 times what you do.
Go to Zillow, accurate or not, and pick a house in your zip code. Go to graphs and look at the pre-2004 and post-2004 trends. Then follow the line from pre-2004 until it reaches the level of pricing today. My guess is it will take you well off the graph to about 2020. The point is prices cannot stay this high while incomes catch up.
And think about it, a house is like anything you buy. It wears out, get olds, breaks down, requires maintenance, repairs, fresh paint, the whole 9. But we know over the long term prices go up, while things like cars, that do the same thing typically go down. So why do houses go up? It’s because incomes do and nothing else. Dramatic increases and decreases are the result of other circumstances like the credit nightmare of the past 3 years, but over time housing has no choice but to track with what people can afford. The question is can prices hold out for the 10 years or more while incomes catch up. Factor in today’s credit market, declining wages and increasing layoffs, and the obvious answer is no way. Prices have a long way to come, and it will slow and painful.
cr
ParticipantMost people who have bought in the last 2 years are probably lucky to have any equity at all, much less 50%. Another reason national averages can be misleading. A lot of people are upside down.
We’re starting to see the shift most of here have known to be coming for a few years now: the market peaked, people are out of money, and things will slow down a lot.
There’s an article in the LA times today about the cable TV shows that thrived off the housing boom now being revamped for a changing market.
Mainstream is just now catching on and saying, “yeah, we knew this was coming” when we know for a fact they were the ones calling the bottom a year ago. Or maybe now they just listen to people like Rich who saw the emotional, irrational exuberance from the get go.
cr
ParticipantWhat’s alarming to me is that everything we are seeing today is just the start of the effects of the bubble. Considering what’s to come from declining home values, resetting ARMs, job layoffs, tightened spending, rising foreclsoures and inventories, it unequivocally has to get worse before we get out of this mess. The pressure on the middle class among higher costs of living, and declining wages is eventually going to necessitate revolutionary reform.
cr
ParticipantSpeak your mind guys:
cr
ParticipantI thought the foreclosure problem wasn’t that big a deal? So say the now silent bubble nay-saying hypocrits.
Screw future generations to save the lifestlyes of reckless, irresponsible and just plain stupid people, all so a couple billion dollars of dirty MBS/CDO’s can line the pockets of the filthy rich. And I emphasize filthy.
What are we teaching these people? Why should they get a tax break or any break at all? They should be forced to to pay off every cent they owe, or go to jail and do community service until every cent is paid off in charitable work. So should the idiots who oversaw the granting of these loans.
We incentivize idiocy.
cr
ParticipantAgreed Kewp.
GDP may be a good indicator of reasonable inflation rates, but here’s the percentage changes for 2004-2006 from the previous year:
2004 2005 2006
3.9% 3.2% 3.4%Nowhere near what housing was appreciating at.
Source: http://www.bea.gov/bea/newsrelarchive/2007/gdp406a.xls
As you said, you’re thinking logically about something that was caused by reckless emotions. You can’t understand the reasoning behind those emotional decisions because there is none.
cr
ParticipantI’ve got to agree with radelow.
We fund China’s growth. Their recent threat to unload their reserves after our urging them to revalue the RMB is a hollow threat IMO.
They unload their holdings, we stop buying, their manufacturing hits the brakes hard.
What we should really be afraid of is what they start buying their own products en masse, and in enough volume to support production capacities without exports to America. That’s when they’ll sell their US$, and their economy really takes off. Meanwhile the dollar tanks more, it becomes cheaper to manufacture here, but because anyone in the world can buy here they DO buy up our businesses, but to stop that governments control all business as our social capitalism moves to communism.
Look on the bright side though, at that point we probably have a trade surplus.
cr
ParticipantBTW, this article is now front page.
Some interesting points:
The company forecasts prices in California to drop 16% to 20%, counting inflation.
Where are all the “experts” now, who said this can’t happen?Already, 2.9% of subprime loans issued just last year are in default. That’s alarmingly high, Cutts says, and an unprecedented number of borrowers are not making even the first few payments.
I think we’ve all seen the Credit Suisse chart with billions of ARMs resetting over the next 5 years. More to come, I’m sure.In San Diego and fast-growing inland cities, the economic pressure from collapsing housing prices may become exacerbated by job losses in the subprime-mortgage industry…
After the collapse of the Southern California defense industry in the early 1990s, prices took 10 years to reach previous levels.
In the 90’s 10 years of depreciation were the result of job losses. This time around the collaspe is going to cause the layoffs that will prolong the downturn. And it won’t just be subprime mortgage brokers.
August 30, 2007 at 10:18 AM in reply to: Freddie Mac agrees to accept some Alt-A loans = mini bail out = badnews #82578cr
ParticipantI think this more of a political feel-good stunt. FMAC is not going to underwrite loans that have any hint at going bad. They’d be foolish not to learn from the countless firms that have gone Chpt 11 on sub-prime and increasingly on Alt-A.
This may help a few refi to avoid foreclosure, but chances are if they got into a loan they couldn’t afford before standards were tightened, they won’t be able to get into one now, unless the lender takes a huge hit, and lenders aren’t in business for charity.
cr
ParticipantNo doubt whatever political nonsenscial jargon Helicopter boy says tomorrow will be analyzed ad nauseum.
As far as inflation, I’m in imports too. There’s a little thing called VAT that I am really surprised has not made more headlines. In one fell swoop it raised prices on thousands of China commodities anywhere from 2-8%, overnight! Rumor is that may happen again at another 3-5%.
Then there’s the currency, which every single day appreciates to the dollar. Today it’s 7.56:1, a year ago it was 7.92:1. Rumor there is it will go to 7.3:1 by the end of the year. Labor costs are rising as a result, and so are material costs.
Of course we only need to worry about “core” inflation, because food and energy costs haven’t gone up 20% this year either.
cr
ParticipantI read somewhere today that the FF rate is higher than the other major rates, and the conclusion was that they are sending a message to the FED come their meeting 2 weeks from now.
I still think Helicopter boy is stuck: he lowers the rate inflation goes up, he raises or even leaves it, the bulls will flee, market dives, and housing, well housing is screwed either way.
Will he stick to his Anti-inflation shtick, or will he fold to political pressure?
These days I don’t think anyone knows.
cr
ParticipantEnter the 200 year mortgage?
cr
ParticipantGuys, have you noticed anything about Alex’s post yet?
He doesn’t reply to them, he just wants a reaction.
Stop replying to his outlandish posts! He’s clueless.
Alex, if you even read this, why don’t you go buy a house today for maximum I/O ARM financing and let us know how that works out for ya.
Everyone else, this guy isn’t worth the read, much less a reply.
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