Like the illusion of Wall Street, with its vast and powerful investment banks, now shuttered, China too is an illusion perpetuated by the Globalists that gave us the 15,000 mile Caesar salad, poisoned cat food and lead based paint on babies' pacifiers. Like the illusion that money would come from thin air to always push housing prices higher, China has spent a generation pursuing its illusion. Pursuing an unattainable dream to be like the West, while 6000 years of its carefully shepherded top soil blows into the sea.
Rising spreads represent a greater chance of default. In commercial real estate, most spreads are now wider than they were in the peak of the mid-summer credit crunch. This indicates two things:
1) Problems that previously affected only residential real estate have now spread in a big way to commercial real estate.
2) In spite of the big stock market rally off the summer lows, underlying credit conditions are deteriorating rapidly.
_________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
Joined: Oct 18, 2004 Posts: 2129 Location: kiwibush
Posted: Mon Nov 05, 2007 10:14 pm Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
The saga of an insatiable system cannabilising itself....and so we find ourselves in the closing days of this absurd dream we wove called limitless growth. _________________ Bugger me, I hear oil's runnin out mate!
Joined: Apr 13, 2005 Posts: 3254 Location: St.Louis, Mo
Posted: Mon Nov 05, 2007 11:51 pm Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
Wow, scary stuff. We all knew it was coming, just not the timing. It seems everything is coming home to roost now. Weeks ? Months ? I would say 6-12 months easily at the most.
Posted: Tue Nov 06, 2007 1:24 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
We have heard all of this so many times before. I am not optimistic but I dont give credence to sudden doom scenarios. _________________ I play the cards I'm dealt, though I sometimes bluff.
Posted: Tue Nov 06, 2007 3:58 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
There are actually many who believe we could 'melt-up' from here. Due to many of the same reasons you have listed. This might be seen as the flip-side to inflation (i.e. not real gains, but illusionary). Some like Jim Rogers who actively criticize the Fed and see inflation actually think that the Shanghai stock market might double (again) from current levels. Others see the credit crunch as spuring a move into 'risk free' US treasuries and so keeping long-term yields down. This makes US treasuries expensive and stocks cheaper by comparison. That would mean that US stocks might continue to rally into 2008 despite a weak US economy, especially if the Fed keeps easy (and fuelling inflation). I doubt any of those predictions will come to pass in 2007. But it is only 6-weeks to go so let's wait and see, eh?
How far will short-sighted politicians go to keep this rally going? Here is an example of your lawmakers hard at work to destroy your future. Enjoy.
Quote:
Citigroup Inc. and other big U.S. banks say plans by Congress Democrats to ease lending rules, aimed at avoiding mortgage foreclosures, may weaken bankruptcy laws and curtail lending, the Wall Street Journal reported.
Citigroup, JPMorgan Chase & Co. and Wells Fargo & Co. are opposing draft legislation that would permit bankruptcy judges to change interest rates and mortgage lengths for borrowers in bankruptcy, the Journal reported.
Banks said such changes would curtail lending and increase the borrowing costs, the Journal reported, citing Scott Talbott, the senior vice president of the Financial Services Roundtable, an industry group.
The bill, sponsored by North Carolina Democratic Representative Brad Miller and California Democratic Representative Linda Sanchez, would also allow judges to change parts of loans from secured to unsecured debt if house values dropped below mortgage amounts, making it harder for banks to recover what they'd lent, the newspaper said.
Source: Nov. 5 (Bloomberg) -- _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Tue Nov 06, 2007 5:41 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
Bas wrote:
MrBill wrote:
How far will short-sighted politicians go to keep this rally going? Here is an example of your lawmakers hard at work to destroy your future. Enjoy.
destroying your future? Destroying your future homelessness?
This just means that banks will have to be more careful when lending money; rather long overdue IMO.
Sorry, Bas, that is not what the article is saying at all. The intention is to weaken foreclosure rights or otherwise gives courts the right to renegotiate contracts or mortgages after the fact. This creates uncertainty.
Having dealt with this issue in the aftermath of the Russian crisis when the government declared contracts for differences illegal and refused to enforce collateral pledges we saw new lending to Russia disappear completely.
One of the reasons I am here in Cyprus is so that we can strike commercial contracts under EU law and therefore avoid the gray areas of Russian law. Not to mention enforcement of those laws in a non-user friendly legal environment.
If you do not think that hampering bank's rights to repossess homes in mortgage default, and to use proceeds from the sale of these homes, so-called recourse loans, is important to mortgage lending then you are missing the point. It is essential. It lies at the very heart of mortgage lending. Without it then only those that can afford to borrow will be able to borrow. If you cannot pledge your home as security against the loan - unconditionally - then banks will demand not only larger down-payments, but also wider credit spreads to take the lending risk.
That will have the opposite effect as intended. It will further cause re-financing markets to seize up and make credit even harder to come by. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Joined: Mar 26, 2005 Posts: 3904 Location: over here
Posted: Tue Nov 06, 2007 5:59 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
well, that's true, but obviously banks were giving out mortgages far too easy as it was; it created this mess in the first place.
Also many of the repossessed houses now fall into disrepair, making them essentially worthless, ultimately costing the banks much more money than a rescheduled mortgage. Either way, stricter lending rules should be instituted by law to supplement it.
Joined: Jun 03, 2004 Posts: 127 Location: Great Britain
Posted: Tue Nov 06, 2007 6:14 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
I don't buy these sudden doom predictions either. Nobody knows what is going to happen to the markets in the next year or 2. I'm a pessimist and see severe declines in the economy and markets sometime soon (next 5 years), but nobody knows with such a degree of certainty that they can say this or that will happen in the next few weeks. The markets aren't logical after all.
Posted: Tue Nov 06, 2007 6:34 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
Aside from the very obvious restrictions on fraud and predatory lending practices, if you really want to destroy the economy, let government come in and bail out those facing foreclosure and bankruptcy. Any such effort will bail out big banks that are already part of the problem. The whole system is out of whack because people have been insulated from the consequences of bad decisions. Let the process work. Let some big banks go broke. Let some loan officers go to jail. Foreclosures will flood the market. Housing prices will drop to rock bottom lows and the market will adjust. I suspect that much of this paper is owned by the Chinese. Devaluing the dollar will make their goods more expensive and our goods cheaper. Who knows, we may scrape some of the rust off of our factories and start making things again.
Posted: Tue Nov 06, 2007 7:18 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
yull wrote:
I don't buy these sudden doom predictions either.
I recall a thread from this spring where everyone was trading gasoline storage techniques to prepare for the coming doom this summer.
Much like our flying cars and fusion, the crash is always just around the corner . _________________ Those that cannot do..... teach. Those that cannot teach......teach gym.-Jack black
Joined: Apr 27, 2007 Posts: 4351 Location: The Great Sonoran Desert
Posted: Tue Nov 06, 2007 7:30 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
jbeckton wrote:
yull wrote:
I don't buy these sudden doom predictions either.
I recall a thread from this spring where everyone was trading gasoline storage techniques to prepare for the coming doom this summer.
Much like our flying cars and fusion, the crash is always just around the corner .
Actually, the crash is well under way.
But for you JB...just keep the blinders on...
Remember bro...6 billion gotz 2 go...we all need to do our part...no matter how insignificant it may seem. _________________ "There must be a bogeyman; there always is, and it cannot be something as esoteric as "resource depletion." You can't go to war with that." Emersonbiggins
"... hope is a rotten-thighed whore" Niko Kazantzakis
Posted: Tue Nov 06, 2007 7:45 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
Bas wrote:
well, that's true, but obviously banks were giving out mortgages far too easy as it was; it created this mess in the first place.
Also many of the repossessed houses now fall into disrepair, making them essentially worthless, ultimately costing the banks much more money than a rescheduled mortgage. Either way, stricter lending rules should be instituted by law to supplement it.
Which is in any case up to the lender and the borrower (perhaps with the aid of a consumer credit specialist) to hammer out the details between them. And not up to a judge to re-write mortgage details after the fact.
Clearly there are always moral risks. We recognize that even with mortgage insurance in the first place backed by FDIC or bought by Freddie Mac and Fannie Mae. However, we always have to be very careful not to shield banks or borrowers from their past mistakes at the expense of new borrower's ability to borrow sensibly in the future.
As a realistic scenario. If someone out bid you for a house, so you continued to rent, while they received a tax deduction against their interest paid that you as a taxpayer helped subsidize. Houses went up out of your financial reach because you were prudent. Then the borrower that out bid you took out 2nd and 3rd home mortgages against that equity so he or she could buy toys like new cars and expensive vacations. And then the market goes lower and they are in a negative equity situation.
Why should you as a renter or a taxpayer all of a sudden support poorly thought legislation that keeps that irresponsible homeowner in his or her house when in fact you are still renting and paying taxes and they are getting a free ride at your expense? If homes were allowed to come down in price through forced foreclosures then maybe those renters could afford to enter the real estate market and purchase their own first home. But as it is everyone is conspiring to keep the irresponsible in their homes at the expense of would be home buyers. That ain't right.
If I were to make legislation, and I would prefer not to, but I would increase the amount of downpayment needed to qualify for Federal home insurance as well as disallow interest only or balloon mortgages.
Also I might look at some restrictions on 2nd and 3rd mortgages on Federally insured mortgages, so that equity is kept positive or increases over the life of the mortgage. My feeling is that if you qualify for a lower mortgage because of a taxpayer guarantee that there should be strings attached.
Of course, the first thing I would eliminate is the tax deductibility of interest expense on primary residences. Obviously, no one is going to vote for MrBill (but they should)! ; - ) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Last edited by MrBill on Tue Nov 06, 2007 8:38 am; edited 1 time in total
Posted: Tue Nov 06, 2007 7:48 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
I think a crash is entirely possible, but it seems like there are ways to avoid going down with the ship. It may be time to change things into tangible assets soon. Meanwhile the ship keeps blundering on.
I just bought 20 shares of FPL, since they're the lowest carbon electricity producers in the US. People will still need to keep the lights on for a few years, whatever happens. I'll sell before 2012, since that's when the Olduvai Gorge starts to open up, and the lights start to go out, according to Duncan.
I'm betting on a long slide starting this winter and accelerating as of the summer of '09, since that's when we start to drop 4% per annum in oil production according to Skrebowski.
I like to have some time to get ready. A crash could happen anytime, but these are my best guesses as to when it gets dicey. _________________ Deep in the mud and slime of things, even there, something sings.
Posted: Tue Nov 06, 2007 8:16 am Post subject: Re: The Great Unraveling Begins - Weeks, at most away...
RE Cleveland, Subprime Capital of America
Thanks for the link, Bas. I don't know. I am not totally unsympathetic, but if you have been building equity in your house for 30-years why should you ordinarily be at risk of losing it? Why did she not sell her house to buy her apartment? Instead she gave it to her (obviously deadbeat) sons.
How to legislate nationwide to protect individuals from their own poor decisions? Or in fact is urban decay not a local condition in the first place and only secondly a national issue?
I do not know, but someone needs to be asking these questions because it was not long ago that community leaders on behalf of, yes you guessed it, black and latino neighborhoods were chastizing banks for not opening up enough branches or lending enough in poorer neighborhoods. That was back when the property market was rising and these community leaders were worried about blacks and latinos being excluded.
Our collective amnesia is truly breathtaking in action! ; - ) _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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