The American Securitization Forum wrote the rate freeze presented to the public by the President of the United States of America.
it would appear that some of the firms that sold a lot of the bad debt,
are members of the industry group for the lending and investment banking business
that being the American Securitization Forum
Who is going to profit from the rate freeze modifications?
Who is going to look good if it works, but very bad if it doesn't?
In the executive summary of Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans,
it looks like thier not going to check howmeowner income, and will be allowed to modify loans even if they don't make contact with the homeowner
wow
Members include Ameriquest Mortgage Company, Capital One Citi Global Markets Inc., Countrywide Home Loans, Fannie Mae, Freddie Mac, GMAC, JPMorgan Chase, Thornburg Mortgage, Inc., Washington Mutual Bank, MetLife
Deloitte & Touche LLP, Ernst & Young LLP, Grant Thornton LLP, KPMG LLP, PricewaterhouseCoopers LLP
DBRS, Fitch Ratings, Moodys Investors Service, and Standard & Poors
ABN AMRO, Inc., Banc of America Securities LLC, Barclays Capital Inc., Bear, Stearns & Co. Inc., Countrywide Securities, Credit Suisse, Deutsche Bank Securities Inc., Goldman, Sachs & Co., HSBC Securities (USA) Inc., Lehman Brothers Inc., Merrill Lynch & Co., Morgan Stanley, UBS Investment Bank, PIMCO,
Whos stocks went up after the announcement?
Notables
CHAIR Greg MedcrafT, Managing Director, Global Head of Securitization,
Societe Generale Corporate & Investment Banking DEputy CHAIR DianE W old, Managing Director, HEAD OF Investment Banking, GMAC-ResCap
SECRETARY Sanjeev Handa, Head of global public markets, TIAA -CREF
TREASURER nelson soares, managing director, HEAD OF U.S. SECURITIZATION BANKIN G GROUP, LEHMAN BROTHERS
EXECUTIVE VICE PRESIDENT JASON H.P. KRAVITT , SENIOR PARTNER , SECURITIZATION PRACTICE , MAYER BROWN, ROWE & MAY LP
EXECUT IVE VICE PRESIDENT LAWRENCE RUBENSTEIN , GENERAL COUNSEL , WELLS FAR GO ASSET SECURITIES CORPORATION
The world's second-largest economy grew an annualized 1.5 percent in the three months ended Sept. 30 after a 1.6 percent contraction in the previous period, the Cabinet Office said in Tokyo today. The median estimate of 25 economists surveyed by Bloomberg News was for growth to be unchanged from the government's preliminary estimate of 2.6 percent.
This should help fuel tomorrow's rally with Japan heading back for ZIRP and whatnot.
Interesting the Moody's/Economy.com has joined the 15% decline bandwagon. They were more conservative before. I think just down 5%. I remember because Countrywide used Moody's 5% figure in its last big investor presentation to show how things would all be fine.
Whose numbers will they use now?
OT CIBC announced $3.5 billion of exposure to CDO's guranteed by an A insurer (ACA presumably). Losses could easily exceed $1.7 billion. I think this makes them the first to confess. I wonder who else is next?
Also, CIBC's indicated marks on Oct. 31 are not friendly for the "AAA" insurers.
Hey there's a lot of equity there that still has not been consumed. What good is all that equity if you don't use it for pleasurable pursuits? Now if household equity was only, say, 15% one might worry a bit, but at over 50% I say let the good times roll. [LOL?]
That household % equity is alarming. This means that taking out those w/o a mortgage leaves a VERY debt ridden landscape. MEW may be strong in Q3, but that number surely fell off a cliff in Q4 and beyond methinks.
WAY! OT, but ironically interesting. The LA Times reported today:
"In the late 1920s, Los Angeles theater mogul Alexander Pantages started work on a costly Art Deco playhouse that would be topped by a 12-story office tower overlooking the famous intersection of Hollywood and Vine.
A massive steel and concrete foundation was laid, but the 1929 stock market crash halted construction at two stories. To this day, the Pantages Theatre, currently showing the long-running musical "Wicked," remains a two-story structure.
Now, 77 years after the Pantages' spectacular opening night, efforts to finish the landmark theater's upstairs offices are moving ahead again with those long-forgotten 10 additional floors -- all true to the original Art Deco design."
Any bets on how many stories get built during this attempt. Maybe we should say:
existing household real estate assets will fall by $3 Trillion
That sounds right to me. The Nasdaq blowout wiped out much more than that, something like 8-9 trillion if I remember right. There's a bunch of fake paper floating around that has no backing, it has no reality.
Just in case anyone doesn't have a calculator handy $67 billion is less than $800 per average household over the last 3 months. The correct response is to dismiss it as a deliberate lie.
existing household real estate assets will fall by $3 Trillion
That sounds right to me. The Nasdaq blowout wiped out much more than that, something like 8-9 trillion if I remember right. There's a bunch of fake paper floating around that has no backing, it has no reality.
If housing values were to overcorrect, as bubbles typically do, we might be looking at something on the order of 7-10 trillion dollars in today's $.
No really the dollar is down ~11% yoy. If the Fed cuts, and many think it will, the dollar could drop another 11% in 6 months. I've been watching dollar action like a hawk since the emergency discount window cut. It's bouncing up, but only to about the 50 day MA and then retreating. A rate cut would cut it's legs off. Since that cut the buck has gone from 82 (it's last break above 50 day MA) to a low of ~74.6. It hasn't breached the 50 day MA since.
What does that mean? For now it means an additional $2.2T of REAL declines.
or -. We're talking Trillions here so...close here works just as good as a hand grenade.
"Rabobank, which manages Tango with Citigroup (C.N: Quote, Profile, Research), said the SIV has only 5.2 billion euros ($7.6 billion) in cash assets, down from 9.7 billion in July. Rabobank had warned on Wednesday that Tango's size had almost halved as it has been selling off assets."
from the wsj, the big 3 are cutting back drastically on truck production. note the quote!!
The big drop in November sales left each company with hefty inventories of trucks. GM has enough Chevrolet Silverados on dealer lots to last more than five months, and Chrysler has enough Dodge Rams to last four months.
Sales of fuel-thirsty pickup trucks and sport-utility vehicles have plunged this year amid housing woes and high energy prices.
Bob Thibodeau, who heads a Ford dealership near Warren, Mich., said he was surprised production cutbacks at GM and Ford were "as small as they were."
"I'm seriously concerned that we have an issue that is a lot bigger than a lot of people are thinking," Mr. Thibodeau said. "We've gone a few days without selling anything. I'm concerned."
"We're sitting here with plenty of F-Series trucks," he said adding that he still has some 2007 models he needs to move.
.......One analysis, by Eidesis Capital, a fund specializing in CDOs, estimates that, of the CDOs issued during the peak years of 2006 and 2007, investors in all but the AAA tranches will lose all their money, and even those will suffer losses of 6 to 31 percent.......
If all this sounds like a financial house of cards, that's because it is. And it is about to come crashing down, with serious consequences not only for banks and investors but for the economy as a whole.
That's not just my opinion. It's why banks are husbanding their cash and why the outstanding stock of bank loans and commercial paper is shrinking dramatically.
It is why Treasury officials are working overtime on schemes to stem the tide of mortgage foreclosures and provide a new vehicle to buy up CDO assets.
It's why state and federal budget officials are anticipating sharp decreases in tax revenue next year.
And it is why the Federal Reserve is now willing to toss aside concerns about inflation, the dollar and bailing out Wall Street, and move aggressively to cut interest rates and pump additional funds directly into the banking system.
This may not be 1929. But it's a good bet that it's way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.............
There's a bunch of fake paper floating around that has no backing, it has no reality.
You are flat wrong! As a matter of fact I'm going to grab my flashlight and see if I can't find me some of that lost money right now! Me and OJ are gonna find it and we won't rest until we do.
That fake paper has virtual reality! The dot coms made it so. In fact, that virtual money can be traded for virtual assets in virtual World(s) of Warcraft. The stock market has also transported itself into virtual reality...
The drop in average value is particularly bad news for homeowners who treated their homes as piggy banks instead of as savings accounts. They drained $468.7 billion out of their homes in 2004 through home equity loans or cash-out refinancings, according to a report this year from former Fed Chairman Alan Greenspan and Fed senior economist James Kennedy. Fifty-eight percent of that cash went to home improvements and personal spending, while another 27 percent paid off credit card debt.
27 percent was just clearing off the credit cards. Go America!
Yikes There's a bunch of fake paper floating around that has no backing, it has no reality.
You are flat wrong! As a matter of fact I'm going to grab my flashlight and see if I can't find me some of that lost money right now! Me and OJ are gonna find it and we won't rest until we do.
sdtfs | 12.06.07 - 9:09 pm | #
Okay, I'm back. I found a dime and one of those knockout thingies that look like a quarter. We don't need a new government plan, we just need to give everybody a flashlight.
$3T? How many times has Wall Street leveraged that figure???
The "percent homeowner equity" number was high the moment it was published, especially given the low level of price discovery. Again, the era of equity trade-ups supporting high home prices is DONE -- stick a fork in it.
Misean, I'm guessing MEW will finally fall off a cliff in Q4 too. But homeowners with established HELOCs can keep borrowing up to the limit - and that is what is happening.
What a day for my internet connection (Time Warner again) to go down. Oh well, the local library has a nice facility.
NioRio, I think Wall Street is slowly moving towards 15% as the expected price decline. But I think it could be much worse.
These losses are a lot more serious for the economy than the NASDAQ losses. And we really haven't seen much yet ($60B out of $3Trillion or more is a drop in the bucket).
mp [Repoman, the "new plan" is a placebo. It won't have any significant effect.]
You guys are falling for the carnival tricks. What makes any of you think this is the last of what we'll be seeing from our leadership, as we head into an election?
This is not even round 1 of a 12 round heavyweight fight, and Hillary hasn't even worked up a sweat.
This month's short sterling futures, which indicate where the market expects the key benchmark interbank borrowing rate to be in two weeks' time, actually rose markedly after the Bank's decision - an almost unprecedented reaction. The pound also ended the day up slightly on its trade-weighted index - another highly unusual outcome on the day of an interest rate cut...
Peter Spencer, chief economic adviser to the Ernst & Young Item Club, said: "The fact of the matter is that the market rather than the Bank is now dictating monetary policy - and not from the point of view of controlling inflation, but from the point of view of a random walk. It is behaving in a way which is totally rational for individual banks but adds up to a major deflationary issue.
"I think this is a very grave situation indeed - and not just for the 1.5m [households due to renew their mortgages next year]. If this problem is not sorted out in the next two to three months we are looking at major insolvencies in UK plc."
Fifty-eight percent of that cash went to home improvements and personal spending
And I'm sure that went into really smart household upgrades and personal necessities that still have tremendous values.
Does it make any difference?
A couple of years ago, I took a HELOC and spent $70,000 making what I thought were smart, value-adding home improvements. I spent the money at Home Depot, on contractors, appliances, etc.
But what difference would it have made FOR THIS ECONOMY if I had spent the same money at Vegas and on hookers? In both cases, the money greases the economy. In both cases, the money isn't being productively invested NOW (earning interest or gains) or making me richer. Maybe in several years I'll get my improvement money back. Maybe I won't. But until then, what's the difference for me or the economy?
MEW is MEW. When it's spent, the economy grows. When it's not spent, the economy sinks.
"I'm guessing MEW will finally fall off a cliff in Q4 too. But homeowners with established HELOCs can keep borrowing up to the limit - and that is what is happening."
Yeah, kinda like Countryfried pulling their LOC's late summer. Stupid is as stupid does I suppose.
rich:
"MEW is MEW. When it's spent, the economy grows. When it's not spent, the economy sinks."
Not exactly. Spending in every case has a multiplier effect attached to it. Spending on big TV sets has less of a multiplier effect than spending that amount on hookers (although I'd have to look up the numbers). That's because hookers have a higher propensity to consume (spend) than do most retail clerks (who sometimes save money). The faster money gets sloshed around in the economy, and the more hands that touch it... the healthier the economy.
As for capital spending, investing in a factory (productive assets) gives you a far higher multiplier than spending the same amount on building homes (non-productive asset).
Try this link... it partially explains it. Multiplier (economics) - Wikipedia, the free encyclopedia
And yes, if someone would like to show me how to make a shorter link, I'll listen.
Be good.
Have you ever tried to annotate the various blips in the household value as %GDP graph?
For example, we can see the 80's bubble and the 90's correction. But what happened in 1976-1982 period to bring about what looks like a structural change in ownership rates or housing values?
Is there any reason to expect the current value to stay above, say, 110% of GDP going forward?
The reason why the equity ratio is so high in 1952 could be because this was a time when for almost twenty years no significant construction was done (1929 to 1949).
But even more curious to me is the graph during the years 1986-1990 and 2000-2006. Why is it that the equity ratio drops in times of housing bubble and stabilizes (as in 1993-1998) during a time of stagnation of housing prices.
If you want to stabilize the finances of the middle class you need to bring house prices down then mortage debt goes down, particular MEW, equity share rises and the household can buffer more shocks (such as house price decreases). Of course, house prices are lower in absolute terms, too, but nothing in life is free.
From an antropological standpoint it is puzzling that increasing equity in terms of house bubble is untapped or is the bubble created so that MEW can materialize ?
How to bring house prices down - here is one more idea: abolish the mortgage interest deduction, this should have done during the Hyper Bubble years 2003-2006. Abolishing it would result in estimated 15% price decline.
That this will most likely not happen now is another boon for home owners and another obstables for a return to regular sane levels (2000 prices).
This is sad chart since it indicates that together with still existing lending standards (allowing up to 90% and only occasianally up to 85% in socalled "distressed areas") many borrowers will still extract the maximum for their houses. Sad, sad.
Yay! I'm first. The fall in equity in graph 1 may not be due primarily to MEW, but rather to putting little down as compared with earlier days.
The American Securitization Forum wrote the rate freeze presented to the public by the President of the United States of America.
it would appear that some of the firms that sold a lot of the bad debt,
are members of the industry group for the lending and investment banking business
that being the American Securitization Forum
Who is going to profit from the rate freeze modifications?
Who is going to look good if it works, but very bad if it doesn't?
In the executive summary of Streamlined Foreclosure and Loss Avoidance Framework for Securitized Subprime Adjustable Rate Mortgage Loans,
it looks like thier not going to check howmeowner income, and will be allowed to modify loans even if they don't make contact with the homeowner
wow
Members include Ameriquest Mortgage Company, Capital One Citi Global Markets Inc., Countrywide Home Loans, Fannie Mae, Freddie Mac, GMAC, JPMorgan Chase, Thornburg Mortgage, Inc., Washington Mutual Bank, MetLife
Deloitte & Touche LLP, Ernst & Young LLP, Grant Thornton LLP, KPMG LLP, PricewaterhouseCoopers LLP
DBRS, Fitch Ratings, Moodys Investors Service, and Standard & Poors
ABN AMRO, Inc., Banc of America Securities LLC, Barclays Capital Inc., Bear, Stearns & Co. Inc., Countrywide Securities, Credit Suisse, Deutsche Bank Securities Inc., Goldman, Sachs & Co., HSBC Securities (USA) Inc., Lehman Brothers Inc., Merrill Lynch & Co., Morgan Stanley, UBS Investment Bank, PIMCO,
Whos stocks went up after the announcement?
Notables
CHAIR Greg MedcrafT, Managing Director, Global Head of Securitization,
Societe Generale Corporate & Investment Banking DEputy CHAIR DianE W old, Managing Director, HEAD OF Investment Banking, GMAC-ResCap
SECRETARY Sanjeev Handa, Head of global public markets, TIAA -CREF
TREASURER nelson soares, managing director, HEAD OF U.S. SECURITIZATION BANKIN G GROUP, LEHMAN BROTHERS
EXECUTIVE VICE PRESIDENT JASON H.P. KRAVITT , SENIOR PARTNER , SECURITIZATION PRACTICE , MAYER BROWN, ROWE & MAY LP
EXECUT IVE VICE PRESIDENT LAWRENCE RUBENSTEIN , GENERAL COUNSEL , WELLS FAR GO ASSET SECURITIES CORPORATION
I wonder what graphs of US net home equity and net household wealth look like when adjusted by the USDX.
The world's second-largest economy grew an annualized 1.5 percent in the three months ended Sept. 30 after a 1.6 percent contraction in the previous period, the Cabinet Office said in Tokyo today. The median estimate of 25 economists surveyed by Bloomberg News was for growth to be unchanged from the government's preliminary estimate of 2.6 percent.
This should help fuel tomorrow's rally with Japan heading back for ZIRP and whatnot.
Japan Economy Grew Slower Than Initially Reported
Interesting the Moody's/Economy.com has joined the 15% decline bandwagon. They were more conservative before. I think just down 5%. I remember because Countrywide used Moody's 5% figure in its last big investor presentation to show how things would all be fine.
Whose numbers will they use now?
OT CIBC announced $3.5 billion of exposure to CDO's guranteed by an A insurer (ACA presumably). Losses could easily exceed $1.7 billion. I think this makes them the first to confess. I wonder who else is next?
Also, CIBC's indicated marks on Oct. 31 are not friendly for the "AAA" insurers.
I smell deflation. Where's General Glut when we need him?
FAQ about "the plan" from Marketwatch:
http://www.marketwatch.com/news/story/questions-answers-about-mortgage-rate-freeze/story.aspx?guid={E34C3FD5-7A4E-40DD-AA11-87949A455778}&siteid=yahoomy
Hey there's a lot of equity there that still has not been consumed. What good is all that equity if you don't use it for pleasurable pursuits? Now if household equity was only, say, 15% one might worry a bit, but at over 50% I say let the good times roll. [LOL?]
CR,
Interesting analysis. I'm going to have to remember that one. Totally logical, I just never thought of doing it.
Cheers,
That household % equity is alarming. This means that taking out those w/o a mortgage leaves a VERY debt ridden landscape. MEW may be strong in Q3, but that number surely fell off a cliff in Q4 and beyond methinks.
Cheers,
WAY! OT, but ironically interesting. The LA Times reported today:
"In the late 1920s, Los Angeles theater mogul Alexander Pantages started work on a costly Art Deco playhouse that would be topped by a 12-story office tower overlooking the famous intersection of Hollywood and Vine.
A massive steel and concrete foundation was laid, but the 1929 stock market crash halted construction at two stories. To this day, the Pantages Theatre, currently showing the long-running musical "Wicked," remains a two-story structure.
Now, 77 years after the Pantages' spectacular opening night, efforts to finish the landmark theater's upstairs offices are moving ahead again with those long-forgotten 10 additional floors -- all true to the original Art Deco design."
Any bets on how many stories get built during this attempt. Maybe we should say:
History doesn't repeat, it echoes.
Cheers,
Ok, so this does basically nothing.
My analysis of the current situation is as follows:
Using numbers from Phoenix and following Elliot Pollacks analysis.
Uptake of houses has been running 46k per year based on population growth of 3% per annum.
Number of houses on the market current MLS 57k (15 month supply)
Current Realtytrac pipeline 27k
Single family Permits pulled this year 22k
Add the supply up and positing no drop in sales we have over two years of supply.
Dropping sales and no financing means big drop in prices. Good luck Phoenix!
Someday this war's gonna end...
existing household real estate assets will fall by $3 Trillion
That sounds right to me. The Nasdaq blowout wiped out much more than that, something like 8-9 trillion if I remember right. There's a bunch of fake paper floating around that has no backing, it has no reality.
Just in case anyone doesn't have a calculator handy $67 billion is less than $800 per average household over the last 3 months. The correct response is to dismiss it as a deliberate lie.
existing household real estate assets will fall by $3 Trillion
That sounds right to me. The Nasdaq blowout wiped out much more than that, something like 8-9 trillion if I remember right. There's a bunch of fake paper floating around that has no backing, it has no reality.
If housing values were to overcorrect, as bubbles typically do, we might be looking at something on the order of 7-10 trillion dollars in today's $.
Of course, maybe this time it's different.
Broward Horne
$3T nominal. Real...priceless.
No really the dollar is down ~11% yoy. If the Fed cuts, and many think it will, the dollar could drop another 11% in 6 months. I've been watching dollar action like a hawk since the emergency discount window cut. It's bouncing up, but only to about the 50 day MA and then retreating. A rate cut would cut it's legs off. Since that cut the buck has gone from 82 (it's last break above 50 day MA) to a low of ~74.6. It hasn't breached the 50 day MA since.
What does that mean? For now it means an additional $2.2T of REAL declines.
Cheers,
"Rabobank, which manages Tango with Citigroup (C.N: Quote, Profile, Research), said the SIV has only 5.2 billion euros ($7.6 billion) in cash assets, down from 9.7 billion in July. Rabobank had warned on Wednesday that Tango's size had almost halved as it has been selling off assets."
UPDATE 2-Rabobank takes SIV Tango's assets onto balance sheet
| Reuters
from the wsj, the big 3 are cutting back drastically on truck production. note the quote!!
The big drop in November sales left each company with hefty inventories of trucks. GM has enough Chevrolet Silverados on dealer lots to last more than five months, and Chrysler has enough Dodge Rams to last four months.
Sales of fuel-thirsty pickup trucks and sport-utility vehicles have plunged this year amid housing woes and high energy prices.
Bob Thibodeau, who heads a Ford dealership near Warren, Mich., said he was surprised production cutbacks at GM and Ford were "as small as they were."
"I'm seriously concerned that we have an issue that is a lot bigger than a lot of people are thinking," Mr. Thibodeau said. "We've gone a few days without selling anything. I'm concerned."
"We're sitting here with plenty of F-Series trucks," he said adding that he still has some 2007 models he needs to move.
Steve Perlstein, WaPo
.......One analysis, by Eidesis Capital, a fund specializing in CDOs, estimates that, of the CDOs issued during the peak years of 2006 and 2007, investors in all but the AAA tranches will lose all their money, and even those will suffer losses of 6 to 31 percent.......
And
.........ad_icon
If all this sounds like a financial house of cards, that's because it is. And it is about to come crashing down, with serious consequences not only for banks and investors but for the economy as a whole.
That's not just my opinion. It's why banks are husbanding their cash and why the outstanding stock of bank loans and commercial paper is shrinking dramatically.
It is why Treasury officials are working overtime on schemes to stem the tide of mortgage foreclosures and provide a new vehicle to buy up CDO assets.
It's why state and federal budget officials are anticipating sharp decreases in tax revenue next year.
And it is why the Federal Reserve is now willing to toss aside concerns about inflation, the dollar and bailing out Wall Street, and move aggressively to cut interest rates and pump additional funds directly into the banking system.
This may not be 1929. But it's a good bet that it's way more serious than the junk bond crisis of 1987, the S&L crisis of 1990 or the bursting of the tech bubble in 2001.............
Neal!
It's all contained. The Super Sewer and the Jedi's...erm...New Hope Alliance (
will save us. No worries here. Move along.
Cheers,
Had enough of the plastic economy called trickle down? This mess is what the republican mantra of borrow and spend brought us.
Here are the ratios of household debt to GDP and disposable personal income. The ratios are still rising.
Year Q CMDEBT CMDEBT
/GDP /DPI
2000 1 67.9% 92.7%
2001 1 71.4% 96.8%
2002 1 75.9% 101.1%
2003 1 81.2% 109.0%
2004 1 85.1% 114.5%
2005 1 89.0% 121.5%
2006 1 92.7% 126.9%
2007 1 95.6% 131.4%
2007 2 96.8% 131.7%
2007 3 97.7% 133.1%
There's a bunch of fake paper floating around that has no backing, it has no reality.
You are flat wrong! As a matter of fact I'm going to grab my flashlight and see if I can't find me some of that lost money right now! Me and OJ are gonna find it and we won't rest until we do.
Interesting article that I came across:
Who Needs the Mortgage-Interest Deduction?
HOMESTEADS; A Condo on a Permanent Luxury Cruise - NY Times
Tax Break - Who Needs the Mortgage-Interest Deduction? - NYTimes.com
And the market loves it...prepare your portfolio for a major major February crash cause its coming,,,yes it is...
What will the new plan do to housing prices? Will they stabilize or continue to fall at a slower or faster rate?
That fake paper has virtual reality! The dot coms made it so. In fact, that virtual money can be traded for virtual assets in virtual World(s) of Warcraft. The stock market has also transported itself into virtual reality...
Repoman, the "new plan" is a placebo. It won't have any significant effect.
Uh oh
The drop in average value is particularly bad news for homeowners who treated their homes as piggy banks instead of as savings accounts. They drained $468.7 billion out of their homes in 2004 through home equity loans or cash-out refinancings, according to a report this year from former Fed Chairman Alan Greenspan and Fed senior economist James Kennedy. Fifty-eight percent of that cash went to home improvements and personal spending, while another 27 percent paid off credit card debt.
27 percent was just clearing off the credit cards. Go America!
Yikes There's a bunch of fake paper floating around that has no backing, it has no reality.
You are flat wrong! As a matter of fact I'm going to grab my flashlight and see if I can't find me some of that lost money right now! Me and OJ are gonna find it and we won't rest until we do.
sdtfs | 12.06.07 - 9:09 pm | #
Okay, I'm back. I found a dime and one of those knockout thingies that look like a quarter. We don't need a new government plan, we just need to give everybody a flashlight.
$3T? How many times has Wall Street leveraged that figure???
The "percent homeowner equity" number was high the moment it was published, especially given the low level of price discovery. Again, the era of equity trade-ups supporting high home prices is DONE -- stick a fork in it.
They are not correct. It will be worse than that.
Fifty-eight percent of that cash went to home improvements and personal spending
And I'm sure that went into really smart household upgrades and personal necessities that still have tremendous values.
fears that the Bank of England has lost control of monetary policy..
Market fears that Bank has 'lost control' - Telegraph
Misean, I'm guessing MEW will finally fall off a cliff in Q4 too. But homeowners with established HELOCs can keep borrowing up to the limit - and that is what is happening.
What a day for my internet connection (Time Warner again) to go down. Oh well, the local library has a nice facility.
NioRio, I think Wall Street is slowly moving towards 15% as the expected price decline. But I think it could be much worse.
These losses are a lot more serious for the economy than the NASDAQ losses. And we really haven't seen much yet ($60B out of $3Trillion or more is a drop in the bucket).
Best to all.
fears that the Bank of England has lost control of monetary policy..
Haha... looks like Bernanke has a new friend.
These losses are a lot more serious for the economy than the NASDAQ losses.
Is that a shot across Sebastian's bow?
Fifty-eight percent of that cash went to home improvements and personal spending
And I'm sure that went into really smart household upgrades and personal necessities that still have tremendous values.
Granite countertops increase productivity.
mp [Repoman, the "new plan" is a placebo. It won't have any significant effect.]
You guys are falling for the carnival tricks. What makes any of you think this is the last of what we'll be seeing from our leadership, as we head into an election?
This is not even round 1 of a 12 round heavyweight fight, and Hillary hasn't even worked up a sweat.
I just read Tanta's "Initial Reaction". Will I need Kindle (and an afternoon, and a sixpack) for when she really gets her thoughts together?
From that article above:
This month's short sterling futures, which indicate where the market expects the key benchmark interbank borrowing rate to be in two weeks' time, actually rose markedly after the Bank's decision - an almost unprecedented reaction. The pound also ended the day up slightly on its trade-weighted index - another highly unusual outcome on the day of an interest rate cut...
Peter Spencer, chief economic adviser to the Ernst & Young Item Club, said: "The fact of the matter is that the market rather than the Bank is now dictating monetary policy - and not from the point of view of controlling inflation, but from the point of view of a random walk. It is behaving in a way which is totally rational for individual banks but adds up to a major deflationary issue.
"I think this is a very grave situation indeed - and not just for the 1.5m [households due to renew their mortgages next year]. If this problem is not sorted out in the next two to three months we are looking at major insolvencies in UK plc."
Does it make any difference?
A couple of years ago, I took a HELOC and spent $70,000 making what I thought were smart, value-adding home improvements. I spent the money at Home Depot, on contractors, appliances, etc.
But what difference would it have made FOR THIS ECONOMY if I had spent the same money at Vegas and on hookers? In both cases, the money greases the economy. In both cases, the money isn't being productively invested NOW (earning interest or gains) or making me richer. Maybe in several years I'll get my improvement money back. Maybe I won't. But until then, what's the difference for me or the economy?
MEW is MEW. When it's spent, the economy grows. When it's not spent, the economy sinks.
MEW is MEW. When it's spent, the economy grows. When it's not spent, the economy sinks.
Oh, now rich is trying to tweak Steve.
MEW is MEW. When it's spent, the economy grows. When it's not spent, the economy sinks.
So the homeowners who own outright are horrible for the economy?
So the homeowners who own outright are horrible for the economy?
Damn straight! They don't spend every dime they earn and then some. Think of all the finance leeches that would die if everyone worked this way.
tj & the bear & stdfs,
I know you're clowning a bit...but savings is what makes the economy grow...not spending....
Cheers,
sdtfs,
sadly true in what passes for our economy these days, the debt needs not only to grow, but to grow at an accelerating rate...
CR,
"I'm guessing MEW will finally fall off a cliff in Q4 too. But homeowners with established HELOCs can keep borrowing up to the limit - and that is what is happening."
Yeah, kinda like Countryfried pulling their LOC's late summer. Stupid is as stupid does I suppose.
Cheers,
energyecon,
"sadly true in what passes for our economy these days, the debt needs not only to grow, but to grow at an accelerating rate..."
Have you been reading Mises and Hayek? That'll get you sent into the tin foil hat room you know.
We're all pwned...this is a Leroy Jenkins moment.
;P
Cheers,
So where are all the people that said inflation was just around the corner? Paging AllenM, Paging AllenM A deflation scenario is at the door.
rich:
"MEW is MEW. When it's spent, the economy grows. When it's not spent, the economy sinks."
Not exactly. Spending in every case has a multiplier effect attached to it. Spending on big TV sets has less of a multiplier effect than spending that amount on hookers (although I'd have to look up the numbers). That's because hookers have a higher propensity to consume (spend) than do most retail clerks (who sometimes save money). The faster money gets sloshed around in the economy, and the more hands that touch it... the healthier the economy.
As for capital spending, investing in a factory (productive assets) gives you a far higher multiplier than spending the same amount on building homes (non-productive asset).
Try this link... it partially explains it.
Multiplier (economics) - Wikipedia, the free encyclopedia
And yes, if someone would like to show me how to make a shorter link, I'll listen.
Be good.
===============
re: Yossarian
That's because hookers have a higher propensity to consume (spend) than...
You sure about that ? I thought they saved like mad to get off the game in "just a few years".
And if you disagree with me,{injoke alert ) I'll that hooker of yours where you are hiding at.
-K
CR (or anybody),
Have you ever tried to annotate the various blips in the household value as %GDP graph?
For example, we can see the 80's bubble and the 90's correction. But what happened in 1976-1982 period to bring about what looks like a structural change in ownership rates or housing values?
Is there any reason to expect the current value to stay above, say, 110% of GDP going forward?
The reason why the equity ratio is so high in 1952 could be because this was a time when for almost twenty years no significant construction was done (1929 to 1949).
But even more curious to me is the graph during the years 1986-1990 and 2000-2006. Why is it that the equity ratio drops in times of housing bubble and stabilizes (as in 1993-1998) during a time of stagnation of housing prices.
If you want to stabilize the finances of the middle class you need to bring house prices down then mortage debt goes down, particular MEW, equity share rises and the household can buffer more shocks (such as house price decreases). Of course, house prices are lower in absolute terms, too, but nothing in life is free.
From an antropological standpoint it is puzzling that increasing equity in terms of house bubble is untapped or is the bubble created so that MEW can materialize ?
How to bring house prices down - here is one more idea: abolish the mortgage interest deduction, this should have done during the Hyper Bubble years 2003-2006. Abolishing it would result in estimated 15% price decline.
That this will most likely not happen now is another boon for home owners and another obstables for a return to regular sane levels (2000 prices).
This is sad chart since it indicates that together with still existing lending standards (allowing up to 90% and only occasianally up to 85% in socalled "distressed areas") many borrowers will still extract the maximum for their houses. Sad, sad.