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With all the talk about the market, "going up" or "hitting new highs", you have to ask yourself, new highs in what?
-After inflation (of at least 5-6% over the last 10 years for real people), the DOW is up maybe 1-2% in real terms since Greenspans "irrational exuberance" of '96. And thats on top of the wildest bubbles in history.
-In euro's, the market has been crushed. Didn't it start out around .85 cents when it was introduced (in 99, 00?) and now it's $1.40.
-In gold and commodities, thoroughly crushed.
I wonder, what are the odds that we can avoid a Northern Rock bank run here in the US (or much worst)?
Here is a chart showing the upcoming resets by category. While subprime has dominated the media, the impact of the Option ARMs and Alt-A is still to come and will continue for quite a while. The Option ARMS are really scary, because financially-strapped homeowners can keep negatively amortizing themselves into a deeper and deeper hole... especially if they're planning to walk away eventually.
I think this chart makes a lot of sense, because real estate traditionally peaks and valleys in seven-year cycles. The peak was 2005-2006, so that would put the valley around 2012-2013-- right where the chart would indicate. Of course, with all this market manipulation, who knows? Many of these loans will not reset-- people will either bail, be bailed out or opportunistically refi.
Last edited by goodbyehollywood; 11-24-2008 at 03:29 PM..
I think things will get worse. A lot more mortgages are going to re-set well into 2008. I'm not happy that a bunch of people were suckered into buying more house than they could afford and weren't able to understand or read the fine print of what they were getting into. Lenders shouldn't have been lending to people without verifying the borrower's income and other information. And there were a lot of investors who invested in these "bundled" investments of loans without knowing what they were getting into (such as Northern Rock, a British bank which had a "run" on the bank the other day and had to be bailed out by the Bank of England). I think some of this borders on fraud.
You are generous to say "borders" on fraud. I believe it was out and out fraud.
My prediction is the economy is going in the crapper big time after the first of the year. The Federal Reserve are a bunch of criminals and nothing they do surprises me. If you have to ask if this was a moral hazard you have completely lost your moral compass. Hey people we are reaping what we have sown. When you base an economy on lies and debt, it has to collapse, everyone lied, cheated, and profited from a liars economy. No one cared as long as they were getting what they wanted and living the high life. Now the bill is due and nothing anyone does will stop the carnage.
OK, what would you have done, what consequences would you expect, and why do you feel it would be a more appropriate approach?
Congress has the power to negate and undo any action taken by the Federal Reserve.
If the Federal Reserve lowers interest rates, then Congress should have raised taxes and/or cut government spending in order to limit the amount of money.
Congress could have eliminated the mortgage interest deduction. It could have levied a tax on credit card interest, by taxing the banks on the interest they charged and/or taxing the people, for example if you paid $2,000 in credit card interest in 2002, then you owe $2,000 in taxes.
Had Bush done any of those things, would he have been re-elected in 2004?
Not no, but hell no.
If he had done them recently, would the Republicans have a chance at winning the 2008 Election? Not no, but hell no.
If the Gorebot had been elected in 2000 and done what was necessary, he would not have been re-elected in 2004.
The biggest problem is the American electorate. The vast majority are ignorant, selfish, self-interested, greedy, materialistic, undisciplined and lack any understanding of economics or finance, especially personal finance.
I can make such broad sweeping characterizations because they've proven it repeatedly, if for no other reason than Americans refuse to save money. What moron buys a car with 0% down for 60 or 72 months? There's no way to possibly justify it, just as there's no possible way to justify purchasing a home with less than 20% down, or buying a $3,000 plasma TV and paying $2,000 in interest on it.
A recession is inevitable, and the best thing that could happen is a massive tax hike that throws the country into a recession to clear out the crap and restructure everything, but I don't think you'll see that out of either candidate for exactly the reasons I mentioned about.
My prediction is the economy is going in the crapper big time after the first of the year. The Federal Reserve are a bunch of criminals and nothing they do surprises me. If you have to ask if this was a moral hazard you have completely lost your moral compass. Hey people we are reaping what we have sown. When you base an economy on lies and debt, it has to collapse, everyone lied, cheated, and profited from a liars economy. No one cared as long as they were getting what they wanted and living the high life. Now the bill is due and nothing anyone does will stop the carnage.
YEP ! Things are going to get very ugly very soon!
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ARM resets in 2009?
