Our collective economic ass is about to get kicked, hard and rude.

Lounge
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Now that’s more frightening than nuclear debris…

and this hint of thigs to come:
From Financial Times..

Investors on Monday expressed renewed concern about trouble in the US subprime home mortgage market spreading to higher quality loans following a stark profit warning from American Home Mortgage Investment.
The warning from American Home, which focuses on prime- and near-prime loans, served as a reminder that mortgage delinquencies are continuing to pile up and could be spreading among less risky buyers.

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wow.. bad news bears

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Housing Boom Tied To Sham Mortgages - washingtonpost.com

gee - ya think?

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yeah… in addition:

this may be one of those monster stories that nobody in the media dared report because so much advertizing revenue came directly from real estate business… so everybody kept quiet and played along hoping the game wouldn’t stop…

"Federal law enforcement officers say that with heavy demands on them from homeland security, they have had the resources to shut down only the worst offenders. :open_mouth:

“By the time we prosecute, the damage has been done, the neighborhoods are already destroyed and the money is gone,” said David E. Nahmias, the U.S. attorney who oversaw the Hill case.

In Atlanta, entire neighborhoods and condominium developments, especially those in affluent areas, were hit by organized fraud rings. Initially, these schemes pumped up housing values for everyone as artificially high appraisals helped the swindlers get inflated loans. Legitimate home buyers rushed in to get a piece of what they thought was a soaring real estate market. Now as the fraud is being exposed, their home values are taking a hit.
As more of these cases come to light around the nation, the question is: How much did an epidemic of fraud contribute to the frenzied housing market of recent years?"

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BTW, in spite of assurances, the Fed is now clueless

and this isn’t a good thing. Maybe nobody in there has the foggiest idea of what to do next ?

“The subprime problem ‘is a brand-new kind of shock,’ said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. ‘The data we’ve seen lately is consistent with an economy that’s just not picking up.’”
“‘No one’s sure of the scope of the problems,’ said Harris. ‘We don’t have a lot of history to draw from in estimating the impact. It’s difficult to quantify.’”
“‘Since the risks to both economic growth and inflation are up, it makes the Fed even more uncertain,’ Lehman’s Harris said. ‘The Fed is a deer in the headlights right now. They don’t know which problem to address.’”

annnnnd uhhhhhh…

"The Financial News. “Trading volumes of Alt-A mortgages, which are considered less risky than the US sub-prime sector, have hit a wall in the past month as banks reported problems selling the loans in the secondary market.”
“Analysts are warning this is the second problem to emerge after those in the higher risk sub-prime market began in January.”
“Mehernosh Engineer, senior credit strategist at BNP Paribas, said: ‘This is starting to look more like what happened in 1991– a consumer hard landing. Sub-prime and Alt-A is more like a $3.5 trillion problem, which will progress gradually through 2007 and 2008.’”

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Foreclosure’s shadow falls across diverse set of US homeowners

Then there’s this!

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… I knew I shoulda moved to FiJi

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And yet another not so fine point from today’s news

"A promotional spot for the National Association of Realtors came on the radio the other day. The spot, introduced as something called “Newsmakers,” was supposed to sound like a news report, with the association’s president offering real estate advice.

“This is the best time to buy,” Pat Vredevoogd Combs, the president, said cheerfully. :cool: “There’s a lot of inventory in the marketplace. Interest rates are low. It’s a wonderful tax deduction.”
By the Realtors’ way of thinking, it’s always a good time to buy. Homeownership, they argue, is a way to achieve the American dream, save on taxes and earn a solid investment return all at the same time.
That’s how it has worked out for much of the last 15 years. But in a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. :open_mouth: :open_mouth: In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.
Most striking, perhaps, is the fact that prices may not yet have fallen far enough for buying to look better than renting today, except for people who plan to stay in a home for many years.
With the spring moving season under way, The New York Times has done an analysis of buying vs. renting in every major metropolitan area. The analysis includes data on housing costs and looks at different possibilities for the path of home prices in coming years.
It found that even though rents have recently jumped, the costs that come with buying a home — mortgage payments, property taxes, fees to real estate agents — remain a lot higher than the costs of renting. So buyers in many places are basically betting that home prices will rise smartly in the near future. (Humble Tacitus injects a thought here… what happens if and when this expectation no longer obtains ? :confused: )

Over the next five years, which is about the average amount of time recent buyers have remained in their homes, prices in the Los Angeles area would have to rise more than 5 percent a year for a typical buyer there to do better than a renter. The same is true in Phoenix, Las Vegas, the New York region, Northern California and South Florida. In the Boston and Washington areas, the break-even point is about 4 percent.
“House prices have to fall more before housing becomes a clear buy again,” says Mark Zandi, chief economist of Moody’s Economy.com, a research company that helped conduct the analysis. “These markets aren’t as overvalued as they were a year ago or two years ago, but they’re still unfriendly. And that’s one of the reasons the market is still soft — people realize it’s not a bargain.”

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For those of us who have an interest in the economy, real estate market, etc.:

The Mogambo Guru

I highly recommend favoriting this and reading it every Wednesday night.

He makes economics scary, funny, and easy to understand all at the same time. Does anyone else read his column?

Cheers,

:cool: Quicksilver

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helllooooooo… I just checked with the hard numbers guys, the National Association of Home Builders… they maintain an index of industry wide expectations… and guess what ? Right now the best informed players in the business, the guys who live and die by home sales, have their index down in the low 30’s… only a smidge higher than the deepest period of recession in 1990-1991… and I’m getting personal calls about rapidly cooling conditions in “impervious” markets, like Arizona and Florida… so we hafta ask at some point, is there a deliberate cover-up in place ? Is the media pulling a major news blackout on this story because to talk about it might trigger an all out panic ?

Having said that, other sides of the US economy are going great, like corporate profits, and the stock market is booming along with it…

This is like the Super Disconnect… corporations are blowing the doors off, and real estate is starting to cave in… the freakiest thing I think I’ve seen in the economy…

Boy, if we have one more round of “adjustments” in the next level of mortgages, this could get very hard to explain to the voting population…:open_mouth:

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wall of worry?

"The real estate market is making gurgling sounds as it sinks below the waves; America’s automotive industry awaits with knee-knocking trepidation the arrival of cars from India’s Tata Motors selling fo $2,500 each; a half-trillion US dollars has been squandered ruining Iraq; sky-high energy prices; the menace of global warming; America’s infrastructure bucklng; crime rates soaring; a divisive debate about this country’s ‘broken borders’ and uncotrolled immigration that might include al-Qaeda operatives sneaking nuclear weapons hidden in their bales of marijuana; on and on, but the stock markets acrosss the board keep making new all-time highs! This logic-defying performance is not always amenable to reason…

And yet, long experience has displayed this scene to us before, articulated by the early great stock-market forecasters as ‘climbing a wall of worry’. In other words it is the very negativity now extant that is leading to our rising stock market! Furthermore, even a cursory glance at the charts of worldwide stock markets shows an across-the-board series of bull markets with nary a Downtrend in sight, meaning that something Fundamntal is going on that affects the entire wolrld across the board".

– Dines Report May 25 (one of the oldest stock market letters)

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How unlikely is this metaphor: “drowning in money”… well, also, the fed is barely figuring this out, I would put it like this, the sources of credit are passing through their equivalent of the industrial revolution, and secondarily (in more senses than one) risk can now be securitized and parceled out in a global web, so no one weak link is expected to bear the full weight of any “event”… because risk can now be “granulated” and dispersed, higher risk ventures and adventures have effectively (much) lower risk-reward ratios, from a systemic perspective… meaning policy floodgates become substantially less restrivtive:’

Ergo,

  1. lots more easily avalable credit, “subprime” merely being an unhealthy manifestation thereof

  2. easily accessed means of risk dispersal… “put options on everything”

  3. liberalization of policy

and also

  1. faster and more accurate responses to pre-crisis conditions before they expand beyond managability, “smarter world, tighter feedback loops, better tools”

Doesn’t always insure against the six-sigma-ish confluence of events, i.e. perfect storms… especially of slow moving global processes that slide under the radar or for which there are no “crisp logic” solutions in the policy toolboxes…

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Speaking of “slow moving global processes” here’s an interesting site I’ve been following since October of last year. It’s latest claim is that Alan Greenspan has been arrested. (Note: he may have been re-released again) This publication seems highly reputable, but a person with connections to the cabinet of a G-8 country would need to verify this info independently. The Chinese in particular seem to have a stake in this.

Global Analysis and International Intelligence - World Reports - Soviet Analyst - Edward Harle - Global Analysis - London and New York

check the archive Announcements Archive

December 07 is a good date to start.

I’m curious what other people’s take on this stuff is.

Cheers,

:cool: Quicksilver

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well, i couldnt find the article on greenspan on the site you linked to, but i remember reading, that he was being trailed for somthing or other after having written somthing in his biography that linked him to some of the 911 or new world order crap.
cant remember excactly what it was though..

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Never heard of the journal, or the author and I’m not sure on what basis they are to be considered a ‘highly reputable’ source. The site doesn’t read like it’s written by someone grounded in reality with talk of the revolutions of 1989 as being illusory, part of a ‘Leninist deception’.

There’s a lot of crap out there on the net…

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The credit binge is global - it’s not just the US
Bloomberg.com: Worldwide

uly 4 (Bloomberg) – U.K. lenders are providing mortgages to customers who don’t need them and may not be able to afford them, practices that may lead to serious wider consequences,'' the country's financial regulator said. All the subprime-mortgage lenders examined failed to apply responsible lending standards, and five of 34 intermediaries are being investigated and may be punished, the Financial Services Authority said in an e-mailed statement today. Defaults by holders of subprime mortgages, those with the worst credit histories, have contributed to the steepest housing slump in the U.S. since the 1930s. U.K. consumers are saddled with a record 1.3 trillion pounds ($2.6 trillion) in debt and with interest rates rising, the cost of servicing that burden is at the highest since 1992, according to Citigroup Inc. Poor sales practices in this market may lead to serious wider consequences,‘’ Clive Briault, the FSA’s managing director of retail markets, said in the statement.
Mortgage brokers often give bad advice, and U.K. lenders are repeating mistakes made in the U.S. by failing to check whether information they were given was believable. Poor record- keeping at some mortgage brokers means they were unable to prove mortgages sold to clients were suitable, the FSA said.
`Very Concerned’
We are very concerned about these findings,'' Briault said. Consumers in the subprime market are vulnerable people who may have high debts or a bad credit history. It’s therefore important that they are properly assessed and advised. We will not hesitate to take action where we find bad practice.‘’

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Mmmmm… this is spreading into a global event, or what ? One has to suspect “the media”… whoever “the media” are… has been underreporting this as much as they can get away with while retaining a shred of credibility… too many big fish involved…

"How Wall Street stoked the mortgage meltdown

Bob Morris @ Jul 6th 2007 00:15 - real estate bubble
From the Wall Street Journal, no less. (Their investigative reporting remains excellent even as neanderthals lumber across their editorial page. Lest we forget, it was WSJ that broke the Enron story. Two of their reporters went digging and said, whoa, these numbers do not add up.)
Twelve years ago, Lehman Brothers Holdings sent a VP to look into making loans to First Alliance Mortgage Co. The VP reported back that First Alliance was a” financial ’sweat shop’ specializing in ‘high pressure sales for people who are in a weak state.’ At First Alliance, he said, employees leave their ‘ethics at the door.’ ”
Lehman apparently left their ethics out the door too, as they loaned First Alliance $500 million, then sold $700 million in bonds backed by the loans. The company cratered and a federal jury found that Lehman “helped First Alliance defraud customers.”
So why would investment banks knowingly back such risky loans? “Because most of the risks that loans would go bad were passed to investors.” Once the loans were packaged as bonds and sold, the investment bank had little or no exposure left. Should the loans go bad, well that would be someone else’s problem, because they were making millions."…

Well, heck, I’m shocked, simply shocked ! Imagine that, systematically screwing the poor and passing the bag to the middle class ? You must admit, the scope and audacity of the scam is unmatched in human history… Oh, BTW, remember that Iraq cost-of-war counter… ?..

$440,784,502,684

at last reading… most interesting, isn’t it, that this relates to the value of the subprime loan market.. which is estimated at about

$800,000,000,000.

So what it looks like, a most upretty picture, the subprime market (meaning the increased flow of money through our economy) was indirectly paying for the war in Iraq… it explains how we could reduce taxes and fight a war… because we had a massive tax increase, one the poor were assessed in the form of bogus home ownership (made possible by effectively removing all regulation of the lending market) and by devaluing the dollar…. the only difference is that this ingenious new way of taxing the public was never perceived as taxation…

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dunno if any of you have seen it, but if you havnt you probably should: America: Freedom to Fascism - Director’s Authorized Version
(theres a lot about the current state of economy in it)

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:cool: Nothing so grand here… it is rumored that a widespread subculture of mortgage fraud spung up in the wake of the subprimes… instead of top down corruption there was a massive amount of bottom up, local scamming which involved the collusion of appraisers, loan officers, etc…

Al of which now is teetering on the edge of interest rates, which have reversed course (once again) and are creeping back up… and this is where the depth charge looks like it is waiting…

The mortgage market has periodic “resets” that are tied to interest rates at the date of the reset, so every upwards increment of interest will have a potent effect on the hundreds of billions of $$$ in mortgage reset values…

IF (that’s only an IF) interest rates move up in the next 6 months, that’s the “kill window” when the great bulk or ARMs will reset, you could have a massive aftershock…

For instance… this story barely made the news… so much so there had to be an active decision to supress it…:

"In a surprise move, the Swiss bank UBS said late yesterday that its chief executive, Peter A. Wuffli, would be succeeded by his deputy, Marcel Rohner, effective immediately.
The abrupt power shift at UBS, one of the world’s largest money managers for wealthy individuals, comes amid growing criticism about rising expenses and disagreements over strategy at the bank.
UBS has also suffered a string of defections in its United States investment banking group, and it took steep losses this year in subprime mortgage investments in its hedge fund group, Dillon Read Capital Management, which ultimately led to that unit being shut down.

The oddest thing was… you scarcely heard a blip about that… it could have happened and you would never have known… Dillon Read shut down ?

Hush child… the natives might start murmuring…

“Dissolving Dillon Read was noted as a “major embarrassment” for the risk-averse UBS; not being able to reach this “couple of months” goal would likely only rub salt in Swiss bank’s third-straight-decline-in-quarterly-profit wounds. Jenkins also said that this year, there would be a focus on “keeping a lid on costs.” Related? An additional $300 million in shut down costs…”
**
***Yowch…:open_mouth: ***

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This story was on the front page of the Financial Times European edition today. Should it be a major story on CNBC? Maybe… Dillon Read (in this incarnation) was just an internal hedge fund set up in a hurry to appease a star performer who was threatening to leave and go elsewhere. So on an industry level, it’s not that big a deal based on what has been publicly reported.