Wednesday, Jul 11, 2007
GAME OVER
Market Watch: S&P finally says subprime is mostly junk
"But the bigger news is that S&P isn't going along with the charade anymore. A lot of debt will be downgraded to junk status. A lot of that debt will have to be sold at fire-sale prices. A lot of pension funds and hedge funds that once thrived on the high returns they could get from investing in subprime junk will now lose a lot of money.
S&P's announcement is a death warrant for the subprime industry. No longer will mortgage brokers be able to help buyers lie their way into a home. Fewer stressed homeowners will be able to refinance their mortgage, thus extending and exacerbating the housing bust.
"We do not foresee the poor performance abating," S&P said."
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Posted by millard @ 10:58 AM (174 views) Add Comment
3 Comments
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1. japanese uncle said...
However much Chanel No.5 is poured onto a manure and served on a plate in a posh restaurant, a diner with any reasonable sense of smell would not eat it. But this is exactly what those allegedly excellent financial minds at major banks did actually. Can you believe it? I won't. This is another pyramid scheme and those thugs who originated this business knew all along that things were destined to go wrong on a cataclysmic scale.
2. dohousescrashinthewoods said...
Game over indeed.
The point is (not stated explicitly) that a lot of funds (e.g. pensions) have rules saying they don't invest in junk bonds.
That is what will force a lot of sales.
This could be "it" - watch what happens as trading starts and they start re-rating all the other stuff they have indicated, like CDOs.
"Prices will fall, and foreclosures will rise. More mortgage fraud will be uncovered as the tide goes out."
(incidentally, I'll be interested to see how much fraud and laundering goes on in the UK market when our own can of worms is opened)
3. millard said...
it's going to get very messy, i'm glad my pension is in cash (for what it's worth), there will be a lot of funds forced to sell at a loss; once again it's the little man that will get hit while the fund managers have taken their bonus, but all the while failing to do their job.