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Us Mortgage Meltdown

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Guest Winnie

http://www.moneyandmarkets.com/issues/MaM633_4.html

For many months, Mike Larson has been warning you about a meltdown in America's vast new market for home mortgages.

Now that meltdown is here.

He told you home sales and prices would fall, and they did.

He told you that American homeowners would default on their mortgage payments in record numbers, and they have.

He warned this would shake Wall Street to its core. Now it is.

The evidence is ubiquitous and indisputable:

From their peaks in 2005, existing home sales are down 16.9%; new home sales, down 29.4%.

For the first time since data was collected in 1968, home prices have declined nationally for nearly a year.

Worst of all, American homeowners are falling behind on their mortgage payments in record numbers: The delinquency rate on low-quality mortgages has surged to 13.8%. On medium-quality mortgages, it has more than doubled. And on all mortgages, it has now surpassed the worst level of the last recession.

This mortgage meltdown has struck down the stocks of home builders, low-quality lenders, and now, as Mike demonstrated on Friday, also the widely owned Real Estate Investment Trusts (REITs).

The mortgage meltdown has mortally wounded or killed 82 higher-risk lenders, delivering huge loan losses, early payment defaults and funding cutoffs. Some have severely curtailed lending operations. Others have filed for bankruptcy.

And last week came the clincher:

The Mortgage Meltdown Has Just

Precipitated One of the Largest

Hedge Fund Collapses of All Time

The fund's manager, Bear Stearns, promptly come to its rescue with an astounding sum of $3.2 billion. But the collapse — and even the rescue itself — have raised a series of urgent questions for investors that few on Wall Street seem ready to answer:

Urgent Question #1. The fund's marketing and even its name — High-Grade Structured Credit Strategies Fund — stressed safety. Were they lying?

Urgent Question #2. Until recently, the fund's investments were supposedly holding their value pretty nicely, with relatively modest losses despite the mortgage meltdown. So how did that value evaporate so quickly?

Urgent Question #3. The last time a major hedge fund — Long Term Capital Management — collapsed in the U.S., the Federal Reserve and nearly all of Wall Street came to its rescue. This time, Bear Stearns acted alone. And it did so much more quickly. Why?

Urgent Question #4. Is this an isolated event? Or is it just the tip of the iceberg?

Urgent Question #5. What does it mean for other mortgage and real estate investments — Fannie Mae and Freddie Mac mortgage bonds … homes, shopping malls, and office buildings … real estate stocks and REITs?

Urgent Question #6. What should you do about it, regardless of what you invest in?

Here are our answers …

Read on... anyway, the US basically know what is happening to themselves......eventually this realisation will arrive on our shores...I'd guess some time around February 2008 it will be PAINFULLY clear that we are in for even worse.....

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http://www.moneyandmarkets.com/issues/MaM633_4.html

For many months, Mike Larson has been warning you about a meltdown in America's vast new market for home mortgages.

Now that meltdown is here.

He told you home sales and prices would fall, and they did.

He told you that American homeowners would default on their mortgage payments in record numbers, and they have.

He warned this would shake Wall Street to its core. Now it is.

The evidence is ubiquitous and indisputable:

From their peaks in 2005, existing home sales are down 16.9%; new home sales, down 29.4%.

For the first time since data was collected in 1968, home prices have declined nationally for nearly a year.

Worst of all, American homeowners are falling behind on their mortgage payments in record numbers: The delinquency rate on low-quality mortgages has surged to 13.8%. On medium-quality mortgages, it has more than doubled. And on all mortgages, it has now surpassed the worst level of the last recession.

This mortgage meltdown has struck down the stocks of home builders, low-quality lenders, and now, as Mike demonstrated on Friday, also the widely owned Real Estate Investment Trusts (REITs).

The mortgage meltdown has mortally wounded or killed 82 higher-risk lenders, delivering huge loan losses, early payment defaults and funding cutoffs. Some have severely curtailed lending operations. Others have filed for bankruptcy.

And last week came the clincher:

The Mortgage Meltdown Has Just

Precipitated One of the Largest

Hedge Fund Collapses of All Time

The fund's manager, Bear Stearns, promptly come to its rescue with an astounding sum of $3.2 billion. But the collapse — and even the rescue itself — have raised a series of urgent questions for investors that few on Wall Street seem ready to answer:

Urgent Question #1. The fund's marketing and even its name — High-Grade Structured Credit Strategies Fund — stressed safety. Were they lying?

Urgent Question #2. Until recently, the fund's investments were supposedly holding their value pretty nicely, with relatively modest losses despite the mortgage meltdown. So how did that value evaporate so quickly?

Urgent Question #3. The last time a major hedge fund — Long Term Capital Management — collapsed in the U.S., the Federal Reserve and nearly all of Wall Street came to its rescue. This time, Bear Stearns acted alone. And it did so much more quickly. Why?

Urgent Question #4. Is this an isolated event? Or is it just the tip of the iceberg?

Urgent Question #5. What does it mean for other mortgage and real estate investments — Fannie Mae and Freddie Mac mortgage bonds … homes, shopping malls, and office buildings … real estate stocks and REITs?

Urgent Question #6. What should you do about it, regardless of what you invest in?

Here are our answers …

Read on... anyway, the US basically know what is happening to themselves......eventually this realisation will arrive on our shores...I'd guess some time around February 2008 it will be PAINFULLY clear that we are in for even worse.....

The DOW has gone from positive 128 to Minus 40 in the last couple of hours. I think they may have awaken to the beast within!

U.S. Stocks Erase Gain; Brokerage, Energy Stocks Lead Retreat

http://www.bloomberg.com/apps/news?pid=206...&refer=home

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http://www.moneyandmarkets.com/issues/MaM633_4.html

For many months, Mike Larson has been warning you about a meltdown in America's vast new market for home mortgages.

Now that meltdown is here.

He told you home sales and prices would fall, and they did.

He told you that American homeowners would default on their mortgage payments in record numbers, and they have.

He warned this would shake Wall Street to its core. Now it is.

The evidence is ubiquitous and indisputable:

From their peaks in 2005, existing home sales are down 16.9%; new home sales, down 29.4%.

For the first time since data was collected in 1968, home prices have declined nationally for nearly a year.

Worst of all, American homeowners are falling behind on their mortgage payments in record numbers: The delinquency rate on low-quality mortgages has surged to 13.8%. On medium-quality mortgages, it has more than doubled. And on all mortgages, it has now surpassed the worst level of the last recession.

This mortgage meltdown has struck down the stocks of home builders, low-quality lenders, and now, as Mike demonstrated on Friday, also the widely owned Real Estate Investment Trusts (REITs).

The mortgage meltdown has mortally wounded or killed 82 higher-risk lenders, delivering huge loan losses, early payment defaults and funding cutoffs. Some have severely curtailed lending operations. Others have filed for bankruptcy.

And last week came the clincher:

The Mortgage Meltdown Has Just

Precipitated One of the Largest

Hedge Fund Collapses of All Time

The fund's manager, Bear Stearns, promptly come to its rescue with an astounding sum of $3.2 billion. But the collapse — and even the rescue itself — have raised a series of urgent questions for investors that few on Wall Street seem ready to answer:

Urgent Question #1. The fund's marketing and even its name — High-Grade Structured Credit Strategies Fund — stressed safety. Were they lying?

Urgent Question #2. Until recently, the fund's investments were supposedly holding their value pretty nicely, with relatively modest losses despite the mortgage meltdown. So how did that value evaporate so quickly?

Urgent Question #3. The last time a major hedge fund — Long Term Capital Management — collapsed in the U.S., the Federal Reserve and nearly all of Wall Street came to its rescue. This time, Bear Stearns acted alone. And it did so much more quickly. Why?

Urgent Question #4. Is this an isolated event? Or is it just the tip of the iceberg?

Urgent Question #5. What does it mean for other mortgage and real estate investments — Fannie Mae and Freddie Mac mortgage bonds … homes, shopping malls, and office buildings … real estate stocks and REITs?

Urgent Question #6. What should you do about it, regardless of what you invest in?

Here are our answers …

Read on... anyway, the US basically know what is happening to themselves......eventually this realisation will arrive on our shores...I'd guess some time around February 2008 it will be PAINFULLY clear that we are in for even worse.....

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BEAR STERNS is a big bad daddy bear. If it goes down expect the most humongous credit crunch markets everywhere will suddenly seize up before you can say "counterparty risk"

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Guest Popalot

This week is a biggy in the US anyway:

Tomorrow: Consumer Confidence; New Home Sales

Wednesday: Durables

Thursday: GDP and the FED

Friday: Personal Income and Spending....; launch of Apple iPhone (expect a spike in any weather)

Big Daddy Bear Sterns will be under instructions from the PPT to fence off the inevtable until at least next week......

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What we are seeing in action is the very systemic risk that central bankers fear and are powerless to combat on a widespread scale, PPT or no PPT. Once it spreads from a one institution problem to a multiple institution problem there is nothing (and no amount of available money) to stop it. The plug is just pulled.

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Guest vicmac64

I guess tomorrow may well be the day the markets fall!

I could be worng - but sentiment is a powerful force and I think we have just seen the balance tip to a major BEAR MARKET

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What we are seeing in action is the very systemic risk that central bankers fear and are powerless to combat on a widespread scale, PPT or no PPT. Once it spreads from a one institution problem to a multiple institution problem there is nothing (and no amount of available money) to stop it. The plug is just pulled.

Why can't the Fed just give unlimited credit to cover all losses? The Fed could in theory just print money and give it away

to those who need it. Beside the fact that it might be illegal and fuel inflation, is there any reasons why they could not

want to do that? My fear is we could see a lot of buying (also of treasuries) from the Fed in the near future. If it is covert,

it will prop the market possibly for quite some time, until finally enforced inflation feeds through.

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I guess tomorrow may well be the day the markets fall!

I could be worng - but sentiment is a powerful force and I think we have just seen the balance tip to a major BEAR MARKET

....today's close in New York suggests you could be on track:

http://investing.reuters.co.uk/news/articl...S-UPDATE-13.XML

while in Hong Kong this morning a sympathy fall over the US sub prime is expected:

http://investing.reuters.co.uk/news/articl...CKS-PREOPEN.XML

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....today's close in New York suggests you could be on track:

http://investing.reuters.co.uk/news/articl...S-UPDATE-13.XML

while in Hong Kong this morning a sympathy fall over the US sub prime is expected:

http://investing.reuters.co.uk/news/articl...CKS-PREOPEN.XML

.....latest from Bloomberg on today's (Tuesday 26th) markets in Asia:

http://www.bloomberg.com/apps/news?pid=206...&refer=asia

Opening paragraph reads:

Asian Stocks Decline for a Third Day on U.S. Subprime Concern

By Chen Shiyin and Makiko Suzuki

June 26 (Bloomberg) -- Asian stocks fell for a third day on lingering concern that losses tied to U.S. subprime mortgages will curb growth in the world's biggest economy.

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http://www.sfgate.com/cgi-bin/article.cgi?...BUG0OQLH9T1.DTL

Investors fear Bear Stearns flu .. this article implies we have probably six months before the tsunami if it does hapen, and that the stock market will fall 20 pct and house prices will bear the brunt of the fallout.

But everywhere one looks there are credit bubbles. Bubbles burst.

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I guess tomorrow may well be the day the markets fall!

I could be worng - but sentiment is a powerful force and I think we have just seen the balance tip to a major BEAR MARKET

Equity markets have been hugging the bearish side for the past few weeks. It has little to do with the housing sector as housing has been a drag on US economic growth for 6 consecutive quarters. In fact the soft housing market has helped to keep the Fed on hold for that past 12 months, during which time the DOW has been on an unassailable rally. This is not a coincidence. There are lots of mixed signals coming out of the US right now - woeful construction and housing data against a marked pick-up in manufacturing data, with May's retails sales also showing a marked increase.

The real test of the Bear Stearns hedge fund debacle is whether or not it leads to a mass repatriation of capital flows - which is what one might expect. That should result in a sizeable liquidation of carry trades and while we have seen the Japanese yen strengthen today, there is no sugnificant evidence of a carry trade unwind in the currency markets, or equity markets for that matter. Hedge funds may have collapsed but risk appetite shows little sign of letting up, as evidenced by multi-decade highs hit by the high yielding Australian and New Zealand dollars today, and with sterling creeping back above the $2 against the US currency.

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Hedge funds may have collapsed but risk appetite shows little sign of letting up, as evidenced by multi-decade highs hit by the high yielding Australian and New Zealand dollars today, and with sterling creeping back above the $2 against the US currency.

So everyone believes in the Greenspan Put? ... Strong inflation ahead!

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Guest grumpy-old-man
Equity markets have been hugging the bearish side for the past few weeks. It has little to do with the housing sector as housing has been a drag on US economic growth for 6 consecutive quarters. In fact the soft housing market has helped to keep the Fed on hold for that past 12 months, during which time the DOW has been on an unassailable rally. This is not a coincidence. There are lots of mixed signals coming out of the US right now - woeful construction and housing data against a marked pick-up in manufacturing data, with May's retails sales also showing a marked increase.

The real test of the Bear Stearns hedge fund debacle is whether or not it leads to a mass repatriation of capital flows - which is what one might expect. That should result in a sizeable liquidation of carry trades and while we have seen the Japanese yen strengthen today, there is no sugnificant evidence of a carry trade unwind in the currency markets, or equity markets for that matter. Hedge funds may have collapsed but risk appetite shows little sign of letting up, as evidenced by multi-decade highs hit by the high yielding Australian and New Zealand dollars today, and with sterling creeping back above the $2 against the US currency.

do you still think the US & UK won't go into recession then ?

wishful thinking imo ;)

edited - I'd prefer a straight "yes " or "no" please rather than a politicians answer.

Edited by grumpy-old-man

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Guest grumpy-old-man
No need to worry

"There are some problems in the U.S. housing market but so far they are largely contained" senior vice president at Freddie Mac.

http://www.reuters.com/article/bankingfina...637053720070626

So no spill over of subprime problems no recession. Alls well.

you can't beat a dry sense of humour bleakhouse. :D

subprime largely contained eh:

we shall see

Edited by grumpy-old-man

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Having read "Psychology Of The Bubble" it would seem that Freddie Mac are in the Denial Stage.

Btw does anyone ever look at the CBOE volatility index (VIX)? It is quite high which usually indicates something is going on, just not what.

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So everyone believes in the Greenspan Put? ... Strong inflation ahead!

Monetise that debt and set the controls for the heart of the sun.

Can't think that those Far East buyers of US T-Bills are going to be very happy about this situation.

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Monetise that debt and set the controls for the heart of the sun.

Can't think that those Far East buyers of US T-Bills are going to be very happy about this situation.

I think the US has two options: inflation or - inflation!

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