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Ubprime-mortgage-collapse-why-bear-stearns-is-just-the-start

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This a really great article because it explains the whole financial mess in a way that is very clear, easy to follow and comprehend. I just copied out the whole thing to send to people (family memebers) who *should* be interested in this but, somehow, are not.

Thanks for the link crash!

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Guest grumpy-old-man

great link crash2006.

some snippits:

"This is not the idle chatter of permanent bears. The subprime mortgage collapse now hitting Bear Stearns may be just the start.

Serious analysts from big investment firms are talking ominously about "the big one". :o:o

"How large? Well, the equity lost can be very roughly estimated from first principles. There are about 6,000,000 subprime mortgages in the USA. They typically result from re-financing deals – topping up to utilise whatever equity has accumulated in a house usually to pay off credit card debt; so they stay near 100% outstanding. The average house price in the USA is about $190,000, but we can reduce that to $150,000 on the assumption that we're at the lower end of the market. That gives us a principal sum of $900,000,000,000, which is 7 times the size of the LTCM exposure.But the more serious figure – the housing equity lost to falling prices – is currently estimated at approaching 8% which is $72 billion. That doesn't include an adjustment for synthetic CDOs created by investment bankers to short the weakest MBSs, which is what they did with Delphi Corp.

Now you can see the difference in scale between LTCM and the subprime bust. This may be 20 times worse than LTCM. And it's getting worse – daily." :o:o

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holy sh1t

here in France the panic is unfolding nicely.

Stuff I looked at end last year still hasnt sold, and a new trend is developing - french peasant owners putting a new roof on in the hope of finding a brit buyer.

Needless to say, it wont work.

Ah, crashes. Dontya just luv em?

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holy sh1t

here in France the panic is unfolding nicely.

Stuff I looked at end last year still hasnt sold, and a new trend is developing - french peasant owners putting a new roof on in the hope of finding a brit buyer.

Needless to say, it wont work.

Ah, crashes. Dontya just luv em?

By french peastants do you mean like these:

LeNainPaysans.jpg

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So reading this the derivatives backing the securitisation of the mortgaged industry (CDOs)aren't secure at all ,they are leveraged up to fifteen times and the money isn't really there if the mortgages default.With the only saving grace that the third tranche of the CDOs that has the least preference on default(The Nuclear Waste) and the mid tranche(The Mezzanine)are insured to a Lloyds style syndicate,but this isn't safe either because the recipients of the insurance have not put up any collateral.

And all this because Alan Greenspan and Eddie George reduced rates too far after 9/11 so the investment banks had to come up with some dodgy derivative vehicles for investors to earn a fair rate of interest.And in doing so the derivatives caused an explosion in the money supply and house prices.You f**king idiots Fed and MPC.

You have been warned holders of 35K plus savings with Institutions,especially those with Societies* who have expanded in the last two years through agressive lending.The securitisation of your savings is backed by ''Nuclear Waste''.

Good link crash 2006,I have been wanting to discover more about securitisation as it really is at the heart of the present mess.

*definitely got to divide up that deposit I hold with Northern Rock.

Edited by crashmonitor

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I think in a nutshell, that article explains why we have massive HPI.

Its not about BTL, or supply shortages. Quite simply its about selling and packaging of mortgage backed securities with mortgage lenders merely conduits to stuff cash down people's throats.

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You have been warned holders of 35K plus savings with Institutions,especially those with Societies* who have expanded in the last two years through agressive lending.The securitisation of your savings is backed by ''Nuclear Waste''.

*definitely got to divide up that deposit I hold with Northern Rock.

http://www.nsandi.com/products/index.jsp

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Yep,NS and I, sound advice.Trouble with me is I am a bit greedy, 5.2% is the best available for a lump sum as compared to 6.61% in the commercial sector,risk carries it premium.The inflation linked may out-perform the 6.61% depending on where the RPI ends up in the future.However,it is a bit of a lock in to gain the full rate(up to five years);and it would take me years to get the 250K maximum holding in, as you are only limited to the issues out at the time and have to build the portfolio up as new issues become available.

5.2%'' 100% secure backed by HM Treasury''or 6.61% backed by CDO derivatives a third of which is classed in the Industry as '' Nuclear Waste''.It does make you think though. :unsure:

Edited by crashmonitor

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great link crash2006.

some snippits:

"This is not the idle chatter of permanent bears. The subprime mortgage collapse now hitting Bear Stearns may be just the start.

Serious analysts from big investment firms are talking ominously about "the big one". :o:o

"How large? Well, the equity lost can be very roughly estimated from first principles. There are about 6,000,000 subprime mortgages in the USA. They typically result from re-financing deals – topping up to utilise whatever equity has accumulated in a house usually to pay off credit card debt; so they stay near 100% outstanding. The average house price in the USA is about $190,000, but we can reduce that to $150,000 on the assumption that we're at the lower end of the market. That gives us a principal sum of $900,000,000,000, which is 7 times the size of the LTCM exposure.But the more serious figure – the housing equity lost to falling prices – is currently estimated at approaching 8% which is $72 billion. That doesn't include an adjustment for synthetic CDOs created by investment bankers to short the weakest MBSs, which is what they did with Delphi Corp.

Now you can see the difference in scale between LTCM and the subprime bust. This may be 20 times worse than LTCM. And it's getting worse – daily." :o:o

Interesting read, this and the main article. Before i email this to my mates to help explain my rreason to STR, do we have the same MBS / CDO /CDS bonds in the UK from UK subprime lenders such as Birmingam Midshires Self Cert mortages selling off MBS bonds to UK investment banks? Any anecdotals?

Otherwise they will just say that is the USA, this is the UK, different market, blah, blah.

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fantastic example

But do you remember Lloyds of London? It used to be the world's biggest insurance underwriter. The way it worked was that rich individuals were allowed to keep all their money invested in their favourite stocks and shares, but they could also earn a second income from those assets by pledging that same wealth to underwrite commercial insurance risks which were sliced and diced by syndicates on behalf of their members.

Many Lloyds members lost absolutely everything – houses, furniture and indeed their life – when a series of vicious insurance losses hit the world's insurance market through the early 90s. Acquiring synthetic CDOs is the modern professional money manager's equivalent of being a Lloyds member.

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