Friday, September 21, 2007

Bernanke tells Congress subprime will get much worse

Bernanke warns of worse to come in subprime fallout

Financial markets might be breathing easier, but US Federal Reserve chairman Ben Bernanke is warning there is worse to come, with subprime defaults expected to surge in the coming months.

Posted by mybrainhurts @ 10:06 AM (946 views)
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8 thoughts on “Bernanke tells Congress subprime will get much worse

  • As we know,

    Its only just warming up this. And we are 5 times more overindebted than the US? Is that what people are saying?

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  • Batten down the hatches – if you have any.

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  • sovietuk (2)

    If you have no hatches – get some credit while there is still some and get hatches!!

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  • no, get battens. hatches are the weak point; battens are what protect them

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  • dohousescrashinthewoods says:

    Wichever you buy, don’t buy them on a teaser rate.

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  • dohousescrashinthewoods says:

    I did a back-of-an-envelope calculation, based on yesterday’s MarketOracle post:

    Taking the market capitalization of all US stocks:
    1994: $5.3 trillion
    2006: $35 trillion

    If you work out the compound growth it is 17%. If you assume growth of 4% per year for a stable economy, they would be at $8.5 trillion. The FTSE averages, what, 9% per year? even at that rate, they should only have reached $14.9 trillion.

    That suggests the market is 235% what it should be. The DJIA started the year arount 12,500 suggesting it really should have been 5,300 (excluding inflation).
    Does that mean assets values are approinately double what they would be in a “non-credit-infested” world?
    Does that mean we can expect assets to halve in value if credit disappears?
    And, if large amounts of resources are diverted to servicing debt, does that mean valuations could go below half?

    Does that mean I can get that 300K townhouse for under 150K if I can still get a mortgage in a few years’ time? 😉

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  • Credit Suisse did some really useful analysis which was posted here yesterday. Ben couldn’t do much else other than own up!

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  • dohousescrashinthewoods, yes.

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