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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (24908)	1/19/2005 10:36:06 AM
From: John Vosilla	Read Replies (1) of 110194

<Exactly what is stopping us from having a credit crunch right here at 2.25%? Please state the case because I do not think you can. IMO If housing slows down it is all over. Perhaps you think that housing will not slow down here but you must agree that it possible.> I think the misallocation of capital into speculative real estate in many areas of this country will end very badly. The question is when and how quick will the pain be felt. As long as ARM's, fixed rate mortgages and underwriting standards remain anywhere near where they are today it keeps monthly payments still reasonable for the masses already in the game and for first time home buyers to support the whole ponzi scheme. No doubt a continued flattening of the yield curve will be enough to tilt us into recession. I think fed funds at 3% and the 10 year remaining at today's levels gets us there. This is I believe what Greenspan wants so as not to pop the housing bubble all at once. It will be a two step process.

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