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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Ramsey Su who wrote (46025)11/23/2005 11:53:59 AM
From: UncleBigs  Read Replies (1) of 110194
 
The refi index is down. Who would refinance today? I would, if my hybrid is coming to reset (I took out a 7/1 in 2003). I figure at today's rate, my reset would be 2.25 + 1 yr libor, or about 7%. There would be no reason why I would dump this adjustable for a lower fixed. Applying same logic, it seems to me that almost all types of ARMs should be converting to fix today if it is feasible. There is so much down side risk to an adjustable and no upside. The only advantage to holding an ARM today would be if the rates drop. If that is the case, you can always refi.

If you look at Goldenwest Financial (gdw), they have 99% of their loans with arms. Arm refinances account for 78% of originations. Who is refinancing into an arm right now? I would think nobody. Yet originations click right along and the stock is close to an all time high.

This is a company with loans concentrated in California and Florida. It would seem to be the perfect storm for this company . Declining interest spread. Payoffs soon to exceed originations (?), exposure to big bubble markets. Nope, stock market can't get enough of the stock.

I see the housing bubble continuing for some time. I also see the stock market powering right through any housing weakness much as it has done in Britain.
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