Mish,
as a matter of fact, I do consider the 10 yr or so slide in Japan a soft landing. If that can somehow be duplicated here, we should consider ourselves lucky. However, it is worthless trying to compare two societies at extreme ends of savings habits.
The G.R.E.B. (Greenspan real estate bubble) is a credit event. The more I think about it, the less I believe it has anything to do with real estate.
The bubble started with Fed accommodation at a time that rates were already relatively low and the real estate market quite healthy. The expansion of the ABS markets just added extra hydrogen to the Hindenburg. Then all the unsound underwriting guidelines are like starting some B-B-Qs inside the zeppelin.
I have been trying to time the explosion, actually believing that it is possible given the data available.
Here is another example.
library.corporate-ir.net
This link is from LEND, a subprime lender. You can see from the tables the performance of the loans on a month by month basis after origination. There are a few pieces of excellent information:
Look at the two charts on page one. You can see that while delinquencies rose fairly uniformly, the losses started to mount after the 24th month. That is most likely attributable to the 2-28 loans.
Look at the tables on page two, specifically across the 20th payment (seasoning). You can see how these loans behaved under normal circumstances (pre 2002/2003 G.R.E.B.). Then you can see how the free money era provided easy outs for the defaulting borrowers evidenced by the Cumulative Loss tables for the same period.
Finally on page 5, LEND has chosen the perfect time frame to illustrate the effects of GREB, clearly demonstrating how the defaults/losses dipped in 2003 refimania year and 2004 real estate bubble year.
As you can see, we are once again approaching the 24th month for the Vintage 2004 loans. The data presented above was as of end of Sept qtr, 2005 so two more critical payment periods have already gone by. How many of these borrowers are christmas shopping today instead of sitting down and seriously think about their finances?
So on this Sunday morning, I am going to stick my neck out and not be wishy washy for a change. Here is my bold prediction of the credit event:
FEB 1, 2006
That is when the recasts hit in earnest just in time for the christmas bills to arrive. Joe6pak cannot handle this one two combo.
(there is more ..... to be continued .....) |
