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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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From: stan_hughes7/19/2007 8:17:06 AM
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Now this chart is interesting --



Fixed rate mortgages aren't seeing much in the way of defaults, even in the sub-prime class -- it's all at the margin in the variables. Note that the onset of the variable default uptick neatly corresponds to every Tom, Dick & Harry I-wanna-get-rich-quick idiot buying the top of the housing market in 2005 along with the help of a lot of crooked mortgage lenders.

While that chart might not surprise some people, from a timing/trading perspective it is especially worth noting IMO because it indicates a lot of people with bad credit are still trying to keep it together here. People who had enough smarts/discipline to go fixed in the first place.

However, the wheels are going to really come off when that fixed rate sub-prime paper starts going into default -- and being fixed, it won't be about resets or rising interest rates or trying to scam the system, it will be about enough time having passed to experience shear exhaustion of resources and the corresponding inability to continue to make payments on a devalued home.

How long until this second wave begins? Beats me, but the message is still clear -- that this is a long way from being over

Full entry here --

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