How about this: U.S. Housing Is one of History's `Biggest Bubbles,' Rogers Says
By Chen Shiyin and Pimm Fox
Aug. 3 (Bloomberg) -- The U.S. subprime-market rout that wiped out $2.1 trillion from global share values last week has ``got a long way to go,'' Jim Rogers said.
Concern that defaults among subprime mortgages may be spilling over to other credit markets and hurting earnings and takeovers last week sent the Morgan Stanley Capital International World Index to its worst weekly drop in five years. Further losses may be in store even as shares rebounded this week, said Rogers, chairman of New York-based Beeland Interests Inc.
``This was one of the biggest bubbles we've ever had in credit,'' Rogers, who predicted the start of the global commodities rally in 1999, said in an interview from Hong Kong. ``I have been and am still short the investment bankers in America. I'm also short homebuilders.''
The MSCI World plunged 5.3 percent last week, the most since the five days ended July 19, 2002, after Countrywide Financial Corp., the largest U.S. mortgage lender, said more borrowers are defaulting on mortgages and D.R. Horton Inc. reported its first quarterly net loss in at least a decade.
The MSCI World Index today climbed 0.1 percent, its fourth gain this week as investors speculated that better-than-forecast earnings will help offset the impact of mortgage losses.
Gains may be capped by further signs of turmoil among borrowers. Accredited Home Lenders Holding Co., the subprime mortgage company being acquired by Lone Star Funds, plunged 35 percent yesterday after saying it may go bankrupt.
A measure of financial companies such as Countrywide Financial has dropped 3.7 percent so far this year, the only decliner on the MSCI World Index.
``This is only time in world history when people were able to buy houses with no money down and in fact, in some cases, the builders gave them money for a down payment,'' Rogers said. ``So this bubble is the worst we've had in housing and it's going to be the worst we've had cleaning it out.'' |
