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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Peter V who wrote (158927)10/22/2008 6:56:20 AM
From: RockyBalboaRead Replies (1) of 306849
 
The residential RE problems have now been sucessfully exported to Europe. The roof is caving in.

This leads to the pervert problem that the EUR gots sold down without mercy. The inner reason is that homebuyers aggressively financed in Yen, Swiss franc, and even Dollars. Many of the late buyers were in Yen, later moved to the Swiss. As the EUR loses 20% and more, banks demand more collateral... a well known process.
The more exotic financings put some leverage into the system:
"The zero or low interest rate financing" - an amount of 2x or 3x is borrowed in a low interest currency and the excess amount put into a money market or corp. bond fund. In theory the excess interest income pays most of the interest due on the loan with the loan balance paid off at maturity. It worked some time but first the asset didn´t show yields anymore then depreciated and now the borrowing currency runs away. A billion EUR grave is dug open.
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