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To: patron_anejo_por_favor who wrote (5185)	7/22/2000 12:44:37 PM
From: patron_anejo_por_favor	Respond to of 436258

Doug Noland also weighs in on Bubble Boy, in The Credit Bubble Bulletin: prudentbear.com While Greenspan trumpets wonderful technological advances, it is certainly our view that innovations throughout the financial sector have made it much more difficult for the Fed to manage the economy through minor adjustments in short-term rates. For one, lenders have been quite creative in developing products that provide low monthly payments. And the higher home prices move, the more appealing these products. Golden West’s website provides a large selection of mortgage products including the “4.50% Option Loan (7.890APR) – This incredibly low-payment adjustable rate mortgage is for three types of people... 1) Investors, 2) new home buyers, and/or 3) those needing debt consolidation. This is the one of the LOWEST monthly payment loans in America, and the payment increases are limited to 7.5% a year for 10 years. Use the money saved to invest in mutual funds, pay down credit card debt, or put in your new back yard.” Adjustable-rate mortgages are clearly the product de jour, as captured here: “Some people are still convinced the only way to fly is with a fixed rate. The security is nice, but it could be costing you money.” Wall Street firms have also created mortgage products that minimize down payments and monthly payments - providing maximum funds to play the market. From one firm, a “program enables you to obtain up to 100% financing on your home using eligible securities in your investment portfolio as collateral. Now you can purchase a home without a cash down payment and without disrupting your investments. That means you can enjoy home ownership while continuing to hold or trade securities — so your assets keep right on working for you.” Or, a “strategic mortgage for the wise investor - adjustable-rate first mortgage loans enable you to make interest-only payments for the first 10 years — leaving the principal portion of the loan payment for you to use as you choose…” “Keep your assets invested. Any interest, capital appreciation or dividends continue to accrue to your benefit.” At the “Schwab Mortgage Center” “search over 70 lenders’ products…qualify for as little as 3% down…use the equity in your home to pay off your credit cards, finance a car, or pay for college…” Again, credit could not be easier, and more dangerous. We must admit that we consider Alan Greenspan quite the enigma. Does he, as an astute student of history, appreciate the severity of the U.S. bubble? And recognizing the inevitable catastrophe that would result from any aggressive move on rates, has he chosen to let the bubble run its course? Or is he simply oblivious of this enormous house of cards, even though he addressed the bubble as far back as 1994? Either way, Wall Street now clearly takes great comfort believing that he will not end this fateful boom. Yesterday, in fact, was a great example of how markets now focus keenly on Greenspan’s take on fundamentals, as opposed to actual economic developments. Accordingly, with Greenspan at bay, credit markets have experienced a significant rally that will only throw more fuel on the overheated and distorted US economy. What a bubble… It is certainly our view that the over zealous U.S. financial sector is in desperate need of some stern disciplining. However, Greenspan wants to be the market’s buddy, when the dysfunctional U.S. financial sector needs a strict parent.