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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: AC Flyer who wrote (13763)	1/21/2002 2:51:24 PM
From: Mike M2	Read Replies (1) \| Respond to of 74559

AC Debt defaults set record theadvertiser.news.com.au mike

To: AC Flyer who wrote (13763)	1/21/2002 10:51:18 PM
From: LLCF	Respond to of 74559

< Total consumer credit outstanding... 37% increase over 5 years. This corresponds to an average annual rate of growth of 6.5% over this period> Well, you're right, your debt growth alone doesn't tell you beans! What was the income growth?? GDP?? It certainly wasn't 6.5%, so clearly it's unsustainable. IMO incomes for many Americans will FALL in the coming year. <Moody's North American Credit Quality Index shows an improvement in the credit quality of north american public companies from October 2001, following a multi-year decline.> The fourth quarter was a bright spot.... that's nice, it was a bright spot everywhere else in the economy as well, we'll see how long it lasts, I suppose that's the million dollar question. <<Total household debt service burden was 13.8% of disposable income in Q3, 2001>> Yes, it's tickling all time highs at the end of the greatest boom in history. It will be interesting what it will look like in the coming trough.... much higher would be my guess. Also notice where interest rates were in past peaks.... leaving plenty of room for a fall in rates to bail out debtors... this time?? Also note that =% of debt service @ lower rates = higher absolute amount of debt... ie paying off X amount lowers debt burden less. Hmmmmmm... let's see, income, employment, at all time highs and interest rates at all time lows while debt burden is STILL near it's all time highs. I would think that after the boom we'd have people much more flush, not letting as much ride as say in the middle of a boom. Here's some data points from a stogy midwestern firm on the debt burden topic: northerntrust.com <The delinquency rate for mortgage loans on one- to four-unit residential properties was 4.87 percent in the third quarter of 2001, up 24 basis points from the second quarter of 2001. The percentage of loans in which foreclosure started during the quarter rose 2 basis points to 0.38 percent, while the percentage of loans in the process of foreclosure at the end of the quarter rose 4 basis points to 0.95 percent.> Yea, the home is that last thing to go... things have to get REAL bad for home loan defaults to spike. Typically after unemployment rate peaks.... that'll be a while. Hey, everyone has their opinion... but I will say that if homes start getting taken back by banks in any meaningful way you can probably buy the stock market. :) DAK

To: AC Flyer who wrote (13763)	1/23/2002 10:46:52 AM
From: Mike M2	Read Replies (1) \| Respond to of 74559

AC, good read "...Friedrich von Hayek, 1974 Nobel Laureate, was the only academic economist who wrote prior to the Great Depression that a crisis and downturn in America were imminent. Interest rates in the world would not fall, he wrote, until the American boom collapsed. And "the boom will collapse within the next few months". This prediction, printed in the Austrian Institute of Economic Research Report, February, 1929, generated interest in Austrian economics and Hayek was offered a Professorship at the London School of Economics in the early 1930s. Ludwig von Mises, also an Austrian, anticipated a worldwide depression in the 1930s, as reported by Fritz Machlup, Mises' assistant at the time. Mises' wife Margit wrote, in her husband's biography, that in the summer of 1929 he had rejected a high position in Kredit Anstalt, one of the largest banks in Europe at the time. His explanation was "a great crash is coming and I do not want my name in any way connected with it". Less than two years later, Kredit Anstalt was bankrupt...." from gold-eagle.com mike