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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (7303)	2/8/2004 9:40:31 AM
From: mishedlo	Read Replies (3) \| Respond to of 110194

From SuisseBear on my board on the FOOL credit practices in the US are astounding to the average European, whereby I can never quite determine whether those extremely loose criteria indeed represent the mean, or a few outliers only. Let me contrast Noland's tales with practices over here (just happened to talk to a few banks on this by chance). Swiss banks/ insurances (yeah, none of that GSE business) lend up to a maximum of 80% of the sustainable value of your home, according to their own assessment. Basically they don't mind getting the property back as long as they consider their backside thoroughly covered. At this point, they assess many areas as overvalued, particular the Geneva area. We are seeing a bout of corporations moving their European or even global headquarters to the pleasant shores of Lac Leman (now how's that - manufacturing and knowledge workers to China and India, execs to Switzerland?), with thousands of expats in tow who are flooding the local market. So say a slightly more than modest appartment goes for chf 500m (current market price), the banks may assess a value of chf 380m (sustainable price medium to long term), and then finance just above 300m (80% of the latter, or about 60% of purchase price w/o closing fees), in practice shielding the bank from price drops of up to 40%. OTOH, they are prepared to give you an interest rate-only mortgage. Back to the US, I found this PR spin particular noteworthy (Noland quoting a lender's website): This is a great product for a consumer who only intends to own the property for a short time [...] ROFL!! Whether by 'grand design', or a mere neverending sequence of pols adopting the "not under my watch" attitude, I suspect everyone is looking at the US and its consumers to burn themselves out in order to keep the global economy afloat, until those stubborn Asians finally start to consume (or is it our turn to whip out those platinum credit cards??)... <hyperbole> US credit practices and debt levels conjure up the image of a dying star: as the inner fuel supply starts to diminish below the threshold, the star enters into a terminal phase of fiery expansion, becoming a growing supernova swallowing everything in its neighbourhood - prior to suddenly collapsing, leaving nothing than a black hole... </hyperbole> SB

To: Haim R. Branisteanu who wrote (7303)	2/8/2004 9:44:15 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

From RobiMart in the UK Guys - the UK is part of the EU and always has been, but it is not part of EMU (Economic Monetary Union) which leads to the adoption of the euro as a currency and interest rates being set by the ECB. The UK is of course managed by the Bank of England, which in fact only raised interest rates to 4% this week (I think that's the rate now). Whilst this raise was expected in all quarters this has done little to deflate a completely crazy housing market. I really mean crazy. I can't tell you the number of times I've talked to taxi drivers who say they drive "just for fun" and all their money is being made by buying property. Similarly 22 year old friends of mine are buying $300,000 one bedroom flats/studios in central London at salaries of less than a tenth. And they consider me nuts for "flushing rent money down the toilet" when the spread between falling rents and rising property prices is higher than ever (the latter surely lags the former). Whilst I don't watch TV I am told there are at least 2 programmes which are dedicated to the "buy restore sell" scheme i.e. you see house wives buying 400K properties, spending 2 months restoring them and buying furniture on CC and then bringing the houses back to the market. I have heard the programme depicts this "strategy" as a one-way road to riches and a dramatic number of people have left their jobs to do this (just like with daytrading several years ago)... It really is quite scary and I would argue that the consumer here in the UK is in a very similar situation to those in the UK. Personal indebtedness and credit card is at a record high. As is the number of personal bankruptcies which made the headline on the FT yesterday. I have been itching to short the propert market for 2 years now and am glad I haven't as i'd be badly down. Interestingly London prices seem to finally be stalling and it's usually a leading indicator of other regions. However, I'll wait a few months to see whether rising City bonuses and employment give it another lift. cheers, robimart

To: Haim R. Branisteanu who wrote (7303)	2/8/2004 9:53:04 AM
From: mishedlo	Read Replies (3) \| Respond to of 110194

The head of a leading German think tank, Ifo, said on Saturday the European Central Bank should intervene in foreign exchange markets to prop up the weakening dollar. "If the dollar continues to weaken, the ECB must sell euros for dollars," economist Hans-Werner Sinn, head of the Munich-based Ifo research institute, told Der Spiegel news magazine. He said the ECB shouldn't be overly cautious. A central bank that wants to devalue (a currency) can on its own certainly have an impact on the market forces," he said. He said that studies have found that the ECB would have to sell $30 billion to cause a lasting 10-cent decline of the dollar. He said the other way to counter the euro's weakness -- lowering interest rates -- was not advisable because the economy in the euro zone was about to recover and likely to see higher interest rates in the medium-term. =========================================================== This is really too funny. So in contrast to everyone's worry about foreign governments bailing on US treasuries and the US$. Aparently they can not get enough of either of them. LMAO biz.yahoo.com