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Gold/Mining/Energy : MOLYMANIA the race is on -- Ignore unavailable to you. Want to Upgrade?

To: Cogito Ergo Sum who wrote (206)	1/25/2005 5:10:53 PM
From: Condor	Respond to of 336

In a sense though, the 30's. A huge amount of dislocation as their new economy tears apart lifestyles from urban to city, traditional to modern. (maybe the 50's is a better analogy) I see a lot of real estate housing "interest payment only" talk. It is becoming popular I believe and will certainly have a more bubble propulsion effect than the "no down payment" currently sweeping real estate. This frightens me. Can you imagine where the price of houses will go. "Of particular concern is a new product just introduced by the 7500 mortgage lenders in the United States. The "interest only product" has become a huge hit as it lowers a $2000/mth mortgage by $770/mth. The problem is, not only is it tied to fluctuating interest rates, but after 2 to 5 years, you must start paying the principal back. Wage increases are few and far between already. What if rates go up, energy costs continue to increase, etc. Mortgage lenders are putting people into more and more expensive homes that they cannot afford. This new mortgage concept has swept across California like wild-fire and is rapidly catching on in bubble cities across the country. Dominion Bond Rating service recently notified bond buying clients to beware of the potential dangers associated with this new product. "We suspect that all the elements are in place for a perfect storm - a major delinquincy and default spike starting by the end of 2005" (VP of Credit Risk Research Company - SMR Research Corp) On the flip side of this whole topic, the chief economist at the U.S. Mortgage Bankers Association sees little cause for concern. New home construction was strong in December and continues to fuel the economy plus default and foreclosure rates are in the normal 20yr range. They also contend that Greenspan would intervene to cut rates in the event of a default crisis. I hate financial dooms-day scenarios and this is not intended to be one. It is merely an issue that everyone should keep in the back of their mind over the next year or two. Rates have been low a long time now and it's difficult to think they will go up anytime soon. Governments may continue to intervene and keep them low but then you have issues that affect the currency backing them and we're already seeing the impact that can have on the U.S. dollar. That in itself opens up an entirely new can of worms. I would just be aware of what is happening in the real estate market as these "interest-only" mortgages are serious cause for concern. Something doesn't make sense when basic 1950's era brick homes in regions of Maryland are selling for $700,000 U.S. or the lowest end homes in London are selling for the equivalent of $800,000 cdn. When you combine this mortgage debt with consumer credit, many families can barely afford to put gas in their vehicles let alone put something away in a savings account or invest in the stock market. It's a bizarre situation and most everything follows the same law of physics... what goes up, must come down. The big question typically is, when will the ball drop ? " C