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

To: patron_anejo_por_favor who wrote (26906)	2/21/2005 10:29:44 PM
From: Square_Dealings	Read Replies (2) \| Respond to of 110194

For the CDC to be reporting on avian flu it must be worse than anyone is saying. The history of this administration is to cover up news as long as possible. Especially if it could affect the stock market. the dollar appears to be falling like a rock m

To: patron_anejo_por_favor who wrote (26906)	2/22/2005 2:32:16 AM
From: Henry Niman	Respond to of 110194

As I saids earlier, you can be fairly certain that if the situation is being officially acknowledged, then it is much worse than indicated. I am getting more info on Korea, which is looking worse than I imagined. Avian flu is mich more about economics and politics than science. Denial as the order of the delay and remains so until things are so bad that they have to be acknowledged.

To: patron_anejo_por_favor who wrote (26906)	2/22/2005 7:59:56 AM
From: russwinter	Respond to of 110194

Tuesday, February 22, 2005 Market hasn't adjusted for ARMS New loans are untested in Economic downturn JONATHAN LANSNER They seem to come in waves, like the storms that have battered these parts this winter. Another week. Another report stating that home prices - here and across the nation - have been on an extremely swift incline. This latest study - or the newest one I've stumbled across - is noteworthy for two reasons: First, the author: the Federal Deposit Insurance Corp., the national bank regulator that makes sure your savings accounts are in good hands. Second, their worry: Lenders are selling new products that haven't been tested by economic calamity. "Uncharted territory," says the FDIC report of a potentially volatile mix of highly appreciated home prices and a mortgage revolution. By the FDIC's math, in 2003, a total of 33 local home-price "booms" - inflation-adjusted gains of 30percent or more in three years - were under way nationwide, including the one here. The latest time the boom count was anywhere near as high was 1988. And 2003's booming regions comprise roughly 40 percent of the American population. But booms don't automatically mean ensuing busts, the FDIC says. Its study of pricing patterns since 1978 found that price busts - drops of 15 percent or more over five years - follow booms only once in about every six occurrences. Typically, the busts that do happen only come after deep, overarching economic woes in a region. Despite this compelling historical argument against the likelihood of any massive "bubble bursting" home-price collapse, the FDIC economists bluntly said the history book might be useless as a guidepost for the current cycle. Why? The lending game has changed so much. Regulators cited the soaring popularity of: So-called "subprime" loans, made to folks with dubious credit or limited incomes. Loans made with little or no down payments. "Piggyback" deals in which folks borrow to come up with the down payment used for the first mortgage. Hybrid mortgages that purportedly combine the best features of adjustable-rate and fixed-rate borrowing. "A lot of this innovation ... is not recession-tested," says Jack Phelps of the FDIC's division of insurance and research A FRESH FLAVOR The new "hybrid" mortgages - part fixed-rate deal and part adjustable loan - dramatically altered the housing game. These deals let folks get an upfront cut in payments, and also delay the onset of adjustable payments for two to 10 years. Hybrids account for much of adjustable loans' soaring counts - tabulations that usually don't differentiate between traditional variable deals and hybrids. Last year, $410 billion was lent in California for adjustable home mortgages of all sorts - a sum equal to the gross domestic output of say, Poland or the Philippines. That lending pace is up 53 percent in a year. In Orange County, all types of adjustable-mortgage lending totaled $42 billion, up 46 percent in a year. Bet you didn't know that adjustable mortgages are no longer just popular with buyers. Last year in California, 60 percent of all adjustable mortgages were done as refinancings. In Orange County, it was 62 percent. I wonder if years of cheap money may have dulled folks' wariness of interest-ratespikes. And long-running appreciation of home prices added an extra false sense of security. Are too many hybrid-loan borrowers banking on another shot at cheap refinancing when their delayed adjustments results in a payment shock that could be 40 percent or more? Do too many bankers see little risk in hybrids because they believe these loans will be paid off quickly through future refinancings? "There's not a lot of history on how hybrids might perform in different scenarios," regulator Phelps says. MISTAKE-PRONE? Let's be clear: The FDIC isn't saying the sky is falling. A home-price collapse is not imminent. Rather, these regulators raise a real, valid concern: How many folks can really afford their mortgages - here or across the country? It's even scarier to think that these regulators admit they don't have a good handle on the full scope of the use of these newfangled loans. These lending twists arose in a business climate that made borrowing and lending a relative breeze for buyer and seller. "A favorable economy and rising (home) prices cover a lot of mistakes," Phelps says. Cheap money does funny things to people's heads: like put them in a historical fog. Higher interest rates are all but guaranteed for the foreseeable future. Huge home-price appreciation for years to come isn't likely in the cards. And there's little doubt that increased risk-taking by both borrower and banker leaves the housing market particularly vulnerable to various economic shocks. So if you're gulping because you have a hybrid mortgage, please note that the strange gods of interest rates are still offering relative bargains on fixed-rate loans. If I had a hybrid with an initial discount period that ended in the next few years, I'd be seriously thinking about refinancing. A new loan may cost a few extra bucks, but history says 6 percent fixed for 30 years is a fabulous deal.