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

To: philv who wrote (36296)	7/19/2005 11:00:00 AM
From: John Vosilla	Respond to of 110194

It's not a problem if you return on investment is somewhat higher than your true cost of capital. Coastal RE that generates 2-3% tops is eventually going to be a problem even in a 5.5% interest rate environment. Any leveraged asset that generates double digit returns can easily afford debt service these days. People can talk all they want about appreciation in home prices in some places these days or the tech bubble of yesteryear but in the end it ultimately comes down to cash flows and structuring of debt.

To: philv who wrote (36296)	7/19/2005 11:38:51 AM
From: loantech	Read Replies (1) \| Respond to of 110194

Thank you. That makes sense somewhat. I guess it does until it doesn't work. I have spent the last 21 years in the home loan business. Unreal the way things are twisted to qualify buyers and how much credit people are willing to take on. I don't see much if any of it getting paid back. How does a regular middle of the roader expect to pay back $250,000 or $450,000 on a mortgage when they constantly refi their balance? And if the economy turns down refi's will be out and wages fall......... BWTHDIK?

To: philv who wrote (36296)	7/19/2005 11:52:14 AM
From: Umunhum	Read Replies (2) \| Respond to of 110194

<A loan produced by the fractional banking system, when paid back should not affect the money supply, because it is taken back out of circulation when it is paid back.> This is an erroneous statement. If someone borrows 100K at 10% interest for one year, he will pay back 110K at the end of the year. The net result of this loan extracted 10K out of the money supply. Thus an economy using a fractional reserve banking system needs ever expanding debt otherwise a deflationary collapse will ensue. This is why the next few years are going to be so interesting. An economy based on fractional reserve banking is going to meet a resource constrained world.