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

To: Ramsey Su who wrote (46545)	12/4/2005 9:32:29 AM
From: westpacific	Read Replies (2) \| Respond to of 110194

This looks nice (real estate) - SRPIX West -any takers

To: Ramsey Su who wrote (46545)	12/4/2005 9:49:14 AM
From: russwinter	Read Replies (1) \| Respond to of 110194

You've nailed it, it's a perfect storm. Also on the list: 1. The other very big event are the new lending guidelines on toxic loans due out any time, that will be the silver bullet into the heart of the credit and housing Bubble vampire. 2. It also looks like December's heating bills will be a lulu, and spread across almost all regions. This is a brutal early month start. Message 21941992 3. Then there are other annoyances like increased minimum payments on credit cards. 4. We have also seen initial signs of layoffs in the mortgage sector itself, how could that not spread quickly. That industry is where many of the speculators and Humpties come from, which feeds into even more pressure to unload empty rentals. etc. 5. Another wave of condo projects and coversions is being completed in places like San Diego, Vegas, Florida, and other Bubble locales just swelling inventory even more, right as the toxic marginal buyer is knocked out of the picture and it's time to close on all those pre-constuction flips. There is a big failure coming there at any time. Even if the Fed is done at 4.25% (which I think they are), that's not going to stop or curtail this, it's bursting out. If they decide to start monetizing, it will just enhance an energy spike.

To: Ramsey Su who wrote (46545)	12/4/2005 9:51:31 AM
From: Ramsey Su	Respond to of 110194

(cont.) Whether we have a soft or hard landing is dependent upon mitigation. On the monetary side, Bennie will most like start a G.R.E.B. II by aggressively lowering rates. On the fiscal side, tax cuts can provide a little support. The most famous of tax cuts for real estate was probably A.C.R.S. back in the mid 1980s when depreciation schedules were so favorable that the tax benefits alone is worth buying some income property. I am not suggesting that these are viable remedies, just the obvious ones. We have not talked much about what will happen in the private sector, when foreclosures escalate. Since we already have a maturing ABS market, I believe one of the most logical step is to package these bad loans, sell them to someone who can handle them and then securitize them again to be resold to the next group of investors. These are the guys who are already doing it. c-bass.com As you can see, they did about $3 billion this year. c-bass.com How much they paid for these loans is a heavily guarded secret but it is no secret that C-BASS had been contributing heavily to the earnings of their parent companies, MTG and RDN. The following is from MTG's qtr report about C-BASS. C-BASS: Credit-Based Asset Servicing and Securitization LLC (“C-BASS”) is particularly exposed to credit risk and funding risk. In addition, C-BASS’s results are sensitive to its ability to purchase mortgage loans and securities on terms that it projects will meet its return targets. With respect to credit risk, an increasing proportion of nonconforming mortgage originations (the types of mortgages C-BASS principally purchases), are products, such as interest only loans to subprime borrowers, that are viewed by C-BASS as having greater credit risk. In addition, credit losses are a function of housing prices, which in certain regions have experienced rates of increase greater than historical norms and greater than growth in median incomes. With respect to liquidity, the substantial majority of C-BASS’s on-balance sheet financing for its mortgage and securities portfolio is short-term and dependent on the value of the collateral that secures this debt. While C-BASS’s policies governing the management of capital at risk are intended to provide sufficient liquidity to cover an instantaneous and substantial decline in value, such policies cannot guaranty that all liquidity required will in fact be available. Although there has been growth in the volume of non-conforming mortgage originations in recent years, such growth may not continue if interest rates increase or the economy weakens. There is an increasing amount of competition to purchase non-conforming mortgages, including from newly established real estate investment trusts and from firms that in the past acted as mortgage securities intermediaries but which are now establishing their own captive origination capacity. Decreasing credit spreads also heighten competition in the purchase of non-conforming mortgages and other securities. Why is C-BASS important to watch? I believe C-BASS, along with the subprime lenders, are the most savvy servicers. Unlike a BofA, or Wamu, not to mention the GSEs, there are no grace periods, no christmas specials, no BS excuses. You don't pay on the due day, you are going to start getting phone calls the next day and the ball gets rolling immediately. They would realize that time is of the essence and REOs would be disposed off at the best market price over a very short marketing period. If enough properties are in the hands of this type of servicer, then the fall will be fast and furious.

To: Ramsey Su who wrote (46545)	12/4/2005 11:14:10 AM
From: mishedlo	Read Replies (1) \| Respond to of 110194

Why is the 2001 vintage showing a decline after 48 months, at the beginning of 2005? Likewise the 2000 series shows a decline after 60 months. In fact the 2000 series shows a clear leveling off after 24 months so that does not match your theory either. Here is my explanation for the discrepency. The 2000 series leveled off after 24 months because that is when the FED started slashing rates. The 2000 and 2001 series dropped in 2005 because that is when housing peaked. I seem to recall default rates being way lower in California than other places (because of the rapid rise in housing prices masking other problems?). Do you have that recollection as well. Now we have a potentially lethal combination of housing well passed peak (in many key areas but peaking in other areas) and the 2 year reset coming up. Rather than be a "waterfall" I think it may be more like a cascade starting about the time you propose, the cascade steepening as more and more arms get reset and more and more lenders and homeowners get spooked about refis on falling property values. I may do a blog on this incorporating all the ideas that people say on this topic. Thanks Mish

To: Ramsey Su who wrote (46545)	12/4/2005 1:55:01 PM
From: kris b	Read Replies (1) \| Respond to of 110194

Ramsey, You are absolutely right. It is all about world wide credit/liquidity bubble. Public just chooses the vehicle/asset class to speculate in with the liquidity. In the 90's it was NASDAQ, in 2000-2005 it is RE. Is there another asset class that can replace RE, as a next cassino?. Kris

To: Ramsey Su who wrote (46545)	12/4/2005 5:13:01 PM
From: mishedlo	Respond to of 110194

Ramsey please see PM Thanks Mish