Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: ild who wrote (46625)	12/4/2005 9:08:37 PM
From: Kailash	Respond to of 110194

That argument might hold in some areas -- a law that makes eveyrone a criminal is in some sense meaningless. But the point is that these laws aren't simply an authoritarian fiat; they're meant to help lenders and perhaps borrower to make rational decisions. Steven Roach just wrote a piece praising the slowly emerging rationality of Chinese banks and lending practices; it looks like we've been sliding the other way. When banks don't require documentation, it's clear they're complicit. I wonder if a bankrupt customer could shield his assets based on this complicity argument. Kailash

To: ild who wrote (46625)	12/5/2005 12:54:13 AM
From: John Vosilla	Respond to of 110194

<They said "well, yes, but he'll have to do "stated income" loan". I asked, if they meant that he would have to state that he makes more than $40K. They said "yes". I replied that to me it would be a fraud. They said "No. That's what everyone does". > Apparently they take your occupation, upgrade it a bit and use the median salary for the area via government statistics. I heard on one of these mortgage broker radio programs of a very young plumber's assistant with only a year or so experience upgraded to the average plumber with his own biz who has perhaps 15-20 years experience and several people working under him. Using stated income the salary came in five times what he actually made. I think he actually made perhaps $20k and qualified for $350k with zero down..

To: ild who wrote (46625)	12/5/2005 2:18:31 AM
From: ild	Respond to of 110194

Forest from the Trees Dependable profits are always the result of selling something that is both scarce and useful to others. One of the reasons that many investors have difficulty replicating the success of great investors like Warren Buffett is that many investors fail to even recognize the product that great investors sell. By John P. Hussman, Ph.D. hussmanfunds.com

To: ild who wrote (46625)	12/5/2005 10:23:21 AM
From: ild	Read Replies (1) \| Respond to of 110194

Berson's Weekly Commentary Economic Commentary December 5, 2005 What might the housing market look like if investor and second home demand moves back to more normal levels? In last week's Economic Commentary, we provided an estimate of how much lower home sales would have been if the surge in investor and second home buying over the past couple of years hadn't occurred -- with the actual share climbing to just over 20 percent in the most recent quarter. We found that sales would have been 5.7-7.3 percent lower than they actually were. While interesting, a more pertinent question is what will home sales be going forward if the investor and second home share of activity declines to a more "normal" level? As in last week's Commentary, we have two definitions of normal: 10 percent (which assumes no change from the 2002 level) and 13 percent (which assumes continued growth at the more measured pace of 1995-2002). In the most recent period of declining investor/second home activity (1990-91), this drop occurred fairly quickly -- so we make the assumption that the potential decline in this cycle is completed within one year. As a result, the investor and second home share drops to either 10 or 13 percent by the end of 2006. We estimate (based on actual data through October) that total home sales in 2005 will be a record 8.26 million units. With the investor/second home share dropping to 10 percent by the end of next year, total home sales would decline to 6.67 million units in 2007 -- down by 19.2 percent. Alternatively, with the investor/second home share falling to 13 percent, total home sales would slip to 6.86 million units in 2007 -- down by 16.9 percent. But what do we compare these declines to? Our baseline forecast has home sales falling to 7.40 million units in 2007, a decline of 10.4 percent. But a significant portion of this drop stems from the assumption that a large portion of the unsustainable rise in investor/second home demand comes out of the market over the next year. Alternatively, we could compare the figures in the two scenarios with another scenario: our projection for home sales if the investor share remained close to its recent elevated level. In that case, home sales would fall to 7.53 million units in 2007. If the investor/second home share fell to 10 percent, then home sales would decline by an additional 86,000 units from the 7.53 million-unit figure. And if the investor share declined to 13 percent, home sales would fall by an additional 67,000 units from that 7.53 million-unit figure. The table below summarizes our results for the change in home sales, both prospectively (with a return to 10-13 percent investor/second home share) and retrospectively (if the investor/second home share had remained at 10-13 percent). Even without the boost to the market from the unprecedented rise in this share, home sales would have risen to record levels in the past couple of years -- although the level of sales would have been much lower. And if the share should return quickly to more normal levels, total home sales will decline fairly sharply -- but the level of sales in 2007 would still be the fourth highest ever, boosted by still strong-job and income growth, historically low mortgage rates, and positive demographics. Home Sales (PDF) This will be a much smaller week for economic data, spread fairly equally across each of the days. On Monday, the Institute for Supply Management's (ISM) non-manufacturing survey index is expected to be little changed at around 60.0 in November -- a level suggesting strong activity in the services sectors of the economy. On Tuesday, factory orders are projected to increase by 1.3 percent in October, with the key data on non-defense capital goods orders and shipments both up strongly -- based in part on the already reported durable goods data. Also on Tuesday, productivity growth in the non-farm sector should be revised up to around 4.6 percent for the third quarter -- with unit labor cost growth reduced to a drop of 1.0 percent. On Wednesday, consumer credit outstanding is expected to rise by $5.8 billion in October -- after essentially no growth in the previous month. On Thursday, initial unemployment claims are expected to edge down to around 315,000 for the week ending December 3rd -- continuing a downward trend caused by a stronger job market. On Friday, wholesale inventories are projected to rise by 0.4 percent in October -- a modest slowdown from the prior month, but with the inventory-sales ratio continuing to decline. Finally, on Friday, the University of Michigan's Index of Consumer Sentiment should show a rise to around 85.0 for the entire month of November (up from a mid-month reading of 81.6) -- as the job market continues to expand and oil prices decline. David W. Berson Molly Boesel Fannie Mae Economics Last Revised: December 5, 2005