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

To: ild who wrote (68625)	8/22/2006 5:40:00 PM
From: CalculatedRisk	Respond to of 110194

Yeah, I read that yesterday and laughed. My comments: calculatedrisk.blogspot.com I'm amazed by their conclusion. The authors clearly understood that the surge in residential investment was related to new mortgage products, but I believe they missed that excessive leverage can be considered speculation. "... substitution away from rental housing made possible by developments in the mortgage market, such as subprime lending, could account for a significant fraction of the increase in residential investment and homeownership." This type of leveraged activity pulls demand from future periods. Starting with the first diagram on the left, these leveraged financing programs shift the demand curve to the right (light red) and increase the price from P0 to P1. In the future, the demand will be shifted to the left and the future price will be Pf1. If Pf1 is less than P1, and the homeowner cannot make the mortgage payment, then the homeowner might resort to "jingle mail", and the supply will increase further - and depress prices even more.

To: ild who wrote (68625)	8/22/2006 9:41:20 PM
From: Broken_Clock	Read Replies (1) \| Respond to of 110194

Wow. These guys are running our Fed policy? To paraphrase BC... "I guess is depends on what the meaning of fuel is." In this case I think we can safely say the fed are either fools or are deathly afraid of mob lynchings in the huge downdraft to come and are spewing out any nonsense possible in hopes the masses will buy their crap.