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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: MulhollandDrive who wrote (8170)	8/26/2007 6:29:13 PM
From: Augustus Gloop	Read Replies (1) \| Respond to of 33421

I don't envision millions of homeless people. I do think its plausible that if the event got severe enough that it could negatively impact the entire country. If that potential becomes apparent I guess I'd rather do something proactive than live through a period of protracted economic downside. I'm not sure I'm buying into the 'moral hazard' way of thinking as much as you may believe. Think about it like this - I think you and I agree that lowering general rates could be real bad for a variety of reasons. If we're going to do it anyway, wouldn't it make more sense to do something like I suggest in an effort to avoid general inflation as well as property inflation? I guess I'd rather do something like that, have an element of control in not allowing increased debt and try and keep control of what I think is an environment ripe for inflation (if we lower general rates). I'm not suggesting I have the answers - I don't. I have lots of questions and damn few answers. I'm also not one of the people in a bad debt/mortgage situation so my thought process is in no way self serving. What really bothers me - and I think you'll agree - is that banks have failed to do thier due diligence. They've played a huge role in creating this debt bubble and consumers were willing participants. When I think about it solely in those terms it makes me think that whatever happens they'll get was they deserve. When I think beyond the 'get what you deserve' mindset I see things a little differently. I'm trying to avoid the thought process of I've got mine so screw you. In this case that way of thinking could create a situation that none of us want to endure. In the back of my mind I guess I'm also thinking that we've bailed out companies and other things so if needed why not our own people? I don't know how bad this is going to get. Maybe it will be nothing other than a blip. OTOH a bailout could be in everyone's best interest and quite self serving to our economy. I'm not bright enough to claim I have all the answers but I think I have some valid questions Thats pretty much all I'm saying when I talk of possibly doing a bailout.

To: MulhollandDrive who wrote (8170)	8/26/2007 6:36:40 PM
From: Augustus Gloop	Respond to of 33421

Here's another way of looking at it Banks and consumers have done some stupid things so why help them? Well - building a home in a floodplain is also pretty dumb IMO but we're stepping in and bailing them out after all the flooding in the midwest

To: MulhollandDrive who wrote (8170)	8/26/2007 7:20:11 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 33421

i don't....i expect significant number of home-owner wannabes back to renting (where they should have REMAINED until they came up with risk-mitigating down-payments..but alas, EZ credit circumvented that, right?).... How about the fact that most renters required credit checks for their leasees and that factor HEAVILY into the renter approval? There's no guarantee that they'll find someone who will rent to them if they have lousy credit scores caused by a mortagage default. Combine that with the fact that those people who default on their mortages will suddenly have tremendously low FICO scores and likely find their credit card limits drastically reduced, and rates increased, a situation that might cause them to default on their credit balances?? And all of this could initiate a similar consumer credit squeeze for those who have every means of making their payments, because all of those securititized CDOs backing that have been sold to the investor world could suddenly be perceived as "untouchable"... That the heavy handed way of deflating the credit bubble is not necessarily the only way. All bubbles should be deflated as gradually as possible so that wide-spread economic dislocation is mimimized. In sum, avoid tactics where investors throw out the baby with the bath water. That's the pragmatic way to handle this. Like the saying goes.. be careful what you ask for.. You might just get it. Hawk