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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (21824)	8/31/2007 7:07:35 AM
From: Snowshoe	Read Replies (1) \| Respond to of 217879

>>The FHA says it can "help an additional 80,000 homeowners in 2008." But there are 2 million supposedly under stress. What happens to the other 1,920,000?<< TJ, You ask good questions. Perhaps the Sherlock Holmes story Silver Blaze by Conan Doyle provides a clue... Gregory (Scotland Yard detective): "Is there any other point to which you would wish to draw my attention?" Holmes: "To the curious incident of the dog in the night-time." Gregory: "The dog did nothing in the night-time." Holmes: "That was the curious incident." If my hunch is right, the real message is that the "other 1,920,000" are indeed going to take the hit. Yes, there will be some palliative measures like relief from the insidious IRS policy of assessing taxes against the "forgiven' debt. But these folks are getting burned, and so are the folks who bought the toxic mbs waste. Oh yes, the buzzards are already assembling for the feast... Vulture Funds Start Circling Credit Markets Move on Distressed Debt Could Signal Recovery Might Be Long, Slow By CRAIG KARMIN August 31, 2007; Page C1 Jeffrey Gundlach, chief investment officer for TCW Group, thinks the turmoil that started with subprime loans and spread throughout other debt markets is going to get worse. He is launching a giant distressed-debt fund aimed at seizing on the turmoil. The development, along with other similar funds being started, could be an early signal that credit markets are beginning a potentially long process of adjustment to the unrest of the past few months. Fresh money seeking out investments in mortgage securities could help to clear these markets, which have been highly illiquid and plagued by uncertainty as mortgage delinquencies rise. more: online.wsj.com Snowshoe@creativedestruction.com

To: TobagoJack who wrote (21824)	8/31/2007 8:38:01 AM
From: carranza2	Respond to of 217879

The devil is in the details, Jay, and they have not been finalized. I see this more as a strategic/political move to calm the markets down than anything else. Please also note that Congressional approval is not required for the bulk of the things to be done, so Democrats cannot take credit, though they will try.

To: TobagoJack who wrote (21824)	8/31/2007 1:27:11 PM
From: energyplay	Read Replies (3) \| Respond to of 217879

Two parts here: Mortgage, and not much of a Bernancke Put 1. Mortgage is still a work in progress. I fully expect that most aspects of the bailout will be extended to many of the 2 million or so homeowners. Speculating a bit here - FHA will guarantee mortgage payment. So the FHA pays your mortgage - but the homeowner now owes the FHA. Maybe at zero or much lower interest, but not a total free lunch. Waiving the 3% down payment means that the FHA can do this for no down payment loans. Notice no mention of FannieMae or FreddieMac yet. Open question : Does this apply only to owner occupied houses, or will it help the housing speculators ? For places like Detroit, chances are good the owner is in Alberta or Texas where they can find work, and not waiting to be rehired by the auto companies. There is an IRS tax change so that loan forgiveness related to housing will not be counted as income. That will facilitate renegotiation. There's more needed, and lots more details. For the holders of sub-prime and the various CDOs, this is pretty good news. The FHA guarantees will reduce defaults down to a level closer to what the models expected. This should bail out 99% of the AA tranches that might be in money market funds. I will bet the bailout will increased until that happens. The next question is the lower rated tranches - will they 70 cents on the dollar or 90 cents or 97 cents ? That question is wide open, but maybe most of the A rated gets about 90 cents. This will also bail out the mortgage insurers - maybe not 100%, but they will avoid bankruptcy. They may have a change in management, however. There will be lots of holes - houses bought by the undocumented, speculators with a dozen houses, people who vastly overstated their incomes, etc. The various CDOs will still stink, and it may be 6 months or longer before they will be tradeble at 85 cents on the dollar. So the hedge funds and other entities will be punished for buying this crap, but not killed in many cases, if they only had a little sub-prime. 2. No Bernancke put - There is some talk out of Jackson hole saying "maybe no rate cut September 18". Notice that gold did not make a huge move. The talk is that the FED will not move until there is actual recession where output from the real economy drops. The FED will keep financial markets functioning - but that does not mean saving the bonuses of Wall Streeters.