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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: patron_anejo_por_favor who wrote (96857)	12/10/2007 2:10:12 PM
From: Perspective	Read Replies (1) \| Respond to of 306849

Thanks, I needed that. I can't believe stock averages are at levels surpassed for only about 20 trading days in October. Of course, I couldn't believe we got to those levels in October, either, so I guess I just don't get it. New math or something. I see comparisons to 1998. This is no 1998. It's more than a single bad hedge fund that needs to be unwound. We're talking about $1T in bad loans whose losses continue to be denied. Even if everyone takes their lumps, the more important factor is the death of a huge profit center for finance. This is business that isn't coming back. Period. And the financial markets don't reflect that at all. This is a major credit market dislocation, and nothing attempted yet has solved the problems. And short of government buying up all the crap, nothing will any time soon. Now why are people buying stocks? The beauty of OPM in action... BC

To: patron_anejo_por_favor who wrote (96857)	12/10/2007 2:18:07 PM
From: Perspective	Read Replies (2) \| Respond to of 306849

CalculatedRisk noted that, with the >97% LTV requirement, they are basically looking at loans that are upside down given the recent pricing data. So they aren't doing "home owners" any favors here. It would be in their best interest to just walk away and stick the lender with the capital loss. We'd all get cheaper housing out of the deal while the lenders would take a bath. Trying to coax these folks into holding the capital loss avoids passing it on to the lender. This is mostly just political grandstanding, to short-circuit other things in the works in Congress. The other issue is the voluntary nature. It's a classic "prisoner's dilemma". If all the other lenders don't push for foreclosure, it props up values, but it maximizes the gains I can get if I foreclose and sell. So, ideally nobody else would foreclose, and let me sell all my foreclosures into a stronger market. Of course, if everyone acts in their own self-interest, the foreclosure wave will drive down prices. I wonder if they will cooperate or act in their own self-interest - anybody want to place some bets here? <g> BC