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

To: Hawkmoon who wrote (8634)	1/8/2008 8:35:47 AM
From: robert b furman	Read Replies (1) \| Respond to of 33421

Hi Hawk, Really not sure of total size of the outstanding paper out there. It appears to me that the banks had a proprietary model which factored in some losses. As this subprime mess surfaced it does appear to be getting worse. If real estate declines more the problem gets worse. Let's face it 1% money for three years gave us an escalation in real estate that attracted investor speculation flipping and at tax free rates. So it was/is a serious bubble that is trying to be let down slowly - arms renegotiation, fannie mae,and the fed auctioning liquidity. In general the decline is being supported - now how long does that take - hopefully a lot less than Japan! One thing for sure the risk cannot be determined since it was so sliced and diced. If you need money and have to go to the market to sell - you get killed and that is why Citi and Hsbc have taken these off balance sheet operation and put them on their balance sheet. There is no market to sell them in and the government is providing the veiled bail out - that in net is a good thing. As these CDO's come back to the banks the holder is getting full value - if they wait for expiration - thusly the growing continual problem. That's also why the fed is now auctioning 30 billion a tafi auction vs 20 billion. It appears to be the solution. The final loss or gain will be known as the foreclosures do or don't result. In my mind - foreclosures will be stymied by stopping the slide in housing value more than the reset rate. I think they've killed the reset rate going up-now to bolster the inflated prices paid on real estate. Many people especially those with poor credit will walk from a 300,000 mortgage when their neighbors house sells for 200,000. On the other hand if you like where you live and can afford it - you stay - this too shall pass and values over time do increase. Bob