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

To: neolib who wrote (110947)	3/17/2008 11:10:24 AM
From: MulhollandDrive	Respond to of 306849

very well stated

To: neolib who wrote (110947)	3/17/2008 11:25:14 AM
From: patron_anejo_por_favor	Respond to of 306849

Privatize profits, socialize liabilities?<G>

To: neolib who wrote (110947)	3/17/2008 12:00:25 PM
From: wonk	Read Replies (2) \| Respond to of 306849

Well far be it from me to agree with Hawk, or Steve Forbes, but market to market is a problem at this moment in time. There are 3 basic methods in appraisal: cost, market and income. Cost is rarely a good indication; market is only a good indication in a snapshot look. The best is income, but income requires you be able to forecast the present value of future cash flows. While we all agree that housing is tremendously overvalued, the “actual” losses if these funds are held to maturity will be far less than fear makes them. But there’s other concepts from appraisal that come into play, i.e., value as a going concern, value in an “orderly” liquidation“, value in a "forced" liquidation. The forced liquidation value is often 50-80% less than intrinsic value. That is what you saw with Bear, forced liquidation. In normal times I have no problems with the hyenas of the financial world cleaning up the mess, and rightfully so, but these are not normal times. Look at market-to-market using a bond analogy. Lets say I own a bond with a 5% coupon and interest rates go to 10%. Market to market makes me immediately write off the market loss. But if I hold to maturity, I have earned my coupon rate with no loss of principal. No loss at all. As of today – and I emphasize today – mark to market is forcing people to recognize paper losses, not real losses. It is magnifying the instability in the system. We can figure out how to draw-and-quarter the free market fundamentalists later: First we have to make sure that we are all not going to end up pushing our stuff around in shopping carts.

To: neolib who wrote (110947)	3/17/2008 1:35:35 PM
From: Hawkmoon	Read Replies (1) \| Respond to of 306849

Your view seems to be that a bidding frenzy is an efficient market, which should not tolerate intervention, but a lack of bidders is a seized up market which demands intervention. No.. absolutely not.. I was very critical of these "interest only", and "no-doc" loans that were being spewed around.. I saw that it was increasing demand and a speculative bubble. I will admit that I didn't then recognize how severe it would become, but I certainly knew that prices were too high for my risk/reward analysis.. Even with interests at a low, the Fed has the ability to up the reserve requirements and lending standards for mortgage loans. I heavily fault Greenspan for not implementing these regulations. It's no different than if my broker lets me borrow 100% on the value of stock I hold, or even more foolish, loans me 100% up front to buy a stock I don't have the cash to purchase outright. And, of course, I blame the rating agencies, which I perceive had a direct conflict of interest in creating and then rating these CMO Traunch products. I'm surprised no one has filed a class-action lawsuit against them.. Hawk