View Full Version : The Mickster on The Market

08-22-2007, 08:50 PM
10 percent of all mortgages in the US fall into the sub prime category
25 percent of sub primes are in default, the definition being two months late in payments
Therefore 2.5% of the home mortgage business is in default.
No one knows how many of these defaults will turn into disclosures. Anyone who knows is lying to you. The market hates unknowns.

Banks make home mortgage loans. They in turn package these up as a security. But banks mostly still perform the administrative duties eventhough they've sold the loan. They package the mortgages together as a security so that they can write up additinoal loans.

As you know, the market for buying these secuirties froze up lately. Call it a locking of the bowels. Banks decided not to use these "bad loans" as collateral to use for each other. Things halted. Thus, the credit crunch. Banks stopped loaning money to one another. Some banks then decided to lay off people. Some banks actually went to The Fed and borrowed money...like Citigroup did today. BAnks haven't actually borrowed from The Fed since 2001. Banks borrow from each other and you....rarely from the Fed. Hell they pay you only 2%-3% on your deposit accounts, so why in the heck do they need The Fed most of the time? The Fed, although very very very very very very very very important, is symbolic. So the freeze in commercial paper these past couple of weeks is kinda sorta ridiculous. No one is sure what the heck is going on. A bank may foreclose on a house. Even if it does, what's the impact? Nobody knows. Say Joe Blow borrowed $100K and is now in default. So the bank decides to initiate foreclosure proceedings and thus seizes Mr. Blow's house. The bank, in turn, sells Mr. Blow's former home for $95K inclusive of real estate fees, etc. So the bank loses $5,000. Big deal. Housing represents only about 6% of the GDP (I think this is right, but could be f'ing wrong).

The subprime lenders were dumb. They would not in many cases verify borrowers' income. Someone could decleare their income at $290K/year and actually only be making $50K and still get a $1M loan. Again, this was still only a small part of the overall mortgage market. No one knows the impact. Again, markets do not like unknowns.

Maybe the shoe has already dropped. Commercial credit is still available. The job market is good. There is low unemployment. Record US exports -- $134B in June alone -- It's 8% or so of the US GDP. Economic growth is on track for 2.5% - 3% through 2008. Some people say the trade imbalance (the fact the US imports more than it exports is bad). But on what basis? The US exports goods such as tractors and airplanes and lethal weapons. But the US imports rubber dog$hit and consumer items. Is this imbalance a bad thing? Unknowns. Whoever tells you otherwise is lying or talking out their arse (a very good skill indeed).

The correction. You know...the stock market one. 10% or so, was it? We've had one each year since 2003. The S&P is STILL up 13.8% on an annualized basis. Aug 2006 through today. Historically, a 10% - 11% return is very good. Corporate profits continue to do well. Large cap stocks may be waking up.

well...what does that mean for housing? No one knows. It is uncertain. However, looking at the FACTS: On a relative basis, it is still relatively speaking maybe a good time to still buy residential properties. Relative in terms of all markets and submarkets in the US.

Sub prime....yawn. Maybe not such a big big big deal after all. The accountants got our undies perhaps all tied in a bunch for nothing....perhaps!

I am The Mickster. Thank you.

08-22-2007, 08:58 PM

08-23-2007, 12:14 AM

The Mickster is now our Metal Financial Analyst!




08-23-2007, 02:04 PM
Did you guys know you dont have to pay your federal income tax?

08-24-2007, 01:41 AM
Did you guys know you dont have to pay your federal income tax?

Go for it. I don't think METALSETLISTS has anyone reporting from the federal pen yet. :whipped:

09-14-2007, 11:12 PM