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Many of those you list did make the money. But the big money was in using these bundled loans to in essence borrow against (derivatives)and then use that money to invest in more securities etc…The week link was when the borrowers of the initial sub-prime loans start defaulting it causes a chain reaction and the house of cards starts to fall. It’s seems to be like buying stocks on margin…it’s great as long as the markets and stocks you own and are buying are going up…this sub-prime mess is like you were using a credit card to buy stocks and then margin money to buy more stocks you can see where this would lead…So now the hedge funds that engaged in these practices are in some trouble and entire divisions at the big banks that were in the sub-prime “business” are being fired. I don’t think it’s the end of the world but a shaking out of the mega greed in the market place.
Lotus, I think you are right about it not being the end of the world. The thing I really can’t understand, is the way all the financial commentators are dismissing this as if it already over. The news has been full of these guys the past few days. Now they are talking about the real estate bust being almost over. Last week they were heading for the hills, saying it will be at least the end of 2008 before it turns. The fact that a few sectors are showing higher sale prices has these guys in a tizzy. I just can’t believe how they turn from bears to bulls in three seconds.
I’m sure you know a lot more than I do about RE. Do you think the bust is over? Or are these market makers just hyping it up?Good points everyone, I agree with most of you to some extent. I agree with Sprite that there are opportunities in the market when it is down. I am a very conservative invester though and dont have a very bright outlook on the market. History is against me in that the market has never produced a loss over any ten year period in history. I do feel like the situation now is much more dire than in the past though and I dont feel that it is entirely because of the sub prime lending issue. I do think that less money will be put into the market in the near future because many are not able to invest with rising costs, devalued dollar ect. I am staying in the market and think that the only ones bailing out after this fall are people who do not know what they are doing. Seems the big fish are still buying or holding. Again I am a conservative investor so I really only buy blue chips and dont get involved in risky ventures which have a potential for much higher returns. Am I making alot of money? NO, but I am not taking the losses that alot of other people are either. Problem is I am not beating inflation or the devaluation of the dollar which is getting alot worse with the Fed pumping money into the markets to keep it from diving. I totally agree with buying precious metals and think that is really the safest way to go. I have just started with Gold and Silver but would like to lean that way more down the road. I have also purchased Foreign Mutual funds to try and balance my portfolio more with the declining US economy.
I also totally agree with Lotus and that is what my plan is. I just want to have my home built, run solar power, and have enough money for a modest lifestyle. The more self reliant you are, the better off you will be in any economic situation. For now I am stuck in the market to try and make these things happen for me. If I stuffed my money in a mattress it would not work out for sure. I may be losing money every year due to inflation and devaluation of the dollar(I would have to make over 15 percent interest to beat the devaluation) but I am earning something more than just a money market would do for me. As all of you know it is just a game. You cant win if you dont play. I just watch my moves more closely than alot of other folks because I dont tolerate risk well. If I was rich I would be in more risky ventures.
Manhattan has been bullet proof prices have just continued to rise and sales and rentals are strong…That said most of my hedge fund/trader friends and clients tell me there will be big time lay offs continuing on “wall street”. Our market is also driven by wall street bonus money and word on the street is the envelopes will be very light this coming year!
So, I guess the shakeout will continue. Amazing how Manhattan keeps on booming though. Then again, it is all about location.
Those of you who believe this problem has now run it’s course may wish to look at the very first chart at again.
We have far larger dollar amounts of sub-prime mortgages that will have their rates reset in:
September 2007
October 2007
November 2007
December 2007
January 2008
February 2008
March 2008
April 2008
May 2008
June 2008
July 2008
August 2008
September 2008This problem has not ended, this problem has just begun.
Scott Oliver – Founder
WeLoveCostaRica.comThose tables Scott posted, appear to be ominous. So, we can look forward to another year of this madness. Unless interest rates fall, which I’m sure they are taking a look at now, this thing is not over by a long shot.
My bank just mailed me a notice the other day, telling me that I am pre-approved for an equity loan. They still want to lend it. It’s the only way they can stay in business.I see the ads for money etc…but a mortgage guy I use recently told me it’s not easy getting loans right now. He looked scared the last time we spoke a few days ago, and usually he tells me I’m to negative and everything is fine…?
Lotus, I suspect there has to be a tightening of mortgage lending. It would be foolish to continue doing business the way they have. Sill, there are companies making these crazy offers. I just got a popup when I logged on, showing a $150k loan for $349 a month. I guess some of these Bozos are still at it.
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