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<p>The $915B bomb in consumers' wallets


Americans have record credit-card debt and banks are starting to sweat an uptick in default rates, reports Fortune's Peter Gumbel. Why some fear this could be the next subprime.</p>

<p><a href="http://money.cnn.com/2007/10/29/magazines/fortune/consumer_debt.fortune/index.htm?postversion=2007103007">http://money.cnn.com/2007/10/29/magazines/fortune/consumer_debt.fortune/index.htm?postversion=2007103007</a></p>

<p>If there is an international precedent the U.S. should be watching, it's actually that of the U.K. British consumers are just as overstretched as Americans, but since the real estate market there rose faster and fell earlier, they're about 18 months ahead in the credit cycle. Since the last quarter of 2005, credit card delinquencies and charge-off rates in Britain have risen as much as 50%, forcing banks to take huge write-offs. </p>

<p>It's a sign of the times that, according to one survey last month, 6% of British homeowners have been using their credit cards to pay their mortgages. That's suicidal, of course, given that credit card interest rates are more than double even the heftiest mortgage. Keep your fingers crossed that it's not a trend that crosses the Atlantic. </p>

<p> </p>
 
<p>I guess it's much easier to be a forward thinking economist, than a backwards thinking politician ...</p>

<p>Greenspan: Subprime securitization seen too risky</p>

<p><a href="http://www.reuters.com/article/bankingfinancial-SP/idUSWAT00838420071029?sp=true">http://www.reuters.com/article/bankingfinancial-SP/idUSWAT00838420071029?sp=true</a></p>

<p>SOUTHAMPTON, Bermuda, Oct 29 (Reuters) - Former Federal Reserve Chairman Alan Greenspan said on Monday securitized assets backed by subprime loans were unlikely to become a problem in the future because markets have lost their enthusiasm for them. </p>

<p>"Markets have made the decision that subprime securitization is much too risky, so problem solved," Greenspan told a conference on hedge funds. </p>
 
This is great stuff, comparing the market's anticipation of ffr cuts to a drug junkie's dependence:





<a href="http://market-ticker.denninger.net/2007/10/hyperinflated-monday-and-farewell-for.html">http://market-ticker.denninger.net/2007/10/hyperinflated-monday-and-farewell-for.html</a>
 
jw,





I love the market ticker blog and I have posted links to it before too. But I always add the disclosure to make sure that no kids are watching over your shoulder as you read it. He can be very colorful with the language.
 
Yeah, I find it funny. This rant is actually quite far ranging and very good.





I say that if people are acting crazy they deserve a few obscenities tossed their way.
 
Just signed this guy's petition:





<a href="http://financialpetition.org/">http://financialpetition.org/</a>





It's about time the citizens start standing up for their currency and financial systems.
 
<p>America's Big, Fat Housing Inventory


<a href="http://biz.yahoo.com/bizwk/071030/oct2007db20071024022437.html?.v=1&.pf=real-estate">http://biz.yahoo.com/bizwk/071030/oct2007db20071024022437.html?.v=1&.pf=real-estate</a></p>

<p> </p>
 
From ns2524's Business Week link above:



"Home prices are still falling -- the national medium home price is down 4.2% from a year ago, to $211,700, according to the NAR -- a sure sign that demand is weak. "



Uh, what's a medium home price? How about a small, or a large?
 
<p>Spooking investors


Oct 25th 2007


From The Economist print edition</p>

<p>Financial markets remain on edge because the credit crunch has not been solved </p>

<p><a href="http://www.economist.com/finance/displaystory.cfm?story_id=10024679">http://www.economist.com/finance/displaystory.cfm?story_id=10024679</a></p>
 
<p>"Rate Cut Unlikely to Fix Housing Woes". Damn, I thought we will be in the clear after tomorrow's 1/4 point cut.


</p>

<p><a href="http://biz.yahoo.com/ap/071031/fed_interest_rates_housing.html">http://biz.yahoo.com/ap/071031/fed_interest_rates_housing.html</a></p>

<p> </p>
 
<a href="http://www.bloomberg.com/apps/news?pid=20601103&sid=aQa_BmGs8VRs&refer=us">Homeownership falls in longest slide since 81</a>.





<em> "Owning a home in this country has been a principal source of wealth creation for low- and moderate-income people,'' said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies in Cambridge, Massachusetts. ``In the absence of home equity, families will inevitably spend less.''</em>





And this <a href="http://housingpanic.blogspot.com/2007/08/discredited-reic-hack-nicholas-retsinas.html">asshat</a> had the audacity to call us pollyannas and chicken littles. He gives Harvard a bad name and they should give him the boot. Look who is the Cassandra now.


<a href="http://www.researchrecap.com/index.php/2007/10/29/research-roundup-m-lec-superfund/">


A recap on the SIV</a>.





<a href="http://wallstreetexaminer.com/blogs/winter/?p=1191">Shylocks and village idiots</a>.





I got these from <a href="http://ml-implode.com/">mortgage implode</a> and then checked <a href="http://patrick.net/housing/crash.html">Patrick</a> who had most of them.





And I check MW before I go to bed and I see <a href="http://tinyurl.com/ytbjuf">Looming Danger of a Recession</a>.


<em>


"One reason the recession fears haven't gained more prominence is that economists are generally loathe to forecast serious downturns.


</em>

<p> </p>

<p><em> Carl Tannenbaum, chief economist at La Salle Bank in Chicago, who used to compile economists' surveys from the National Association of Business Economics, said he doesn't recall ever seeing a formal forecast of a recession. </em></p>

<p><em> What generally happens in a recession is that the economy starts to slow down, and then growth just falls sharply. None of the complex econometric models in use can forecast this break.


</em> </p>

<p><em> "Most of the models are continuous, where the economy strengthens a bit or softens a bit. It is quite difficult to deal with what could be a step-change, where you get some tipping point where everyone decides it is time to cut back on hiring and capital spending. When that happens, pretty soon everything snowballs into a major slowdown," said Nigel Gault, economist at Global Insight."





</em>And this is what bugs me about economists and analysts. All the models you can use can never replace common sense. Of course when the numbers have been there all along it makes it worse. Gawd I hate being bear. This is not fun. Can I go back to being a bull without the Kool Aid please?


</p>
 
Want a laugh, check out Lansner's blog:





<strong><a href="http://lansner.freedomblogging.com/2007/10/30/can-25-price-cut-get-local-housing-off-bottom/">Can a 25% price cut get local housing off bottom?</a></strong>


"What south county broker Vince Bindi is telling his clients …


As far as pricing is concerned, I’m seeing some interesting events. In the past several weeks, there have been multiple offers and/or homes selling within 7 days or less from the time they are listed at essentially the asking price, for bank-owned REO homes that are well priced. This has been happening in the past several weeks for multiple properties from various cities, from condos to large estates. For the various properties I analyzed, the sale prices were about 20% to 25% less then the peak in pricing that occurred in May of 2006. My gut feeling tells me that this represents the bottom in pricing, for a lot of these buyers represent the so-called smart money jumping into the marketplace. Today’s stats show an overall market that is down in pricing from about 10% to 12% from the peak in May of 2006. The stats you read about in the press from DataQuick and others are lagging behind by about 4 to 6 months."





Guess that's it folks, Bindi has spoken, housing bust over. Return to your normal lives...

 
<p>More signs of the Apocalpyse:</p>

<p><a href="http://www.cnbc.com/id/21560577">www.cnbc.com/id/21560577</a></p>

<p>"Expectations that the Fed will cut interest rates, combined with an unexpected drop in crude supplies last week, could finally send oil prices over $100 a barrel.</p>

<p class="MsoNormal">The Fed is widely expected to approve a quarter-point cut in short-term borrowing rates this afternoon, a move that could further weaken the dollar and act as an enticement to buy oil" </p>

<p class="MsoNormal"><a href="http://www.cnbc.com/id/21550981">www.cnbc.com/id/21550981</a></p>

<p class="MsoNormal">"The dollar slipped against the euro and a basket of major currencies on Wednesday, as investors shrugged off a mostly strong batch of U.S. data and focused on a Federal Reserve meeting expected to end in an interest rate cut."

<p class="MsoNormal"><a href="http://www.cnbc.com/id/21557000">www.cnbc.com/id/21557000</a></p>

<p class="MsoNormal">"A surge in euro zone inflation in October beat all expectations, data showed, raising the odds for a rise in European Central Bank interest rates despite weakening sentiment and sending the euro up against the dollar." (Can I get a "LIBOR"!!!!)</p>

<p class="MsoNormal">Wall Street continues to be a Polly-Ana.</p>

<p class="MsoNormal"><a href="http://biz.yahoo.com/ap/071031/wall_street.html">biz.yahoo.com/ap/071031/wall_street.html</a></p>

<p class="MsoNormal">"Stocks rose in a quiet session Wednesday as investors awaited the results of the Federal Reserve's two-day meeting on interest rates and cheered a better than expected reading on third-quarter growth."</p>

<p class="MsoNormal">The market's rise based upon the economic data make sense except Wall Street still wants a rate cute. So inflation is just a fantasy word for Wall Street. </p>

</p>
 
<p>Not to beat a dead horse more than 50 times but . . .</p>

<p><a href="http://news.yahoo.com/s/ap/20071031/ap_on_bi_ge/fed_interest_rates_housing">news.yahoo.com/s/ap/20071031/ap_on_bi_ge/fed_interest_rates_housing</a></p>

<p>"The interest rate cut Wall Street believes will buffer the economy from housing market woes is unlikely to boost hard-hit banks and homebuilders much in the near term, analysts say. "</p>

<p>"The problems in the housing market, the problems in the credit markets are not easily solved by the Fed cutting rates," said Steve East, chief economist for investment bank Friedman Billings, Ramsey & Co. in Arlington, Va., who sees the Fed making three quarter-point cuts by January and puts the odds of a recession in 2008 at 60 percent.</p>

<p>The thinking is that lenders can improve battered balance sheets if they have to pay less for money they borrow short-term while the rate they charge borrowers for long-term loans holds steady or moves higher. Yet analysts say problems in the credit markets extend beyond the benefits of small rate cuts.</p>

<p>Struggling homebuilders, such as D.R. Horton Inc., Lennar Corp. and Pulte Homes Inc., are faced with tightened lending standards and severely limited demand. Many would-be buyers are unable to qualify for loan approvals, even if rates move lower.</p>

<p>Lower interest rates are "certainly not the panacea" for getting the housing market back on track, said UBS homebuilding analyst David Goldberg.</p>

<p>The median U.S. home price nationwide fell for the eighth consecutive month in August, according to the S&P/Case-Shiller index released Tuesday. Fifteen of 20 metropolitan areas included in the index declined. Many experts predict housing prices will fall further before demand rebounds.</p>

<p>Jefferson Harralson, a banking analyst with Keefe, Bruyette & Woods Inc. who follows banks such as Bank of America Corp. and Wachovia Corp., said an acceleration in losses from defaults "seems to be a given, whether or not a rate cut occurs."</p>

<p>He says home equity lines of credit will be less likely to default if rates are lower. But that's hardly a revenue cure for banks in an environment in which housing prices continue to fall and foreclosures continue to rise.</p>

<p>"The home equity business isn't going to be a growth business," Harralson said.</p>
 
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