Comments on: The financial markets are going nuts, and it will take time and some economic pain to make them sane again http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/ Think. It ain't illegal yet... Fri, 10 Feb 2012 07:25:01 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: It’s past time for some perspective on recent stock market volatility « Scholars and Rogues http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-444 It’s past time for some perspective on recent stock market volatility « Scholars and Rogues Fri, 07 Sep 2007 17:16:55 +0000 http://www.scholarsandrogues.com/?p=66#comment-444 [...] in absolute dollars, and it absolutely represents some real economic pain for people (although, given that the capital markets are more than just a little crazy these days, how much is fear and how much is real economic weakness is a very good question). And I know a [...] [...] in absolute dollars, and it absolutely represents some real economic pain for people (although, given that the capital markets are more than just a little crazy these days, how much is fear and how much is real economic weakness is a very good question). And I know a [...]

]]> By: whythawk http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-443 whythawk Wed, 22 Aug 2007 15:37:43 +0000 http://www.scholarsandrogues.com/?p=66#comment-443 Well Bernanke has already cut rates once. Let's see if he does it again. Given the deficit and partisan fighting in congress (which, I see, by some mystery has even lower popularity ratings than GWB - how's that possible?) I can't see how any agreement could come through on bailouts - or any other legislation - before the market rectifies itself... Well Bernanke has already cut rates once. Let’s see if he does it again. Given the deficit and partisan fighting in congress (which, I see, by some mystery has even lower popularity ratings than GWB – how’s that possible?) I can’t see how any agreement could come through on bailouts – or any other legislation – before the market rectifies itself…

]]> By: Martin http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-441 Martin Wed, 22 Aug 2007 10:37:59 +0000 http://www.scholarsandrogues.com/?p=66#comment-441 Gavin, I agree with you. But as I said, history does not leave me much room for hope that governments will leave the markets alone on this one. I fear that any potential bailout will be the worst of both worlds--capital infusions and rate cuts to support distended lenders, while the borrowers twist in the winds and end up in foreclosure. I'd much rather see laws passed that limit predatory lending and mandate financial education for borrowers than I would pumping more fake money into the system to prop up over-leveraged hedge fund managers. Gavin, I agree with you. But as I said, history does not leave me much room for hope that governments will leave the markets alone on this one. I fear that any potential bailout will be the worst of both worlds–capital infusions and rate cuts to support distended lenders, while the borrowers twist in the winds and end up in foreclosure.

I’d much rather see laws passed that limit predatory lending and mandate financial education for borrowers than I would pumping more fake money into the system to prop up over-leveraged hedge fund managers.

]]> By: whythawk http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-436 whythawk Wed, 22 Aug 2007 07:02:30 +0000 http://www.scholarsandrogues.com/?p=66#comment-436 Martin, that was the point many analysts are making <i>"then beg for bailouts while the people who bought into the myth have to live with the consequences"</i>. There must be NO bailouts to the companies that created the problem. Let them fail. Otherwise companies learn (like with S&L) that government - like a concerned parent - will always bail them out of taking responsibility for their errors. Martin, that was the point many analysts are making “then beg for bailouts while the people who bought into the myth have to live with the consequences”.

There must be NO bailouts to the companies that created the problem. Let them fail. Otherwise companies learn (like with S&L) that government – like a concerned parent – will always bail them out of taking responsibility for their errors.

]]> By: Martin Bosworth http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-442 Martin Bosworth Tue, 21 Aug 2007 18:41:42 +0000 http://www.scholarsandrogues.com/?p=66#comment-442 Unfortunately, given everything from the Great Depression to the S&L bailout of the late '80s is any indication, we never learn. We just find new avenues to loot and plunder, then beg for bailouts while the people who bought into the myth have to live with the consequences. The bank run on Countrywide gave a lot of people jitters, but now the layoffs are beginning: http://www.bizjournals.com/nashville/stories/2007/08/20/daily12.html What's significant about those layoffs is that they are in the company's "Alt-A" designation, which is better than subprime but not quite prime. "Alt-A" mortgages usually consist of those massive $400,000-plus McMansions (especially common out here in the DC/VA area) that are too big to be insured by Fannie and Freddie. This has already gone well beyond the subprime sector and is now threatening to engulf even the most seemingly stable mortgage originators--like yours. :) Don't worry, though, because your mortgage lender's CEO still stands to make out like a bandit even if the company's stock fails: http://investing.reuters.co.uk/news/articleinvesting.aspx?type=tnBusinessNews&storyID=2007-07-25T222341Z_01_N25437274_RTRIDST_0_BUSINESS-COUNTRYWIDE-MOZILO-DC.XML&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage2 So while I have cautious optimism that this will get better, history does not offer much in the way of comfort. But at least housing in the coming years will be cheap for us potential buyers! :) Unfortunately, given everything from the Great Depression to the S&L bailout of the late ’80s is any indication, we never learn. We just find new avenues to loot and plunder, then beg for bailouts while the people who bought into the myth have to live with the consequences.

The bank run on Countrywide gave a lot of people jitters, but now the layoffs are beginning:
http://www.bizjournals.com/nashville/stories/2007/08/20/daily12.html

What’s significant about those layoffs is that they are in the company’s “Alt-A” designation, which is better than subprime but not quite prime. “Alt-A” mortgages usually consist of those massive $400,000-plus McMansions (especially common out here in the DC/VA area) that are too big to be insured by Fannie and Freddie. This has already gone well beyond the subprime sector and is now threatening to engulf even the most seemingly stable mortgage originators–like yours. :)

Don’t worry, though, because your mortgage lender’s CEO still stands to make out like a bandit even if the company’s stock fails:
http://investing.reuters.co.uk/news/articleinvesting.aspx?type=tnBusinessNews&storyID=2007-07-25T222341Z_01_N25437274_RTRIDST_0_BUSINESS-COUNTRYWIDE-MOZILO-DC.XML&pageNumber=0&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage2

So while I have cautious optimism that this will get better, history does not offer much in the way of comfort. But at least housing in the coming years will be cheap for us potential buyers! :)

]]> By: Brian Angliss http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-439 Brian Angliss Tue, 21 Aug 2007 15:27:27 +0000 http://www.scholarsandrogues.com/?p=66#comment-439 <em>...hopefully we all learn from this and don …hopefully we all learn from this and don

]]> By: whythawk http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-432 whythawk Tue, 21 Aug 2007 15:01:03 +0000 http://www.scholarsandrogues.com/?p=66#comment-432 Cape Town's property market has been illogical for many years. I rent an apartment for a quarter of the bond repayments if I bought it. Your comment on banks being hit even though they don't lend to the sub-prime market is indicative of the overall problem. Hedge-funds bought up the sub-prime debts via Collateralised Debt Obligations (CDOs) sold on the open market. These CDOs were rated by various agencies and the funds borrowed money on the strength of these ratings. From banks who don't do sub-prime lending, like Countrywide. And that's why the market is running in terror. No-one is sure who bought what and what liabilities this exposes them to. Yes, it is Darwinian. Yes, there will be pain. But, as I've said before, hopefully we all learn from this and <i>don't do it again.</i> Cape Town’s property market has been illogical for many years. I rent an apartment for a quarter of the bond repayments if I bought it.

Your comment on banks being hit even though they don’t lend to the sub-prime market is indicative of the overall problem. Hedge-funds bought up the sub-prime debts via Collateralised Debt Obligations (CDOs) sold on the open market. These CDOs were rated by various agencies and the funds borrowed money on the strength of these ratings. From banks who don’t do sub-prime lending, like Countrywide.

And that’s why the market is running in terror. No-one is sure who bought what and what liabilities this exposes them to. Yes, it is Darwinian. Yes, there will be pain. But, as I’ve said before, hopefully we all learn from this and don’t do it again.

]]> By: DomPierre http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-433 DomPierre Mon, 20 Aug 2007 20:59:42 +0000 http://www.scholarsandrogues.com/?p=66#comment-433 As a consideration, you might try listing your property in Canada or other countries with good economies. BC and Alberta have had double-digit year-over-year growth. And in Vancouver, property is just outrageously priced because all the Asian influx of money that used to flow into the US, but not any longer. As a consideration, you might try listing your property in Canada or other countries with good economies. BC and Alberta have had double-digit year-over-year growth. And in Vancouver, property is just outrageously priced because all the Asian influx of money that used to flow into the US, but not any longer.

]]> By: DomPierre http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-434 DomPierre Mon, 20 Aug 2007 20:52:49 +0000 http://www.scholarsandrogues.com/?p=66#comment-434 On a separate note, I wonder how many people in Utah (miners included) voted for the Republicans, who in turn made mine safety worse so the mine owner could make more money. On a separate note, I wonder how many people in Utah (miners included) voted for the Republicans, who in turn made mine safety worse so the mine owner could make more money.

]]> By: DomPierre http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-435 DomPierre Mon, 20 Aug 2007 20:50:10 +0000 http://www.scholarsandrogues.com/?p=66#comment-435 Are you trying to be logical in illogical times? Are you trying to be logical in illogical times?

]]> By: Sam Smith http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-437 Sam Smith Mon, 20 Aug 2007 19:57:54 +0000 http://www.scholarsandrogues.com/?p=66#comment-437 This is all driving me toward doing something rash like renting. If I could, I'd gladly let the damned house we own in NY go for a $10K loss just to be rid of the hassle and risk, but I fear these latest developments have even made that impossible. This is all driving me toward doing something rash like renting. If I could, I’d gladly let the damned house we own in NY go for a $10K loss just to be rid of the hassle and risk, but I fear these latest developments have even made that impossible.

]]> By: Brian Angliss http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-438 Brian Angliss Mon, 20 Aug 2007 19:00:51 +0000 http://www.scholarsandrogues.com/?p=66#comment-438 My wife and I technically made about $500 on our first house - if you negate the fact that we put something like $25,000 into it over the course of the 3 years we lived there (we put in the back yard, a deck and patio, a sprinkler system, and finished the entire basement). Since we left, my wife told me that the house is now worth about $15,000 LESS than what we sold it for, so I have some understanding of your pain. In addition, the problem with selling our last house was that we were surrounded by foreclosures and HUD homes that were WAY cheaper than our house was, and our location and improvements weren't enough to compensate for the price differential. And all those cheaper homes were because of people who bought more home than they could afford, or bought on interest-only loans, or who got laid off when the economy went into recession after the tech bubble popped and 9/11. I'm not trying to say you shouldn't be angry, but rather not to let your anger drive you into doing something rash like demanding the Fed lower interest rates a lot and fast (something that would bring on massive inflation) or selling just to get out of a house if you don't financially have to. In fact, if you can contain your anger and direct it appropriately, it can actually serve you in this instance. It helps keep the pressure up on local, state, and federal government to rein in sub-prime mortgage regulations so that things don't get as out of control as this ever again. Anger and pain can be great motivators for learning from our mistakes, something that we need to do from this particular correction. My wife and I technically made about $500 on our first house – if you negate the fact that we put something like $25,000 into it over the course of the 3 years we lived there (we put in the back yard, a deck and patio, a sprinkler system, and finished the entire basement). Since we left, my wife told me that the house is now worth about $15,000 LESS than what we sold it for, so I have some understanding of your pain.

In addition, the problem with selling our last house was that we were surrounded by foreclosures and HUD homes that were WAY cheaper than our house was, and our location and improvements weren’t enough to compensate for the price differential. And all those cheaper homes were because of people who bought more home than they could afford, or bought on interest-only loans, or who got laid off when the economy went into recession after the tech bubble popped and 9/11.

I’m not trying to say you shouldn’t be angry, but rather not to let your anger drive you into doing something rash like demanding the Fed lower interest rates a lot and fast (something that would bring on massive inflation) or selling just to get out of a house if you don’t financially have to.

In fact, if you can contain your anger and direct it appropriately, it can actually serve you in this instance. It helps keep the pressure up on local, state, and federal government to rein in sub-prime mortgage regulations so that things don’t get as out of control as this ever again. Anger and pain can be great motivators for learning from our mistakes, something that we need to do from this particular correction.

]]> By: Jim Booth http://www.scholarsandrogues.com/2007/08/20/the-financial-markets-are-going-nuts-and-it-will-take-time-and-some-economic-pain-to-make-them-sane-again/comment-page-1/#comment-440 Jim Booth Mon, 20 Aug 2007 18:45:48 +0000 http://www.scholarsandrogues.com/?p=66#comment-440 I understand the logic - and the good sense - of your reasoning, here, Brian, but that doesn't lessen the pain for some of us. I have a house in NC that has been on the market for 18 months and is now priced $40K below tax value - and I still can't sell it. A lot of that has to do with potential buyers either being afraid to buy or unable to qualify because qualification has tightened so much so quickly. So telling me to be patient reaches my head, but it doesn't make my heart ache and anger at the fast and loose playing of the system by the financial industry that put me in this mess any easier to bear.... I understand the logic – and the good sense – of your reasoning, here, Brian, but that doesn’t lessen the pain for some of us. I have a house in NC that has been on the market for 18 months and is now priced $40K below tax value – and I still can’t sell it. A lot of that has to do with potential buyers either being afraid to buy or unable to qualify because qualification has tightened so much so quickly.

So telling me to be patient reaches my head, but it doesn’t make my heart ache and anger at the fast and loose playing of the system by the financial industry that put me in this mess any easier to bear….

]]>