Market crash: are we there yet ?

[BADG]

The very actions being taken by those running from the mortgage industry is compounding the problem. We have only begun to see the result - it ain't pretty and on its heels is the debacle that is the credit card industry. Already indicating pending problems of its own unsecured debt is going to skyrocket as those most in trouble with their mortgages begin to hit the already issued credit they've been saving in their sock drawer just to survive their own unabated consumption.

I’m in a business directly related to the mortgage industry and I’ve been watching for years as people spend the equity in their homes as if it were earned income. Mortgage balances have followed the market appreciation of the homes that secure the loan at an even pace and as they continued to refinance so did they continue to spend on cars, motorcycles, pools, vacations and even…boats. I literally watched one couple over a 4-year period refinance their home 3 times. They bought a car the first time, a pair of jet skis with a trailer the second time and a trip to Hawaii for 4 weeks the third time without blinking. This same couple is now seeking a fourth refi, this time they are only looking to get out of an ARM and into a fixed rate but in order to do so they need $30k just to get to a 95% LTV. IF they can come up with that cash, there is nobody who will do that loan anymore. There are millions of people all across the country in the same shoes. To say that this will have no effect on the big picture is foolish. We’ve all been waiting for it to happen and it is here. Hang on!

[Rickm505]

You're right... fasten your seat belts......

[SteveSouthwood]

Originally Posted by Rickm505

Well Mr. SteveSouthwood I'm sorry to see that we still have a failure to communicate. Your posts continue to indicate that the credit crunch is contained to mortgage companies. Of course it isn't. Yes Mr. Bernake did say it was contained ( An ill advised comment that I'm certain he regrets) but has been proven wrong and has since reversed himself.

There are 60 High yield bond sales resulting from corporate buyouts that never took place this summer as no one would touch the bonds, no matter what the bond rating was. In addition more than $16 billion worth of leveraged loan and high-yield bond deals have been canceled or postponed so far this summer... this is according to Fitch Ratings.

We are in a complete credit meltdown that has transcended it's subprime origins. To illustrate.....

____________________
NEW YORK (AP) -- Chrysler Group's sale to a private-equity firm was put back on track Wednesday after a group of Wall Street banks agreed to assume the bulk of a $12 billion debt sale that failed to attract buyers. Bankers have been unsuccessfully marketing the financing package to major institutional investors since June, but recent turmoil in the mortgage industry has weakened demand for leveraged loans and high-yield debt. With no investor appetite, the seven banks led by JPMorgan Chase & Co. will instead keep the debt on their books.
_____________________

Limited corporate and personal credit is what's shaking global markets. What we are seeing on Wall Street is more than a simple market correction. At the heart of it is Moody's and S&P's confident AAA ratings on subprime MBS. The ratings as it turned out were either misleading or incorrect.

To say that a couple of mortgage companies may go out of business is probably the biggest understatement of the week. To date 120 haved ceased operations because they can't sell the mortgages, any mortgages. Today Countrywide our country's most profitable lender indicated that they are rapidly running out of money because no one will buy any of their mortgages or securities. Our entire Non GSE mortgage industry has collapsed. And of course corporate bond sales have also come to a halt. Where do you think banks get the money that they lend...from America's savings accounts????

At this point no one trusts any rating on ANY mortgage backed security or for that matter ANY corporate bond. The key to liquidity is Trust in the quality of the underlying security. That trust has been broken.

I think if you can explain how our credit markets can function in this situation, you ought to call CNBC and they will be more than happy to give you your own TV show. The Fed would love to have you as they must be tired of pumping billions into the market.

Neither of us will succeed in convincing the other but we should at least try and get our facts straight. You say that the Fed is tired of pumping billions into the market. So they pumped a few billion into the market yesterday in further overnight loans. If you paid attention, you would notice this was absolutely normal for a treasury auction day. So all that money pumped in over the last week is no longer there.

And so the leveraged loan and high yield bond business is affected. Where is the surprise there? This is the high risk end of the credit market.

Thanks for the suggestion for a TV show but no thanks. Did they turn you down? Is that why you're now offering the suggestion.

As I have said before, these are *my* opinions - not something regurgitated and selected from the hysteric press. Please don't feel as though I am trying to convince you of anything (as you seem to think) - I am not trying. I just feel people need to see the alternate viewpoint.

The lesson of the markets is that only time will tell.

[Rickm505]

Ummm ...... Hysteric press? I strongly disagree. The mortgage market has collapsed. The stock market, real estate industry and home builders are tanking. Retail outlets (Walmart, Home Depot) are reporting lower sales and profitability .... Limited portions of corporations or people can borrow money at any price.

The open operations conducted by the Fed (injected liquidity) hasn't occurred since 911 and that operation paled compared to what's happening now. The only thing holding up the dollar is the rush to buy safety in US Treasuries, which you can only do in dollars. The downside of course is that the floor has dropped out from under treasuries yields.

The scope and depth of this crisis hasn't happened since 1987, and before that 1929. And you think the press is hysterical? If anything they are under reporting the seriousness of the situation as to date it's been confined to financial publications.

Yes, time will tell.

[Sapperwhite]

Originally Posted by Rickm505

Ummm ...... Hysteric press? ...

I agree Rick, what is so hysterical about the reporting of facts?
Should the paper print headlines like "Economy Doing Great, Couldn't Be Better", even though it clearly is not.

[uspirate]

I think we're almost there

[Sapperwhite]

Originally Posted by uspirate

I think we're almost there

You've been watching todays trading too huh?

The top NASDAQ loser so far is E Trade Financial with a 20% value loss.... another lender biting the dust?

[uspirate]

Originally Posted by Sapperwhite

You've been watching todays trading too huh?

The top NASDAQ loser so far is E Trade Financial with a 20% value loss.... another lender biting the dust?

getting scary

[Sapperwhite]

Originally Posted by uspirate

getting scary

The FED had to have just pumped it, it climbed from -300 to -100 in an hour and E Trade is no longer in the bottom, the lowest NASDAQ is a 9% loss, pretty good recovery for E Trade there. Also, JP Morgan Chase is now the Dow leader with a 5% gain..... I wonder how big that pump was?


........EDIT..... Just as I post this it dropped back to -200 and E trade is back to 11% loss and biggest loser,......volatile....

[PBzeer]

Don't forget, the market tends to be a self-fulling phropecy when it turns bearish. When you panic, things tend to get trampled underfoot.