Discussion in 'The Economy' started by Simon Hampel, 22nd Dec, 2007.
The 7.30 Report - ABC
News Online - 21-Dec-2007
I'm not sure aftershock is the right word since it is so likely to get worse:
“The nature of the problem will be significantly bigger next year because in 2006 [mortgages] had lower underwriting standards, no amortisation and no down payments,” Mr Paulson said in an interview with The Wall Street Journal.
"A total of 446,726 American houses foreclosed in the third quarter, kicking off a process that will likely end in a forced auction or repossession. This is a 100 per cent rise on the same period the year before and represents one in every 196 households."
Henry Paulson’s gloomy view on mortgages rattles markets - Times Online
These are pretty big numbers, and I really can't see them getting out of it or avoiding a recession. Central banks will be facing a contentious choice in the new year:
"The issue of fast food price inflation and faster fuel price rises complicates the monetary policy analysis simply because it might result in central banks hesitating before they cut rates," Investec chief economist Philip Shaw said.
Food prices are growing thorn in inflation outlook | Editor's Choice | Reuters
Certainly will be interesting so to see which way they go. I'd prefer they concentrate on inflation, and its good to see the RBA will probably be doing so.
The inflation in the US is pretty high.
They should raise interest rates like every other bank in the world to control their inflation.
Commodity prices are getting out of hand.
But they wont till after the election.
The subprime ripple will have little effect on the average Australian, it is rather an issue for larger companies, and as such, retrenchments etc. and inflation may cause issues here...but yeah, these things happen and it seems like a nice little catalyst for teh next downturn in the markets...it has to happen sooner or later.
US recession is already here, warns Merrill
US recession is already here, warns Merrill - Daily Telegraph
Daily Telegraph reports the US has entered its first full-blown economic recession in 16 years, according to investment bank Merrill Lynch. David Rosenberg, the bank's chief North American economist, argues that a weakening employment picture and declining retail sales signal the economy has tipped into its first month of recession.
Mr Rosenberg, who is well-respected on Wall Street, argues: "According to our analysis, this [recession] isn't even a forecast any more but is a present day reality." Mr Rosenberg points to a whole batch of negative data to support his analysis, including the four key barometers used by the National Bureau of Economic Research - employment, real personal income, industrial production, and real sales activity in retail and manufacturing... although the NEBR will be the final arbiter of any recession, such confirmation may be two years away as it typically waits for conclusive evidence including benchmark revisions.
However, he believes that all four of these barometers "seem to have peaked around the Nov-Dec period, strongly suggesting that we are actually into the first month of a recession."
"Margin lending broker runs out of money
THE solvency of the broking house Tricom may be in question after it was unable to cover the cost of trades yesterday, halting settlement on the Australian Securities Exchange for more than four hours - is believed the margin loan specialist took heavy losses last Tuesday when the worst sharemarket fall in 18 years caused a record number of margin calls.
A spokesman for the Australian Securities Exchange said settlement, which is when the money changes hands for trades already agreed, is scheduled to occur at 12.30pm every day.
Tricom's inability to cover its trades meant settlement yesterday was stalled until 4.42pm. "Sufficient funds were not available for this participant to settle at the required time to meet the scheduled settlement arrangements," the spokesman said.
According to documents lodged with ASIC, Tricom's creditors include ANZ, Commonwealth Bank and Westpac along with investment banks Morgan Stanley, Merrill Lynch and Babcock & Brown, and fund managers BT Securities, Aspen Capital Partners and, as of June, Allco Principals Investments."
Broker can't pay but says it's OK | The Australian
"Moment of agony for MFS investors
THE Gold Coast-based MFS Limited has temporarily shut down its largest unlisted investment vehicle, fuelling fears the $770 million fund, along with the rest of the troubled property group, could be in a death spiral".
That's something I thought I would never see.
What an interesting and educational month on the markets this has been.
Well....nothing can surprise me anymore.
Better stuff is here :
The Financial Tsunami and the Evolving Economic Crisis: Greenspan’s Grand Design
Too much for me to read LOL.
Can you summarize it all in a sentence please
Laziness is nothing more than the habit of resting before you get tired.
The sub-prime phenomenon—something only possible in the era of asset securitization and Glass-Steagall repeal, combined with unregulated OTC derivatives trades—was the predictable result of deliberate Greenspan policy.
Greenspan was consciously fuelling the market’s “irrational exuberance”
the question is why.
Who Says the 'Subprime' is over?
This thread is titled 'Aftershocks'.... I would argue we have only just begun
The subprime market is has forecast to have losses between 150Bn-500Bn depending on which report you read... What happens if this spreads into the Mortgage Insurers due to the record number of housing foreclosures. Any fallout in the Mortgage Insurance market could make the Sub Prime market losses look like a picnic! The Mortgage Insurance market is US$36 trillion dollars in size, so any fallout here will be huge.
Now is not the time to believe everything is Rosy!...
Just my opinion...
Yeh...we are getting better and better every day.
despite being long - that makes for a fascinating read. I too ask 'why'. On a basic premise Greenspan rejected Glass-Steagall to break down the Chinese walls, then manipulated both the dot.com and RE boom - but for what purpose? If people defaulton debts then how do the Central Bankers and their cronies make money, or have the made it along the way - maybe that's it, they make it along the way and then 'close down shop'..
Two Greenspan induced bubbles effected by the removal of the Glass-Steagall Act, the dot.com and the RE boom how much sense does it make if US goes into recession?
"if the central bankers and their cronies profited along the way, but how much sense does it make if US goes into recession?"
Do not worry about them.
They know how to profit during recession.
Well, I might suggest the subprime crisis is either:
1) Financial mismanagment by error (greed and excess risk)
2) Deliberate (Private banking syndrome and Neo-Cons)
So will we have lots of pain, difficulty and suffering (the financial tsunami the Costello spoke off) while we get our asset booms, inflation etc back under control?
Mabe the DOW will explode - with low interest rates and derivatives all the go, there is no reason why the US couldn't be directing funds from property back now into the share market.
For OZ though I suspect that it will be high inflation, increasing house prices, high interest rates, and then wage growth, creating a very inflationary environment.
If this gets out of control then a recession here might be hard to avoid, but I suspect we will just have a subprime 'hang over' labelled as inflation.
I am guessing that it was an experiment, another way of making money
for the TBTF (Too big to Fail) companies and he relied on the fed bailing them out.
It wasn't a bad plan, money was made at every step of the way
and the risk was taken care off, it was now someone elses problem
and being the American way who cares about the little guy anyway?
He can take care of himself. It's his problem if he defaults.
It will be interesting to see where this ends and how much it will cost.
This seems like a really big problem but it's not the only 1.
My other concern is how they are going to pay for the Iraq war.
Will the TBTF superpower eventually fall to it's knees?...
Every Empire eventually falls... The question is who/which country will step up to take their place?
Separate names with a comma.