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Post by jeffolie on Jul 19, 2007 14:53:50 GMT -6
This video produced by Bloomberg is an excellent view of the various points of view regarding the declining housing market. Areas that are covered include impact of rotten lending, credit markets including today (Thursday July 19th), the dollar, the impact on the stock market and regulators. www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/v0OR3iFv14lg.asfThe spin from very well known, top notch people in the financial community is communicated from the middle of the road. I am more bearish than most of the points of view. Nothing is put forward about the $400 Trillion deviatives market in this video.
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Post by unlawflcombatnt on Jul 20, 2007 2:40:42 GMT -6
This was a great video.
It's interesting to hear so many people together who are this bearish on the housing market. Shiller speaks of the "mean reversion" on housing prices, stating that home prices may well decrease over 50%, especially considering that they have risen over 50% in many areas. Shiller also states the loss of wealth from the collapse of the housing bubble will be in the trillions. This seems obvious, but none of the other mainstream financial "wizards" have fessed up to the likelihood of losses this large.
Regarding the subject of how to stem the downward trend in housing prices came up, Shiller questions whether we should even try. He believes the current high prices are keeping many people from being able to afford homes.
It was somewhat reassuring to hear Orange County Treasurer Chris Street imply that Orange County (CA) hadn't bought much of the paper backed by subprimes. He implied it was obvious from the start that something was wrong when AAA bonds had junk bond yields.
A good point was made by McCulley from Pimco that Wall Street provided the "demand" for debt purchase, resulting in an increase in mortgage origination to provide this debt for purchase.
Thus underwriting standards disappeared, and loans were provided to uncreditworthy borrowers, thus providing banks with more loans to sell to Wall Street, who had more loans to create securities from, and more securities for non-risk averse investors who purchased the securities. The end result of the increase in purchase of these securities was to provide more money for lending to the banks and mortgage originators. The easy sale of these securities provided (excessive?) capital to create still more risky mortgages.
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