Ron Paul Tops McCain in Cash on Hand

[JeffWartman]

They were losers who were invited to all the DC social functions

You are showing a complete ignorance of Barry Goldwater. He was invited to all the DC social functions because he was a powerful, conservative force. YOU know NOTHING about conservatism.

 

[red states rule]

You are showing a complete ignorance of Barry Goldwater. He was invited to all the DC social functions because he was a powerful, conservative force. YOU know NOTHING about conservatism.

and he and his followers won what?

 

[Paulie]

and he and his followers won what?

The hearts and minds of TRUE conservatives all over the country.

But idiots like you are part of the reason why TRUE conservatism has been hijacked by liberals MASKED as conservatives. You're boy Bush is a shining example, as are the rest of the mindless zombie yes-men he has follow him around like a lost puppy. And so are you.

a TRUE conservative doesn't just want social program spending cuts...that's only moderately conservative.

You say decrease spending, and the budget will be balanced.

Do you support decreased defense spending? Those couple trillion these past 6 years spent by the LIBERALS, only masked as conservatives, would be nice to have back.

 

[red states rule]

The hearts and minds of TRUE conservatives all over the country.

But idiots like you are part of the reason why TRUE conservatism has been hijacked by liberals MASKED as conservatives. You're boy Bush is a shining example, as are the rest of the mindless zombie yes-men he has follow him around like a lost puppy. And so are you.

a TRUE conservative doesn't just want social program spending cuts...that's only moderately conservative.

You say decrease spending, and the budget will be balanced.

Do you support decreased defense spending? Those couple trillion these past 6 years spent by the LIBERALS, only masked as conservatives, would be nice to have back.

The current budget is spending RECORD amounts on social programs and wealth transfers

The current Dems are increasing prok, spending, and Congresional perks

 

[Paulie]

The current budget is spending RECORD amounts on social programs and wealth transfers

The current Dems are increasing prok, spending, and Congresional perks

because NONE of them are true conservatives. Dem, Repub, whatever.

It's a paradigm, RSR. How many times do you have to be told?

You would do much better to investigate matters that have way more impact on our country, than how dems and repubs work in government.

It's a distraction, nothing else.

While you argue about pointless politics, there are injustices happening all over the world at the hands of the US government, and their corporate cronies.

Do you even care?

 

[red states rule]

because NONE of them are true conservatives. Dem, Repub, whatever.

It's a paradigm, RSR. How many times do you have to be told?

You would do much better to investigate matters that have way more impact on our country, than how dems and repubs work in government.

It's a distraction, nothing else.

While you argue about pointless politics, there are injustices happening all over the world at the hands of the US government, and their corporate cronies.

Do you even care?

I am for less spening, and more tax cuts

The US economy is booming and Dems want to screw it up by raising taxes

 

[Paulie]

I am for less spening, and more tax cuts

oh well then by all means, go ahead and stamp CONSERVATIVE on your forehead.

The US economy is booming

The US Economy is on the brink of 1929 x 10. Debt bubbles never before seen in history, and the Fed's answer is INFLATE some more.

Before i show you the plethora of information available to prove that the economy is NOT booming, i want you to prove to me that you even have any clue at all about US economics.

Do that, and I will provide you with (not that you'll fucking listen anyway) all the information you need to know. It's right in front of your face. It's just that the cozy little upper class suburbanites don't notice, or don't care. Is that you, RSR?

Show me you know the economy, and I'll show you the TRUTH.

Let's see what you got, smart ass.

 

[red states rule]

oh well then by all means, go ahead and stamp CONSERVATIVE on your forehead.



The US Economy is on the brink of 1929 x 10. Debt bubbles never before seen in history, and the Fed's answer is INFLATE some more.

Before i show you the plethora of information available to prove that the economy is NOT booming, i want you to prove to me that you even have any clue at all about US economics.

Do that, and I will provide you with (not that you'll fucking listen anyway) all the information you need to know. It's right in front of your face. It's just that the cozy little upper class suburbanites don't notice, or don't care. Is that you, RSR?

Show me you know the economy, and I'll show you the TRUTH.

Let's see what you got, smart ass.

http://www.usmessageboard.com/showthread.php?t=49510

low unemployment, low interest rates, shrinking deficit, record revenues to the US Treasury, and all bad in Liberalville

 

[Paulie]

You didn't show shit, as always, except what the news is telling you to help you sleep at night.

http://www.nytimes.com/2007/03/23/us/23vacant.html?th&emc=th
http://www.truthout.org/docs_2006/031207P.shtml

http://www.nytimes.com/2007/03/11/business/11mortgage.html?_r=2&th=&adxnnl=1&oref=slogin&emc=th&adxnnlx=1173636494-GZLoetH4YXp6m2M+6MlHWQ&oref=slogin

Crisis Looms in Market for Mortgages

By GRETCHEN MORGENSON
Published: March 11, 2007

On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.

What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.

The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago.

Now, as then, Wall Street firms and entrepreneurs made fortunes issuing questionable securities, in this case pools of home loans taken out by risky borrowers. Now, as then, bullish stock and credit analysts for some of those same Wall Street firms, which profited in the underwriting and rating of those investments, lulled investors with upbeat pronouncements even as loan defaults ballooned. Now, as then, regulators stood by as the mania churned, fed by lax standards and anything-goes lending.

Investment manias are nothing new, of course. But the demise of this one has been broadly viewed as troubling, as it involves the nation’s $6.5 trillion mortgage securities market, which is larger even than the United States treasury market.

Hanging in the balance is the nation’s housing market, which has been a big driver of the economy. Fewer lenders means many potential homebuyers will find it more difficult to get credit, while hundreds of thousands of homes will go up for sale as borrowers default, further swamping a stalled market.

“The regulators are trying to figure out how to work around it, but the Hill is going to be in for one big surprise,” said Josh Rosner, a managing director at Graham-Fisher & Company, an independent investment research firm in New York, and an expert on mortgage securities. “This is far more dramatic than what led to Sarbanes-Oxley,” he added, referring to the legislation that followed the WorldCom and Enron scandals, “both in conflicts and in terms of absolute economic impact.”

While real estate prices were rising, the market for home loans operated like a well-oiled machine, providing ready money to borrowers and high returns to investors like pension funds, insurance companies, hedge funds and other institutions. Now this enormous and important machine is sputtering, and the effects are reverberating throughout Main Street, Wall Street and Washington.

Already, more than two dozen mortgage lenders have failed or closed their doors, and shares of big companies in the mortgage industry have declined significantly. Delinquencies on loans made to less creditworthy borrowers — known as subprime mortgages — recently reached 12.6 percent. Some banks have reported rising problems among borrowers that were deemed more creditworthy as well.

Traders and investors who watch this world say the major participants — Wall Street firms, credit rating agencies, lenders and investors — are holding their collective breath and hoping that the spring season for home sales will reinstate what had been a go-go market for mortgage securities. Many Wall Street firms saw their own stock prices decline over their exposure to the turmoil.

“I guess we are a bit surprised at how fast this has unraveled,” said Tom Zimmerman, head of asset-backed securities research at UBS, in a recent conference call with investors.

Even now the tone accentuates the positive. In a recent presentation to investors, UBS Securities discussed the potential for losses among some mortgage securities in a variety of housing markets. None of the models showed flat or falling home prices, however.

The Bear Stearns analyst who upgraded New Century, Scott R. Coren, wrote in a research note that the company’s stock price reflected the risks in its industry, and that the downside risk was about $10 in a “rescue-sale scenario.” According to New Century, Bear Stearns is among the firms with a “longstanding” relationship financing its mortgage operation. Mr. Coren, through a spokeswoman, declined to comment.

That was the first of three pages. I copied it because you have to sign up for the NY Times to read it.

http://www.azcentral.com/business/articles...aults01-ON.html

Mortgage defaults start to spread

Ruth Simon and James R. Hagerty
Wall Street Journal
Mar. 1, 2007 12:09 PM
The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.

At issue are mortgages made to people who fall in the gray area between "prime" (borrowers considered the best credit risks) and "subprime" (borrowers considered the greatest credit risks). A record $400 billion of these midlevel loans - which are known in the industry as "Alt-A" mortgages - were originated last year, up from $85 billion in 2003, according to Inside Mortgage Finance, a trade publication. Alt-A loans accounted for roughly 16 percent of mortgage originations last year and subprime loans an additional 24 percent.

The catch-all Alt-A category includes many of the innovative products that helped fuel the housing boom, such as mortgages that carry little, if any, documentation of income or assets, and so-called option adjustable-rate mortgages, which give borrowers multiple payment choices but can lead to a rising loan balance. Loans taken by investors buying homes they don't plan to occupy themselves can also fall into the Alt-A category.

http://www.marketoracle.co.uk/Article639.html

Asset Deflation : The Death of Real Estate

Mar 29, 2007 - 03:58 PM

By: Steve Moyer

I sell investment real estate in the San Francisco Bay Area. Have been for 25 years. It's a nice business. I've enjoyed it, and I value my clients.

My pappy's a realtor. My grandpappy was a realtor. My uncle's a realtor; so is my brother. Heck, some of my best friends are realtors (and it takes a big man to admit that).

That's why it pains me to give you the bad news, to wit: Real estate in America is officially dead. But only for a generation or so.

In other words, it is time to sell all of your real estate, save for possibly your home. If you don't, you will likely regret it. You will gradually watch all of your equity disappear into thin air. And then, unless you have little debt against it, you will likely lose your property to foreclosure. It's as simple as that.

The far better strategy is to sell now, even if you are disappointed with the selling price, take your equity (less any capital gains taxes you must pay) and put it into safe, interest-bearing cash-equivalents for a while. Do not put it into the stock market. Do not fiddle with bonds. Don't buy gold (for now, anyway). Stay away from the other metals. Just sit there. Don't be cute. Stop annoying your brother. And try not to be smug. Exercise that virtue known to Job as patience.

Eventually you will be able to buy all the real estate you want, probably including the stuff I'm happy to sell for you now, for literally nickels on the dollar.

I have talked Asset Deflation enough that I'm a light shade of blue in the face, but allow me once again to introduce myself: My name is Steve Moyer and I will be the host of Safehaven's upcoming new series, " CSI America: What the Hell Happened to Real Estate ?!" which will be dominating the headlines for the next decade or two.

In case you haven't noticed, or choose to stick your head in the sand, or don't know much about investment manias and credit bubbles, or think that real estate values "always go up in the long run," or believe that just because Ben Bernanke's Fed has a printing press, they can compel ordinary Americans to borrow increasingly reckless amounts of money, allow me to be the one to pour a big bucket of ice water over your head. The fact is, we have officially entered the frightening, post-NASDAQ-bubble, post-subsequent-real estate-double-bubble, credit-contracting, asset-deflationary portion of the 75 year cycle. So buckle-up for Mr. Toad's Wild Ride, people, because there is no looking back at this point. Mark my words, it's going to be nauseating.

If you were able to see LVI Services Inc . implode the venerable old Stardust Hotel in Las Vegas a week ago, well, that was a fitting representation of what the coming real estate market will look like in the United States. The big difference is that the Stardust implosion happened on purpose; the real estate version will be a little less swift, a lot more decisive and considerably more painful for most Americans.

If you're a financial news junkie like I am, you're reading numerous stories on a daily basis of men and women across America walking away from their homes (and, in some cases, dozens of families moving out of entire neighborhoods). Shinola has begun to hit the real estate fan, beginning with the houses purchased at artificially-high prices, no money down and idiot loans during the housing bubble's terminal, methamphetamine-driven "last run up" in 2005 and 2006.

Foreclosures are up 79% in California; in Florida they've nearly doubled compared to the same period last year. Nevada's foreclosure rate is up 77%. Colorado, Georgia and Michigan report the same tales of woe. Ohio's Cuyohoga County, where folks have abandoned neighborhoods and thieves steal cabinets and copper pipe from vacated homes, has seen its foreclosure rate increase sixfold since 1995. 2,100,000 households in America were said to be in default as of year-end, 2006. Teaser loan payments are rising, home values are falling, and "greater fools" are no longer stepping into the breech to save anyone's financial day.

We're still in the early stages of Foreclosure Mania and nowhere near the point of full recognition, but even at this point, lenders and homebuilders have begun walking away from their obligations just as quickly as those poor, unsuspecting subprime and zero-equity borrowers.

The first-wave victims of the housing bubble implosion are tapped out and must begin their lives anew with statistically no savings. I suppose that means they will no longer be buying flat-screen TV's, new trucks or trinkets from the "Things You Don't Need On Any Basis" store for a while. And you know those Mercedes-driving, $700 purse-toting realtors, loan brokers, appraisers and title company folks? They'll be hunkering down for the foreseeable future, too. How about the subprime, predatory and other assorted, irresponsible lenders and mortgage "securities" dealers? I imagine they've stopped buying original Monets and Picassos at this point but, hey, I'm just guessin'.

All together now -- can you say, "drag on the economy?" All of this -- and it's really just beginning -- is only going to make matters even worse.

Eventually, everyone will come to the realization that 1) just like when the NASDAQ bubble burst back in 2000, real estate values are going down, down, down, then 2) that this time it's not a "normal real estate cycle" but instead a relentless, post-bubble and post-bubble-bubble real estate deflation that we expect will have no historical rival.

That realization will pervade the consciousness of real estate buyers across the board, as they hear about ever-more distressed and foreclosed inventory competing with already-languishing housing stock. Buyers will conclude that, just like computers, "prices will be lower next year" and they will demand significantly discounted prices; sellers who resist selling now will find an even weaker market and a greater dearth of buyers with each passing year. Nightly news reports will further the psychology, and that dampening mind-set will spread to all real estate types: office and retail buildings, industrial and income property, single lots and land. The implosion of the real estate bubble will quickly translate to snap-the-pocketbook-shut consumer spending, declining rents, more bankruptcies, a moribund job market and fire-sale drops in real estate prices. Fannie Mae, Freddie Mac, bank and lending crises are sure to be sprinkled on top of that soggy cereal at some point, too.

Surviving lenders, under constant pressure due to rampant foreclosures, will make lending standards increasingly more stringent and loans more difficult to procure, meaning more equity will be required to buy property. But Americans have been living on borrowed money and have no such equity; they've been conditioned to borrow to buy things because they assumed that the value of their homes would continue to bail their finances out forever. Another segment of the buying marketplace will therefore be lopped off.

As time goes by, those in a position to buy will consider real estate not worth the headaches and a bad investment, to boot. It goes without saying that the real estate market's take-down, concurrent with its attendant, severe and involuntary credit contraction, a stock market pratfall, not enough U.S. savings, the corresponding liquidity crunch and an inevitable value decline in all asset classes will mean that anyone left with 2005-2007 cash will come out the winner.

In my opinion, the ultimate affect of the real estate bubble -- and its mostly unanticipated implosion -- is that the entire asset class will fall out of favor for many years, possibly for a generation. Only a select few will benefit -- those who had the foresight to sell now and squirrel away the money safely before the real anguish begins.

I applaud anyone who has stepped away from the mainstream long enough to consider my unprostituted takes. You are to be commended for at least listening to my point of view and for considering the idea of taking action before it's too late. You have the chance to see the still-manageable snowball forming up near the top of a giant, powder-covered mountain. You're one of the lucky ones who can step aside before a slushball bigger than the planet Mercury rolls down and flattens you (and all of your neighbors) like a gnat.

(Be on the lookout for my upcoming follow-up article on Safehaven, Asset Deflation: The New Rules of Real Estate. I expect to have it out in a week or two. It will give you a jump on the real estate game in the coming environment. As always, we welcome your feedback. Our last article produced our greatest response to date and I apologize if I did not have the chance to respond to every inquiry. From what I read in those emails, I have every confidence our readers will be able to survive the impending mess).

By Steve Moyer
[email protected]
PonderThis.net

Copyright © 2005-2007 Steve Moyer
He has been an investment real estate broker since 1982. He is a columnist and the assistant editor of the monthly newsletter, Ponder This .... www.ponderthis.net

 

[red states rule]

The doom and gloom message had been told for five years - so far the economy continues to prove them wrong

 

[Paulie]

here's a great educational article about deflation, how it gets setup, how it gets kicked off and what it means to you. It should mean a whole lot as some serious negative fallout accompanies deflations and the depressions that accompany them. This is from Elliott Wave International.

http://www.elliottwave.com/deflation/

What is Deflation and What Causes it to Occur?

Defining Inflation and Deflation

Webster's says, "Inflation is an increase in the volume of money and credit relative to available goods," and "Deflation is a contraction in the volume of money and credit relative to available goods." To understand inflation and deflation, we have to understand the terms money and credit.

Defining Money and Credit

Money is a socially accepted medium of exchange, value storage and final payment. A specified amount of that medium also serves as a unit of account.

According to its two financial definitions, credit may be summarized as a right to access money. Credit can be held by the owner of the money, in the form of a warehouse receipt for a money deposit, which today is a checking account at a bank. Credit can also be transferred by the owner or by the owner's custodial institution to a borrower in exchange for a fee or fees - called interest - as specified in a repayment contract called a bond, note, bill or just plain IOU, which is debt. In today's economy, most credit is lent, so people often use the terms "credit" and "debt" interchangeably, as money lent by one entity is simultaneously money borrowed by another.

Price Effects of Inflation and Deflation

When the volume of money and credit rises relative to the volume of goods available, the relative value of each unit of money falls, making prices for goods generally rise. When the volume of money and credit falls relative to the volume of goods available, the relative value of each unit of money rises, making prices of goods generally fall. Though many people find it difficult to do, the proper way to conceive of these changes is that the value of units of money are rising and falling, not the values of goods.

The most common misunderstanding about inflation and deflation - echoed even by some renowned economists - is the idea that inflation is rising prices and deflation is falling prices. General price changes, though, are simply effects.

The price effects of inflation can occur in goods, which most people recognize as relating to inflation, or in investment assets, which people do not generally recognize as relating to inflation. The inflation of the 1970s induced dramatic price rises in gold, silver and commodities. The inflation of the 1980s and 1990s induced dramatic price rises in stock certificates and real estate. This difference in effect is due to differences in the social psychology that accompanies inflation and disinflation, respectively.

The price effects of deflation are simpler. They tend to occur across the board, in goods and investment assets simultaneously.

The Primary Precondition of Deflation

Deflation requires a precondition: a major societal buildup in the extension of credit (and its flip side, the assumption of debt). Austrian economists Ludwig von Mises and Friedrich Hayek warned of the consequences of credit expansion, as have a handful of other economists, who today are mostly ignored. Bank credit and Elliott wave expert Hamilton Bolton, in a 1957 letter, summarized his observations this way:

In reading a history of major depressions in the U.S. from 1830 on, I was impressed with the following:

(a) All were set off by a deflation of excess credit. This was the one factor in common.
(B) Sometimes the excess-of-credit situation seemed to last years before the bubble broke.
© Some outside event, such as a major failure, brought the thing to a head, but the signs were visible many months, and in some cases years, in advance.
(d) None was ever quite like the last, so that the public was always fooled thereby.
(e) Some panics occurred under great government surpluses of revenue (1837, for instance) and some under great government deficits.
(f) Credit is credit, whether non-self-liquidating or self-liquidating.
(g) Deflation of non-self-liquidating credit usually produces the greater slumps.

Self-liquidating credit is a loan that is paid back, with interest, in a moderately short time from production. Production facilitated by the loan - for business start-up or expansion, for example - generates the financial return that makes repayment possible. The full transaction adds value to the economy.

Non-self-liquidating credit is a loan that is not tied to production and tends to stay in the system. When financial institutions lend for consumer purchases such as cars, boats or homes, or for speculations such as the purchase of stock certificates, no production effort is tied to the loan. Interest payments on such loans stress some other source of income. Contrary to nearly ubiquitous belief, such lending is almost always counter-productive; it adds costs to the economy, not value. If someone needs a cheap car to get to work, then a loan to buy it adds value to the economy; if someone wants a new SUV to consume, then a loan to buy it does not add value to the economy. Advocates claim that such loans "stimulate production," but they ignore the cost of the required debt service, which burdens production. They also ignore the subtle deterioration in the quality of spending choices due to the shift of buying power from people who have demonstrated a superior ability to invest or produce (creditors) to those who have demonstrated primarily a superior ability to consume (debtors).

Near the end of a major expansion, few creditors expect default, which is why they lend freely to weak borrowers. Few borrowers expect their fortunes to change, which is why they borrow freely. Deflation involves a substantial amount of involuntary debt liquidation because almost no one expects deflation before it starts.

What Triggers the Change to Deflation?

A trend of credit expansion has two components: the general willingness to lend and borrow and the general ability of borrowers to pay interest and principal. These components depend respectively upon (1) the trend of people’s confidence, i.e., whether both creditors and debtors think that debtors will be able to pay, and (2) the trend of production, which makes it either easier or harder in actuality for debtors to pay. So as long as confidence and production increase, the supply of credit tends to expand. The expansion of credit ends when the desire or ability to sustain the trend can no longer be maintained. As confidence and production decrease, the supply of credit contracts.

The psychological aspect of deflation and depression cannot be overstated. When the social mood trend changes from optimism to pessimism, creditors, debtors, producers and consumers change their primary orientation from expansion to conservation. As creditors become more conservative, they slow their lending. As debtors and potential debtors become more conservative, they borrow less or not at all. As producers become more conservative, they reduce expansion plans. As consumers become more conservative, they save more and spend less. These behaviors reduce the "velocity" of money, i.e., the speed with which it circulates to make purchases, thus putting downside pressure on prices. These forces reverse the former trend.

The structural aspect of deflation and depression is also crucial. The ability of the financial system to sustain increasing levels of credit rests upon a vibrant economy. At some point, a rising debt level requires so much energy to sustain - in terms of meeting interest payments, monitoring credit ratings, chasing delinquent borrowers and writing off bad loans - that it slows overall economic performance. A high-debt situation becomes unsustainable when the rate of economic growth falls beneath the prevailing rate of interest on money owed and creditors refuse to underwrite the interest payments with more credit.

When the burden becomes too great for the economy to support and the trend reverses, reductions in lending, spending and production cause debtors to earn less money with which to pay off their debts, so defaults rise. Default and fear of default exacerbate the new trend in psychology, which in turn causes creditors to reduce lending further. A downward " spiral" begins, feeding on pessimism just as the previous boom fed on optimism. The resulting cascade of debt liquidation is a deflationary crash. Debts are retired by paying them off, " restructuring" or default. In the first case, no value is lost; in the second, some value; in the third, all value. In desperately trying to raise cash to pay off loans, borrowers bring all kinds of assets to market, including stocks, bonds, commodities and real estate, causing their prices to plummet. The process ends only after the supply of credit falls to a level at which it is collateralized acceptably to the surviving creditors.

Why Deflationary Crashes and Depressions Go Together

A deflationary crash is characterized in part by a persistent, sustained, deep, general decline in people's desire and ability to lend and borrow. A depression is characterized in part by a persistent, sustained, deep, general decline in production. Since a decline in production reduces debtors' means to repay and service debt, a depression supports deflation. Since a decline in credit reduces new investment in economic activity, deflation supports depression. Because both credit and production support prices for investment assets, their prices fall in a deflationary depression. As asset prices fall, people lose wealth, which reduces their ability to offer credit, service debt and support production. This mix of forces is self-reinforcing.

The U.S. has experienced two major deflationary depressions, which lasted from 1835 to 1842 and from 1929 to 1932 respectively. Each one followed a period of substantial credit expansion. Credit expansion schemes have always ended in bust. The credit expansion scheme fostered by worldwide central banking (see Chapter 10) is the greatest ever. The bust, however long it takes, will be commensurate. If my outlook is correct, the deflationary crash that lies ahead will be even bigger than the two largest such episodes of the past 200 years.

Financial Values Can Disappear

People seem to take for granted that financial values can be created endlessly seemingly out of nowhere and pile up to the moon. Turn the direction around and mention that financial values can disappear into nowhere, and they insist that it is not possible. "The money has to go somewhere...It just moves from stocks to bonds to money funds...It never goes away...For every buyer, there is a seller, so the money just changes hands." That is true of the money, just as it was all the way up, but it's not true of the values, which changed all the way up.

Asset prices rise not because of "buying" per se, because indeed for every buyer, there is a seller. They rise because those transacting agree that their prices should be higher. All that everyone else - including those who own some of that asset and those who do not - need do is nothing. Conversely, for prices of assets to fall, it takes only one seller and one buyer who agree that the former value of an asset was too high. If no other bids are competing with that buyer's, then the value of the asset falls, and it falls for everyone who owns it. If a million other people own it, then their net worth goes down even though they did nothing. Two investors made it happen by transacting, and the rest of the investors made it happen by choosing not to disagree with their price. Financial values can disappear through a decrease in prices for any type of investment asset, including bonds, stocks and land.

Anyone who watches the stock or commodity markets closely has seen this phenomenon on a small scale many times. Whenever a market "gaps" up or down on an opening, it simply registers a new value on the first trade, which can be conducted by as few as two people. It did not take everyone's action to make it happen, just most people's inaction on the other side. In financial market "explosions" and panics, there are prices at which assets do not trade at all as they cascade from one trade to the next in great leaps.

A similar dynamic holds in the creation and destruction of credit. Let's suppose that a lender starts with a million dollars and the borrower starts with zero. Upon extending the loan, the borrower possesses the million dollars, yet the lender feels that he still owns the million dollars that he lent out. If anyone asks the lender what he is worth, he says, "a million dollars," and shows the note to prove it. Because of this conviction, there is, in the minds of the debtor and the creditor combined, two million dollars worth of value where before there was only one. When the lender calls in the debt and the borrower pays it, he gets back his million dollars. If the borrower can't pay it, the value of the note goes to zero. Either way, the extra value disappears. If the original lender sold his note for cash, then someone else down the line loses. In an actively traded bond market, the result of a sudden default is like a game of "hot potato": whoever holds it last loses. When the volume of credit is large, investors can perceive vast sums of money and value where in fact there are only repayment contracts, which are financial assets dependent upon consensus valuation and the ability of debtors to pay. IOUs can be issued indefinitely, but they have value only as long as their debtors can live up to them and only to the extent that people believe that they will.

The dynamics of value expansion and contraction explain why a bear market can bankrupt millions of people. At the peak of a credit expansion or a bull market, assets have been valued upward, and all participants are wealthy - both the people who sold the assets and the people who hold the assets. The latter group is far larger than the former, because the total supply of money has been relatively stable while the total value of financial assets has ballooned. When the market turns down, the dynamic goes into reverse. Only a very few owners of a collapsing financial asset trade it for money at 90 percent of peak value. Some others may get out at 80 percent, 50 percent or 30 percent of peak value. In each case, sellers are simply transforming the remaining future value losses to someone else. In a bear market, the vast, vast majority does nothing and gets stuck holding assets with low or non-existent valuations. The "million dollars" that a wealthy investor might have thought he had in his bond portfolio or at a stock's peak value can quite rapidly become $50,000 or $5000 or $50. The rest of it just disappears. You see, he never really had a million dollars; all he had was IOUs or stock certificates. The idea that it had a certain financial value was in his head and the heads of others who agreed. When the point of agreement changed, so did the value. Poof! Gone in a flash of aggregated neurons. This is exactly what happens to most investment assets in a period of deflation.

http://www.msnbc.msn.com/id/18043828/

Mortgage mess spreads to Alt-A segment

Subprime turmoil ensnaring companies that lend to people with good credit

Updated: 10:23 a.m. CT April 11, 2007

NEW YORK - Turmoil in the mortgage market is ensnaring more companies who lend to people with decent credit.

The spread of home lending woes beyond loans to those with weak credit threatens to reduce the availability of loans for some consumers and even threaten the existence of some lenders.

Rising delinquencies and defaults among subprime borrowers — those with blemished credit histories — have resulted in more than two dozen lenders going out of business, moving into bankruptcy protection or putting themselves up for sale.

Now the so-called Alternative-A mortgage sector, which loans to borrowers with better credit than subprime borrowers but not quite prime, is starting to hurt.

One Alt-A lender, American Home Mortgage Investment Corp. of Melville, N.Y., announced late last week that it was having trouble selling its mortgages into the secondary market and would have to cut its earnings forecast for the quarter and the year. At least five analysts downgraded the stock on Monday, and its shares fell more than 15 percent on the New York Stock Exchange. The shares dropped $2.37, or 11 percent, on Tuesday to close at $19.55.

Other Alt-A lenders that have taken hits in the market in recent days are First Horizon National Corp. of Memphis, Tenn., which some analysts predict may be forced to sell out to a bigger bank, and M&T Bank Corp. in Buffalo, N.Y.

Guy Cecala, publisher of Inside Mortgage Finance Publications in Bethesda, Md., said a “backlash” from the subprime market meltdown is part of the equation.

“While you’re starting to see some deterioration of the quality, it’s not so much that investors should be dumping (mortgage-backed securities),” he said. “But nobody wants to own a security that goes down in value, whether because of public perception or the reality of the market.”

Doug Duncan, chief economist for the Mortgage Bankers Association in Washington, D.C., said that Alt-A mortgages made up a small share of the U.S. market at about 6 percent of outstanding loans. Loans to prime customers, who are the most creditworthy, make up 74 percent; those to subprime borrowers are about 11 percent, and government-backed loans total about 9 percent.

Alt-A borrowers traditionally had credit scores as high as prime borrowers, but often provided less documentation of their finances; in recent years, however, some Alt-A borrowers have had credit scores closer to subprime borrowers and still weren’t asked for full documentation.

Duncan said he expected to see some increase in delinquencies and defaults in the Alt-A market this year, but said the bigger problem was that investors appeared less willing to invest in these loans because of the deepening subprime problems.

That will be a factor in slowing mortgage origination this year to an estimated $2.2 trillion from a peak of $3.9 trillion in 2003 and $2.5 trillion last year, Duncan said.

In fact, The delinquency and default rate for Alt-A mortgages has been considerably less than for subprime mortgages, according to First American Loan Performance, a research firm based in San Francisco that looks at mortgage loans packaged into securities and sold to investors.

The First American data shows that January payments were 60 days late on 14.3 percent of subprime loans, up from 8.4 percent a year earlier. The late-payment figures for Alt-A loans was 2.6 percent in January, up from 1.3 percent a year earlier.

Still, companies that write the Alt-A mortgages are finding that investors are less willing to buy securities that are backed by mortgages — or are demanding significantly higher returns.

Among the biggest Alt-A lenders in 2006 were IndyMac Bancorp Inc. of Pasadena, Calif.; Countrywide Financial Corp. of Calabasas, Calif.; Residential Capital, or ResCap, of Minneapolis, a holding company for the residential mortgage operations of General Motors; EMC Mortgage Corp. in Irving, Texas, a subsidiary of The Bear Stearns Cos.; and Washington Mutual Inc. of Seattle.

Glenn Costello, a managing director with the Fitch Ratings agency in New York, said that some of the Alt-A lenders were trying to distinguish themselves from others, arguing that they were worth investors’ continued attention because they had lower delinquencies and fewer problems.

“But the fact remains that for some of the riskier products they originate, there’s a lack of demand for them” as investors get pickier about the market, he said. “Investors just aren’t willing to pay what they used to.”

As the debt bubble collapses on lenders, borrowers and real estate prices, a lot of the middle class will be wiped out. Those living below the poverty level has increased over the last several years. Watch for that percentage to spike in the next several years. The number of homeless and the uninsured will spike along with that number. I know some of you don't believe or don't WANT to believe things will get that bad. I'm no sage or seer of things economic and financial. I am somewhat well read and educated in these matters. But I rely on professionals a lot smarter than I am. At the same time, it doesn't take a Nobel prize economist to see how fu*ked up things are. And a brief review of history will give you some idea how bad things are going to get fu*ked up. Believe what you wanna believe. I just hope you're prepared for what's coming. Better to have it and not need it, vs. need it and not have it. Best of luck.


There's plenty more, RSR.

Get to reading, if you actually care.

 

[red states rule]

During the Clionton years, libs loved the economy

With Pres Bush having the same or better economic numbers - the economy stinks

 

[Paulie]

You couldn't possibly have read all of that.

is that all you can ever do to respond to anything? post 1 or 2 sentences, and throw "liberals" and "dems" into it?

You really do suck at discussions, RSR.

 

[red states rule]

You couldn't possibly have read all of that.

is that all you can ever do to respond to anything? post 1 or 2 sentences, and throw "liberals" and "dems" into it?

You really do suck at discussions, RSR.

I know the doom and gloom message the libs have been whining about

The US economy is good and libs hate it

Even the budget deficit is dropping and libs can;t stand it

 

[Paulie]

All you need to do is educate yourself on inflationary bubbles and deflationary practices.

The Fed is ruining this country, and you think it's peaches and cream because you still have a job, and your dollar still buys you SOMETHING.

You are an uneducated political junkie with nothing better to do with your time than instigate and inflame arguments with people you don't even know on message boards.

If you really have a problem with how politics in this country work, then get your fucking pussy ass up away from the computer desk and go hit the streets.

 

[red states rule]

All you need to do is educate yourself on inflationary bubbles and deflationary practices.

The Fed is ruining this country, and you think it's peaches and cream because you still have a job, and your dollar still buys you SOMETHING.

You are an uneducated political junkie with nothing better to do with your time than instigate and inflame arguments with people you don't even know on message boards.

If you really have a problem with how politics in this country work, then get your fucking pussy ass up away from the computer desk and go hit the streets.

Yes I have my job.

And so do about 95% of Amercia

More bad news for the libs and the Bush haters

 

[Edward]

He is not twisting - it is what you said

Don't tell me what I said asshole or I will start telling you what you said. Now shut the fuck up and go vote with the asshole on what I said as I give you my middle finger and tell you what I actually said. I know what I said and you are a fucking liar if you think you have the right to tell me what I said. Do not think for a minute that I will let your retarded ass twist what I said anymore then I will let that bastard. Two bastards telling me what I said or one is the same.

 

[actsnoblemartin]

educate me, i know im a moron on economics, but do tell me, why you believe the fed is as you say, ruining the country, if you would. ill listen.

All you need to do is educate yourself on inflationary bubbles and deflationary practices.

The Fed is ruining this country, and you think it's peaches and cream because you still have a job, and your dollar still buys you SOMETHING.

You are an uneducated political junkie with nothing better to do with your time than instigate and inflame arguments with people you don't even know on message boards.

If you really have a problem with how politics in this country work, then get your fucking pussy ass up away from the computer desk and go hit the streets.

 

[Edward]

Ron Paul is the only honest R running.

I dont always agree with Ron but I always admire him.

I agree completely. It is shocking that so many of these traitors aren't honest. Ron Paul has more brains then 90% of these scumbags and their families.

 

[Edward]

hah whatever, Kathianne. It was a serious question.

He said "be for this". I typed a lot of things...so specifically, be for WHAT?

Asking a traitor like Kathianne a serious question is like asking the traitors who represent her a serious question. They will give the same response!!!