Posted on 08/04/2007 10:36:23 AM PDT by ex-Texan
Jim Cramer today angrily called on Federal Reserve Chairman Ben Bernanke to lower interest rates, saying he "has no idea how bad it is out there" in the nation's credit markets.
In his "Stop Trading" segment on Street Signs today, Cramer said the nation's central bank is "asleep" and should immediately "relieve the pressure" on financial firms and the nation's home owners who are facing big increases in their mortgage payments as 'teaser' rates expire. Many thousands will "lose their homes," he warned. "This is not the time to be complacent."
About an hour later, he made a return appearance on CNBC's Closing Bell to soften his initial comments, making it clear that he is not recommending investors sell stocks. He predicted a big rebound for the major stock market averages if the Fed does indeed lower rates, and said he was upset by Bear Stearn's Bear Stearns Co Inc [BSC] "complaining" during a conference call earlier in the afternoon. "I don't want to scare anybody," he added. "The Fed can make this whole problem go away" by lowering interest rates.
Standard & Poor's changed its rating outlook on the firm to negative from stable this morning.
NOTE: There is a MUST SEE Video at the primary link. Why? Jim Cramer losses it on the air.
But you’re clueless when it comes to knowing what it takes to return the economy to an even keel. You’re arrogant and indifferent to the suffering of others just so you an pick up a cheaper house on the foreclosure market.
Rule #1 - If possible, pay cash for your home.
Rule #2 - If following Rule #1 is not possible, then don’t get greedy. You don’t need more house than you can pay for. Do not borrow more than you can pay back.
Rule #3 - Never take out a loan where the interest rate will fluctuate.
Three simple rules that eliminate the problem.
FIrst off, it is very unlikely I woudl touch a foreclosure in TX, the rules and laws make it to risky. Secondly I do think we need to reign in inflation with higher rates to lessen the coming recession. And thanls to the low rates combined with the hinky loans it is coming, if not already here.
Lower rates and the party restarts. Many people in the chain do get paid when insane lending practices are used. If rates are lowered back down the problem will only grow.
Does March 2000 until 2003 count as a bear market? If not you have to go back to the 1970's.
Well, that almost answers your own question. You bought before the latest huge spike in home prices. It's easier to make a bigger downpayment and get a better interest rate when the home price is lower to begin with. Yes, your own fiscal responsibility is a big piece of the equation as well, but really, what was your house worth in summer 2005? Could you have bought it then, under the same terms?
If the interest rates go down, then the dollar goes down, and foreign investors will be loathe to invest in our equity markets... they would have to subtract the %loss in the dollar from every percent gained in stocks.
But if rates are left alone, the dollar will still go down, because many of the oil producing countries are switching to do their business in Euros. And again, with the dollar falling, foreign investors will not want to invest in our equity markets.
But if rates are increased, more homeowners with be caught upside down in their mortgates, housing starts will fall even more, which will stall the economy, which will bring down stock prices.
Ergo, I think the stock market doesn’t have much upside for the next year or so.
It's funny. The boom was in full swing already. I thought I was buying at the top of home prices, but near the bottom of interest rates. Turns out prices (at least on paper) continued to go up.)
To answer your question, my 175K home (2001 price) is supposedly worth 285K now. Could I buy it for that price? No. But more importantly, WOULD I buy it for that price? No. There were 280K homes in 2001. I simply ruled them out for being out of my range. The real question is where the hell would I find a home IN my range today? Who knows. I've made some career moves since then, on the basis of my current situation. If I were trying to buy a home today, I'd probably still be a corporate stooge instead of a free man.
Been wondering where you have been.
I suspect things are going to get a lot worse, and fast, soon.
Just check my posts. It will get a lot worse very soon. All my friends who were in the mortgage biz lost their jobs. They all made BIG bucks, too. High level people, talented people with technical skills and graduate degrees from good colleges.
Thousands have lost their jobs in So-Cal.
Higher rates will not "lessen the coming recession".
And thanls to the low rates combined with the hinky loans it is coming, if not already here.
Low rates do not cause a recession.
Ignorance of the laws of economics is no excuse.
The market eventually punishes stupidity. People who make $60,000 a year and got financing for a $700,000 house by have a 50 year, interest only loan are stupid. The people are stupid for thinking they can afford it, and the banks are stupid for lending them the money. The skyrocketing home prices in places like California could have been tempered by decrease demand due to the inability of people to secure financing. Instead, the easy ability to get mortgages increased the asset bubble.
The Fed isn’t there to help out the banking industry’s stupidity as much as it would help equity markets. The rise in stock price would be coupled with inflation.
Currency depreciation could be caused by inflation, but it can also be caused by many other reasons... including that our economy is doing better. If our economy is growing faster than the European economy, then we have more money to spend and will be more imports. (Marginal propensity to buy imports)
Currency depreciation also helps US manufacturers ability to compete, and has stemmed the tide of offshoring.
I would not want to be Bernanke. He has a one trick pony—short term interest rates—to fight a double trick war—value of the dollar and the health of the economy.
I do agree though that Bernanke is caught between the devil and the deep blue sea. The market punishes stupidity and it's not for Bernanke to save them.
Bernanke to Cramer: Drop dead!
Presently gold is going for 680/oz; ignoring numismatic value one ounce of gold is a working man’s salary—$35,000 or $17 per hour.
Gold does fluctuate, but it also mirrors changes in the dollar.
The dollar depreciation, then and now, determines inflation more than anything else. Before he was famous, and when he was a young acolyte of Ayn Rand, Fed Greenspan wrote a paper proving this point and indicating the failure to maintain the value of the currency robbed bond investors first but eventually all investors. Of course, Greenspan changed his tune when he came into power as chairman of the Fed.
Amazing ! 'Bubble Proof Houston' ? Really . . . ? Yikes !
Excerpt:
One of the nation's largest mortgage lenders, Houston-based Aegis Mortgage Corp., stopped taking new loans Monday, amid a day of news that signaled tougher days ahead for lenders and homebuyers.American Home Files for Bankruptcy After Shutdown"It's a bloodbath out there," said Mark Cady, senior vice president of Market Street Mortgage in Houston.
The announcement came on the same day New York-based American Home Mortgage Investment Corp. filed for bankruptcy protection.
Falling home prices nationwide and a rise in foreclosures have scared investors away from buying securities backed by home loans.
That, in turn, has led to tougher lending standards and higher interest rates.
For example, late last week, Wells Fargo upped its interest rate for large 30-year fixed rate home loans made through mortgage brokers to 8 percent
from 6.875 percent.
Excerpt:
American Home Mortgage Investment Corp. became the second-biggest residential lender to file for bankruptcy protection this year, adding to signs that late payments have spread to homeowners with good credit records.Countrywide To Buy Certain Mortgage Assets Of HomeBancThe company sought federal court protection from creditors in Wilmington, Delaware, today, saying it had assets of more than $100 million and debts of more than $100 million owed to more than 100,000 creditors. The filing comes after the company announced Aug. 2 it would halt operations and slash staff.
Amazing ! HomeBanc bailed out of the mortgage biz today. In case you were unaware: HomeBanck is that troubled subsidiary of Bank of America. It stupidly bought tons of bad paper from Bear Stearns and EMC Mortgage. EMC Mortgage is embroiled in scandal from coast-to-coast.
So let's see; Bad mortgage paper goes from Bear's EMC (sold on Wall Street by Bear) to HomeBanc to B of A to Countrywide. Countrywide must be planning to do a lot of snaky foreclosures in the near future.
112 Mortgage Lenders Have Now Gone Belly Up Since December, 2006
"Good riddance," I say. Just wait until Congress begins investigating this MASSIVE ponzi scheme. For a good graphic illustration of the ponzi scheme Click Here All those mounds of bad paper. Acres deep. Mortgages sold, then resold and resold and resold on Wall Street.
Does anybody want to learn more? Really? The truth will make you sick to your stomach.
The fed is standing pat on the rate at 5.25%>
Greed has always been able to overpower sense.
so they took a risk......why should we care about them?....it was reckless for them and the banks to lend money out so freely.....
I think there is a ripple effect but not if you're not buying and are happy where you are at....and, maybe the people who can afford second homes or vacation homes can finally get a good deal, seeing as how they didn't speculate when others did....
“Bubble Proof Houston”
Much of Houston is “bubble proof” because there is an ample supply of new houses due to the lack of zoning, and the lack of land use laws. Without zoning, areas can go from industrial to residential without delay as we’ve seen in the parts of the Heights and Rice Military area. Some parts of Houston might be in a “bubble” like the Norhill area of the Heights or Garden Oaks.
Areas like California have land restrictions, meaning that new homes can be built in areas because of the spotted earthworm or some other creature.
What both zoning and land use laws lead to is an artifically decreased supply, leading to rising prices followed by speculation, followed by collapse.
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