Even so, September is historically the worst month to be in the market. I moved into all cash today. I'll jump back in come early-mid October.
Posted on 08/31/2007 3:10:22 PM PDT by Kimmers
CBS) Despite all the bad buzz about subprime mortgages, Sunday Morning correspondent Ben Stein says the economy is strong and that the amount of foreclosures is small in relative terms.
--------------------------------------------------------------------------------
Perspective is a great thing. It's especially good where money and the stock market are concerned.
Recently, there has been large movement, mostly down, as the stock market reacts to a large number of foreclosures on homes in the so-called "subprime" mortgage area. This is the place where higher risk borrowers got loans during the housing boom of the last three or four years. Now, to people who actually made those loans, it's a scary phenomenon to see those loans default, and the companies that made those loans are in real trouble.
But here is where perspective comes in, and is such a lovely thing: The U.S. mortgage market is immensely large, spectacularly large. Total foreclosures are a large amount in dollar terms, but a tiny amount in percentage terms. Foreclosures are now about 1 percent of loans. The lenders will sell the houses and recover at least fifty per cent of the value. That means the total loss may be about ½ of one percent of the mortgages made and probably less, and a lot of it is insured. This is an absolutely trivial number in the context of a $14 trillion economy with net wealth in the realm of $60 trillion.
This whole subprime mortgage mess is just an excuse for the gunslingers and river boat gamblers on Wall Street to use their tricks to move markets and make money. The economy is still very strong. The most cagey players on Wall Street like Goldman Sachs are now trying to buy — not sell — as much distressed merchandise in the mortgage area as they can. This is a good clue about where the smart money is going.
You can panic if you enjoy being panicky. But this will all blow over and the people who buy now, in due time, will be glad they did.
Anyway, that's my perspective.
That’s pretty much it. When ever they want to buy, the just flood the media with ‘subprime’ stories and the markets drop 200 points. The next day everything is rosy and it goes up 100 points.
I am not sure it is that easy — even for the big guys.
I’m growing tired of Mr. Stein’s “everything is fine” speech. Real Estate and mortgage lending are a larger part of our overall economy then he believes, and may spill over into the auto finance and credit card industry.
Bueller ... Bueller ... Bueller ...
Fry ... Fry ... Fry ...
H
This is true on the surface.
But the market is thinking “Hey, I wonder if there’s anyone else who can’t pay? Those leveraged corporate loans, those derivative counterparties - how are those guys holding up?”
Bingo!
It will be as soon as I get some of Ben Stein’s money!
This is the same guy who said slavery would have resolved itself without the need for the Civil War.
At the same time, he overlooks the fact that in modern times we have a huge “slave” class of illegals who work for almost nothing and can’t complain when they are mistreated and have no rights.
Also, heard him say the other day that wealth should be taken away from the wealthy and even given to poor people who are poor by their own choice. The ungrateful, lazy, poor.
Ben Stein Says Economy Is Fine and "rich people should pay more."
yitbos
really bad logic alert.
to compare value of market decline with estimated absolute risk in subprimes (as he did in a NY Times piece not long ago) is not only naive, not only intellecually dishonest, it's....it doesn't even qualify as stupid. It's like comparing an adolsescent to a man as proof the adolescent is irrelevant.
Adolescents grow up.
I'm not taking the opposite position necessarily, I'm only pointing out that this piece, when I read it, was a real disappointment.
And so what if Goldman is buying. Who knows why? Perhaps their doing a favor for someone. Consider where GS alumnus have landed in government.
Absolutely no mention of people who are barely making payments but not in default.
Absolutley no mention of the mammoth loss of paper equity as home prices recede in some very large markets.
Absolutely no mention of the increase in real debt from people refinancing or taking 2nd mortgages to use homes as ATMs. That boon to the economy is now dead and gone.
Absolutely no mention of jobs lost in the home-building industry as long-lead housing starts wind down.
Absolutely no mention of the scope of currnet and future expected jobs lost related to housing, from furniture to remodeling to the financial sector activity.
Absolutely no mention of the change in unemployement or consumer confidence.
Ask 100 economists, get 100,000 different answers and they all spin the data to suit their desires. I don’t see this as any different. He treats mortgages in default as if isolated in a vacuum and all other sectors in the economy must continue to grow strongly.
I wont be convinced this economy is solid until I see strong sales during the Christmas buying season. I think Christmas retail sales will be very telling how the economy is really doing.
And this, I can't help but disagree with completely.
The S&L crisis that gave birth to the RTC knocked the wind out of the economy for the early '90s. Japan's real estate bubble has been a ball and chain for their economy for 15 years.
Would that it would "blow over."
It may, like a bad storm, or it may, like Hurricane Andrew. It may if we get really, really lucky. But I don't think it's likely.
Oh yeah... No mention of all the mortgage resets to come over the next year, which if it doesn’t cause defaults and foreclosures will certainly affect disposable income for discresionary spending, after many thousands more dollars have to go into the home mortgage.
But then, Ben wants me to believe the spending spree will just keep going even after Joe Sixpack’s wealth plunges.
Even so, September is historically the worst month to be in the market. I moved into all cash today. I'll jump back in come early-mid October.
Interesting comment.
Wonder if it applies to the oil market and other commodities?
Now is an opportunity to buy! Stein is right.
Pray for W and Our Troops
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.