Posted on 08/28/2008 7:09:19 AM PDT by Sam's Army
I haven't seen any conservatives doing that. Have you?
Ben Stein for a big example. Stein told people that the idea of a housing “crisis” was silly. He thought that the sub-prime “crisis” was overblown out of all proportion and so on.
Disagreeing about the extent of a problem is not the same thing as saying that everything is hunky-dory.
I don’t give a rat’s rear end about what the MSM says about the economy. Really. That’s why I keep thumping people over the head to go to the source data and read that. Just use the MSM “analysis” of the data as toilet tissue, if you like.
The actual data showed that the housing melt-down was coming. The actual data from the bond markets showed that the financial sector was getting way stupid before the first mortgages started defaulting.
When I look at the internals of things like the BEA GDP report, I don’t see happy-times in there. Period. Don’t care what a bunch of twinks in the MSM have to say about it.
The problem for the “Bush economy” is that income growth has not kept up with real inflation. This has become especially true in the last two years. Another problem with the “Bush economy” is that most of the job growth in the good years of the “Bush economy” came from the housing sector - and far too many of those people employed in the boom-boom housing markets (CA, FL, NV) were illegals, so their job losses aren’t showing up in the official stats.
And as far as whether we’re in or not in a recession, I leave that to the NBER. They get to make that call. Their former president, Martin Feldstein, has said on more than one occasion earlier this year that he thinks the US might have slid into recession as early as January of this year. The NBER, as I said above, often identifies a recession starting point eight to nine months after it began - they don’t have firm data any sooner given how revisions are made to US macro-economic data. Given the information available at hand to date, I agree with Feldstein - we very well might have slipped into recession as of the Q1 of this year.
From Stein himself, August, 2007:
“Subprime is a mess. But it’s a small mess. Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That’s 4 percent of mortgages.
Of these, maybe half, or 2 percent, will go into foreclosure. There will be roughly 50 percent recovery on sale of these. This is a loss of 1 percent in the mortgage market — a sum the lenders have already made many times over because of the hefty fees on those deals. In the context of the size of the U.S. financial sector, it’s nothing. “
Yep. So there we have it. Why are Freddie and Fannie going to require a huge taxpayer bailout? “Nothing.”
The above “analysis” by Stein was a complete cow-flop, showing no real understanding of the RMBS market, or even the bond market.
And as for saying everything was hunky-dory? Oh yes, he did that too:
“In the meantime, the economy is strong. Profits are great, and interest rates are low and will stay that way. Don’t sell. With all the shrieking about the market, it only fell to what it was about five weeks ago — and we didn’t think we were poor then.”
Interest rates are lower than they were then - and because the Fed doesn’t feel so confident about the economy as Stein does.
If people had sold (and not listened to Stein and his cohorts), they wouldn’t be looking at the sort of losses that many people who remained in equities have in their portfolios now.
So what were the real numbers? More than 4% of mortgages? How many went into foreclosure? More than 2%?
Why are Freddie and Fannie going to require a huge taxpayer bailout?
Do Freddie and Fannie deal with subprime mortgages?
“In the meantime, the economy is strong. Profits are great, and interest rates are low and will stay that way.
Wasn't the economy strong in Aug 2007? You may not like the 3.3% number, but that sounds pretty strong to me.
Interest rates are lower than they were then - and because the Fed doesn’t feel so confident about the economy as Stein does.
Is he saying the everything is hunky-dory now?
Thanks. I’ll check it out. It is always useful to have new sources of information. I don’t put stock in any one source but a variety of different sources gives me a feel for what the truth might be, and especially those sources that have proven credible in the near term. Listening to Jim Cramer and Bob Brinker is not what I consider leading edge financial knowledge.
Too many people can’t seem to get beyond listening to multi-millionaire Rush Limbaugh spout off about refusing to “participate in a recession.” Funny, but Warren Buffet’s Berkshire hasn’t been too successful refusing to participate in this recession... If Buffet can’t avoid the recession, I’m mystified how Joe Sixpack or Fred FreepyAnna can avoid it.
I’ll suggest one myself. These guys are permabears, but I’ve only been reading them since the liquidity crisis, so it is possible they are bullish as appropriate, but I won’t vouch for that at this time. Still, the mark-to-market threads, if you can make it through the worthless banter, has some real nuggets of insight from the posters and they do offer some articles I don’t see anywhere else.
Call this food for thought, or discard as your gut tells you to do, but I enjoy reading these threads on Mark-to-Market and feel like I’ve learned a little from them...
Again, this isn’t insightful contributions like Mish or Roubini or Winter, but just banter with some interesting nuggets. But check out a few threads before you judge... One thread may be worthless while another contains more information.
http://www.capitalstool.com/forums/index.php?s=849591ec338cdf6c542f810da12f3afa&act=SF&f=7
Yes, Fannie and Freddie deal with sub-prime mortgages - in their debt portfolio in addition to buying sub-prime paper from lenders.
But - there’s good news! You’ll be happy to know that Fannie and Freddie have pulled out of the NY State sub-prime market:
http://www.newsday.com/business/ny-bzfan265816842aug26,0,5165654.story
It isn’t for the right reason, but it is a little sliver of good news that the idiots at Fannie/Freddie will cease buying mortgages that have a high risk of default. There’s no point in adding more problems to the mountain of pony poop they already own.
Fannie and Freddie are also now contending with losses and rapidly increasing defaults on Alt-A paper, which accounted for a whoppin’ large percentage of their recent losses.
The total number of defaults is the secondary issue here. That’s what is wrong with Stein’s analysis. The total number does not matter as much as the number exceeding assumptions and the models of the secondary market.
The first issue is that the number of defaults are exceeding the expectations of people who buy and hold RMBS’, what was predicted/modeled in things like CDO’s and the credit rating of the securities based on these models and assumptions. When the initial analysis was done in March of 2007 of people defaulting on 2005 and 2006 vintage sub-prime mortgages within the first three months, it was easy to see that a lot of assumptions about the mortgage market were going to be thrown out the window.
The economy in 2007: it was easy to see that it was starting downhill - that the housing market was starting to crump. All one had to do was see the increasingly shrill advertising on TV, the absurd kick-backs and incentives by home builders to get people to buy. It was easy to see the number of people who weren’t carrying through on a sales contract at that time too. Since I lived in Nevada, I could see it happening in real time, rather than waiting for the “analysts” to pick up on the fact. A lot of newly built homes, purchased, standing empty. You could see the speculators were going to get their clocks cleaned, but good. All of that was available by simply driving into Reno or Vegas and doing the Peter Lynch “invest by walking around” technique. Just a few questions of the right people showed in Vegas and Reno that things were completely out of hand - and in Nevada, the mortgage lenders were a bit more conservative than they were in California.
The other thing that Stein didn’t (and still doesn’t) realize is the implications of the HELOC freezes by lenders. Consumers are now being schooled on the difference between credit and cash. Credit is not the same as cash in your pocket - you get to determine whether you can spend cash in your pocket.
Stein is still saying that the economy is “not so bad.” He’s still my #1 example of a guy who should know better than letting his political perspective cloud his economic analysis.
I put my money where my mouth is/was: I was largely out of equities and very overweight in cash by August 2007. Haven’t regretted it. Didn’t regret shorting the heck out of financials earlier this year, either. Missed the short on homebuilders - I didn’t trust their numbers or accounting. Still don’t.
Well that was stupid.
The total number of defaults is the secondary issue here.
But what is the number?
The total number does not matter as much as the number exceeding assumptions and the models of the secondary market.
Lot of panic out there.
Since I lived in Nevada, I could see it happening in real time
You're in the center of the mania. Glad you avoided the mess.
Stein is still saying that the economy is “not so bad.”
Aside from some financials, where is the economy "so bad"?
He’s still my #1 example of a guy who should know better than letting his political perspective cloud his economic analysis.
I've been a little mad at him since he started pushing higher taxes.
I put my money where my mouth is/was: I was largely out of equities and very overweight in cash by August 2007.
Excellent!
Borrow a bunch more money and you’ll have even more in your wallet.
But don’t tell me that’s prosperity.
That's a poor substitute for getting a higher paying job.
"But don’t tell me that’s prosperity."
Strawman.
Sorry I didn’t give you a response on the default rate earlier. The new numbers were coming out, so I figured to just give the new info:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aMn7WL5p0Q6Y&refer=home
Thanks for the update.
Well, we were happy enough to buy them for the last few years, including last Christmas when it seemed like there was lead paint on every toy out there. The economy stinks. The banks are on the brink. The housing bubble is bursting and with it America's ATM (home equity) is in the tank. I'm actually amazed in the face of the Fannie and Freddie disaster people are willing to dance while our country's economic Titanic sinks. This downturn's going to take a few years to run its course, but resourceful folks, as always, will come through just fine.
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