Subprime lending crisis and you - Page 5

ajcardfan · March 14th, 2007, 10:17 AM

I think this doesn't change a thing in the big picture - we're all gonna die and we won't be able to take a penny with us.

40yearfan · March 14th, 2007, 10:18 AM

Quote:

Originally Posted by conraddobler

Then it's awesome and nothing bad happens, what's your point?

I don't want bad things to happen even if it proves me right, I'd rather be wrong, but I'm not looking at this in terms of being right or wrong, simply observing things, reading things and paying attention, then I draw my own conclusions on what's likely to happen.

It's not something I just decided to worry about 40, it's that nagging feeling I've had over the years that man, loans like this are just stupid and getting worse, all along I was like what's keeping this from just imploding the industry? and for a long long long time nothing imploded it.

At the time these were rampant people sneered at me for not doing them, looked at me like some sort of idiot for not rushing in and grabbing the bags of money laying there. I didn't because I thought someday they'd bite the whole industry in the butt and I don't like doing loans for people I wouldn't do myself. I would do a subprime loan myself if it was my only option in certain situations but not anything like what these crooks did to people.

That's what IMO is bad is the confluence of events that lead to this industry never really blowing off steam and correcting, at approximately the time it should have due to 911 and other events they pumped money into the economy to avoid a disaster, I think they grew the size of the problem to biblical proportions, in other words it's not that markets don't work efficiently over time they do but every time you get people thinking nothing bad can ever happen then the hammer usually comes down, the longer the hammer stays away the bigger it gets.

A bubble like this is nothing more than cheap money fueling mistakes chasing the money. I wouldn't have been gloomy on the economy 5 years ago, I wasn't 10 years ago, I wasn't 15 years ago. Now I most certainly am.

CD, I respect you opinion. You are certainly a lot closer to this issue than I am and have a lot more knowledge of the problems we are facing.

I just have a lot more faith in the economy and believe it's strong enough to override this problem with little effect to the economy as a whole. I hope I am right.

conraddobler · March 14th, 2007, 10:26 AM

Quote:

Originally Posted by 82CardsGrad

DEI - I can't say this again any more clearly... I AGREE that the issue surrounding the sub-prime market will be just that, an issue. I AGREE that many people will be hurt, some terribly. However, I don't agree that the issue will be nearly as catostraphic as you and others seem to want to make it... 9 months from now, I suspect this issue will not be a front-page item on a national level. Yes, in certain markets where the micro economy and tangential real estate market might be spiraling, an issue such as this will be hyper-intensified. But NOT on a national level and thus, this will not be nearly as broad of a catastrophy as you guys are painting it...
But please, carry on... I actually get a kick our of your collective paranoia!!!

I've said all along that what's keeping the economy strong is the consumer, so far you can punch them flat in the face and they'll come back spending and spending and spending time after time.

My opinion is that the American consumer is unstoppable until you simply won't give them more money then they stop.

The question you have to ask yourself is with a negative savings rate, tightening credit standards and now falling home prices or at least stagnant prices nationwide, where's the money comming from?

I guess the money fairy.

Divide Et Impera · March 14th, 2007, 10:27 AM

Quote:

Originally Posted by conraddobler

I've said all along that what's keeping the economy strong is the consumer, so far you can punch them flat in the face and they'll come back spending and spending and spending time after time.

My opinion is that the American consumer is unstoppable until you simply won't give them more money then they stop.

The question you have to ask yourself is with a negative savings rate, tightening credit standards and now falling home prices or at least stagnant prices nationwide, where's the money comming from?

I guess the money fairy.

Bam! Point made.

Dback Jon · March 14th, 2007, 10:33 AM

Gosh - I hope the Government DOES NOT bail the industry or people out.

I am renting, because there was no way I could qualify for a standard mortgage, and I refuse to play the shell game of sub-prime, etc.

So in the meantime, these subprime rates are driving up housing costs, increasing rental rates, etc.

now that the house of cards is falling down, people want MY tax dollars to bail them out of their stupidity? How about lending me some of those governmental dollars?

40yearfan · March 14th, 2007, 10:37 AM

Quote:

Originally Posted by Dback Jon

Gosh - I hope the Government DOES NOT bail the industry or people out.

I am renting, because there was no way I could qualify for a standard mortgage, and I refuse to play the shell game of sub-prime, etc.

So in the meantime, these subprime rates are driving up housing costs, increasing rental rates, etc.

now that the house of cards is falling down, people want MY tax dollars to bail them out of their stupidity? How about lending me some of those governmental dollars?

Don't worry Jon. They won't. Just like last time when the Demo congress changed the way real estate was handled in the tax code to get more revenue into the government, they will simply point the finger at someone else and blame them.

conraddobler · March 14th, 2007, 10:38 AM

Quote:

Originally Posted by 40yearfan

CD, I respect you opinion. You are certainly a lot closer to this issue than I am and have a lot more knowledge of the problems we are facing.

I just have a lot more faith in the economy and believe it's strong enough to override this problem with little effect to the economy as a whole. I hope I am right.

I respect that you feel it will be fine and a lot of people agree with you and I certainly hope you are right.

My simplest explanation of why people don't appreciate this for what it is, happens to lie in a misunderstanding IMO of what just took place.

Anywhere from 10 to 20% of new homeowners will default, not maybe, will, not because they lost their job or the economy got bad just because they are in a loan that will rise to levels whatever rates do that they can't pay.

First those people will stop spending to save their home, then they'll get nuked and be put into a category that can't borrow any signifigant amount of money for a year or two, they'll be on a cash only basis period.

The rest of them that survive will also cut back on spending and have their credit damaged to the degree they won't have credit card or credit access either.

It depends on the forecast but at least 5 to 10 percent of consumers just got their credit cut off in effect, that will lead to lower spending which then finally leads to real job loss and the cycle picks up steam and goes from there.

Every single analyst ever says that consumer spending drives the economy, well 10 percent of the drivers minimum just flew out the back window, so good luck maintaining current spending levels, if spending growth lowers even 5% it's a disaster.

We'll see soon how bad it really is because it's the spending by consumers as whole that determines which way this goes.

82CardsGrad · March 14th, 2007, 10:39 AM

Quote:

Originally Posted by 40yearfan

Don't worry Jon. They won't. Just like last time when the Demo congress changed the way real estate was handled in the tax code to get more revenue into the government, they will simply point the finger at someone else and blame them.

Russ Smith · March 14th, 2007, 10:39 AM

Quote:

Originally Posted by 40yearfan

What just galls me is this whole thing with the stock market going up an down is simply because some people think we are heading for trouble and based on their speculations, the market drops.

Stocks are not overpriced right now. If we can get away from the doom and gloom naysayers and just let it operate, it will be just fine.

There used to be all professional people buying stocks who had been trained to do so and they weren't so quick to react to every little economic bubble. Now every time a retired fed chairman opens his mouth, people panic and start selling. What a way to try and run a business.

yep although I really doubt retail investors are driving the market THIS much in recent days. They tend to follow the herd not lead it.

82CardsGrad · March 14th, 2007, 10:44 AM

Quote:

Originally Posted by conraddobler

I've said all along that what's keeping the economy strong is the consumer, so far you can punch them flat in the face and they'll come back spending and spending and spending time after time.

My opinion is that the American consumer is unstoppable until you simply won't give them more money then they stop.

The question you have to ask yourself is with a negative savings rate, tightening credit standards and now falling home prices or at least stagnant prices nationwide, where's the money comming from?

I guess the money fairy.

Not sure why you guys continue to inject the savings rate into this discussion... if people are actually "saving" at some sort of "rate" that would somehow make you more "comfortable", they would then be spending less.
In any event, home prices falling or stagnating is a good thing. Incomes continue to rise. The Baby Boom Generation (the largest and wealthiest generation to ever walk the planet) will begin to retire in the next 2-3 years and will carry through over the next 2 decades.
You see these things are negatives. I see them as extremely POSITIVE!
As I said earlier, if the Bush tax cuts remain intact and are made permament, we all are in for a long run of sustained solid economic times. Should congress eventually remove the tax cuts, well... all bets are off!!

conraddobler · March 14th, 2007, 10:46 AM

Quote:

Originally Posted by Russ Smith

yep although I really doubt retail investors are driving the market THIS much in recent days. They tend to follow the herd not lead it.

Exactly, it's not the little guy, they don't pay that much attention since day traders got blasted out of the market.

It hasn't fallen far enough to have people dump their 401k money, heck I saw people ride Ford down and lose 400,000 of a 450,000 401k because it bled to death over time and never fell off a cliff.

This is a war between big money guys 40 don't kid yourself, they're arguing about it just like we are and the battle will go back and forth until reality makes itself apparent.

You are right it goes back up.

I'm right it's going to look one day or another like a ski slope.

Russ Smith · March 14th, 2007, 10:48 AM

Quote:

Originally Posted by 82CardsGrad

Not sure why you guys continue to inject the savings rate into this discussion... if people are actually "saving" at some sort of "rate" that would somehow make you more "comfortable", they would then be spending less.
In any event, home prices falling or stagnating is a good thing. Incomes continue to rise. The Baby Boom Generation (the largest and wealthiest generation to ever walk the planet) will begin to retire in the next 2-3 years and will carry through over the next 2 decades.
You see these things are negatives. I see them as extremely POSITIVE!
As I said earlier, if the Bush tax cuts remain intact and are made permament, we all are in for a long run of sustained solid economic times. Should congress eventually remove the tax cuts, well... all bets are off!!

Do you mean baby boomers retiring opens up the job market for younger
workers? To me the downside is all those people start filing for social security and hit an already failing system.

My whole concern is we have no idea how much of the good economy was being driven by bad loans and refis that gave people equity they were spending. Now the value of their home is down, their mortgage is up and they can't spend anymore .

Depending on how much that happens it could really stop the economy. But I have no idea how many mortgages are out there like that.

conraddobler · March 14th, 2007, 10:50 AM

Quote:

Originally Posted by Russ Smith

Do you mean baby boomers retiring opens up the job market for younger
workers? To me the downside is all those people start filing for social security and hit an already failing system.

My whole concern is we have no idea how much of the good economy was being driven by bad loans and refis that gave people equity they were spending. Now the value of their home is down, their mortgage is up and they can't spend anymore .

Depending on how much that happens it could really stop the economy. But I have no idea how many mortgages are out there like that.

Historically, a ton.

It's not even all the way revealed itself, all the loans in 2006 during the last gasp haven't reset yet, most of these loans are from 2005 it got more crazy the longer it went.

82CardsGrad · March 14th, 2007, 10:53 AM

Quote:

Originally Posted by Russ Smith

Do you mean baby boomers retiring opens up the job market for younger
workers? To me the downside is all those people start filing for social security and hit an already failing system.

Nope... Baby Boomers will not access SS as early as previous generations. #1, they won't need to as their inheritances, 401k's and other investments & savings will provide them with enough cushion so that they can delay dipping into SS. Additionally, it is widely believed that while Boomers may retire at a staggering rate, they will not entirely leave the workforce. They are healthier than previous generations and fully capable of carrying on in either full or reduced capacity well into their 70's.
And don't get me started on "the failing system"... If only Bush could have gotten his plan passed. Privatization is the only things that will cure the diseased SS System...

Quote:

Originally Posted by Russ Smith

My whole concern is we have no idea how much of the good economy was being driven by bad loans and refis that gave people equity they were spending. Now the value of their home is down, their mortgage is up and they can't spend anymore .

Depending on how much that happens it could really stop the economy. But I have no idea how many mortgages are out there like that.

Again 0 the doom & gloom, end of the world speak is quite entertaining...

conraddobler · March 14th, 2007, 11:03 AM

Quote:

Originally Posted by 82CardsGrad

Not sure why you guys continue to inject the savings rate into this discussion... if people are actually "saving" at some sort of "rate" that would somehow make you more "comfortable", they would then be spending less.
In any event, home prices falling or stagnating is a good thing. Incomes continue to rise. The Baby Boom Generation (the largest and wealthiest generation to ever walk the planet) will begin to retire in the next 2-3 years and will carry through over the next 2 decades.
You see these things are negatives. I see them as extremely POSITIVE!
As I said earlier, if the Bush tax cuts remain intact and are made permament, we all are in for a long run of sustained solid economic times. Should congress eventually remove the tax cuts, well... all bets are off!!

Actually the boomers retiring will cause an enormous strain on our economy because they'll move from a period of intense consumption to very light consumption except of medical services.

Their income goes way down, they'll stop spending just naturally, heck my Dad and my inlaws are perfect examples of this, they haven't bought a new tv in 10 years, most older people hate spending money, boomers won't be much different and even if they do spend more than my examples it's still going to be much less than now.