Originally Posted By Mr X The overall markets are okay, BUT if anyone is invested in any homebuilders/lenders...anything realestate related you might want to watch the markets VERY carefully next week. This also goes for any MUTUAL FUND holders that have funds heavily invested in such. This is a very serious warning, I've watched several companies go out of business this past week, with more to come.
Originally Posted By Mr X I should say, "the overall markets SEEM okay". Investing at this point is at your own risk, of course. But if you do, STAY AWAY from anything mortgage and mortgage related...it's about to get a WHOLE lot worse!
Originally Posted By friendofdd Thanks for the warning, Mr X. I hope your investments are going the way you hoped in the dixcussion of a few weeks ago. I've found something that may work out for me. Someone wants to send a huge amount of money out of an African country and they are going to share it with me for helping them. All I have to do is give them my bank acct number and I will soon be wealthy.
Originally Posted By Mr X DD, congrats on the newfound wealth! I received a similar email from an arabian king's accountant...but deleted it by mistake! Ugh, I could have been so rich! Oh well, I guess I'll sink all my money into domestic oil speculation and hope for the best. As for the heads up everyone, just please, please keep an eye on any real estate/homebuilder/lender stocks or mutual funds that have significant holdings of such...if they drop precipitously this is NOT the time to "ride it out". Many, many companies have gone belly up recently and the stock price almost ALWAYS gives warning to get out (a 20-30% loss is far better than 100%). Not trying to panic anyway, like I said this is just for the specific sector NOT the overall market...the homebuilders/lenders/banks/investment banks however are treading very dangerous waters now. Tonight the Nikkei is already down 250 points, by the way (reaction to Fridays Wall Street selloff most likely). P.S. Thanks for asking DD, my investments are going quite well thanks (I don't remember the specific conversation though...did I mention some particular investment besides my weekly lotto ticket? )...made some mistakes, had some good calls, so far this year I'm up on the year (couldn't say that til recently!), which is just fine with me.
Originally Posted By Mr X In case you're not taking me seriously, folks... At an emergency board meeting on SUNDAY (that should tell you something right there!), Warren Spector, the co-president of prestigious global investment bank BEAR STERNS, resigned in the wake of TWO subprime related hedge fund failures within the firm. Hedge funds are like mutual funds for rich folk. Where we might be happy with 10-15 percent, the rich want their hedge fund to make 30-50 percent per annum. There is normally a heafty minimum investment (a quarter mil, and half a mil, something like that). That means hedge funds take more risks, do more "creative" stuff, more leverage with derivitives like PUTS (which SuperDry just loves to use in his reckless investment schemes) etc...in order to produce spectacular returns (that's the idea, anyway). Well anyway these two at Bear totally FAILED due to this crisis. Put it into perspective...how would you feel if you lost ALL the money in one of your mutual funds? All of it. Balance zero. That's what happened at Bear Stearns...scary stuff. And this is a HUGE, PRESTIGIOUS, GLOBAL company. This is no small mortgage company closing its doors here. Bear Stearns is a HUGE name on Wall Street (their stock price is completely tanked now). Makes you want to invest in spyders, peeaanuut may be right after all!
Originally Posted By fkurucz Mr X is quite right. The real estate bubble is starting to pop, and its going to be spectacular. And its not just "sub-prime" that will go down the tubes. There is speculation that the overwhelming majority of mortgages that were made in the past 4 years are going to default.
Originally Posted By Mr X Nope, it's totally beyond subprime now (fkurucz)... American Home Mortgage closed it's doors on Friday, and they are "Alt-A" which the lenders wanted you to think was MUCH safer than subprime (in fact, it's going to be much worse).. Not sure about "the overwhelming majority", but surely a lot...these were insane loans that shouldn't have been made in the first place! But none of that even matters for the moment...the REAL meltdown is happening because no investors are BUYING the crappy loans the lenders have written (thus no income for the lenders...game over). It's a lot more complicated, but I'm just trying to boil it down and not write too much (even though I already have lol).
Originally Posted By Mr X That original parentheses was supposed to be "(fkurucz is right on the money)".
Originally Posted By SuperDry This reminds me of something I've been meaning to post about: I have 10 high-rise, pre-construction condos available for sale: 5 in Miami, and 5 in Las Vegas. If anyone is interested in an excellent real estate investment, my email address is in my profile.
Originally Posted By friendofdd I don't recall all the conversation or it's details, Mr X. It was a topic you started about investing in something which you felt should make a large, fairly quick return. My only property investment is my house, which is paid for. Being on a "fixed" income, my investments are very conservative,including a mutual fund which is all I have left in the stock market. I need to count on steady, reliable returns and, thus, settle for less, but certain, interest. I am drilling in my back yard for oil, though. I am starting to think I may have to exchange the shovel for an auger to have any success in this effort.
Originally Posted By Mr X Can I invest in your backyard schem...er, project? I can mail you half my assets, with that do? Smart man being conservative...being retired and all of course you want to keep only very safe investments. If I were you I'd do a little research on your mutual fund and make sure there isn't a large percentage of banks or lenders in there...though there will be tax consequences, it might be a good move to switch over to a different fund that has no exposure to the mess! But anyway a bought an paid for house is a terrific investment at any time...wish I'd bought something back around 2000!
Originally Posted By Elderp ^ Don't worry as soon as I get my check from the British Lottery I will take care of all of us. I agree that the housing market is taking a hit right now, but all those crazy loans. What were they thinking?!
Originally Posted By Mr X Speaking of large, fairly quick returns... I bought 1,000 shares American Home Mortage two days before they closed their doors for a daytrade and sold the next day for $4.13 on a death bounce. An over 300% return in just two days, how's THAT for large and quick!? Only wish I'd bought more, but the reason I only invested the $1,000 was because it was the maximum I was willing to lose (and I WAS prepared to lose it all) on such a gamble. Paid off this time boy!
Originally Posted By Mr X Awsome...I'll throw in my Japanese lotto winnings too! "What were they thinking?!" And they're STILL DOING IT!! Google "80-20 loan" and clink on the 3rd link to see the insane "liar loans" that Countrywide is STILL offering! Total irresponsibility.
Originally Posted By Jim in Merced CA Mr. X, the text on the Countrywide website reads: <Our 80/20 no down payment loan allows qualified borrowers with excellent credit to get an 80% first mortgage and a 20% Home Equity Line of Credit to equal 100% financing on their home, not counting closing costs.> 'with excellent credit' is the key phrase here. Didn't the problem that loan companies were granting loans to people who didn't qualify? Or is that the whole problem?
Originally Posted By friendofdd >>>I can mail you half my assets, with that do?<<< Not necessary at all. I'll consider you a partner right away. Just give me your bank account number and, as soon as the profits start rolling in, I'll deposit your share directly.
Originally Posted By Mr X k. I'll send that right away DD. Jim, the issue with these 80/20 loans are multiple. First of all, handing out a loan for a house with no money down is stupid in itself (the homeowner has no "skin" in the investment)...so when the home value crashes the homeowner finds themselves in hock for more than they could ever get for the house...walking away starts looking tempting. Secondly, excellent credit means simply that someone paid their car bill and credit card bill on time for several years...it does not mean much more than that. Third, these are "no doc" loans, meaning that "excellent credit" can be used to sign the papers even if the applicant is JOBLESS (getting better, huh), or if their income is much less than stated etc... It's illegal to do that of course, but many people don't think about that when they're hyped on getting that dream house. Also, arms resets can absolutely MURDER even the most responsible person, exellent credit or not. This is part of why these loans are so "risky", and why wall street is refusing to buy them anymore. There's much, much more but I'm tired...sorry. I'll chime in more later. Just know, this is a time bomb situation here and the big boys just sent in the bomb squad...we shall see if they can defuse it over the coming weeks...there are lots more bombs ticking away, they are set for later in the year and next year...it's a BAD situation.
Originally Posted By Mr X Thing is Jim, you are correct in the sense that subprime companies didn't EVEN worry about good credit, thus they were the first to fall. But the irresponsibility goes MUCH deeper (like that 80/20 no doc thing I mentioned). American Home Mortgage wasn't a subprime lender at all, they were mostly Alt-A...first Alt-A company to fall, but they won't be the last , that I'm certain of.
Originally Posted By fkurucz <<Not sure about "the overwhelming majority", but surely a lot.>> I should have qualified that statement: loans made in markets that were undergoing high, double digit appreciation. <<I agree that the housing market is taking a hit right now, but all those crazy loans. What were they thinking?!>> Fees and commissions. << Just know, this is a time bomb situation here and the big boys just sent in the bomb squad...we shall see if they can defuse it over the coming weeks...there are lots more bombs ticking away, they are set for later in the year and next year...it's a BAD situation.>> It is very bad. A lot of people bought houses in the hottest markets with no money down, teaser rate loans (to keep monthly payments temporarily super low) with the expectation that the house would appreciate 20% or more in a year, and that they would be able to resell within a year and make a handsome profit. So you buy a 600K house in OC, live in it for year while only paying $1500 a month, then you flip it, pocket the 100K+ profit, and repeat! It works great as long as there is double digit appreciation, but if that stops (and it has), they the specu-vestor is now stuck with a hungry alligator that can cost $4-5K per month to feed. As X said, then it becomes very tempting to just walk away. There are charts that show when current ARMS are going to reset to their real rates, and huge number will be resetting this Fall. So what can the powers that be do? 1) They could lower interest rates on mortgages to something as low as 1-2%. This would however: a) Kill the value of the dollar. b) Fan the flames of inflation. c) Scare all foreign investors away (who do you think is financing all of our mortgages?) 2) They could buy all of the defaulted/defaulting mortgages: a) It could cost a trillion+ dollars b) Where would they get the money without killing the dollar and promoting high inflation? 3) They could encourage lenders to sit on foreclosed properties (REOs) and not sell them, with the hope that the hosing market will eventually rebound. a) Without the toxic loans it is not likely that the market will bounce back anytime soon. Large builders have flooded the market with McMansions that few people can afford with conventional financing. The rule of thumb is that a mortgage should not be more than 3x a borrowers annual income. In most markets the median price is 5x the median household income and in the really hot markets its as high as 10x. IMHO, there is NOTHING they can do. Lenders cannot sit on REOs indefinitely. They will have to eventually sell them at fire sale prices and prices will collapse.
