Tuesday, July 14, 2009

Option ARM And A Leg - P3 Anyone?

ARMs and the CRE destruction that has been largely ignored by the media are the straws that will break the camel's back. Here are two good articles that will help you understand the dire times we are in.

Denninger - Banks: Here Come The OptionARM Blowups! Karl's been pounding the table on the mortgage issues and we all know he is right. Just how crooked and stupid our elected officials are is amazing. ...."Generational buy on banks eh, when their entire "valuation" is predicated on balance sheets where one can't possibly assign an honest value to huge parts of their loan portfolio? I think not, and I've been pounding the table on this since The Market Ticker began - literally, from the first posting. SHUT THEM ALL DOWN."

Calculated Risk has Report: Option ARMs Performing Worse than Subprime. "For the third straight month, option adjustable-rate mortgages are generating proportionally more delinquencies and foreclosures than subprime mortgages ...". Calc risk does one of the best jobs of consistently reporting on RE and CRE issues.

From Mish let's just toss in Housing Update - How Far To The Bottom?. Mish is always so positive. Let's see what he has to say, "Thus I see no reason to switch from my long-held estimate of a 2011-2012 timeframe for a bottom. Furthermore, even once housing does bottom, do not expect a V shaped recovery. Housing prices are likely to remain weak especially in real (inflation adjusted) terms for another decade. For a clue as what to expect, take a look at the period from 1991 to 2000 in the first Case-Shiller chart. Expect a similarly long "fat tail" once housing does bottom." Did he just say 2011-2012 as a bottom target. Thought so. This is a great post with a timeline of events.

The funny part (well, not really) is that they have just shoved subprime shit to the side and are moving on like it does not exist. They have no clue what to do with it, so it just got shelved. ROF LMAO, wish I could do that with some of my debt. Ah, just shelve it. I'll address it sometime later when I get around to it.

That sometime will come sooner that later and this IMO is what will wreck the banks and cause a second stimulus. The drawers are full and the closets are bulging with shit they have stuffed away and there are not enough POD's to hold the rest. The ARM resets might as well be on Mars. They are the red headed step child that is totally ignored. Guess they will deal with that problem when it gets here. Out of sight, out of mind.

Of course the majority of the stimulus was not used to create jobs or ignite the economy. It was used to bail out the banking system (thanks Henry). It is almost like they calculated an acceptable unemployment number, decided that was what they could afford to live with, basically screwed the rest of us, gave all the money to the banks and moved on like nothing ever happened. If this is Change You Can Believe In then Bush was golden, cause this administration is more corrupt and owned than any before it. Too bad we (and our children and their children) have got to be the ones that pay for it.

When this blows up, it will not be pretty. They can't hide it forever. P3 anyone?

GL trading!

1 comment:

  1. The bear channel and monthly charts suggest that the markets are not going any higher and you should be 100% short.

    The journey to the southside of the down channel could accelerate at any moment. We are repeating last year's summer pattern nearly exactly.


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