The coming financial crisis

Started by Butchers Bill, August 09, 2007, 05:05:33 PM

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Butchers Bill

This is not looking good folks.  As a investor and analyst of some of this stuff, I think we are in for a world of hurt for the next 18-24 months.

Mortgages being foreclosed on at an unprecedented rate.

New mortgages becoming increasingly difficult to get funded.

Credit lines vanishing.

The dollar losing value daily.

China threatening to worsen the dollar collapse by sellings its reserves.

The US Fed asleep at the wheel.

MAJOR financial institutions (Goldman Sachs, Bear Stearns, Merrill Lynch) all in danger because of bad mortgages.




We could be seeing the start of the next great depression IMO.  If the US economy goes in the tank, the rest of the world may not be far behind.








I believe I've passed the age of consciousness and righteous rage
I found that just surviving was a noble fight.
I once believed in causes too,
I had my pointless point of view,
And life went on no matter who was wrong or right.

Diomedes

There is considerable overlap between the intelligence of the smartest bears and the dumbest tourists." - Yosemite Park Ranger

rjs246

Is rjs gonna have to choke a bitch?

Let them eat bootstraps.

PhillyPhanInDC

Hillary will save us, and if not her, we always have the Jesus guy to fall back on. Christ loves America more than the other countries.
"The very existence of flamethrowers proves that some time, somewhere, someone said to themselves, "You know, I want to set those people over there on fire, but I'm just not close enough to get the job done.""  R.I.P George.

rjs246

I'm planning 100% to rely on me, my brain, my stunning good looks and my pump action shotgun to survive the fall. And any zombie attacks that may ensue.
Is rjs gonna have to choke a bitch?

Let them eat bootstraps.

PhillyPhanInDC

"The very existence of flamethrowers proves that some time, somewhere, someone said to themselves, "You know, I want to set those people over there on fire, but I'm just not close enough to get the job done.""  R.I.P George.

ice grillin you

i can take a phrase thats rarely heard...flip it....now its a daily word

igy gettin it done like warrick

im the board pharmacist....always one step above yous

Seabiscuit36

"For all the civic slurs, for all the unsavory things said of the Philadelphia fans, also say this: They could teach loyalty to a dog. Their capacity for pain is without limit." -Bill Lyons

Eaglez

I hope some of those idiots do lose their houses.

Who takes out an interest-only mortgage? The first two years of the term the borrowers of those mortgages were only making interest payments and now all of the sudden they realize that they have to pay the principal as well so most are just facing foreclosure. Classic problem of some Americans thinking that they can live above their means for an indefinite period of time.

I don't think the housing market is in that bad of a condition. Cramer always over-reacts, but he is fun to watch. China is talking about liquidating its Treasury holdings and infusing the market with U.S. greenbacks to spur inflation but they would lose out on their interest income as well. Plus they know that the U.S. is a virtual non-existent default risk. The only reason they are talking about it through some of their official outlets was because of all the trade protectionist talk coming from some senators in Congress, which would just precipitate and exacerbate any economic slow down (trade protectionism that is). The U.S. is still one of China's biggest markets. They would not jeopardized that relationship.

Real wages are growing for non-supervisory positions, U.S. unemployment has been stable at around 4.5%, inflation low, and the greenback losing some value actually increases exports since foreign currency would buy more American goods (one of the reasons why China doesn't want to re-value their currency -- although having a perpetual weak currency should never be a goal in the long run). I think we'll see somewhat of a slowdown, but a cataclysmic collapse tantamount to the Great Depression is highly unlikely because the policies that generated the Great Depression (protectionist trade policies, the Federal Reserve failing to expand the money supply, and extraordinarily high marginal tax rates which stifled investment) aren't in place.

Should the Fed maybe buy some Treasury holdings and target a lower interest rate? Maybe. But I don't know about the implications it would have on inflation. I just think there is a lot of hysteria that will balance out over the next few weeks/months.

I do agree that America's obsession with credit with no asset backing has to stop though. It is getting silly (see the current housing market).

Butchers Bill

I believe I've passed the age of consciousness and righteous rage
I found that just surviving was a noble fight.
I once believed in causes too,
I had my pointless point of view,
And life went on no matter who was wrong or right.

Eaglez

Quote from: Butchers Bill on August 09, 2007, 08:03:45 PM
Quote from: ice grillin you on August 09, 2007, 07:14:08 PM
http://www.youtube.com/watch?v=2eaMj1DPI6U&mode=related&search=

Sadly he's right.  I work in the bond market and "Armageddon" is not an exaggeration.

So what's the inside scoop, Bill? What is everyone, in particular, truly worried about?

Butchers Bill

Quote from: Eaglez on August 09, 2007, 08:17:37 PM
Quote from: Butchers Bill on August 09, 2007, 08:03:45 PM
Quote from: ice grillin you on August 09, 2007, 07:14:08 PM
http://www.youtube.com/watch?v=2eaMj1DPI6U&mode=related&search=

Sadly he's right.  I work in the bond market and "Armageddon" is not an exaggeration.

So what's the inside scoop, Bill? What is everyone, in particular, truly worried about?

Some big players (I mentioned a few above) may actually become insolvent, some hedge funds who invest heavily in those companies will have nothing to back their derivative trades with, which would unravel billions possibly trillions of dollars in hedged trades.

In laymans terms, hundreds of billions of dollars (possibly trillions) would simply vanish from investors and these huge financials.  If that happens, no one is safe...the stalwarts of the American economy would have proven vulnerable, and if they are, is the US gov't just as vulnerable?  What if China stopped buying treasuries because of a perceived weakness in the Us's ability to pay its debt?  I can tell you our government would have to shut down...80% of the bond trades I place are with the Chinese.

The scary part is the hedge fund industry in completely unregulated and there are trillions of "paper assets" that are at stake here.  What happens if the US wakes up one morning to see trillions gone?  I don't even want to think about it.   
I believe I've passed the age of consciousness and righteous rage
I found that just surviving was a noble fight.
I once believed in causes too,
I had my pointless point of view,
And life went on no matter who was wrong or right.

ice grillin you

with all due respect this sounds like some y2k ish to me
i can take a phrase thats rarely heard...flip it....now its a daily word

igy gettin it done like warrick

im the board pharmacist....always one step above yous

Butchers Bill

Quote from: ice grillin you on August 09, 2007, 08:42:47 PM
with all due respect this sounds like some y2k ish to me

I admit it does.  I wish I didn't know what I know...I could sleep at night.  There are trillions of dollars in hedge funds comprised of nothing but MS Excel and creative accounting based on debt and derivatives.  If the debt blows up, so do the derivatives and the hedge funds will effectively cease to exist...along with trillions of dollars.
I believe I've passed the age of consciousness and righteous rage
I found that just surviving was a noble fight.
I once believed in causes too,
I had my pointless point of view,
And life went on no matter who was wrong or right.

Butchers Bill

I believe I've passed the age of consciousness and righteous rage
I found that just surviving was a noble fight.
I once believed in causes too,
I had my pointless point of view,
And life went on no matter who was wrong or right.