Comments on: “Do you think China’s gonna forget?”

By: Tom

Tom — Mon, 01 Oct 2007 13:35:51 +0000

I didn’t check on this recently until the link posted in this morning’s article, but I just had to comment on this:

“you can if you leverage it high enough.”

Sorry, but that doesn’t make any sense, you can’t leverage $10 trillion of debt into more than $10 trillion in losses, it would be exactly the opposite, leverage would reduce the losses if anything since less money was fronted to buy the debt.

By: UBS takes $3.42 billion write down related to the credit crunch and subprime mortgage contagion

Mon, 01 Oct 2007 07:14:01 +0000

[...] world’s largest wealth manager. It sounds eerily similar to this story of an employee doing mortgage backed securities deals on Wall Street. From the CNBC article: The bank’s losses resulted from applying sharply [...]

By: Marites

Marites — Tue, 25 Sep 2007 16:37:48 +0000

Hello,
Thank you for the publishing this website for us to see and read. Now, I do understand how mortgage notes works.

I cannot believe what I am reading!

Thank you so much.

Sincerely,

Marites Oberg

By: Morgan Brown

Morgan Brown — Thu, 20 Sep 2007 22:42:51 +0000

Bob – the business is cyclical – but the disruption that we are seeing is unprecedented. As banks get more connected the greater likelihood that the system is susceptible to a systemic episode. Why do defaulting mortgages in california cause a bank run in London? Because now – more than ever before – the global banking system is tied and leveraged on to itself more than ever before. This interdependency opens the system up for larger shocks (while simultaneously insulating against smaller ones) – so the question is – is this a minor shock that can be absorbed – or does it cause a systemic break?

By: Morgan Brown

Morgan Brown — Thu, 20 Sep 2007 22:40:22 +0000

Tom – thanks for the link. Remember that we’re just talking one guy sharing his frustrations and disbelief at what was transpiring. I am sure that there is hyperbole and whatnot built in to the story – regardless its still a rather harrowing tale.

Morgan

By: 3rdbillygoat

3rdbillygoat — Thu, 20 Sep 2007 03:11:38 +0000

Reminds me of a conversation I had with an options mkt maker friend of mine over 10yrs ago. At that time the big Asian tiger was Japan. China was just beginning to stir.

“Why does Japan pump all this money into the US economy. It seems a whole lotta of these deals don’t make sense. Are they clueless or something?”

MM: “No, but we have the nukes.”

He went on to say that some of this money flow was a type of protection money.

Our republic may be rotting from the inside, especially with debt, but we still carry a very big stick with our military capabilities.

Not a sustainable model, and there’s always another badass coming up, but, for now, we do have brute power. Hell, we ought to, we waste enough treasure on the Pentagon Playhouse.

By: sales analyst

sales analyst — Wed, 19 Sep 2007 22:48:31 +0000

you can if you leverage it high enough.

“you can?t get to trillions of dollars of CDO?s worth 10 cents on the dollar from a starting point of $10 trillion in total mortgages.
“

By: Tom

Tom — Tue, 18 Sep 2007 18:58:41 +0000

You are not looking at trillions of dollars of debt worth 10% on the dollar. The total value of every US mortgage is about $10 trillion (Source: http://online.wsj.com/article/SB119008641253430876.html?mod=googlenews_wsj ), you can’t get to trillions of dollars of CDO’s worth 10 cents on the dollar from a starting point of $10 trillion in total mortgages.

By: Bob O.

Bob O. — Tue, 18 Sep 2007 15:33:31 +0000

Thomas has it dead to rights. China isn’t investing in the United States just to make a profit. They’re keeping their currency over valued at gunpoint! China’s economy has soared on the backs of American consumers… they’re not really “losing” anything. Where is China going to dump its money? Europe?

This business is cyclical. It always has been. People need housing. People want a home. There will be a correction, there will be fence sitters, but the fever will break and those left (those with a conscience that protected their clients) will be around to reap the rewards.

Enough doomsday…

By: Aunty J

Aunty J — Tue, 18 Sep 2007 13:56:11 +0000

This is another story which seems to suggest we will be going back to NORMAL underwriting standards. No more 5X, 6X, 7X income loans – just 3X or 4X at most. No more undocumented loans. No more negative amortization loans. No more interest only loans. No more 100% financing – which means sizeable down payments. Just plain Jane, honest to gooodness, well-underwritten loans based on historically proven and sane guidelines.

Look, no one’s going to give us money for these mortgages for a long time. The banks are going to keep these loans on their own books or sell them to the GSEs (Fannie Mae, etc.). In either case, this means good conservative underwriting. Don’t forget there will be fewer bucks to go around to fund mortgages. How do you think the banks are going to weed out the applications who don’t get approved? The guy with the strongest application gets the loan. This means high FICO, large down payment, low LTV, etc.

If and when the foreigners are stupid enough to come back, guess what, they are going to insist on conservative underwriting.

If you own a home in a VERY expensive neighborhood, watch out. You will be affected more than the little guy.