stock market thread

[WrongWay 0]

http://www.marketwatch.com/news/story/paul...18B3EC7B1CAC%7D"Treasury Secretary Henry Paulson had a tough message for homeowners: Don't think about walking away from your mortgage if you can afford the payments.""Economists are concerned that many homeowners will choose in coming months to take part in "jingle mail" or mail their house keys back to the bank because of the falling value or rising payments as their adjustable rate loans reset."Shut up.... OF COURSE they are going to walk. You owe $400K on a house and an identicle one down the street just sold for $250K???? You would be a moron NOT to walk away.And they are just figureing this out NOW!!!!!!!! Two years ago I was saying this was going to happen! $0 down, I.O., negative amortization, no-doc, piggy-back..... If you let people gamble with other peoples' money, they will gamble with other peoples' money. When the gamble goes bad, they will walk away.80% of people "at risk" are not even bothering to contact their lender? Duhhh... Why contact the lender when you have NO INTENTION of actually paying for the overpriced house(s) you purchased at the peak of the boom?Bye bye U.S. economy!

[El Guapo 8]

MBIA got its ratings upheld last week. And the new conforming limits and repositioning of funds opened more dollars for freddie and fanny for loans. Altough I do not 100% disagree with you, I thik your arguments are a bit misguided.

[WrongWay 0]

MBIA got its ratings upheld last week. And the new conforming limits and repositioning of funds opened more dollars for freddie and fanny for loans. Altough I do not 100% disagree with you, I thik your arguments are a bit misguided.

2/21 rumors of workout for AMBAC and MBIA get leaked.2/25 AMBAC and MBIA ratings reaffirmed. 2/28 rumors bailout may be in trouble.2/29 Bailout hits snag. More capital needed. http://www.cnbc.com/id/23405541http://finance.yahoo.com/echarts?s=%5EDJI#...ource=undefined

[WrongWay 0]

market is stuck in the 12200 to 12700 range. Probably will be for a good while.

Ooops. Interday low yesterday was below 12200. Today we have bounced below 12100 a couple times.Here comes a January interday low retest. 11600.Bernanke's speach this money was pretty funny. Started out okay with: supply-demand imbalance = falling prices = negative equity = skyrocketing defaults, forecolsures and CRAZY low recovery rates that will likely fall further.Then he goes into some magic wand waiving: Lenders just write down mortgage balance without going insolvant. Oh, there is disincentive to rework loans that have been packaged and sold as MBS (most of the trouble loans) and we'll... well... we'll come up with something.... Oh, modernize FHA but don't drop lending standards. AND we can dump bad loans back on the originators, but that will still make originators more likely to loosen standards again....Then, poof.... it is all dependant on stopping prices from falling and then get some recovery.He is a professor, right??? Let's say I am in his Econ 101 class and he gives me this problem.Falling demand, high and going higher supply. Demand already well below supply. Prices are way above support levels and falling. Most likely:a) Prices will stabalize and begin rising without prices falling back to support level where supply/demand balance point.B) Prices will keep falling until the reach support level where demand and supply will return to balance.Would I be correct if I pick a?2) Using traditional lending standards, people find it difficult to qualify for loans more than 3x income. House prices in many parts of the country are more than 5x annual income with some markets above 10x. These prices were acheived using crazy looselending standards where anyone could qualify for any loan as long as they didn't mind fudging a few numbers on the loan application (mortgage fraud, but aAEERYONE is doing it). Recently, lending standards have returned to the traditional limitson price/income. What is most likely:a) Prices will remain at the inflated level despite the tightening lending standards preventing people from borrowing.B) Prices will return to the hsitoric normal level that traditional lending standards permitted people to qualify for loans.

[Yoda 1]

Buying 60 Monsanto @ 111, right now. Pretty big down move on no news, this is the dip I was waiting for. (now it just has to stop dipping).

[WrongWay 0]

And.... rumor the AMBAC bailout may be back on, and the DOW recovers 70 points in a matter of minutes.

[WrongWay 0]

market is stuck in the 12200 to 12700 range. Probably will be for a good while.

Good thing we are stuck in a range... With all the margin calls and rumors of insolvancy, we could be headed for a record close if it weren't for that range we are stuck in.I am so glad that I was wrong about the housing market collapsing causing a credit crunch, spilling over into the broader economy, and causing drops in stocks.It would have really sucked if I had been right. With the high degree of leverege in the system, had I been right then the losses would have trigged systemic losses that could collapse the financial system.

[ShakeZuma 585]

http://www.marketwatch.com/news/story/paul...18B3EC7B1CAC%7D"Treasury Secretary Henry Paulson had a tough message for homeowners: Don't think about walking away from your mortgage if you can afford the payments.""Economists are concerned that many homeowners will choose in coming months to take part in "jingle mail" or mail their house keys back to the bank because of the falling value or rising payments as their adjustable rate loans reset."Shut up.... OF COURSE they are going to walk. You owe $400K on a house and an identicle one down the street just sold for $250K???? You would be a moron NOT to walk away.And they are just figureing this out NOW!!!!!!!! Two years ago I was saying this was going to happen! $0 down, I.O., negative amortization, no-doc, piggy-back..... If you let people gamble with other peoples' money, they will gamble with other peoples' money. When the gamble goes bad, they will walk away.80% of people "at risk" are not even bothering to contact their lender? Duhhh... Why contact the lender when you have NO INTENTION of actually paying for the overpriced house(s) you purchased at the peak of the boom?Bye bye U.S. economy!

wrongway, I've been thinking about this recently... you talk about all these people walking away from their mortgages because they're for more than their houses are worth. when they do this, where are they going to live?

[WrongWay 0]

Feb 1, Yoda said:ITB - Bought 1/4 position at 19 (clearly too early) 1/4 position at 15 and 1/2 at 14. Hey, look where it is now!

Short squeeze!!!! DUMP NOW or ride it back down!

Wonder if he took my advice... Back down from 21.5 to 16.5. Back on Oct 11 he said...."Symbol: ITB. Put in a half position at $21.80 a week or 2 ago. Once everything stabilizes a little further I plan on slowly putting in more and more. I will have at least a double position when all is said and done. Maybe more."Wonder why he left that buy off his list of purchases.Housing is JUST getting started on the downside.

[WrongWay 0]

wrongway, I've been thinking about this recently... you talk about all these people walking away from their mortgages because they're for more than their houses are worth. when they do this, where are they going to live?

They will go back to renting, and will be paying much less.During the boom caused by crazy loose lending standards, home ownership increased from 60% to 70%. At the same time, house prices on a national level jumped 75% even in inflation adjusted dollars.... over 100% in the most bubbly areas. This means people are paying $2K a month for a place they can rent for $1300 a month.... At least on my street that is the buy/rent price spread. I live in one of these bubble areas (Phoenix). We are seeing vacancy rates skyrocket as speculator owned properties that have been sitting empty are rented out or brought to the resale market, as failed condo conversions are returned to rental apartments, as new condos are completed and find no buyers so are transformed into leased units... Prices on the fringe have already plunged 20+%, and we are seeing falling-knife catchers buying up foreclosures and renting them out...Then you have people like my sister-in-law. Bought in 2002 for $140K. 3 cash-out refi-s and a bankruptcy later, she had a sub-prime I/O ARM for $240K sitting at 8% scheduled to adjust to 11%. She could not sell, could not refi, she could not afford the higher payments.So, what did she do?She drew up fake lease documents saying ther old place was leased out. Then got a cash advance from her realtor whcih she used as a 3% down to get an FHA loan to buy a new house. The builder paid her Realtor a 6% comission which repaid the 3% advance she used as a down. As soon as the new house closed, she stopped making payments on her $240K sub-prime loan.http://recorder.maricopa.gov/recdocdata/Ge...0&res=FalseForeclosure auction scheduled for May 21st.Until prices fall back to historic normal, the new constrction market will continue to undercut the exisitng home market, adding more inventory to an allready saturated market....

[ShakeZuma 585]

so wait a second... I'm seeing two options here. either you find a rental company thats willing to rent a house/apartment to you after you JUST defaulted on a mortgage (not bloody likely), or you commit forgery to rent the place then default on the loan. don't think anybody is ever going to catch on to this little scheme?are there any other options out there that I'm missing for someone to just stop paying on a loan and magically get back into another house? and for that matter, a huge percentage of the population doing this as would need to happen to make your scenarios come true?

[El Guapo 8]

so wait a second... I'm seeing two options here. either you find a rental company thats willing to rent a house/apartment to you after you JUST defaulted on a mortgage (not bloody likely), or you commit forgery to rent the place then default on the loan. don't think anybody is ever going to catch on to this little scheme?are there any other options out there that I'm missing for someone to just stop paying on a loan and magically get back into another house? and for that matter, a huge percentage of the population doing this as would need to happen to make your scenarios come true?

Yeah buy another house before you default on the one you are in.

[WrongWay 0]

"either you find a rental company thats willing to rent a house/apartment to you after you JUST defaulted on a mortgage (not bloody likely),"I see ads all over for rentals... "recent foreclsoure not a problem".http://phoenix.craigslist.org/apa/601682933.html"Utilities Included Credit & Foreclosure Friendly"http://phoenix.craigslist.org/apa/598667392.html"reduced rents to prospective renters with foreclosures, bankruptcies, bad credit/no credit "http://phoenix.craigslist.org/apa/595548929.html"Credit doesn't matter!!!!!"http://phoenix.craigslist.org/apa/601700049.html"Do U have Credit issues ? Need To Move? Call Now!! "Again, we are at record high vacancy level. A lot of the avaialble demand has suck credit. So, there are 2 choices... rent to someone with bad credit, or do not rent it at all.

[ShakeZuma 585]

Yeah buy another house before you default on the one you are in.

how do you buy an additional house when you already have a mortgage out on one? I mean, unless you bought well below what you could afford, i can't see a bank giving you a mortgage that far out of your earning ability. how would you do that?

[El Guapo 8]

how do you buy an additional house when you already have a mortgage out on one? I mean, unless you bought well below what you could afford, i can't see a bank giving you a mortgage that far out of your earning ability. how would you do that?

I have a friend doing it right now, he owns three homes. He owes 2.1 million on about 1.2 million in real estate. He is still current on all the payments. He is buying a short sale for 450K he has some cash for the down payment and as soon as he gets in the door he is going to stop paying the mortgages on the others let them go, rent them until finally foreclosed on. Currently foreclosures are taking anywhere between 6 and 12 months. His credit will be in the crapper for 7-10 years after that so he plans on staying in the next house for a while.In CA they cannot go back after him for the new house because the old ones are collateralized loans and as soon as they either accept a short sale or reposses the home.Its, shady, I'm not sure I would ever do it, but his only option is to make a 4,000 month payment on a house that has dropped 40% in value that he cannot refi. (being his primary residence)

[ShakeZuma 585]

"either you find a rental company thats willing to rent a house/apartment to you after you JUST defaulted on a mortgage (not bloody likely),"I see ads all over for rentals... "recent foreclsoure not a problem".http://phoenix.craigslist.org/apa/601682933.html"Utilities Included Credit & Foreclosure Friendly"http://phoenix.craigslist.org/apa/598667392.html"reduced rents to prospective renters with foreclosures, bankruptcies, bad credit/no credit "http://phoenix.craigslist.org/apa/595548929.html"Credit doesn't matter!!!!!"http://phoenix.craigslist.org/apa/601700049.html"Do U have Credit issues ? Need To Move? Call Now!! "Again, we are at record high vacancy level. A lot of the avaialble demand has suck credit. So, there are 2 choices... rent to someone with bad credit, or do not rent it at all.

ok well it looks like those are in phoenix. larger cities. could be that more people are renting out to people with bad credit in places like that, I don't know, but I do know around here nobody would rent to somebody who just defaulted on a loan. also, if that many people default on loans and go back to renting, won't the demand for apartments go up and consequently make the qualifications to get the apartments higher? ie no more loan defaulters? also, you're assuming that every person who has bought a house and now sees it devaluing will just give it up because of assumed lost value. I seriously doubt this will happen. I would think MAYBE 15% of recent homebuyers might, but I would venture to guess that more often than not people would just tough it out for the time being so that they could keep their house and their credit in tact. to me this whole thing if more of a psychological issue than you're making it out to be.

[ShakeZuma 585]

I have a friend doing it right now, he owns three homes. He owes 2.1 million on about 1.2 million in real estate. He is still current on all the payments. He is buying a short sale for 450K he has some cash for the down payment and as soon as he gets in the door he is going to stop paying the mortgages on the others let them go, rent them until finally foreclosed on. Currently foreclosures are taking anywhere between 6 and 12 months. His credit will be in the crapper for 7-10 years after that so he plans on staying in the next house for a while.In CA they cannot go back after him for the new house because the old ones are collateralized loans and as soon as they either accept a short sale or reposses the home.Its, shady, I'm not sure I would ever do it, but his only option is to make a 4,000 month payment on a house that has dropped 40% in value that he cannot refi. (being his primary residence)

I still don't see how he got the loans for all of that in the first place, must be real estate stuff I don't know about. what I'm talking about though is your average homebuyer, a family of 4 or whatnot, not some house flipper trying to make 100k. I just don't see 80% of them doing this.

[El Guapo 8]

ok well it looks like those are in phoenix. larger cities. could be that more people are renting out to people with bad credit in places like that, I don't know, but I do know around here nobody would rent to somebody who just defaulted on a loan. also, if that many people default on loans and go back to renting, won't the demand for apartments go up and consequently make the qualifications to get the apartments higher? ie no more loan defaulters?

Well alot of them wont have any option and since there is such a high forclosure rate they will probably overlook that factor. But if it couple by a 540 credit score and other defaults, then they might have a problem.

also, you're assuming that every person who has bought a house and now sees it devaluing will just give it up because of assumed lost value. I seriously doubt this will happen. I would think MAYBE 15% of recent homebuyers might, but I would venture to guess that more often than not people would just tough it out for the time being so that they could keep their house and their credit in tact. to me this whole thing if more of a psychological issue than you're making it out to be.

This is correct Shake. I bought my home for 420K in 2003, 18 months ago it was worth ~620K, the house across the street from me foreclosed for 350K. So I am upside down in my home. But I am not walking away from it. In CA homes are near there 2001 price levels, there is no way it is going to stay here.I'll use my house as an example of why. It is ~1700, new carpet, fixtures, marble, backyard etc. Its fixed up very nice. To build a home is between 100 and 200 a sqft. so for my house lets go in the middle at 150. that is 255000. I alos have a dock that goes to the delta, that is worth a minimum 100k. Now lets be real conservative on the price of my bare land, at 100K. That puts a base price point of my house at 455,000. It is undervalued right now.I took my son for a walk yesterday, and there is not one home for sale in my neighborhood. One for rent. The only thing on the market right now is foreclosures and short sales. Once those get purchased by either new home owners who can afford again or new investors, then price will re-adjust and look to see prices back to 2005 levels in 2011 or 2012.

[El Guapo 8]

I still don't see how he got the loans for all of that in the first place, must be real estate stuff I don't know about. what I'm talking about though is your average homebuyer, a family of 4 or whatnot, not some house flipper trying to make 100k. I just don't see 80% of them doing this.

I don't either, I was just giving you one scenario I know of.

[dms26 3]

I still don't see how he got the loans for all of that in the first place, must be real estate stuff I don't know about. what I'm talking about though is your average homebuyer, a family of 4 or whatnot, not some house flipper trying to make 100k. I just don't see 80% of them doing this.

I think what is happening in some cases are families are paying a mortgage of say 2K a month, the house next door is renting for 1300 a month. So they are walking on their current house which they financed with 0% down. Then renting a similar house for the 1300 a month and foreclosing their loan. Someone scoops up their foreclosure and turns into a rental for the next family who walks away from their loan. Rinse and repeat.At least that is how I understand it.Also some of what Guapo and Wrongway are talking about should be illegal.

[ShakeZuma 585]

I took my son for a walk yesterday, and there is not one home for sale in my neighborhood. One for rent. The only thing on the market right now is foreclosures and short sales. Once those get purchased by either new home owners who can afford again or new investors, then price will re-adjust and look to see prices back to 2005 levels in 2011 or 2012.

yeah see this is what I'm saying. me personally, I'm looking forward to a drop in housing prices so that (assuming I'll have a job thats stable enough for me to agree to a mortgage) I'll actually be able to afford one. and I'm damn sure there are plenty of others out there just like me waiting for the prices to drop so they can start buying again. I mean, I see what wrongway is saying and I guarantee there is a housing market crash coming, and I'm pretty damn sure it will be accompanied by a recession. but I just don't see the grand scale destruction of the us economy he's predicting. oh well, time will tell I suppose.

[dms26 3]

I mean, I see what wrongway is saying and I guarantee there is a housing market crash coming, and I'm pretty damn sure it will be accompanied by a recession. but I just don't see the grand scale destruction of the us economy he's predicting. oh well, time will tell I suppose.

Wrongways view is pretty much a doomsday scenario. I think he makes a lot of good points he just makes it sound like the world is going to end. It will probably still get worse but I don't think you will see the majority of homeowners to just walk away.

[ShakeZuma 585]

Wrongways view is pretty much a doomsday scenario. I think he makes a lot of good points he just makes it sound like the world is going to end. It will probably still get worse but I don't think you will see the majority of homeowners to just walk away.

yeah thats my point. and about you're 1300 vs 2000 point, that makes a good argument. the only thing I see there though is that I still don't see that many homeowners walking away from their mortgages just because it would be cheaper to rent the same thing at the time. owning a home is just as much of a psychological thing than it is a financial one. it means something to own a home. because of this, the only people I see walking away from their mortgages in droves would be the ones who couldn't actually afford it at all in the first place, and I'm not sure what percentage of buyers in the past 10 years or so this is. most people who buy a home after the careful planning that should be taken aren't worried about the absolute cheapest way they could be living at that exact point in time. they have too much already psychologically invested in that home to just give it up to rent and save a few bucks. if that was their methodology, I doubt they would have bought a home in the first place.

[El Guapo 8]

yeah see this is what I'm saying. me personally, I'm looking forward to a drop in housing prices so that (assuming I'll have a job thats stable enough for me to agree to a mortgage) I'll actually be able to afford one. and I'm damn sure there are plenty of others out there just like me waiting for the prices to drop so they can start buying again. I mean, I see what wrongway is saying and I guarantee there is a housing market crash coming, and I'm pretty damn sure it will be accompanied by a recession. but I just don't see the grand scale destruction of the us economy he's predicting. oh well, time will tell I suppose.

The housing market crash is already here. -40% in 18 months, it will get a bit worse but not much.

yeah thats my point. and about you're 1300 vs 2000 point, that makes a good argument. the only thing I see there though is that I still don't see that many homeowners walking away from their mortgages just because it would be cheaper to rent the same thing at the time. owning a home is just as much of a psychological thing than it is a financial one. it means something to own a home. because of this, the only people I see walking away from their mortgages in droves would be the ones who couldn't actually afford it at all in the first place, and I'm not sure what percentage of buyers in the past 10 years or so this is. most people who buy a home after the careful planning that should be taken aren't worried about the absolute cheapest way they could be living at that exact point in time. they have too much already psychologically invested in that home to just give it up to rent and save a few bucks. if that was their methodology, I doubt they would have bought a home in the first place.

I agree here, plus 2000 a month is writeoff, 1300 a month no writeoff, its cheaper to own the home.

[ShakeZuma 585]

The housing market crash is already here. -40% in 18 months, it will get a bit worse but not much.

I think that varies by region though. I know here here home prices are still really inflated. plenty of people have told me that if they had to buy their house now they couldn't afford it.

I agree here, plus 2000 a month is writeoff, 1300 a month no writeoff, its cheaper to own the home.

oh true dat yo. I didn't even think of that either.