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31 comments on The Finance Round-Up: October 17th 2007
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31 comments on The Finance Round-Up: October 17th 2007
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Note the emphasized statement. September was the end of the current quarter. During the next quarter, ARM resets go up again. Then during the quarter after that ARM resets go up even further. It is not until April-June 2008 that ARM resets drop and even then they are still well above the current ARM reset rate right now which is what is triggering this mess in the first place. This credit crunch is only just beginning right now. And remember that Citigroup is just the first of many and also that Citigroup just underestimated their losses which they had to revise upwards. So when you look at that $2.24 billion future loss estimate, remember that so far Citigroup and every one of their peers has been consistently low on estimating future losses.
"The greatest shortcoming of the human race is our inability to understand the exponential function." -- Dr. Albert Bartlett
Into the Grey Zone
And where do you hide financially? FDIC insured. Gold? Ammo ;)
Buy an extra bottle of dishwashing soap, shampoo, and laundry detergent, a shopping cart of toilet paper and dish towels, an extra dozen cans of sliced peaches, chili, asparagus, beans, chicken soup, or whatever you usually buy. Your rate of return on canned goods will be above your rate of return on treasury notes.
No joke, stick a few thousand bucks worth of stuff in the closet. Lightbulbs, towels, whatever you bought last year that didn't need to be refrigerated.
No worries mate.
According to Little Ben Sunshine (Helicopter's Bean-Count Cousin):
Rest of Little Ben's NYTimes op ed piece, "The Gloomsayers Should Look Up" can be found here.
Silly puppy, buying food from the Mexican phone company.
Yeah, and there is also the self-reinforcing foreclosure cycle in the US whereby current foreclosures and short sales cause neighborhood home appraisals to drop, thus putting additional borrowers in an "upside down" situation where they owe more on the house than it is worth. The result is "jingle mail" where the keys are mailed back to the bank, who then forecloses.
Sometime in 2008, one can expect whole condominum projects to foreclose in Miami.
http://www.youtube.com/watch?v=QVFBojFJTZM
Here in AZ a few days ago on the news they had a whole development a bit outside of town where new houses started at 285K, They were auctioning them off with a reserve of 89K and only selling one in 10 if that.
The problem started when they loaned to those not capable of producing significant wealth through their work.
I followed a link here a few weeks back regarding the Florida condo market. The area being described had a historic appetite for about 1,000 units a year changing hands. There were 9,000 units, mostly unoccupied spec housing, currently on the market.
This has even happened here in the middle of nowhere. We have a little tourist town complex here made of Okoboji, West, Okoboji, Arnold's Park, Spirit Lake, Wahpeton, Egralharve, and Milford - about 6,000 full time residents set in the midst of 21.7 square miles of glacial lakes. Its cool, but its not all that. The far northeast corner in Spirit Lake where the city ends and the farmland begins has a six story condo tower overlooking a bit of East Lake Okoboji and some corn fields. There is a big sign on the side "Discount for first eight units sold". Judging from the parking lot there is someone there in the sales office and its otherwise unoccupied.