patrick.net

A lot of people do not even care if they are amortizing the loan

A lot of GBFs (greedy Boomer f*cks) would just pass their debts onto their children and grandchildren if the law allowed them to.

A lot of GBFs (greedy Boomer f*cks) would just pass their debts onto their children and grandchildren if the law allowed them to.

The motto is: live rich and die broke.

A lot of people do not even care if they are amortizing the loan.

A lot of people don't know what is amortization.

I know individuals who just care about the low monthly payments and not about how much of the loan they are actually repaying.

I know individuals who just care about the low monthly payments and not about how much of the loan they are actually repaying.

And not even about how much the monthly payments will be in the future.

A lot of GBFs (greedy Boomer f*cks) would just pass their debts onto their children and grandchildren if the law allowed them to.

They're half way there already with Prop 13 and Social Security.

It's too bad young people are too busy working to vote. They'll always be screwed.

Well shiver me timbers! Are those barnacles I see forming on your gutters, matey!

Pffftt. Anyone got a snorkle extenstion? Wait, that'll be the next Mortgage Broker advertising ploy!

Hello there Mr. and Mrs. FB! I'm Diver Dan, the under water re-financin' man! (gurgle, gurgle) If you're underwater on your home loans WE CAN HELP! Just tie a message to a tuna and we'll come a' paddling! :)

The motto is: live rich and die broke.

I don't see anything wrong with this, if you can pull if off. I don't feel like I have any great obligation to give my children a life of trust funded luxury. If I raise them to adulthood and pay for their college education, I will have done more for them than my parents did for me.

It is a problem if you outlive your assets and expect your children to take care of you afterwards, though.

I want to live rich and die heavily indebt.

I guess I would feel differently if I was optimistic enough to have children...

I suppose that's another justification for spending more money now. There might not be many snow capped mountains and polar bear sanctuaries in another twenty years.

Peter P,

I read about some dire predictions of total fisheries collapse in less than 40 years. Eat NOW!!!

"There's too much liquidity in the system,''

US Government - let's print more money to finance our growth. Oh Yeah, let's not collect M3 data as well. We want to make sure we can hide everything under the rug"

Hyper-stagflation is possible.

Hyper-stagflation is the most logical possibility and that will be like adding a turbo-charger to the housing crash.

Pay more for food and have less left over to pay the mortgage. Being that so many are so heavily leveraged, this will REALLY kill the market.

I want to live rich and die heavily indebt. :lol:

Doctor: You have 3 months to live.

Patient: Do you know a good mortgage broker?

I read about some dire predictions of total fisheries collapse in less than 40 years. Eat NOW!!!

I will eat now.

But such predictions are no better than the one for 'global warming.' :)

Whether you can refi whilst underwater depends a lot upon how far underwater (which itself depends upon how much you put down), and how good of credit risk you are.

Hyper inflation is all but impossible in the US. I've covered this many times before. I think when most people say "hyper inflation" they mean "uncomfortably high inflation", ala the 70s.

Hyper inflation has a specific definition which, among other things, means inflation of 1% per day, which is over an order of magnitude per year.

It has never occurred within a modern nation state that wields credible military power. Many examples of building-to-hyper inflation scenarios have been averted by this same mechanism, as in Russia in the 90s.

When presented with the option of (a) make crippling payments to foreign owners of debt at great and perilous cost to your own citizens, culture and system of government, or (b) default and tell everyone to deal with it; every single power with a credible military has chosen (b).

Hyper-inflation = Peter P going hyper, jumping up and down, screaming at the skyrocketing sushi prices.

DP,

My understanding was that they "would no longer publish" M-3? They're probably still tracking it (in horror) but they are no longer making it available (I mean being all old and outdated and such).

We have the advantage that our foreign debt is denominated in our own currency. Thus, even if the dollar collapses, there is no Argentina scenario on the horizon for the US.

Most likely, we will allow the dollar to slowly depreciate as a way of easing the pain of repayment and avoiding an outright default (though some would argue that depreciation of the currency is equivalent to a partial default from the perspective of the foreign creditor).

I agree that hyperinflation is very unlikely. Even generalized inflation shouldn't be a problem because wages will not rise very fast in light of the global labor arbitrage. To anyone who thinks we will have generalized inflation, I will believe it when I start seeing my salary hyperinflate.

But we will probably continue to see a decline in purchasing power of the dollar, with respect to imported goods and commodity products.

I suppose one argument for "living for the moment" is that a trip to Europe would have been about 30% cheaper, in dollar terms, a couple of years ago. And you will probably never again get the kinds of deals we are getting now on imported consumer goods like computers, televisions, furniture, etc., etc.. Inflation could really take hold if the dollar decline continues (and esp. as China moves away from its dollar peg).

I read an article about short sales recently (sorry, don't have a link). They said that due to the slicing and dicing of MBS's, there are a lot of new restrictions on lenders' ability to modify loan terms. And there are so many parties to any potential agreement, that individual "workouts" will be less feasible.

This market is just going to seize up and stop working, IMO.

For instance, suppose the borrower's mortgage has been securitized, then subdivided into tranches, then sold off to 12 different hedge funds, pension plans, etc... Even if the servicing department of the originating bank is able and willing to throw a rope to the borrower by offering modified terms (eg: extending the adjustment date out a couple of years), it isn't going to happen. The covenants in the securitizing instrument would prevent such an arrangement unless the bank makes the MBS holders whole by absorbing 100% of the loss. Banks won't be able to afford it.

By the same token, if the bank forecloses on tons of properties, then they will have a tougher time selling MBSs in the future, since they will get a bad reputation for originating crappy loans.

I would imagine that a bailout (really more of a global "workout") is a possibility. Similar to LTCM, only bigger. All the big financial institutions took a whack as a result of LTCM, but it was survivable. The Fed may want to orchestrate another effort to spread the pain in order to save banks and MBS investors. FBs will be on their own.

There are some very powerful arguments in favor of (I'm not making this up):

the present value of consumption.

As Glen just described, if the dollar is in a secular purchasing power decline, then consumption of certain things now is more valuable than saving, because the future value of savings will be less than the future costs of the same consumption.

Traveling to Europe is a great example.

Of course, this all depends upon believing in a long-run decline of the dollar's purchasing power. I'm not sold on that yet, though it does look possible. Let me rephrase. It's not so much that I thin the dollar is good. It is terrible. Horrible. Crap. But it's better than everything else. I'm definitely *not* sold on the Euro. That could be undermined much more immediately and with much less perturbation than the dollar at any time.

During the boom, if borrowers asked about the adjustable rates on their mortgages, they were told “oh, you can just refinance and start over”.

Yep. I heard arguments questioning "why would anyone these days want a fixed rate, 30 year mortgage when you have more control over your money with an Option ARM? You're just going to refi in a couple of years anyway."

I knew something was amiss when the broker I talked to was offering me interest rates before even vetting a loan app or checking my credit. Can you say "Yield Spread Premium"

GC,

Calmness will come in time. I'm still living in a country where Bush gets about 30% support.

DinOR

"My understanding was that they “would no longer publish” M-3?" Yep

Not publishing means they are definitely hiding something. I think some Investment Companies are trying to recreate the "equation" to track this data privately. Might be interesting to see the "horror".

DP,

I can easily visualize firms trying to "reverse engineer" their way through this thing. The justification for doing away with it was flimsy at best.

Patrick, nice graphic, good thread to revisit. Like I've said before it is silly to try to predict the future, and timing but with that said I sense most agree that the scenario for the bubble burst starts with a maximization of prices due to more creative ways of keeping the payment the same and then people just buying for pure speculation. After prices can't appreciate, foreclosures depress prices because they break the stalemate from reluctant sellers, and patient buyers. This scenario is now UNDISPUTABLE, and we can laugh at how simple it is but any of us who were doing this 2 years ago have first hand stories of being ridiculed for even floating an opinion of a real price correction.

I have read two of your recent links. The normal foreclosure rate is 1 per 1000 historically. In Detroit, and La Vegas that number is now 1 in 56, and 1 in 52. The cheerleaders keep trying to say we are at the bottom, and we have been saying this is just the beginning. I don't know how people can have the arrogance after being proved so conclusively wrong to then continue this denial that the obvious fundamentals suggest prices will very likely fall 50% in some hot areas, and will revert to a normal trendline in the less frothy areas.

It's official. The bubble is national. Check out this cruddy looking new construction in Little Rock AR for nearly $700K. Apparently someone in Bubba country didn't get the memo that the bubble is over.

http://littlerock.craigslist.org/rfs/318617669.html

You gotta be kidding me.

Glen,
Thanks for the Thursday afternoon entertainment. Just what the world needs: another McAlbatross in Arkansas. What the hell is "Whispering Woods Cove" anyway? What are the woods whispering? "I see debt people.."?

Spot it.
Ohhhh... Dinor would like this one. At least with stocks there are regulations and margin calls. No such luck with a negative amortization mortgage... you can loose all your mony and then some. Nice.

Even if someone had $500K cash to plunk down to buy a house for cash, WTF kind of sales pitch is that: "it can't go to zero!" Wow. Better than Enron or pets.com! Where do I sign up?

Jeesh... and of course the obvious. A twenty percent decline in price will lose you twice your down payment if you put 10% down. Fun with leverage on the way down...
BTW, the BA Craigslist ReduceOMeter shows an all time high of 176 "reduced" listings for April 27-28.

Well that house in AR is on 5 acres. What is the cost of 5 bare acres over there?

I have to admit that I have never even been to AR, let alone shopped for RE there, so I have no idea what 5 acres in Little Rock goes for. However, I did see this ad for 40+ acres (with house) for $295K in the Ozarks. Plus they will throw in a mule!

http://littlerock.craigslist.org/rfs/309869088.html

Don't see how you could be a housing bear and expect inflation- please explain. One of the best things possible for home owners w/ fixed rates. Lever yourself up and repay in funny money. I see deflation, possibly followed by politically created inflation.

Inflation to deal with housing debts would be the preference of Barney Frank and many "populist" (translated demagogue appealing to the ignorant) politicians, the fed would likely raise rates signficantly in the face of inflation, and with little regard to the pols. Forcing a recession is preferable to letting inflation catch hold- less shorter term pain vs. greater longer term pain ending in a recession anyway. It would take a reasonably severe recession to set in for the pols to gather enough support to usurp the fed's decision making power (the markets would likely go nuts when they tried). Inflation also has the nice effect of reducing the gov'ts debt liability, though this only works if the gov't doesn't need to continue borrowing significant sums to pay off the GBF's.

That is how I could see inflation playing out.

By the way, that $295K property in the Ozards included 40+ acres, partially wooded, with rolling hills, two ponds and a large-ish house.

In LA you are lucky if you can get a cramped condo for $295K. Here's a sample:

http://losangeles.craigslist.org/sfv/rfs/323169356.html

Ozards = Ozarks

He finally started sputtering about some property in Saratoga with “built in equity” - a.k.a. 75,000 reduction in price. That was when I walked away.

You mean "Instant Equity?"

I have been to Arkansas and you would use those 2 ponds to raise catfish as that is what everybody does , eats it , thinks about, talks about, and I thought catfish was a baitfish.
@peterp
while the catfish themselves gobble each other's droppings like canapes. The only thing worse than catfish is catfish sushi

Ozarks are breathtaking .Little Rock is a nice place if you want to be a bail bondsman. To think Walmart was born in Ark is mind-altering .

On the last thread this NA really does know about women, the college girl , the over 25 , lesbian , he is SPOT ON. He should start a consulting marriage bizz as he is genius as he takes something so complex and spits it out so simple its scary.

China to go on a buying binge in San Francisco, among other cities.

http://www.ft.com/cms/s/4ca5a916-e9eb-11db-91c7-000b5df10621,dwp_uuid=5aedc804-2f7b-11da-8b51-00000e2511c8.html

bruceb: You could raise trout in those ponds, but your neighbors would think you're uppity.

China to go on a buying binge in San Francisco,

We have plenty of Cheese for them. Lots and Lots of Cheese...
Not sure if it goes well with Chow Mein...