Quote from the1:
You are assuming the people who hold those mortgages will not be able to pay the reset amount. Remember, they are a higher grade borrower and many of them probably bought the house with the increase in a mortgage payment factored in so the default rate will probably be much lower. And the banks that do face losses as a result of the defaults have the Fed's zero percent borrowing plan. They have guaranteed profits by having the ability to borrow for nothing. The next crisis isn't going to come from real estate. It's going to come from too much government debt.
Quote from the1:
You are assuming the people who hold those mortgages will not be able to pay the reset amount. Remember, they are a higher grade borrower and many of them probably bought the house with the increase in a mortgage payment factored in so the default rate will probably be much lower.
And the banks that do face losses as a result of the defaults have the Fed's zero percent borrowing plan. They have guaranteed profits by having the ability to borrow for nothing. The next crisis isn't going to come from real estate. It's going to come from too much government debt.
Quote from sumfuka:
If there is another real estate boom between now and 2012, or another multi-trillion dollar bailout of some kind. That graph would become sort of useless/distorted.
Quote from scriabinop23:
These charts are meaningless. They are based on data before mortgage modifications + obama HARP etc refi boom. Not to mention that many of these underwater borrowers may have preemptively walked away -already-. Oh one more thing ... Just count the aggregate values of those #s ... something like 10B/month avg = $100B of mortgages gone bad. Lets say average loss is 50% (very pessimistic). This is a piddly $50B in losses. BAC raised that much in a day.
Non issue.
I'd be more concerned about a sovereign default. Not this.
Quote from zboy2854A:
The part that you're missing is it's not just the mortgage defaults themselves that are the problem, it's the leverage derived from them that levers the risk up by an order of magnitude. The whole OTC derivative market is still very much alive and kicking and all those CDO's, CDS's and other alphabet soup of esoteric derivatives based on these mortgages are still lurking out there, and in some cases, have been added to since the first round of the crisis.
It's not the mortgages themselves blowing up that is the danger, it's the mortgages blowing up and taking the derivatives with them that is the real danger. It's why the subprime blowup brought the financial institutions to their knees despite (as the graph shows) nominally not being a huge number in and of itself. Now add this time around the subprime, plus Alt-A, plus commercial, plus option arm plus prime resets all still backed by derivative instruments, during an economic period where unemployment is much worse than it was when the first round of subprime blew up, and you have a pretty explosive cocktail.
Quote from scriabinop23:
So now that I make the point that losses are likely realtime much less than this chart, the best you come up with is the "unknown derivative leverage" argument?
The delevering happened. DTC data showed outstanding cds/etc contract by 50% (something like 60T to 30T) when this happened. That is yesterday's story, and the probability of repeat is minimal. Thru the AIG funding, the one time catastrophe you are referring to was averted.
The next future blow-up will be somewhere else, I guarantee you. These credit suisse charts don't qualify as research anymore - they have long been in the mosaic of public info and those risks and positions have been hedged/dumped/profits taken.
Quote from Random.Capital:
Either the crisis was more or less a figment of our imagination, or there is another shoe to drop, or this is going to be an endless decade-long slow-grind "collapse" a la Japan.
I would say those are the three most likely scenarios - place bets accordingly.
How you know that it is'n over yet?Quote from piggie2000:
Nasdaq up 82% off lows and up an incredible 45% for the year. nasdaq on pace for its 3rd best gain in its 38 year history.I ask one question. $3 trillion of world wide bank loses, $5 trillion of value is gone in falling housing prices in the us,$800 billion a year of atm home equity lines per year that reved the economy from 2003-2007 is gone,$4 trillion of open credit card lines are being taken as we speak.oh i forgot 10% unemployment. the list goes on and on and throw in 100's of stocks up 500% or more in 2009. SO MY ONLY QUESTION IS CAN THE GREATEST CRISIS SINCE 1930 BE OVER IN 1 LOUSY STINKEN YEAR?And the fall in 2008 is coming off a 5 year bull mkt.The gov't has postponed the inevitable. The gov't basically took the place of the consumer in 2009. thats fine but now its payback time in 2010-2012 with much higher taxes and higher rates to finance the huge debt. All the gov't did was not allow us to feel all the pain at once and it will now be spread out of years or decades with below avg growth. Trillions of $'s went into black holes that should have gone under. so that misallocation of capital will be a huge drag on growth for a long time.The gov't has basically punished savors and people that have been responsible with there money.They have rewarded speculation and moral hazard.During the coming double dip down turn all this will come out.