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Jan. 29th, 2008
on credit and credit insurance
Jan. 29th, 2008 08:41 pmHere's a good article explaining monoline insurers. These are important and you should be paying attention to the companies involved - if any of them go under, economic life gets interesting. Moreso, I mean. Quoting one analyst:
Also, on lending and credit - remember how I've mentioned previously about banking fears that "walking away" from financially underwater real estate might become socially acceptable? Now there's a California company set up to help you do it, including helping you live in the house for free for the longest period of time possible before you have to move out. I'm assuming this is at least partially real on the basis that they're advertising all over the country - particularly California, Arizona, Florida, but also in places that don't shriek "housing bubble," like Kansas, and Michigan. It's quite the business model, isn't it? But if you thinking the housing market is close to a bottom, please realise that we are nowhere close to such a thing - particularly if this, or something like it, takes off. Expect 25% to 30% downpayment requirements in the future, as well as higher interest rates, if this company does well.
The irony, of course, is that over the last few days of market action, the big drivers upwards have been homebuilders and financials. Now that's funny. Any bets on how long that'll last? Oh, and look, one of the smaller builders (nr. 14, Tousa) declared bankruptcy tonight. Fun times!
In total, we estimate that global losses in CDS markets and the underlying credits they insure would be $365bn-$425bn. As every $1 of bank capital gets multiplied into $8-$10 of credit, the result of capital destruction is shrinkage of credit and liquidity. In all, we reckon global liquidity is set to shrink by 8-10 per cent.And that's where you get deflationary pressure. A lot of deflationary pressure.
Also, on lending and credit - remember how I've mentioned previously about banking fears that "walking away" from financially underwater real estate might become socially acceptable? Now there's a California company set up to help you do it, including helping you live in the house for free for the longest period of time possible before you have to move out. I'm assuming this is at least partially real on the basis that they're advertising all over the country - particularly California, Arizona, Florida, but also in places that don't shriek "housing bubble," like Kansas, and Michigan. It's quite the business model, isn't it? But if you thinking the housing market is close to a bottom, please realise that we are nowhere close to such a thing - particularly if this, or something like it, takes off. Expect 25% to 30% downpayment requirements in the future, as well as higher interest rates, if this company does well.
The irony, of course, is that over the last few days of market action, the big drivers upwards have been homebuilders and financials. Now that's funny. Any bets on how long that'll last? Oh, and look, one of the smaller builders (nr. 14, Tousa) declared bankruptcy tonight. Fun times!