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spinning faster and faster
Mar. 5th, 2008 09:35 pmMotley Fool says It's So Much Worse Than You Think, in large part because there's a Goldman/Sachs report out that if there's no recession, housing prices will fall by 15%, but if there is (which seems inevitable) then it'll be 30%. Now a lot of us are already aware of that, but it includes some neat details, like at 30% price decline, 39% of mortgages are "below water," or negative equity, or, are for more money than the house would make, if sold. MarketWatch notes that housing prices haven't fallen like this since the Great Depression, which we've already noted before, and that value declines are accelerating - leveling off is nowhere in sight, and Kevin Depew at Minyanville makes the argument that Bernanke's recent speech laid the groundwork for the nationalisation of Fannie Mae and Freddie Mac.
None of this can really start to bottom out until all the bullshit around CDOs and the many other parts of the credit collapse get taken apart properly. The monoline insurers are a pathetic joke; MBIA, a supposedly AAA-rated company, can't even estimate its own losses in January. I can't even fathom how anybody can go along with this pretense that the AMBAC "bailout" means anything. It just doesn't. It can't. And Karl at Market Ticker talks about how the rest of the credit market is reacting to that reality.
Bernanke's other action is to try to save things through economic stimulus, but that's failed. Citigroup in particular is in trouble, with serious questions about its cash levels and inability to raise new capital. And thanks to all this, bond auctions are failing at ever-higher levels. (Of course, default rates on munis will rise during this recession, but not at all to the tune of 20% for ports).
It really feels like things are spinning out of control badly now, with parts flying off in different directions. If you've ever seen the original Dawn of the Dead, it's kind of like that moment at the beginning of the film, in the TV studio, where they're broadcasting emergency messages and one of the engineers realises it's all bullshit and they have lost, but most of the people are still either in denial or pretending to be. That's about what it feels like right now. Hopefully I'm really, really wrong.
ETA: Dollar is hitting new lows against the dollar basket every day. Not huge shifts lower, really. This evening's new record low: 73.330. I've heard rumours of some banks setting a target down at 60. Oh, and if you missed it: oil hit a new record today in both raw and inflation-adjusted numbers, at US$104.52/barrel. It closed at that high.
None of this can really start to bottom out until all the bullshit around CDOs and the many other parts of the credit collapse get taken apart properly. The monoline insurers are a pathetic joke; MBIA, a supposedly AAA-rated company, can't even estimate its own losses in January. I can't even fathom how anybody can go along with this pretense that the AMBAC "bailout" means anything. It just doesn't. It can't. And Karl at Market Ticker talks about how the rest of the credit market is reacting to that reality.
Bernanke's other action is to try to save things through economic stimulus, but that's failed. Citigroup in particular is in trouble, with serious questions about its cash levels and inability to raise new capital. And thanks to all this, bond auctions are failing at ever-higher levels. (Of course, default rates on munis will rise during this recession, but not at all to the tune of 20% for ports).
It really feels like things are spinning out of control badly now, with parts flying off in different directions. If you've ever seen the original Dawn of the Dead, it's kind of like that moment at the beginning of the film, in the TV studio, where they're broadcasting emergency messages and one of the engineers realises it's all bullshit and they have lost, but most of the people are still either in denial or pretending to be. That's about what it feels like right now. Hopefully I'm really, really wrong.
ETA: Dollar is hitting new lows against the dollar basket every day. Not huge shifts lower, really. This evening's new record low: 73.330. I've heard rumours of some banks setting a target down at 60. Oh, and if you missed it: oil hit a new record today in both raw and inflation-adjusted numbers, at US$104.52/barrel. It closed at that high.
