Friday, November 23, 2007

How Many Drops in a Bucket Anyway?

I trust all had a nice Thanksgiving holiday. This last segment of the year leading up to Christmas is always a strange time. Time seems to both fly by and move at a crawl. My cloning group tends to slow down quite a bit this time of year. Motivation for work around year's end is a commodity in short supply!
This shortened week certainly was filled with drama and headlines. Next week may be very interesting indeed.

The Never ending Search for the Elusive Bottom
I caught a bit of CNBC today, and as usual it was a comedy show. The "up" day today was wildly celebrated. Never mind that the volume traded today was so low that no real market direction could be inferred, the good old folks at CNBC were out "bottom searching" once again. Now I am not against bottom searching in general (especially if the bottoms belong to Kim Kardashian, Beyonce, or Angelina Jolie!), but we are still in the infancy of the mortgage and housing blow up. The "bottom" for various sectors is like one of those elusive and secretive animals in the Amazon. Researchers try to capture a night vision photo of the species for years, but no confirmed sightings have been documented.
The depth of the residential real estate loan debacle is only now just starting to be seen. Fake appraisals, non existent loan qualification guidelines, and an entire class of people whose only reason for a home purchase was indeed the "American Dream", the one where you get rich by doing nothing. All of this dirty laundry must come out in the wash. As a way to monitor the situation, I suggest checking out this site:
On that site you will see that shady loans, no documentation loans, serial refinance loans, and poor credit loans are still alive and well. Whatever lending rules have been toughened up, the folks on that board are not seeing it. When BrokerUniverse's grapevine goes silent, perhaps we may be approaching a bottom. Until then, no freaking way.

How Many Drops in a Bucket Anyway?
All day today I heard that the losses in the mortgage arena are a "drop in the bucket" in relation to the US economy. Maybe they are. The problem is that we have no idea how much the losses are at this point, and anyone trumpeting that the losses are insignificant have ZERO credibility. I propose we petition all the FED and government officials as well as the market commentators to give us a number where the losses do become significant. 100 Billion, 500 Billion? How much is significant? If the losses so far are so minuscule, why all the rate cut and save the banks rhetoric? If the problems are so well contained, why not let things be? Its disingenuous to have a position that, at the same time, contends things are just fine but a major bailout is needed.
Here is some bucket humor:

The point I am trying to make is that there is literally a sea of home owners across the US right now that have no intention of holding on to a losing asset. The purpose of the home purchase was easy money through refinancing and a pot of gold after a sale. That's over. Finished. While the average American is pretty much a fool about things financial, they are quick to run from a waste of their time. Paying property taxes, upkeep costs, and a monster mortgage loses its appeal when you have no jackpot waiting for you. I do not think the overall market understands yet just how quick folks are going to bail on losing properties. Before long, I think they will.

Enough Doom and Gloom, its Friday! I am all out of whack due to the holiday schedule. It does not feel like Friday at all. For comic relief, here is a totally hilarious clip from the movie "Clerks" where we meet a russian metal singer wannabee:

Watching this car crash footage on an icy street holds so many parallels to the current financial situation, I offer it without comment:

A throwback to the original "Transformers", Optimus Prime vs. Megatron. "One shall stand, one shall fall."

Have a good night.


Anonymous said...

In a conversation the other day I mentioned to family the sheer losses that are being reported and how no one seems to care. We are talking billions of dollars here people. I can't even manage the simple bills that I have required of me these days and banks are loosing billions of dollars. Spending in the trillions and we all just sigh and say oh well... such is life?

H3LL NO! This is wrong and will end with the barrel being turned in the general populations direction rather shortly.

Just for the record I didn't shop at all the last few days and plan on being frugal until next year. I wont be part of this system (American Consumer Economy) any longer.

Thanks for playing.


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