credit crunch topic

50 replies [Last post]
anabuhabkuss's picture
Offline
Joined: 2005-05-02

so i still dont understand whats going on in the market. I hate sounding like a twit but I'd rather look like one and ask then learn than not learn at all about what's going on with this credit scare.
i'd appreciate some 101 on this to whomever is willing to help someone who cares about this business. in the interim i'm going back to basic economics :(

troll's picture
Offline
Joined: 2004-11-29

Scary. 
Do you think he'd be able to understand the business if he had been taught that the first letter in a sentence is to be capitalized?

bornagainbankr's picture
Offline
Joined: 2007-07-16

People and businesses borrowed money they cannot afford to pay back now the banks are sh*tting themselves, they are making their "credit" requirements tighter in an effort to fix what is already broken.   At this point, it is wait and see.  Wait and see what % do default and what % eeek through.  Make sense?  Try picking up the journal. barrons etc. if you do not like to read find a new job.  Seriously you will not succeed unless you like to read.

troll's picture
Offline
Joined: 2004-11-29

Devil'sAdvocate wrote:
Scary. 
Do you think he'd be able to understand the business if he had been taught that the first letter in a sentence is to be capitalized?

Do they teach that at Smith Barney and that's why you are such a big producer for them?

troll's picture
Offline
Joined: 2004-11-29

Devil'sAdvocate wrote:
Scary. 
Do you think he'd be able to understand the business if he had been taught that the first letter in a sentence is to be capitalized?

RK, are you trying to be like me? Is that the best you can do?

Mike Damone's picture
Offline
Joined: 2004-12-01

RK?

blarmston's picture
Offline
Joined: 2005-02-26

I dont mind... All the excess of past years are finally coming to fruition... The markets will adapt to these developments, some financial stocks may get hurt short term, client accounts may trend somewhat lower but then bounce back... And my dream beachfront condo keeps dropping its selling price.... NICE !!!

troll's picture
Offline
Joined: 2004-11-29

blarmston wrote:I dont mind... All the excess of past years are finally coming to fruition... The markets will adapt to these developments, some financial stocks may get hurt short term, client accounts may trend somewhat lower but then bounce back... And my dream beachfront condo keeps dropping its selling price.... NICE !!!
How long does it take to "bounce back?"
It is true that beachfront  property may come down in value, but how is somebody who wants such property ahead if the value of their assets is also down?

blarmston's picture
Offline
Joined: 2005-02-26

Listen up ya douche...
As my dream condo drops in price from $650,000 to the current $550K and potentially lower,than the affordability issue comes more and more into play... Could I manage the payment on a mortgage balance of say $500K? Sure... But I am also aware that I would not want to strap myself to a monthly nut at this point... Better to keep putting some money into savings and be patient as the market potentially declines further.
Oh... And my investment accounts have not only treaded water in recent weeks/months, they have also appreciated...

snaggletooth's picture
Offline
Joined: 2007-07-13

blarmston wrote:
Listen up ya douche...
As my dream condo drops in price from $650,000 to the current $550K and potentially lower,than the affordability issue comes more and more into play... Could I manage the payment on a mortgage balance of say $500K? Sure... But I am also aware that I would not want to strap myself to a monthly nut at this point... Better to keep putting some money into savings and be patient as the market potentially declines further.
Oh... And my investment accounts have not only treaded water in recent weeks/months, they have also appreciated...

Blarm, what does $550k get you for a beach front condo?  Studio? 1 Bath?  Sq. footage?  If it goes down enough, buy it and rent it out.  Better yet, I'll buy it and rent it out to you.  I want my second house to be on a beach in So Cal someday...

blarmston's picture
Offline
Joined: 2005-02-26

The location I am looking at is literally a casual baseball throw to hit the sand, so location is the big attraction. I would be looking at a 1BR, 1.5BA in a 2 year-old condo complex. Nice balcony, underground parking (key because parking is crap in the area), high end appliances and marble countertop in kitchen, etc... Square feet around 700... I wouldnt want to buy and rent but to eventually make the move away from paying rent and focusing it all on handling the mortgage...

troll's picture
Offline
Joined: 2004-11-29

blarmston wrote:
Listen up ya douche...

Why would you refer to somebody as a douche?

blarmston's picture
Offline
Joined: 2005-02-26

Because I am an a$$hole... And I just love that word. Does that word offend you?

troll's picture
Offline
Joined: 2004-11-29

blarmston wrote:Because I am an a$$hole... And I just love that word. Does that word offend you?
Not at all, just wondering how sophomoric you can be.
You're just a little boy aren't you--do you live at home with Mommy and Daddy or are they renting you an apartment?

Baller's picture
Offline
Joined: 2007-06-06

DAtoo wrote:
blarmston wrote:Because I am an a$$hole... And I just love that word. Does that word offend you?
Not at all, just wondering how sophomoric you can be.
You're just a little boy aren't you--do you live at home with Mommy and Daddy or are they renting you an apartment?

Sophmoric is getting deleted from an internet forum, but you wouldn't know anything about that would you?

snaggletooth's picture
Offline
Joined: 2007-07-13

DAtoo wrote:
blarmston wrote:Because I am an a$$hole... And I just love that word. Does that word offend you?
Not at all, just wondering how sophomoric you can be.
You're just a little boy aren't you--do you live at home with Mommy and Daddy or are they renting you an apartment?

DumbDevil, why are you so bitter all of a sudden?  You used to post some insightful stuff, but now you post garbage and have degraded yourself to a dried-up old sap that obviously has forgotten to take your crazy pills.
You remind me of a senior at a fraternity jealous of the newer guys.  You think you're the only one who deserves to be in this business, don't you?  Nevermind the hard work others put in to learn, and constantly grow in this profession.  You were young once, and wish you could have it back.  It doesn't matter if we're 25, 35, or 45 years old, you still think your sh*t don't stink. 
Why do you feel it necessary to be so bitter?

Reggin's picture
Offline
Joined: 2005-09-03

DAtoo wrote:
blarmston wrote:Because I am an a$$hole... And I just love that word. Does that word offend you?
Not at all, just wondering how sophomoric you can be.
You're just a little boy aren't you--do you live at home with Mommy and Daddy or are they renting you an apartment?

What's your problem? Katz got your toungue?

Ashland's picture
Offline
Joined: 2007-03-06

I'm wondering what regulatory changes may come out of this one. Someone earlier said that banks are tightening their boxes after the damage has been done. That's exactly right.

I wonder if our Democratic Congress is going to see it that way & wonder how we got ourselves into this position. How much more expensive will such changes cost us?

The other thing that is affecting this is that the vast majority of 'mortgage' companies don't have the capital to hold on to mortgages once they get their customers to sign on the bottom line. They have to place or sell them immediately or they run into reserve requirements that are much too restrictive for them. FPD's & adjustments in the 1st year that put people out of range of their mortgage payments are just stupid.

In the meantime, buy 'em cheap and hold 'em forevermore!

anabuhabkuss's picture
Offline
Joined: 2005-05-02

bornagainbankr wrote:People and businesses borrowed money they cannot afford to pay back now the banks are sh*tting themselves, they are making their "credit" requirements tighter in an effort to fix what is already broken.   At this point, it is wait and see.  Wait and see what % do default and what % eeek through.  Make sense?  Try picking up the journal. barrons etc. if you do not like to read find a new job.  Seriously you will not succeed unless you like to read.
Makes sense. I try not to read too much. I think it'd offend a prospect if I interrupted my presentation to read Barron's and carry on an hour later.

anabuhabkuss's picture
Offline
Joined: 2005-05-02

Guests wrote:
Scary. 
Do you think he'd be able to understand the business if he had been taught that the first letter in a sentence is to be capitalized?

Scary.
What makes you think I'm a "he"? Or do you just swing that way?

troll's picture
Offline
Joined: 2004-11-29

anabuhabkuss wrote:Guests wrote:
Scary. 
Do you think he'd be able to understand the business if he had been taught that the first letter in a sentence is to be capitalized?

Scary.
What makes you think I'm a "he"? Or do you just swing that way?

You're too smart to be a girl.

anabuhabkuss's picture
Offline
Joined: 2005-05-02

Thanks bobby

Dust Bunny's picture
Offline
Joined: 2007-05-07

Bobby Hull wrote:anabuhabkuss wrote:Guests wrote:
Scary. 
Do you think he'd be able to understand the business if he had been taught that the first letter in a sentence is to be capitalized?

Scary.
What makes you think I'm a "he"? Or do you just swing that way?

You're too smart to be a girl.

Ahem!... 

Broker24's picture
Offline
Joined: 2006-10-12

Ana,
Banks are holding adjustable rate mortgages that they sold to people that can't afford them.  Rates went up, they defaulted on their mortgages.  Now nobody will buy these bad loans.  The banks are stuck with them.  There is now a liquidity "crisis" as banks cannot sell loans that they also aren't getting paid on.  Banks are no longer lending to "no-doc" or "low-doc" borrowers, or people with low credit scores (usually the same crowd), so they are writing fewer loans (thus less cash coming in).

Dust Bunny's picture
Offline
Joined: 2007-05-07

I'm wondering what regulatory changes may come out of this one. Someone earlier said that banks are tightening their boxes after the damage has been done. That's exactly right. I wonder if our Democratic Congress is going to see it that way & wonder how we got ourselves into this position. How much more expensive will such changes cost us?
Governmental interference by boneheaded ignoramuses into areas that they have no reason to be involved is what has gotten us into this mess in the first place.  The law of unintended consequences rules when it comes to politicians pandering to special interests.
http://www.baltimoresun.com/news/opinion/oped/bal-op.sowell0 8aug08,0,522262.story
God, please spare us from well meaning liberals.

madabroker's picture
Offline
Joined: 2007-05-09

So back to original topic. One of the greatest books ever is "Maestro" by Bob Woodward (I'm 99% certain), it's about Alan Greenspan and his running the Fed. A phenomenal read on how the big boys think. Some would say he was terrific, others would say otherwise. If you look at where we are economically, we are absolutely ripe for a full-blown recession, whether with a specific incident to set it off, or not.

You can always tell we're at full employment when the bag person at Costco is a former PenPal (if you get my drift), and your checker at Target is fresh off a welfare roll.

Look around, it's not too tough.

Other than that, we've been through similar credit crunches before. It happened in 98, but I think this one was far more calculated. The major investment banks controlled the mortgage puppets, and that means a middleman is involved, which means, if you take out the middleman, you can lend direct, or take a bigger slice of the pie. What do you think happened? It's not finished yet. Of course, there was a huge amount of negligence on the underwriting side and just plain stupidity on the borrower side. Stupidity, with a side of unparalleled optimism.

Sad.

the word's picture
Offline
Joined: 2007-04-16

OK i am interested in getting a more firm grip on this situation. 
1) Banks can't sell there loans and are not bringing in revenue for these loans; no liquidity. 
2) So banks who do have funds to loan are driving up the feds fund rate b/c they are charging more to lend due to more risk.
3) To offset the rise in the fed fuds rate they have injected much cash into the system the last few days.  Bringing rates back down.
4)The market is scared b/c the perception is that the economy has been driven to its new levels by the mortgage markets.  If this company's fall apart we could erase much of our gains.  Market also scared b/c lending policies tightening means less access to capital for economic growth.
Correct?  Anything alse that needs to be factored in?
 

blarmston's picture
Offline
Joined: 2005-02-26

Markets are concerned because there has been a lack of information relating to exactly how much exposure the banks and financial institutions have to the sub-prime mess... Remember, in recent years there has been an abundance of cheap money and liquidity in the markets... Hedge funds and other players have gotten into the mortgage industry with increasing amounts of leverage... A couple bad bets that unravel could have many players left holding severly depreciated assets...
It is a scary thought to see how much this debacle could unfold...

blarmston's picture
Offline
Joined: 2005-02-26

Sorry... severely

pretzelhead's picture
Offline
Joined: 2007-03-23

Big ripple effect too.  Even internationally... Look at the effect in France:
http://marketplace.publicradio.org/shows/2007/08/09/PM200708 091.html
 

Broker24's picture
Offline
Joined: 2006-10-12

The other issue is the hedge fund clients are starting to cash in.  Because of these redemptions, hedge funds are locking in some gains, selling large blocks, typically their large, liquid positions (blue chips).  That is why some big names are down so far right now, with no real good explanation.  However, it is my belief that mutual funds are going to snap up some bargains.
 

troll's picture
Offline
Joined: 2004-11-29

Broker24 wrote:
The other issue is the hedge fund clients are starting to cash in.  Because of these redemptions, hedge funds are locking in some gains, selling large blocks, typically their large, liquid positions (blue chips).  That is why some big names are down so far right now, with no real good explanation.  However, it is my belief that mutual funds are going to snap up some bargains.

What qualifications do you have to conclude that mutual funds will be snapping up the holdings of hedge funds that are locking in their gains?
I suggest that what is happening is the hedge funds--and mutual funds--are being forced to unload positions to satisfy redemtion requests and what they're selling are their weak positions.  It goes against good portfolio management to sell your winners and hold your losers.
That would mean that as the liquidations continue--and they will continue--we will eventually get to selling the winners, but that we're not there yet.
Why is my opinion less valid than yours?

troll's picture
Offline
Joined: 2004-11-29

DAtoo wrote:Broker24 wrote: <?:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
The other issue is the hedge fund clients are starting to cash in.  Because of these redemptions, hedge funds are locking in some gains, selling large blocks, typically their large, liquid positions (blue chips).  That is why some big names are down so far right now, with no real good explanation.  However, it is my belief that mutual funds are going to snap up some bargains.

What qualifications do you have to conclude that mutual funds will be snapping up the holdings of hedge funds that are locking in their gains?
I suggest that what is happening is the hedge funds--and mutual funds--are being forced to unload positions to satisfy redemtion requests and what they're selling are their weak positions.  It goes against good portfolio management to sell your winners and hold your losers.
Read closer, dimwit. He said sell LIQUID positions to meet redemptions, and he assumed those would be gains, given the market's performance the past few years. You injected winners and losers.
DAtoo wrote:
Why is my opinion less valid than yours?

 
Because you're a clerk who washed out at being an FA and you obviously have reading comprehension issues.
 

blarmston's picture
Offline
Joined: 2005-02-26

Putface,
Here is the fundamental difference between most posters here and you. Your post had a semblance of wisdom there, and I personally agree with your statement. Those types of posts belong here, and are welcomed...
If I had posted it, you would have immediately dismissed it since I havent yet had my 30th birthday. "What credentials.." blah blah bah...
Respect. Although I dislike you and feel you are no more than a washed up old man now struggling with adjusting to his new lot in life, I still respect your thoughts... In contrast, you are incapable of giving respect to those younger than you and whom you feel you are superior to...

troll's picture
Offline
Joined: 2004-11-29

blarmston wrote:
I still respect your thoughts... In contrast, you are incapable of giving respect to those younger than you and whom you feel you are superior to...

That's true--and the reason is becasue I am superior to you.  I have more experience--which is the currency in Wall Street.
Do you believe that if you're lucky enough to make it for thirty five or more years that you will know more than you do today?
Or have you peaked and now know all you need to know and will not bother to learn more?

anonymous's picture
Offline
Joined: 2005-09-29

That's true--and the reason is becasue I am superior to you.  I have more experience--which is the currency in Wall Street.
 We aren't looking for currency on Wall Street.  Our clients are on Main Street, Elm Street, and every other street.   Your management track kept your head up your company's butt instead of dealing with client's.   That's old age that you have, not experience.

troll's picture
Offline
Joined: 2004-11-29

anonymous wrote:
That's true--and the reason is becasue I am superior to you.  I have more experience--which is the currency in Wall Street.
 We aren't looking for currency on Wall Street.  Our clients are on Main Street, Elm Street, and every other street.   Your management track kept your head up your company's butt instead of dealing with client's.   That's old age that you have, not experience.

Child, I could follow you from client to client and ACAT every one of them except your Mommy and Daddy--and they would stay up all night talking about if they should or not.

blarmston's picture
Offline
Joined: 2005-02-26

DAtoo- those types of responses are why I feel sorry for you...

troll's picture
Offline
Joined: 2004-11-29

blarmston wrote:DAtoo- those types of responses are why I feel sorry for you...
What are you talking about?

blarmston's picture
Offline
Joined: 2005-02-26

Sorry old man... Just put in 8 hours, set a new meeting for TUE with a VP of Bus. Develop., had a conference call with a client back east who is adding another $300k to their account, made about 50 dials, ate some great Thai food with this girl I am seeing, and about to hit the gym for a quick workout.
After that its home for a nap then off to the W downtown where my friends and I are getting a table to enjoy the night...
I dont have time to explain things to you. Enjoy your Friday... Sitting in front of your computer.

the word's picture
Offline
Joined: 2007-04-16

It goes against good portfolio management to sell your winners and hold your losers.
Now i have got too seriously doubt that you have ever had anything to do with this profession at all. 
Once again your post flies inthe face of all rational investment theory.  You do sell you winners.  How do you suppose to lock in gains?  And with the new cash you usually like to average down on your losers, if you still believe in them. I think this is the crux of rebalancing a portfolio.
Maybe the question should be poised to you.  What qualifications do you have to make such judgements?  As far as i we can tell your an old man who got moved to management b/c of inability to produce.  And couldn't produce b/c, as you admited, and displayed with every post, aren't very smart. 
And finally.  I wanted to be and planned to be in this carrer since i was 19. 

troll's picture
Offline
Joined: 2004-11-29

the word wrote:
It goes against good portfolio management to sell your winners and hold your losers.
Now i have got too seriously doubt that you have ever had anything to do with this profession at all. 
Once again your post flies inthe face of all rational investment theory.  You do sell you winners.  How do you suppose to lock in gains?  And with the new cash you usually like to average down on your losers, if you still believe in them. I think this is the crux of rebalancing a portfolio.
Maybe the question should be poised to you.  What qualifications do you have to make such judgements?  As far as i we can tell your an old man who got moved to management b/c of inability to produce.  And couldn't produce b/c, as you admited, and displayed with every post, aren't very smart. 
And finally.  I wanted to be and planned to be in this carrer since i was 19. 

Nope, what you do is "Let your winners run and cut your losses short."
You do not sell your winners and use the money to attempt to catch a falling knife.
When a fund is under pressure to redeem they liquidate their cash and near cash positions first.  If the pressure continues they begin to liquidate their weak positions, holding their stronger positions, hopefully to extend their gains.
As for wanting to be in the job since you were 19.  I don't believe you.  I've known a lot of 19 year olds and not one of them hoped to be a commission salesman.

troll's picture
Offline
Joined: 2004-11-29

blarmston wrote:
After that its home for a nap then off to the W downtown where my friends and I are getting a table to enjoy the night...

Oh boy getting a table at a hotel bar.  Little boys pretending to be grownups, hoping that the W whore will sit down and negotiate a chance to get laid.

the word's picture
Offline
Joined: 2007-04-16

My goal was to be a CFP.  Should be done in about a year.
Whose attepmting to catch a falling knife.  If it was in your port. then you have some belief in its future prospects.  And if dips a bit then you buy more.  Certainly you don't buy more if some fundamentals or news changes.  And yes you do sell your winners.  How else do you produce gains?  i guesss you could be stupid and think that since it went up it could never go down.   
HAVE YOU EVER REBALANCED A PORTFOLIO?

troll's picture
Offline
Joined: 2004-11-29

the word wrote:
My goal was to be a CFP.  Should be done in about a year.
Whose attepmting to catch a falling knife.  If it was in your port. then you have some belief in its future prospects.  And if dips a bit then you buy more.  Certainly you don't buy more if some fundamentals or news changes.  And yes you do sell your winners.  How else do you produce gains?  i guesss you could be stupid and think that since it went up it could never go down.   
HAVE YOU EVER REBALANCED A PORTFOLIO?

There is no need to lock in taxable gains if I have unrealized, but still very real, gains and the NAV growth is reflecting it.
I'll repeat--"Let your winners run and cut your losses short."  So if pressed for cash I'll sell my losers and hold my winners.
I am not rebalancing my position, I am liquidating to meet redemptions.
But even if I were rebalancing I won't be selling my winners to buy more shares of my losers just to avoid taking losses.  In fact I will be agressively selling my losers so I can reduce my gains.
My shareholders won't care if I don't distribute capital gains at the end of the year as long as my NAV is up.

troll's picture
Offline
Joined: 2004-11-29

the word wrote:
My goal was to be a CFP.  Should be done in about a year.

If you're not yet a CFP your goal IS to be a CFP not your goal WAS to be a CFP.
You wanted to be a CFP or an RIA?

the word's picture
Offline
Joined: 2007-04-16

There is no need to lock in taxable gains if I have unrealized, but still very real, gains and the NAV growth is reflecting it.
...and your unrealized gains get wiped out when the market goes south, much like recently, and your NAV reflects it. 
But even if I were rebalancing I won't be selling my winners to buy more shares of my losers just to avoid taking losses.  In fact I will be agressively selling my losers so I can reduce my gains.
I must of selpt through the whole buy high sell low lecture.
My shareholders won't care if I don't distribute capital gains at the end of the year as long as my NAV is up.
What shareholders....  
 
 

pretzelhead's picture
Offline
Joined: 2007-03-23
AllREIT's picture
Offline
Joined: 2006-12-16

anabuhabkuss wrote:
so i still dont understand whats going on in the market. I hate sounding like a twit but I'd rather look like one and ask then learn than not learn at all about what's going on with this credit scare.
i'd appreciate some 101 on this to whomever is willing to help someone who cares about this business. in the interim i'm going back to basic economics :(

"As with any form of debt financing, until the spigot is turned off, you cannot understand the enormous impact readily available leverage has on prices and psychology. Increase the leverage available to asset classes and prices will rise." -- Seth Klarman.
And when you decrease the leverage available ---> See my sig.  
 
 

aldo63's picture
Offline
Joined: 2006-09-11

just maybe......elliot spitzer wii turn to the mortgage lenders and leave us alone..

blarmston's picture
Offline
Joined: 2005-02-26

Oh boy getting a table at a hotel bar.  Little boys pretending to be grownups, hoping that the W whore will sit down and negotiate a chance to get laid.
Just got into the office- that's a good one... I did have an eventful night... Although she wasnt a hooker- just another 22 year old from Orange County down for the weekend to have a good time...

Please or Register to post comments.

Industry Newsletters
Careers Category Sponsor Links

Sponsored Introduction Continue on to (or wait seconds) ×