Credit crunching top and bottom

[moonman]

Banks aren't lending each other and 500 billion in deals is just sitting on desks unfunded in the so-called equity markets. Meanwhile foreclosures hit another high yesterday. One in seven or roughly 14.28% of subprime loans are now in foreclosure. Come October the highest monthly increase in in ARM's will be adjusted upward. An estimated 50 billion of those 1 percenters will now cost 9+%.

Such is the nature of a credit crunch. It wipes out the top and bottom of the market first. The vast middle is getting squeezed as lenders are turning down 700 FICO scores with as much as 35% down.

The real problem in a credit crunch is that nobody know's what anything is worth. This really is an admission that money has no value. That bears repeating. When money has no value, nothing can be valued relative to money.

So why oh why in this market did Walmart & Macy's report higher than anticpated revenue? Walmart is easy to understand as people are trading down. Macy's? Not even they know. However, for one day at least the touts all pointed to Walmart & Macy's as evidence that the consumer is still spending.

Oil topped $75.00 a barrell again. Gold topped $700 an ounce. The former has tripled in price while the latter is up 170% since Bush cut taxes and increased spending. As theold saw goes, "You ain't seen nuthin' yet."

This is just the beginning of the biggest financial meltdown in known history.

[Jennifer]

Yea, John Edwards should stop foreclosing on people's mortgages! :P


Seriously though, this is a case of banks making bad market decisions and lending money to people without doing the proper background research to see if A) they can afford it and B) they are a good credit risk.

That's why it's called SUB-PRIME loans.


I see it as a market correction. Homes are way over priced anyway. We went from 1945-1988 with homes increasing in value equivalent to inflation. Then suddenly it started to go closer to 300 - 400% of inflation in value increase! About time we see a correction!

[Bill]

It should be an interesting holiday season.

[Linkster]

I saw Countrywide mortgage announced today they are cutting out 12000 of their workers positions due to the crunch - thats not a good thing when in the first time in history jobs creation went down this month - instead of the expected 100,000 jobs growth that is typical - maybe we ought to start a draft - then we can replace all the people we're killing off and Bush can then claim he's creating jobs :)

[Bill]

No need for a draft.

The troops aren't complaining.

And americans are due to tighten their belts.

Every bit of pain helps the consciousness of the country.

[moonman]

The Fed is still in crisis mode pumping another 32 billion USD's into the banking system this week. One can only imagine the fallout if the Fed released M3 figures, the widest measure of cash in the system.