BoatBanter.com - View Single Post - There's just nothing quite like capitalism

Calif Bill

"Short Wave Sportfishing" wrote in message
...
On Wed, 30 Jan 2008 17:07:17 -0000, wrote:

On Wed, 30 Jan 2008 16:01:54 +0000, Short Wave Sportfishing wrote:

Then you can put the insurance companies back into the game by putting
rules in place that brings the mortagage lending practices back to what
worked before - verification of income and ability to pay based on
monthly/yearly income and expenses.

Regulation? Damn, how un-Republican of you. ;-)

Not so much regulation as policy. There will always be situations
that don't fit the local market conditions, or non-classic buyers who
have considerations other than those I mentioned, which local bankers
and underwriters can evaluate properly.

What you say makes a lot of sense, but this subprime fiasco seems
more like Tulip Mania than a classic bubble. I mean, what were they
thinking, or not?

With respect to tulips, the analogy isn't exactly "perfect" in the
sense that there are some arguments about the true cause of the Tulip
Mania Bubble by some fairly competent historians.

However, as popularly explained, the housing bubble is exactly like
the Tulip Mania Bubble which is the classic case. Prices will go up
forever - ergo, you can't lose money because you will always make
money.

While true over time, it's generally not true over the short term (say
5 years as opposed to 13 years). For instance properties I've owned
until recently that appreciated in terms of real market value (as
opposed to fair market value) 90% since a point in 2001 - one house
that I still have was bought at $132K and was bank appraised last week
at $234,000 (fair value $219k) and I have an offer of $230k.

That's what most people were counting on with the low ARMs - get in
low and sell high.

Only it didn't work that way. :)

Did you here about the French trader that lost $7 billion? Somebody at
Societe Generale was asleep.

And entirely believable oddly enough. Certainly the trader's
supervisors were asleep at the switch, but one single trader can, and
has done before, bought into futures trades on their own and ruined
financial institutions.

What I find interesting is how Soc Gen unwound the trades - that was
total incompetance.

Lots of those upside down loans, at least out here, were speculators.
Counting on a 20% / year growth. A few out here are stuck with 5+ houses.