[Rhodes22-list] Dow Jones.....I hate to say it.....

[Brad Haslett]

Wally,

Will Rodgers said it best, "worry about the return OF your investment, not
the return On your investment".  The mortgage community forgot that simple
rule.  They were lending to anyone and everyone, "knowing" that the
underlying secured asset was sure to go up in value. That is not investing,
that is speculating. They bundled sub-prime loans and jumbo loans and sold
them under the "greater fool rule" for a good long while.  The market got
smart.  Speculating in anything is just like playing musical chairs - fun as
long as your ass has something to land on.  They don't and this too shall
pass.  Anytime I think there might be a new "paradigm shift"  in the world
of business, I dig out my 30 year-old accounting textbooks and visit "deja
vu all over again".  The world is full of first class industries and
companies.  Don't get greedy in the marketplace and you won't get spanked.

Brad

On 8/13/07, TN Rhodey <tnrhodey at gmail.com> wrote:
>
> The fed rate is not the problem toay however i do think they will go up.
> Rates are still very low for Conforming Loans. Loans have been considered
> liquid assets. Credit agencies rated these dogs as a relatively safe
> investment and now many funds and billions of dollars are gone.
>
> The obvious result sub-prime and non conforming loans are no longer
> liquid.
> These include any loan over $417,000, Sub-Prime, Alt A or Jumbo. These
> loans
> typically don't follow every move of the fed. Right now no one will buy
> these loans so rates are going to rise regardless of what the fed does (I
> think). They will keep rising to the point that the loans become liquid
> again.
>
> American Home Mortgage shopped 200 million in loans last Monday and they
> got
> no offers. They could not fund loans, they cold not secure funding for new
> loans, and when the margin calls came in they were done. They closed on
> Wednesday. These were not sub prime loans. Countrywide also was not able
> to
> sell loans but they have much bigger pockets. They are the biggest
> mortgage
> lender in the US.
>
> The media is focusing on sub-prime but this is not going to be limited to
> sub-prime. This is already hitting commercial lending at every level.
> Everything from small business credit to IPO inveatment credit is drying
> up.
> I am not saying the sky is falling (yet) but I think this is more than a
> minor correction.
>
> Wally
>
>
>
> On 8/10/07, john Belanger <jhnblngr at yahoo.com> wrote:
> >
> > someone once told me that standard interest is 3%. anything over that is
> > inflation. with "increased liquidity" balancing out "tightness". there
> > should be little effect on interest rates at the present time at the
> > consumer level. i think they will rise if the government has to borrow
> > instead of tax for things like bridges and highways because of
> infrastucture
> > fears. on the other hand, these pressures are being generated by big
> money.
> > so we may not be getting the whole story.
> >
> > Hank <hnw555 at gmail.com> wrote:  Brad, et al,
> >
> > What will this do to interest rates? Are they likely to go up or down or
> > remain the same? That is something I have never understood is why they
> > change the rate.
> >
> > Hank
> >
> >
> > On 8/10/07, Brad Haslett wrote:
> > >
> > > Dave,
> > >
> > > Let's hope I'm right and you're wrong. It smells like a necessary
> > > correction and a mild "bank run" to me. I'm at least ten years away
> from
> > > needing to cash-in any chips so I'm along for the ride. What a good
> one
> > > the
> > > last six months have been, I "made" more money in my 401K than my day
> > job
> > > pays. I knew that wouldn't last.
> > >
> > > Other than the Fed stepping in to prevent a liquidity crisis, I hope
> the
> > > government does nothing. My personal solution is to drive to Branson,
> MO
> > > today for a mini-vacation before Cora starts school.
> > >
> > > Watch the market for me today and cry for us all if it gets any more
> > > nasty.
> > >
> > > Brad
> > >
> > >
> > >
> > > On 8/10/07, DCLewis1 at aol.com wrote:
> > > >
> > > >
> > > > Brad,
> > > >
> > > > Your point about the business cycle is well made - but the issue is
> > > what's
> > > > bringing it down. Is it "the usual stuff", or is it something
> > > > truly sinister?
> > > >
> > > > Two ponderous and conservative governmental institutions, the ECB
> and
> > > the
> > > > Fed, that like to move slowly and with incremental steps, moved
> > quickly
> > > > to make
> > > > available up to 95 Billion Euros(ECB) and 24 Billion USD - done
> > > within a
> > > > space of less than 8 hours(maybe less than 4 hrs, I didn't time out
> > when
> > > I
> > > > learned about each move). That's a lot of money and they skipped a
> lot
> > > of
> > > > staffing to move that quickly - It tells me there's a big urgent
> > > problem.
> > > >
> > > > We know a variety of US, UK, and Australian hedge funds
> > > have folded. We
> > > > know many mortgage companies have folded - not in trouble and hence
> > had
> > > > to cut
> > > > back - simply put out of business. We know of 1 US investment bank
> > > > that's
> > > > taken a big hit. We know of at least 1 German bank in
> > > > receivership. Today we
> > > > learned the second largest bank in France is stressed. This is not
> > > > normal.
> > > > As I recall, most business cycles end because of inventory
> imbalances
> > -
> > > > this
> > > > is nothing like that, this is a financial melt down.
> > > >
> > > > Welcome back!
> > > >
> > > > Dave
> > > >
> > > >
> > > >
> > > > ************************************** Get a sneak peek of the
> all-new
> > > AOL
> > > > at
> > > > http://discover.aol.com/memed/aolcom30tour
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