It's About To Hit The Fan

Author

Previous Topic | Next Topic

MarkIFC

545 Posts

Posted - 07/14/2008 : 06:29:10 AM

Ignore my words, or prepare, but we are sitting on a powderkeg with an inch of fuse left.

If anyone here has never read "Manias, Panics, and Crashes" now is the time. The book outlines the process in which bubbles turn to crashes. Every financial mania in history has followed the same pattern from the Tulip Bubble in Holland, to the Great Florida Land Boom in the 1920s, to our present Housing/Financing Bubble. At the top there is a great euphoria and sense that the top is limitless. Then things pop -- first there is a feeling of uneasyness (things slow down in 2006), then denial (sellers cannot believe their homes have decreased in value), then desperation (foreclosures skyrocket). So far, this whole Housing Bubble/Financing Crisis has followed the pattern exactly. Is there any reason not to believe it will not continue?

Now we are entering the most critical phase -- PANIC. During this panic phase participants in the Mania run for the doors in a desperate attempt not to be the one left to turn out the lights. During this phase, people run to cash out and dump the assets at any price which causes a frenzy further driving down the price. Institutions which promoted the Mania collapse (bank failures, Bear Sterns, CW, IndyMac). Government attempts to quell the panics have never succeeded throughout history.

Interest rates are about to climb. Fannie and Freddie have lost their credibility. Who is going to pour cheap money into our financing system? There is going to have to be a HUGE RISK PREMIUM to attract mortgage-backed investors. Read Charles Hughes Smith's article today regarding where interest rates are headed: http://www.oftwominds.com/blog.html
The more intervention by our government, the more inflation will flare up, the higher rates will climb.

The PANIC is about to start. Witness the wild fluctuations in Fannie & Freddie stock and the run on IndyMac. By the way, there are 90 other banks on the Fed's watch list AND INDYMAC WAS NOT ONE OF THEM!

After almost 20 years in the Mortgage business this is the worst I have seen it and the most frightened I've been. Three top producers that have been in the business as long or longer than me that I have worked with have dropped out in the last 6 months. I'm getting 10 to 20 buyer referrals a week from Realtor relationships but it's become more and more difficult to get anything to actually close. Like others have said here: working 4 x as hard and making less.

And the worst is yet to come?

genealle

1073 Posts

Posted - 07/15/2008 : 05:24:58 AM

quote:
Originally posted by MarkIFC

Ignore my words, or prepare, but we are sitting on a powderkeg with an inch of fuse left........................
And the worst is yet to come?

I think it started in 2004/5 when the economy softened & sagged and few seemed to notice, or even talk about it. Thus began problem #1

Most seemed to continue, business as usual. It seemed I met more and more people that had lost jobs, income, and both. They still got loans. Problem #2 continued unnoticed.

Problem #3-Even more job losses and now the defaults were apparent, then they became rampant.

Problem #4-You can't read a newspaper or watch the news without seeing doom & gloom. Not that the news shouldn't report it---maybe they should have noticed sooner. Now the people are wondering if they're next to lose a job or take a financial hit. DOW tumbles to where it SHOULD have been.

Problem #5-gas prices become insane and choke the economy even more. (Wish I had bought FSLR a year ago @ $80. Today above $300)

The grand result? People are scared schitless and while many are unable to buy anything, just as many are afraid to buy anything. Net result? Even less spending.

Consumer confidence is lost and we need to restore it. Well, not WE, but some actions need to bolster confidence. People need to see some growth or sunshine somewhere.

I try to focus on the positive side, but it's so hard to ignore the negative. When I feel down, my productivity suffers. When I get past the morass of bad news and weak financials, I pep up and Get'r Done.

Previous Topic | Next Topic