Why are we Nervous? Because We Can't Do Without

[jk]

Re: Why are we Nervous? Because We Can't Do Without

here's a refresher course on what really happens. get ready to open up your wallets, again...

http://dharmajoint.blogspot.com/2007...of-humpty.html

great link, metalman. thanks.

[Rajiv]

Re: Why are we Nervous? Because We Can't Do Without

NYTimes on mortgages - Crisis Looms in Market for Mortgages

On March 1, a Wall Street analyst at Bear Stearns wrote an upbeat report on a company that specializes in making mortgages to cash-poor homebuyers. The company, New Century Financial, had already disclosed that a growing number of borrowers were defaulting, and its stock, at around $15, had lost half its value in three weeks.



What happened next seems all too familiar to investors who bought technology stocks in 2000 at the breathless urging of Wall Street analysts. Last week, New Century said it would stop making loans and needed emergency financing to survive. The stock collapsed to $3.21.

The analyst’s untimely call, coupled with a failure among other Wall Street institutions to identify problems in the home mortgage market, isn’t the only familiar ring to investors who watched the technology stock bubble burst precisely seven years ago.

[Spartacus]

Re: Why are we Nervous? Because We Can't Do Without

Poetic and rhetorical license.

If not these, then at least Internet board hyperbole license.

Gimme a break, Aaron. (I did know that it's NOT exactly zero, but decided to (harumph) "punch up" the point).

Right. Not zero; but even in terms of conventional reserves-to-Fed-system-money, the reserves capitalization is less than 1%.

The reserves ratio to mortgage assets might be even lower.

And the loss percentages are sure to be much higher, especially in a declining housing market where total loan values were inflated and recovery will happen on a much lower basis.

Look at what happened to coast financial already.

~12% losses on a $110mln mortgage pool; swinging the company to unprecedented negative cash flow, and causing it to receive a FDIC downgrade to "adequately capitalized".