what's the fuss about subprime crisis?
Groups | Search | About
User Password
Register Now! Lost Password?

Financial Planning - Financial planning in general. (Moderated) 

get this group's latest topics as an RSS feed add this group's latest topics to your My MSN content add this group's latest topics to your My Yahoo content  add this group's latest topics to your Google content  YahooMyWeb Yahoo!  Google Google  Windows Live Favorites Windows Live  del.icio.us del.icio.us  digg digg  Add to Netscape Netscape
Subject Author Date
what's the fuss about subprime crisis? Bucky 08-11-2007
Posted by Bucky on August 11, 2007, 3:59 am
Obviously, the borrowers are affected by having their homes
foreclosed, and the lenders are affected by having their loans
defaulted. But why is this such a global crisis?


Posted by anoop on August 11, 2007, 9:21 am
> Obviously, the borrowers are affected by having their homes
> foreclosed, and the lenders are affected by having their loans
> defaulted. But why is this such a global crisis?

Subprime is just one of the things causing these problems.
There are a number of other issues that aren't being explicitly
called out. There's a bit of a domino effect and the financial
markets are worried that things are beginning to unravel.
http://www.rgemonitor.com/blog/roubini/209779/

Anoop


Posted by The Henchman on August 11, 2007, 10:31 am

> Obviously, the borrowers are affected by having their homes
> foreclosed, and the lenders are affected by having their loans
> defaulted. But why is this such a global crisis?

I'm in Canada and I heard our central bank pumped billions of dollars into
the banking system the other day. Now all Canadian banks have US exposure,
and if it's not in the personal lending side like mortgages then it'll also
be in the brokerage side as well. I dunno if the Canadian central bank
pumped all this money to help us Canadians out or to help out the USA which
is still considered our largest trading partner

Canada's housing market is still in boom mode. New, Resale, and
recreational housing prices increases are slower than they were but they are
still increasing to record highs. Real estate agents are camping out to be
the first in line in some developments here in Toronto and our province is
in the weakest position in Canada. Some cities in Canada had prices
increase 30% last quarter. At the same time our national wages increased
above national inflation the last 3 years

So again why did Canada's central bank pump billions into a money system
because of a problem that has nothing to do with us? This problem shows no
signs are coming here. Unfenced border and all.

My guess is there is no credit left in he USA and private equity firms can't
make payments so American brokerages and Banks must go to foreign sources
for immediate cash. American Brokerages and smaller banks are prolly not
able to sell the debt and are stuck with it on balance sheets. Bigger
banks have good cash flows so they can hide it a bit easier. Brokerages
can't hid it as well and funds have to be frozen. When funds are frozen,
cash is not so liquid.

I looked at two private equity deals that mean alot to me: Home depot's
sale of HD supply and here in Ontario the Teachers Pension plan to buy Bell
Canada Phone company. The HD supply deal might be breaking down and the
private group want a lower sale price. Home Depot can get stuck with HD
Supply if the price goes to low.

In both cases the private buyers are having trouble finding the money they
promised. I bet if you look at other private equity deals the case will be
true. If the subprime and maybe Alt-A markets collapse tying up vast sums
of money and of coarse the profits that were supposed to be made (and
reinvested into other loans), maybe that's how it affects global money
supply.


Posted by on August 11, 2007, 3:39 pm
> Obviously, the borrowers are affected by having their homes
> foreclosed, and the lenders are affected by having their loans
> defaulted. But why is this such a global crisis?

It's a symptom that housing overvalued worldwide and the effects of a
correction will be major. Although people go on the news and say "it's
contained to subprime", in private they're busy covering their own
behinds. E.g. CEO of Countrywide selling shares a day before
announcing the mortgage market is the worse they've ever seen.


Posted by The Henchman on August 11, 2007, 6:03 pm

>> Obviously, the borrowers are affected by having their homes
>> foreclosed, and the lenders are affected by having their loans
>> defaulted. But why is this such a global crisis?
>
> It's a symptom that housing overvalued worldwide and the effects of a
> correction will be major. Although people go on the news and say "it's
> contained to subprime", in private they're busy covering their own
> behinds. E.g. CEO of Countrywide selling shares a day before
> announcing the mortgage market is the worse they've ever seen.

Any evidence to suggest it's overvalued worldwide? Real estate always has
been a very localized market in my understanding.

And what about housing markets for years that were undervalued?? Another
point: There is a global shortage of urban and suburban housing worldwide
now and the condition will only get worse with over half the world's
population living in cities.

The city beside me where I wanted to live in grew by 35 000 in 5 years
(that's double it's 2001 city size) and the city I work in has tripled in
size in 1991 census. The rural area I left in has been pretty stagnant (3
hours drive from here) since the early 1990's.

I always thought real estate was a local condition, that's all.


Similar ThreadsPosted
causes of subprime crisis October 30, 2007, 9:26 am
deregulation and the current credit crisis September 22, 2008, 1:00 pm
Money Markets and the Current Financial Crisis July 15, 2008, 12:05 pm
A Good Look at the Subprime Mess October 27, 2007, 1:52 pm
Finding info on bank's subprime exposure? January 9, 2008, 3:04 pm

other essential online resources:
United States Treasury
US Securities and Exchange Commission
New York Stock Exchange
Tokyo Stock Exchange
Accounting and Tax Software Forums
Contact Us | Privacy Policy   XML SitemapXML Sitemap