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Sub prime issue - a good article, must read

I guess in the financial world more an experienced financial GURU like say Alan Greenston talks about something, the more prominent it becomes. What if one fine day he suddenly says "The sub prime crisis has come to an end!" Will the issue be solved?? LOL I wish so:D
 
I guess in the financial world more an experienced financial GURU like say Alan Greenston talks about something, the more prominent it becomes. What if one fine day he suddenly says "The sub prime crisis has come to an end!" Will the issue be solved?? LOL I wish so:D


LOL =D>
good point ;), what if it is a mental exercise, at the end of the day.
If all the wall street "GURUS" think that a few million people who decide not to pay off their home loans should not effect our Financial Markets, i guess they can make it happen.
After all, the GURUs are followed by many people, and if they can pull off this "MINDTRICK" a major problem would be solved. :D
 

alain

Older and Wiser
I guess in the financial world more an experienced financial GURU like say Alan Greenston talks about something, the more prominent it becomes. What if one fine day he suddenly says "The sub prime crisis has come to an end!" Will the issue be solved?? LOL I wish so:D

who is Alan Greenston?
 

alain

Older and Wiser
America's housing market | Cracks in the façade | Economist.com

Amazing is'nt it, just because of few million people are unable to pay their loans, the entire financial market gets a scare, but i am sure it is just a scare, and it is being digged too much.

In the link above, the author has mentioned many sides of the sub-prime issue.

These "scares" cost a lot of money... if a few million (Xe6) owe on the average $300,000 (these are subprime loans which mean there is probably no equity accumulated), we are talking about $300X billions. Assuming the lenders are able to recover 50% of the money in foreclosures (this is very optimistic), the lenders are still short $150X billions.... draw your own conclusions.

This is just an example of how bad things could become. Something to keep in mind, in the US, if you declared bankruptcy, you get a clean "sheet". i.e. all your debt is wiped out and you don't owe money to anybody (you lose everything and you won't be able to get credit for the next few years but whoever is your counterparty gets almost nothing from you). I don't know how it works in some other parts of the world.
 
These "scares" cost a lot of money... if a few million (Xe6) owe on the average $300,000 (these are subprime loans which mean there is probably no equity accumulated), we are talking about $300X billions. Assuming the lenders are able to recover 50% of the money in foreclosures (this is very optimistic), the lenders are still short $150X billions.... draw your own conclusions.

This is just an example of how bad things could become. Something to keep in mind, in the US, if you declared bankruptcy, you get a clean "sheet". i.e. all your debt is wiped out and you don't owe money to anybody (you lose everything and you won't be able to get credit for the next few years but whoever is your counterparty gets almost nothing from you). I don't know how it works in some other parts of the world.

yeah, in the last quater of 2007, we have seen/experienced the worst season since CDO/ABS/MBS/CDS were introduced to the market.

In my view, I agree with a lot of others opinion that we haven't seen the real damage yet. It will perhaps take 2 or 3 year to go through the big wash up circle.

We expect an increase in defaults and rating downgrades in 2008 for credit structure market to absorb any easing of the knock on/flow on effects, leading to little spread compression. We believe corporate CDOs will survive, but we are likely to enter the "2.0" era, where over-engineered structures and ratingefficiency take the sideline, making room for less levered and less complicated structures. The importance of funding efficiency, especially for large Aaa tranches, means that the destiny of the corporate CDO market is exposed to the (slow) healing of balance sheets at large banks. After years of sustained growth, the CLO manager club is likely to experience a significant contraction over the next 12-24 months,
(LB Live)​

 
Rather than 2-3 years, perhaps, it takes shorter for the sequelae of sub-prime crisis to calm down.
 
i was talking to a frn in NY and she has a huge mortgage. she is amongst highly paid ones on street. really smart gurl. and she says she will renegotiate her mortgage. ppl are just renegotiating because they are getting a good deaal out it! i m surprised :)
 

alain

Older and Wiser
i was talking to a frn in NY and she has a huge mortgage. she is amongst highly paid ones on street. really smart gurl. and she says she will renegotiate her mortgage. ppl are just renegotiating because they are getting a good deaal out it! i m surprised :)

sounds really really strange.
 
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