Market jitters to subprime woes

A 3rd Bear Stearns hedge fund has failed, and American Home Mortgage is duh-duh-duh dead.

I'm guessing the market plunge is an irrational reaction to a troubling, but reasonably contained problem. Consumer confidence is at a 5 year high. I don't see how sub-prime defaults can really spread into every sector of the economy.

Am i dead wrong? How does the failure of a few niche mortgage companies' affect liquidity on the overall markets?

Anyway - it's been a shitty fucking week.

 

Just think you are buying cheap. Worry about the market when you are 55.

 

I've used the subsidiary of AHM...ABC (American Brokers Conduit). They are NOT a subprime lender, but Alt-A. This is shit like Stated Income, No Doc Loans, Pay Option Arms, No ratio, 95%+ LTV Investment properties...

This is the shit that's getting fucked up now...

 

Check out this site...the Mortgage Lender Implode-O-Meter.

So far 105 lenders have died since late 2006. That's a LOT of companies and a LOT of people looking for jobs.

http://ml-implode.com/

 

Not worried. Won't worry when i'm 55, either. Just curious.

 

It is a mess. I have some KEY and they dump theirs last month. Buy property it is going to be cheap.

 

So you're saying that this IS enough to destroy liquidity for the ENTIRE market, not just mortgages?

I just don't see it. I gotta say it's an irrational reaction.

And as far as I'm concerned, no doc loans are kind of a niche product.

Anybody know actual percentages of mortgages actually default? Percent of ALL, not just niche products.

And how much, on a percentage basis, has it risen from 10 years ago?

And how many defaults, on a percentage basis, did it take for the niche lenders to go belly up? In other words, did AHM go under because 1%, 2%, 5%, 10%, 30% of their loans defaulted?

And how many jobs were lost with 106 lenders going under?

I think this post likely illustrate the uncertainty, and markets don't like uncertainty.

 

FEAR is the main problem here. No one is buying anything but the FNMA Conforming products on the secondary market...the the lenders are losing money on them. Then you have the big investment banks cutting off funding to the lenders (Novastar, New Century, etc...). So...they have no money to lend!

The mortgage problem has really hurt builders BAD. If there's a huge slowdown in new construction, wont' this trickle down into the suppliers? Lumber, steel, insulation manufacturers, roofing, etc...

 

Basically liquidity brought about by easy credit has been fueling the markets. With all this subprime crap hitting the fan the fear is credit will be harder to get, thus limiting liquidity, thus hurting what's been fueling the market for the past couple of years.

 

Not worried, but it still kinda sucks to see my returns diminish. Won't be worried at 55 either, of course I won't be 100% stocks then either.