If someone loses huge on a leveraged spread to Treasuries the root cause of the spread widing is still the same. That being the precipitous drop in the asset backing the paper. In this case the asset is real estate. It's the biggest credit market in the world ya know. Without CDO markets knowing the ultimate price of RE, the future rates of forclosures ect., the paper is almost unpricable. I love the UBS quote after yesterdays write down: "In the last several months, continued speculation about the ultimate value of our subprime holdings -- which remains unknowable -- has been distracting," Wait till people go upside down in Tahoe and Palm Beach bro.
Its going to happen. There are going to be some people out there who have a ton of assets and very little cash flow and they are going to get hit.
Ultimate price of RE? You truly believe that's the underlying cause? Check out the the FC's on realtytrac.com in 89450
You say the same bullshit for a year. How Fed is not responsible for energy costs? They must restrict money supply and allow $ to appreciate through rate hikes to curb foreign demand Greenspan did what you suggest five years ago and now we're here It would be a disaster to have such incompetent people like you and Cramer to be Fed members
Cramer is clueless! He just doesn't get it! The Fed should IMMEDIATELY DROP THE FUNDS RATE TO ZERO NOW!!! He doesn't know how bad it is "out there"!
You're making my case. I looked up my zip down here. 1200 properties! And this is a zip that hasn't seen new construction (per 'se by SoFla standards) and hence flippers in years. Sub-prime is to 2007 what Credit-Anstalt was to 1931. It was just the first domino to fall causing every spread in the world to readjust. At the end of the day LEH's loss is perversely attributed to some black delinquent homeowner in Detroit.
What's wrong with this place ? Since when did the Fed ever have anything to do the economy ? The Fed controls money supply, that's it thats' all. They exist to control inflation nothing else.
If you don't see that rates need to be much lower, you're either clueless or not paying attention. It has *nothing* to do with saving asset markets of any kind. There's sand in the gears of the economy, and the only way to clean them is to add grease and let 'em get worked out. Look at the yield curve. You think banks can make money there? Here's a recipe for disaster: pass a FASB resolution that forces everyone to chase each other marking down assets. Then don't deal with the synthetic tightening of credit that results from an intermittently dysfunctional interbank market. The answer is to slash the shit out of rates now. He should have gone 50 bps and 75 to the discount rate today. Raise them right back in 6 to 9 months when the markets are functioning better. We don't have a dollar crisis right now; we have a worldwide lending crisis.
doesn't the argument go that artificially low rates during the greenspan era are what put the sand in the gears in the first place..
Why should a working family pay one penny higher for a loaf of bread while Bankers get rich off risky loans. Inflation is nothing more than a TAX levied on workers/consumers for the benefit of asset holders. In WHAT WORLD should the Treasury pay me lower yield than the rate of inflation. We reward asset buyers while punishing savers and holders of dollars. The market is wising up. Rate cuts in this environment are like putting out fire with gasoline. As Keynes' said it's a game of Old Maid. Let the Fed help Wall Street pass that depreciating Queen around the party.