Wanna be really terrified?

[Mr._johngalt]

I wish I could say it was my "dry" wit coming to the fore, but unfortunately it was completely accidental.

Maybe the references came from my subconscious as a result of symptoms of this horrible flu I'm fighting. I do feel a bit like I'm drowning at times...

Hang in there. Explore your options. Try to becalm and sail on
in spite of nose leakage. A sea change is dead ahead.

JG

 

[audreyh1]

Here is the article that was quoted in the "Who Bears the Risk" blog link above:
http://www.contracostatimes.com/mld/cctimes/news/local/states/california/15395980.htm

Pretty interesting.

Audrey

 

[Alex]

funny, but this crap doesn't scare me one bit.

 

[Mr._johngalt]

funny, but this crap doesn't scare me one bit.

Me neither. Bring it on !

JG

 

[Texas Proud]

Brewer...

A good 101, but a little off from my experience....

Usually they sold the C and kept a Z... this last traunche is usually the 'remainder'.... and most pools are over securitized by some percentage... hench a remainder.... and usually the interest rate on the pool exceeds the amount that has to be paid so the longer it has been in existence the larger this remainder gets if normal defaults occur...

IF defaults occur higher than anticipated... they are protected... it HAS limited their exposure to that pool to a certain dollar figure... this is what they are looking for... if all payments are made, we make a boat load of money because we are borrowing 'cheap' and lending at a high rate... if it is normal default, we still make a boat load of money, not as much... and if everything goes to sh!t.... well, we can only lose X dollars on this large portfolio...

PS.... I was a trustee for many issues... and I dealt with many that had huge defaults... none every lost money on the Z shares...

 

[perinova]

What do you think of the segmentation of the US population here? Too simplistic in my opinion. Yes there will be many dafaults etc but the segmentation may be quite off.

Of the 64% of the population with homes many may very well be exposed to credit problems as many stretched there wallet with higher cost homes. Specially the ones shopping at Neiman Marcus; which is not all of them! Where are the LBYM in the segmentation?

By the same token many people with substantial wealth are not exposed to the real Estate market and do not own homes (actually the % of millionaires with RE investments dropped significantly as of late). Many like to rent as it is a simpler lifestyle or simply like to move around.

Many examples of these segments on this board. I am not saying that the conclusions of the study and implication on the overall economy will be wrong. Just that the segmentation is too simplistic:
1. Home ownership is not always tied to assets.
2. Credit overextention is not always tied to income.

 

[GrayHare]

The power of hindsight makes this one of the more interesting old threads.

 

[SRyan]

I am becoming increasingly convinced that we will be entering a housing-lead recession late 2007/early 2008.

Wow!

 

[packrat44]

A small minority can cause havoc for the majority. Back then I thought only those who were doing foolish things in the housing market were going to get burnt. Very naive, never thought it would have such a negative effect on the rest of society.

 

[Koolau]

Wasn't I naive? I just assumed when the housing bubble DID burst - and I too was certain it would - those who bought McMansions and the STOCKHOLDERS of the institutions who made it possible would be the ones to suffer. Silly me. Surely we learned our lesson back during the S&L crisis. Maybe not. YMMV

 

[clifp]

The power of hindsight makes this one of the more interesting old threads.

[FONT=arial, helvetica, sans-serif]I started reading this thread thinking Meredith Whitney was issuing a new report. I was wondering why Brewer was explaining securitization cause I figured most board regulars understand it by now.

It wasn't until I read the second page I figured out it was an old thread.


[/FONT]

1. Buy treasuries, puts on equity indexes, and avoid junk bonds.

2. Go short/buy puts on banks and REITs involved in subpprime loans.

Just think how rich you'd be if you followed Brewers investment advice back in Oct 2006 and then reversed course sometime in 2009.
I am surprised Brewer is still working.
[FONT=arial, helvetica, sans-serif]
[/FONT]

 

[Masquernom]

Here's one guy that saw it coming and figured out how to make a bundle of cash. Interestingly, a lot of the investors in his fund didn't believe him and pulled their cash out before the crash, when his investments paid off. The ones who stuck with him, made out very, very well....

Michael Burry - Wikipedia, the free encyclopedia

 

[brewer12345]

Just think how rich you'd be if you followed Brewers investment advice back in Oct 2006 and then reversed course sometime in 2009.
I am surprised Brewer is still working.
[FONT=arial, helvetica, sans-serif]
[/FONT]

I got whacked along with everyone else, although I regained the investment money I lost pretty quickly. The collapse was broader and less predictable than I would have guessed. The biggest loss was my extremely lucrative job, but since I am now in a far more livable situation job-wise that turned out to be a blessing in disguise. Ah well.

 

[Midpack]

A small minority can cause havoc for the majority. Back then I thought only those who were doing foolish things in the housing market were going to get burnt. Very naive, never thought it would have such a negative effect on the rest of society.

+1. I was aware that lots of people were taking on loans they shouldn't have, but I also (naively) thought the damage would be mostly limited to them and the fly-by-night mortgage companies (their ads were telling), I never imagined...

It was fun to read this thread many years later, glad someone revived it. Many of the ER members come out looking very smart...congrats.

 

[tryan]

The recession seems reasonable in my hood (STILL). Every home buyer from 2004-2010 is upsidedown .... and no right-side-up is insight. Rates creep .... forget-about-it.

 

[brewer12345]

One of the lessons of the crash for me is that the world is a much more volatile place than I had previously ascertained. That being the case, I have been taking steps to help lower my risk profile and not all of them have been portfolio related. So while I have taken to keeping more cash and CDs handy and I have become more disciplined about selling stuff that runs up to my targets, I have also moved to an area with much lower catastrophe risk and lots of handy open forest nearby. I have chosen to stay in a rock solid job I could do with half my brain rather than take risk chasing big money (which probably is not there anyway). I will likely refi my ARM to a 30 year fixed later this summer and hang onto the cash rather than take a 15 or seek to prepay. I will be learning to hunt this fall (never go hungry if you can quietly pick off the occasional "limb chicken"). And we are slowly building up a supply of stored food, water and ammunition (I will probably never have to buy .22 shells ever again). The vast majority of this is probably unnecessary, but it takes a fraction of 1% of my portfolio and if it cuts off a very unpleasant tail scenario it is well worth it.

 

[sengsational]

I was having a pretty good evening, then I read that our resident 'seer' is saying

the world is a much more volatile place than I had previously ascertained. That being the case, I have been taking steps to help lower my risk profile and not all of them have been portfolio related.

and then I read this thread http:// http://www.early-retirement.org/forums/f52/the-u-s-budget-cant-be-balanced-61240-new-post.html

 

[Independent]

Wasn't I naive? I just assumed when the housing bubble DID burst - and I too was certain it would - those who bought McMansions and the STOCKHOLDERS of the institutions who made it possible would be the ones to suffer. Silly me. Surely we learned our lesson back during the S&L crisis. Maybe not. YMMV

+1

I didn't expect the US would bail out a company like AIG. It didn't even occur to me that someone would sell that much uncovered credit insurance and go that far under.

I didn't think we'd try to pay 100 cents on the dollar to F&F bondholders.

 

[kcowan]

I got whacked along with everyone else, although I regained the investment money I lost pretty quickly. The collapse was broader and less predictable than I would have guessed. The biggest loss was my extremely lucrative job, but since I am now in a far more livable situation job-wise that turned out to be a blessing in disguise. Ah well.

The problem with being right is that you could not have anticipated the widespread bailouts that changed the course of our history. I suppose shorting banks would have been good but the bailout prolonged their decline by years.

Who would have guessed that Buffett would have made money by investing $5B in Goldman at the peak of the crisis?

(Of course, a move to God's country is not a bad consolation prize!)