Subprime Meltdown, the Repricing of Credit, and the Impact Across Asset Classes
"Currently $ 25 Billion of ARM's are experiencing their first interest rate uptick each month. That will increase to $ 50 Billion per month and continue at that rate for 12 to 15 months.My thought was that the reaction of the markets in the 26 days since the DJIA set it's record closing high was not dramatic. Here's a bit from Barron's "Up and Down Wall Street":
The securities created from these mortgages will continue to be marked to market for at least that long. If the U.S. goes into recession, even more people will default on their mortgages, including formerly prime borrowers."
OUR OLD FRIEND, INVESTMENT SAVANT, PROPRIETOR of the always informative and insightful commentary with the vaguely doggerel title of Gloom, Boom & Doom Report and, not least, valued Roundtable worthy, Marc Faber, offers some pertinent and pungent comments on the troubled capital markets.
Marc is the nearest thing to a truly global investor we've ever come across and was busily discovering the merits of emerging markets long before either the phrase was invented or the venues became so popular. We're thoroughly convinced that if mankind, out of design or necessity, establishes a colony on Mars, Marc will be among the first to explore its investment possibilities. He's Swiss, but, even so, has a sly and spry sense of humor to go with his considerable erudition and trademark skepticism. And he's a first-rate guy.
In surveying the current investment landscape and the eruptions that are taking place courtesy of the subprime disintegration, he recalls that when Nasdaq began to go south in 2000, most Street pundits were convinced that we were witnessing only a brief correction. In like manner, in 2005 as the home-building stocks, which had been whiz-bang winners, slipped back, the prevailing advice was not to worry, housing was fundamentally sound....More
