[Rhodes22-list] Dow Jones.....I hate to say it.....

[TN Rhodey]

The fed rate is not the problem toay however i do think they will go up.
Rates are still very low for Conforming Loans. Loans have been considered
liquid assets. Credit agencies rated these dogs as a relatively safe
investment and now many funds and billions of dollars are gone.

The obvious result sub-prime and non conforming loans are no longer liquid.
These include any loan over $417,000, Sub-Prime, Alt A or Jumbo. These loans
typically don't follow every move of the fed. Right now no one will buy
these loans so rates are going to rise regardless of what the fed does (I
think). They will keep rising to the point that the loans become liquid
again.

American Home Mortgage shopped 200 million in loans last Monday and they got
no offers. They could not fund loans, they cold not secure funding for new
loans, and when the margin calls came in they were done. They closed on
Wednesday. These were not sub prime loans. Countrywide also was not able to
sell loans but they have much bigger pockets. They are the biggest mortgage
lender in the US.

 The media is focusing on sub-prime but this is not going to be limited to
sub-prime. This is already hitting commercial lending at every level.
Everything from small business credit to IPO inveatment credit is drying up.
I am not saying the sky is falling (yet) but I think this is more than a
minor correction.

Wally



On 8/10/07, john Belanger <jhnblngr at yahoo.com> wrote:
>
> someone once told me that standard interest is 3%. anything over that is
> inflation. with "increased liquidity" balancing out "tightness". there
> should be little effect on interest rates at the present time at the
> consumer level. i think they will rise if the government has to borrow
> instead of tax for things like bridges and highways because of infrastucture
> fears. on the other hand, these pressures are being generated by big money.
> so we may not be getting the whole story.
>
> Hank <hnw555 at gmail.com> wrote:  Brad, et al,
>
> What will this do to interest rates? Are they likely to go up or down or
> remain the same? That is something I have never understood is why they
> change the rate.
>
> Hank
>
>
> On 8/10/07, Brad Haslett wrote:
> >
> > Dave,
> >
> > Let's hope I'm right and you're wrong. It smells like a necessary
> > correction and a mild "bank run" to me. I'm at least ten years away from
> > needing to cash-in any chips so I'm along for the ride. What a good one
> > the
> > last six months have been, I "made" more money in my 401K than my day
> job
> > pays. I knew that wouldn't last.
> >
> > Other than the Fed stepping in to prevent a liquidity crisis, I hope the
> > government does nothing. My personal solution is to drive to Branson, MO
> > today for a mini-vacation before Cora starts school.
> >
> > Watch the market for me today and cry for us all if it gets any more
> > nasty.
> >
> > Brad
> >
> >
> >
> > On 8/10/07, DCLewis1 at aol.com wrote:
> > >
> > >
> > > Brad,
> > >
> > > Your point about the business cycle is well made - but the issue is
> > what's
> > > bringing it down. Is it "the usual stuff", or is it something
> > > truly sinister?
> > >
> > > Two ponderous and conservative governmental institutions, the ECB and
> > the
> > > Fed, that like to move slowly and with incremental steps, moved
> quickly
> > > to make
> > > available up to 95 Billion Euros(ECB) and 24 Billion USD - done
> > within a
> > > space of less than 8 hours(maybe less than 4 hrs, I didn't time out
> when
> > I
> > > learned about each move). That's a lot of money and they skipped a lot
> > of
> > > staffing to move that quickly - It tells me there's a big urgent
> > problem.
> > >
> > > We know a variety of US, UK, and Australian hedge funds
> > have folded. We
> > > know many mortgage companies have folded - not in trouble and hence
> had
> > > to cut
> > > back - simply put out of business. We know of 1 US investment bank
> > > that's
> > > taken a big hit. We know of at least 1 German bank in
> > > receivership. Today we
> > > learned the second largest bank in France is stressed. This is not
> > > normal.
> > > As I recall, most business cycles end because of inventory imbalances
> -
> > > this
> > > is nothing like that, this is a financial melt down.
> > >
> > > Welcome back!
> > >
> > > Dave
> > >
> > >
> > >
> > > ************************************** Get a sneak peek of the all-new
> > AOL
> > > at
> > > http://discover.aol.com/memed/aolcom30tour
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