[dutchcyclist]

European stocks also deep in the red.
A lot of money will be lost in the next 48 hours, maybe even crash.

[peaker_2005]

$this->bbcode_second_pass_quote('Roccland', '[')url=http://www.bloomberg.com/apps/news?pid=20601080&sid=aVFVrl_TE8Cg&refer=asia]Macquarie Says Fortress Funds Value May Fall 25%[/url]

BTW this is a corporate secured account...not a subprime or alt-A.

[firestarter]

Get strapped in. We're in for a helluva a ride today.

[Zardoz]

$this->bbcode_second_pass_quote('firestarter', 'G')et strapped in. We're in for a helluva a ride today.

[manu]

I have a bad feeling about the next five years.

[Roccland]

I am getting word of yet another hedgy on the brink and this one with ZERO leverage...

They are happening daily and breeding like rabbits.

GAME OVER

Got Bunker?

[manu]

I was watching the buisness news on CNN and the guy was talking about hedgefunds, ect. I was drinking some water and almost choked when he said "I dont think this is a global meltdown, but I wouldnt advise anyone on what to do". On CNN.

[Eli]

Roc

That is the thing that is most troubling now, there are trillions of funds that are leveraged to the hilt, of course those are going down. But what we are seeing is that funds with limited exposure are going tits up, the assets they own are losing value so fast people can't get out fast enough.

Melt down is exactly what we are in the middle of, it is going to take place over months.

[Zardoz]

Can this be right? Can 30% of the mortgage activity in the U.S. have been killed off overnight?

Denninger thinks so

$this->bbcode_second_pass_quote('', 'S')PECIAL UPDATE - Moody's Puts a Fork In What's Left

The non-agency mortgage business was killed this evening.

Most ALT-A paper is now essentially being rated as "subprime", with huge increases in overcollateralization and such required.

"Actual performance of weaker Alt-A loans has in many cases been comparable to stronger subprime performance, signaling that underwriting standards were likely closer to subprime guidelines," said Marjan Riggi, Moody's senior credit officer, "Absent strong compensating factors, we will model these loans as subprime loans."

The short answer to "what will this do" is that it is going to destroy most of what is left of the CDO mortgage marketplace by forcing spreads high enough that you'll think you took out a credit card loan to fund your mortgage.

Effectively, the market has spoken.

More on this when I get details; the short version, however, is that what I had predicted - roughly 30% of all mortgage activity in the US, based on 2006/early 07 levels - has just been shut down.

Nobody writing other-than-agency paper will be untouched by this. Even presumed "reasonably safe" big lenders such as Countrywide are going to get severely roached, and the ALT-A "boutique" lenders will simply be taken out and shot.

The futures are roaching hard as I write this. Tomorrow's open is likely to be very interesting, and not in a way that, if you left long positions on going into the close, you will find amusing.

[RonMN]

Zardoz, My guess would be "yes".

It's all about nobody willing to "invest" their hard earned/saved money in mortgages now...and those who are in them already are STUCK in them.

It's all unfolding like a bank run.

[Eli]

Yup agreed.

What is happening now is that people in the hottest markets are getting killed. Even if they had good credit and put 10% and were a premium borrower, they are now coming to terms with the fact that they are upside down in a house that continues to slide in value.

alt-As were a supposed step up from subprime but it is complete bull shit, they were loans usually for people with better credit ratings but they still did not have to do all the paper work of regular loans. People have Zero equity in there house, the banks are the only ones with something to lose.

I blame it all on too much HGTV and flip that house shows, they better start filming some shows about this blood bath but I seriously doubt it.

[Twilight]

A European news watcher's impression of the US credit market...

2006

"This is a piece of paper. We have many others like it. It is worth $100m and is connected to a vacant lot, but next year it's going to be BIG."

2007

"This is a piece of paper. We have many others like it. It is connected to a vacant lot that is still vacant, the builder no longer exists and the realtor has left town and moved in with her mom while things settle down. It is still worth $70m. It is for sale by the way. We can negotiate."

2008

"Security, there is a man here asking questions."

"Sir, you will have to leave now."

2009

[Vacant unit 200,000 sq ft]

[Zardoz]

I sure hope CNN is right about this:

Why stocks can shake off mortgage meltdown

$this->bbcode_second_pass_quote('', 'U')ncertainty about how wide credit problems will spread is likely to persist, which means investors are in for more sharp swings in the market. But there are a number of reasons why stocks aren't likely to fall off a cliff, analysts say.

Stock valuations are reasonable...

Deals not doomed...

Economy still fundamentally strong...

Plenty of cash out there...

[jboogy]

Twilight, I don't understand your post with the dates and the vacant lot. Could you possibly expand on it or at least explain what it means? , it looks like it might be interesting.

[evilgenius]

I was thinking that what we are experiencing this week doesn't necessarily mean the beginning of the end. This could be how PO works the shakeout amongst the several more wealthy players left in the group that can still afford to run on oil. The Third World disappeared down the Darfur and Zimbabwe holes around 50-60 per barrel.

The group at the top has enjoyed the lack of competition. Now, there is supply tightening again as the new big users, the BRIC countries, have expanded to take up the Third World's slack. It is my opinion that the US wants to see China get what it needs, even if housing here has to go to reduce our demand enough so that cheap goods can still flow. I think that is why Sec Paulson is in China now.

It is complicated because I am saying that there is demand destruction being encouraged in the US in order to not realign exchange rates and to keep the price of a barrel from reaching a hundo too soon.

In other words, they want a hundo, but in a few months when their plans for Iraq would benefit from it. I think they are just hoping for a mild hurricane season and the usual fall come down on oil prices. They figure with what will happen to political will in the US after sub-prime goes and the economy gets a haircut they will be able to keep pulling the wool over the people's eyes. What I mean is, not so much the danger of camps and such for Americans but the danger that exists for the US if its leadership's plans fail at any point and the whole thing collapses like a road bridge over the Mississippi River.

[firestarter]

$this->bbcode_second_pass_quote('Zardoz', 'I') sure hope CNN is right about this:

Why stocks can shake off mortgage meltdown

$this->bbcode_second_pass_quote('', 'U')ncertainty about how wide credit problems will spread is likely to persist, which means investors are in for more sharp swings in the market. But there are a number of reasons why stocks aren't likely to fall off a cliff, analysts say.

Stock valuations are reasonable...

Deals not doomed...

Economy still fundamentally strong...

Plenty of cash out there...

[Eli]

That article is complete and utter horse shit.

There is 500 billion stuck in hang fire right now in LBO deals, the Banks can find no buyers for the loans.

And as far as the Global economy being able to resist a US debacle yeah right. A German bank just had to be bailed out there is all kinds of exposure held in EU banks and in China, but we only get info from the EU, China would like to keep there losses under their hat.

When the US goes down, the three Trillion dollar Yen Carrie trade is going to come a part.

This is not a US melt down, we all are part amazing new global economy. Japanese house wifes can borrow Yen for nothing invest in dollars and make free money, it's magic baby!

It is Global crash.

[Jack]

A small quibble, if I may - it is not a global crash, not yet. Rather, it is a potential global crash.

If you take a look at societies, they have different nightmares. Germany, for example, remembers the events after a bout of hyperinflation, so they are quite sensitive to the problem.

The U.S., on the other hand, is particularly sensitive to the images of the 1929 depression - to the soup line, if you will.

Given the choice between mass unemployment, mass foreclosures, angry voters, a destroyed stock market, a destroyed housing market, and the demise of the banking industry - OR - lots of inflation - which will the U.S. choose?

I strongly suspect the choice will be inflation. Recall the Bernanke of the Fed has spoken about increasing the money supply. He has made reference to Friedman's statement that one could throw money out of helicopters to achieve the desired end.

Who does inflation hurt? Not the wealthy - they have assets that will track inflation. Not the doctors and lawyers - they raise their fees. No, it is the fellow just barely hanging on to a low-wage job that gets taken to the cleaners. And who will the political structure favor?

So I can only conclude that a crash, while possible, is not probable. Inflation will be the more likely future.

[Lore]

$this->bbcode_second_pass_quote('Jack', 'S')o I can only conclude that a crash, while possible, is not probable. Inflation will be the more likely future.

[evilgenius]

Inflation seems natural, but don't forget if enough money is removed from the system at once that will create deflation. Deflation can, by the way, take place in an inflationary environment. It can happen while natural resources peak enforcing an inflationary environment. That's where the die off strikes first, amongst those whose economies, as opposed to their persons, haven't got any capital. Deflation destroys capital, therefore, the ability to invest. So, prices go up and there is no way to get a handle on them because all of the necessary investment capital to retool and realign for the problem is gone. The apparent inflation cited is the product of a broken system in that situation.

So, which countries or regions go next?