Have you guys been following?

[Embar Angylwrath]

Hehe yer not going to see the bottom of this for another two years. Just wait for the CA implosion......it's comming. Hang on Lurker!

Most of California has seen the implosion already, especially certain parts like the Inland Empire and parts of the Central Valley. The dust is starting to settle in the less volatile markets, and housing prices are starting to stabilize in pockets. Hell, my neighborhood even saw an uptick in comps value, over the last month.

I don't expect much appreciation over the next couple of years, just a slow absorption of inventory. In may of the more stable areas (the ones that had less sub-prime borrowers), housing is off about 30% from its peak in 2006. That's a solid correction, and wipes out much of the over-speculation from 2002-2006. I think we've seen the worst of it, barring a complete lock-up of capital.

On that note, community banks and credit unions are still pretty strong, since their asset balance is heavily weighted towards deposits, and less on investments. They seem to be doing fine, and there are some indications that money is heading towards these institutions.

[Harlowe]

From what economists are saying, we'll hit bottom far sooner than two years. I bet Ddrak is right.

[Kulaf]

Hehe yer not going to see the bottom of this for another two years. Just wait for the CA implosion......it's comming. Hang on Lurker!

Most of California has seen the implosion already, especially certain parts like the Inland Empire and parts of the Central Valley. The dust is starting to settle in the less volatile markets, and housing prices are starting to stabilize in pockets. Hell, my neighborhood even saw an uptick in comps value, over the last month.

I don't expect much appreciation over the next couple of years, just a slow absorption of inventory. In may of the more stable areas (the ones that had less sub-prime borrowers), housing is off about 30% from its peak in 2006. That's a solid correction, and wipes out much of the over-speculation from 2002-2006. I think we've seen the worst of it, barring a complete lock-up of capital.

On that note, community banks and credit unions are still pretty strong, since their asset balance is heavily weighted towards deposits, and less on investments. They seem to be doing fine, and there are some indications that money is heading towards these institutions.

Well if you have seen it already......why is CA looking for a 9 billion loan? You have only seen the tip of the iceberg........there is another 80% lurking in the wings.

[Kulaf]

Oops.....sorry. 9 billion was last weeks total......this week the CA deficit is 16 billion.

[Embar Angylwrath]

California typically gets loans to cover budget bumps. The place they normally go to get it, the bond market, is working too well right now, as you would know if you've been following the financial crisis.

Anyway, I thought you were talking about the housing implosion, which has already happened. Are you talking about some other kind of implosion?

[Kulaf]

Yeah CA itself is imploding. Its facing a mass exodus of jobs to other states with more favorable tax codes and less wacky environmental restrictions and the glut you see now is nothing compared to what yer gonna see in the housing market.

[Embar Angylwrath]

Looks like we might see an entire nation declare bankruptcy as a result of the global meltdown. Iceland is on the verge of declaing Bankruptcy. If that happens, there will be other European countries that follow suit. Why? Iceland has a huge banking industry, and controls substantial capital in many different European countires. When and if one European country declares bankruptcy, expect a domino effect that might stop at China. Might.

http://www.iht.com/articles/2008/10/09/ ... cebank.php

[Ddrak]

The only real solution for Iceland is to join the EU and switch to Euros. The question is whether they have the political will to pull it off.

Dd

[Embar Angylwrath]

The only real solution for Iceland is to join the EU and switch to Euros. The question is whether they have the political will to pull it off.

Dd

Or for a consortium of EU governments to bail them out behind the scenes. It sucks to prop up another country and use your nation's cash to bail out another soverign nation, but considering that much of that cash in Icelandic banks is really the cash of other EU nations (or more accurately, other smaller governments in those EU nations, corporations and individual investors), I don't know that those EU nations have much choice other than prop up Iceland.

Interesting times, people, interesting times.

I find it noteworthy just how interwoven macroeconomics is today, and just how much the rest of the world leans on the US economy. As bad as the US situation is right now, its worse overseas. Seems like the US stumbles, but the repurcussions cause other nations to collapse. That's simply amazing to me.

http://www.ft.com/cms/s/0/a0eac1e2-96f0 ... 07658.html

Almost all the major markets took roughly the same hit, and almost all the major markets are off about 40% form their peaks last year. I can't even begin to imagine what kind of colossal evaporation of worth that means. Easily pushing towards $100 trillion dollars, and probably past that. Thats more than the entire worldwide GDP. Almost two years in fact. Its almost the same as 6 billion people working for no pay whatsover for two years. That's how much value has evaporated in this meltdown.

[Ddrak]

As bad as the US situation is right now, its worse overseas. Seems like the US stumbles, but the repurcussions cause other nations to collapse. That's simply amazing to me.

There's a number of things at play. The world economy is very interwoven so any large stumble (whether it be the US, EU or Asia) will send shocks everywhere. The larger economic blocs have a lot of inertia so it takes a while for the effects to sink into their economic systems, while the smaller nations tend to get thrown around wildly and in this instance some even get sent into bankruptcy. Any of the large banking collapses (Bear, Lehman, AIG, etc.) are much larger than the entire Icelandic economy so as a matter of scale it's inevitable that nations financially collapse in the face of much larger financial entities collapsing.

One of the bigger complaints (and problems) in Australia is the ease in which the large mutual funds in the US can manipulate our entire economy. The Aussie dollar *should* be at around 80-85c US but we saw it shoot all the way up to 98c because of currency manipulation. Nothing much our central bank can do about it either, short of pegging the AUD to the Euro or something equally as drastic.

Dd

[Embar Angylwrath]

What I see happening is a de facto world currency emerging. The US and Euro central banks are going to coordinate a repsonse to the global meltdown, and the only way they can do that is to make sure all currencies rise and fall at essentially the same rate. Its the only way to stabilize the wild oscillations. They won't call it a world currency, but mark my words. After this debacle, most of the major economies will have mechanisms built in to ensure everyone rises and falls with one another. Currency trading wil be dead (and I won't miss it in the least, I hate speculative "investing").

On that note, part of.. wait.. most of the problem in this global crisis was sparked and fueled by speculation. Dollars (or euros), chasing swings in the market, or market segments, instead of investing in real companies and real production. Hopefully, this will bring investing back to the basics.. invest in a company that will make a profit by creating something, and distribute some of that profit in the form of a dividend. Don't invest in vehicles that are merely bets on market fluctuations. With the exception of commodity futures, of course.

[Fallakin Kuvari]

I certainly don't think it helps that they lifted the ban on short selling again.

[Kulaf]

Remember when we were talking about what would happen to the world economy if the US economy went in the tank......well we no longer need to speculate we can watch it live.

[Ddrak]

I don't think the currency thing can happen unless governments surrender their individual control over their nation's economies. Currencies have to float with respect to each other or you end up with serious imbalances when governments start deficit spending (printing more money). Until you can mandate a balanced budget on an international level there's nothing much you can do about currency speculation.

I didn't think the global meltdown as fuelled by currency speculation at all (though I could be wrong). I thought it was just the same thing that's been happening inside the US - banks owning toxic derivatives from US mortgages, or having large investments in the banks that failed in the US and not being able to cover their losses. It's just a flowon from the amount of cross-national ownership that exists in the global financial scene.


@Fallakin:

Short selling doesn't really do as much as people pretend it does. It's also a big risk in a falling market if the players doing the short selling can't come up with an actual sale then they could be forced to buy at a price that loses them a bunch of money.


@Kula:

Yep, and if I recall correctly I was a little off base. I never realized quite how much coupling there was between the US and European economies.

Dd

[Embar Angylwrath]

Dd -

I didn't mean to imply the crisis was sparked by currency speculation, but rather speculative trading in general. This was sparked by betting on whether or not certain market segments (in this case, securities backed by mortgages, and derivatives thereof) were going to rise. There was no real "investment" in those trade actions, since a mortgage can only produce a certain amount of income, i.e. the interest on the mortgage. But Wall Street turned mortgages into speculative bets, and a lot of firms made the wrong bets. That's completely different than trading shares in companies that produce dividends.

Also, about your comment on the US world economy having such an impact globally.. I don't think many fully understood that until now. I heard it put this yesterday on NPR, if the US economy catches a cold, the rest of the world gets the flu.

[Ddrak]

Ahh - I see what you mean by "speculation" now. Point taken.

Dd