Thursday, November 15, 2007

Pipe Dream Bankers

Let’s see it was July and all was well, and then Bear Sterns had two hedge funds go poof. Financial funding for housing dropped dead. Now three months later you read the headline “Bear Stearns Says Worst Is Over After Writedown”. Seems as if the damaged has been contained.

The housing foreclosure rate during the present one year period has exceeded what took three years, the last time these values were reached. The sub prime resets are just beginning. We have Bear Sterns with no problem four months ago now saying that the worst is over. I submit that what we know today they knew three months ago. So to fast forward three months from now, Bear Sterns as well as the rest of the crowd could be going parabolic on losses. What they know now, we won’t read about, until January rolls around (keep quiet keep your job).

Then to top this off, Citigroup, Bank of America and JPMorgan Chase (the Larry, Moe and Curly of finance), have formed a triumvirate to bail out the SIV’s with a 100 billion dollar fund. Where do you get money like that for such a lost cause? (I can think of two sources, Visa and Master Card) It’s kind of like a hooker with VD. You get a great rate today, but you pay later (it gives new meaning to “Share what you have”).

100 Billion, that's more than 5 General Motors Corporations. Where do you get that much money from? It's a little like the joke about the psychiatrist examining a patient who asks "What would you do if a tank came rolling toward you?" the Patient say "I'd hop in my Porsche and drive away." The shrink says "Where did you get the Porsche?" The patient says, "The same place you got the tank."

The only problem I see, is that this might not be Monopoly money when they begin the program, but it could live "up" to our expectations, given time.


Cranky said...

“It’s kind of like a hooker with VD. You get a great rate today, but you pay later (it gives new meaning to “Share what you have”).”

That was too dang funny!

I told some relatives last Holiday season that this (Christmas 06) could be the last credit card Christmas you might see for awhile.
I’m starting to wonder myself if I’m off on this. Credit card companies are still doling out cards, or at least card applications as if they are connected at the hip with the Horn of Plenty??? The week after Thanksgiving should be interesting.

You know people used to live paycheck to paycheck… now they are living credit card to credit card. It’s insane. I guess once the card companies start cutting back, those people will have no reason to run down to the mail box with pen in hand.

Jim in San Marcos said...

Hi Cranky

Glad to hear from you. Thanks for the ata-boy.

I'm like you, how much more can they charge before it becomes too much? I guess we're not there yet.

I still get 4 apps a month for credit cards. If you bother to read the boiler plate, they're not giving away the store either!

Take care