Ken Fisher deflates all the hot air and nonsense we've been hearing about this issue.
Noteworthy:
TCS: You don't see major long-term economic consequences?
KEN FISHER: I think intuitively everybody knows that in the long term, this is not a big deal for the economy and the stock market. I don't think it's big enough to matter.
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TCS: If you want to promote home ownership at the margin, don't you by definition have to lend to people who don't qualify for traditional mortgages? And doesn't the risk of default increase in some proportion to how deeply you move into that pool of non-homeowners?
KEN FISHER: Yeah, and default rates are now up. There are more people failing. But say you got to a ratio of 85/15. We're still better off. If the default rate soars all the way up to 20 percent, we'd still be better off.
Politicians want to talk about this as if subprime lenders were involved in predatory activities because some of the people that borrowed from them failed and suffered. These politicians talk as if they want to restrict this activity moving forward so that, simply put, those 90 percent of subprime borrowers won't be able to buy homes.
The fact is, if 90 percent of our activities succeed and ten percent fail, we're a whole lot better off than if we didn't do anything at all.
And, yes, I'm sympathetic to those who suffer the pain; but I'm really gleeful about the 90 percent who got the homes.
Fisher doesn't go into the reasons for all the babble we've heard on this issue, but it's pretty apparent to those who are paying attention.
There are certain people with a certain worldview who have a political stake in letting this courty slide into a "recession", if at all possible, before the 08 elections. The goal is to discredit Republicans so that there is no chance that the GOP will regain control of Congress, or retain the Presidency.
Can you guess who those people are that want you to believe that the subprime meltdown will wreak havoc on our nation's prosperity?
I disagree with Fisher as many from both parties do.
ReplyDeleteWhy did Bush go national with an idea to help those with mortgage issues if it is not an upcoming large problem.
Bubba, check me out on this as I may be wrong...our worst recessions show less than a 15% reduction of GNP. My point is 10% is a big number.
I have moved to cash or fixed in the past few months as I believe it will take a few more months for the markets to drop to negative levels.
Yes...I believe a recession is coming and that is has little to do with politics and much more to do with greed on the part of many lenders making marginal loans and then packaging and selling same.
"Yes...I believe a recession is coming and that is has little to do with politics and much more to do with greed on the part of many lenders making marginal loans and then packaging and selling same."
ReplyDeleteBush wants people to "feel good" about their bad decisions. It's a mistake.
I disagree with your assessment. The indicators are not saying anything that supports moving to a cash position.
Besides politics at work, there are the old standbys of greed and opportunity at work in the market.
Shorts and money managers are manipulating this situation.....as usual.
The media has been blowing smoke constantly on this for years. When they finally got something to work with, they've used it to the max.
Time will tell but my guess this market is closer to a top.
ReplyDeleteFollowing the subprime my concern is inflation and interest rate.
I do hope you are right.
On a funny note...not sure how much credence I would put in Fisher...he tends to be a little wild with his guesses.