yo!...
going, going, gone...innit!
PALOOKAGRAD FINANCIAL
capitulation day
+292
...once-upon-a-time...
...here in...
...palookagrad...
...there was a tower called...
...................
...in those olden days there was a nasty witch...
...called bust...
...and this bust threatened to bring down the owners of the great tower...
...for some while the tower wobbled...
...and all the soothsayers argued about whether or when it would fall...
...about the same time there were rumours about an insurance company...
...that we worked in...
...the AAA magic that protected the company...
...was wearing out....
...due to non-performing...
...property investments...
20% OF THE SALES FORCE BRING IN 80%
OF THE BUSINESS
...the big hitters...
...had hit big...
...and made off with their commissions...
...the empty malls and towers...
...sucked the life out of the insurance company...
...AAA to AA+ to A to B...
...well you can guess the rest...
...and of course the tower fell as well...
NOTHING LIKE THIS COULD HAPPEN TODAY
Gillian Tett : ...So will US property prices stabilise? Not if you believe a startling presentation I saw this week from a large, global financial group. This particular bunch of analysts – who have done a remarkably good job at predicting the credit crisis during the past four years – are currently warning their clients to expect a peak-to-trough fall in US residential prices of more than 40 per cent in this cycle.
The good news is that in some US regions, prices have already fallen so sharply – often by more 30 per cent – that property is already very affordable, relative to incomes and on a historical basis.
But the bad news is that houses are not yet cheap enough to prevent more price falls. On the contrary, this particular team of analysts thinks that when the problems of excess house inventory and rising unemployment are added into the model, average US house prices will still fall by another 14 per cent in the next few years – on top of the declines seen so far.
That headline figure conceals some startling regional discrepancies. Colorado is reckoned to be through the worst. In New York, though, the pain has barely started. Prices there are projected to decline by another 30 per cent or so. Taken as a whole, these projections imply that about 25m households in America end up in negative equity.
This projection is gloomier than those made by the US government and many large US banks. But the 25m number is currently being echoed by other investment groups, such as Pimco. If it turns out to be correct, it raises two crucial questions. One is the degree to which the western banking system could face a secondary round of real estate losses (particularly as these analysts are even more alarmed about the commercial property outlook than the residential sector.)
But the second fascinating question is what further house prices falls might do to consumer psychology. America has never experienced negative equity on this scale before. Thus nobody is entirely sure how households might respond. Will they default en masse? Will voters become so angry that they demand more populist public bail-outs of the housing sector (or financial reform)? Will consumers cut spending further?..." Gillian...
