There's a lot of buzz going around based on a super-big chart-filled presentation by some scare-mongers called "T2 Partners", who're attempting to use reality to scare customers into buying their services. Sadly, the reality they paint, is, well, real. Here're a few of said charts:
Here's the situation with regards to subprime mortgage rate resets:
Here's where we stand with regards to the Alt-A resets...
or scheduled resets in general:
The 64-thousand-dollar question of course is what this will do to bank valuations. No-one knows for sure how many of these mortgages will end up defaulting, but I'm suspecting that they're already factored into bank shares' trading prices.
With $1.7T of mortgages resetting over the next five years, during the worst economy seen in decades, the big question will be how will this affect the rest of the economy. Especially retail sales. No-one knows, but I'm wagering that those "V-shaped" recession wonks are wrong, and that the "U-shaped" wonks are also wrong. Given the way mean reversion versus a growth trend-line tends to work, I'm betting on an "L-shaped" recession that stays flat, just like the Japanese have seen (since we're repeating their mistakes).
This of course while we're debasing the currency so much that the Treasury Secretary got laughed off the stage in China.
We now return you to your regular sunshine filled day.
5 comments:
Yeah, this is making the old day. Thanks buddy.
I'm beginning to think my mastery of the worst case scenario that I played so well has rubbed off onto you.
I was thinking we would get a J shaped recession. Originally I got this idea from a Toles political comic (the economy goes into the toilet like a J-shaped pipe) but now I'm thinking the economy will go back up, but its new baseline is never what it was before. Kind of like a permanent devaluation.
Sure, it'll do that eventually, but first it has to overshoot the mean. Once it does that it can waffle around until the real mean is discovered, and from there it can slowly crawl upwards until we realize it's overshot again and it's time for the next recession. If your J leans way to the right, that'll be not far from it. "L___/" is the shape I'd bet on.
I've looked at this six times, and can't understand why these charts should be making me upset. what am I not understanding?
Well, "upset" isn't quite the word, but check the dates. We've a lot of f***age ahead of us, and it'll whallop consumer spending (and the banks, but then our crocodile tears will be similar).
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