No instead it is a trading term where the market takes a breather or the afternoon off if things fall too far, too quickly. Keep an eye on this as a scenario I laid out in August for a pessimistic case looks like it is coming closer to reality than the more optimistic contained cases:
this post is a more pessimistic scenario that has greater uncertainty, higher risk premiums and more things cascading forward in a positive feedback loop.
In this scenario, investors, regulators, lenders and creditors believe that the entire mortgage and collatoral backed securities markets have systemic problems....
Everyone believes they know revelations of problems will continue into the intemediate future but they don't when or what will be revealed.
There is also systemic mistrust of the credit rating agencies as they screwed the pooch royally as evidenced by all of the CYA downgrades in the past couple of months. Uncertainty is very expensive and that means either lenders will not lend money or they'll lend it at much higher interest rates....
This problem puts people in a bind. Minimal real wage gains as well as inflation ex inflation in food, energy, medicine and education are putting people over the barrel and deeper in debt. The debt was managable as long as their was cheap credit and easy rolling over available. That may be changing. Mortgage payers now either must refi at higher rates and credit ratings (the cheap rates today are for a much higher FICO score than the cheap rates were 3 years ago), or find something in their already stretched budget to cut back on as they suck it up and pay the higher, reset monthly mortgage payment.....enough people get kicked in the ass and all of the marginal loans and not-so marginal loans are either renegoatiated or foreclosed. And that could get ugly.
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