Boy! That stupid fake housing boom!
And man! I’m not even finished writing this on a Friday and boom! Dow falls 280 points over credit worries!
As the subprime collapse continues to hound the Wall Street, I try to look at what happened years ago that precipitated all of these. One should look back at the “housing boom”. If you think about it, I believe that – that was nothing more than a fake housing boom! Why do I say that? That housing boom was created by loan sharks and fly-by-night mortgage companies and loan originators who made quick money and disappeared! Indeed, they were able to manipulate the sub-prime market and bring them on board the so called housing bonanza and thus created a “boom” which was not really founded on a good financial base.
I hear a lot of my friends talk about that this is a buyer’s market with all the foreclosure and the interest going down, but be careful, it’s not everyone’s buyer’s market. The buyer that we are talking about here, at this time are only reserved to those people who have money and who have good credit.
Why is that? Credit is a big concern, therefore, banks and mortgage companies are now doubly guarding extending credit to those who deserve credit. None of those lax credit. They will scrutinize your credit like crazy. Obviously, deals are becoming more difficult to execute.
I personally believe that Wall Street will still slide down. Up to where? Up to it’s correct level. It will continue it’s slide until it finds the right equilibrium. This is the good thing that the sub-prime problem has created, that is, correct the market. Why do I believe that the market will continue to slide? Well, here are the reasons why:
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Bank of America No. 2 U.S. bank by assets, reported a 5 percent rise in earnings from growth in capital markets activity and consumer fees, offsetting an increase in credit losses. But provision for credit losses ballooned 79.2 percent to $1.81 billion, up from $1.24 billion in the first quarter and $1.01 billion in the second quarter of 2006. Net charge-offs, or bad loans, rose to $1.5 billion, compared with $1.43 billion in the first quarter and $1.02 billion in the year-ago quarter.
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JPMorgan, the nation’s third-largest bank, on Wednesday reported a 20 percent increase in second-quarter profit. The bank said it tripled the money it set aside in case its loans go sour.
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Wachovia Corp., the fourth-biggest U.S. bank, said today second-quarter earnings rose 24 percent as its purchase of Golden West Financial Corp. boosted profit from mortgages. The company, based in Charlotte, North Carolina, said its total provision for credit losses rose to $179 million from $59 million a year earlier. Loans it couldn’t collect almost tripled.
Now, if these large US banks are increasing their reserve accounts, what does that tell you? It only means that they are still expecting a lot more delinquencies and a lot more loans going south.
Listen to me guys: I’m no financial advisor, these are just my personal analyses and opinions. Should you decide to use my opinion on your investment decisions, due diligence still rests on you. Now, just because you read my opinion, do not run to the bank or your investment house and trade them or withdraw them, ok? If you do at pumalpak ang desisyon mo, sasabunutan kita!
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{ 3 comments… read them below or add one }
Buy! Buy! Buy! Well…not yet. I think house prices have note yet hit rock bottom. I’d wait a few more months ’til owners realize that they can’t sell a two bedroom dump for 250K. Seriously though if you’ve got the cash for the downpayment, closing costs, etc. now is the time to buy. Please please do not get an adjustable rate. You can always refinance when the interest rates reach lower levels. As far as the stock market goes, I *think* that some of those very conservative blue chips are cheap right now. Which means b-u-y. Please refer to Reyna’s disclaimer though and if you don’t know S@#$ about the stock market, see a financial advisor.
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Hey JHV, that stupid ARM knocked off a lot of houses in our development, no wonder, i was driving one time and i saw dozens of for sale signs until i had a talk with one of my neighbor who had a scoop as to what’s with those signs.
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SHARE prices will remain linked to the fate of the US stock market, which is reeling from a growing subprime lending problem.
READ THE REST OF THE STORY HERE:
By Elizabeth Sanchez-Lacson
Inquirer
Last updated 07:44pm (Mla time) 08/05/2007
http://business.inquirer.net/money/breakingnews/view_article.php?article_id=80716
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