Tuesday, August 02, 2005

It's a Credit Bubble

I first saw this article by Kevin Duffy mentioned on the most excellent blog The Housing Bubble 2. But it is so good that I thought I'd reference it too; I couldn't resist. The graphs are most telling.

Some choice quotes:
"Can any mere mortal really know the timing of a bubble?"

"Although history rhymes, the great bubbles of at least the past century have followed a remarkably similar script right before they popped. As absurdly high valuations weigh on relentless injections of liquidity, the advance narrows. Former favorites are treated like lepers while the remaining beauty queens become the focus of intense adoration and pursuit. Eventually, even the central bank bubble blowers get cold feet and begin posting speed limit signs by raising rates. Initially the crowd runs right through the signs, taking their speculative vehicles on a reckless, parabolic joyride. As higher rates slow liquidity, speculators sell their losers in one last desperate attempt to get their hands on more fuel. The jig is finally, mercifully, up."

"The bubble du joir is not so much in housing as it is in credit. We are hard-pressed to know who is crazier, the borrower swimming without a bathing suit or his Pollyannish lender. Not all regional housing markets are in bubble territory, but credit availability, rates, and standards are clearly detached from reality."

"Credit-related stocks, as measured by the Bearing Credit Bubble Index, rose ten-fold from 1995 through the end of 2004. Its eight sub-indexes (banks, brokers, subprime lenders, etc.) were all in sync until mid-2003 when the government-sponsored enterprises began to lag. The speculative darlings of the past 2 years have clearly been the homebuilders (+170%) and subprime lenders (+107%). This year the subprime lenders hit the wall, leaving the homebuilders alone to carry the speculative torch. The remaining credit providers and facilitators (especially those weighed by heavy market capitalizations) are now either stalled or joining the GSEs in full retreat."

"With the stocks of the country’s largest credit engines – Citigroup, JPMorgan Chase, and Fannie Mae – shutting down and nearing 2-year lows, this credit rocket is sputtering on fumes."

1 Comments:

Blogger RyanOnTheBeach said...

Some snipits from UK news

HSBC, the world's second biggest bank, yesterday branded Britain as its most difficult market due to a weaker economy and an increasing number of borrowers struggling to pay off loans.

Domestic decline sends industry into recession.
HE recession in manufacturing appears to be persisting into the second half of the year, according to the first snapshot of industry activity that will further cement expectations of an interest rate cut this week.

UK High Street sales remain weak
The CBI survey of retailers' sales gave a balance of -18, following on from a balance of -19 in June, the lowest since the survey began in 1983.

Profits fell sharply at housebuilder Ben Bailey as the slowdown in the market begins to bite.
In the first half to 30 June profits before tax fell 18%
The shares fell 12%
For those of you looking at short timing it's share price is still way up there looking at it over 5 years it's got alota room to fall. 12% is but a blip on the chart.

Aug 2, 2005, 11:18:00 PM  

Post a Comment

Links to this post:

Create a Link

<< Home

Terms of Use: The purpose of the Marin Real Estate Bubble weblog (located at URL http://marinrealestatebubble.blogspot.com/ and henceforth referred to as “MREB” or “this site”) is to present and discuss information relating to real estate and the real estate industry in general (locally, state-wide, nationally, and internationally) as it pertains to the thesis that recent real estate related activity is properly characterized as a “speculative mania” or a “bubble”. MREB is a non-profit, community site that depends on community participation and feedback. While MREB administrators do strive to confirm all information presented here and qualify all doubtful items, the information presented at MREB is neither definitive nor should it be construed as professional advice. All information published on MREB is provided “as is” without warranty of any kind and the administrators of this site shall not be liable for any direct or indirect damages arising out of use of this site. This site is moderated by MREB administrators and the MREB administrators reserve the right to edit, remove, or refuse postings that are off-topic, defamatory, libelous, offensive, or otherwise deemed inappropriate by MREB administrators. You should consult a finance professional before making any decisions based on information found on this site.

The contributors to this site may, from time to time, hold short (or long) positions in mentioned and related companies.