Banking Bust: More To Come

[Hawkgirl]

Banking Bust: More To Come
Liz Moyer, 01.16.08, 4:30 PM ET


Banks have written down more than $100 billion since the summer. Yikes. Now the bad news: There are still billions worth of potentially toxic securities sitting on the books.

The additional $1.3 billion write-down disclosed by JPMorgan on Wednesday was just the latest loss big banks have reported in the fourth quarter. Merrill Lynch is expected to report a sizeable write-down when it reveals fourth-quarter numbers on Thursday, by some estimates in the neighborhood of $15 billion. Bank of America, Wachovia and other big lenders report next week and are also expected to write down billions of securities holdings.

At Citigroup, $37 billion of collateralized debt obligation exposure remains even after the bank wrote down an eye-popping $17 billion of its holdings in the fourth quarter. Of course that raises the likelihood that Citi will have further substantial write-downs in the quarters ahead. The bank reported a more than $9 billion loss in the fourth quarter because of the write-downs and related credit costs, the worst quarter in its history.


http://www.forbes.com/home/wallstreet/2008/01/16/banking-cdo-credit-biz-wallst-cx_lm_0116banks.html


O% Down, 3 and 5 year ARMS, everyone gets approved, regardless of credit rating....How's that working out for you?
We are in this mess, not only because people purchased more than they can afford, but also because banks were giving out money to people they shouldn't have.  That's why real estate went through through the roof a few years ago..So now everyone is feeling the pain, including the lenders.
These stocks aforementioned are going to plummet when their earnings are reported, stock holders will bail, stock market will see a steady decline.
Now the questions is, good buying opportunity, or keep your $ in Cash and wait out this slump?  Assuming of course, we don't head into a deep recession.

[Chris_]

This, too shall pass.

This is a blip.  37 billion in a multi-trillion industry?

In the meantime, keep your long-term goals the same.  A little extra gold wouldn't hurt but if your eyes are 10-20 years down the way, then this will be meaningless.

[NHSparky]

Okay, banks buy tens of BILLIONS in paper from people who wouldn't qualify for a loan at Cal Worthington Ford (or his "dog" Spot) and they're SURPRISED when these trailer park rejects who couldn't break 500 on either their SAT's OR their FICO scores default because they can't afford a 500K mortgage working at Burger King?

Well, smack my ass and call me Susan!  Let's bail these worthless mouth-breathers out so they can do it again!

[Lauri]

i agree this too shall pass...


what ive read, and it could be wrong, is that only 7 percent of the home mortgages in the US are in default. a good portion of that 7 percent were either 'flippers' or second homes. or the people who kept cashing out their equity.. still, its such a small group of people and its being way overblown i think.

the average American is not a sub prime borrower. the fact that retail sales were down over Christmas shows that Americans arent willing to get into really deep debt just for a holiday.

i'd wager its a two year cycle and we can expect housing prices to come back .. if a Dem gets into the White House, expect a new wave of prosperity to dovetail with their taking office.  the headlines will change overnight.

[NHSparky]

It's not 7 percent.

It's 0.7 percent.

[DixieBelle]

It will ultimately be a blip. The newspapers and media outlets love to yell Doom and Gloom but in the grand scheme of things, we're doing alright. It's also an election year. We know what that means!

[Lauri]

Okay, banks buy tens of BILLIONS in paper from people who wouldn't qualify for a loan at Cal Worthington Ford (or his "dog" Spot) and they're SURPRISED when these trailer park rejects who couldn't break 500 on either their SAT's OR their FICO scores default because they can't afford a 500K mortgage working at Burger King?

Well, smack my ass and call me Susan!  Let's bail these worthless mouth-breathers out so they can do it again!

i dont think they are giving 500K mortgages to people who work at Burger King. The banks let people get into much bigger homes than they can usually afford at first.. thats where ARMs came in.

what people usually do is adjust their living, and typically start earning more money  and it evens out over time.

the people who are really going to be hurting is the ones who keep using their equity like a piggy bank, not realizing they are borrowing the money twice...

i dont think the banks purposefully try to lose money on bad loans... that doesnt seem reasonable to me.

[NHSparky]

Okay, banks buy tens of BILLIONS in paper from people who wouldn't qualify for a loan at Cal Worthington Ford (or his "dog" Spot) and they're SURPRISED when these trailer park rejects who couldn't break 500 on either their SAT's OR their FICO scores default because they can't afford a 500K mortgage working at Burger King?

Well, smack my ass and call me Susan!  Let's bail these worthless mouth-breathers out so they can do it again!

i dont think they are giving 500K mortgages to people who work at Burger King. The banks let people get into much bigger homes than they can usually afford at first.. thats where ARMs came in.

what people usually do is adjust their living, and typically start earning more money  and it evens out over time.

the people who are really going to be hurting is the ones who keep using their equity like a piggy bank, not realizing they are borrowing the money twice...

i dont think the banks purposefully try to lose money on bad loans... that doesnt seem reasonable to me.

No--it's even WORSE than that. 

There were cases where I used to live (Orange County) of migrants (can you say, ILLEGAL?) with incomes of LESS than 30K a year QUALIFYING for 600K mortgages!  It's not the bank per se, it's the unscrupulous mortgage broker who writes this paper then puts it in part of a 20-30 million package that the banks buy up.

http://www.sacbee.com/103/story/500345.html

[Lacarnut]

Banking Bust: More To Come
Liz Moyer, 01.16.08, 4:30 PM ET



Now the questions is, good buying opportunity, or keep your $ in Cash and wait out this slump?  Assuming of course, we don't head into a deep recession.

Depends on your long or short term goal. Like others have said, in 5 or 10 years this will be just be a blip. However, if you are looking at the short term which I am, I have dumped most of my stocks and mutual funds and bought bond fund, mutual funds and ETF's that are shorting financials, emerging markets and others.

[Hawkgirl]

Banking Bust: More To Come
Liz Moyer, 01.16.08, 4:30 PM ET



Now the questions is, good buying opportunity, or keep your $ in Cash and wait out this slump?  Assuming of course, we don't head into a deep recession.

Depends on your long or short term goal. Like others have said, in 5 or 10 years this will be just be a blip. However, if you are looking at the short term which I am, I have dumped most of my stocks and mutual funds and bought bond fund, mutual funds and ETF's that are shorting financials, emerging markets and others.

I'm looking at at least 5-10 years down the road...Mutual funds is how I'll go, with at least one that invests in international companies, european and even emerging south american markets, which are now big earners.I suppose I'll scout those with 5 star morningstar ratings and pick 4 or 5.

[Lacarnut]

Banking Bust: More To Come
Liz Moyer, 01.16.08, 4:30 PM ET




I'm looking at at least 5-10 years down the road...Mutual funds is how I'll go, with at least one that invests in international companies, european and even emerging south american markets, which are now big earners.I suppose I'll scout those with 5 star morningstar ratings and pick 4 or 5.

TRowe Price, Fidelity & Vanguard have good funds. TR. Price has low expenses. 

[Hawkgirl]

thanks Lacernut....I was thinking of TRPrice and Janus Funds...

[Lacarnut]

thanks Lacernut....I was thinking of TRPrice and Janus Funds...

I forgot about Janus which has some good funds. However, there has been a great deal of turmoil there with top managers leaving so I would check out the length time which is quite important in choosing a fund. 

[Lauri]

Banking Bust: More To Come
Liz Moyer, 01.16.08, 4:30 PM ET



Now the questions is, good buying opportunity, or keep your $ in Cash and wait out this slump?  Assuming of course, we don't head into a deep recession.

Depends on your long or short term goal. Like others have said, in 5 or 10 years this will be just be a blip. However, if you are looking at the short term which I am, I have dumped most of my stocks and mutual funds and bought bond fund, mutual funds and ETF's that are shorting financials, emerging markets and others.

my husband thinks buying electricity would be a smart deal .. i think i agree...

[Lacarnut]

Banking Bust: More To Come
Liz Moyer, 01.16.08, 4:30 PM ET



Now the questions is, good buying opportunity, or keep your $ in Cash and wait out this slump?  Assuming of course, we don't head into a deep recession.

Depends on your long or short term goal. Like others have said, in 5 or 10 years this will be just be a blip. However, if you are looking at the short term which I am, I have dumped most of my stocks and mutual funds and bought bond fund, mutual funds and ETF's that are shorting financials, emerging markets and others.

my husband thinks buying electricity would be a smart deal .. i think i agree...

After you stated that your electric bill for the month was $900, I think buying stock in your local electric company might be a good idea.

[Lauri]

Banking Bust: More To Come
Liz Moyer, 01.16.08, 4:30 PM ET



Now the questions is, good buying opportunity, or keep your $ in Cash and wait out this slump?  Assuming of course, we don't head into a deep recession.

Depends on your long or short term goal. Like others have said, in 5 or 10 years this will be just be a blip. However, if you are looking at the short term which I am, I have dumped most of my stocks and mutual funds and bought bond fund, mutual funds and ETF's that are shorting financials, emerging markets and others.

my husband thinks buying electricity would be a smart deal .. i think i agree...

After you stated that your electric bill for the month was $900, I think buying stock in your local electric company might be a good idea.

no, let me be clear on that. it wasnt a 900 electric bill.

it was for Christmas Lights on the house.. we got an estimate for about 450-500. they put them up and take them down, in the rain and sleet and my husband said, "yes please, let someone else take the risk" and then the bill arrived and it was twice as much.

but we use a lot of natural gas in this house (water heater/fireplace/six burner stove) and we cook a lot..  maybe buying that stock over the winter is a good idea as well.