Subprime Euro

[Player]

I am a simple bloke, and perhaps I don't understand it all, however can any good come of this?

http://www.businessspectator.com.au...FSF-bon-pd20111003-M9RJU?OpenDocument&src=kgb

Will we see the Lehman's model of packaging (govt) debt into CDO's and selling them off (like they did with the subprime ninja loans to our municipal councils.............more fool them) recur?

Perhaps the days of smoke and mirrors aren't over yet.

 

[Aaron Sice]

I am a simple bloke, and perhaps I don't understand it all, however can any good come of this?

http://www.businessspectator.com.au...FSF-bon-pd20111003-M9RJU?OpenDocument&src=kgb

Will we see the Lehman's model of packaging (govt) debt into CDO's and selling them off (like they did with the subprime ninja loans to our municipal councils.............more fool them) recur?

Perhaps the days of smoke and mirrors aren't over yet.

NAB are bundling Aussie CDOs and selling them - so i predict the debt monster is only just starting to play out - as in, this "correction" or "crash" is just the trial run. now we understand the mechanics, we can "play ball."

just like the 1907 bankers panic almost read like a "what if?" playbook to the 1929 depression, the 2007 bankers panic will probably lead to a 2029 great depression.

i always said this was a structureed event. to see the Euro and AU markets selling CDOs smacks of undercurrent.

the world's economies are being de-stabilised bit by bit by bit. i plan to make money in this upcoming "golden age of the twenties" but let me be REALLY clear - i'm selling up in 2025. said it before and happy to stick to it.

 

[BV]

Perhaps the days of smoke and mirrors aren't over yet.

Michael

I took 1 thing from the article.
"The eurozone is about to kick the can a final time"

IMO this is another band aid measure which isn't going to work.
What they really need is to lower the cost of funding significantly so that governments can keep paying their debt without having to kill their economies.

They need to find ways to address this issue even if it means having a new EU treaty.
Otherwise they are all history.
How does this affect us?
Is our super safe?
Can we make money?
I think we can.


cheers

 

[Belbo]

They need to find ways to address this issue even if it means having a new EU treaty.
Otherwise they are all history.
How does this affect us?
Is our super safe?
Can we make money?
I think we can.
cheers

You sound earily reminiscent of Milo Minderbinder in Catch-22:

1st Lt. Milo Minderbinder: We're gonna come out of this war rich!

Yossarian: You're gonna come out rich. We're gonna come out dead.

 

[BV]

You sound earily reminiscent of Milo Minderbinder in Catch-22:

Belbo mate
Haha are you referring to Europe's exposure to debt or to my comment re making money?
I think we'll make money (if we're not crashed under the weight of our unbearable debt..... )

 

[mattnz]

Buy another 3 years please

NAB are bundling Aussie CDOs and selling them - so i predict the debt monster is only just starting to play out - as in, this "correction" or "crash" is just the trial run. now we understand the mechanics, we can "play ball."

just like the 1907 bankers panic almost read like a "what if?" playbook to the 1929 depression, the 2007 bankers panic will probably lead to a 2029 great depression.

i always said this was a structureed event. to see the Euro and AU markets selling CDOs smacks of undercurrent.

the world's economies are being de-stabilised bit by bit by bit. i plan to make money in this upcoming "golden age of the twenties" but let me be REALLY clear - i'm selling up in 2025. said it before and happy to stick to it.

I like the way you are thinking about this Aaron. I'm just hoping they can kick the can down the road another 3 years or so, then I will be cashed up when the inevitable finally happens.

 

[Intrinsic_Value]

I am a simple bloke, and perhaps I don't understand it all, however can any good come of this?

http://www.businessspectator.com.au...FSF-bon-pd20111003-M9RJU?OpenDocument&src=kgb

Will we see the Lehman's model of packaging (govt) debt into CDO's and selling them off (like they did with the subprime ninja loans to our municipal councils.............more fool them) recur?

Perhaps the days of smoke and mirrors aren't over yet.

CDO's arent too bad when everyone is aware of the risks and prices accordingly. The intial thought process of CDO's was quite intelligent: risk vs return, those happy to accept higher risk get a higher return, but are first inline when something goes wrong. The overall effect is a lowering of the 'net interest rate' (efficient market).

In the current environment, i am sure lots of focus (maybe too much) will be on the 'risk' factor.

 

[Aaron Sice]

CDO's arent too bad when everyone is aware of the risks and prices accordingly. The intial thought process of CDO's was quite intelligent: risk vs return, those happy to accept higher risk get a higher return, but are first inline when something goes wrong. The overall effect is a lowering of the 'net interest rate' (efficient market).

In the current environment, i am sure lots of focus (maybe too much) will be on the 'risk' factor.

i beg your f__king pardon?

CDOs are an equity made up of nothing - debt.

those CDO's and their value are tied to a particular population's ability to pay their mortgages. remove the ability, CDOs value falters.

lets put 1+1+1 together now, huh?

1) every country / news reporter / economics guru says that commodities are in for a hard hit next year.
2) australia's ability to prosper is perceived (internationally) to rely on commodities.
3) aussies banks selling CDOs on their ability for those holding the debt to be able to pay.
4) if the AUD and our stock market is sold down on the back of this slump, aussie everything will take a hit - and i mean a capital "H", capital "I", capital "T".
5) unemployment / underemployment will rise, peoples ability to pay said debt is removed and those that bought the CDOs now have nothing.
6) they ask for a bailuout using taxpayer's dollars. double whammy - those dogged with the mortgage debt now have a tax debt as well.
7) cycle is complete.

to argue otherwise is symantics. this HAS happened in the US and the wheels are VERY CLEARLY in motion to happen here.

 

[Aaron Sice]

I like the way you are thinking about this Aaron. I'm just hoping they can kick the can down the road another 3 years or so, then I will be cashed up when the inevitable finally happens.

there'll be a rise in values between then and now, though; through false means, bank/LMI valuer directives, controlled media releases, lower cash rates - whatever. the RBA is across all this and can see the kickback they'll get from it.

remember GS have a decent silent holding in CBA.

credit will loosen a little as CBA, ANZ, WBC jump on the CDO bandwagon and try to get as much market share as possible.

remember, if you're getting something for free and can't work out what's being sold - you're the one being sold.

 

[Aaron_C]

The problem with CDOs (from a legal perspective) is that it unravels the fundamental notion of debt. It basically creates another step away from the lender (mortgagee) and the borrower (mortgagor). Can the CDO investor enforce a debt against the borrower even though the borrower has no idea who the CDO investor is? Is the CDO investor privy to the original mortgage contract? I don't think these questions have been legally tested here yet...

 

[Aaron Sice]

The problem with CDOs (from a legal perspective) is that it unravels the fundamental notion of debt. It basically creates another step away from the lender (mortgagee) and the borrower (mortgagor). Can the CDO investor enforce a debt against the borrower even though the borrower has no idea who the CDO investor is? Is the CDO investor privy to the original mortgage contract? I don't think these questions have been legally tested here yet...

......or anywhere.

CDOs created such a s__tstorm in the US that banks don't even know if they hold the title for the mortgaged property anymore.

banks are trying to repossess houses whereby the evictee says "show me the title" and they can't produce it. owners are paying off their mortgages and banks cant give them a title - and now another bank has your title and they want their mortgage payments....

look up "title insurance" for US houses now...that's right, you now need insuarance to guarantee the property you buy is the property you buy!

 

[Aaron_C]

......or anywhere.

CDOs created such a s__tstorm in the US that banks don't even know if they hold the title for the mortgaged property anymore.

banks are trying to repossess houses whereby the evictee says "show me the title" and they can't produce it. owners are paying off their mortgages and banks cant give them a title - and now another bank has your title and they want their mortgage payments....

look up "title insurance" for US houses now...that's right, you now need insuarance to guarantee the property you buy is the property you buy!

lol....reminds me of the old common-law title for properties...searching through mountains of paperwork and past transactions to establish current title

 

[Player]

I see this as another layer of derivative upon the derivative. The underlying is debt which was created out of thin air in the first place. Next they'll have CFD's on the CDO's..........house of cards IMO

I repeat, I am quite a simple minded person in Economics, however my feeling is that this does not augur well except for the original vendors of the debt.

 

[Aaron Sice]

I see this as another layer of derivative upon the derivative. The underlying is debt which was created out of thin air in the first place. Next they'll have CFD's on the CDO's..........house of cards IMO

I repeat, I am quite a simple minded person in Economics, however my feeling is that this does not augur well except for the original vendors of the debt.

......and this isn't being played out "somewhere else" - it's with our mortgages here in Australia.

it WILL happen here - and when it does, it will be the sign that property equity around the world is being stolen.

 

[investor2009]

I don't understand this article, nor whats being discussed here.. In laymens terms, how do you think this will affect property? I don't know what CFD or CDO means

If rates continued downward, property prices may pick up, right? Like they did in our last recession. We are very different to the US where they have an oversupply of property and 0% interest rates. I don't know how you bounce back from that.. But I don't ever see it happening here. I've seen many different triggers supply the property market with upswings over the years and rarely are any of these thought upon as factors that may contribute to a boom.

 

[BV]

If rates continued downwards, property prices may pick up, right? Like they did in our last recession. We are very different to the US where they have an oversupply of property and 0% interest rates. I don't know how you bounce back from that.. But I don't ever see it happening here.

Unless ofcourse all credit dries up so if you want to get a home loan you could perhaps have to pay 10% interest (although the RBA rate could be very low)

When credit is not available property prices could come down significantly.
My 2nd concern is unemployment because if the above situation came about,
those of us with high mortgages and no recession proof jobs we could be history....

 

[investor2009]

Aha, I see your concerns. We can only hope that the stars align and we ride out the slump relatively unscathed, or perhaps even come out better off.

Unless ofcourse all credit dries up so if you want to get a home loan you could perhaps have to pay 10% interest (although the RBA rate could be very low)

When credit is not available property prices could come down significantly.
My 2nd concern is unemployment because if the above situation came about,
those of us with high mortgages and no recession proof jobs we could be history....

 

[Dawn]

I don't know what CFD or CDO means

CDO = Gamble
CFD on CDO = Gamble on the Gamble

 

[Aaron Sice]

CDO = Gamble
CFD on CDO = Gamble on the Gamble

A CDO is a Collaterised Debt Obligation.
A CFD is a Contract For Difference.

wiki has some pretty good explanations of what they are.

the subprime crisis in the US is a perfect example of why CDOs are bad kids, m'kay?

the stock market crash is a perfect example of why CFDs are a weapon of wealth destruction.

 

[Belbo]

Belbo mate
Haha are you referring to Europe's exposure to debt or to my comment re making money?
I think we'll make money (if we're not crashed under the weight of our unbearable debt..... )

Both, you frothing lunatic! How can Europe go down (with the US in tow), and our own nearly inconsequential little economy - with us in it - not suffer horridly? Hang on - Is there a silver lining I'm not seeing in this impending train wreck???