So tired of the "subprime collapse" reason for stocks tanking - somebody give me a real reason that actually makes sense (like profits falling everywhere): 1. Mortgage market is 10 trillion (about) 2. Around 10-14 percent is subprime 3. Depending on the day about 5 percent actually in foreclosure, half of which gets recovered in foreclosure 4. This totals 30-35 billion of actual loss - which maybe will grow to 60-70 billion due to "stupid loans" during boom. 5. This is drop in the bucket vs. stock / bonds markets
6 percent loss in market (recent drops in Dow) cost 1.2 trillion - WAY out of proportion to any "subprime" issues (or "concerns" about private equity deals or other credit issues, etc). Plus "real" values of large, liquid companies as in Dow 30 are hardly impacted by loss of any monetary liquidity, they have lots of cash - as long as consumer spending is stable there should be little impact to their business. Foreign stocks, which have also been crushed, even less real impact.
Irrational selling - driven by fear - means great buying opportunities, but tough to jump in when every blaring headline is "the sky is falling". Inflation is much bigger concern, long-term deficits, consumer spending falloff - much bigger impacts than so-called mortgage disasters, other than for a few specific financial institutions (Bear Stearns - oops).
Far as Cypress - only thing that really matters is Sunpower growing and TJ doing something about it for stock holders.
that's just the beginning. It's not just subprime. First American is letting 1300Full Time Equivalents go. Land America 1100. Countrywide 20%(!) of its staff. This will spread into the entire housing market. More and more defaults, more and more foreclosures, more and more REO's. With home prices going down, the refinance boom will stop overnight. Lenders tighten the money, less people qualify. Many shouldn't have qualified in the first place. I'm talking from the inside (and I have been bearish on RE and called the 2005 top and sold).
Anybody thinking this is just subrpime is ignorant of all the facts. I forecast a 40% drop in home prices in the once "Hot" areas, such as California, Phoenix, Florida. There is only one way this will end, and it isn't pretty.
I exited Real Estate in 05, exited consumer goods stocks and am long in Precious Metals (have been since 2004).
It does not get more simple than paper is sold at the 'perceived worth' of the paper.
The US stock market continues to spin downward because the same people who have spun perception higher than value, as in the sub-prime note holding business, are now taking their marbles out in cash (paper) and using it to buy safer and limited securities such as metals, minerals, and resources.
The squeeze on oil is being overly downplayed now (lower gas prices) just so the elite crowd can convert their profitable investments from the big bad banks and 30% interest lenders back into something Bush has quietly lowered, but continues to spend our tax dollars and children's lives on.
There is nothing worse for an economy than a lame-duck Republican helping his peeps cash out before he goes. The FED is going to break, but it will be too late for us individuals. We will once again get stuck footing the loses.
Buy strong, buy US - that is why I own CY. You guys have a noggin. (Look at 'X' - US Steel, I still can't see how the Chinese can find a cheaper way to clone the freight charges associated with steel.)
First off, your posts are too long and too detailed to hold my interest very long.
The Mortgage Company that lost half it's value yesterday was NOT sub-prime. Their average loans are $600,000+!!!
True-sub-prime in and of itself is a SMALL percentage. With that said---EVERY company needs CASH FLOW and NEEDS TO BORROW to make money! Everyday now the BIGGIES of the corporate are reporting problems---Home Depot and WalMart yesterday.
Remember--a CHAIN ALWAYS BREAKS AT IT'S WEAKEST LINK! The sub-prime just happens to be the weakest link this time around. In year 2000(Irrational Exuberance) just happened to be the Tech Sector!
The Fed LOWERING the Fed Funds rate at this time will NOT solve the problem. It would only be a temporary fix.
Good Luck to you!
Your Mayor--looking forward to Wet T-shirt night at the Pink Flamingo tonight! :-))