Martin Sykora's Personal Blog: Housing Crisis

Showing posts with label Housing Crisis. Show all posts

Thursday, September 10, 2009

Crisis Sentiments - pretty cool!!

BBC has made a google map that maps to opinions and comments relating to the crisis kicked off by the Lehman Brother collapse (various dates are associated with the crisis start thought). It is an interesting interactive World Wide Map, location point & click & read interface, pretty neat web 2.0 idea, so make sure to check it out!!!

check out my customised adds and comments

Tuesday, October 14, 2008

Close to the bottom??!

As I wrote on Friday 17th October the "Black Friday of 2008" has reached shores of global markets. Looking at past crises what follows after such days is a lot of extremely volatile sideways action and a possibility of market bottom beeing reached. Every individual crisis is handled differently with varying macro variables involved. Hence it is difficult to say whether a natural market bottom is close.

Given the current environment and efforts my bet is that there will be further drops but some sense of stability returning into markets. Maybe the worst panic has been shielded but an economic downturn is not over yet!! At least not for some market regions, let us remind ourselves that recent years have initiated some economies becoming more potent now than ever.

Yesterday (13th October) markets saw their White Monday of 2008. Over the weekend European leaders have finally agreed on coordinated rescue action, over $2 trillion were put on the line as off Monday in guarantees and emergency measures to save banks in Europe.

The current crisis prevention efforts have prevented the worst for now. Monday and today have seen good bullish price bursts. However rescue efforts create a number of deep problems. To name a couple,

huge budget deficits, this will put a lot of strain on population and take time to heal.
due to the current scare it is also clear markets will become over-regulated, this will criple free trade mechanics and it is difficult to say to what extent will negatively affect markets.
even thought we are in a recession inflation risks are still very real, in the UK today reached 5.2% as opposed to government's target of 2%.

In the end of day, specifically risks of Securitised Mortgage Backed Assets are just beeing shifted from private sector onto thegovernment, it does not dissapear. There is no magic tric to this, we will have to deal with this pickle!

Friday, October 10, 2008

10th October 2008 - the Black Friday of 2008

We have see large losses on world markets for the past two weeks. You may wonder why then did I pick today.

Well it's pretty simple actually, and has to do more with psychology than with real economy. This week served to confirm that feelings are now taking the larger part of healthy judgement.

Last week 29th Sept - 3rd Sept, was full of expectations. Monday the House of Representatives voted against the $700b bail out plan, hopes were still high thought after wednesday senate voted in favour of a slightly tweaked $700b rescue plan and finally friday the rescue bill did pass the House. It was thought that this should ease the crisis, some even hoped for a miracle. To most traders thought it was always clear the question is not UP or DOWN but the severety of the market DOWN.

The $700b rescue bill didn't do the trick ;-)! Monday 6th Sept was a complete let down, as we saw FTSE go down by nearly 8% and other world markets following this trend. In fact this was a clear sign that the $700b came too late. Whats more, on wednesday 8th Sept UK government anounced its rescue plan worth dozen billion pounds the markets still fell. Thursday saw coordinated efforts of 7 central banks lowering interest rates, to no avail. Well and today came the cherry of the week, Nikkei dropped nearly 10% eventhought the government anounced that they'll pump several billion dollars into its markets.

I could carry on mentioning a plethoria of rescue efforts by governments and regulators, let me just say that the UK markets have lost nearly 20% of its value this week, so have the US and Nikkei has lost twice as much as during the 1987 crisi. We are way past the fundamentals now, this is a full on crisis, comparable to 1987, 1970s, 1929.

We have reached a point where economics stops making sense and investor psychology takes over. Let me rephrase, economical incentives in form of regulation and rescue efforts should logically help, however panic has spread and nobody wants to own anything in the markets anymore, investor trust is gone!! This is just panic.....

Rebuilding trust takes time, which is the only thing we never have enough off.

Monday, September 22, 2008

REASONS for this crisis

As a follow up to my previous blog post, I would like you to understand the system behind bad loans that has brought so many companies into turmoil recently. I found a number of videos by khanacademy on youtube, that do a pretty good job at summarising the subprime crisis.

The first 3 videos look at Mortgage backed Securities, 4th clip explains CDOs, and remaining 4 videos address housing market and the mortgage system that was at fault. Carefully watch these youtube videos, they explain the problem in its entirety. I found them extremely easy to follow so I'm sure you will as well and maybe even easier.