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Shahla
Money Managing Guru
Joined: 13 Nov 2004
Posts: 3324
Cash Points ££ 126163.28
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 Posted: Sun Mar 18, 2007 4:54 am Post subject: US Subprime Mortgage Meltdown - Financial Fiascos Everywhere |
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“Millions at risk of losing homes” was the headline on the news wires on Wednesday, March 14. This happened on the day when the stock market showed a positive intraday reversal on strong trading volume. Obviously, the stock market wasn't put off by this negative piece of news.
If it were true that millions of Americans risk losing their homes over the sub-prime mortgage fiasco, the market would have already tanked by now.
Remember, the stock market is a leading indicator and the men in positions of power to control it see all and know all, well in advance of the rest of us. If the money controllers saw a massive housing collapse, and knowing full well what it would mean for the economy and financial system, they would have sold out long ago and the market wouldn't be at the relatively high levels of today. Moreover, we wouldn't be seeing high levels of insider buying, which we most certainly are right now.
You may remember back in 1999 in the days and weeks leading into the fateful “New Millennium” of Jan. 1, 2000. So many people were expecting the lights to go out worldwide, figuratively and literally. Worst-case scenarios and an “Apocalypse Now!” mentality abounded. Yet as the fateful date drew near it became obvious that the so-called Y2K Crisis wouldn't materialize because the stock market was making all-time highs right up until the last trading day of 1999. Had the powers-that-be foreseen a genuine Y2K collapse they would have cashed out well in advance of the date and in so doing cracked the markets big time. A strong stock market in the face of a supposed “crisis” generally means the crisis is overblown, at least as far as its ability to severely impact the economy.
Could the scare stories over the sub-prime lending debacle be the final wash-out phase of the U.S. housing market correction? I think it could be. It's certainly typical of past wash-outs of bear markets and as usual the mainstream press is doing a stellar job of exaggerating the negatives and trying to scare the country out of its collective wits. They've got everyone and their brother-in-law running for the cellar screaming “The sky is falling, the sky is falling!” You can't pick up any newspaper without seeing it plastered all over the front page in big, bold headlines. An Internet friend sent me the following example from the front page of the St. Paul (MN) Pioneer Press:
SUBPRIME MORTGAGE MELTDOWN
It doesn't get much more bearish than that! I take this barrage of pessimistic headlines to be a contrarian indicator that the worst has already been discounted by the markets and it shouldn't have that great of an impact on the national economy. This isn't to say that the sub-prime mortgage problem is just going to vanish overnight without any pain or negative consequences, for there almost certainly will be more. But as far as major national economic pain…doubtful. Sub-prime borrowers are more often than not equity rich and yet don't always pay their bills on time. It's not as if they're dirt poor and one paycheck away from the curb as the media would have us believe.
http://www.marketoracle.co.uk/Article534.html |
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