The latest bad tidings in that the Fannie/Freddie turmoil may lead our favorite foreign credit sources to dial down their purchases of Treasuries and agencies a tad. We’ve become so dependent on foreign credit that a mere tightening of the spigot would have significant consequences.
naked capitalism has the full details of it, and Yves explains it much better than I ever could.
Just a couple of comments to add to it:
1. I think, in a nutshell, it describes why I believe that rates are going to be higher in 6 months than they are now.
2. It also describes what one could say is the “We’re all going to die!” mentality.
3. I once read an article that stated that Bill Gates fortune was worth about 67 Gazillion dollars or something like that. It also said that a huge percentage of his net worth is in Microsoft stock and if he attempted to sell it, he’d do such incredible damage to the value of his holdings that the price would drop like 80%. So what difference does that make? A couple of things: A number of foreign countries own a lot of our debt. They aren’t going to, because of our current troubles, suddenly dump all of their treasury holdings because they’d lose their shirts (even governments have shirts). So, any changes they make will be small and incremental.
But the incremental changes won’t be good for the housing market, so we all need to be prepared.
We’re not all going to die, but it’s not going to be a lot of fun for a while.
Call or e-mail me if you want to talk about it.
Tom Vanderwell (616) 292-7559 or straighttalkaboutmortgages@gmail.com
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