FUTUREPREDICTIONS.COM MISSION IS TO ORGANIZE THE WORLD'S FUTURISTS, FUTUROLOGISTS, PREDICTIONS, INNOVATIONS, AND FORECASTS TO MAKE THEM EASILY ACCESSIBLE.
Hey there! Thanks for dropping by FUTUREPREDICTIONS.COM Source of Likely and Preferable Futures ™! Take a look around and grab the RSS feed to stay updated. See you around!
Cramer and Welch Predict Light in the Tunnel, Finally!
Is the worst real estate crisis nearly over asks this observer? With mortgage resets nearly over and the talking heads linning up perhaps the boom is just around the corner.
The U.S. housing market has shown strong signs of bottoming and could soon turn around, “Mad Money” host Jim Cramer says, at least if recent housing data and bullish comments from prominent businessmen are any indicator.
Jack Welch, meanwhile, has joined the group of notable businessmen who think the housing market is looking up. Earlier this month, the former General Electric chairman said a combination of low prices and record-low interest rates have helped the battered real estate market hit bottom and get ready to rebound, perhaps even stronger than many economists expect. ”Housing has pretty well bottomed and rental prices are going up. Vacancies are almost nonexistent,” Welch said. “So you’ve got a lot of forces driving toward the housing market. Prices are down, interest rates are down, the affordability index is good. … We think it could be a blowout. Housing could be really good based on all the dynamics that are out there.” By Drew Sandholm, Posted 20 January 2012
Bernanke, Ben S. (1953–)
Election: 2001, Fellow
Members of the American Academy of Arts & Sciences: 1780–2011
Affiliation at election: Princeton University
Residence at election: Princeton, NJ
Career description: Economist; Educator
Current Affiliations: United States Federal Reserve
On September 16, 2008, AIG suffered a liquidity crisis following the downgrade of its credit rating. Industry practice permits firms with the highest credit ratings to enter swaps without depositing collateral with their trading counter-parties. When its credit rating was downgraded, the company was required to post additional collateral with its trading counter-parties, and this led to an AIG liquidity crisis. AIG’s London unit sold credit protection in the form of credit default swaps (CDSs) on collateralized debt obligations (CDOs) that had by that time declined in value.
The United States Federal Reserve Bank announced the creation of a secured credit facility of up to US$85 billion, to prevent the company’s collapse by enabling AIG to meet its obligations to deliver additional collateral to its credit default swap trading partners. The credit facility provided a structure to loan as much as US$85 billion, secured by the stock in AIG-owned subsidiaries, in exchange for warrants for a 79.9% equity stake, and the right to suspend dividends to previously issued common and preferred stock.
AIG announced the same day that its board accepted the terms of the Federal Reserve Bank’s rescue package and secured credit facility. This was the largest government bailout of a private company in U.S. history, though smaller than the bailout of Fannie Mae and Freddie Mac a week earlier. AIG’s share prices had fallen over 95% to just $1.25 by September 16, 2008, from a 52-week high of $70.13. The company reported over $13.2 billion in losses in the first six months of the year.
The AIG Financial Products division headed by Joseph Cassano, in London, had entered into credit default swaps to insure $441 billion worth of securities originally rated AAA. Of those securities, $57.8 billion were structured debt securities backed by subprime loans. CNN named Cassano as one of the “Ten Most Wanted: Culprits” of the 2008 financial collapse in the United States.
As Lehman Brothers (the largest bankruptcy in U.S. history at that time) suffered a catastrophic decline in share price, investors began comparing the types of securities held by AIG and Lehman, and found that AIG had valued its Alt-A and sub-prime mortgage-backed securities at 1.7 to 2 times the values used by Lehman which weakened investors’ confidence in AIG.
On September 14, 2008, AIG announced it was considering selling its aircraft leasing division, International Lease Finance Corporation, to raise cash. The Federal Reserve hired Morgan Stanley to determine if there are systemic risks to a financial failure of AIG, and asked private entities to supply short-term bridge loans to the company. In the meantime, New York regulators allowed AIG to borrow $20 billion from its subsidiaries.
At the stock market’s opening on September 16, 2008, AIG’s stock dropped 60 percent. The Federal Reserve continued to meet that day with major Wall Street investment firms, hoping to broker a deal for a non-governmental $75 billion line of credit to the company. Rating agencies Moody’s and Standard and Poor downgraded AIG’s credit ratings on concerns over likely continuing losses on mortgage-backed securities. The credit rating downgrade forced the company to deliver collateral of over $10 billion to certain creditors and CDS counter-parties. The New York Times later reported that talks on Wall Street had broken down and AIG may file for bankruptcy protection on Wednesday, September 17.
Just before the bailout by the US Federal Reserve, AIG former CEO Maurice (Hank) Greenberg sent an impassioned letter to AIG CEO Robert B. Willumstad offering his assistance in any way possible, ccing the Board of Directors. His offer was rebuffed.”
Watch “To Big to Fail” HBO… The key issue was the sales of unregulated uncollateralized insurance sold by AIG and Hartford, and the other big insurance firms. This is the key to the 2008 and 2011 downturns… When real estate was placed in equity portfolios and then the values crashed 35% t0 60% the policies had to pay out and so AIG who sold the lion share could not pay, the dominos nearly fell across the globe… I’ll bet you that Putin called George in the White House and said if you let AIG go BK then he would find Washington gone in the morning. So then they backed up AIG to stop the fall.
“The problem with the real estate market remains excess inventory. Based on Shilling’s research, there are 2 million to 2.5 million excess homes in the country — a supply that will take 4-5 years to work-off. The result: Housing prices will fall another 20% and underwater mortgages will balloon from 23% to 40%, he says.
With housing slumping again, Shilling says recession is coming to a town near you in 2012.” Source>>>>
WHO IS GARY SHILLING?
Gary Shilling on How to Invest in the Age of Deleveraging and Deflation, Part I
Gary Shilling on How to Invest in the Age of Deleveraging and Deflation, Part II
An estimated 64 million unsold units in China making the USA’s real estate bubble look minuscule in comparison.
“According to Financial Times, the country’s banks have been ordered to assess their viability if real estate fell 50%. Does this portend some kind of pricking of the much-hyped real estate bubble?” Read more>>>>
“Kangbashi, a city in China’s Inner Mongolia originally designed to accommodate around 1 million people that currently has about 30,000 residents. The desert city is part of the Chinese government’s plan to add 36 million units of affordable or social housing in the next five years. Critics warn that “ghost cities” like Kangbashi are adding to the nation’s real estate bubble.” (Source: Bloomberg)
Is bubble about to burst on China’s over-hyped financial sector? For more ‘Real Deal With Chris Cuomo,’ at ABC please visit>>>>
