A couple of years ago, I posted a graphic of the mortgage resets from Credit Suisse First Boston. Let’s see where we are now.
Congratulations to all. We’ve made it through the subprime crisis and only lost GM, every investment bank, nearly wiped out the FDIC Deposit Insurance Fund, put 1 out of 8 homeowners late or in foreclosure on their mortgages, and sent the economy into a tailspin. Otherwise, we made it through the subprime crisis.
We’re ready to start growing again, right?
Except… except the pool of alt-A and option ARM mortgages (all of which is defaulting at the same or higher rates of default than subprime 2 years ago) is still ahead, and it’s 50% bigger than the subprime mortgage market ever was.
If you’re thinking the worst of the storm has passed, it’s more like the eye of the hurricane. The second, stronger wall of the storm is arriving shortly. If you’re thinking that now is the time to spend a little more freely, to open up your wallet, think again and batten down the hatches. If anything, now is the time to increase your financial conservatism, to tighten spending if you can. Only once the storm has fully passed – in a couple of years – will it be time to go outside and start planting anew.
For more detailed charts, check out this post on Mish’s blog.
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You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.
I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.
I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.
I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.
You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.
I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.
Chris, I'm unfamiliar with the concept of mortgage rate resets… can you point me towards a resource that could help me get up to speed?
Thanks as always for your insight…
Chris, I'm unfamiliar with the concept of mortgage rate resets… can you point me towards a resource that could help me get up to speed?
Thanks as always for your insight…
Chris, I'm unfamiliar with the concept of mortgage rate resets… can you point me towards a resource that could help me get up to speed?
Thanks as always for your insight…
Batten down the hatches and tighten spending? Therefore making worse the paradox of thrift?
Er, no thanks. What we need is more organic consumer spending (as opposed to debt spending). The rate of US savings is up (around 5%, I believe), and cutting back on consumer spending is only going to exacerbate the problems in the real economy (which is slowly beginning to recover). We can destroy that progress in the real economy by cutting back spending.
Needless to say, I disagree with your prescription.
Batten down the hatches and tighten spending? Therefore making worse the paradox of thrift?
Er, no thanks. What we need is more organic consumer spending (as opposed to debt spending). The rate of US savings is up (around 5%, I believe), and cutting back on consumer spending is only going to exacerbate the problems in the real economy (which is slowly beginning to recover). We can destroy that progress in the real economy by cutting back spending.
Needless to say, I disagree with your prescription.
Gulp!
Gulp!
Gulp!
Batten down the hatches and tighten spending? Therefore making worse the paradox of thrift?
Er, no thanks. What we need is more organic consumer spending (as opposed to debt spending). The rate of US savings is up (around 5%, I believe), and cutting back on consumer spending is only going to exacerbate the problems in the real economy (which is slowly beginning to recover). We can destroy that progress in the real economy by cutting back spending.
Needless to say, I disagree with your prescription.
Batten down the hatches and tighten spending? Therefore making worse the paradox of thrift?
Er, no thanks. What we need is more organic consumer spending (as opposed to debt spending). The rate of US savings is up (around 5%, I believe), and cutting back on consumer spending is only going to exacerbate the problems in the real economy (which is slowly beginning to recover). We can destroy that progress in the real economy by cutting back spending.
Needless to say, I disagree with your prescription.
Gulp!
Gulp!
Very interesting! I am unfamiliar with the concept of mortgage rate resets but I would like to learn about it as much as possible. I hope your blog will help me. Thank you for sharing this information. I will tell my friends about it so that we could discuss it.