Credit & Debt: Containing The Contagion

Much as worries about the housing bubble were met with a flurry of mainstream press assuring the public that "now was a good time to buy" and there was nothing to worry about, now we're seeing a ton of articles about how jobs will save the flagging economy, and how companies ranging from Countrywide to Bear Stearns are shrugging off the losses and showing increased earnings:

Countrywide is betting the mortgage malaise doesn't spread to prime and near-prime loans. Fears about contagion "are warranted," but mostly reflected in Countrywide's stock price, "leaving only relatively modest downside risk," wrote Merrill Lynch & Co. analyst Kenneth Bruce. He rates Countrywide "buy."...Bear Stearns wasn't the only one to try to assuage market fears on March 15. IndyMac Bancorp, Inc. (NDE) insisted that its exposure to subprime mortgages is small and it has been inappropriately categorized by many media sources as a subprime lender.

Not everyone is quite so sanguine, however. Take Jim Rogers, for instance:

"Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it'll be worse because we haven't had this kind of speculative buying in U.S. history," Rogers said..."When you have a financial crisis, it reverberates in other financial markets, especially in those with speculative excess," he said.

I also have to point out that despite the claims of Rachel Beck, higher wages are NOT a guarantee the economy can weather the storm. Simply put, people are maxed out on credit, expenses, and can't rely on steady income from long-term gainful employment like they once did. When you have the Fed talking about your wages as the "primary pressure" on the economy, and CEOs who look at you as a cost on a balance sheet, is it any wonder that people still feel like they're falling behind?

Or that they would put themselves so far at risk just to preserve the American Dream?

Posted at March 16, 2007 03:29 PM

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Much as worries about the housing bubble were met with a flurry of mainstream press assuring the public that "now was a good time to buy" and there was nothing to worry about, now we're seeing a ton of articles about how jobs will save the flagging economy, and how companies ranging from Countrywide to Bear Stearns are shrugging off the losses and showing increased earnings: Countrywide is betting the mortgage malaise doesn't spread to prime and near-prime loans. Fears about contagion "are warranted," but mostly reflected in Countrywide's stock price, "leaving only relatively modest downside risk," wrote Merrill Lynch & Co. analyst Kenneth Bruce. He rates Countrywide "buy."...Bear Stearns wasn't the only one to try to assuage market fears on March 15. IndyMac Bancorp, Inc. (NDE) insisted that its exposure to subprime mortgages is small and it has been inappropriately categorized by many media sources as a subprime lender. Not everyone is quite so sanguine, however. Take Jim Rogers, for instance: "Real estate prices will go down 40-50 percent in bubble areas. There will be massive defaults. This time it'll be worse because we haven't had this kind of speculative buying in U.S. history," Rogers said..."When you have a financial crisis, it reverberates in other financial markets, especially in those with speculative excess," he said. I also have to point out that despite the claims of Rachel Beck, higher wages are NOT a guarantee the economy can weather the storm. Simply put, people are maxed out on credit, expenses, and can't rely on steady income from long-term gainful employment like they once did. When you have the Fed talking about your wages as the "primary pressure" on the economy, and CEOs who look at you as a cost on a balance sheet, is it any wonder that people still feel like they're falling behind? Or that they would put themselves so far at risk just to preserve the American Dream?