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Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

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121–130 of 134 posts

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#121

Earlier quoted context omitted.

Going through mortgage application now, they grill the shit out of you on every little detail of your life now. They're aware of the last crash, and have done a lot to compensate.

On the other hand, I recently sold a house that received a lot of offers. Only one person actually had the down payment money. Everyone else's loans were approved, but most were people were coming with low cash and lower income than I would have expected. Some looked like irresponsible loans to me.

When I was a whippersnapper 15% down was considered pretty low. These days you can get pre-approved with less than 10% down and no validation that your downpayment isn't a loan itself. Kinda crazy.

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#123
post #17

Earlier quoted context omitted.

Bernanke was pitching them this idea. He suggested the Japanses government issues zero-coupon perpetual bonds and the BoJ buys them. Ha, ha, "bonds". As crazy as this sounds I think it makes sense - just admit honestly that the situation is fucked up, monetize, generate stagflation and eventual normalization.

It seems like I'm missing something basic. I would like to understand when the inflation happens and where it comes from. More money chasing fewer goods, sure, but if we already have too much of a money-equivalent, why aren't bondholders chasing goods with it already? And, clearly there isn't any inflation. It seems like demand should have increased when the government sold the bonds and spent the money.

But the government spent the money over decades.

Monetizing the debt overnight is like a dam braking.

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#124

Earlier quoted context omitted.

It seems like I'm missing something basic. I would like to understand when the inflation happens and where it comes from. More money chasing fewer goods, sure, but if we already have too much of a money-equivalent, why aren't bondholders chasing goods with it already? And, clearly there isn't any inflation. It seems like demand should have increased when the government sold the bonds and spent the money.

You and everybody else. Japan's current situation seems to stump most economic models. I wonder if there's something about culture and having basic survival needs met. Most economic models assume effectively unlimited long-term demand: as productivity grows and people in existing sectors are thrown out of work, they will find new things to do, and the people who have reaped the financial rewards of productivity growt…

I would be really grateful if you can let us know your thoughts that if interest rates go to zero, would the asset prices continue to increase to infinity?

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#125
post #11

So should I pull out on all my stocks and stuff everything into bonds then?

I think it is pretty clear by now that nobody can predict the market. Hence the nice returns on index funds.

Stocks are pretty low risk if your investment time is long (>10 years)

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#126
post #39

I'm a founder and have been getting spammed hard-core lately for small business loans. There are many companies offering 5-6 digit business loans and revolving lines of credit to basically anyone who can fog glass, and there are salespeople and spammers pushing them. I'd say I average 2-3 e-mails or cold calls per day. Feels like they're trying to stuff loans down my throat. I've spoken to other founders and small bu…

I think this is true. Collateralized Loan Obligations are big business now.

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#127

Earlier quoted context omitted.

> "they will recover" If you invested in 1914 German stock market, it didn't recover until 2014.

Wasn't that more or less a societal collapse situation? I'm not sure that almost any investment vehicle is going to be reliable through two world wars.

There are a non trivial number of people predicting American societal collapse. They're probably wrong, but...

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#128
post #123

Earlier quoted context omitted.

It seems like I'm missing something basic. I would like to understand when the inflation happens and where it comes from. More money chasing fewer goods, sure, but if we already have too much of a money-equivalent, why aren't bondholders chasing goods with it already? And, clearly there isn't any inflation. It seems like demand should have increased when the government sold the bonds and spent the money.

But the government spent the money over decades. Monetizing the debt overnight is like a dam braking.

I don't think there is any reason to do it overnight, so why would they do that? It would make more sense to pay off bonds as they mature.

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#129

Earlier quoted context omitted.

You and everybody else. Japan's current situation seems to stump most economic models. I wonder if there's something about culture and having basic survival needs met. Most economic models assume effectively unlimited long-term demand: as productivity grows and people in existing sectors are thrown out of work, they will find new things to do, and the people who have reaped the financial rewards of productivity growt…

I would be really grateful if you can let us know your thoughts that if interest rates go to zero, would the asset prices continue to increase to infinity?

I've thought about negative interest rates specifically at length, and I can't imagine a situation where they don't lead to a chaotic breakdown in capital markets or even a currency collapse. The problem is in the compounding: normally there's a negative feedback loop against borrowing too much because you have to pay back more than you borrowed, and if you don't, you go bankrupt and can't borrow any more. With negative rates, there's a positive feedback loop: the more you borrow, the more you make in profit, so everybody is incentivized to borrow as much as they possibly can, nobody wants to pay anything back, total debt increases to infinity, and with it the amount of money in circulation and asset prices also increase to infinity. Additionally, the most profitable sector of the economy becomes borrowing money, so all productive work stops and people focus on financial gains.

This is pretty much the definition of hyperinflation, so there's a template for what happens here, but not in the developed world.

I suspect that a lot of the demand for Bitcoin is also driven by fear of this scenario. In the world above, the incentive for savers is to simply not play in the established financial world; they'll take their savings and put it in assets that are not rapidly going to zero. If only there were a transferrable currency that's deflationary by design and immune to manipulations of supply & interest rates...

Re: Risky Mortgage Bonds Are Back and Delinquencies Are Piling Up

#130

Earlier quoted context omitted.

On the other hand, I recently sold a house that received a lot of offers. Only one person actually had the down payment money. Everyone else's loans were approved, but most were people were coming with low cash and lower income than I would have expected. Some looked like irresponsible loans to me.

When I was a whippersnapper 15% down was considered pretty low. These days you can get pre-approved with less than 10% down and no validation that your downpayment isn't a loan itself. Kinda crazy.

Why would I tie up funds in a mortgage where I can make more in the market with those funds? Just have to make sure I actually put my funds into the market, heh...
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