Whilst the subprime numbers are huge, they actually represent a small percentage in the bigger picture.
And...the losses are paper losses, based on zero return for all debt...if we were to equate this to a company in adminstration, we would be looking at recoveries of some 80c in the dollar...and in all likelihood, a recommendation from the administrator to re-finance and maintain the company as a going concern.
The problem here was more about the conversion of high risk debt to low risk bankable debt...it hasn't disappeared, just the perceived value of it at this point in time.
It is a paper loss.
The numbers quoted are based on the losing the lot, which would require every property under finance to suddenly vanish...and the land to not exist. Not only will this not happen, but within a short period, the paper loss could well turn back into a paper profit.
If the "backers" all rush the doors now however...demanding repayment of their debt "valuations"...then clearly we have a case of insolvency, one that will make ripples, but certainly not waves.
The question therefore regarding how this is handled, potentially relates more to other agenda...to which I draw your attention to the falling markets and potential opportunites being created here.
If you lose money in one place...why not generate it back from another?
lol
Clearly not a healthy scenario...and a falling US housing market will only exacerbate the situation...but hardly a real problem in terms of the capital markets.
The US has much bigger problems...but they will not be headline news until the real crash comes in my mind...but not yet...not until the mother of all stings is done and dusted!
Current "noise" is just smoke screen in my view...but we can bet they will milk it for all it's worth.
The whole process of information flow...from the buisiness media...be it US, AUS, wherever, is really just a larger far more organised version of what we see here on HC every day.
Rampers...up and down...talking their books...every last one of them!
lol
Watch this...(5 parts)...
Cheers!
ASX Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)