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Thread: Stocks dive on subprime mortgage worries

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    Elite Member JamieElizabeth's Avatar
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    Default Stocks dive on subprime mortgage worries

    Dow, Nasdaq fall on subprime lender woes - Yahoo! News

    By MADLEN READ, AP Business Writer 29 minutes ago

    NEW YORK - Stocks plunged Tuesday, driving the Dow Jones industrials down more than 200 points and erasing all the gains made last week as troubles for subprime lenders piled up.

    Investors, bracing for a wilting economy, fled the already deflated subprime mortgage sector while problems increased for lenders such as New Century Financial Corp., Accredited Home Lenders Holding Co. and General Motors Acceptance Corp.'s residential unit. Bolstering the belief that the problems are widespread, the Mortgage Bankers Association reported that new foreclosures surged to an all-time high in the last quarter of 2006.

    The subprime lending worries, coupled with anxiety over the Commerce Department's report Tuesday that U.S. retailers eked out a meager 0.1 percent rise in sales last month, knocked down all three major stock indexes more than 1 percent.

    "The market's still jittery, and they're starting to get full-blown concerns over a bleed in the larger subprime mortgage market," said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.

    The subprime market is a relatively small sector of the U.S. economy, Kelmon noted. But Tuesday's selling was accentuated by options expiring soon and by volatility that has increased since the market's big plunge two weeks ago — a 416-point drop in the Dow that was caused partially by the problems of subprime lenders, who loan to people with poor credit.

    In late afternoon trading, the Dow fell 200.92, or 1.63 percent, to 12,117.70. Broader stock indicators also fell. The Standard & Poor's 500 index fell 23.62, or 1.68 percent, to 1,382.98, and the Nasdaq composite index slid 40.71, or 1.69 percent, to 2,361.58.
    Volume on the New York Stock Exchange, where declining issues outnumbered advancers by more than 4 to 1, was high at 1.56 billion shares.

    Trading collars were triggered Tuesday afternoon when the New York Stock Exchange Composite index lost more than 180 points. The collars put a chokehold on certain orders, forbidding transactions that capitalize on discrepancies in prices.
    Subprime lending jitters and sluggish retail sales drove up bond prices. The yield on the benchmark 10-year Treasury note fell to 4.50 percent from 4.56 percent late Monday.

    "Investors are poking around to see how much rotted wood there is here," said Jack Ablin, chief investment officer for Harris Private Bank. "It looks like the notion was subprime was contained, and now we're starting to see that maybe this problem has moved into other areas of the market. That's causing investors great concern."

    Gold prices fell. The dollar was higher against the euro but lower against other the yen. That movement renewed anxiety about traders unwinding their yen "carry trades," or taking money out of high-yielding dollar assets bought with the low-yielding yen.

    There was little good news to keep stocks afloat Tuesday. The Commerce Department said sales at U.S. retailers rose 0.1 percent in February as wintry weather in much of the country kept shoppers away from stores. Investors had expected an increase of 0.3 percent from January.

    "I think a big question mark on this is how much of this is weather-related," said Rob Lutts, chief investment officer at Cabot Money Management. "We had two or three days during the month which knocked out activity. ... I think it is causing a little bit of alarm short-term."
    Several retailers fell following the Commerce Department's report. Federated Department Stores Inc., parent of Macy's and Bloomingdale's, fell 92 cents, or 2 percent, to $44.02; Wal-Mart Stores Inc. slid $1.05, or 2.2 percent, to $46.21; and Target Corp. fell $1.85, or 3 percent, to $60.38.

    Meanwhile, Accredited Home shares plunged $7.09, or 62 percent, to $4.31, after it disclosed its own liquidity problems.

    Also, the New York Stock Exchange took steps to delist New Century shares, and the company said the Securities and Exchange Commission was conducting a preliminary inquiry into accounting errors that inflated its loan portfolio.

    The Mortgage Bankers Association's quarterly report on the mortgage market confirmed investors' worries that the entire sector is struggling and could weaken further: not only did new foreclosures hit a record high in the fourth quarter of last year, but late mortgage payments soared to a 3 1/2-year high.

    Giving stocks an extra kick lower was a report from General Motors Acceptance Corp., General Motors Corp.'s part-owned financing arm, which reported that its fourth-quarter profit rose but that struggles in its Residential Capital LLC unit was eating into earnings.

    Investors trying to determine the breadth of the problems in the subprime sector also pounced on comments from Goldman Sachs. The investment bank said that while the subprime sector showed "significant weakness," the broader credit environment "remained strong."
    Still, Goldman Sachs fell $1.83 to $200.77, despite record first-quarter profit thanks to strong revenue from trading and investment banking.
    Homebuilders took a hit, as lending obstacles could further cripple the struggling housing market. D.R. Horton fell 3.6 percent, Centex Corp. lost 4.7 percent and Toll Brothers dropped 2.5 percent.

    The Russell 2000 index of smaller companies fell 16.66, or 2.11 percent, to 772.34.
    Overseas, Japan's Nikkei stock average fell 0.66 percent. Britain's FTSE 100 fell 1.16 percent, Germany's DAX index fell 1.36 percent, and France's CAC-40 fell 1.15 percent.
    Light, sweet crude fell 98 cents to $57.93 per barrel on the New York Mercantile Exchange.

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    Hit By Ban Bus! UndercoverGator's Avatar
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    Big fucking deal. Anyone with any experience in the market will tell you it is very volatile. The traditional pattern is two days of steady gains followed by a third day of the market adjusting downward. It's part of a cycle and if you're too much of a pansy to be able to see the big picture, the long term gains, then you no business playing the market.

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    Elite Member Born In A Brothel's Avatar
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    Yeah, wake me when it breaks below 10,000

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    Elite Member JamieElizabeth's Avatar
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    Quote Originally Posted by UndercoverGator View Post
    Big fucking deal. Anyone with any experience in the market will tell you it is very volatile. The traditional pattern is two days of steady gains followed by a third day of the market adjusting downward. It's part of a cycle and if you're too much of a pansy to be able to see the big picture, the long term gains, then you no business playing the market.
    The big picture is American people can't make their mortgage payment and need the FED to bail them out.

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    Elite Member Grimmlok's Avatar
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    Well thats what happens when you have sky-high prices, a massive wealth gap, burger flipping jobs substituting for real employment and desperate people.
    I am from the American CIA and I have a radio in my head. I am going to kill you.

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    They can't afford basic healthcare either. I don't know why we have yet another thread about people buying houses they can't afford and if your ability to repay a mortgage is so dependent on the natural fluctuations of the stock market they are even more of an clueless idiot who needs to learn some basic economics before taking on the burden of an unaffordable mortgage.

    The housing market is no different to any other. Supply and demand.
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    Elite Member Born In A Brothel's Avatar
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    Bravo A*O!


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    Elite Member JamieElizabeth's Avatar
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    The housing market is different because it should not be treated as such a disposble item. Such as continous building w/o any plan on what happens down the road. Someone has made the money and left the market for the govn't to manage.

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    The government ain't touching this mess. Thousands of retards that bought houses they couldn't afford will lose their over valued homes and move to condos, apartments and trailers and the housing market will right itself again. The stockholders for the sub prime mortgage companies will take a financial bath and write it off as a loss on their taxes to offset their other gains. Smart people will rush in once the houses hit rock bottom and buy many of them as a substancial discount before turning them into rentals.

    The Mr and I are planning on snapping up a few bargains and renting them out as soon as the prices hit the level we are looking at as reality.

    Reality is a bitch when it bites you on the ass. Ask the old timers who lived through the Great Depression and lost everything due to equally stupid financial moves they made in the giddy Roaring Twenties.

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    Elite Member louiswinthorpe111's Avatar
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    From my research, 1 out of every 5 subprime loans goes into foreclosure. I know of a local bank that has 9 houses going into foreclosure, and they are not subprime lenders. I'm going to pick up a couple of those houses and flip them.

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    Quote Originally Posted by louiswinthorpe111 View Post
    From my research, 1 out of every 5 subprime loans goes into foreclosure. I know of a local bank that has 9 houses going into foreclosure, and they are not subprime lenders. I'm going to pick up a couple of those houses and flip them.

    How do you find foreclosures? I'm interested in flipping too.

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    Gold Member greeneyedbeauty's Avatar
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    Anyone that can't afford a house payment for a home that was bought around 2002 - 2004 has issues anyway. Rates were beyond low at that time, we were closing mortgages that had a 30 year rate of 3.75%; this was in June 2003.
    If someone can't pay that back then they aren't going to pay back anything.

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    Quote Originally Posted by hotncmom View Post
    How do you find foreclosures? I'm interested in flipping too.
    I know the lenders at the banks. Although HUD has a website that some realtors subscribe to. Be prepared to use your own money unless you have it set up at a bank to get a construction loan or a line of credit, which they don't generally do for newbies.

    BTW--Argent Mortgage fired over 100 people today...

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    I think profiting from someone else's foreclosure misfortune is ethically and morally questionable. I know people do it, but I think it is ghoulish.

    I think it should be illegal. Just because they did a stupid thing -- if they did -- doesn't mean others should profit from it. Two wrongs don't make a right, etc.

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    Elite Member JamieElizabeth's Avatar
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    ^^The standards have never been set that well, then.

    That market can turn nasty, if you aren't a "wheeler and dealer"; it takes a take-charge attitute, but a lot of the people can become outright nasty.

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