Comments for The US housing bubble: which dominoes will fall next? at http://www.sibernews.com , comment 0 to 2 out of 2 comments http://www.sibernews.com Fri, 29 Aug 2008 00:05:09 +0100 FeedCreator 1.7.2 http://www.sibernews.com/news/world/-200610136056/#pc_1119 I think that you are missing a potentially huge “domino tile�, that is, the CDO market. As default rate accelerates, the CDO market is an accident waiting to happen. There is a huge pile of CDOs that is based on high-risk mortgages (ARM, Option ARM, Stated income, etc...). The trouble with the CDO market is that rather then reducing risks, it actually introduces poorly understood counter-party risks. A relatively small default someplace can actually trigger a huge cascade (an avalanche) with serious consequences. Hedge funds are making huge risky bets with other people money disregarding the risks, just so they could collect their outrageous fees. This “Domino� is far more serious then a large reduction in consumer spending. And, of course, the two “dominos� are self re-enforcing. Potentially we can have a big disaster. All the best, GK - g66k Thu, 19 Oct 2006 22:26:35 +0100 http://www.sibernews.com/news/world/-200610136056/#pc_1046 ARMS resetting bigtime between this year and 2008. Estimated 80% of homebuyers in the last 3 years purchased homes with adjustable rate mortgages. I am calculating in a small blip of increased comsumer spending in home upgrades in a final paniced attempt to sell these homes before forclosure. They have nowhere to go. They cannot sell (no buyers) and they cannot afford a fixed interest rate, or another ARM for that matter. The pool of greater fool has dried up. - Jeremy Sat, 14 Oct 2006 07:12:22 +0100