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Merrill Lynch on how fucked things are
by Decius at 3:45 pm EST, Jan 8, 2009 |
Fully 35% of a person’s FICO score boils down to one’s history of making
payments on time. The average FICO score today now is down to 690 after the
borrowing spree of the past seven years. Yet to obtain a plain-vanilla 30-year
fixed rate mortgage, the minimum score is 760. For a 15-year HELOC, it is 740.
And, for a three-year auto loan, the minimum FICO is 720. This is a primary
reason why the credit cycle is not about to be revived. It is not that standards are too tough as much as the unprecedented borrowing binge over the past seven years has left the household sector, at the margin, with a credit profile that is too risky for the banking community to justify to their shareholders.
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RE: Merrill Lynch on how fucked things are
by noteworthy at 6:56 pm EST, Jan 8, 2009 |
Fully 35% of a person’s FICO score boils down to one’s history of making payments on time. The average FICO score today now is down to 690 after the borrowing spree of the past seven years. Yet to obtain a plain-vanilla 30-year fixed rate mortgage, the minimum score is 760. For a 15-year HELOC, it is 740. And, for a three-year auto loan, the minimum FICO is 720. This is a primary reason why the credit cycle is not about to be revived. It is not that standards are too tough as much as the unprecedented borrowing binge over the past seven years has left the household sector, at the margin, with a credit profile that is too risky for the banking community to justify to their shareholders.
This URL (from Ritholtz) is no longer valid ... It looks like it was meant to be a one-time-use URL that is only usable during a very brief window. The excerpt you/Barry provided isn't found anywhere else at the moment, and based on the comments at The Big Picture, no one has yet found it elsewhere. Similar numerical data is readily found elsewhere; example: About 60% of people have scores of 700 or more. At 720, a person is considered a safe risk and typically receives a loan without a problem and at a low interest rate. The FICO score is weighted as follows: * 35% payment history. Having a long history of making payments on time and no missed payments on all credit accounts is one of the top things that creditors look for. ...
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RE: Merrill Lynch on how fucked things are
by Decius at 10:22 pm EST, Jan 8, 2009 |
noteworthy wrote:
This URL (from Ritholtz) is no longer valid ... It looks like it was meant to be a one-time-use URL that is only usable during a very brief window. The excerpt you/Barry provided isn't found anywhere else at the moment, and based on the comments at The Big Picture, no one has yet found it elsewhere.
Damn. This was one of the best things I've read on the state of the crisis. I'll check my machine tomorrow and see if I have it cached. Basically, no inflation, thinks hopes for a 2009 recovery that have been priced in over the past few weeks are going to be dashed, sees a commodities bottom forming (IE oil is now undervalued, possibly gold), says invest in good dividend companies -- utilities for example. Notes that cellphones are a staple in this cycle and consumers will continue to spend money on them while cutting other things (including food). |
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Rosenberg Roundup
by noteworthy at 7:00 am EST, Jan 9, 2009 |
Until David Rosenberg's recent research report is recovered (or is replaced by today's report), here's a roundup of recent media reporting in which Rosenberg appears. On CNBC yesterday, he said: "It’s pretty fool-hearted to believe that anything is going to reach any sustainable low until we put in a firm bottom on residential real estate valuation across the country."
He was brought in to CNBC to discuss his latest FT article: We expect to be in recession through to the end of 2009 at the earliest, even with the help from intense monetary and fiscal stimulus before a recovery takes hold in 2010. Sustained negative wealth effects from the slide in housing and equity prices will reinforce the uptrend in the personal savings rate. This, in turn, creates a highly disinflationary environment as job losses mount and pushes the unemployment rate up towards 9 per cent in the US in the coming year. What we probably need is a supply-side resolution, either creating regional land banks to ring-fence the inventory or a moratorium on new housing starts to prevent further corrosion in residential real estate values. Supply-demand divergences are likely to persist through 2009, in our view, and will require even further contraction in construction activity before balance is restored in the real estate market.
In a story for Reuters from earlier this week, he is quoted as saying: "The pullback in consumer and business spending in the coming year will likely be so big that even under the latest leaks on the size of the coming fiscal package, we think it will barely offset half the retrenchment in organic private sector GDP."
Rosenberg is apparently quite vocal lately: The [recent market] rally appears to hinge on a growing consensus view that the economy will start to rebound in the second half of 2009. And guess what? That view is almost certainly wrong, growls David Rosenberg, Merrill Lynch's North American economist, in reports published every day of the new trading year.
You see, he "growls" because he's bearish. Here's another: "The market may be focused less on the patient right now and more on the cure. This, in turn, means that the doctors better come up with something that is going to turn the economy around."
In the Monitor: The US has experienced a two-decade expansion of credit availability – punctuated in recent years by phenomena such as mortgage loan... [ Read More (0.3k in body) ]
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