Christopher S. Penn – Marketing AI Keynote Speaker

The eye of the storm

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Christopher S Penn

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A couple of years ago, I posted a graphic of the mortgage resets from Credit Suisse First Boston. Let’s see where we are now.

CSFB in 2009

Congratulations to all. We’ve made it through the subprime crisis and only lost GM, every investment bank, nearly wiped out the FDIC Deposit Insurance Fund, put 1 out of 8 homeowners late or in foreclosure on their mortgages, and sent the economy into a tailspin. Otherwise, we made it through the subprime crisis.

We’re ready to start growing again, right?

Except… except the pool of alt-A and option ARM mortgages (all of which is defaulting at the same or higher rates of default than subprime 2 years ago) is still ahead, and it’s 50% bigger than the subprime mortgage market ever was.

If you’re thinking the worst of the storm has passed, it’s more like the eye of the hurricane. The second, stronger wall of the storm is arriving shortly. If you’re thinking that now is the time to spend a little more freely, to open up your wallet, think again and batten down the hatches. If anything, now is the time to increase your financial conservatism, to tighten spending if you can. Only once the storm has fully passed – in a couple of years – will it be time to go outside and start planting anew.

For more detailed charts, check out this post on Mish’s blog.

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The eye of the storm 1 The eye of the storm 2 The eye of the storm 3

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Comments

39 responses to “The eye of the storm”

  1. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  2. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  3. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  4. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  5. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  6. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  7. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  8. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  9. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  10. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  11. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  12. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  13. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  14. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  15. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  16. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  17. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  18. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  19. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  20. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  21. Stuartfoster Avatar
    Stuartfoster

    I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.

    Reply
  22. Stuartfoster Avatar
    Stuartfoster

    I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.

    Reply
  23. Stuartfoster Avatar
    Stuartfoster

    I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.

    Reply
  24. Stuartfoster Avatar
    Stuartfoster

    I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.

    Reply
  25. obilon Avatar
    obilon

    You are a rock star, Chris and this information is why I follow you. I hope this is wrong and from the bailout programs and stimulus spending the government has put into place we see a much softer bounce on the other side of this storm (isn't that what they were trying to accomplish after all?) but only time will tell.

    Reply
  26. Stuart Foster Avatar
    Stuart Foster

    I really really hope this is wrong. Nevertheless, awesome and informative article, that scared me to death.

    Reply
  27. butwait Avatar
    butwait

    Chris, I'm unfamiliar with the concept of mortgage rate resets… can you point me towards a resource that could help me get up to speed?

    Thanks as always for your insight…

    Reply
  28. butwait Avatar
    butwait

    Chris, I'm unfamiliar with the concept of mortgage rate resets… can you point me towards a resource that could help me get up to speed?

    Thanks as always for your insight…

    Reply
  29. butwait Avatar
    butwait

    Chris, I'm unfamiliar with the concept of mortgage rate resets… can you point me towards a resource that could help me get up to speed?

    Thanks as always for your insight…

    Reply
  30. Rian Avatar
    Rian

    Batten down the hatches and tighten spending? Therefore making worse the paradox of thrift?

    Er, no thanks. What we need is more organic consumer spending (as opposed to debt spending). The rate of US savings is up (around 5%, I believe), and cutting back on consumer spending is only going to exacerbate the problems in the real economy (which is slowly beginning to recover). We can destroy that progress in the real economy by cutting back spending.

    Needless to say, I disagree with your prescription.

    Reply
  31. Rian Avatar
    Rian

    Batten down the hatches and tighten spending? Therefore making worse the paradox of thrift?

    Er, no thanks. What we need is more organic consumer spending (as opposed to debt spending). The rate of US savings is up (around 5%, I believe), and cutting back on consumer spending is only going to exacerbate the problems in the real economy (which is slowly beginning to recover). We can destroy that progress in the real economy by cutting back spending.

    Needless to say, I disagree with your prescription.

    Reply
  32. Daniel Johnson, Jr. Avatar
    Daniel Johnson, Jr.

    Gulp!

    Reply
  33. Daniel Johnson, Jr. Avatar
    Daniel Johnson, Jr.

    Gulp!

    Reply
  34. Daniel Johnson, Jr. Avatar
    Daniel Johnson, Jr.

    Gulp!

    Reply
  35. Rian Avatar
    Rian

    Batten down the hatches and tighten spending? Therefore making worse the paradox of thrift?

    Er, no thanks. What we need is more organic consumer spending (as opposed to debt spending). The rate of US savings is up (around 5%, I believe), and cutting back on consumer spending is only going to exacerbate the problems in the real economy (which is slowly beginning to recover). We can destroy that progress in the real economy by cutting back spending.

    Needless to say, I disagree with your prescription.

    Reply
  36. Rian Avatar
    Rian

    Batten down the hatches and tighten spending? Therefore making worse the paradox of thrift?

    Er, no thanks. What we need is more organic consumer spending (as opposed to debt spending). The rate of US savings is up (around 5%, I believe), and cutting back on consumer spending is only going to exacerbate the problems in the real economy (which is slowly beginning to recover). We can destroy that progress in the real economy by cutting back spending.

    Needless to say, I disagree with your prescription.

    Reply
  37. Daniel Johnson, Jr. Avatar
    Daniel Johnson, Jr.

    Gulp!

    Reply
  38. Daniel Johnson, Jr. Avatar
    Daniel Johnson, Jr.

    Gulp!

    Reply
  39. Single Olga Avatar
    Single Olga

    Very interesting! I am unfamiliar with the concept of mortgage rate resets but I would like to learn about it as much as possible. I hope your blog will help me. Thank you for sharing this information. I will tell my friends about it so that we could discuss it.

    Reply

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