Subprime US Banking Financial Crisis Explained Part 3

Hi Cvalmart, Thanks for the comment am glad you like the video. I am not an accounting expert however as I understand it the regulators came out with a statement that basically told the banks they did not have to use mark to market accounting since the market is so illiquid right now and instead could rely on their models for valuing these securities. This as I understand would involve the use of DCF and forcasting methods for default rates of the underlying mortgages. Best Regards, Dave

Enlightning for sure. Very good presentation. Question: Since there is no more market for the MBS, do you know how they value them ? DO they use an income approach (DCF method) and build models that resemble business plans ?

Hi fourthcitizen, Thanks a lot for the comment and encouragement I really appreciate it. I also agree that the networks have turned to crap and that there is a big opportunity for self publishing in general which I am hoping to tap into so I appreciate your input. If you visit the free course section of my site you will find a course section there on the subprime crisis with lots more videos on the topic. Best Regards, Dave

Wow. I just finished watching all 3 videos on the Subprime Crisis and I now feel much better informed. Your desire to educate the public is to be admired and your ability to cover complicated topics with an absolute minimum of "showbiz influence" should make the networks concerned. I came looking for more information about the "crisis" because my 11 year old kept asking me, "How did this happen? What caused it?" and I really couldn't explain it to him.

Now I can.
Thanks
Thanks very much.

Hi Great6034, Thank you for the comment am glad you liked it. Best Regards, Dave

I watched all three. Very helpful. Many thanks.

Hi Rkrishnacse, Thank you for the comment. There are a number of varying opinions on this. I try to cover the basics of how the Fed tries to manage the business cycle in the free video course on InformedTrades. Specifically module 8 covers this. Best Regards, Dave

Hello David,
I have one question, when every one took loan
for small interest why the FED has increased the rates? why to decrease them...and then gradually increase them? why cannot they keep it constant or low always

Nice talk but, please draw or show some block diagrams or flow charts showing these relational concepts instead of talking eco double talk jargon. This would make your presentation more effective.

Hi Madashelldude, Thanks for the comment. I am limited to how much I can post here and as the answer to your questions are pretty in depth I have posted them on my blog in the comments section of the article "subprime crisis explained simply part 3". You can find my blog in the middle of the InformedTrades homepage and I will also message you the link. Best Regards, Dave

Hey David,
Really cool series, I finally understand some of the basics. Have you heard any estimates of how bad these SIVs are leveraged? I heard people say numbers like 1000:1, ie for every dollar in a real subprime mortgage there are $1000 worth of debt instruments just passed on to foreign banks, pension funds and townships. Is that true and how do you even begin to estimate this? Is this related to offshore bank secrecy, OTC derivatives and special purpose entities ala ENRON? if yes how?

Hi Piyush, I will be doing soe additional videos on current market trends in the future however right now my other videos are all focused on trading education and not current events. The Wall Street Joural's website if you are a subscriber is an excellent source of info as is the New York Time's website which you can access for free. Best Regards, Dave

Thanks Dave!!!

I really appreciate your quick reply...Do you have any other videos related to current market trends etc. I am currently finding resources to read on Singapore based Temasek's offer to Merrill Lynch. Is it similar to Abu Dubai's offer to Citigroup..??? Any videos/resources you may suggest.
Holdings

Hi Piyush, Thanks for the comment am glad you like the videos. Lets say for example I want to buy a $100,000 house. I have $20,000 so I go to the bank and borrow the other $80,000. At this point I have $20,000 in equity in the house. If the value of the house then goes up to $120,000 I still only owe the bank $80,000 so I now have $40,000 in equity in the house. With this in mind I can go to the bank and get a more favorable loan because I own a larger portion of the asset. Brgrds, Dave

Hi David,

Great Videos!! Some places you have mentioned borrowers were expecting to refinance their asset expecting the valuation to go up which did not happen as the interest rates started to rise again. I could not follow how can a borrower refinance upon their asset if it is still hypothecated to bank ..???

Piyush