Thursday, March 29, 2007

Additional Notes on the Subprime Sector

Looking at the subprime sector effectively requires a framework for understanding the problem. Of the analysis on the subprime sector --, Kreisel out of Northern Trust, etc, (there are 100's) -- and note that the Fed (Greenspan) covered the sector in a speech in 05 -- most are based on a few "nuggets" of info with a few charts (no offense to Kreisel for example but that is his style, also the style of Rosenberg out of Merryl and most other bank economists).

I think the Fed is way ahead of most economists -- economists at Goldman and Merryl because every time the Fed issues a statement/report it is evident that they have a team of economists with very sophisticated models -- stress tested -- to back up their statements. You can't get access to their models though so the best I can find is the projection from the report linked in my previous story dated 3/27/07.

That said, what is clear from the projections is that the subprime sector hits the lower income sector harder (hard), and whether that will pull down the rest of the economy, probably not, but best would be to look at the projections to figure this out. Subprime is one more factor to skew income distribution in addition to top heavy pay scales and tax codes (alternative minimum taxes, lower taxes on capital gains, etc). I find the trend disturbing and can see it out here in the Bay Area, no question, plain as day. The contribution of the subprime sector to greater disparity in income distribution was a subject of a business week note here:


Post a Comment

<< Home