Subprime Debt Values in a Recession
February 11, 2008 5:27pm by Barry Ritholtz
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Did you know Einstein wasn’t all that great in math (reletively speaking lol).
Einstein had a lot of help from his mathematician friend Marcel Grossmann.
Einstein was referring to German subprime, so it won’t matter here. That is how permabulls would rationalize it :-)
Actually the formula expressed on the chalk board is approximately what was actually done!
Einstein’s miracle of compound interest working both sides of the equation, the up as well as the down.
V = 0 ?
Lucky cookies!
Imagine if V < 0? Ouch!
http://www.hetemeel.com/einsteinform.php
There’s also one for church signs.
Oh come on. It doesn’t take a genius to figure THAT out!
(:
The underlying asset will always determine the value of the financial instrument. Even if the house falls down, the land is worth something. My guess is $.25 – $.30 on the dollar as a ballpark to the loan value. Wait a couple of years (2010) and walk into your local bank. By that time they will realize the “value” of these properties and be happy to talk to you.
Happy investing.