Subprime Mortgage  Credit Crisis ,Causes and Consequences Proactive Structural Simulation Credit and Market Risks  Integration Simulation :Proactive Recession Strategy
Housing Bubble Prices Bubbles Burst and Sub-Prime Mortgage Credit  Default Crisis Early Warning Simulation

                     Warren Huang    OSA  Intl   Operations Analysis  San Francisco, Ca., USA

         Website :www.osawh.com /  www.osaglobalstrategicmanagement.com/blog1   email: wh3928@yahoo.com
                        Fenglan Zhang,  Zhejiang University, Hangzhou, Zhejiang, China  joycezhang001@yahoo.com.cn,  
Dr. Warren Huang (黃華南博士) Pioneer, Proactive structural global inflation, macro economy, daily financial markets interest rates, currency, stock, bond, Derivatives, housing, commodities, oil asset pricing and risks valuation markets fundamentals mechanism, accurately warned on Wall Street Journal Real Time Economic, Market beat Blog Sept.19, 2007 that US housing price slump continue into summer 2008 drag  US dollar to 1.55-1.65 EURO, 90- 105 Yen , economy into inflationary recession and US, global stock indices bear market correction, oil above 110, Bear Stearn 30 billion dollar  MBS hedge fund  failure. despite Fed rate cuts He also warned top QFII management on Peking Univ June 2007 International Financial Engineering Conference that China overheated housing, stock market wealth gain resulted inflation over 8. 7 % will lead to China Peoples Bank credit tightening to remove excessive liquidity, Housing, stock markets follow US housing price slump, recession, bear market correction, with Shanghai A testing 3000- 4000 till summer 2008   

2008 China/US housing prices bubbles burst impact on inflationary recession, stock bear market correction.
Dr. Warren Huang will be the full day master class workshop lecturer for  Terrapinn Fund World China

 2008 conference, Shanghai  Pudong Shangri-La hotel, March 6 offer Proactive structural China/global asset pricing,2008 credit tightening, recession impact on BRIC,Optimal  1x0/x0  long-short hedging, asset allocation strategy 2008
Proactive Structural dynamic analysis of US Sub-prime crisis 

　

omment by Warren Huang Wall Street Journal Real estate Development Blog  - May 14, 2008 at 6:35 pm

From the data shown we, still have one third of cities Housing price gain, despite average price down 6.7 %.
From the past US global housing bubble bursts, we are still at the early stage of housing price correction, this is especially for high end housing, just too high to be afford. and the mounting job cuts, foreclosure will continue drag housing prices slump into this summer. may be down 30- 50 % in some cites. while the average housing price must down 20- 30 %.My US national and regional housing price can be calculated from national, local unemployment, mortgage rate, money supply growth, foreclosure data.
details can be found www.osawh.com/mortdefa.htm and www.osawh.com/UShouswksp.htm
One more variable to add, the stock price index in regional cities, for high tech cities, use Nasdaq, for banking finance center use DOw Jones, or banking index.
like Seatle, San Jose use Nasdaq,New York city use Dow Jones index Comment by Warren Huang - May 14, 2008 at 6:38 pm

The trouble in sub-prime crisis are due to poor housing , equities, CDO valuation and credit rating
method, which are based on 30 year old statistical, probabilistic models in pricing and default., betting on the wrong side of investment, over-optimistic over US inflation and economy and housing markets.
As I warned last June , 2007 Peking University, Beijing International Financial Engineering Risk Management Conference to top global investment, housing executives and on this blog last Sept before Fed rate cuts
that rate cuts, can not stop US housing price slump continue into 2008 summer, drag US into recession, US and global stocks into bear market correction, with banking, finance, housing, shares down 50 %, IT, oil, retail and high fliers GOOG, AAPL, PTR shares down 30 %
Only my proactive structural dynamic simulation predicted months, years ahead of the emerging market trend avoided trillion dollar market loss
details can be found on my one day full day workshop Mar.6, Pudong, Shanghai, China world fund 2008
www.osawh.com/fund2008.htm and www.osawh.com/mortdefa.htm

Comment by Warren Huang -Wall Street Journal Market Beat Blog February 8, 2008 at 12:39 pm

Trillion dollar recession hedge by Dr. Warren Huang

click here for2008  US inflation, recession out look and asset prices, asset allocation strategy
 click here for 2008 housing slump impact on  economic recession and equities, commodities asset prices, allocation strategy forecast                                           

                                                                                         Abstract

This paper demonstrated  Huang’s 30 years pioneering proactive, structural equities, housing asset prices bubbles bursts Operations Simulation Analysis (OSA), applications to mortgage default crisis, credit crunch early warning
Thousands simulators have been developed, implemented for strategic investment, markets, credit risks simulation integration early warning for 30 million China, US Taiwan 15 cities 30 million institutional, private investors, global finance, capital market QFII, QDII, real estate, insurance, credit rating agencies, multinational CEO, seniors executives, lectures, workshops and 24 global central bank governors, banking, financial crisis, Hedging risks management conferences.
These artificial intelligence neural net based expert systems integrated macro financial, industrial econometrics OSA tracking, forecast years, months ahead of the causes, onset, spread, recovery, early  warning of last 20 years global banking, financial and asset bubble burst , credit default crisis.
These dynamic deterministic OSA　tracking global central banks monetary, economic, fiscal policy impact on macroeconomic inflation, GDP, daily Fed fund rates, currency, commodities, housing mortgage demand, prices, credit rating,  prepayment, defaults, systemic risks, recovery modeling, financial futures, credit derivatives, CRE, CDO, ABS, MABS assets class securitization pricing, credit and cash flow performance, hedging risks early warnings, integrating monetary policy impact on asset market prices risks into credit risk,  supporting financial, systems investment，macro-economic systemic risks , Basel II  credit, markets , operational risks control.
Huang directed Zhang to extend these OSA simulators to Nobel laureate  R. Engle’s Spline GARCH and co-integrate into Granger causes and casualty analysis. mortgage default and housing prices and ABS pooled asset credit and performances are related to deterministic exponential spline, combination of macro , monetary  economic and  time series dynamics . These unconditional mortgage default probability is estimated for US , China, UK national, regional housing prices bubbles, and mortgage default probability , credit crunch over recent housing boom and bust cycle
These analysis also supporting Huang’s 30 years OSA tracking the causes, onset, recovery, early warning of mortgage default credit crunch  in which mortgage default risks are caused by 40 year low mortgage rate resulted speculative purchase and financing created soaring housing prices bubbles and banking, finance stock prices bubble, the default rate soared as mortgage rate rebound from 5.7 % to 6.7 % , while housing prices peaking out，down 20 %  increased sub-prime home buyer prepayment and monthly interest payment cost.
Despite monetary policy is not direct cause of default due to central bank only focus on underestimated  core inflation and unemployment (exclude food, energy cost ), ignoring housing and equities, commodities prices bubbles.  Excessive rate, tax cuts lead to over spending in personal debt and business spending created  trillions dollar housing and stock s market wealth gain , excessive liquidity speculative bubble asset bubbles growth to big for any central bank monetary policy to handle., lead to final bubble burst.
  This model shown by Dr. Warren Huang last Sept on Wall Street Journal Market Beat and Real Estate Development blog that  Current US national, regional housing price slump will continue into this summer, drag economy into recession mounting job cuts, soaring inflation and foreclosure default, and plunging stock prices, despite Fed monetary easing, rate cuts  .  .
    These models improve current probabilistic, statistical CAPM  asset pricing and Monte Carlo default simulation, oversimplified macroeconomic,  mortgage bond spread, credit rating and hedge fund,  real estate asset prices in structural finance CRE, MABS, CDO applications , avoided trillion dollars loss due to betting on the wrong side of credit derivatives, speculation over the business, economic news resulted past , current mortgages loan default and  stock market crash.

4 millions global government, banking, finance, enterprises CEO, executives and academics visited Huang’s www.osawh.com website tracking  forecasts last 10 years daily results.  
 Keyword : Housing ,Equities bubbles, Operations Simulations Analysis, proactive structural CAPM  credit risk,  market risks, currency interest rates derivatives pricing, risks hedging, securitization Basel II  risk  
presented  to Global financial engineering risk management conference , Peking Univ. June 12, 2007, Beijing, China

presented to International Financial Engineering Risk Management Conference, June 12, 2007, Peking University China, with Noble prize 2003 Economic winner, 2003, give keynote speech on Spline GARCH applications and  to Asset Based Securitization Conference, Malaysia Central bank conference, Sept. 30, 2002 with Standard & Poors managing director give keynote speech

Dr. Warren Huang Wall Street Journal Real Time Economic Blog Dec. 29, 2007  

From my 30 years proactive, structural simulation forecast of global monetary economic, fiscal policy impact on global housing, equities, bond, commodities, gold prices:
1. Housing sales, and housing starts will continue follow housing price slump which holding up buy rate cuts supported stock market rally.We will not see the trough, the eventual tough of housing price slump and sales, start trough until stock market end its correction and crash with the housing markets prices next summer.
2. Gold price speculation only on economic fundamental, not on geopolitical events,soaring demand, plunging dollar pushed record oil commodity, gold prices, inflation not by any geopolitical crisis.
3. It is meaningless for checking stock index ending the last day of the year.Stock prices responded dynamics to the price mechanism ( fundamentals, macro-financial economy, sectors supply, demand)
not on any specific calender, regardless January or year end effect. Strong December can not guarantee strong Jan.. Housing slump will drag market into bear correction in 2008.
It is still premature for Soverign Fund (SWF) petrodollar to pick up the financial mess due to mortgage default.
These banking, finance, housing stocks write off have not seen the worst.Early summer of 2008 is much better timing.As Citi make its new low after ABU cash injection.
Morgan, Merril will find new low in the month ahead.
details can be found on www.osawh.com/fund2008.htm and www.osawh.com/SWF.htm

Comment by Warren Huang - December 29, 2007 at 12:03 pm

Dr. Warren Huang Wall Street Journal  Real Time Economic Blog Dec. 27, 2007 Housing price bubble burst cycle                                                
This Shiller home price index does not reflect the housing bubbles burst cause ,onset, recovery and early warning
It is lagging indicator. It did not shown 300- 400 % price gain in coastal cities in last few years bubbles.and San Francisco housing prices still up 7.2 % due to high end housing price gain by all time high stock market resulted wealth.My research tracking last 30 years global housing price bubble burst cycle, indicating, it take 3 years completed the burst cycle, with housing prices plunged 30 %-50 % for high end. 20-30 % for middle range.takes two year to recover.so housing price plunged started last year, will continue through next year as I predicted on this blog 3 month ago detail can be found on www.osawh.com/mortdefa.htm and www.osawh.com/fund2008.htm Comment by Warren Huang - December 27, 2007 at 1:45 pm

Comment by Warren Huang Wall Street Journal Market Beat Blog - November 30, 2007 at 8:24 pm According to my mortgage default model, default rate is closely related to mortgage rate, money supply, housing price, stock market price, Fed fund rate.
freeze the mortgage rate will work only if the house price and stock price both going up or freezed too.
Default rate will go up with housing and stock price definitely to plunge till next summer. Fed rate cuts and freeze will not be able to cut housing , stock price enough to reduce mortgage default for the sub-prime and jumbo loan. detail can be found on www.osawh.com/mortdefa.htm
Reservation, for Shanghai, Beijing, Hong Kong, Taipei, San Francisco  in-house workshops    wh3928@yahoo.com
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