US Sept. consumer confidence plunge to 38, ISM manufacturing purchaser index plunge to 38 and jobless rate to 6.5% and Dow Jones plunged 40  % third quarter GDP contract 0.3 %core inflation up 2.9 %, warned, predict by me Sept. 2007 on this blog that US  housing slump continue , will entering double dip inflationary recession 3Q 2008 despite rate cuts, stimulus, bail out plan and extends into deeper recession contracting by 2 % in $Q 2008 and 1Q 2009,  resulted by  full impact o business, consumer spending decline due to 6.5 % jobless and 20 % housing slump, 40 % stocks market loss
  The real causes of current mortgage, credit, financial crisis and recession are due to poor financial, monetary policy decision modeling in asset pricing and  risks valuation mechanism, MBS, CDO , the burst of super housing, commodities asset price bubbles caused by 7 year longest expansive excessive money supply, easy credit policy .
Global central banks, financial markets financial decision still rely on 30 year old probabilistic, statistical Capital Market Asset Pricing (CAPM) and macroeconomic modeling, ignoring asset price impact on inflation and financial, housing , MBS, CDO prices.
Predicted by Dr. Warren Huang, pioneer of Proactive Global Asset Pricing Mechanism , June 2007 , Beijing, Wall Street Journal Economic, Market Beat
 Blog Aug.2007   and March 5, 2008 Pudong, China Fund World 2008 to 200 global top investment banking, fund managers that Global Housing price bubble burst, prices plunge 30 % into 2009, drag  global economy into recession and stocks bond, oil,  commodities, metals ,Derivative Asset Prices Bubbles Burst with 50 % Price Correction Cause Credit, Financial Crisis and Economic Recession, ( As Dow Jones, SP 500, NASDAQ drag global stock indices plunged more than 50 % into 2002 recession low ,( Dow Jones  after current consolidate in 8000- 9000 will test 7000, NASDAQ test 1250, S&P test 700 low, oil price plunged 50 % from 147 to 60，Gas oil from1300 to 700 , corn  from 800 to 350, cotton from 80 to 44 as global economy  enter deep recession by year  end, XLF financial SPDR plunge 70 % as banking finance share drop 70- 90 %,despite US 700 billion  and ECB 2.3 trillion bail out to stabilize credit crisis

details on www.osawh.com/Fedcrisab.htm  www.osawh.com/mortdefa.htm www.osawh.com/commody.html www.osawh.com/centmaf.html
　

Proactive Structural Simulation of US and Asian  Sub-prime Mortgage Crisis,  Credit Crisis and Financial Crisis, Recession Impact on Housing, Equities, Commodity Price  Bubble  Burst and  Financial Sectors SPDR (XLF component stock performance) (  Daily Blogs and Workshops )

                                                         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,  
　

Predicted by Dr. Warren Huang, pioneer of Proactive Global Asset Pricing Mechanism , June 2007 , Beijing, Wall Street Journal Economic, Market Beat
 Blog Aug.2007 that Global Housing price bubble burst, prices plunge 30 % into 2009, drag  global economy into recession and stocks bond, oil,  commodities, metals ,Derivative Asset Prices Bubbles Burst with 50 % Price Correction Cause Credit, Financial Crisis and Economic Recession, ( As Dow Jones, SP 500, NASDAQ drag global stock indices plunged more than 50 % into 2002 recession low ,( Dow Jones  after current consolidate in 8000- 9000 will test 7000, NASDAQ test 1250, S&P test 700 low, oil price plunged 50 % from 147 to 60，Gas oil from1300 to 700 , corn  from 800 to 350, cotton from 80 to 44 ）as global economy  enter deep recession by year  end, despite US\700 billion \and ECB 2.3 trillion bail out to stabilize credit crisis

  Proactive Asset Prices Bubbles Burst impact on Global Mortgage, Credit, Financial Crisis, Economic RecessionMonetary Policy Impact on Global Banking finance, housing performance

 Continued SEC restriction on naked short of financial and Fed rescue extended to Jan 2009 indicating As I predicted on this blog that we are half way to housing, stock market correction, credit and financial crisis. banking, housing, financial; stocks correction continue into Jan 2009. Banking finance share give up all its recent gain,  Dow Plunged to 8900
Any rally out of speculation on economic, business, oil price news are bear market rally, and not sustainable, give up it gain and heading lower.
detail on www.osawh.com/Globaloiln.html  www.osawh.com/oilpetpri.htm  www.osawh.com/fund2008.htm  www.osawh.com/OSAmarkettoday.htm www.osawh.com/mortdefa.htm
Comment to  Wall Street Journal  REal Time Economics  Blog Aug 3,  2008  3:26AM 

May 2008 Schiller housing price index plunge 16 %, decline accelerate continue confirm our housing price slump model predicted on Wall Street Journal market beat, development blog  http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_072943.pdf                                                                                                                       

                                                                                                                               Abstract

This paper demonstrated  Huang’s 30 years pioneering proactive, structural equities, housing asset prices bubbles bursts spread into credit, financial crisis Operations Simulation Analysis (OSA), applications to US national and regional sub-prime and prime 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 housing ,asset bubble burst , credit default crisis, financial crisis..
These dynamic deterministic OSA　tracking global central banks monetary, economic, fiscal policy impact on macroeconomic inflation, GDP, daily Fed fund rates, mortgage interest rate, currency, commodities, housing mortgage demand, prices impact on  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, Asian (  China, India, Hong Kong, Taiwan, Malaysia, Thailand, Singapore, Vietnam ) 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  wealth gain bubble, the default rate soared as mortgage rate rebound from 5.7 % to 6.7 % ,and jobless rate soared from 4.4 % to 5.5 %  while housing prices peaking out，down 20 %  increased sub-prime home buyer prepayment and monthly interest payment cost and soaring jobless rate.
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 regional housing price slump will continue through 2008  till 2009 plunge 30- 50 %  Schiller 20 cities national  housing price index plunge 30 % ( down 16 % in May 2008)  drag economy into  2009 inflationary recession by mounting job cuts, soaring inflation and foreclosure default, and plunging stock prices bear market  30- 50 % correction , despite Fed monetary easing, rate cuts
Default rate soared to 10 % in  northern California  with 6.9 % jobless rate, while national default at  9 % with 6.5 % jobless rate..  .
    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. tracking, forecast month ahead global  monetary, policy, foreclosure impact on national and regional housing prices 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.
Plunge in housing, commodities , stock price investment drag investment cause trillion dollar loss mortgage companies Fannie Mae, Fredie Mac, Warmu, Wachiovia,
and MBS, CDO, CDS derivatives, hedging loss caused XLF component sock plunged 70- 90 %:
                      company        recent stock price
                       AXP             20- 28
                       AIG              1- 3
                       BAC             18-22
                       C                 9- 12
                       GS              70- 90
                       JPM             30- 40
                       MER            12- 18
                       MS               7- 18
                       USB              20-28
                       WFC             20- 32                                                                                   
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

 Dr. Warren Huang (黃華南博士) Pioneer, proactive structural dynamic global inflation, macro economy, daily financial markets interest rates, currency, stock, bond, derivatives, housing, commodities, oil asset pricing and risks valuation markets fundamentals price mechanism, accurately warned on Wall Street Journal Market beat Blog Sept.19, 2007 and Mar 5, 2008 masterclass  workshop China fund world 2008, Pudong, China  to Goldman Sach managing directors JPM, UBS and 150 China QDII/QFII fund managers that  US Fed aggressive rate cuts drag dollar to 1.53-1.65 EURO, 95- 108 Yen, economic stimulus boost consumer spending on gasoline and jet fuel summer, demand, driving gasoline , heating oil to 415, oil price to 121-145, commodity price double, will peak out as US dollar rebound follow Fed ending rate cuts cycle , can not stop sub-prime crisis spreading, regional  housing price slump 30-50 %  and credit crisis, crunch crisis continue through  2009 drag economy into 2009 double dip  inflationary recession resulted trillion housing and stock market loss and US, global stock indices bear market  50 % , Dow Jones test  7000- 8000  NASDAQ PLUNGE testing  1250- 1500 and high fliers (GOOG, PTR, AAPL) , IT, retail stocks facing  correction,    with banking, finance, housing share price plunge 70- 90   %, dollar making to new low 90 Yen,   commodity prices doubled,  and bubble burst plunge 50 % in recession widening bond , CDS spread and failure in MBS/CDO, Bear Stearn 30 billion dollar MBS hedge fund and government steps rescue Fannie Mae, Freddie Mac bail out,  despite Fed rate cuts , 700 billion bailout. He also warned top global 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, Banking housing, stock markets follow US housing price slump, recession, bear market correction, with Shanghai A testing  1800  through  early 2009  until economy softlanding
China is suffering from housing market overheating, with 300 % gain in housing prices still  up 3.5 % , FIXED investment , export growth and consumer spending still up 26 %, first 9 month GDP still up 9.9 %, CPI up 7 % despite  China peoples Bank 6  rate hikes, 16 bank deposit rat hike to 17.5 %. China need to further cut its M2 money supply growth  from 15 % to 12 % next year to achieve housing price cut of 30 %, CPI to 4 %, GDP to 8 % to achieve soft landing and start of bull market stock rally.