Sunday, December 30, 2007
ok, NOW, I'm scared!
Wall Street's Next Crisis
Dec 17 2007
Now that the subprime shakeout is nearly over, another real estate mess looms, this time in commercial property.
by Jesse Eisinger
So far, the current credit crisis has zeroed in on mortgages for the less affluent. But easy credit was a sprawling millipede whose wobbly legs reached into the farthest corners of the financial markets. This is the year the other 999 shoes start to drop.
Any loan to any borrower can begin to seem subprime if there's too little down and too much debt. And that, unfortunately, brings us to the commercial-real-estate market.For the past several years, the market for commercial property—offices, malls, apartment buildings, industrial plants, warehouses, and the like—has enjoyed the very best of times. Prices soared, and lenders lent readily. Owners had no problem meeting their payments. By early 2007, delinquencies had fallen to record lows.
In their own way, however, commercial-real-estate loans were no less foolish than those made to home buyers with speckled credit. And as with the subprime mess, the reckoning will come. Just like what happened in other sectors already hit by the credit crunch, these loans will cause problems that will probably find their way beyond the obvious players in the commercial-real-estate market. Judging by the aspects of the credit crisis we've already seen, commercial-real-estate trouble will probably emerge sooner than people expect—and will be worse than they anticipate. Portfolio
Analysis: as a Commercial Real Estate Appraiser here in lovely NYC I speak from first hand experience when I say that what people are paying for rinky dink apartment buildings in Brooklyn is just a little too much for my comfort, stomach and most of all common sense. It seems the same yayhoo's who thought that finishing a Carlton Sheets or Ron LeGrand workshop qualified them as "house flippers" also qualified them as real estate "entrepeneurs" and therefore they can "MAKE IT BIG!" in multi-family investing. The most quoted, and hence, the least favorite thing I like to hear is "Hey, but it sold for 10 times rents!" SO!?!? What are the rents? What are the taxes? Expenses? INSURANCE!?!?! Vacancy rates? Neighborhood trends? Oh and most importantly, DEBT SERVICE?
When your "posh" Bed-Stuy / Bushwick / 'Billy Burg "gonna be condo one day" shack starts losing tenants because of the more than likely recession because the rents were too high from the git go you're gonna have a hard time paying YOUR mortgage let alone the building's mortgage.
Hint: WAIT! Keep your powder dry. Walk the streets of those neighborhoods that you're thinking of investing in. Use your EYES. Honestly assess the stability and quality of the neighborhood(s) your looking at. No cars on blocks? GOOD! But crackheads around the corner? NOT GOOD! Take a lesson from Warren Buffet: invest in something that is unpopular, cheap, but WILL rebound and most of all wait. Don't be Donald Trump.
Tuesday, December 4, 2007
Ever drop a hammer on your foot? What about an engine block?
Home prices see biggest drop in 25 years
Housing values fall 1.3 percent nationwide in the third quarter, according to a Freddie Mac survey.
NEW YORK (CNNMoney.com) -- National home prices showed their biggest quarterly drop in 25 years during the third quarter of 2007, said a report Tuesday.
Freddie Mac's (Charts, Fortune 500) home price index fell 1.3 percent on an annualized basis in the quarter, according to its survey of home purchases and mortgage refinance appraisals.
"The number of home sales fell during the third quarter, and the inventory of existing single-family homes for sale rose to 10.5 months by October, the highest level since 1985," said Frank Nothaft, Freddie Mac's chief economist.
Housing values fall 1.3 percent nationwide in the third quarter, according to a Freddie Mac survey.
NEW YORK (CNNMoney.com) -- National home prices showed their biggest quarterly drop in 25 years during the third quarter of 2007, said a report Tuesday.
Freddie Mac's (Charts, Fortune 500) home price index fell 1.3 percent on an annualized basis in the quarter, according to its survey of home purchases and mortgage refinance appraisals.
"The number of home sales fell during the third quarter, and the inventory of existing single-family homes for sale rose to 10.5 months by October, the highest level since 1985," said Frank Nothaft, Freddie Mac's chief economist.
It ain't over 'til the fat lady sings and dances and her pictures get plastered all over the Internet
Fannie Mae could face more losses
A look at the bonds it holds, and the extent to which Fannie has marked them down so far, indicates that it may see as much as $5 billion more in write downs. Peter Eavis reports.
(Fortune) -- Could Fannie Mae be the next large financial company to announce billions of dollars of market losses on bonds backed by distressed mortgages?
The vast majority of Fannie Mae's mortgages are loans to borrowers with good credit, but over the past five years the government sponsored enterprise became exposed to mortgages that were made to people with poor credit -- subprime mortgages -- and to mortgages that were made with incomplete documentation of borrowers' income, called Alt-A mortgages in industry parlance.
One way that Fannie increased its exposure to subprime and Alt-A mortgages was to buy bonds backed with these types of loans. While these subprime and Alt-A mortgage-backed bonds are only a small proportion of Fannie's overall mortgage holdings, their combined value of $76 billion is almost double Fannie's $40 billion of capital, which is the net worth of a company and the last cushion against losses.
Losses are climbing on these loans as borrowers default, which has caused the market value of bonds backed with such loans to fall sharply. Investors are bidding down the value of mortgage bonds in anticipation that defaults will prevent many of the bondholders from being paid back in full.
CNNMoney
Let My People Go!
Break Free From Brokerages
Punk Ziegel & Co.
IN THE PAST FEW WEEKS THE RATINGS on three brokerage companies were raised from Sell to Market Perform. Two of them have fallen in price since that time, one rose.
I now believe that the upgrades were premature and I am adjusting the ratings back to Sells on all three stocks [Bear Stearns, Goldman Sachs and Lehman Brothers]. I am also adjusting the earnings estimates for each of the brokers.
[Merrill Lynch and Morgan Stanley are also rated at Sell]
My position from this point forward is to aggressively buy the bank stocks and sell the brokers.
BARRONS (yeah, I know it's a subscriber service, but believe me, it's worth it weight in gold).
Punk Ziegel & Co.
IN THE PAST FEW WEEKS THE RATINGS on three brokerage companies were raised from Sell to Market Perform. Two of them have fallen in price since that time, one rose.
I now believe that the upgrades were premature and I am adjusting the ratings back to Sells on all three stocks [Bear Stearns, Goldman Sachs and Lehman Brothers]. I am also adjusting the earnings estimates for each of the brokers.
[Merrill Lynch and Morgan Stanley are also rated at Sell]
My position from this point forward is to aggressively buy the bank stocks and sell the brokers.
BARRONS (yeah, I know it's a subscriber service, but believe me, it's worth it weight in gold).
And no, I don't know if she's gellin', like Magellan, but her last name is Yellen
Fed's Yellen: Economy's Downside Risk Getting Worse
Federal Reserve Bank of San Francisco President Janet Yellen said on Monday that worsening financial conditions and weaker-than-expected economic data have raised downside risks to the economic outlook.
"Since the October FOMC meeting, financial conditions have deteriorated, and we have seen some unexpected softening in the economic data," she said in a speech to business leaders in Seattle on the U.S. outlook and monetary policy.
"These developments necessitate some rethinking of my growth forecast, and have highlighted the downside skew in the risks to that forecast."
On inflation, Yellen said consumer prices were expected to rise broadly in line with price stability, although there were some "notable upside risks" such as higher labor costs, a weaker dollar and rising energy prices.
She added that more economic data to be released ahead of the Fed's rate-setting committee's meeting on Dec. 11 would have to be incorporated into the outlook.
CNBC
If it walks like a duck, quacks like a duck and flies like a hippo...
Hedge-Fund Nov. Losses Near Dot-Com Crash Levels
Hedge-fund investors suffered their worst month of investment performance since the bursting of the dot-com bubble, with intense volatility in global markets tipping every strategy into a loss, London newspaper the Times reported, citing preliminary figures from Hedge Fund Research (HFR).
The Global Hedge Fund Index worth $1.33 trillion lost 2.6 percent in the first 29 days of November, the Times said, despite many strategists predicting strong full-year profit for the sector.
The decline was last surpassed in April 2000, when HFR's Global Fund index down 3.9 percent after the value of Internet companies plunged. August's credit-market crunch caused a 2.55 percent drop in the index, the Times said.
Stock-market strategies were the hardest hit, with HFR's Equity Hedge index slumping more than 4 percent in November, while "event-driven" and convertible arbitrage strategies all generated losses, according to the London paper.
CNBC
Hedge-fund investors suffered their worst month of investment performance since the bursting of the dot-com bubble, with intense volatility in global markets tipping every strategy into a loss, London newspaper the Times reported, citing preliminary figures from Hedge Fund Research (HFR).
The Global Hedge Fund Index worth $1.33 trillion lost 2.6 percent in the first 29 days of November, the Times said, despite many strategists predicting strong full-year profit for the sector.
The decline was last surpassed in April 2000, when HFR's Global Fund index down 3.9 percent after the value of Internet companies plunged. August's credit-market crunch caused a 2.55 percent drop in the index, the Times said.
Stock-market strategies were the hardest hit, with HFR's Equity Hedge index slumping more than 4 percent in November, while "event-driven" and convertible arbitrage strategies all generated losses, according to the London paper.
CNBC
He was born at night, just not last night...
Deutsche Bank Chief Turns Down Chance at Citigroup
Dec. 4 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann turned down an opportunity to pursue the top job at Citigroup Inc., the biggest U.S. bank, according to a person with knowledge of the matter.
The New York-based bank contacted Ackermann by telephone about two weeks ago to ask the Swiss-born manager if he'd be interested in becoming CEO, said the person, who declined to be identified because the talks were private. Ackermann will stay at Frankfurt-based Deutsche Bank, the person said.
Citigroup is seeking a replacement for Charles O. ``Chuck'' Prince III, who stepped down last month after the bank reported its first loss in 17 years. Ackermann, in five years at Deutsche Bank, raised profit 14-fold by expanding the securities unit, cutting more than 14,000 jobs and selling assets.
BLOOMBERG
Dec. 4 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann turned down an opportunity to pursue the top job at Citigroup Inc., the biggest U.S. bank, according to a person with knowledge of the matter.
The New York-based bank contacted Ackermann by telephone about two weeks ago to ask the Swiss-born manager if he'd be interested in becoming CEO, said the person, who declined to be identified because the talks were private. Ackermann will stay at Frankfurt-based Deutsche Bank, the person said.
Citigroup is seeking a replacement for Charles O. ``Chuck'' Prince III, who stepped down last month after the bank reported its first loss in 17 years. Ackermann, in five years at Deutsche Bank, raised profit 14-fold by expanding the securities unit, cutting more than 14,000 jobs and selling assets.
BLOOMBERG
WWWWWWEEEEEEEE!!!!!!!!!!!!
CDO Sales May Tumble 65% in 2008 on Subprime Slide
By Jody Shenn
Dec. 4 (Bloomberg) -- Issuance of collateralized debt obligations will tumble 65 percent next year, with ``little or no'' sales of CDOs made up of structured-finance securities such as subprime-mortgage bonds, JPMorgan Chase & Co. says.
About $163 billion of new CDOs will be sold, down from an estimated $469 billion this year, according to a report yesterday from New York-based JPMorgan analysts led by Christopher Flanagan. The decline will occur with ``the very concept of securitization under pressure,'' the analysts wrote.
Securitization, or the packaging of assets into securities, has slowed amid losses on home-loan debt. Many mortgage-linked securities originally carried investment-grade ratings, only to be downgraded at an unprecedented pace following record homeowner foreclosures. CDOs are created by packaging pools of assets into new securities with varying risks. None were sold in the U.S. last week, according to JPMorgan data.
Losses for banks and brokerages from the credit-market seizure have totaled $66 billion, as companies including Merrill Lynch & Co. and Citigroup Inc., both of New York, took writedowns largely related to CDOs. Default rates on subprime loans, made to borrowers with poor credit, have reached records.
BLOOMBERG
By Jody Shenn
Dec. 4 (Bloomberg) -- Issuance of collateralized debt obligations will tumble 65 percent next year, with ``little or no'' sales of CDOs made up of structured-finance securities such as subprime-mortgage bonds, JPMorgan Chase & Co. says.
About $163 billion of new CDOs will be sold, down from an estimated $469 billion this year, according to a report yesterday from New York-based JPMorgan analysts led by Christopher Flanagan. The decline will occur with ``the very concept of securitization under pressure,'' the analysts wrote.
Securitization, or the packaging of assets into securities, has slowed amid losses on home-loan debt. Many mortgage-linked securities originally carried investment-grade ratings, only to be downgraded at an unprecedented pace following record homeowner foreclosures. CDOs are created by packaging pools of assets into new securities with varying risks. None were sold in the U.S. last week, according to JPMorgan data.
Losses for banks and brokerages from the credit-market seizure have totaled $66 billion, as companies including Merrill Lynch & Co. and Citigroup Inc., both of New York, took writedowns largely related to CDOs. Default rates on subprime loans, made to borrowers with poor credit, have reached records.
BLOOMBERG
At least it will help with his handicap
Henry Paulson’s Mortgage Mulligan
The Bush administration, federal regulators, and major investment banks are “aggressively pursuing,” in the words of treasury secretary Henry Paulson, a plan to save some mortgage borrowers and their lenders from the consequences of their bad decisions. The deal is called “Hope Now.” It should be subtitled: “Worry Later.”
Part of the pact likely will call for mortgage lenders and their agents—including teetering mortgage giant Countrywide Financial and tottering financial-services giant Citigroup—to change the terms of, potentially, more than $100 billion worth of mortgages that they approved for home buyers over the past few years. In those cases, borrowers, often those who couldn’t afford high monthly mortgage payments or who didn’t have much money for down payments, took on mortgages that carried initial “teaser” interest rates. That is, instead of signing mortgages that required the same monthly payment for 30 years, the borrowers agreed to pay a super-low rate for one or two years, and then to pay a much higher one for the remaining 28 or 29 years. Investment banks then packaged and sold huge bundles of these mortgages to outside bond investors, providing the original lenders with more money to make more such loans.
For these deals to work after the teaser rates expired, the housing market could never falter, because few borrowers could afford the new, higher rates that they would have to pay in a few years. Both the borrowers and the lenders understood this risk, or should have, but they ignored it. They assumed that when the teaser rate came close to expiration, the borrower could simply refinance his loan, taking out a new mortgage with a similar teaser rate—which would buy more time for the borrower and also provide new fees to mortgage lenders and brokers. This scenario collapsed when the housing market started to decline, because a borrower can’t refinance a mortgage loan if his home is worth less than the amount of money he already owes.
CITY JOURNAL
The Bush administration, federal regulators, and major investment banks are “aggressively pursuing,” in the words of treasury secretary Henry Paulson, a plan to save some mortgage borrowers and their lenders from the consequences of their bad decisions. The deal is called “Hope Now.” It should be subtitled: “Worry Later.”
Part of the pact likely will call for mortgage lenders and their agents—including teetering mortgage giant Countrywide Financial and tottering financial-services giant Citigroup—to change the terms of, potentially, more than $100 billion worth of mortgages that they approved for home buyers over the past few years. In those cases, borrowers, often those who couldn’t afford high monthly mortgage payments or who didn’t have much money for down payments, took on mortgages that carried initial “teaser” interest rates. That is, instead of signing mortgages that required the same monthly payment for 30 years, the borrowers agreed to pay a super-low rate for one or two years, and then to pay a much higher one for the remaining 28 or 29 years. Investment banks then packaged and sold huge bundles of these mortgages to outside bond investors, providing the original lenders with more money to make more such loans.
For these deals to work after the teaser rates expired, the housing market could never falter, because few borrowers could afford the new, higher rates that they would have to pay in a few years. Both the borrowers and the lenders understood this risk, or should have, but they ignored it. They assumed that when the teaser rate came close to expiration, the borrower could simply refinance his loan, taking out a new mortgage with a similar teaser rate—which would buy more time for the borrower and also provide new fees to mortgage lenders and brokers. This scenario collapsed when the housing market started to decline, because a borrower can’t refinance a mortgage loan if his home is worth less than the amount of money he already owes.
CITY JOURNAL
Monday, November 12, 2007
Beginning O' The Week Heads-Up
Throw me a lifesaver, and not the Marx Brothers kinds. CNBC
Swing and a miss!!! WSJ
Fear, Greed and Speculation: what really runs the markets. BARRONS
You could also get a job at McDonald's. Their stock is worth more. CNBC
There's pain, there's big pain, and then there's just plain old imminent financial immolation.
Swing and a miss!!! WSJ
Fear, Greed and Speculation: what really runs the markets. BARRONS
You could also get a job at McDonald's. Their stock is worth more. CNBC
There's pain, there's big pain, and then there's just plain old imminent financial immolation.
But, on a positive note: Sinking Dollar, Rising Portfolio.
Thursday, November 8, 2007
Word Plays on Words
from the WSJ
SIV Rescue Plan Faces New Pressure
By Carrick Mollenkamp and David Reilly
A rescue plan for investment funds that are one source of credit-market concern is under new pressure after Moody's Investors Service said the funds were liquidating assets to meet financial commitments.
The rescue plan, led by Citigroup Inc., Bank of America Corp. and J.P. Morgan Chase & Co., is aimed at providing cash to the funds, known as structured investment vehicles, or SIVs. The plan is aimed at avoiding a forced fire sale of the SIVs assets...
Citigroup for the first time disclosed details about the SIVs it sponsor in third-quarter financial statements filed earlier this week with the SEC. The bank said that as of Sept. 30, the SIVs it was affiliated with had $83 billion in assets, following the sale of $19 billion in assets since July.
The three SIVs whose capital notes were placed on negative credit by Moody's are the largest of the seven SIVs Citigroup, and they have a combined $50 billion in assets. Of the seven SIVS, 7%, or nearly $6 billion, of assets are invested in U.S. mortgage-backed securities. However, the bank added that, "the SIVs have no direct exposure to U.S. subprime assets and have approximately $70 million of indirect exposure" through investments in collateralized debt obligations.
Translation: having no "indirect exposure" to U.S. subprime assets means, yeah, we're gonna get the flu, but hey, at least we won't die of frostbite!"
The more reports I read on this issue, the more I notice a pattern: little by little, the debt grows, the trouble worsens and more companies report losses (oh, and the more people get fired, too).
The CDO/SIV/LBO "action" of 2006-2007 is going to result in the "bust" of 2008. 2009. 2010...
No, it won't be as bad as the Dot Com BOMB of 2001, but it will be close. Recession, yeah, the severity of which is yet to be seen. All of the (undisciplined) money that chased the dot com's, chased the oil and now the real estate market are going to meet their maker. The flight-to-quality buying Wednesday (gold, treasurys, etc.) is yet another sign that the smart money sees the storm and are taking shelter in brick houses rather than straw, i.e., stocks.
If you're an investor, whether it be stocks or real esate, here's what you should do: wait. PLEASE! Keep your powder dry. Just as a rising tide lifts all boats, so does an ebbing tide lower all boats. Not only should you be watching stocks, you should be watching sectors. You think "Tech" is gonna survive the coming storm? Doubtful. Remember, we now have a global economy (ugh, how I hate those words). What affects us, affects Europe, what affects Europe, affects Asia...and they bought a lot of our junk. Unfortunately we live in a consumer driven economy, and if people start losing their homes, losing their "ATM", how are they going to spend? And what do all the overseas manufacturers do with all of their inventory? Give it away like Crazy Eddie? The same with the banks. What do they do with all of those REO properties? Sell 'em for pennies on the dollar, in some cases.
I'm rambling, I'm tired, my eyes are bleedin' and I have an interview tomorrow. Cover me, I'm goin' in. Adieu.
SIV Rescue Plan Faces New Pressure
By Carrick Mollenkamp and David Reilly
A rescue plan for investment funds that are one source of credit-market concern is under new pressure after Moody's Investors Service said the funds were liquidating assets to meet financial commitments.
The rescue plan, led by Citigroup Inc., Bank of America Corp. and J.P. Morgan Chase & Co., is aimed at providing cash to the funds, known as structured investment vehicles, or SIVs. The plan is aimed at avoiding a forced fire sale of the SIVs assets...
Citigroup for the first time disclosed details about the SIVs it sponsor in third-quarter financial statements filed earlier this week with the SEC. The bank said that as of Sept. 30, the SIVs it was affiliated with had $83 billion in assets, following the sale of $19 billion in assets since July.
The three SIVs whose capital notes were placed on negative credit by Moody's are the largest of the seven SIVs Citigroup, and they have a combined $50 billion in assets. Of the seven SIVS, 7%, or nearly $6 billion, of assets are invested in U.S. mortgage-backed securities. However, the bank added that, "the SIVs have no direct exposure to U.S. subprime assets and have approximately $70 million of indirect exposure" through investments in collateralized debt obligations.
Translation: having no "indirect exposure" to U.S. subprime assets means, yeah, we're gonna get the flu, but hey, at least we won't die of frostbite!"
The more reports I read on this issue, the more I notice a pattern: little by little, the debt grows, the trouble worsens and more companies report losses (oh, and the more people get fired, too).
The CDO/SIV/LBO "action" of 2006-2007 is going to result in the "bust" of 2008. 2009. 2010...
No, it won't be as bad as the Dot Com BOMB of 2001, but it will be close. Recession, yeah, the severity of which is yet to be seen. All of the (undisciplined) money that chased the dot com's, chased the oil and now the real estate market are going to meet their maker. The flight-to-quality buying Wednesday (gold, treasurys, etc.) is yet another sign that the smart money sees the storm and are taking shelter in brick houses rather than straw, i.e., stocks.
If you're an investor, whether it be stocks or real esate, here's what you should do: wait. PLEASE! Keep your powder dry. Just as a rising tide lifts all boats, so does an ebbing tide lower all boats. Not only should you be watching stocks, you should be watching sectors. You think "Tech" is gonna survive the coming storm? Doubtful. Remember, we now have a global economy (ugh, how I hate those words). What affects us, affects Europe, what affects Europe, affects Asia...and they bought a lot of our junk. Unfortunately we live in a consumer driven economy, and if people start losing their homes, losing their "ATM", how are they going to spend? And what do all the overseas manufacturers do with all of their inventory? Give it away like Crazy Eddie? The same with the banks. What do they do with all of those REO properties? Sell 'em for pennies on the dollar, in some cases.
And that's when you buy. If you've got any debt, knock it out. Free up your cash. That way, when you go and apply for a loan, all you'll have to supply is the money and not your DNA and / or your soul
Remember the phrase "Buy low, sell high"? Well consider Warren Buffet's advice: There are two rules to investing, #1: Don't lose money, #2: Don't forget rule #1. Both of these rules apply.
But more importantly, don't curse the darkness, light a candle. Or as I like to say, don't raise the bridge, lower the river...I'm rambling, I'm tired, my eyes are bleedin' and I have an interview tomorrow. Cover me, I'm goin' in. Adieu.
Tuesday, November 6, 2007
Stop me if you've heard this before...
Credit Card Debt a $915 Billion Disaster-in-Waiting for Banks
Tuesday, November 6, 2007 8:14 PMBy: Newsmax Staff
Think the estimated subprime debt load carried by the big international banks is big, at $1 trillion?
How about this: Americans now owe nearly as much – a record $915 billion – on their credit cards alone.
And defaults and delinquencies in the credit card sector are piling up – which means big banks are on the hook, again. More sand in the gears for the global economy.
Credit card companies wrote off 4.58 percent in payments between January and May, almost a third more than in the same period in 2006, according to Moody's Investors Service. As a result, lenders such as Citigroup, Bank of America, and American Express, among others already reeling from the subprime mortgage disaster, are being further weakened.
I haven't had a credit card since September '06. I feel happier than a test subject in proctology school.
from NEWSMAX
That's TRILLION with a "T"...
Markets fear banks have $1 trillion in toxic debt
By Sean O’Grady, Economics Editor
Published: 06 November 2007
A new phase in the credit crunch, one of “$1 trillion losses” seems to be dawning. The crisis at Citigroup and renewed doubts about some of the world’s leading banks disquieted stock markets on both sides of the Atlantic yesterday, with the fractious mood set to continue.
The FTSE 100 fell 69.2 to 6,461.4, with Alliance & Leicester (down 4 per cent) and Barclays (off 3 per cent, to a two-year low) singled out for punishment. In New York, Citigroup, down 4.9 per cent to multi-year lows, weighed on the Dow Jones index, which fell 51.7, or 0.4 per cent, to 13,543.4. Merrill Lynch, Goldman Sachs and Lehman Brothers also dropped on speculation they face more writedowns on top of the $40bn (£19bn) announced in the past four months.
Bill Gross, the chief investment officer of Pacific Investment Management, said US mortgage delinquencies and defaults would rise in 2008. “There are $1 trillion worth of sub-primes, Alt-As [self-certified] and basically garbage loans,” he said, adding that he expects some $250bn in defaults. “We’ve only begun to see the pain from rising mortgage payments,” he added. Brian Gendreau, an investment strategist at ING, commented: “Financials are 20 per cent of the S&P 500 and if that sector doesn’t do well all bets are off. People just don’t know what’s on the balance sheets.” Translation: now's a good time to get some MRE's, find a cabin...and pray.
from The Independent
Surely, you jest!? No, and stopping calling me Shirley.
playing games with shells
Deals With Hedge Funds May Be Helping Merrill Delay Mortgage Losses
By SUSAN PULLIAM
November 2, 2007 12:28 p.m.
Merrill Lynch & Co., in a bid to slash its exposure to risky mortgage-backed securities, has engaged in deals with hedge funds that may have been designed to delay the day of reckoning on losses, people close to the situation said.
The transactions are among the issues likely to be examined by the Securities and Exchange Commission. The SEC is looking into how the Wall Street firm has been valuing, or "marking," its mortgage securities and how it has disclosed its positions to investors, a person familiar with the probe said. Regulators are scrutinizing whether Merrill knew its mortgage-related problem was bigger than what it indicated to investors throughout the summer.
from the WSJ
Deals With Hedge Funds May Be Helping Merrill Delay Mortgage Losses
By SUSAN PULLIAM
November 2, 2007 12:28 p.m.
Merrill Lynch & Co., in a bid to slash its exposure to risky mortgage-backed securities, has engaged in deals with hedge funds that may have been designed to delay the day of reckoning on losses, people close to the situation said.
The transactions are among the issues likely to be examined by the Securities and Exchange Commission. The SEC is looking into how the Wall Street firm has been valuing, or "marking," its mortgage securities and how it has disclosed its positions to investors, a person familiar with the probe said. Regulators are scrutinizing whether Merrill knew its mortgage-related problem was bigger than what it indicated to investors throughout the summer.
from the WSJ
Why? Did they make bad loans too?
Senate Panel Probes 6 Top Televangelists
CBS News has learned Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee, is investigating six prominent televangelist ministries for possible financial misconduct. Letters were sent Monday to the ministries demanding that financial statements and records be turned over to the committee by December 6th.
According to Grassley's office, the Iowa Republican is trying to determine whether or not these ministries are improperly using their tax-exempt status as churches to shield lavish lifestyles.
Yet ANOTHER way for people to excuse their lack of faith of in God. Thanks for the black eye, you bloodsuckers. BTW, how are those planes Mr. Hinn? Mr. Copeland?
from CBSNews
"Boy, when you die at the Palace, you really die at the Palace!"*
*Mel Brooks, "History of the World, Pt. 1"
They get you coming, and they get you going.
Dubious Fees Hit Borrowers in Foreclosures
As record numbers of homeowners default on their mortgages, questionable practices among lenders are coming to light in bankruptcy courts, leading some legal specialists to contend that companies instigating foreclosures may be taking advantage of imperiled borrowers.
Because there is little oversight of foreclosure practices and the fees that are charged, bankruptcy specialists fear that some consumers may be losing their homes unnecessarily or that mortgage servicers, who collect loan payments, are profiting from foreclosures.
Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.
Now you know why there's a Hell folks, and I'm not joking.
from the NYTimes
They get you coming, and they get you going.
Dubious Fees Hit Borrowers in Foreclosures
As record numbers of homeowners default on their mortgages, questionable practices among lenders are coming to light in bankruptcy courts, leading some legal specialists to contend that companies instigating foreclosures may be taking advantage of imperiled borrowers.
Because there is little oversight of foreclosure practices and the fees that are charged, bankruptcy specialists fear that some consumers may be losing their homes unnecessarily or that mortgage servicers, who collect loan payments, are profiting from foreclosures.
Bankruptcy specialists say lenders and loan servicers often do not comply with even the most basic legal requirements, like correctly computing the amount a borrower owes on a foreclosed loan or providing proof of holding the mortgage note in question.
Now you know why there's a Hell folks, and I'm not joking.
from the NYTimes
Sunday, November 4, 2007
Fear, Greed and Speculation: What really runs the market.
from the Wall Street Journal, with laser like analysis from yours truly...
Fresh Credit Worries Grip Markets
“"The situation is now more negative than in the summer," said Pete Nolan, a portfolio manager at Smith Breeden Associates in Chapel Hill, N.C. He said that "in many cases, the fundamentals are catching up" with investors' worst fears. The worry is that a huge financial edifice that is built on top of the now-shaky mortgage market could weaken, potentially causing lenders to tighten up on loans and slowing the economy. Translation: people (Wall St.) are now beginning to see how bad it really is...and they are scared.
In a recent report, analysts from J.P. Morgan Chase & Co. said they expect bank credit losses on mortgages and complex debt securities to continue well into 2008 as housing prices weaken further. As bank losses continue, we expect bank lending capacity to be reduced," they said, adding that banks will have to ration credit and are likely to favor lending to corporations over consumers…. Translation: Well into 2008? Try 2010! or '11! And bank "lending capacity"? Nil. Rationing credit simply means you'll be putting down 20% AND donating DNA
Besides the problems with banks and brokers, there was evidence of more problems in the mortgage market. Mortgage-servicing companies, which collect payments from borrowers, said delinquency and prepayment data were worse than expected. Translation: Cue the music! "...more problems in the mortgage markets" means IT'S BAD!! Delinquency and prepayment is worse than expected now, wait until 2008 when all those 2/5 ARM's break!
"Mortgages are still deteriorating at an accelerating pace, and that's scary," said Karen Weaver, global head of securitization research at Deutsche Bank AG. "We haven't come near a stabilization, and we expect things to get worse as the bulk of resets" of interest rates on adjustable-rate mortgages "have yet to come." The first line says it all.
The percentage of subprime mortgages -- those to home buyers with weak credit -- that were more than 60 days behind in payments topped 20% in August, up from 18.7% in July and 17.1% in June, according to the latest data from First American LoanPerformance. Like Ted Bundy once said, "add a zero" to that August number. No, he didn't say that, but you know what I mean.
Mark Zandi, an economist at Moody's Economy.com, estimates that of the $2.45 trillion in especially risky mortgages currently outstanding -- including subprimes, interest-only loans, mortgages that exceed Fannie Mae lending limits and others -- as much as a quarter could suffer defaults in the months ahead. Total losses on these mortgages, he estimates, could reach $225 billion. That would hit bondholders hard, since the value of mortgage securities is driven by the performance of underlying mortgages. And it could make such bonds harder to sell in the future. Watch that $2.45 trillion and $225 billion go up in December. Watch!
Many expect the value of homes to continue to slip as well. Mr. Zandi puts the drop at 10%, from the market's peak in the fourth quarter of 2005 to its projected bottom in the fourth quarter of 2008. Such a decline would wipe out more than $2 trillion in home values. That's less than the $7 trillion in stock wealth wiped out by the tech bust that began in 2000, but still would represent a significant hit to the economy. I pray to GOD that I'm wrong, but me thinks we might get very, very close to $7 trillion. I think alot of investors, punch drunk and stupid from the Dot Com bust, needed to make up some losses and hedged on the housing market to "right their ship". When the hits just kept on coming, they let the record play, scratches be damned.
Because mortgages are bundled into securities sold to investors all over the world, the deterioration in mortgages' value is having a wide effect. Many of the more complex securities, known as collateralized debt obligations, or CDOs, are held by banks and brokerage firms.
They've been the cause of many of the big losses at those institutions. No, firing four of your top risk analysts and piling on the risk is the cause!!!
In CDOs, risk is portioned out to different groups of investors. Those willing to take the biggest risks buy securities with the highest potential returns, while investors who want more safety give up some return to get it. Already, the riskier "tranches" of CDOs have sunk dramatically in value. An index that tracks risky subprime bonds has fallen to a record low of 17.4 cents on the dollar, down 50% from August, according to Markit Group. In other words, a billion is now only worth 174 million. I don't even think the short traders get that kind scratch on a good day.
That decline, while worrisome, hit investors willing to take risk. But the recent turmoil stems from declines in the market for the safest securities. Rated triple-A, they should be affected by mortgage defaults only in extreme circumstances. An index that tracks triple-A securities is trading at 79 cents on the dollar, down from roughly 95 cents just a month ago. Good Lord, even the rich are suffering! Help us!
At the top are "super-senior tranches." It is a decline in value of these supposedly safe securities that is hurting many banks and brokerage firms. Because banks must value many of their securities holdings at the price at which they could be sold -- called marking to market -- many banks have had to report losses. As an appraiser, when I hear the words "could be sold" I automatically think "probably won't be sold" because sellers always list their "wares" higher in order to negotiating or "wiggle" room. So if these..."things" are marked at let's say 500 million, take off five-ten percent for negotiating, that leaves you with a value of roughly of 450-475 million bucks. In today's market. What will that be like in let's 1Q08?
In October alone, Moody's Investors Service, Fitch Ratings and Standard & Poor's downgraded or put on watch for downgrade more than $100 billion in CDOs and the mortgage securities they contain. In a glimpse of how much banks have at stake, UBS holds more than $20 billion of super-senior tranches of CDOs. They're among the reasons UBS, which reported a third-quarter loss of 830 million Swiss francs ($712.8 million), has warned that its investment bank is likely to face further losses in the current quarter.
"There was some widespread miscalculation when it came to estimating the credit risk and market risk of the super-senior tranches," notes Ralph Daloiso, managing director of structured finance at Natixis, a French banking group.
Specialized funds known as structured investment vehicles, affiliated with banks and independent managers, invested in the top-rated tranches of CDOs. Banks set up the funds as a way to derive income from securities held off their balance sheets. The SIVs borrowed money from outside investors by issuing short-term and medium-term notes, then used the money to pay for the securities. Now, though, investors' reluctance to lend to SIVs has raised concerns that the funds -- which hold some $300 billion in assets -- could be forced to sell en masse.
The SIVs are the focus of an effort by major banks to raise a rescue fund that could reach up to $100 billion. The intent is to calm markets by buying good, highly rated securities from the SIVs. But the fund is still weeks away from coming into operation. And the deterioration of even the most highly rated securities will make it increasingly difficult to differentiate between good and bad investments.
The large Wall Street firms weren't alone in believing triple-A-rated debt securities were safe. In the last few years, bond insurers such as MBIA Inc. and Ambac Financial Group Inc., as well as financial guaranty units of American International Group Inc., PMI Group Inc. and ACA Capital Holdings, aggressively wrote insurance on super-senior tranches of CDOs that were backed mainly by subprime mortgages. These companies effectively agreed to bear the risk of losses on these securities.
Shares of Ambac and PMI yesterday fell 19.7% and 11%, respectively, and along with MBIA hit new 52-week lows, on growing investor worry that they may need to hold more capital against the risk they are insuring and could be hit with sizable claims down the road.
Over the past two weeks, some of the insurers posted significant net losses for the third quarter because of adjustments on credit derivatives they used to provide insurance on the bonds. The bond insurers have said, however, that they don't expect actual losses from the CDO tranches they have insured.
Anywayz, you get the gist. If you want my advice, save your money. Buying oppurtunities will abound, whether in stocks or housing in 2009. That is of course if Armageddon doesn't pop.
WSJ
Fresh Credit Worries Grip Markets
“"The situation is now more negative than in the summer," said Pete Nolan, a portfolio manager at Smith Breeden Associates in Chapel Hill, N.C. He said that "in many cases, the fundamentals are catching up" with investors' worst fears. The worry is that a huge financial edifice that is built on top of the now-shaky mortgage market could weaken, potentially causing lenders to tighten up on loans and slowing the economy. Translation: people (Wall St.) are now beginning to see how bad it really is...and they are scared.
In a recent report, analysts from J.P. Morgan Chase & Co. said they expect bank credit losses on mortgages and complex debt securities to continue well into 2008 as housing prices weaken further. As bank losses continue, we expect bank lending capacity to be reduced," they said, adding that banks will have to ration credit and are likely to favor lending to corporations over consumers…. Translation: Well into 2008? Try 2010! or '11! And bank "lending capacity"? Nil. Rationing credit simply means you'll be putting down 20% AND donating DNA
Besides the problems with banks and brokers, there was evidence of more problems in the mortgage market. Mortgage-servicing companies, which collect payments from borrowers, said delinquency and prepayment data were worse than expected. Translation: Cue the music! "...more problems in the mortgage markets" means IT'S BAD!! Delinquency and prepayment is worse than expected now, wait until 2008 when all those 2/5 ARM's break!
"Mortgages are still deteriorating at an accelerating pace, and that's scary," said Karen Weaver, global head of securitization research at Deutsche Bank AG. "We haven't come near a stabilization, and we expect things to get worse as the bulk of resets" of interest rates on adjustable-rate mortgages "have yet to come." The first line says it all.
The percentage of subprime mortgages -- those to home buyers with weak credit -- that were more than 60 days behind in payments topped 20% in August, up from 18.7% in July and 17.1% in June, according to the latest data from First American LoanPerformance. Like Ted Bundy once said, "add a zero" to that August number. No, he didn't say that, but you know what I mean.
Mark Zandi, an economist at Moody's Economy.com, estimates that of the $2.45 trillion in especially risky mortgages currently outstanding -- including subprimes, interest-only loans, mortgages that exceed Fannie Mae lending limits and others -- as much as a quarter could suffer defaults in the months ahead. Total losses on these mortgages, he estimates, could reach $225 billion. That would hit bondholders hard, since the value of mortgage securities is driven by the performance of underlying mortgages. And it could make such bonds harder to sell in the future. Watch that $2.45 trillion and $225 billion go up in December. Watch!
Many expect the value of homes to continue to slip as well. Mr. Zandi puts the drop at 10%, from the market's peak in the fourth quarter of 2005 to its projected bottom in the fourth quarter of 2008. Such a decline would wipe out more than $2 trillion in home values. That's less than the $7 trillion in stock wealth wiped out by the tech bust that began in 2000, but still would represent a significant hit to the economy. I pray to GOD that I'm wrong, but me thinks we might get very, very close to $7 trillion. I think alot of investors, punch drunk and stupid from the Dot Com bust, needed to make up some losses and hedged on the housing market to "right their ship". When the hits just kept on coming, they let the record play, scratches be damned.
Because mortgages are bundled into securities sold to investors all over the world, the deterioration in mortgages' value is having a wide effect. Many of the more complex securities, known as collateralized debt obligations, or CDOs, are held by banks and brokerage firms.
They've been the cause of many of the big losses at those institutions. No, firing four of your top risk analysts and piling on the risk is the cause!!!
In CDOs, risk is portioned out to different groups of investors. Those willing to take the biggest risks buy securities with the highest potential returns, while investors who want more safety give up some return to get it. Already, the riskier "tranches" of CDOs have sunk dramatically in value. An index that tracks risky subprime bonds has fallen to a record low of 17.4 cents on the dollar, down 50% from August, according to Markit Group. In other words, a billion is now only worth 174 million. I don't even think the short traders get that kind scratch on a good day.
That decline, while worrisome, hit investors willing to take risk. But the recent turmoil stems from declines in the market for the safest securities. Rated triple-A, they should be affected by mortgage defaults only in extreme circumstances. An index that tracks triple-A securities is trading at 79 cents on the dollar, down from roughly 95 cents just a month ago. Good Lord, even the rich are suffering! Help us!
At the top are "super-senior tranches." It is a decline in value of these supposedly safe securities that is hurting many banks and brokerage firms. Because banks must value many of their securities holdings at the price at which they could be sold -- called marking to market -- many banks have had to report losses. As an appraiser, when I hear the words "could be sold" I automatically think "probably won't be sold" because sellers always list their "wares" higher in order to negotiating or "wiggle" room. So if these..."things" are marked at let's say 500 million, take off five-ten percent for negotiating, that leaves you with a value of roughly of 450-475 million bucks. In today's market. What will that be like in let's 1Q08?
In October alone, Moody's Investors Service, Fitch Ratings and Standard & Poor's downgraded or put on watch for downgrade more than $100 billion in CDOs and the mortgage securities they contain. In a glimpse of how much banks have at stake, UBS holds more than $20 billion of super-senior tranches of CDOs. They're among the reasons UBS, which reported a third-quarter loss of 830 million Swiss francs ($712.8 million), has warned that its investment bank is likely to face further losses in the current quarter.
"There was some widespread miscalculation when it came to estimating the credit risk and market risk of the super-senior tranches," notes Ralph Daloiso, managing director of structured finance at Natixis, a French banking group.
Specialized funds known as structured investment vehicles, affiliated with banks and independent managers, invested in the top-rated tranches of CDOs. Banks set up the funds as a way to derive income from securities held off their balance sheets. The SIVs borrowed money from outside investors by issuing short-term and medium-term notes, then used the money to pay for the securities. Now, though, investors' reluctance to lend to SIVs has raised concerns that the funds -- which hold some $300 billion in assets -- could be forced to sell en masse.
The SIVs are the focus of an effort by major banks to raise a rescue fund that could reach up to $100 billion. The intent is to calm markets by buying good, highly rated securities from the SIVs. But the fund is still weeks away from coming into operation. And the deterioration of even the most highly rated securities will make it increasingly difficult to differentiate between good and bad investments.
The large Wall Street firms weren't alone in believing triple-A-rated debt securities were safe. In the last few years, bond insurers such as MBIA Inc. and Ambac Financial Group Inc., as well as financial guaranty units of American International Group Inc., PMI Group Inc. and ACA Capital Holdings, aggressively wrote insurance on super-senior tranches of CDOs that were backed mainly by subprime mortgages. These companies effectively agreed to bear the risk of losses on these securities.
Shares of Ambac and PMI yesterday fell 19.7% and 11%, respectively, and along with MBIA hit new 52-week lows, on growing investor worry that they may need to hold more capital against the risk they are insuring and could be hit with sizable claims down the road.
Over the past two weeks, some of the insurers posted significant net losses for the third quarter because of adjustments on credit derivatives they used to provide insurance on the bonds. The bond insurers have said, however, that they don't expect actual losses from the CDO tranches they have insured.
Anywayz, you get the gist. If you want my advice, save your money. Buying oppurtunities will abound, whether in stocks or housing in 2009. That is of course if Armageddon doesn't pop.
WSJ
Past As Present
OK, let's continue to beat this dog into mush. Hey, I made a sled dog joke.
On October 25TH, Merrill Lynch & Co. took an $8.4 Billion credit hit, the largest in it's, or anyone else's history. Part of the reason was because of it's plunge into CDO's, spearheaded by "...Christopher Ricciardi, who from 2003 to early 2006, helped transform Merrill from bit player to powerhouse in the lucrative business of bundling loans into salable securities. But the value of many of the securities, known as collateralized debt obligations, or CDOs, has tanked this summer and fall amid rising mortgage delinquencies. Mr. Ricciardi liked to be called the grandfather of CDO's. Long before joining Merrill, he helped push Wall Street into risky new areas such as subprime mortgages, those made to home buyers with weak credit. Then he helped turn Merrill into the Wal-Mart of the CDO industry, before leaving behind a roughly $8 million annual paycheck to jump to a small firm that was a Merrill client. Along the way, he lobbied both credit-rating firms and investors, talking up the safety and juicy returns of CDOs. He and his former Merrill colleagues churned these out frenetically during the height of the boom. Now that the market has soured, leading to billions of dollars in losses for CDO investors, those involved in the business face a growing legion of angry investors." WSJ
What also contributed to the problem was the firing of four senior analysts who were tasked with overseeing the risks of these types of investments. Had the proper oversight been in place, Merrill could have avoided the mess that it's in now. But the question that begs to be asked is: who else took these risks? It's estimated that there are $300 - $400 billion (yep, that's billion with a "B") worth of CDO's out there that has yet to be accounted for.
Consider this: Merrill, in an effort to reduce it's exposure to risky mortgage-backed securities, entered into deals with hedge funds that may have been designed to to delay the day of reckoning on losses. WSJ.
As time goes on, we'll see that this may be just the tip of the iceberg.
On October 25TH, Merrill Lynch & Co. took an $8.4 Billion credit hit, the largest in it's, or anyone else's history. Part of the reason was because of it's plunge into CDO's, spearheaded by "...Christopher Ricciardi, who from 2003 to early 2006, helped transform Merrill from bit player to powerhouse in the lucrative business of bundling loans into salable securities. But the value of many of the securities, known as collateralized debt obligations, or CDOs, has tanked this summer and fall amid rising mortgage delinquencies. Mr. Ricciardi liked to be called the grandfather of CDO's. Long before joining Merrill, he helped push Wall Street into risky new areas such as subprime mortgages, those made to home buyers with weak credit. Then he helped turn Merrill into the Wal-Mart of the CDO industry, before leaving behind a roughly $8 million annual paycheck to jump to a small firm that was a Merrill client. Along the way, he lobbied both credit-rating firms and investors, talking up the safety and juicy returns of CDOs. He and his former Merrill colleagues churned these out frenetically during the height of the boom. Now that the market has soured, leading to billions of dollars in losses for CDO investors, those involved in the business face a growing legion of angry investors." WSJ
What also contributed to the problem was the firing of four senior analysts who were tasked with overseeing the risks of these types of investments. Had the proper oversight been in place, Merrill could have avoided the mess that it's in now. But the question that begs to be asked is: who else took these risks? It's estimated that there are $300 - $400 billion (yep, that's billion with a "B") worth of CDO's out there that has yet to be accounted for.
Consider this: Merrill, in an effort to reduce it's exposure to risky mortgage-backed securities, entered into deals with hedge funds that may have been designed to to delay the day of reckoning on losses. WSJ.
As time goes on, we'll see that this may be just the tip of the iceberg.
File this under: Why didn't they do this in the first place?
Fitch to Downgrade CDO's
By Anusha Shrivastava
Fitch Ratings warned that $36.8 billion of collateralized-debt-obligation transactions face downgrades, with the bulk carrying the highest, triple-A, rating.
CDOs use sliced and diced assets like subprime-mortgage bonds to create customized products that are tailored for investors' appetite for risk.
Fitch said two-thirds of the $23.9 billion in triple-A-rated CDOs on watch for a ratings cut face severe downgrades, with the revised ratings likely to be the lower rungs of investment-grade or speculative grade, or junk. WSJ
Translation: Um, we got it wrong the first time.
By Anusha Shrivastava
Fitch Ratings warned that $36.8 billion of collateralized-debt-obligation transactions face downgrades, with the bulk carrying the highest, triple-A, rating.
CDOs use sliced and diced assets like subprime-mortgage bonds to create customized products that are tailored for investors' appetite for risk.
Fitch said two-thirds of the $23.9 billion in triple-A-rated CDOs on watch for a ratings cut face severe downgrades, with the revised ratings likely to be the lower rungs of investment-grade or speculative grade, or junk. WSJ
Translation: Um, we got it wrong the first time.
Sunday, October 21, 2007
Cause:Effect - or, "Woe unto you, O Angel. Prepare thyself for thy Perp Walk!"
Elvis has left the building. The rats are licking up the scraps.
Kenneth R. Harney over at the Washington Post has written an interesting article about "opportunity investors", individuals who had the patience (and wisdom) to wait out the "irrational exuberance" of the recent real estate market bubble and pounce on buying opportunities. These individuals learned the lessons of the DotCom explosion which happened just seven short years ago, and waited for the builders, developers and investors to run themselves ragged with over-development, some of which had no reason being built (Miami, anyone?).
Well, like an opportunistic virus travelling along with the host, a new breed of "investor" is out there. They call themselves "Angels". These psuedo celestial beings are scoundrels, crooks, con artists and dirt bags who claim to be the Deus Ex Machina with all the bells and whistles from heaven above, but in reality, they are nothing more than robber barons who exploit people in dire financial straits and who need assistance. Instead of helping them climb out of their financial holes (some of which were self-inflicted wounds), these "angels" take advantage of the home owners' ignorance and "obtain" possession of their homes, primarily by gaining their trust with words like "we'll help you avoid foreclosure...", even though they never finish the rest of the sentence which reads "...by taking your house." It's similar to what Uncle Screwtape told his nephew Wormwood in C.S. Lewis' classic, "The Screwtape Letters": It's not what you tell them, it's what you DON'T tell them.
Some of these "angels" promise to share some of the sale proceeds with the (former) homeowner, but after closing (or before, if they have any scruples), they tell them that legally they cannot share any "monies" from the sale of the house, leaving the now "victim" homeless...and broke.
Next Week: The "Gurus"
Read Mr. Harney's full article here.
Kenneth R. Harney over at the Washington Post has written an interesting article about "opportunity investors", individuals who had the patience (and wisdom) to wait out the "irrational exuberance" of the recent real estate market bubble and pounce on buying opportunities. These individuals learned the lessons of the DotCom explosion which happened just seven short years ago, and waited for the builders, developers and investors to run themselves ragged with over-development, some of which had no reason being built (Miami, anyone?).
Well, like an opportunistic virus travelling along with the host, a new breed of "investor" is out there. They call themselves "Angels". These psuedo celestial beings are scoundrels, crooks, con artists and dirt bags who claim to be the Deus Ex Machina with all the bells and whistles from heaven above, but in reality, they are nothing more than robber barons who exploit people in dire financial straits and who need assistance. Instead of helping them climb out of their financial holes (some of which were self-inflicted wounds), these "angels" take advantage of the home owners' ignorance and "obtain" possession of their homes, primarily by gaining their trust with words like "we'll help you avoid foreclosure...", even though they never finish the rest of the sentence which reads "...by taking your house." It's similar to what Uncle Screwtape told his nephew Wormwood in C.S. Lewis' classic, "The Screwtape Letters": It's not what you tell them, it's what you DON'T tell them.
Some of these "angels" promise to share some of the sale proceeds with the (former) homeowner, but after closing (or before, if they have any scruples), they tell them that legally they cannot share any "monies" from the sale of the house, leaving the now "victim" homeless...and broke.
Next Week: The "Gurus"
Read Mr. Harney's full article here.
Thursday, October 18, 2007
Profiting from subprime turmoil
Here's a great article by Micheal Sivy over at CNNMoney that so far for me, explains the subprime debacle at it's "best" and simplest. It's not as long a read as you thnk, and the insight is quite sublime.
From the article:
"News this week that major banks are planning a massive fund to prop up the hardest-hit victims of the subprime mortgage crisis got investors worrying again. Specifically, they're concerned that potential losses from bad subprime bets could be much bigger than previously feared.
In fact, the bailout fund is good news. And you actually have a chance to profit personally over the long term from today's turmoil, as long as you make your investment decisions cautiously.
Shares of banks and financial services companies may not have hit bottom yet - but there will soon be bargains to be had. And some companies with exceptionally strong balance sheets are already good deals.
Understanding the problems
The credit crisis itself is very complicated, but here's pretty much what you need to know. As home prices kept rising over the past few years, more and more people wanted to buy houses. Lenders accommodated them by devising mortgages that required less money down and lower monthly payments.
Often the interest rates on these mortgages could increase sharply from initial low levels. That created the risk that buyers who had stretched to the utmost to buy a house could be forced to default.
The risks were greatly multiplied as the original mortgages were bundled into separate investments and sold off. This kind of packaging has been done for decades by institutions, and the resulting securities have long been part of a stable credit market.
But the new packages, a type of collateralized debt obligation (CDO) known as structured-investment vehicles (SIVs) are far more complicated - too complicated, in fact. The packagers sliced and diced underlying pools of mortgages, mixing lousy loans with solid ones, until nobody could tell what was what. Even the resulting investments that had great credit ratings could ultimately be backed in part by shaky mortgages.
In addition, long-term assets in the portfolios were financed with short-term borrowed money. That means that rising interest rates or tight credit could force banks to take losses as they scrambled for cash.
The great risk is that the overall credit market freezes because lenders are afraid to lend."
CNNMoney
There's more to this article, but I wouldn't do it justice by editorializing on it. Do yourself a favor...read. ;-)
From the article:
"News this week that major banks are planning a massive fund to prop up the hardest-hit victims of the subprime mortgage crisis got investors worrying again. Specifically, they're concerned that potential losses from bad subprime bets could be much bigger than previously feared.
In fact, the bailout fund is good news. And you actually have a chance to profit personally over the long term from today's turmoil, as long as you make your investment decisions cautiously.
Shares of banks and financial services companies may not have hit bottom yet - but there will soon be bargains to be had. And some companies with exceptionally strong balance sheets are already good deals.
Understanding the problems
The credit crisis itself is very complicated, but here's pretty much what you need to know. As home prices kept rising over the past few years, more and more people wanted to buy houses. Lenders accommodated them by devising mortgages that required less money down and lower monthly payments.
Often the interest rates on these mortgages could increase sharply from initial low levels. That created the risk that buyers who had stretched to the utmost to buy a house could be forced to default.
The risks were greatly multiplied as the original mortgages were bundled into separate investments and sold off. This kind of packaging has been done for decades by institutions, and the resulting securities have long been part of a stable credit market.
But the new packages, a type of collateralized debt obligation (CDO) known as structured-investment vehicles (SIVs) are far more complicated - too complicated, in fact. The packagers sliced and diced underlying pools of mortgages, mixing lousy loans with solid ones, until nobody could tell what was what. Even the resulting investments that had great credit ratings could ultimately be backed in part by shaky mortgages.
In addition, long-term assets in the portfolios were financed with short-term borrowed money. That means that rising interest rates or tight credit could force banks to take losses as they scrambled for cash.
The great risk is that the overall credit market freezes because lenders are afraid to lend."
CNNMoney
There's more to this article, but I wouldn't do it justice by editorializing on it. Do yourself a favor...read. ;-)
Tuesday, October 16, 2007
You know how when the doctor says "This is gonna hurt...
...it's gonna hurt.? Well this is gonna hoit.
Paulson Urges Action on Housing Crisis
By MARTIN CRUTSINGER AP Economics Writer
WASHINGTON (AP) -- Treasury Secretary Henry Paulson called Tuesday for an aggressive response to deal with an unfolding housing crisis that he said presents a significant risk to the economy.
In the administration's most detailed reaction to the steepest housing slump in 16 years, Paulson said that government and the financial industry should provide immediate help for homeowners trying to refinance current mortgages before they reset at much higher rates.
He also called for an overhaul of laws and regulations governing mortgage lending to halt abusive practices that contributed to the current crisis.
"Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy," Paulson said in a speech delivered at Georgetown University's law school. "The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."
"The greater the penalty..." We're not talking a five minute major for slashing. We're talking a possible terminal velocity downturn in the economy BECAUSE the "house as ATM" act has dried up and in the future no one will have those cash "reserves" to go out and buy stuff which is what really drives this economy (we stopped being a manufacturing based economy a long time ago, during the Paleolithic era).
Let's see what the suits will do next to "bail" each other out. After all, just because they create a fund to offset the housing crisis doesn't mean no one's getting paid.
Paulson Urges Action on Housing Crisis
By MARTIN CRUTSINGER AP Economics Writer
WASHINGTON (AP) -- Treasury Secretary Henry Paulson called Tuesday for an aggressive response to deal with an unfolding housing crisis that he said presents a significant risk to the economy.
In the administration's most detailed reaction to the steepest housing slump in 16 years, Paulson said that government and the financial industry should provide immediate help for homeowners trying to refinance current mortgages before they reset at much higher rates.
He also called for an overhaul of laws and regulations governing mortgage lending to halt abusive practices that contributed to the current crisis.
"Let me be clear, despite strong economic fundamentals, the housing decline is still unfolding and I view it as the most significant current risk to our economy," Paulson said in a speech delivered at Georgetown University's law school. "The longer housing prices remain stagnant or fall, the greater the penalty to our future economic growth."
"The greater the penalty..." We're not talking a five minute major for slashing. We're talking a possible terminal velocity downturn in the economy BECAUSE the "house as ATM" act has dried up and in the future no one will have those cash "reserves" to go out and buy stuff which is what really drives this economy (we stopped being a manufacturing based economy a long time ago, during the Paleolithic era).
Let's see what the suits will do next to "bail" each other out. After all, just because they create a fund to offset the housing crisis doesn't mean no one's getting paid.
Sunday, October 14, 2007
Oh, yeah, this'll work...
File this under: Everybody in the pool!!!
But wait...is there water in the pool? And is the pool sound? And will the water get all slimey in a few days? And who's gonna guarantee me that no one's gonna gravitate next to me just to piss on me? And how come all these guys seem to know each other? Hmmm...
via Bloomberg
Citigroup, Bank of America Lead Banks Creating Fund
By Mark Pittman and Elizabeth Hester
Oct. 14 (Bloomberg) -- Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. will announce as soon as tomorrow that they are establishing a fund of about $80 billion aimed at reviving the asset-backed commercial paper market, said people familiar with the plan.
The fund, to which other firms will probably contribute, will buy some assets from structured investment vehicles, or SIVs, the people said. SIVs are units set up by banks, hedge funds and other investors to finance purchases of securities, including corporate bonds and mortgage debt.
The Treasury Department encouraged the banks to work together, and it jump-started the talks with a meeting of Wall Street executives in Washington on Sept. 16, said a person with knowledge of the deliberations. Robert Steel, the Treasury's top domestic finance official, brought the lenders together and prodded the competitors to keep working through the following weeks. Treasury Secretary Henry Paulson, a former chief executive officer of Goldman Sachs Group Inc., also made calls.
``Paulson definitely has the cachet to bring everyone to the table, because of his long experience on Wall Street,'' said Joe Mason, associate professor of business at Drexel University in Philadelphia and a former financial economist at the Treasury's Office of the Comptroller of the Currency.
But wait...is there water in the pool? And is the pool sound? And will the water get all slimey in a few days? And who's gonna guarantee me that no one's gonna gravitate next to me just to piss on me? And how come all these guys seem to know each other? Hmmm...
via Bloomberg
Citigroup, Bank of America Lead Banks Creating Fund
By Mark Pittman and Elizabeth Hester
Oct. 14 (Bloomberg) -- Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co. will announce as soon as tomorrow that they are establishing a fund of about $80 billion aimed at reviving the asset-backed commercial paper market, said people familiar with the plan.
The fund, to which other firms will probably contribute, will buy some assets from structured investment vehicles, or SIVs, the people said. SIVs are units set up by banks, hedge funds and other investors to finance purchases of securities, including corporate bonds and mortgage debt.
The Treasury Department encouraged the banks to work together, and it jump-started the talks with a meeting of Wall Street executives in Washington on Sept. 16, said a person with knowledge of the deliberations. Robert Steel, the Treasury's top domestic finance official, brought the lenders together and prodded the competitors to keep working through the following weeks. Treasury Secretary Henry Paulson, a former chief executive officer of Goldman Sachs Group Inc., also made calls.
``Paulson definitely has the cachet to bring everyone to the table, because of his long experience on Wall Street,'' said Joe Mason, associate professor of business at Drexel University in Philadelphia and a former financial economist at the Treasury's Office of the Comptroller of the Currency.
And now for something completely different...
The two posts below shine a bright light into a dark corner of my mind. I'm sorry, but I just couldn't resist.
Thursday, October 11, 2007
File this under...
a) hmmm, don't smell right
b) uh, I wouldn't do that if I was you
c) my name is Ken Lay and I'm back from the dead
d) crap, I have my mortgage with them. I'M NOT JOKING!
Stock Sales by Chief of Lender Questioned
By GRETCHEN MORGENSON
Published: October 11, 2007
The Securities and Exchange Commission has been asked to investigate stock sales made by Angelo R. Mozilo, chief executive of the mortgage lender Countrywide Financial, in the months before its shares plummeted amid the deepening mortgage crisis.
In an Oct. 8 letter to the S.E.C. chairman, Christopher Cox, the state treasurer of North Carolina, Richard H. Moore, questioned changes Mr. Mozilo made to his arranged stock selling program, adjustments that allowed him to increase significantly his sales of Countrywide shares.
After starting a plan in October 2006, Mr. Mozilo twice raised the number of shares that could be sold: once in December 2006, when Countrywide stock was $40.50, and again in February, when it hit a high of $45.03. He has had gains of $132 million since starting the October 2006 plan and expects to sell his remaining shares by the end of the week, a move that will generate millions more.
“As an investor and a Countrywide shareholder, I was shocked to learn that C.E.O. Angelo Mozilo apparently manipulated his trading plans to cash in, just as the subprime crisis was heating up and Countrywide’s fortunes were cooling off,” Mr. Moore wrote. “The timing of these sales and the changes to the trading plans raise serious questions about whether this is a mere coincidence.”
Letter from Richard H. Moore, North Carolina Treasurer (pdf)
NEW YORK TIMES
b) uh, I wouldn't do that if I was you
c) my name is Ken Lay and I'm back from the dead
d) crap, I have my mortgage with them. I'M NOT JOKING!
Stock Sales by Chief of Lender Questioned
By GRETCHEN MORGENSON
Published: October 11, 2007
The Securities and Exchange Commission has been asked to investigate stock sales made by Angelo R. Mozilo, chief executive of the mortgage lender Countrywide Financial, in the months before its shares plummeted amid the deepening mortgage crisis.
In an Oct. 8 letter to the S.E.C. chairman, Christopher Cox, the state treasurer of North Carolina, Richard H. Moore, questioned changes Mr. Mozilo made to his arranged stock selling program, adjustments that allowed him to increase significantly his sales of Countrywide shares.
After starting a plan in October 2006, Mr. Mozilo twice raised the number of shares that could be sold: once in December 2006, when Countrywide stock was $40.50, and again in February, when it hit a high of $45.03. He has had gains of $132 million since starting the October 2006 plan and expects to sell his remaining shares by the end of the week, a move that will generate millions more.
“As an investor and a Countrywide shareholder, I was shocked to learn that C.E.O. Angelo Mozilo apparently manipulated his trading plans to cash in, just as the subprime crisis was heating up and Countrywide’s fortunes were cooling off,” Mr. Moore wrote. “The timing of these sales and the changes to the trading plans raise serious questions about whether this is a mere coincidence.”
Letter from Richard H. Moore, North Carolina Treasurer (pdf)
NEW YORK TIMES
Tuesday, October 9, 2007
A Bank Bet on Condos, but Buyers Want Out
By CHRISTINE HAUGHNEY
Published: October 9, 2007
Javier Miglin may walk away from an $80,000 down payment on a condominium with water views in Miami. Randal Mills may give up a $130,000 deposit on a 15th floor condo on the Strip in Las Vegas. And in San Diego, Jeanette Graham would just like to meet the neighbors.
Jack McCabe, a real estate consultant in Deerfield Beach, Fla., says the market downturn will hurt even successful developers. The three seemingly unrelated predicaments have a common thread that leads to Chicago, and Corus Bankshares, which financed the construction of each condominium development involved.
Whether buyers like Mr. Miglin and Mr. Mills close on their condos will be a crucial indicator for Corus. Many condo projects that started during the real estate boom are just being completed, and developers must begin repaying construction loans taken out before the market turned sour. If buyers do not close, and developers struggle, lenders like Corus may be left holding the bag. NEW YORK TIMES
Published: October 9, 2007
Javier Miglin may walk away from an $80,000 down payment on a condominium with water views in Miami. Randal Mills may give up a $130,000 deposit on a 15th floor condo on the Strip in Las Vegas. And in San Diego, Jeanette Graham would just like to meet the neighbors.
Jack McCabe, a real estate consultant in Deerfield Beach, Fla., says the market downturn will hurt even successful developers. The three seemingly unrelated predicaments have a common thread that leads to Chicago, and Corus Bankshares, which financed the construction of each condominium development involved.
Whether buyers like Mr. Miglin and Mr. Mills close on their condos will be a crucial indicator for Corus. Many condo projects that started during the real estate boom are just being completed, and developers must begin repaying construction loans taken out before the market turned sour. If buyers do not close, and developers struggle, lenders like Corus may be left holding the bag. NEW YORK TIMES
City's Boom May Falter Over Costs
By JULIE SATOW
Staff Reporter of the Sun
October 9, 2007
New York City's building boom may be brought to a halt by something more mundane than monetary policy or global financial disruptions — it could be as simple as copper, diesel, and steel.
By the end of next year, the Producer Price Index for construction inputs — the price of materials that are used in a construction project plus the cost of diesel fuel — will rise by as much as 8% and continue to do so indefinitely, according to a report released yesterday by the Associated General Contractors of America. This is a drastic change from the previous 12 months, which saw construction inputs inch up just 1.6% for the year ending in August.
"This is a warning note," the chief economist at AGC, Ken Simonson, the author of the report, said. "Even a small percentage change can mean the difference of hundreds of millions of dollars in large projects in New York." THE NEW YORK SUN
Staff Reporter of the Sun
October 9, 2007
New York City's building boom may be brought to a halt by something more mundane than monetary policy or global financial disruptions — it could be as simple as copper, diesel, and steel.
By the end of next year, the Producer Price Index for construction inputs — the price of materials that are used in a construction project plus the cost of diesel fuel — will rise by as much as 8% and continue to do so indefinitely, according to a report released yesterday by the Associated General Contractors of America. This is a drastic change from the previous 12 months, which saw construction inputs inch up just 1.6% for the year ending in August.
"This is a warning note," the chief economist at AGC, Ken Simonson, the author of the report, said. "Even a small percentage change can mean the difference of hundreds of millions of dollars in large projects in New York." THE NEW YORK SUN
Big banks dump the risk on investors
By David Weidner, MarketWatch
NEW YORK (MarketWatch) -- Wall Street finally found a buyer for all of that bad debt on its books: the regular investor.
After the single biggest wave of credit-related write-downs in Wall Street history, more than $20 billion and growing, it's investors who are holding the risk. For example, Merrill Lynch & Co. on Friday announced a $5.5 billion charge, the Street's biggest, and immediately investors sent the stock up 2.5%. See full story
Merrill simply followed the path laid down by Citigroup Inc. , which wrote off $3.3 billion and Deutsche Bank AG, which wrote off $3.1 billion and Morgan Stanley, $940 million. All saw their stock rise after dropping the write-down bomb.
The bet is that the bigger the write-down now, the less these institutions will have to write down in the future. This is like a baseball team that celebrates after losing by nine runs, because the odds seem somehow greater that it will lose the next game by a big margin. This logic has Richard Bove, an analyst at Punk Ziegal & Co., flabbergasted.
"These companies are not going to see their markets jump back immediately," he wrote in a note to clients. "Their earnings power has been lowered. This is a reason to sell not buy. The theory that if the company writes off $2 billion it should see its stock price up $1 and if it writes off $6 billion the stock should jump $3 is not one I can embrace."
MARKET WATCH
NEW YORK (MarketWatch) -- Wall Street finally found a buyer for all of that bad debt on its books: the regular investor.
After the single biggest wave of credit-related write-downs in Wall Street history, more than $20 billion and growing, it's investors who are holding the risk. For example, Merrill Lynch & Co. on Friday announced a $5.5 billion charge, the Street's biggest, and immediately investors sent the stock up 2.5%. See full story
Merrill simply followed the path laid down by Citigroup Inc. , which wrote off $3.3 billion and Deutsche Bank AG, which wrote off $3.1 billion and Morgan Stanley, $940 million. All saw their stock rise after dropping the write-down bomb.
The bet is that the bigger the write-down now, the less these institutions will have to write down in the future. This is like a baseball team that celebrates after losing by nine runs, because the odds seem somehow greater that it will lose the next game by a big margin. This logic has Richard Bove, an analyst at Punk Ziegal & Co., flabbergasted.
"These companies are not going to see their markets jump back immediately," he wrote in a note to clients. "Their earnings power has been lowered. This is a reason to sell not buy. The theory that if the company writes off $2 billion it should see its stock price up $1 and if it writes off $6 billion the stock should jump $3 is not one I can embrace."
MARKET WATCH
Monday, October 8, 2007
Ryder Blames "Freight Recession" on Housing Spillover
Trucking company Ryder cites weak market for profit.
Ryder System Inc (R) cut its profit forecast on Monday saying that softness in the U.S. economy has spread beyond the housing sector, sending the truck leasing and logistics company's shares down more than 6 percent. "Economic conditions have softened considerably in more industries beyond those related to housing and construction," Ryder said in a statement.
Ryder cited less-than-expected demand in its commercial rental product lines and lower prices for used vehicles. Ryder's commercial rental business fluctuates with market demand and is more directly affected by a soft market than Ryder's long-term rental operations.
The U.S. trucking sector has been hit by weak volumes since the third quarter of 2006, with some analysts describing this slowdown as a "freight recession."The Ryder announcement affected other trucking companies as well. J.B. Hunt (JBHT), YRC Worldwide (YRCW), Con-Way (CNW), and iShares Dow Jones Transportation Average (IYT) all look vulnerable.The housing recession has now spawned off a "freight recession".
It can't be too much longer before prefixes like "freight" and "housing" are removed from the R word to be replaced by the dreaded "consumer-led" prefix.
MISH'S TREND ANALYSIS
Ryder System Inc (R) cut its profit forecast on Monday saying that softness in the U.S. economy has spread beyond the housing sector, sending the truck leasing and logistics company's shares down more than 6 percent. "Economic conditions have softened considerably in more industries beyond those related to housing and construction," Ryder said in a statement.
Ryder cited less-than-expected demand in its commercial rental product lines and lower prices for used vehicles. Ryder's commercial rental business fluctuates with market demand and is more directly affected by a soft market than Ryder's long-term rental operations.
The U.S. trucking sector has been hit by weak volumes since the third quarter of 2006, with some analysts describing this slowdown as a "freight recession."The Ryder announcement affected other trucking companies as well. J.B. Hunt (JBHT), YRC Worldwide (YRCW), Con-Way (CNW), and iShares Dow Jones Transportation Average (IYT) all look vulnerable.The housing recession has now spawned off a "freight recession".
It can't be too much longer before prefixes like "freight" and "housing" are removed from the R word to be replaced by the dreaded "consumer-led" prefix.
MISH'S TREND ANALYSIS
U.S. Stock Market Stumble Presaged by S&P 500 Options
By Jeff Kearns and Michael Tsang
Oct. 8 (Bloomberg) -- Skittishness over the U.S. stock market's record-setting rally is reaching a crescendo among options traders who are preparing for a crash.
Investors are paying the most ever to protect against a drop in the Standard & Poor's 500 Index, data compiled by Morgan Stanley show. The gap between the price of so-called put options on the benchmark for U.S. equity and the cost to wager on further gains has averaged about 8 percentage points since August. That's more than the previous high in July 2001, before the index dropped 34 percent and fell to the lowest this decade.
The widening spread is a warning for OppenheimerFunds Inc. and Harris Private Bank, which oversee more than $300 billion and say the bearish bets indicate stocks may fall. The S&P 500 rebounded 10 percent since Aug. 15 on speculation the worst is over for banks and homebuilders hurt by the collapse of subprime mortgages. Shares in developed markets outside the U.S. have done even better, climbing 14 percent from their trough.
``Battle-scarred investors are buying some insurance this time around, having the benefit of hindsight,'' said Jack Ablin, who oversees about $50 billion as chief investment officer at Harris Private Bank in Chicago. Ablin said he bought put options for clients during the rally. BLOOMBERG
Oct. 8 (Bloomberg) -- Skittishness over the U.S. stock market's record-setting rally is reaching a crescendo among options traders who are preparing for a crash.
Investors are paying the most ever to protect against a drop in the Standard & Poor's 500 Index, data compiled by Morgan Stanley show. The gap between the price of so-called put options on the benchmark for U.S. equity and the cost to wager on further gains has averaged about 8 percentage points since August. That's more than the previous high in July 2001, before the index dropped 34 percent and fell to the lowest this decade.
The widening spread is a warning for OppenheimerFunds Inc. and Harris Private Bank, which oversee more than $300 billion and say the bearish bets indicate stocks may fall. The S&P 500 rebounded 10 percent since Aug. 15 on speculation the worst is over for banks and homebuilders hurt by the collapse of subprime mortgages. Shares in developed markets outside the U.S. have done even better, climbing 14 percent from their trough.
``Battle-scarred investors are buying some insurance this time around, having the benefit of hindsight,'' said Jack Ablin, who oversees about $50 billion as chief investment officer at Harris Private Bank in Chicago. Ablin said he bought put options for clients during the rally. BLOOMBERG
Bank of Japan Likely to Keep Rate at 0.5% This Week
By Mayumi Otsuma
Oct. 9 (Bloomberg) -- The Bank of Japan will probably refrain from raising interest rates this week after confidence at small companies deteriorated and as policy makers assess the effect of the U.S. housing recession on economic growth.
Governor Toshihiko Fukui and his colleagues will leave the benchmark overnight lending rate at 0.5 percent on Oct. 11, according to all 39 economists surveyed by Bloomberg News.
Companies with capital of 1 million yen ($850,000) or less account for almost half of Japan's corporate revenue. Waning investment and profit growth at small businesses and a U.S. slowdown were cited as risks by Deputy Governor Kazumasa Iwata last week. BLOOMBERG
Oct. 9 (Bloomberg) -- The Bank of Japan will probably refrain from raising interest rates this week after confidence at small companies deteriorated and as policy makers assess the effect of the U.S. housing recession on economic growth.
Governor Toshihiko Fukui and his colleagues will leave the benchmark overnight lending rate at 0.5 percent on Oct. 11, according to all 39 economists surveyed by Bloomberg News.
Companies with capital of 1 million yen ($850,000) or less account for almost half of Japan's corporate revenue. Waning investment and profit growth at small businesses and a U.S. slowdown were cited as risks by Deputy Governor Kazumasa Iwata last week. BLOOMBERG
Banks' new refrain: "We're not doing this anymore"
By Jen Benepe
Shifts in the New York real estate market aren't as drastic as in the rest of the country, but credit questions are getting tougher to answer. The Real Deal looked at the moving target of credit offerings and its effect on the residential market as part of an in-depth series of stories this month examining the shifting climate.Property buyers and real estate brokers in Manhattan, Brooklyn and Queens watched with increasing disbelief as mortgage lenders and bankers walked away from previous rate commitments, further tightened borrowing restrictions or suddenly eliminated previous mortgage programs."Every day is changing," said Barbara Ladesou, a mortgage broker for Manhattan Mortgage Company. "Every day we get a message from the banks, and the catch phrase is, 'We are not doing this anymore.'" REAL DEAL
Shifts in the New York real estate market aren't as drastic as in the rest of the country, but credit questions are getting tougher to answer. The Real Deal looked at the moving target of credit offerings and its effect on the residential market as part of an in-depth series of stories this month examining the shifting climate.Property buyers and real estate brokers in Manhattan, Brooklyn and Queens watched with increasing disbelief as mortgage lenders and bankers walked away from previous rate commitments, further tightened borrowing restrictions or suddenly eliminated previous mortgage programs."Every day is changing," said Barbara Ladesou, a mortgage broker for Manhattan Mortgage Company. "Every day we get a message from the banks, and the catch phrase is, 'We are not doing this anymore.'" REAL DEAL
Tuesday, October 2, 2007
Credit Markets: Unregulated and Pathologically Addicted to Lying
(September 26, 2007)
In keeping with this week's theme, The Rot Within (week II), we've examined the rot within our legal system, Homeowners, Defective Houses and Big Builders: Justice Is Not Blind, and the intellectual hypocrisy/rot within our ruling ideology which claims to support free markets but hurries to feed at the public trough at the first signs of potential loss: Privatizing Profits, Socializing Risk: Hypocrisy and Housing.
Today we look at the rot within our financial regulatory agencies. In the past, I have referred to "lightly regulated hedge funds," and frequent contributor Harun I. has observed that hedge funds are regulated, and that the problem lies elsewhere: what isn't regulated are the exotic financial instruments and derivatives which have been sold to unwary investors the world over.
CHARLES HUGH SMITH
In keeping with this week's theme, The Rot Within (week II), we've examined the rot within our legal system, Homeowners, Defective Houses and Big Builders: Justice Is Not Blind, and the intellectual hypocrisy/rot within our ruling ideology which claims to support free markets but hurries to feed at the public trough at the first signs of potential loss: Privatizing Profits, Socializing Risk: Hypocrisy and Housing.
Today we look at the rot within our financial regulatory agencies. In the past, I have referred to "lightly regulated hedge funds," and frequent contributor Harun I. has observed that hedge funds are regulated, and that the problem lies elsewhere: what isn't regulated are the exotic financial instruments and derivatives which have been sold to unwary investors the world over.
CHARLES HUGH SMITH
Tuesday, September 25, 2007
Are we headed for an epic bear market?
The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game.
By Jon Markman
Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.
One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years, he seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.
I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the
laughter. So I tried again. "Second inning?" More laughter. "First?"
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy. MSN Money
By Jon Markman
Satyajit Das is laughing. It appears I have said something very funny, but I have no idea what it was. My only clue is that the laugh sounds somewhat pitying.
One of the world's leading experts on credit derivatives, Das is the author of a 4,200-page reference work on the subject, among a half-dozen other tomes. As a developer and marketer of the exotic instruments himself over the past 30 years, he seemed like the ideal industry insider to help us get to the bottom of the recent debt crunch -- and I expected him to defend and explain the practice.
I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the
laughter. So I tried again. "Second inning?" More laughter. "First?"
Still too optimistic. Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy. MSN Money
The Derivatives Market Has No Clothes
When it comes to derivatives, there haven't been many truly knowledgeable experts who've been willing to lift the veil on a world where rocket scientists often compete to see who can fleece the most investors for the largest amount of money using a kind of incomprehensible, three-card Monte mathematics.
Fortunately, I came across this eye-opening article from MSN Money's Jon Markman, "Are We Headed for an Epic Bear Market?" which reveals more than a few ugly truths about new age finance and what it all means for financial markets and the economy going forward.
The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game. FINANCIAL ARMAGEDDON.
Fortunately, I came across this eye-opening article from MSN Money's Jon Markman, "Are We Headed for an Epic Bear Market?" which reveals more than a few ugly truths about new age finance and what it all means for financial markets and the economy going forward.
The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game. FINANCIAL ARMAGEDDON.
Private Equity Isn't Wearing Any Clothes, Either
A few days ago, in "The Derivatives Market Has No Clothes," I noted a report by MSN Money's Jon Markman featuring insights from Satyajit Das, one of the world's leading experts on credit derivatives. The article more-or-less confirmed what I and a few others already knew: in many respects, the multi-trillion-dollar over-the-counter derivatives market is little more than houses of cards.
Well, maybe it's in the stars, or may it's just coincidence, but a post today by one of my favorite bloggers, Yves Smith, who publishes the Naked Capitalism blog, has helped to illuminate the dubious underpinnings of another dangerous smoke-and-mirrors operation that has captivated stock traders and the financial press in recent years: the private equity industry. As Smith surmises in "Nursing Home Cost Cuts: A Private Equity Microcosm?" much of this talk about creating value out of dollops of debt and large helpings of hubris seems to have been just that: talk. Unfortunately, it has also had some potentially deadly consequences. Financial Armageddon.
Well, maybe it's in the stars, or may it's just coincidence, but a post today by one of my favorite bloggers, Yves Smith, who publishes the Naked Capitalism blog, has helped to illuminate the dubious underpinnings of another dangerous smoke-and-mirrors operation that has captivated stock traders and the financial press in recent years: the private equity industry. As Smith surmises in "Nursing Home Cost Cuts: A Private Equity Microcosm?" much of this talk about creating value out of dollops of debt and large helpings of hubris seems to have been just that: talk. Unfortunately, it has also had some potentially deadly consequences. Financial Armageddon.
Class is in session: Death spiral financing
Death spiral financing is a process where convertible financing used to fund primarily small cap companies can be used against it in the marketplace to cause the company’s stock to fall dramatically and can lead to the company’s ultimate downfall.
Many small companies rely on selling convertible debt to large private investors (see Private investment in public equity) to fund their operations and growth. This convertible debt, often convertible preferred stock or convertible debentures, can be converted to the common stock of the issuing company often at steep discounts to the market value of the common stock. Under the typical “death spiral” scenario the holder of the convertible debt initially shorts the issuer’s common stock which often causes the stock price to decline at which time the debt holder converts some of the convertible debt to common shares with which he then covers his short position. The debt holder continues to sell short and cover with converted stock which along with selling by other shareholders alarmed by the falling price continually weakens the share price making the shares unattractive to new investors and can severely limit the company’s ability to obtain new financing if the need arises.
An important characteristic of this kind of convertible debt is that it often carries conditions like a quarterly or semi-annual reset of the conversion price to keep the conversion price more or less close to the actual stock price. But a lower conversion price also increases the number of shares that a bond holder gets in exchange for one bond, increasing the dilution of existing shareholders. A lower price reset can also force investors that have set up a long CB/short stock position to sell more stock ("adjust the delta"), creating a vicious circle, hence the nickname death spiral.
From Wikipedia, the free encyclopedia
Many small companies rely on selling convertible debt to large private investors (see Private investment in public equity) to fund their operations and growth. This convertible debt, often convertible preferred stock or convertible debentures, can be converted to the common stock of the issuing company often at steep discounts to the market value of the common stock. Under the typical “death spiral” scenario the holder of the convertible debt initially shorts the issuer’s common stock which often causes the stock price to decline at which time the debt holder converts some of the convertible debt to common shares with which he then covers his short position. The debt holder continues to sell short and cover with converted stock which along with selling by other shareholders alarmed by the falling price continually weakens the share price making the shares unattractive to new investors and can severely limit the company’s ability to obtain new financing if the need arises.
An important characteristic of this kind of convertible debt is that it often carries conditions like a quarterly or semi-annual reset of the conversion price to keep the conversion price more or less close to the actual stock price. But a lower conversion price also increases the number of shares that a bond holder gets in exchange for one bond, increasing the dilution of existing shareholders. A lower price reset can also force investors that have set up a long CB/short stock position to sell more stock ("adjust the delta"), creating a vicious circle, hence the nickname death spiral.
From Wikipedia, the free encyclopedia
If you want a Subprime Bailout, do it Properly!
Axel Merk, September 5, 2007
The administration’s plan to bail out homeowners with adjustable rate mortgages (ARMs) may make them slaves of their homes. We propose an alternative that we believe better serves both homeowners and the marketplace. MERK
The administration’s plan to bail out homeowners with adjustable rate mortgages (ARMs) may make them slaves of their homes. We propose an alternative that we believe better serves both homeowners and the marketplace. MERK
The Federal Reserve’s interest rate cut does not help Americans
Axel Merk, September 25, 2007
In our assessment, the Federal Reserve’s (Fed’s) interest rate cut was wrong. Forget about the “moral hazard” of whether the cut would plant the seeds for further bubbles. Lowering interest rates is wrong because it will do few any good, but cause many a lot of harm.
As the most imminent result, the U.S. dollar has accelerated its decline versus hard currencies. When a country’s central bank cuts interest rates, it is rare that the currency reacts in textbook fashion and declines more than a token amount versus other currencies; that’s because, amongst others, lower interest rates may boost growth and make the currency more attractive for investments. Not so this time with the Fed’s cut: lower interest rates are unlikely to boost economic growth. The reason? The markets are facing a valuation problem, not a liquidity problem. MERK
In our assessment, the Federal Reserve’s (Fed’s) interest rate cut was wrong. Forget about the “moral hazard” of whether the cut would plant the seeds for further bubbles. Lowering interest rates is wrong because it will do few any good, but cause many a lot of harm.
As the most imminent result, the U.S. dollar has accelerated its decline versus hard currencies. When a country’s central bank cuts interest rates, it is rare that the currency reacts in textbook fashion and declines more than a token amount versus other currencies; that’s because, amongst others, lower interest rates may boost growth and make the currency more attractive for investments. Not so this time with the Fed’s cut: lower interest rates are unlikely to boost economic growth. The reason? The markets are facing a valuation problem, not a liquidity problem. MERK
The days of no verification, no downpayment and low credit scores are past
Sept. 25 (Bloomberg) -- Lennar Corp., the largest U.S. homebuilder, reported the biggest quarterly loss in its 53-year history after $848 million of costs to write down the value of real estate.
The third-quarter net loss was $513.9 million, or $3.25 a share, exceeding the most pessimistic estimates from analysts and suggesting the worst housing market in 16 years shows no signs of stabilizing. Revenue at Miami-based Lennar fell 44 percent to $2.34 billion, the lowest in more than three years. BLOOMBERG
The third-quarter net loss was $513.9 million, or $3.25 a share, exceeding the most pessimistic estimates from analysts and suggesting the worst housing market in 16 years shows no signs of stabilizing. Revenue at Miami-based Lennar fell 44 percent to $2.34 billion, the lowest in more than three years. BLOOMBERG
Sunday, September 23, 2007
That light at the end of the tunnel...
New York City Housing Bubble has a great link which you can find here involving Peter Schiff, President of Euro Pacific Capital and Terri Campbell, Managing Director of Eastern Investment Advisors regarding the Fed rate cut and the future of the economy, specifically, the severity of the coming recession and it's duration. It runs 3:50 and it's a must watch, not only for Mr. Schiff's analysis of what did the housing market in, but what's in store for the next couple o' years. I wish I could say benignly that the glass is half empty and suffering the affects of evaporation, but man, not only is half empty, but it was engineered wrong with leakage at most important part: it's base. As Mr. Schiff points out, money was too easy to acquire, mortagages were made based upon the flimsiest "documentation" and then these loans were sold to the most gullible, when in fact that they should rejected them, prima facie (Asian Markets, Hedge Funds, Countrywide anyone?) As a Commercial Real Estate Appraiser here in lovely New York City, we're beginning to see a slow down in the market, both in the construction field and the purchase market. Williamsburg, Greenpoint, Park Slope and even Bushwick and Bed-Stuy(!) were hot markets earlier this year, but sales activity is starting to slow. An analysis done by New York magazine, lists the 'nabes that are in danger. Hop on over when you get a chance. Lastly, check out the Financial Times and there analysis of the dollar's weakness. Look, the Canadians have caught up with us, how bad is that?
Saturday, September 22, 2007
So Good I Had To Post The Whole Thing
Hat Tip to NYC Housing Bubble for the original link.
SuddenDebt has amazing analysis on why the Fed cut the interest rate 50 basis points on Tuesday. Seems there's more than just hedge funds and real estate problems on the horizon...
The Real Reason For The Fed's 50 Basis Point Cut
Occam's Rule: Sometimes the truth is so simple that even as it stares us in the face we are blind to it.
The Federal Reserve cut its Fed Funds benchmark rate by 50 bp to 4.75%, more than most analysts' expectations. Already there have been trillions of pixels written to explain why, but none that I have seen follow the time-honored Occam or KISS principle (Keep It Simple, Stupid). Here is a chart that explains the FRB's move; for the non-professional there is an explanation after it.
The chart above shows the interbank money market yield curve for US dollars, from overnight (O/N) out to 12 months. These are the rates that banks charge each other to borrow for the period specified. When you hear LIBOR mentioned (London InterBank Offered Rate), these are the rates they refer to. The money market is by far the most important in the world, the very foundation upon which banking and finance rest, because it provides the day-to-day financing that keeps the wheels of finance and commerce spinning. It is normally a very mundane and boring market, a sort of meat and potatoes process that just works day in and day out. Think of it as finance's equivalent of the electrical power plant, i.e. it is taken for granted - until something goes wrong. Any trouble in the money market is immediately transmitted via the banks to the bond and stock markets and then quickly out to the "real" economy. So what does the above chart tell us?
On September 12 the money market was truly ugly, with a big "hump" in the cost of money from 1 month out to 6 months. The spread in interest rates between 3 months and O/N was almost exactly 50 bp. The reason was that Asset Backed Commercial Paper (ABCP) that typically came due in 30-90 days was not being rolled over and everyone was scrambling for money to replace it. This is also why the ECB was constantly pumping huge amounts of money into the system: it was bailing out the banks' SIVs that could not find any money to replace their ABCPs (I wrote elsewhere that the ECB was doing the Fed's laundry - this is the reason). At a borrowing cost of 5.70-5.80% against assets that yielded maybe 5.50% and leveraged 10-20x, various SIVs and other borrow short - lend long players were bleeding money like crazy. The situation was indeed critical and the cost of money had to be brought down sharply or the banks would have to sell collateral (CDOs, CLOs, etc.) in a depressed market and write huge losses in their books - If they could find a buyer, that is. So the cost of money was brought down. Clearly 25 bp would not have done the trick - just look at the chart - and so the Fed cut 50 bp. It's as simple as that. Nothing to do with the economy, jobs, retail sales or the cost of peanut butter in Peoria. Ain't the truth fun? So now what? As you can see from the blue line, the "hump" is still there but it is much smaller. The banks have been given some breathing room and can keep those CDOs, CLOs, etc on their books more comfortably. But - there is always a but - the mass of ABCP and ABCP-type financing has now shifted to the O/N market, i.e. it rolls daily because lenders do not trust them and want to be able to pull their money out ASAP. This type of financing from one day to the next is very dangerous: if there is another credit crisis like we saw two weeks ago, such lenders will demand their money all at once, in the same day.
To draw a parallel, say everyone has to drive to work every day but gas stations only provide each customer with enough gas for just one round trip. It is easy to imagine what will happen if gas runs short...Let me say one final thing: most people are not fools. If bankers and politicians try to instill a false sense of confidence by claiming things are different than what everyone knows, they lose credibility. Do it too much and people get really worried and think: defense (i.e. I want my money NOW). Most people know houses are too expensive, most people know there is way too much debt and just about everyone knows that financier pay at a billion dollars a year isn't sustainable. SuddenDebt
SuddenDebt has amazing analysis on why the Fed cut the interest rate 50 basis points on Tuesday. Seems there's more than just hedge funds and real estate problems on the horizon...
The Real Reason For The Fed's 50 Basis Point Cut
Occam's Rule: Sometimes the truth is so simple that even as it stares us in the face we are blind to it.
The Federal Reserve cut its Fed Funds benchmark rate by 50 bp to 4.75%, more than most analysts' expectations. Already there have been trillions of pixels written to explain why, but none that I have seen follow the time-honored Occam or KISS principle (Keep It Simple, Stupid). Here is a chart that explains the FRB's move; for the non-professional there is an explanation after it.
The chart above shows the interbank money market yield curve for US dollars, from overnight (O/N) out to 12 months. These are the rates that banks charge each other to borrow for the period specified. When you hear LIBOR mentioned (London InterBank Offered Rate), these are the rates they refer to. The money market is by far the most important in the world, the very foundation upon which banking and finance rest, because it provides the day-to-day financing that keeps the wheels of finance and commerce spinning. It is normally a very mundane and boring market, a sort of meat and potatoes process that just works day in and day out. Think of it as finance's equivalent of the electrical power plant, i.e. it is taken for granted - until something goes wrong. Any trouble in the money market is immediately transmitted via the banks to the bond and stock markets and then quickly out to the "real" economy. So what does the above chart tell us?On September 12 the money market was truly ugly, with a big "hump" in the cost of money from 1 month out to 6 months. The spread in interest rates between 3 months and O/N was almost exactly 50 bp. The reason was that Asset Backed Commercial Paper (ABCP) that typically came due in 30-90 days was not being rolled over and everyone was scrambling for money to replace it. This is also why the ECB was constantly pumping huge amounts of money into the system: it was bailing out the banks' SIVs that could not find any money to replace their ABCPs (I wrote elsewhere that the ECB was doing the Fed's laundry - this is the reason). At a borrowing cost of 5.70-5.80% against assets that yielded maybe 5.50% and leveraged 10-20x, various SIVs and other borrow short - lend long players were bleeding money like crazy. The situation was indeed critical and the cost of money had to be brought down sharply or the banks would have to sell collateral (CDOs, CLOs, etc.) in a depressed market and write huge losses in their books - If they could find a buyer, that is. So the cost of money was brought down. Clearly 25 bp would not have done the trick - just look at the chart - and so the Fed cut 50 bp. It's as simple as that. Nothing to do with the economy, jobs, retail sales or the cost of peanut butter in Peoria. Ain't the truth fun? So now what? As you can see from the blue line, the "hump" is still there but it is much smaller. The banks have been given some breathing room and can keep those CDOs, CLOs, etc on their books more comfortably. But - there is always a but - the mass of ABCP and ABCP-type financing has now shifted to the O/N market, i.e. it rolls daily because lenders do not trust them and want to be able to pull their money out ASAP. This type of financing from one day to the next is very dangerous: if there is another credit crisis like we saw two weeks ago, such lenders will demand their money all at once, in the same day.
To draw a parallel, say everyone has to drive to work every day but gas stations only provide each customer with enough gas for just one round trip. It is easy to imagine what will happen if gas runs short...Let me say one final thing: most people are not fools. If bankers and politicians try to instill a false sense of confidence by claiming things are different than what everyone knows, they lose credibility. Do it too much and people get really worried and think: defense (i.e. I want my money NOW). Most people know houses are too expensive, most people know there is way too much debt and just about everyone knows that financier pay at a billion dollars a year isn't sustainable. SuddenDebt
Thursday, September 20, 2007
Subprime Borrowers to Lose Homes at Record Pace as Rates Rise
Sept. 19 (Bloomberg) -- As many as half of the 450,000 subprime borrowers whose mortgage payments increase in the next three months may lose their homes because they can't sell, refinance or qualify for help from the U.S. government.
``Short of the cavalry riding in over the hill, a lot of these people are just stuck,'' said Christopher Cagan, director of research and analytics at Santa Ana, California-based First American CoreLogic, the risk management unit of the biggest U.S. title insurer. BLOOMBERG
``Short of the cavalry riding in over the hill, a lot of these people are just stuck,'' said Christopher Cagan, director of research and analytics at Santa Ana, California-based First American CoreLogic, the risk management unit of the biggest U.S. title insurer. BLOOMBERG
Toll Brothers CEO sees downturn worse than 1980s
NEW YORK, Sept 18 (Reuters) - Toll Brothers Inc (TOL.N: Quote, Profile, Research) Chief Executive Robert Toll said on Tuesday the Federal Reserve's rate cut may signal that the economy is worse than previously thought and likely doesn't indicate the U.S. housing market has hit bottom.
Earlier Tuesday, the Federal Reserve slashed the key federal funds rate by a half-percentage point, the first cut in the rate in more than four years.
"I would have done a quarter instead of a half because it signals we're in deep doodoo," Robert Toll said, speaking at the Credit Suisse Homebuilder Conference. REUTERS
Earlier Tuesday, the Federal Reserve slashed the key federal funds rate by a half-percentage point, the first cut in the rate in more than four years.
"I would have done a quarter instead of a half because it signals we're in deep doodoo," Robert Toll said, speaking at the Credit Suisse Homebuilder Conference. REUTERS
US expert warns of fresh shocks
Fresh economic shocks on the scale of the current credit squeeze will occur if US house prices continue to fall, one of the country’s leading housing experts warned on Wednesday.
Robert Shiller, a Yale university economist, told a US congressional panel that he feared “the collapse of home prices might turn out to be the most severe since the Great Depression”. FINANCIAL TIMES
Robert Shiller, a Yale university economist, told a US congressional panel that he feared “the collapse of home prices might turn out to be the most severe since the Great Depression”. FINANCIAL TIMES
Goldman Net Rises 79 Percent, Lifted by Mortgage
Sept. 20 (Bloomberg) -- Goldman Sachs Group Inc. reported the third-best profit in its 138-year history after betting against the mortgage bonds that triggered the credit-market rout and damaged earnings at Lehman Brothers Holdings Inc. and Bear Stearns Cos.
The world's largest securities firm said net income rose 79 percent in the third quarter to $2.85 billion, or $6.13 a share, from $1.59 billion, or $3.26, a year earlier. Goldman shares rose as earnings beat the $4.35-a-share average estimate of 18 analysts surveyed by Bloomberg, the seventh straight quarter that the New York-based company has surpassed expectations. BLOOMBERG
The world's largest securities firm said net income rose 79 percent in the third quarter to $2.85 billion, or $6.13 a share, from $1.59 billion, or $3.26, a year earlier. Goldman shares rose as earnings beat the $4.35-a-share average estimate of 18 analysts surveyed by Bloomberg, the seventh straight quarter that the New York-based company has surpassed expectations. BLOOMBERG
Bear Stearns Net Drops Most in Decade on Credit Rout
Sept. 20 (Bloomberg) -- Bear Stearns Cos., the securities firm hit the hardest by the collapse of the subprime mortgage market, reported its biggest profit decline in more than a decade. The shares rose after the company said the worst is over.
Third-quarter net income dropped 61 percent to $171 million, or $1.16 a share, in the three months ended Aug. 31 from $438 million, or $3.02, a year earlier, the New York-based firm said today in a statement. Profit fell short of analysts' estimates. BLOOMBERG
Third-quarter net income dropped 61 percent to $171 million, or $1.16 a share, in the three months ended Aug. 31 from $438 million, or $3.02, a year earlier, the New York-based firm said today in a statement. Profit fell short of analysts' estimates. BLOOMBERG
Oil Hovers Above $82 on Worries of Supply Crunch
Oil hovered around $82 a barrel on Thursday as sinking U.S. crude inventories and the threat of a storm gathering near Florida increased worries of a winter supply crunch in the world's top consumer.
Oil has traded above $80 for the past week but OPEC officials and oil analysts say the lofty price is unsustainable. CNBC
Oil has traded above $80 for the past week but OPEC officials and oil analysts say the lofty price is unsustainable. CNBC
Wednesday, September 19, 2007
In the Beginning...
Yeah, yeah, yeah, I know "not another real estate bubble blog!". Right...and not so, right. Unlike other blogs out there that rail on and on about what's wrong, we will attempt to show you what's right and how to take advantage of it.
This blog is written by an Appraiser (me) who is actively involved in Real Estate Valuation and who has his eye on the day to day movement of the market and all that influences it.
Of course, that means (cue in dramatic music)...the Stock Market (cue out dramatic music). We (me, myself & I) will also be looking at how what happens on Wall Street influences Real Estate and vice versa.
And on a special note, I chose to launch today (at like THREE in the morning) because it's my son Malaki's 8th birthday. And if you're wondering, his name is pronounced Mal-uh-kie, just like Malachi, the last book of the Old Testament. Here's to you kid...
Yeah, yeah, yeah, I know "not another real estate bubble blog!". Right...and not so, right. Unlike other blogs out there that rail on and on about what's wrong, we will attempt to show you what's right and how to take advantage of it.
This blog is written by an Appraiser (me) who is actively involved in Real Estate Valuation and who has his eye on the day to day movement of the market and all that influences it.
Of course, that means (cue in dramatic music)...the Stock Market (cue out dramatic music). We (me, myself & I) will also be looking at how what happens on Wall Street influences Real Estate and vice versa.
And on a special note, I chose to launch today (at like THREE in the morning) because it's my son Malaki's 8th birthday. And if you're wondering, his name is pronounced Mal-uh-kie, just like Malachi, the last book of the Old Testament. Here's to you kid...
THE BUBBLE GOES UP...
August Foreclosure Filings Rise 115% from Year Ago
U.S. foreclosure filings rose 36% in August from July and 115% from a year ago, hit by declines in once-hot housing markets such as California, Nevada and Florida, according to a report released Tuesday.
RealtyTrac's U.S. Foreclosure Market Report found the number of foreclosure filings in August -- default notices, auction sale notices and bank repossessions -- was 243,947, the highest since it began its monthly report in January 2005, just months before the housing boom peaked.
That translates into one foreclosure filing in August for every 510 households, also a high for the RealtyTrac report. CNBC
August Foreclosure Filings Rise 115% from Year Ago
U.S. foreclosure filings rose 36% in August from July and 115% from a year ago, hit by declines in once-hot housing markets such as California, Nevada and Florida, according to a report released Tuesday.
RealtyTrac's U.S. Foreclosure Market Report found the number of foreclosure filings in August -- default notices, auction sale notices and bank repossessions -- was 243,947, the highest since it began its monthly report in January 2005, just months before the housing boom peaked.
That translates into one foreclosure filing in August for every 510 households, also a high for the RealtyTrac report. CNBC
THE BUBBLE GOES DOWN...
Bernanke Cuts on Slump `Potential,' Adopting Greenspan Approach
Sept. 19 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke adopted the approach of his predecessor Alan Greenspan, reducing interest rates to pre-empt an economic slump rather than waiting for one to occur.
The Fed yesterday lowered its benchmark interest rate by half a percentage point, surprising most economists and spurring the biggest rally in U.S. stocks since 2003. Policy makers said they based their decision on the ``potential'' for the sell-off in credit markets to hobble economic growth. BLOOMBERG
THE BUBBLE GOES UP...
Crude futures climb past $82 to uncharted territory
SAN FRANCISCO (MarketWatch) -- Crude-oil futures moved further into uncharted territory late Tuesday afternoon by topping $82 a barrel in electronic trading, buoyed by ongoing concerns over potential storm risks in the Gulf of Mexico, expectations for fall in U.S. supplies and bets that the Federal Reserve's decision to cut interest rates will help boost energy demand.
"With a typical disturbance that could become a Gulf hurricane, a full half-point drop in the Fed's target rate and concern that there will be another drop in gasoline stocks tomorrow, crude had no way to go but up," said James Williams, an economist at WTRG Economics. MARKET WATCH
Crude futures climb past $82 to uncharted territory
SAN FRANCISCO (MarketWatch) -- Crude-oil futures moved further into uncharted territory late Tuesday afternoon by topping $82 a barrel in electronic trading, buoyed by ongoing concerns over potential storm risks in the Gulf of Mexico, expectations for fall in U.S. supplies and bets that the Federal Reserve's decision to cut interest rates will help boost energy demand.
"With a typical disturbance that could become a Gulf hurricane, a full half-point drop in the Fed's target rate and concern that there will be another drop in gasoline stocks tomorrow, crude had no way to go but up," said James Williams, an economist at WTRG Economics. MARKET WATCH
THE BUBBLE GOES DOWN...
Asian Stocks Rally on U.S. Rate Cuts, Financials Surge
Asian markets continued to rally into the afternoon session Wednesday after the U.S. Federal Reserve slashed two key interest rates -- the benchmark fed fund rate and the discount rate -- by 50 basis points each.
The hefty move was a bold bid to shield the world's biggest economy from a housing slump and financial turbulence, raising hopes that Asia's largest export market will be able to ride out turmoil in the credit market. CNBC
Asian Stocks Rally on U.S. Rate Cuts, Financials Surge
Asian markets continued to rally into the afternoon session Wednesday after the U.S. Federal Reserve slashed two key interest rates -- the benchmark fed fund rate and the discount rate -- by 50 basis points each.
The hefty move was a bold bid to shield the world's biggest economy from a housing slump and financial turbulence, raising hopes that Asia's largest export market will be able to ride out turmoil in the credit market. CNBC
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