Bits Bucket And Craigslist Finds For February 27, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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the story of the day comes from china!
china stocks down 9%, biggest decline in a decade!
details including a marc faber inetrview
http://immobilienblasen.blogspot.com/
Is this the day? Is this the day that Goldilocks finally gets eaten by the bears? In the past 6 months people have been looking for that moment when people stop and say, “this doesn’t seem right”. That just has not happened. The bad news has been piled higher than a New Jersey landfill. Yet Goldilocks keeps on eating porridge and trying new beds.
China is down 8.8%. The U.S. stock market has not plummeted but this is the softest patch I can recall since July. The futures are much lower this morning.
There is a lot of data coming out today. The existing home sales will bring out their fraudulent number. How many times will we hear, “this signals a bottom”? This is the first time that I recall them coming out with this number when the stock market isn’t humming on all 8 cylinders.
When do you begin shorting and buying puts on the whole darn thing? I think TGT looks like a good put opportunity but I am so gunshy that I think I will sit back and watch today.
I think that even a high terror alert somewhere on the globe won’t do the markets any good today.
The real terrorist are Central Bankers. I do believe that the real bubble is in the BOND MARKET. Higher interest rates in China mean just one thing. A mega bust in the bond market not just real estate. Today it’s the stock racket. But expect even more spectacular moves in the bond market. It will be even more uglier than the DOW. Real terror always comes from your friendly central banker.
I have puts on the three major indices, short the utility index, some reits. Damn, wish I had more
TXChick, do you play around with the HBs at all? Check out that earnings report from WCI. Does that scream “bankruptcy” or what? I don’t care how smart Carl Icahn thinks he is. This thing is going to retrace back to its sub $14 low.
I live a couple of towns over from Sun City Center in the Tampa area, which is WCI country. Bankruptcy would really suck for that community. On the other hand, I guess wholesale bankruptcy for many of these builders/developers is the answer to future lawsuits for shoddy and dangerous construction. Gonna be a lot of unhappy retirees around here.
I urged folks to buy or at least stop shorting the HBs here in July and August of last year. I don’t think anyone did it. Cote told me I was nuts.
I’ve shorted TOL a couple of times for $1 - $2 share in the last few months but think I’ll go for the index this time.
Shanghai market has been in a parabolic blowoff that now appears to be ending. IMO it is not too late to get short, as the US market has a long way to fall.
Heavens no. This is just the beginning. The interesting thing for me will be when we go back to the July lows which will possibly be a double bottom and see how that holds.
Buy PSQ to short NASDAQ.
Buy gold. Puts are a hassle when these indices are manipulated and maintained by the crooks from the FED. Want two examples. If we were in a real free market Ford and GM would be worth about ZERO or even less then that. Look at what prices these two piece of garbage trading even today. Want another example of a piece of junk ? Fannie Mae. The examples are so numerous that it’s not even funny. Buy physical gold and silver and wait. It won’t take to much time considering the context. Puts are nice only on a very very very very short time frame. I can bet you that tomorrow everything will be strongly up, courtesy of the crooks at the FED, at the BOJ etc…..
I’m short CFC. I’ve got my rationale posted at http://www.doic.net
but basically:
CFC has enough exposure to sub-prime mortgages that its current stock valuation is questionable. It is well above its 200 day MA. If the lending problems move into prime or the entire sector comes under additional pressure, it is almost certain to fall to the $30 level and is subsequently a good short. It is obvious that the pure sub-prime lenders and originators are getting clobbered. The larger lenders, such as CFC, hold sub-prime mortgages representing a small but significant fraction of their holdings. What if these mortgage problems move away from sub-prime and seep into Alt-A, or even into prime? An interesting study might be to look at exposures to mortgage types: ARMS, option-arms, stated income and others.
Odd day so far. Overall market indexes getting hit downward, but the mortgage lenders have bounced back off of early morning lows and some are already in the green.
Odd day ? It’s odd since the fall of the Berlin Wal. Nothing means nothing. GM that piece of junk is not even worth the paper that’s it printed on. Same thing for Fannie Mae. Same thing for Ford Motors. Odd day ? No odd century.
It’s odd to mention that to even think that it’s odd. Since nothing doesn’t really add up. A country running a 66 billion deficit on a monthly basis, a 55 trillion consolidated government debt, a record indebtness by its citizens. Bubbles, busts, booms and exceess are everywhere. Odd is ordinary today.
have made a quick update on wci
“master of desaster”
Holy crap. Today is going to be a rocker on the market. I can’t remember the last time I watched CNBC and heard so much bad news before the market opened.
What do you think TX? There is going to be some big time volitility, that’s pretty much in the bag. Where do we end the day? And who get’s the worst beatdown?
Got to watch the breakout points on the indices. 1425 S&P is one, then 1400.
Yeah, Steve Lisman “surprised” that Fannie was qualifying borrowers at maxium posssible interest rate.
If he didn’t know that you have to throw all his work out the window.
WASN’T qualifying borrowers
Whither the symbiosis? (Or should I say, “Wither the symbiosis?”)
GLOBAL MARKETS-Stocks slide, bonds and yen surge amid Iran angst
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070227:MTFH76862_2007-02-27_10-13-29_L27212511&type=comktNews&rpc=44
But stocks always go up……just like real estate. hehehe
oh la la, yen surging! Carry trade to unwind.
It looks like the Euro is surging, too. In my opinion it shows that the Fed has lost all control of the situation. Even a rate drop will do no good at this point. All they can do is watch from the sidelines like the rest of us. Game on!
But, but, where’s Hank Paulson? Cramer said he has everything under control. Hey, Cramer, got news for ya: The Emperor Has No Clothes!
Will margin calls in Asia mean a selloff in US securities? I guess we’ll find out in a few hours.
As the hippies and counterculture types used to say back in the day, “Burn, baby, burn”.
It sure worked that way last year. India mkts in particular. Getting a little jazzed now. The first two months of this trading year have been alternatively boring and maddening.
PPT stands ready to buy the market. Give it time for the down pressure to build.
“PPT stands ready to buy the market.”
AG’s lesson for his successors: The best time to inflate is during a crisis…
Stocks have stabilized… but where is it going this afternoon? And as this is day #5 of down trading for the markets, how many more can they take before margin calls pinch? And will Asian traders get hit with margin calls tomorrow (impact our Wednesday market)?
Its an unstable market. As soon as the margin calls come in force… it becomes “the day.”
Got popcorn?
Neil
S&P hit the 50 dma for the first time since last summer. Logical level for buyers. Doesn’t look like that strategy worked this time though. Who was it told me the TA was useless?
Not useless … just a self-fulfilling prophecy. It works because everyone thinks it works.
Me, 8 hours ago:
Will margin calls in Asia mean a selloff in US securities? I guess we’ll find out in a few hours.
Me, now:
Umm, Yes. -400 on the DJIA.
Trying to turn off the bold. Sorry, folks. /
” Game on!” I think that’s true if you are talking about global liquidity tightening.
Another bubble exploding. Stupid Japaneese morons. I hate them. The BOJ is even more stupid than the FED.
That’s “Japanese”, dear.
Squatters looking for flippers
http://sarasota.craigslist.org/rfs/285367168.html
why rent- squat for some utlility payments and bring your paintbrush
Condos anyone?
“Lauderhill man fears role in homeowners’ association made him arson target”
http://www.sun-sentinel.com/news/local/southflorida/sfl-carson27feb27,0,1447877.story?coll=sfla-home-headlines
HOAs can be hell, both for those on the board and for those being governed by the board. I would never live in one after what I went through and it is going to get worse as a result of the shoddy construction during the bubble. People will be trapped as a result of all the special assessments for repairs and legal costs. Heads up, nightmare on the horizon.
A libertarian is a liberal who has been mugged by a co-op or condo board or homeowner’s association.
Liberals like HOA’s? Not this one. I like to have local government with disinterested, professional enforcement and rule of law.
I always thought people who lived in gated communities, etc. were total reactionaries, but perhaps that’s just my bias.
—————————–
NO not Reactionaires Unless you think Karl Marx was reactionary……
Liberals Left wing Communinsts wanted a way to promote their views and they found out through a HOA that they can act like good commies and get away with it.
Blame the Berkeley crowd for the HOA’s, not right wingers.
By being a private corporation, they can make just about any rules they want and selctively enforce them, and UNLESS YOU CAN PROVE Racism, Sexism or age discrimination, then no judge is going to overturn a HOA corporate decision to screw you, even if it means foreclosing on your home for refusing to take down the American Flag on your front lawn.
Karl Marx would love that!
I think we will soon see a lot of new liberals, who once were libertarians until they got reamed out and left on the roadside by a bank or two.
I wish Americans would stop calling socialists “liberals”. The founders of the US were at that time considered liberals, but they would be considered militant libertarians today, definitely not what today are “liberals”.
Actually, to want a lot of government control is, strictly speaking, the “f” word. You know, a bundle of sticks enclosing an ax…
Yeah… Slave owning Liberals. Stange Liberals indeed.
“We the people” except the blacks. Strange Liberals.
I see quite a few of you guys looking forward to a credit cruch and recession caused by the end of this bubble. But how many of you actually were around trying to buy a house in 1990 - 1994? It was not easy, even if you had good credit and money to put down. I had 50% plus to put down and after looking at the intrusive process to buy something, decided to keep renting.
I wouldn’t be shocked to see a full 360 degree turn in lending in the next few years - from Casey Serin being able to get $2M to you and I getting tooled around trying to buy a house to live in with good credit and money down.
I bought a townhouse in 1992 at age 22. The process was like being probed but it was still possible. They gave me 2 1/2 times my income.
“The process was like being probed”
NY, thanks for starting my day off with a good laugh. Heck, I got a good probing as recently as 2000.
Disclaimer: I have never actually been probed. It was just a figure of speech. Honest!!!
The “probing” I was referring to had to do with the mortgage application process in 2000. Countrywide, no less.
(But how many of you actually were around trying to buy a house in 1990 - 1994? It was not easy, even if you had good credit and money to put down.)
In 1994, 40% down, no other debt, three months of delays and demands.
Precisesly. I had a ringer too. A client who was the president of a bank. They were willing to slide it though faster than someone off the street. But when they started asking for all brokerage statements, bank statements for two years, etc. I told them to stuff it.
You got that right Tchic;……Be careful what you wish for…You just may get it….
I’m hoping we get through this with the minimal amount of damage, I didn’t try to buy a home as I was 14 then, but did help build one on some land bought with cash.
Uh, if the supply and demand curve was terrible to us cash-prepared folks on the upswing, why wouldn’t it be kind to us on the downswing.
They’ve got to put people in all those extra living rooms, and I think anyone - ANYONE - who is close to legitimately qualifying will be a viable candidate.
I’m not saying you won’t be able to buy anything but you’ll be ticked at what you have to do relative to what went on the past few years.
1. Pain from buying house 2-3 years from now with money down and good credit, but no pain after that.
2. No pain from buying, but pain of living house-rich and cash poor for 10 years after due to buying too high.
3. No pain from buying with magic I/O, but pain of being foreclosed on.
I’ll take door #1.
Door #1 is the winner.
And if I cannot buy… the south bay market is dead. How will a single realtor pay their mortgage?
At some point there will be a bottom with better buyers being qualified. As others noted, cash is king.
Got popcorn?
Neil
Bought my first home in Philly in 1994 for $85K. I was young and my credit was weak at the time, so I had to have my dad co-sign AND I still had to come up with 20% for a down payment.
BTW, the sellers had purchased the same home in 1990 for $110K.
I bought one in ‘97 - I needed to borrow 10 months’ gross pay - the nut on a 15 yr. fixed cost about 8% of my monthly gross income. I put more time, energy and work into getting that loan than I ever put into getting a date, for Christ’s sake. Funny thing is, almost no one today believes that story. “Impossible,” they say. I fully expect the same scenario before too long.
That sounds like when I bought in the Yunk around then! Bought for $70K and the previous owners had to bring money. They were so nasty to us (and the loan process was awful too) throughout since they were losing money and po’ed. Previous “buyers” had not qualified for loan. When we moved in the house was filthy, the lighting fixtures were gone, and there was a dump in the toilet for us! We saw lots of houses at that time where the “owners” were sooooo nasty and miserable, just following us around complaining about their financial situation. It left an impression on me for sure! Buyer’s markets are not all wine and roses!!!
TL I wanted to tell you my brother has been asked by married pals of his to rent out a room in their newly built condo/townhouse thing in the city! they cannot afford it anymore without a renter. He doesn’t feel like moving out of his apartment however. I thought you’d find that anecdote amusing. Have a feeling we’ll be seeing a lot more of this. Can’t wait for the tax abatements to run out! that should help the situation lots!
Buyer’s markets are not all wine and roses!!!
Whine and hoses?
“TL I wanted to tell you my brother has been asked by married pals of his to rent out a room in their newly built condo/townhouse thing in the city! they cannot afford it anymore without a renter”
So how were they affording it beforehand? Did their teaser rate run out? Or did someone lose a job?
A friend of mine was looking for apartments to rent and found a ton of new condos for rent by the owner (speculator). A lot of little Donold Trumps in Philly, I guess.
this couple (the recent owners) both work in hospitality (bar/restaurants) like my brother does, receipts have just been really flat or down for a while I guess. have no idea what kind of mortgage they have - they got themselves in over their heads at any rate.
it’s different here, you know.
With slowing sales and stumbling prices together with this much leveraged speculation by first timers (lenders, home buyers, speculators, developers, and so on) a credit crunch was inevitable. Hope eveyone is prepared for sky-rocketing insolvencies.
Serfs Up!
I bought my first in 1995 directly from the builder. $98K and I only needed 5% down. It was barely more than renting at the time.
from the Netherlands:
bought a huge 17th century building in 1992 about 40% below asking price. Everybody thought I was nuts buying such an expensive home (after all, you could only loose money by owning a home in those days - everyone was sure about that). I think the mortgage was something like 25% down and over 10% interest rate. Shortly after that prices started rising (I didn’t know, totally uninterested in real estate). Had to sell because of changes in tax law 10 years later with about 350% gain. In the five years after that, the price of the building increased another 100% or so. If the bubble in Europe ever pops I have no idea how much buildings like that will correct. Back to 1992 levels (-85% or so) seems out of the question.
bought a huge 17th century building in 1992 about 40% below asking price.
sounds stunning, nhz. I’d love to see pics, but of course you’d be a nitwit to post pics of your personal residence online.
can you give a quick and dirty description?
17th century merchant home in a small city, built by one of the directors of the VOC (the first multinational company in the world). Volume about 4000 m3 (probably about 8000 sqft of living space, never checked). I don’t live there any longer but here is a sneak preview (inside is more impressive though):
http://tinyurl.com/2zo2su
Thank you so much for these lovely pix, nhz. I was an exchange student to Breda in the late 60’s and have always been hugely influenced by the clean elegance of the country…both its architecture and its institutions. Still trying to get Murka to designate bike paths along its highways….
my reply is not appearing so I will try again:
it’s a 17th century merchant home in a small city; it was owned by one of the directors of the VOC (the first multinational company in the world). Size about 4000 m3 / 8000 sqft of living space. I don’t live there anymore so you will have to do with the front view:
http://tinyurl.com/2zo2su
the inside was far more impressive; they don’t build homes with this quality any more (at least not in my country). The insurance value in 1992 was about 10x the purchase price …
Thank you for the sneak preview. Now I want to see the inside! I have to ask: did you do any improvements?
On one of my trips to Italy, I ended up staying at a 15th century “palazzo”. It had been carved into three units to accommodate various family members, but it was still impressive. There’s a unique quality to staying in a residence with all that history. And you’re right, they certainly don’t build houses like that anymore. I doubt many recent vintage American houses will be able to withstand the rigors of a century or three of use/abuse.
I did some improvements but it was mostly maintenance; it was first of all a company building with private home on the second/third level. Most of the inside spaces were in very good condition and needed just some paint jobs etc. It had been owned by a large government institution for nearly a century before I purchased it. I looked into making some luxury apartment(s) in the top floor but that was soo expensive because of all the building regulations that I didn’t want to take the risk. The new owner made huge changes and probably spent nearly the same on that as on the purchase of the building itself. There was a special sales website for the building around 2000, if you are very experienced maybe you can dig it up from some internet archive
NHZ - I remember a story printed in the New York Times in the late 1980’s about “their man” in Tokyo, who in about 1947 sent a cable to headquarters (still in Times Square, NYC) requesting permission to buy a very small office building in downtown Tokyo - I don’t remember the specific price, but they printed the cable in the paper, circa 1989. The purchase was proposed for the Times’ Japan Bureau.
The publisher cabled back that “We are in the news business, not real estate.”
The Times is good for a tongue-in-cheek laugh once in a while, laughing at itself for an oversight. The office building had, of course, appreciated from the high hundreds of dollars (if I remember right) to the high tens of millions by 1989.
Oh, my point - Tokyo real estate shortly thereafter proceeded to fall, by about 85%. It’s not out of the question.
If the Dutch can’t assimilate their residents of a certain religion, real estate prices will go way down.
I think this problem is a bit similar to the Mexicans in the US; there are problems, but they are wildly exaggerated for political purposes. Without them the Dutch population would be shrinking significantly already, and that would certainly drive RE prices down.
As far as RE is concerned, I think these people drive up RE prices from the bottom just like the Mexicans do in CA (by having relavitely large or more families in a home, using all the homeowner subsidies that have been invented, etc.).
I don’t think problems of violent minorities ar ever wildly exaggerated, just ignored, until it’s too late and vast parts of one’s cities are unlivable.
I agree -85% is not impossible, however central banks and politicians have learned a bit since then, and especially in Europe I’m sure they will fight any RE downturn tooth and nail. If RE goes down 40 or 50% now, most of the Dutch banks, pension funds and maybe even the government itselfs will be bankrupt because of all the leverage and bailout promises. Don’t even think about -85%, what happened in Argentina would look like a sunday picnic compared to that.
I’m not betting on -85%. Just pointing out it is possible, based upon recent history.
Speaking of history, I suspect the Germans will do WHATEVER IT TAKES to snuff out inflation, Dutch real estate be damned. Just a hunch.
funny you mention the Germans - yes, they have about the only RE market that has NOT inflated over the last 10-15 years. And some of the German bankers (unfortunately not the ones working for the ECB) are relatively tough on inflation, they have learned their lessons. But the Dutchies are doing their very best to inflate German home prices near the Dutch border, just like they did with Belgian home prices near the Dutch border 5-10 years ago…
NHZ,
Thank you for sharing those very beautiful photos. I’m assuming you’re a professional photographer, no?
My mother is European (Vienna), and I really regret that most of the U.S. has no architectural (sp?) culture. Those buildings you show have seen so much, and our buildings don’t last much more than 50 years, or so.
Thanks, again, for sharing!
CA renter:
thanks for the compliments, but photography is just a hobby for me (although slightly related to my current job). Vienna is awesome, have never been there but it’s about as good as it gets in Europe. Yes, I love buildings that have stood for centuries: it’s a proof of good construction and design (far more thoughtfull than modern designs). Some of the older US cities have nice architecture as well from what I have seen, certainly compares favourably to the ‘newer’ world like Oz and NZ where most of the city architecture is horrible. They do have some great modern homes though, just like the US - recent home designs in Netherlands are about as bad as it gets, despite sky-high prices and some of the best architects in the world.
I have about $100k set aside for a downpayment and an 813 FICO score. If anything, these figures will improve by 2011 or 2012 when we reach bottom. If I can’t qualify for a mortgage at that point, I can’t imagine who will. It may not be easy, but if that means I won’t be bidding against people with cheap money who can’t genuinely afford to buy, then that will be a marked improvement over today, worth even putting up with a “probing.”
Great job putting away all that cash! You’ll be so glad you waited.
We bought in 1994, during that last slump. We had more than enough cash for the 20% down, long employment records, great credit. The house was about 2.5 times annual income. The loan process wasn’t horrid, but was pretty long and drawn out - every t crossed and i dotted. The interest rate was 8.15% - seems astronomical now. We’ve since refinanced at 4.875% fixed and are nearly finish paying off the mortgage. BTW, the house had been empty for 6 months. Soon after we bought, another house nearby went into foreclosure. Those times will be back soon…
“But how many of you actually were around trying to buy a house in 1990 - 1994? “
I bought in 1993, and I was a grad student at the time! But then again, the payments on my brand new 3br house were cheaper than the rent on my 1br apartment.
I bought my first house in 1992. I was 25 years old with a new baby and three years at my current job.The house was 88K. I put %5 down and I didn’t have the best credit. I can’t say the process was pleasant, but it wasn’t any big deal.
Trading screens glowing red………
Heavy selling overnight in mainland China shares, as well as rising tensions over Iran and Afghanistan, leave the bears firmly in control. Weakness in stock futures overshadows durable-goods data.
http://www.marketwatch.com/?refresh=on
Should be an interesting day on Wall St.
Yeah, here comes the “correction” everyone’s been predicting for the US market. Ho-hum, we knew that one was coming.
What they’re not suspecting is what impact a high-profile terror attack coming, say, later this year might have on an already risk-averse populace.
Quirk,
If you’re still listening, please tell me why you think a high-profile terrorist attack will occur later this year?
-Big V
The article says strip club stocks are up on Wall Street. LMAO!
Yeah, strippers love horny, drunk, broke guys.
‘The article says strip club stocks are up on Wall Street. LMAO!’
IN LA and the IE i notice a proliferation of Large billboards touting strip clubs. You see them everywhere but particularly in the deteriorated rundown older mixed districts such as City of commerce, inglewood,Lax,East SVF,Wilmington,San bernardino metro, ect. The sure mark that a neighborhood is going down the toilet is when Strip clubs sprout up in the burg. In LA about half the entire metro can be classified as a declining, rundown aging slumburb or pure immigrant-ghetto, which in turn invites all kinds of X=rated stuff,e.g Massage parlors, adult porn shops,exotic bars in shupping malls, back of the alley prostitution. ect.
strip clubs and gambling always do well in a recession
Hovnanian now expects a quarterly net loss, according to Yahoo?
But I thought the bottom was in. One of the saddest days during the HB stock rally was the day Daniel Oppenheim killed his credibility. Now, as they begin another leg downward, there is nobody in the media that can be believed on the HBs. I bought KBH puts yesterday.
I managed to buy a couple of DOW calls yesterday morning. I got a 95% return in less than 6 minutes. But the order was small. That was fun.
I wouldn’t go back to that well, not for months. If this is it, you may have seen the high for the year. But options are cheap.
I was wondering who (if anyone) enforces all those primary residence affidavits? I did some research into the empty new house in our neighborhood (that is now for rent after being on the market since 11/06) and found that it is owned by people living in Columbia. They had a POA done by the Bogata consulate’s office. One of the documents the POA signed was a primary residence affidavit. The mortgage broker must have known it was fraud but I guess he/she didn’t care?
Where are you?
MD
Bogota is in Colombia. If they live in Columbia, then they are locals, and right down the road from my house.
nope, its definitely Colombia! Sorry for the typo. Can’t function on just one cup of coffee.
WSJ all over the financial aspects of the bubble in section C.
According to one analyst, the ABX index is overstating the subprime crash, because there is a difference between a hissing housing bubble and a popping one. Hey buddy, if you are in the lowest tranche of a RMBS backed by subprime loans, you don’t even need a hiss for your money to crash; housing just needs to stop going up.
Another article raises the Alt-A meltdown possibility.
I am wondering if the Wall Street Journal is trying to put Ben out of business. They have recently begun to pay serious attention to problems in the subprime sector…
The sub-prime market crashing and the major tightening of lending standards is big big news in the mortgage bank arena. Interestingly, the tightened lending standards will increase the defaults of the already issued loans, because the borrowers will no longer have any way to refinance their way out of trouble. The subprime banks are being hit with a one-two punch of both having done their job badly and not prepared for the risk of the loans going south, and suddenly having to compete with big banks in the subprime market who are much more efficient and better able to pass the risk to other investors.
“…who are much more efficient and better able to pass the risk to other investors.”
How much longer until “pass the trash” is no longer an effective strategy for the big boyz to play?
I just don’t get it. Why hasn’t the sh*t hit the fan?
Over the weekend I talked with a realtor from the South Shore area of metro Boston.
He knew I had sold 4 years ago and has been waiting to buy.
He said I sold too early. Ok, I will give him that.
I just didn’t anticipate the sub prime sector prolonging the bubble an extra 2-3 more years.
Anyway he asked when I will be ready to buy.
I said not until we get another 40% off today prices.
Will never happen he said.
He said we already had our “crash”.
Prices are already 10% off peak. Buyers are stepping up and sales are brisk after a slow 2006.
I was not surprised to hear this since a 40 mil ad campaign carried a lot of clout.
Then we discussed the sub prime implosion.
The last RE bust around here brought down The Bank of New England.
I said before this is over we will have major bank failures.
But I am little perplexed by his response.
He said he has been doing a lot of short sale.
Banks are not taking the hit because they are insured against such losses.
I suspect he meant they are hedged.
Somebody has to be holding the bag.
I know this is just the beginning but why haven’t we seen more blood on the streets?
That is why you always eat Mexican food before talking to a realtor. When they start spewing their nonsense just smile and let out a big fart. At that point you walk away. Conversation over!
Take heart, Golf54. It’s just the sucker rally. I know, it is annoying.
It took seven years from the peak (1987) to reasonable prices (1994) in the Northeast last time. Sellers simply refused to sell at prices buyers could afford. At least 2/3 of the real price decline, therefore, was inflation.
You say prices are down 10%. Have wages gone up, even slightly, with inflation? Add that on to the real value decline. Even at 2-3% per year, you’ll have had an additional 5% return to reality by this summer. That’s up to 15%. And it wouldn’t surprise me if prices fall farther by the third quarter of 2007. That could bring the reality return to 25%.
I will certainly take to 2008, perhaps to 2009 or even 2010 for affordability to return.
Because we haven’t hit an artery yet, just a few minor veins. You are right about one thing: somebody is holding the bag. Unfortunately, that somebody is a group of very rich somebodies: world investors.
And, in a US economy that has stupidly chosen to stake its futures to the fate of every other world economy, many of them run by people not educated enough to pick up trash in this country, we’re going to see who will be getting trashed very soon.
Why do you listen to Unrealtors? What do you think they’re going to tell you, “Psst. Hey, buddy, you know what? You’ll put your retirement fund at severe risk if you buy this place.” Does that sound like a salesperson talking, or someone who’s concerned that their next meal may be from a dumpster?
Maybe the Chinese hold most of the the MBS securities?
Maybe the banks are Turning Japenese by hiding the bad loans?
Or Maybe homeowners still have some hope that they can keep their homes.
But the scary part is IRA’s and 401K are now protected in a BK, so there is no reason to take the money out and pay the mortgage, but i think very few people know that………until its too late and its all gone!
I have seen people do that. Very sad.
Like when they have $80,000 in debt, and borrow their last $40,000 of equity hoping that all the creditors will take $.50 on the dollar. When they don’t, the end up in bankruptcy without a meaningful homestead.
“Banks are not taking the hit because they are insured against such losses.
I suspect he meant they are hedged.
Somebody has to be holding the bag.”
And what if those same banks are providing the credit lines to those so-called insurers?
No, say it ain’t so!
cape cod is always the canary
off in fall 1986
off fall of 2004 - the southy,then boston, then…………….
Yep, you’re right. Every resort area is first to die. South Florida among them.
In my neighborhood in Boston the only sales have, literally, been done by dead people (their estates).
If that isn’t “blood in the streets” its getting close.
“I was not surprised to hear this since a 40 mil ad campaign carried a lot of clout.”
$40M for a NATIONAL campaign is chicken feed….nothing more than a PR stunt to boost the Realtor(tm) brand. A good portion of the GRP buy is in radio (sustaining)….a dead giveaway as to the true goal of the campaign.
It hits the fan slowly, everyday so is hard to spot. I think most of the money is generated by our trade deficit. In the 70’s (and on) it was with the Arabs; real housing prices went up.
In the 80’s our deficit with Japan led to another bubble. And now our deficit with China — $232 billion in 2006 (two percent of our total GDP). With currency flows like that, who can tell what will bubble up next?
The people in China are the ones with the slow fans. About 300 million live in the cities. Another 900 million from the countryside want to live there — it’s like having 8 Mexicos within China’s borders, people willing to work for low wages to get part of the wealth that’s pouring in.
Workers in the cities face wage competition from this huge group. They’re offered negative rates of return by the banks. The market offers a chance of positive return, so all the money floods in and it turns into another bubble. Utimately we all need to find assets that don’t lose value so quickly.
At least house pricess are slower to react than stocks. Imagine a one-day drop of 9% there!
“Who is to blame for America’s negative personal saving rate? For its newfound asset-based saving strategies? For record levels of household sector indebtedness that are required to convert such saving into spendable purchasing power? In my view, the responsibility for these behavioral shifts rests solely on the back of the American consumer. It would be ludicrous to place the blame for the excesses of US consumerism on foreign economies.”
– Stephen Roach, Chief Economist, Morgan Stanley
He’s right of course. No one forces consumers to spend every penny they make and then some.
Maybe the FED bears part of the responsibility, too, by keeping rates so low for so long. Still doesn’t change Roach’s point: blame not foreign economies (”saving glut” etc.) but yourself.
Why does Roach resort to such strong language (”ludicrous”)? He’s trying to bolster his argument with invective rather than proof. I tend to agree with him; but if it’s so obvious, why hype it so much? Maybe it’s not that black and white. Maybe institutional players are making money off dumb consumers as they go in debt.
The money involved in the housing bubble (or the drop in America’s savings rate) is huge. I think America as a whole has become more ignorant in the past couple decades, as average incomes fall. I’m interested to look for what’s behind this change. People always have the inclination to do dumb things (more if they’re poorer, less educated), but only *can* do them if they have access to resources. So who gave them all the money? Follow the money.
LA / San Diego housing prices seem to track developments overseas — growth in a particular economy. See Piggington’s site:
http://piggington.com/images/primer/lapricetoincome.gif
I think it’s interesting how all three spikes correspond with major economic upheavals (although I’m open to the idea that something in our country happened for each of these cycles). It looks like they match up with the oil prices hikes, the Japanese expansion of the ’80’s, and the Chinese expansion recently. If India goes big, we might see something from that as well.
With lots of dollars flowing to these regions, they end up with worthless currency — unless they can turn it around and buy assets in the dollar-denominated economy. If China buys oil with dollars, now the Arabs have inherited the problem — what to do with otherwise worthless dollars.
If you tear a big chunk off the American economy, it comes back in the form of a weaker dollar and foreign asset buys. Banks get flooded with money and have to make it move, so they throw it at any yahoo who walks in the door… Money from low Fed interest rates, and from China which got it from dumb consumers who drained their savings to buy toys.
The Chinese are screwed too — their currency should be revalued much higher, instead the government’s keeping it low and people / companies / banks there are piling up dollars. When the dollar finally drops, a lot of their savings and hard work will go down the drain.
Therefore, nobody wants a weaker dollar, so nobody sells it, the US dollar strengthens.
Bloomberg: housing could cause recession.
http://www.bloomberg.com/apps/news?pid=20601109&sid=apQSOy.1rjjA&refer=home
(“We’re in the midst of a classic boom-bust credit cycle in housing,” says Andy Laperriere, managing director at International Strategy & Investment Group in Washington. “And the bust is just beginning.”
The worst case: Distress already evident in the riskiest part of the mortgage-lending industry turns into a full-scale credit crunch that cripples the housing market and the economy.)
After the past half-decade, typical lending criteria will seem like a credit crunch. Heck, 5% down interest only will seem like a credit crunch.
DGO (7.8) vs. (3.0) exp
ex-transportation (3.1%) vs. (0.2) exp
the effect of MIC military industrial complex
Defense capital-goods rose 10.7% in January.
take housing and MIC out of out economy and what’s left ?
MIC is all transfer payments
we might not even get the Indian fighter jet order…….
Hi TX! Now you’ll really wish you had more puts……if the market truly corrects because of all of the momentum on the way up the speed of the correction will be breathtaking….As for the gentleman in Boston, real estate will be sticky on the downside as people stay in denial as long as possible…..Here in Miami there is almost a four year supply of condo inventory with another 4-5 year supply due to be online this year and yet the current comps are within 5% of the peak. Expect 40-50% decline within 24 months.
Ever hear the song “Miami 2017″? Look up the lyrics. That’s why Miami’s condos are booming - they’re preparing for the big influx!
(great song, BTW)
Great song, but I doubt Miami will be handling any sort of influx anytime soon. Miami’s toast if another hurricane hits in that area. The water probably won’t recede.
I have plenty of cash to short directly and am doing some of that now.
Economist Chris Low of FTN comments on how the subprime meltdown will effect home values and the drag it will have on the economy.
http://www.ftnfinancial.com/media/docs/PDF/doc_199.PDF
No spillover…
http://www.marketwatch.com/news/story/durable-goods-orders-weak-across-board/story.aspx?guid=%7B92C9EAB1%2DB6DA%2D4B0B%2D9852%2DCC4B70CC678B%7D
And in other news, humans need to breathe to live…
http://www.marketwatch.com/news/story/freddie-mac-tightens-standards-buying/story.aspx?guid=%7B34042AA6%2D4C0D%2D4B75%2DAFEC%2DF02F9A7FA6EB%7D
Just heard on CNBC that FreddieMac changed rules for buying sub-prime mortgages. mortgages should not be adjusting to be sold to Mac. S&P housing index out in a few minutes
Turkey Shoot?
http://wallstreetexaminer.com/blogs/winter/?p=473
Looking for some input regarding potential economic fallout within the retail banking industry because of the HB.
I am considering an opportunity with a large bank based in RI. The comp package is good, but I’m concerned about a couple of things. One is the potential impact of the HB crash and the other is the potential for this industry to go through a consolidation phase.
The question is this: Do you think the risk of working for a bank at this time is greater than the reward (10- 15% higher comp). The caveat is while my position today is very secure, the industry my company serves is tied directly to the commercial real estate/development business… so I see some risk either way. The difference is today my company would be hard pressed to operate without me while the banking position is part of a team of four others (read easily replaced/downsized).
I think you’ve answered your own question. If it is security you are looking for, stay put. The 10-15% higher comp might be tempting, but that depends on what amount it is a percentage of. How much of that increase will be taken by taxes, commuting or moving costs or family adjustments (assuming you have a family) and other costs? Not to mention the learning curve in the new situation. Can you use the opportunity to eke a raise out of your current situation? LIFO (last in, first out) is what applies if you take the new situation. Do you like where you are right now and the people you work with? Emotional stability can be just as important as financial stability.
Red Alert!
http://www.marketwatch.com/tools/marketsummary/
I had to laugh when I looked at the charts put together like that.
If there is a PPT, they are going to have to put in OT today.
Is it a red alert because everything on that chart is red?
Sometimes PPT can’t help. I remember one day in July or August of 2002 when the Dow went down like 800 points in one day. I was buying the Dow diamonds down every 100 points. I made 8 buys that day. Flipped them too about a day or two later.
Carolyn Baum Bloomberg Feb 23
http://tinyurl.com/2zymq3
From Pluto, U.S. Inflation Is Near 10%:
“… The Tin-Foil-Hats Department
“The truth, Caroyn (sic), again?” a Plunge Protection Team alumni writes. “What’s gotten into you? Next thing you’ll be calling for an investigation into market manipulation by the government. Especially the gold market.”
The PPT is either a) a committee of government officials and individuals from financial institutions created by President Ronald Reagan after the 1987 stock market crash; or b) a nefarious cabal of the same characters — Goldman Sachs figures prominently — that intervenes surreptitiously to support the stock market and manipulate the gold market.
Now that Goldman has its own man at Treasury (again), well, you write the script.
Where was the PPT during the precipitous plunge in the stock market from 2000 through 2002? Never mind. I can’t prove the markets aren’t rigged, and they can’t prove they are. Ergo, I’m the one who’s naive.
The Out-of-Nowhere Department
Many of the e-mails I receive have only the slenderest connection to what I wrote — and to reality.
“The economy as we know it is collapsing,” another reader states. “There is no rebalancing or inflationary outlet. If there was, it would have happened by now and people would no longer be debating the issue of imbalances. The only person I’ve seen touch on this issue is Mr Stephen Roach at JP Morgan in his weekly commentary.”
Who’s on first? What’s on second? I don’t know who’s at JPMorgan, but Roach is at Morgan Stanley and has a solid following among Armageddon types. …”
“Where was the PPT during the precipitous plunge in the stock market from 2000 through 2002? Never mind. I can’t prove the markets aren’t rigged, and they can’t prove they are. Ergo, I’m the one who’s naive.”
No market manipulation scheme can fight gravity forever. What you would expect are longer periods of relative calm punctuated by 2000-2002 events…
OMG. Gap down from hell! LOL!
Nasty down almost 2% What did I tell ya? That’s where the froth really is.
Existing homes sales increased, so says the NAR. Do they count foreclosures as sales?
Well, in California apparently they do count foreclosures as sales. This is from the Sonoma Housing Bubble blog, Jan. 22, 2007 post: http://sonomahousingbubble.blogspot.com/2007_01_01_archive.html
“On a lark, I decided to track foreclosures for impact on 2007 sales. The Record Searchlight publishes “Notices of Trustees Sales” (potential foreclosures) in the legal section of the paper. When the lender gets the property back (foreclosure), a “Trustees Deed” is issued. I found foreclosures being counted as sales.
Data Quick does not distinguish “Deeds” (regular property transfer) from “Trustee Deeds” (foreclosure). Both are counted together as sales. For Shasta County
141 sales were reported for November — 12 were foreclosures. So, in
reality, 129 properties were sold.
Data Quick did not respond to my email. The Record Searchlight contacted Data Quick and confirmed my finding. Data Quick indicated their program, “Prospect Finder Farm Services”, has NO function to distinguish Deeds from Trustees Deeds
(foreclosures) and it would be expensive to fix this gross error.”
Great catch. This is no longer such a small and insignificant portion of total sales as it was in ‘03-’05.
And consider this too, how accurate are the foreclosure statistics? As I understand things in BK cases sometimes the lawyer will go to the bank and give them the heads up as to what’s going on with their client. At that point bank has 2 choices it can go with a deed in lieu of foreclosure or it can go the judicial route. Now if they go with the deed in lieu of foreclosure the NOD NEVER gets filed.
Propert tax revolt brewing in the Tucson area:
http://www.azstarnet.com/metro/171121.php
“If people think the value is excessive, that they could not sell their property for that value, they should certainly appeal,” Staples said. “If we have incorrect characteristics, they should certainly appeal.”
Ya gotta love dipsh*ts like this clown. It’s like screwing someone in a business deal and saying “Sue me”. But you can only push people so far and then someone goes “Bada-BING!” Really, I’m getting so disgusted with the naked, criminal greed aspects of this bubble. People are really, truly hurting and local governments have turned into vampires, not to mention all the fraudsters, specuvestors, etc. I hope they all get what they deserve. Appealing, court proceedings, etc. all add insult to injury. Do people have to be forced at gunpoint to act with decency?
“Do people have to be forced at gunpoint to act with decency? ” Yes, especially anyone in any government. They want to take as much money from as they can, at gunpoint.
Pay up, or go to jail.
“Do people have to be forced at gunpoint to act with decency? ” Yes, especially anyone in any government. They want to take as much money from you as they can, at gunpoint.
Pay up, or go to jail.
Ha! 9:26 AM Central, CNBC is talking about RE and Hidden Inventory! Now, I don’t really watch CNBC. Does this happen often?
I saw it. No mention of near 50% cancellation rates on HB’s. Basically said, there is a “hidden inventory” of people wanting to sell who don’t have house on market because prices have fallen and they are waiting for market to go back up. waiting for spring surge , LOL
Desertfox
CNBC video report on hidden housing inventory
http://tinyurl.com/ywvtte
January existing home sales figures were just released. Here’s how they look to me:
* Sales rose: The seasonally adjusted annual rate of sales rose 3% to 6.46 million from 6.27 million units in December. The market was only expecting a 0.3% gain. So that’s good news? Well, not exactly. That’s because …
* Home prices dropped sharply: The median price of an existing home tanked by $11,000, or almost 5%, between December and January. At $210,600, existing home prices haven’t been this low in 22 months. This makes one thing crystal clear: Home sellers HAVE to be aggressive on price if they want to sell. One key reason …
* Inventories are climbing again because of the “March of the Re-Listers”: The number of homes for sale rose to 3.549 million units from 3.45 million in December, a gain of almost 3%. Why is this important? Well, a lot of people crowed about the decline in inventory for sale in November and December. They said it was proof the market was stabilizing.
I argued differently. I pointed out that this was entirely seasonal – home inventories almost ALWAYS fall late in the year because of the holidays. Specifically, sellers who fail to sell during the peak spring and summer selling seasons pull those homes from the market around Thanksgiving, then start re-listing them early the following year.
This “March of the Re-Listers” is clearly underway in 2007. I expect the inventory numbers to continue rising in February, March, and April, and we may very well set a new high.
All in all, the housing market is still struggling. Mortgage purchase activity has trailed off. Inventories remain extremely high. And sellers are being forced to cut prices to bring in buyers. Expect conditions to remain weak throughout 2007, with many local markets doing poorly into 2008.
http://interestrateroundup.blogspot.com/
(* Sales rose: The seasonally adjusted annual rate of sales rose 3% to 6.46 million from 6.27 million units in December. That’s because …Home prices dropped sharply: The median price of an existing home tanked by $11,000, or almost 5%, between December and January.)
This IS good news. Maybe the Realtors are doing their jobs. The faster prices fall back to affordability, the sooner the pain will be over — except for those who bought at the peak, those who lent to them, and those who built excess supply. I would be great if we could unwind the excesses by the end of the year. After the last bubble, it took forever.
…and more fun on CNBC.
“Freddie Mac Gets Tough on Risky Loans!” Short of it is that now borrowers will now have to qualify at the higher (after-the-teaser) rate. Close them barn doors!
(Gotta turn this noise off before Suze Orman comes on, In The Next Hour!)
Maybe someone else has commented on this before, but I heard an ad for a Sacramento area dealer on the radio last night. It was something like “I work in the construction business and, when housing slowed down last year, I fell behind on some bills. My credit score dropped to 640. I went to look for a new truck, but I owed too much on my trade and I didn’t want the high interest payments. Then I heard about Paul Blanco Chevrolet’s Fresh Start Program!” Then a kid (the hell!? Why do people always think we want to buy crap from their kids) gives the details of how the program works.
But how’s that for mainstream acceptance of the bubble bursting? It’s now part of other businesses’ advertising strategy.
“But how’s that for mainstream acceptance of the bubble bursting? It’s now part of other businesses’ advertising strategy. ”
Yep, we’ve been hearing some of that. Unfortunately the recognition comes along with an ad prompting consumers to take on MORE debt to buy crap they don’t need.
US mortgage crisis goes into meltdown
Telegraph 2-24-2007
Mr Roubini said: “America faces a ‘reverse cycle’ where a credit crunch has hit before the slowdown, a rare pattern. Normally, recession comes first, setting off credit troubles in its wake. We have a housing recession, an auto recession, a manufacturing recession, and a real investment recession already present. If all this happening in what the consensus terms as a ‘Goldilocks economy’, what would happen if the economy slows down?”
http://tinyurl.com/2rc9uo
From the desk of…Ben Shalom Bernanke,
Fed’s new double-speak language
new acronym:
old:
PS = post script
New:
PS = perfect storm
“It’s a self-perpetuating spiral: as sub-prime companies tighten lending they create even more defaults,”
Where’s deathspiral when you need him?
Yeah, good question.
Roubini: “America faces a ‘reverse cycle’…” (above)
Perhaps we now have a “reverse cycle deathspiral”
What time does the plunge team show up for work? I say about 2 pm EST.
As mentioned above earlier today, low on the S&P today is 1425. That was the breakout point earlier this year. After that, we came down to about 1403 and then bounced. This selloff has a different “feel” than those others, it’s actually sticking and may break that record for days without a 1% correction. If they close it under 1425, I’d look for buyers around 1400, then who knows . . .
For you all shortin hounds, note that the Nasty is down almost 1% more than the Dow. That “rally” in the tech stocks was a bogus as it comes. They tried to break it out last week but that failed too. That’s where I’m looking for new shorts.
Manly, yes, but I like it too! Ha! Anyone remember that?
Kass: Short Side Never Looked So Good
By Doug Kass
Street Insight Contributor
2/27/2007 11:34 AM EST
I am on the road traveling today, but I wanted to say that on Monday, for the first time since early 2000, I went all in on the short side. That is a reflection of how negative I am about this market.
Despite too often sounding like the boy who cried “wolf” in light of the continued market ascent, I have spent the past several weeks outlining my investment rationale and my major concerns: heightened debt loads among consumers, the government and hedge funds; rising mortgage credit losses, which will weigh on a spent-up, not pent-up consumer; nascent inflation, seen in rising raw materials spot prices and crude lately; the ever-present specter of geopolitical tensions; and corporate profit and profit margin vulnerability.
Above all, investors are not being paid for risk — and excessive valuations are not being recognized. As Robert Marcin pointed out Monday, today’s median P/E of 20.5 times trailing earnings of the Value Line composite of 3,000 leading companies compares to 14.5 times at the market’s top in the fall of 2000; meanwhile, credit spreads and volatility –expressions of copious complacency — remain at record low levels.
Here are some reasons we’re at such a precarious point.
1. Brokerages and money center banks are rolling over badly and remain a negative short-term market tell.
2. Hedge fund net-long invested levels (61%) are at the highest level and the AAII survey has bears at the lowest level since December 2004.
3. The daytrading in the Chinese market has begun to eerily resemble daytrading in the Nasdaq, which peaked seven years ago. (The more things change, the more they are the same, though the location changes.)
4. Virtually every hedge fund has the yen carry trade on its books, and recent signs in the currency markets indicate that the trade is getting less compelling. (If it does begin to unfold, the young hot money — especially in the emerging markets like China — could reverse in a nanosecond).
5. Further signs of speculation are the press mentions (and market reactions) of far-fetched takeovers. A classic example was Monday’s item in England’s Sunday Express that Dow Chemical (DOW) might be acquired by a private-equity group. The shares briefly rose by 8% in response.
Two weeks ago, England’s Times of London published a report that Countrywide Financial (CFC) would be acquired by Bank of America (BAC) . Again, the shares rose by nearly 10%, though they have subsequently declined by nearly 15% as subprime problems have grown. The outsize reactions to less-than-legitimate sources is typical these days.
6. History shows that four-year extensions of bull markets, out of deep oversolds, often morph into disaster: 1932-36 (1937 crash); 1957-61 (1962 crash); and 1982-86 (1987 crash). We’re well into four years in the current stretch.
7. Writing again on history (and technical voodoo), over the last century every decade has seen a market crash/deep correction in the sixth or seventh year of that decade.
Above all, the lifeblood of the bull market is the availability of credit, and the subprime issues (dismissed by most, not surprisingly) are putting a halt to lending that for years has disregarded creditworthiness and plain common sense. As night follows day, personal spending will plunge just at a time when most believe the consumer is invincible.
The opportunities on the short side have never been more attractive, just as the signs of a breakdown of the impressive bull market run have started to appear — a potentially lethal combination.
——————————————————————————–
At time of publication, Kass and/or his funds were short CFC, although holdings can change at any time.
Just got back from the market…had to buy extra popcorn for tonight. Blathering Pundits, Ben’s Blog and single malt scotch
http://articles.moneycentral.msn.com/Investing/JubaksJournal/DebtMarketBombCouldHurtUsAll.aspx
“…leaving homeowners or investors fully exposed to the risks of their behavior”
Yes, Neil… I Do indeed have popcorn!
I love some of these observations - I was particularly interested in this one, myself:
“History shows that four-year extensions of bull markets, out of deep oversolds, often morph into disaster: 1932-36 (1937 crash); 1957-61 (1962 crash); and 1982-86 (1987 crash). We’re well into four years in the current stretch.”
HMB is getting crushed today! Mortgage Meltdownnnnnnnnnnnnnnn!
NYSE up down vol. now 77/1
I’m out of 50% of my puts. Riding the remainder with zero cost basis plus some $$$
75% out of my puts. Going to be 100% out if the Dow drops another 50 points. You don’t get days like this very often. My year is about made.
Mortgage-originator stocks are actually relatively strong today. Weird.
That’s a response to the existing home sales numbers, I would guess, speculated on that earlier this a.m. on another thread.
Amazing. Those month-to-month home numbers weren’t good — just better than expected. And year-over-year they were simply bad.
Right but what was the price of those originators discounting?
Note to self — next time investing in puts, add 50% to estimated time horizon when market blows up…
Haha, I need the same advice.
My short sells (homebuilders) finally paying off… I have no problem making money on the long side, but I gotta admit, there’s a certain added pleasure to be making money when everyone else is panicing as the market tanks.
“Dow drops over 500 points”
Coincidental that Black Monday’s drop was (roughly) 500 pts?
Percentage drop is what matters, not absolute value.
Yes and no. To you and me, it is about percentage drop, but the headline number is in points (and it would make a bad headline if there were a larger nominal point drop than on Black Monday, wouldn’t it?).
Yes - it would make a bad headline.
I heard the dow dropped 200 in about a minite. It was down -550 before closing down 416 for the day. Already the AM radio talking heads are talking as if it was an overdue ‘correction’, and not one mention of the subprime meltdown as a possible contributing factor.
Good article on why first-time buyers will do better if they bought homes paying the traditional 20% down:
Analysis of this spring-selling season
It’ll be great when this kind of info becomes the mantra about home buying again. Sanity, here we come.
Fellow bloggers,
I need a bit of help here. Doesn’t someone here keep a running tab on subprime lenders that bite the dust? I searched through previous posts but couldn’t find it. If someone can point me in the right direction, I could settle a little office dispute. TIA
http://ml-implode.com/
Thanks PS !!
Thanks PS - this is great!
Thanks for reading Irwin, everyone here has been saying this situation would come to pass for more than a year.
**********
“Here is the rub: if the Fed slows money growth enough to starve inflation, short-term interest rates will rise further, thereby exacerbating the decline in housing. If the Fed does nothing to rein in the money supply, it will have a credibility problem when it comes to inflation and long-term rates will soar.”
From:
“IRWIN KELLNER
An inconvenient truth
Commentary: The Fed is facing a tough choice
By Dr. Irwin Kellner, MarketWatch
Last Update: 10:15 AM ET Feb 27, 2007
HEMPSTEAD, N.Y. (MarketWatch) — Like it or not, the Federal Reserve is going to have to choose between growth and inflation — a tough call in anyone’s book.”
http://www.marketwatch.com/news/story/fed-facing-inconvenient-truth/story.aspx?guid=%7BC1BCBD83%2D698A%2D4476%2D8D46%2D39F66D9002F1%7D
Chimpo sez:
But there’s another difference now. You can force the market down. The old rules put into place in the 1930s, the ones that were meant to stop motivated sellers from breaking the market are all gone now, taken out by a complacent Securities and Exchange Commission that never dreamed of what could happen today. My sources indicate that a big options trade went awry and some concentrated ETF selling simply cut through this market as easily as a knife through butter.
If that’s true, I’m glad I sold those puts. They’ll make the buyers sorry in the next day or two.
Txchick et al.
My trailing stop bounced me out of my TOL short at 30.60 near market close. I’d look at shorting again around 31.20 on a bounce tomorrow. Are you saying the action mañana is going to correct the correction?
Additionally, I would think that additional shorts of lender may be a no lose proposition because if new home sales come in better than expected then the lenders will bounce and recede, one can sell the bounce. If new home sales come in poor, then the lenders will play catch up with todays action, so sell in the am.
Thoughts?
and here’s one for Jas Jain:
http://www.hinduonnet.com/fline/stories/20070309003802500.htm
About what happened on the stock market today… please forgive my ignorance but can someone please tell me how this will effect the average working person/consumer and the housing market? Does this mean people will lose jobs? Stores will close? Will there be a recession?
IMO Joe and Jane6 will see this as a danger signal that the economy is going south and the peeps just barely hanging on to their homes will try to unload the alligator.
today’s stock selloff is the event that will trigger the panic. It will be interesting to see how the REIC shills are going to spin this one to their advantage.
Won’t they just use it as “proof” that homes are better investment than the stock market?
I mean that’s what the’ve been pushing all along, homes as investment rather than as places to live. It’s worked like a charm for them the past 10 years. They’ll probably give it one more go.
Hopefully, fewer people will fall for it this time around, given what’s been happening the past few months. Barring that (fewer people falling for it), hopefully new lending criteria, lame though it still is, will prevent some homebuyer hopefuls from getting back in.
Good chance that this is the beginning of a deflationary depression, because the decline was across the board, not just any sector. Commodities went down big also.
If the wars in Iraq and Afghanistan end in defeat, things could get wild.
I’m hoping for the worst, so I may be biased.
Don’t pay so much attention to the commodities’ minor drop. They will take off like a rocket when the debt markets fall apart. Inflation will be the order of the day, then perhaps deflation.
Here is a question for either current or future economic policymakers: Are sandpile effects mitigated or worsened by volatility smoothing? I have my own prejudices about the answer, but I am curious what the going beliefs are on this subject? In particular, does anyone working at the Fed or Treas even have a clue about what a sandpile effect is, or why one might want to avoid creating a really big one?
From the February 27th Executive Alert Service:
Japanese rate hike could bring down system.
Although the major financial press on Feb. 21 responded to the one-quarter-point interest-rate rise in Japan, downplaying its significance, in reality, it could spell the beginning of the end of the system. Contrary to such illusions, as one Continental European banker told this news service, “There is nothing in the global financial system, that is not ultimately connected to this yen carry-trade.” According to one U.S. economist, commenting on US economist Lyndon LaRouche’s warning of a coming crash, the interest-rate hike could have a massive impact. There are, worldwide, between $500 and $600 billion in investments outside Japan, which are owned on the basis of borrowed—“carried”—yen. If the yen now starts to rise, on the basis of the rise in interest rates, the effect would be much greater than 0.25%. The Federal Reserve, has reportedly already begun to respond to this, by printing money at such a rate, that M3 is estimated, by at least one analyst, to be growing faster than 11% annually. The main beneficiaries of the carry trade are the big banks, hedge funds, and equity funds, whose derivatives trading has led recently to a worldwide pyramiding of all segments of the market. For the bubble to survive, it must grow, i.e., make profits, and for this, a continuous flow of liquidity is required. Otherwise, the bubble pops. At the center of this blob of hedge funds are the British. The Feb. 3-9 issue of the London Economist spelled it out explicitly, in an article headlined “Britannia Redux: As pecial report on Britain.” It stated that the City of London is the world’s financial center and center of the revived British Empire, in the form of globalization. Alongside the City, there is the Commonwealth, with locations like Bermuda and the Bahamas, as well as Cayman Islands, a British Crown colony, which functions as the capital of the hedge funds. According to the Cayman Islands Monetary Authority (CIMA), 7,481 of the 9,000 worldwide hedge funds are registered in the Cayman Islands. These so called offshore markets are subject to no banking oversight or regulation on the part of central banks or governments. In 1993, the Mutual Fund Law was passed, according to which the simplified establishment or registration of hedge funds in a deregulated system should be facilitated. The goal was that the Cayman Islands, which have already been, since the beginning of the bubble economy, an El Dorado of uncontrolled credit creation, should be made into even more of a pivot of the “finance industry.”
A heads up to all you bloggers on here: there is a historical correlation between today’s record volume (4.24 Bln. shares, previous record 3.8 Bln. shares) and the crashes of 1929 and 1987. Both 1929 and 1987 crashes were preceded, by two days, by a NEW record volume day. If today bore any historical correlation, and I believe it likely will, the big fall will be THURSDAY.
FMT to delay earnings release and 10K filing.
http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070228:MTFH00249_2007-02-28_01-40-24_N27245093&type=comktNews&rpc=44
http://finance.yahoo.com/intlindices?e=asia
Asian Stocks getting killed again today in early trading…
Stocks will bounc today but the long term trend is down. At least till things correct. Asset prices are way over inflated. All those private equity deals are going to come back to haunt these buyout firms. They thing they are smart lol
As one person told me.. to be lucky and think YOU’RE good is bad. Well we have a lot of people who have been lucky and think they’re GOOD, till one day they aren’t and they lose it all.
The smart money is getting out… it might jump back in today but only for a short period.