Bits Bucket And Craigslist Finds For June 22, 2007
Please post off-topic ideas, links and Craigslist finds here.
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
Please post off-topic ideas, links and Craigslist finds here.
Tip of the iceburg.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKltYe1AuvX0
Why does the name Titanic come to mind?
When all of this shakes out -maybe in 09, we ought to gather a list of how many self-deluded prognosticators proclaimed “the worst of it is over”
I think it would be easier to create a list of peopel that were telling the truth, rather than a list of liars.
Or “people” even.
This is interesting.
“Losses in the U.S. mortgage market may be the “tip of the iceberg,” Bank of America Corp. analysts said today in a note for clients.”
A bit of a contradiction from BOA just yesterday…
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aN64WudO99kM
“The worst U.S. housing slump in 16 years will begin to ease in the next month or two, and job growth will lift home prices and spur construction early next year, Bank of America Corp. Chief Executive Officer Kenneth Lewis said.”
cynical:
look at the difference in their AUDIENCE.
audience #1: their paid clients. They give them a little truth since the investors will only keep paying if they can invest using this advice.
audience #2: the sheople. They lie to get them to take out a mortgage, and to have faith in BofA stock price.
Exactly. They have a legal duty to audience no. 1
Great Points.
Check this one out. Either Lewis sure changes his tune fast, or he changes his speech based on audience (as you suggested):
From May 9th:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aq35YzpEUzBE&refer=home
Bank of America Corp. Chief Executive Officer Ken Lewis said a so-called credit bubble is about to break after six years of historically low interest rates and relaxed lending criteria.
I guess this will help the housing market?
Another Ken L. *chortle*
Great Catch CG. It’s great to have “experts” on the case.
This is off of Russ Winter’s site last night.
Looks like somebody besides the retail public will have to eat this caca.
Bear Stearns to cancel Everquest IPO
June 21 2007 23:36
Bear Stearns has called off a planned public offering for a fund holding complex debt securities backed by subprime mortgages, amid a crisis at two other related funds managed by Bear that created turmoil in the market for such risky assets.
The two stricken hedge funds, both run by Ralph Cioffi, Bear Stearns managing director, had close ties with the proposed listing vehicle Everquest Financial, also managed by Mr Cioffi.
The funds had transferred to Everquest the riskier parts of complex collateralised debt obligations, which package portfolios of debt into high-yielding securities, when the company was established last year, according to the IPO filing. Everquest secured a $200m line of credit from Citigroup.
Posted
There is a link but it didn’t come through, I’ll see if I can pull it up.
http://www.ft.com/cms/s/f7b13cda-2046-11dc-9eb1-000b5df10621,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html
Hope this works OK?
if I remember, didn’t merril seize the good stuff and couldn’t get a good price? everquest, I believe, got the crappy stuff.
insert your imagination.
it’s too early for popcorn.
Another tidbit from Winter’s blog.
NEW YORK/BOSTON , June 21 (Reuters) - Brokerage firm Brookstreet Securities Corp. said it may have to shut down in the wake of a severe liquidity crisis sparked by losses on collateralized mortgage obligations.
“Disaster, the firm may be forced to close …,” the Irvine, California-based company told employees in an e-mail on Wednesday
And the hits just keep on comin’….
Why does it always seem bad news seems to follow with more bad news. My 1 year chart of Pulte (PHM) on Big Charts gives the visual of where we are heading. Pulte sold for $5 a share in the 1998 bubble and is at $24 today, down from $50. Watch out below!
News is always best at the top and worst at the bottom.
I’m trying to see if I can short sell the Blackstone stock. Hahahah. Expensive!
I tried to short - LOL - you were borrowing ahead of me.
I can’t wait to see it trade under the offering price.
Just sold at 35.50
Initial indications were a range of $40-45, and they let a few electronic trades slip through in that range. But downward preasure was obvious, so the “reassessed the range” and are going to back out those initial $40-45 trades. Didn’t want the headline to be that the stock fell from its open on the first day of trading.
The official open was $36.45 right?
Now down in the $35.60 area.
How soon before it is under the $31 where insiders got to buy last night?
Probably not today. Monday or Tuesday so that todays buyers do not feel they were suckers.
“Disaster, the firm may be forced to close …,” the Irvine, California-based company told employees in an e-mail on Wednesday ”
It seems like all of Irvine CA will be closed in a couple of years.
Ever-Questing for bailouts.
Most - 55 percent - are confident that their homes continued to increase in value compared with a year ago, according to a nationwide telephone survey conducted this month
http://biz.yahoo.com/cnnm/070621/062107_housing_perception_gap.html?.v=1&.pf=real-estate
I don’t think most people even believe there is a slump yet!
Perhaps Lewis doesn’t read his own company’s analysis?
Bear Stearns should think long and hard about how this loan affects the bankruptcy remote status of the hedge fund. The rating agencies may have been slow to react on the CDO ratings, but they could quickly downgrade BS. In effect, the loan, in and of itself, seems only to increase the chances that this could become systemic because now BS is directly on the line for a big chunk of the loss with all of the attendant moral hazard risks.
Can you imagine if all the compensation and internal assumptions for that compensation comes out? The lawyers will have a field day!
There’s an attorney general somewhere with presidential aspirations who is all over this, I’m sure, on behalf of some state pension fund.
The AG in Ohio has been behaving like an Elliott Spitzer wannabe by suing several subprime lenders — this would seem to be right up his alley.
“Home owners who can’t afford to pay higher interest rates may struggle to sell their properties as the rate of house price increases slows, ”
Rate of price increase slows = bottom falling out….
When your eCONomy is based on flipping homes and refinancing debt you have no real economy, or at least its smaller than it appears.
Margin calls on subprime securities take down a CA broker/dealer-
http://www.latimes.com/business/la-fi-brookstreet22jun22,1,3414975.story?coll=la-headlines-business&ctrack=1&cset=true
Bear Stearns Plans $3.2 Billion Bail Out / Largest since LTCM
Bear Stearns Plans $3.2 Billion Fund Rescue to Halt Fire Sale
Bear Stearns Cos. plans to take on $3.2 billion of loans to stop creditors from seizing assets of one of its money-losing hedge funds in the biggest fund bailout since 1998, people with knowledge of the proposal said.
Largest Since LTCM
“The problem is not what we see happening, but what we don’t see,” said Joseph Mason, associate professor of finance at Drexel University in Philadelphia and co-author of an 84-page study this year on the CDO market. “We don’t know the price of these assets. We don’t know which banks are exposed to this sector. These conditions are the classic conditions for financial crises across history.”
The bailout of the fund would be the largest since Long- Term Capital Management LP, which received $3.625 billion from 14 lenders in 1998. After Long-Term Capital, run by John Meriwether, lost $4.6 billion, lenders including Merrill and Bear Stearns agreed to take a stake in the Greenwich, Connecticut-based fund.
The Bear Stearns funds had borrowed $9 billion and made bets of more than $11 billion, one person said. Aside from Merrill, Lehman and JPMorgan, other creditors included Goldman Sachs Group Inc., Citigroup Inc. and Cantor Fitzgerald LP, all in New York. Bank of America Corp., based in Charlotte, North Carolina, Barclays Plc in London and Frankfurt-based Deutsche Bank AG were the other lenders.
“Bear Stearns Cos. plans to take on $3.2 billion of loans to stop creditors from seizing assets of one of its money-losing hedge funds in the biggest fund bailout since 1998, people with knowledge of the proposal said.”
Is this saying that the Bear Sterns’ common stock/bond holders are bailing out the shareholders of the hedge fund?
Yeah, figured that might happen. They have to, the lawsuits would swamp the firm.
Assholes, let’s see the bonuses for this year!
Piper Jaffrey did that in the 1990’s when one of their money market funds went negative.
another really sleazy outfit
Pulte Homes (PHM) is really tanking from the Bear Stearns meltdown. at 1PM Eastern. Breaking thru 52 week low everyday. They might finally get the message, STOP building any more homes.
would be wonderful to know what the terms of the loans are — are they subprimey?
Why would anyone give them a loan? It makes no sense.
In this day and age, you have to ask that???
It’s as Trump said 15 years ago..
When you owe the bank $500,000, they own you.
When you owe the bank $500,000,000, you own them.
True then, true now.
you own them. ??
Much truth to that…In the downturn of the early 90’s, a industrial development guy I know had multiple buildings with over a mil sq ft of space here in the valley…Some leased and some vacant…He went to his lender and told them this is what I want (Lower rates, deferred payments etc.)…If you don’t, I am handing you back the buildings….The banks caved….
I know a commercial landlord who tried that with a lender. Since he was a small-timer, the bank promptly mailed him a deed-in-lieu to sign.
That is so true. The greater debt you have, the greater the leverage you have.
That is so true. The greater debt you have, the greater the leverage you have.
That is so true. The greater debt you have, the greater the leverage you have.
Oops, sorry about that!
A leveraged response?
And it is working for the little guy too. If you have equity in your house, but poor credit and your ARM is resetting, the bank owns you. If you are significantly upside-down, poor credit, and ARM resetting, you own the bank.
it makes sense in the fact that all those others probably think subprime is contained. the conspiracy theorist in me says they have loaned money to others, and have their own funds, and don’t want these securities sold at “firesale” or revalued.
Or their compensation disclosed. The “investors” will spaz out.
So all these CDO’s built around the subprime caca is going to be locked away like your crazy uncle in the attic?
Gawd, I’ve love to be a fly on the wall while they try to figure out what to do with that. Lots of name calling, objects hitting the wall, etc.
“…and don’t want these securities sold at “firesale” or revalued.”
This is why I think that the secondary market is not where we will see the CDOs go down in flames. IMHO it will be the primary market- when securitzers make a CDO and try to sell the bonds, or put together a REMIC and try to sell the tranches, and find they can’t get enough to make it worthwhile. That is where the mortgage-backed securities market will fail. The bagholders with the bonds (such as hedge funds) are going to try to keep them off the market- they are too illiquid now and would go for squat. I wonder if some pension funds have rules that will make them sell the bonds if they get a ratings downgrade below investment grade? That would be another price-setter…
Strangely Citygroup in Belgium(Europe) is giving 8% on a 3 month term account in euros to attract money from savers, as previously Deutsche bank did with 6% on short term. With a european short term interest rate around 4% it makes you think what’s behind it all. Preparing for liquidity problems?
http://www.citibank.be/promo/wealth2007/wealth_summer.asp?lang=nl
Wow. Liquidity crisis sounds plausible. I am often concerned for the markets from the beginning of summer until November. I wonder what this year’s crisis will be.
You’re seeing it.
“Bears Set to Roar” on Yahoo finance. Ha, wake me up when the Dow breaks 12,000
This year’s crisis… when Countrywide defaults on its service contracts. THAT would stick a fork in it…
very strange, I just negotiated rates for 2 month term deposits and the best available from the large Dutch banks is 3.7% (and that is high compared to the 2.4%-3.2% you get on an internet savings account).
Is Citygroup expecting to go bankrupt or something?
If you were in desperate straights and the only way of righting your ship financially, was to get money by offering a bit more than any other banking concern…
That’s what i’d do.
just heard from a friend in Belgium that Citi is advertising these 8% teaser rates with huge billboards along the highways. Sounds like they are desperate for cash
I’ve seen teaser rates in the US. 6 or 7% on a 3 mo CD. the catch is that you can only deposit $1000. so it looks like a loss-leader to me. Maybe that’s what’s going on.
The 8% world out there, has no limits on how much you can deposit…
Citi also just changed the terms on my cash back AMEX, 5% cash back reduced to 2%.
The ‘teaser’ rate is for 75.000 euro max per account, so multiplied by several thousand belgian savers who only get 1,5% on their normal savings account with ING, Dexia, Fortis, KBC,… it’s more than just teasing.
The ‘teaser’ rate is for 75.000 euro max per account, so multiplied by several thousand belgian savers who only get 1,5% on their normal savings account with ING, Dexia, Fortis, KBC,… it’s more than just teasing.
Wow. A spooky echo of the S and L madness, when they offered irresistable interest rates to suck in funds and stay alive a few more months, long enough for management to get out of Dodge with their pockets stuffed.
So, exactly WHO is making the loans to Bear Stearns? With what money?
Call your Congressional representative today and tell them you support bill #HR 2755 to abolish the Federal Reserve.
Wow , this Ron Paul is really on to something with HR 2755 http://www.dailypaul.com/node/374,
Too bad the American public hasn’t had enough hor$e$hit from their elected representatives… wait a minute…
It’s going to a seriously shallow pool, as all the Korporate Gamblers try and get their do re mi back…
Wait a second!
That pool was just a mirage, my bad.
Yep, like that glacial lake in Chile that just disappeared into the fissures underneath it.
“The problem is not what we see happening, but what we don’t see,’’…“We don’t know the price of these assets. We don’t know which banks are exposed”
Bugs: “eh, Foghorn…what didn’t you know & when didn’t you know it!”
Foghorn: “Now listen up here son…I tell ya I was bamboozled…it was that chicken hawk I tell ya…you gotta believe me…”
“The problem is not what we see happening, but what we don’t see,’’ said Joseph Mason, associate professor of finance at Drexel University in Philadelphia
“…there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns — the ones we don’t know we don’t know.” Don Rumsfeld
This may be the most incorrectly maligned quote in history. Don Rumsfeld’s quote should be pasted on the wall of every office. If you think you know all the right questions, you are going to get hosed ….
http://tinyurl.com/ynm9kv
Time for a perp walk perhaps…
Do you remember a few months ago, me saying that KPMG or someone had to distance themselves from this before this sort of thing happened to avoid becoming another Arthur Andersen? Ha, probably still won’t work.
That was my first job out of college, at KMPG, it was Peat Marwick at the time. Crappy place.
Fifteen years ago, I used to interact with auditors from Anderson, Price Waterhouse, and Coopers & Lybrand.
I was always left feeling very unimpressed. At the risk of being arrogant, my collegues and I forgot more, than they will ever know.
Those who can do, Do.
Those who can’t do,Teach.
Those who can’t teach, Consult/Audit.
I was gonna add a line about daytraders, but didn’t want to offend txchick, whose opinion here I very much appreciate.
I heard all those places are meat grinders.
Wonder why Rains name never comes up? I understood he has a monthly income of $120,000.00 a month+ after he lied/looted the place.
Let’s not make this a racial issue.
It will. This is all just starting to unravel. Give it time.
They’re trying to plug the leaks in the dike with this cheap money while they can. Interesting to see how fast the cheap money dries up now.
Is knife catching real? A Sacramento flipper had purchased a house in Dec 2005 for $499,000 and put $20,000 into fixing it up, then listed it for $589,000. It sat and went into foreclosure. It was bought 6 months ago, out of pre-foreclosure. The first lender got most of his money back, the 20% second mortgage lender got hosed. The investor rents the house for $1800/mon and probably has $1500/mon negative cash flow.
Update today: There are 4 houses listed on the same street and EVERY HOUSE is priced UNDER $450,000. The investor has lost $9,000 in negative cash flow and $25,000 in depriciation in 6 months.
Just another lesson to be very patient. The bottom will come in 2009 or later and it will probably be long and wide! No rush to buy anything today, as you are just throwing good money away.
To mangle a quote, “Sacramento is different… it is going to get pounded.”
They’ll have to rename it:
Sacrentmento
Excremento.
These amateur investors must believe NAR’s crap, “the market has bottomed out” and “worst is behind us”. One of my coworker has recently bought a condo. He does not have much exposure to real estate and financial market, so he believed the housing price will be flat, which, I think, is what his realtor told him. They will feel the pain of the falling knife sooner or later.
You wouldn’t believe how many homes have been sold in Santa Clara lately. It’s amazing how many people think that just because a $750,000 has dropped in price to $730,000 it automatically becomes a “deal”!
Yep — lots of room to drop. I’d wait to confirm the bottom (a couple years hence) by seeing prices starting to go up again over the course of a year, coupled with prices at least being close to what they can support as rentals.
We’re nowhere near any of that. We’re not even near enough to be thinking about it. People who are buying investment property (or making a real stretch to purchase a primary residence) just because they perceive prices are “down” 15 to 20% over the last couple years are in for some unpleasant suprises.
The only way I’d buy (or, in my case, upgrade) in this market was if I had identified a house I would be in for 10 years plus in a neighborhood I really liked, and I could easily swing the nut on a 30 year mortgage.
does anyone know what happened to Ivy Zelman? was she fired for telling it how it is? or did she leave of her own accord? where did she go? is she single?
You need to move to Utah first.
ROFL.
I just drooled coke zero on myself.
don’t tell my wife.
maybe she just quit. Being a sell-side analyst is a crappy job relative to just about every other “production” job on wall street. The hedge fund bid for talent is deep and very alluring…
From Mike Morgan’s website, who’s suing Lennar for building defective homes…
“June 11, 2007 - Credit Suisse’s Ivy Zelman, resigns. Less than two weeks after Lennar deposed Ivy Zelman in regard to the lawsuit Lennar has filed against me for mainting this website, she resigned her position with Credit Suisse. Ms. Zelman was ranked by the Institutional Investor as the top-ranked homebuilding industry analyst for seven of the last eight years.”
http://www.defective-homes.net/wallstreet
Wow, spike, you jumped in just ahead of me.
She got flamed for telling the truth. Seems to be the fashion these days for Wall Street and Washington.
Don’t worry, some hedge fund will grab her.
You’d be surprised at the brain power some of these funds will pay for. My sis used to be on retainer to a fellow who had a small fund, most of it his own skin. Her area of expertise is placing fashion retail and manufacturing management. The guy who hired her had the rather outmoded idea (sarcasm) that the quality or lack of it in the management of various companies might have something to do with how well the companies did. So he paid her to find out where the idiots and geniuses were working and what they might do at various companies.
I think spike66 has the link on that, something about the lawsuit between Lennar and Morgan, in which Ivy Zelman was deposed.
She’s available but I heard she has one hard and fast rule vis-a-vis dating,… NO FRENCH MEN!
out of touch with housing reality:
http://tinyurl.com/2ky388
Jeebus! Gotta be drugs or something.
58% of the populace hasn’t read a complete book since finishing HS.
What can you expect from American Idol/Wal-Mart Nation?
Where did you get that stat? Surely it isn’t so. Tell me it isn’t so. And they all vote. wow.
“Consumers don’t view blips in overall housing prices as a catastrophe”
The army wasn’t too worried about a few blips on the Opana point radar on Dec 7,1941 but they turned out to be a rather big deal.
“Consumers”
I hate this word. That’s how da Boyz see us, “consumers”.
? … I always thought Da Boys were the consumers and we are the cat food.
If all one knows is an increasing RE market (the younger folks), if one’s neighbors have been selling their houses for many multiples of what he paid for his own house 40 years ago (the older folks), and everybody is telling you that RE always goes up, it’s easy to understand why many people believe that their houses are always appreciating in value. Many folks forget the late 80s RE crash, weren’t a part of it, or never heard about it from the embarassed losers of the time. It’s why history repeats itself….
Face it. A lot of the buying public are “strung out” on medications or some version of “Soma”.
Watch out when the “Soma” supply runs out.
Testify, brothah! I think this is a huge part of the problem. In the words of Frank Zappa (American Drinks and Goes Home):
Do your job
Do it right
Life’s a ball
TV tonite!
Crapburner…
The night of the medicated dead?
Nahhhh…just “Feelies” from Brave New World, aladinsane.
Television, Britney Spears, and NASCAR just the Soma used today.
Do they know something we don’t know? Ha Ha!
do yourself a favor and read at least some of “fooled by randomness.” it pretty much describes a lot of the hedge fund masters of the universe, realtors, mortgage brokers, speculators and etc. you’ll recognize “john” and “carlos.”
good book in places, tough to read in others.
Most - 55 percent - are confident that their homes continued to increase in value compared with a year ago,”
99% of them are wrong
no oil rig = no chance
http://www.suntimes.com/classifieds/homes/homelife/438530,HOF-News-afford22w.article
“…in Chicago, the median home price is about $254,000. The salary needed to afford a median-priced home is $87,012, based on generally accepted responsible financial planning practices. These dictate home costs should equal no more than 28 percent of gross/net income plus property taxes and insurance. But the average office worker salary is $31,330.”
But the average office worker salary is $31,330.”
But his stated income is 87k. Bada bing.
Those suggested income levels ( -ie- home price no more than 3X income) can not be on an island as far as the economy goes. What chugged the economy along these past 4 years? Cutbacks happen on discretionary income purchases and that money is alloted for home costs? How will that help the economy?
Not only that, but is the average worker in Chicago an office worker?
I have to assume that “average office worker” means secretary, receptionist, assistant, etc.
I work in software so I’m way out of touch with reality on salaries, but it seems to me that if everyone in your office is making $30k a year it’s rather dumb to be paying downtown office rents.
I’d also like to point out that renting in Chicago doesn’t have the stigma attached to it that many places seem to have. It’s perfectly ok for a young “office worker” in Chicago to rent a tiny studio in Lincoln Park or Lakeview for much less than $1000/month, take the bus or train to work every day, and not own a car. $30k isn’t going to let you retire early, but people can save money every month while still living here - on that salary. And they don’t need to live in the ghetto either.
Apples to oranges. The real comparison should be to median household income, not worker income.
True but there are plenty of people buying $250,000+ one bedroom condos in the Chicago area on single income of $30K-$40K.
Suffolk County, Long Island New York…… Average Home price 2002 … 185k, 2007… 429k……
AVERAGE SALARY…. 32,000….. Chicago is MUCH cheaper, Plus we have the HIGHEST real estate taxes in the country@
“According to the US Department of Agriculture, about 86 million tons of corns could be used to make ethanol fuel between 2007 and 2008.
“The volume of domestic corn destined for ethanol will exceed the total corn exports from the US,” Abbassian said. ”
The UN food body official’s remarks came shortly after China imposed a moratorium on projects making ethanol fuel from corn and other basic food crops. The importance of corn in China’s food economy has prompted the government to ask companies to switch to non-basic food products such as cassava, sweet potato and cellulose to make ethanol fuel.
http://tinyurl.com/24bj9t
LOL! Perhaps a lot of the waste from the failed developments will end up in our gas tanks.
DEVELOPERS buy BUBBLE!
http://www.msnbc.msn.com/id/19055888
Wow, Bass put in $200 million. Sold for $50 million. That bubble popped….
Bet you don’t remember that 23M print of Disney stock in 2001 right after 9/11 out of the Bass Brothers account. I think it was Goldman who bought it and made who knows what on it it in minutes. They’re rich but flaky.
Let’s get Pauly Shore to do the sales pitch to prospects.
Market opened.
Blackstone down 5 from its initial offering, NYSE down 40, 10 year bond up to 5.20%. Gold, oil up. This is just the first 1/2 hour.
Bet the PPTeam gets in today for some H-E-A-V-Y action.
Sit back and make some popcorn.
Nope. No affordability issues in Chicago.
“…in Chicago, the median home price is about $254,000. The salary needed to afford a median-priced home is $87,012, based on generally accepted responsible financial planning practices. These dictate home costs should equal no more than 28 percent of gross/net income plus property taxes and insurance. But the average office worker salary is $31,330.”
sounds familiar: Netherlands median home price for april was EUR 254K and median income EUR 30,1K.
“Totally ignoring trend movements in money growth” would “entail, in my view, excessive and unreasonable risks,” Trichet said in a speech at the 100-year anniversary of the Swiss central bank in Zurich today. History shows that “an upswing in trend money growth points to the existence of upward medium to long- term risks to the inflation profile.”
The comments are Trichet’s strongest defense yet of the ECB’s strategy, which uses monetary indicators to predict future inflation. The U.S. Federal Reserve last year stopped reporting M3, the broadest measure of money in the economy, and has played down the significance of money-supply analysis in policy setting. Some ECB council members are also openly debating how to interpret M3, which in the euro-region is growing at close to the fastest pace in 24 years.
Trichet said while prolonged periods of low and stable inflation make it more difficult to interpret changes in M3, “the long-run relationship between money growth and subsequent inflation is still in the data.”
This is true “not only for the euro area, but also for the United States, where the stability of such a relationship has been most strongly questioned in the past,” he said. “Monetary indicators should not be hastily discarded when their link with inflation appears to have weakened.”
Fed’s Stance
Fed officials say they don’t use money supply as a prime indicator because its relationship with the broader U.S. economy is unstable. Chairman Ben S. Bernanke said in a Nov. 10 speech that’s because of innovation in financial products and special factors such as the fact that as much as two-thirds of American currency is held abroad.
“Although a heavy reliance on monetary aggregates as a guide to policy would seem to be unwise in the U.S. context, money growth may still contain important information about future economic developments,” Bernanke also said. “Attention to money growth is thus sensible as part of the eclectic modeling and forecasting framework used by the U.S. central bank.”
In the euro-region, M3 has expanded more than the 4.5 percent rate viewed by the ECB as non-inflationary in every month since May 2001. It increased 10.4 percent in April from a year earlier, close to the fastest growth in 24 years.
`Crucial Role’
Trichet said M3 growth “played a crucial role” in the ECB’s decision to start raising interest rates in December 2005. Its eight increases since then, taking the benchmark rate to a six-year high of 4 percent, have been `vindicated” by subsequent events, he said.
Still, the Italian central bank said in a research paper last month that the ECB may have overestimated inflationary pressures stemming from money-supply growth. ECB council member Christian Noyer has said the growth of hedge funds and other financial tools is distorting the data.
Global liquidity has swelled as low interest rates, particularly in Switzerland and Japan, pump cheap money into the world economy and both hedge funds and private equity use it to fund investments. ”
Bloomberg
http://tinyurl.com/342ktg
I used to get up every day in 2002 totally energized trying to figure out how to squeeze something out of that zero-liquidity market. I loved that market. These last 2-3 years have just been like a headache that won’t stop.
No kidding! And with John Fleming’s post about 8% yields on 3 month CD’s in Belgium, obviously there are worries about liquidity. I believe Trichet is correct and that increase in monetary supply increases inflation. We are in an 8%+ world wide interest rate environment and every day it is easier to get 8% + from insured investments.
TX I do not know how this financial crisis will begin or will end, but every country is prepared for the last financial crisis (1997). So I know the financial war will be fought on a new playing field. Possibly hard assets, possibly a collapse in the dollar and Euro, possibly 15 - 20% interest rates and possibly all of the above.
I just hope it happens before senility sets in for me and I can’t enjoy it
don’t pay too much attention to the 8%, it is nothing more than a teaser rate.
And even 8% nominal rates would still result in a negative yield with EU M3 surging at 10-12% yoy for the last five years. Although Trichet sounds a bit more sane in his speeches than the Bernanke crew, the financial madness in Euroland is just as bad as on the other side of the pond.
Absolutely true, but what it suggests is liquidity problems developing in the banking industry. A lot of European companies are having difficulty making their interest payments.
I sure hope there are liquidity problems: in that case the Dutch banks will have to cover, they have been keeping rates artificially low for years in order to prop up the mortgage/housing market. It is all financed by keeping savings rates below market. But up to now I have not seen one decent cash alternative (savings accounts, term deposits etc.) in Netherlands from a normal EU bank with rates above 3.7%.
8% three months fixed, max.75.000 euros per account, no further strings attached, is more than teasing. They reckon 1 in 3 leaves his money afterwards at lower rates(but still more than the local players). The other 2/3 will take the profit(no teasing, just real euros) and jump on other occasions.
As house prices fall and the deflation hits, will that affect mostly property and equitys while ignoring CPI, just happened as M3 surged uppward? Or will it be like housing markets, with speculation driven highflyers going up and EVERYONE seeing a piece of the great fall?
Third try.
And today, US Supreme Court raises bar against individual investors suing brokers for lost investments spurred by Enron collapse. Bush admin, Treasury, and Cueball Hank Paulson argued against allowing such lawsuits…poses “risk” to system.
With tiny Brookstreet wiped out and individual investors holding CMOs bagged, see how nicely the dots line up.
Ben,
all my posts re are being eaten.
Has anybody noticed that the realtors are really getting fed up with their sellers? I called a realtor the other day about a house that had been on the market for 6mos without a price reduction, and within 2 minutes, she went off about the seller not taking her pricing advice from the outset and about being unreasonable in their expectations (very, very well-off older folks). I only asked, “when was it listed?” Touchy-touchy….
Blackstone Shares “Soar” 20%
LOL!!!!!
Anyone remember the IPO of Corvis, or Sycamore Networks, or Silknet or TheStreet.com? Or Rambus for that matter? They were “soaring” 400-500%!
What does this tell us?
the party is over?
Market at saturation level?
That Blackstone isn’t as gullable as the rubes who sold their dotcoms.
I’m surprised it went through, considering their tax rate is going to double, and management fees were surpressed (it’s easier to take a pay cut when you’re going to be set in the IPO next year).
Hey, THEY decided to get a little cash out at the top. You really can’t blame them for that. I’ve certainly reballanced my 401k and done some “profit taking” as the analysts say.
do you guys ever wonder about the people on CNBC? they think the market will shrug off everything. not worried about housing, subprime, the trade deficit, the falling dollar and everything else. yet, raise(or it looks more like bring in line with what others pay)taxes and it’s the “war on prosperity” and the “war on the wealthy.” they suggest it could bring the market down.
Bubblevision is paid advertising. I can only watch it with the sound off.
If that’s what it takes, then begin the war on the wealthy. I doubt any of the other 99.9999% of America will cry much over it.
Testify, sistah! The French Revolution comes to the US. Get those guillotines sharpened (to be humane, make sure the blades were not manufactured in China) and have HBO set up a pay per view. A good venue would be that balcony where they ring the frickin’ bell on the NYSE.
On a serious note, I am NOT against people making money or becoming wealthy, provided the source of their wealth is something productive, innovative, works well, enhances the lives of others (besides themselves), creative, contributes to society, etc. Those are better folks than I am and I’ll be the first to admit it. They should make billions. I don’t mind people making money off productive investments, either. I hate parasites.
I’m watching a large, formerly innovative company slide because it is being dictated to by Wall Street, which basically told them to crap on its customers. Yeah, that oughta strengthen the share price. What’s even funnier is watching the company try to worm its way out of this. It came up with a bogus promotion the their customers KNOW is bogus. I was reading the discussion boards over their and some of the comments excoriating Wall Street ANALysts were most entertaining.
“over their”
Crikey. Over THERE.
RE: The French Revolution comes to the US.
Gotta tax resister guy holed up in NH right now with his dentist wife and Randy Weaver as an observer
Says he & his wife will come out in body bags before they’ll do their 5 years in jail for Fed income tax nonpayment.
Lottsa militia types milling around.
US Marshals ready to bring in the armoured cars and sniper teams.
Heil Hitler!
I’m with them philosophically . . .
Godwin’s Law — As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches one.
As does the probability of someone invoking Godwin’s Law…
The assignment of this already long-established Internet observation to himself by Godwin smacks of impertinence.
It is as if I were to put silence to those who dispute me by speaking the words “Ronin’s Law,” that sooner or later someone on the internet will arise to mean-spiritedly disagree with the level-headed savyness of my coolly-reflected observations on the universe.
Someone has to say it: TESTIFY, PALMETTO!
And if you ask me, all this evil ultimately results from central banks handing out money like free candy. They supposedly reduce the problem of financial panics (which may or may not be true), but the price is a stupider world. Who knows how much better the world might be right now if so many productive people hadn’t been seduced into unproductive activity.
Well let’s see, private equity guys are paying 15% on their gains, including service charges to their customers. Earnings: in the billions.
Cleaning woman,working 6 days a week,makes 32k, pays 25%, plus FICA.
Yeah, that’s fair and equitable. No complaints accepted, move along.
After working in Broadcast TV stations like Court TV and numerous others. I know there is a Bias in the media toward the happy side. It’s not repubs democrat liberal or conservative just a bias to THE BLAND type of reporting.
For examaple when Dr Kevorikan was on trial Court TV Almost NEVER had anyone on camera who thought what he did was the right thing to do. I volunteered to be the spokesman, Nancy Grace thought that i had valid points, but the CTV MGT was against Kevorkian and it showed.
I would not like to “live” like Thomas Youk dribbling and useless. But that is me, not you…ok?
Then after dealing with news people they don’t hire the brightest or the ones with critical thinking skills. Just the ones that can ad lib and read the telepromter without screwing up…Sorry folks IT IS HARD not everyone can do it…being under hot lights and a camera that is pointed at you. I think the Best i ever saw was Terry Moran now of Nightline, I was surprised he didn’t get the ABC nightly news anchor job, Maybe Nightline is a warm-up job.
And yet, they sneak in quips like… “Price target for Apple set at $150… Which is meaningless since every analyst sets price targets well above current level, even the stocks they recommend sell or undervalue…. According to the analysts, everything is always going up forever.”
But yeah, they have 1 job, and it isn’t providing financial information. It is about selling advertisement.
They had a guy on this morning during their “war on the wealthy” talking about how raising tax rate on Blackstone is an attack on wealth creation….
What wealth creation? Shipping jobs overseas, turning us into a nation of sales clerks, pouring cash into crazy credit that overinflated the housing market, allowing them to skim off a heavy layer of cream off forthemselve, before the whole economy is taken down by the implosion?
How to make ourselves rich while plunging the nation into The Greator Depression…
Nice… Yeah, we need to keep their tax rate low to encourage more of that kind of “wealth creation”.
The fall of Rome, Darrell. Live and in person.
Where did all the flat tax advocates run off to?
Heck, it’s not the flat-taxers I mind, it’s the goldbugs. I’ve TRIED spraying but it does no good.
I think the US has to work harder to compete with countries like the Netherlands that are setting up special tax laws that provide for just 0,1% tax on income from stocks etc. Even the 15% US tax is extremely unfavourable compared to that! Of course these special provisions only apply to the super-wealthy and they are arranged with hardly any mentioning from the media. Maybe Blackstone should move to the Netherlands - we also have a stock exchange that never prosecutes securities fraud etc. so I think they would like the playground here…
Darrell, regarding shipping jobs overseas, I follow them by investing in equities overseas. U.S. indices fall, overseas indices rise. What? me? Worry?
The Loan Spangled Banner
Oh, say can you see by the housing crash’s light
What so proudly we hailed at the subprime’s last gleaming?
Whose broad fraud and bright stars lost the perilous fight,
O’er the CDO’s we watched were so gallanting leaking?
And the rocket’s red glare, was gone and had turned to despair,
Gave proof through the night that a can of worms was still there.
Oh, say does that Loan Spangled Banner yet wave?
O’er the loaning to the sheep, and any old low wage slave.
Articles in SoCal:
The Desert Sun:
La Quinta homeowners allege fraud
“The homeowners are asking for a cancellation of their purchase agreements to recoup $20 million to $25 million.”
http://www.thedesertsun.com/apps/pbcs.dll/article?AID=/20070620/BUSINESS04/706200305/1043
LA Times:
Mortgage losses slam Irvine broker
“Disaster, the firm may be forced to close,” Stanley Brooks said in his e-mail to brokers Wednesday. “Today, the pricing system used by National Financial has reduced values in all collateralized mortgage obligations. Many of those accounts were on margin and have suffered horrendous markdowns.”
http://www.latimes.com/business/la-fi-brookstreet22jun22,1,3414975.story?coll=la-headlines-business
LA Times:
Owners still upbeat about homes’ value
“”Talk of declining average values of homes is not forcing a cutback in spending. It’s just not translated into the American psyche,” Silverstein said.”
http://www.latimes.com/business/la-fi-housing22jun22,1,6596176.story?coll=la-headlines-business
LA Times:
Applications for jobless benefits jump unexpectedly
“Although the big increase was unexpected, analysts said it did not change their view that the labor market remained healthy despite a yearlong economic slowdown caused by a steep slump in housing and troubles in the domestic auto industry.”
http://www.latimes.com/business/la-fi-econ22jun22,1,4950805.story?coll=la-headlines-business
LA Times:
New Century sued by ex-employees
“The employees want the court to rule that $43 million now held by a bank in a trust may only be used for payments to the employees.”
http://www.latimes.com/business/la-fi-wrap22.3jun22,1,1335901.story?coll=la-headlines-business
Ivy Zelman has left Credit Suisse:
http://calculatedrisk.blogspot.com/2007/06/ivy-zelman-departs-credit-suisse.html
Some of you may know her as a level headed voice in the wilderness on this whole credit mess, and one of the authors of the Credit Suisse report “Mortgage Liquidity du Jour: Underestimated No More” (caution, large PDF file):
http://www.billcara.com/CS%20Mar%2012%202007%20Mortgage%20and%20Housing.pdf
(This is the report from which we get the infamous mortgage reset chart, page 47)
Mortgage losses slam Irvine broker
http://tinyurl.com/2owjp4
updated info…
Brookstreet Securities Corp., an Irvine broker-dealer, has shut its doors, laid off 100 local employees and liquidated its assets because it is unable to meet margin calls on complex securities called collateralized mortgage obligations, the company’s spokeswoman Julie Mains told Register reporter John Gittelsohn today.
An email sent to employees summed up the situation as a “Disaster.”
“It’s heartbreaking,” Mains said.
She said the company went from $16 million in capital Friday to being $3 million underwater Wednesday because its clearing firm, National Financial Services, sold the securities, which had lost value as Wall Street confidence in Bear Stearns & Co’s hedge funds of mortgage-backed securities collapsed .
A spokesman for National Financial Services said it’s not his company’s fault that Brookstreet ran out of capital.
Mains said some of Brookstreet’s customers lost their entire investment and that the National Association of Securities Dealers ordered the company to liquidate its remaining accounts. She said Brookstreet clients should try to find another broker-dealer to take over their accounts.
“… some of Brookstreet’s customers lost their entire investment and that the National Association of Securities Dealers ordered the company to liquidate its remaining accounts. She said Brookstreet clients should try to find another broker-dealer to take over their accounts.
Might I suggest this Dealer: “Waste Management Disposal”
…More confetti fodder for this Autumn’s Doo Dah Parade!
Wealth creation at its finest…..
“the 17-year-old firm’s net worth had fallen from $11 million at the end of May to a negative $2.1 million.”
$13.1 million gone in 3 weeks, just in the company’s value.
Doesn’t say how much the investors lost but “Edwards said his firm had fielded similar complaints from at least half a dozen Brookstreet investors “from Hawaii to New York to Florida” who said they thought they owned safe investments but saw the value of their accounts drop sharply before they were liquidated.”
Drop sharply doesn’t sound good.
Tip of the iceberg
The bad advice keeps coming…
“Buying a home for the first time is a lot like bungee jumping, says Richard Cohen, author of “It’s Not About Rate: The Right Way to Get a Mortgage.”
“It’s scary and exciting at the same time” says Cohen, who has counseled hundreds of first-timers as a mortgage banker at Chicago Bancorp. “When you jump, you have to trust the equipment. When you buy a house, you have to trust your banker.”
Finding a lender to trust, in fact, is the first-time buyer’s first step, says Cohen, a resident of Chicago.
“Using the Internet to gather information is fine,” says Cohen.”But before you get a mortgage, you should establish a relationship with a loan officer in person.”
We quizzed Cohen for other tips for those jumping into the housing market for the first time.
Q. What advice do first-timers usually bring along from Mom and Dad and does listening to them make sense?
A. Mom and Dad tell them they have to put 20 percent down [for a mortgage down payment]. That’s not necessarily true anymore. Now there are all sorts of loans, with down payments as little as zero.
Q. What does your client counseling include?
A. I help them figure out a budget so they can determine if they can afford to buy a home. I tell them the differences between renting and owning.
When you rent, for example, the landlord fixes the broken window. When you own, you fix it. On the other hand, owning gives you tax advantages, especially because of the mortgage interest deduction.”
Here’s the link
http://tinyurl.com/yvyke7
What’s funny is this kind of advice giver is the kind a first timer is supposed to get to know and trust.
New Century sued by ex-employees
New Century Financial Corp., an Irvine-based sub-prime lender that is being liquidated, was sued by a group of more than 120 former employees contending that a $43-million trust fund should be used to pay their deferred compensation.
The employees are asking the U.S. Bankruptcy Court in Wilmington, Del., to treat their suit as a class action on behalf of more than 500 former New Century employees.
The suit says the pay plan is protected under the Employee Retirement Income Security Act. The employees want the court to rule that $43 million now held by a bank in a trust may only be used for payments to the employees.
Why is Lone Star working so hard to raise so much cash?
http://www.cnbc.com/id/19361078
“U.S. private equity firm Lone Star sold a 13.6% stake in Korea Exchange Bank (KEB) in an increased block trade, raising $1.28 billion, a source familiar with the deal said on Friday.”
“Lone Star Divests Other Assets
Lone Star also appeared to have sold its stake in Kukdong Engineering & Construction. In a filing made Korea’s Woongjin Holdings, it said it would buy 26.27 million shares in Kukdong for $712 million.
The private equity group has been cashing in on some of its investments in South Korea, with further plans to selloff leasing firm STARLease as early as Friday, the Reuters report said.”
Another hedge fund in trouble over CDO valuations?
Lone Star had been trying to sell its stake in KEB for a year and was being blocked by ROK.
“The Dallas-based fund manager has been ensnared in a series of legal disputes with Korean prosecutors and tax officials.
Local prosecutors alleged that former Korea Exchange Bank executives and government officials conspired in 2003 to undervalue the bank’s financial health so it would be eligible for a purchase by Lone Star. According to local regulations, a non-bank institution is not allowed to buy a Korean bank unless the bank’s health is extremely precarious, with its capital adequacy ratio, a gauge of a bank’s financial condition, below 8 percent.
The prosecutors failed to prove Lone Star executives were involved, but accused Lone Star senior executives of stock price manipulation when it bought the bank’s credit card unit in 2003.”
Bloomberg
“The investment fund took over Kukdong, which was then under court receivership, in 2003 for 170 billion won. Added to the 220 billion won in dividends it has earned so far, Lone Star will have earned 880 billion won through its purchase of the Korean builder, almost five times its original investment.”
Joong Ang Daily June 23, 2007
Lone Star buys companies mostly Korean ones to sell at a profit. You gotta sell to book a profit, and their investors aren’t generally in it for the long haul.
Another factor in the KEB sale, is that Korea decided that their stake in KEB was bought too cheaply so they trumped up some charges (perhaps valid ones) to force a sale. I doubt they have a CDO, they might issue a few though.
Lansner blog: Early June no better for local home sales
http://tinyurl.com/lzgbg
Right now we’ve got a nice double top setting up in the S&P
I’ll believe it when I see it though after this past year
Mortgage Insider: Mortgage fraud spiked in 2006, goverment data show
http://tinyurl.com/26dahk
I was looking at home prices recently, and was just outraged/amused at their stratospheric levels.
I then thought to myself, “You’re still stuck in a pre-2001 price mindset. Get with the times.”
Then I realized, “Well, my income and the median income still seems to be stuck in a pre-2001 mode then too.”
I realized that these stratospheric prices are a result of exotic financing. Who is getting rich off of this? Lenders. Builders. Real estate agents. Loan originators. Homeowners with a lot of equity who sold at a good time.
I refuse to play. Keeping my money in interest-bearing instruments will allow me to build “equity” until the prices become sustainable. At that point, I will convert a chunk of my savings into real estate.
Doing so now, in a stagnant/declining price environment, just bleeds my wealth away. It’s negative interest.
As previously pointed out….anybody can bid up the price of a house as long as there is ‘free’ $$$. With super low rates, Stated Income Loans (read ‘Liar Loans’), and flipping….it was a period of “free $$$.” Monopoly games see the price of houses/hotels/etc. bid up when the “bank” gives everybody playing more moola.
Still confused…..
Yesterday saw a big disconnect between rising bond rates and rising stock prices. Then this morning we get a big jump in the 10-year yield… and stock just shrug….
Then as we have rates in the 10-year fall back to yesterday’s close, stocks nose-dive.
WHAT THE???? Why the sudden disconnect?
Ohhhh… Bear Sterns delayed a conference call on what is going to happen with its troubled hedge funds… which caused nervousness and the drop in stock prices.
The markets now a based purely on the ability to continue to pretend that CDOs are worth much more than they are worth…Nice.
It seems that at least 50% of stock market value is based upon inflating the value of any assets that can be used a collateral for further loans. This doesn’t end well.
if i’m correct, the Housing Builders just went through the low of the last year and are sitting at the level last seen on Nov 1, 2001
UNBELIEVABLE!!! I just pulled into my hometown in Upstate New York after winding through 9 states.
I visited a relative in Waverly, OH and there were SPEC HOMES being built across from her house. SPEC HOMES in Waverly, Ohio!!!
Also, I call BS on “No bubble” in Buffalo, Rochester, Syracuse… For sale signs everywhere; even in “exclusive” Skaneateles, NY. I’ll get some photos.
Umm, I guess you hadn’t seen my recent posts that said after June 1st inventory exploded in the Syracuse region.
Still some movement…one of my friend’s very inexpensive home sold in 1/2 an hour a few weeks ago. That has to be a record for this small town.
If you’re in Skan, Muggy, take a ride over to Manlius. Reminds me of when I first got on this blog (about 16 mos ago) and checked out the photos coming from out west…..very bubblicious!
I give you my candidate for a woman on the ‘08 ticket.
http://chron.com/disp/story.mpl/front/4910228.html