Further Evidence Of Challenging & Uncertain Conditions
Some housing bubble news from Wall Street and Washington. Associated Press, “Homebuilder M/I Homes Inc. on Thursday withdrew its full-year earnings guidance and said it may book up to $75 million in charges in the second quarter, as the persistent housing-market slump led to lower deliveries. M/I…said falling home prices amid tepid demand makes it ‘difficult for us to predict either our new contracts or margins.’”
“The company joins a host of other builders that have pulled their financial targets for the year. Many have been forced to offer major price incentives to sell houses.”
“In the quarter, which ended June 30, M/I deliveries fell 24 percent to 755 homes from 987 a year ago. New contracts slipped 10 percent to 688.”
From Reuters. “‘Today’s announcement is further evidence of the challenging and uncertain conditions facing the home building industry,’ M/I CEO Robert Schottenstein said in a statement.”
“Conditions deteriorated in the second quarter as a result of credit tightening and difficulties in the subprime market, excess inventory of new and used homes, and weakening demand, the company said.”
“The average sales price of a home in backlog was $327,000, compared with $355,000 at the end of June 2006.”
The North County Times. “Some investors are skeptical that Accredited Home Lenders’ purchase by a Texas-based private equity fund will go through, analysts watching the company said Tuesday.”
“Some investors may think there’s a ‘ticking time bomb’ in Accredited loans yet to be discovered, said Bud Leedom, publisher of the California Stock Report.”
From Newsday. “American Home Mortgage Investment Corp., the Melville-based real estate investment trust, has laid off hundreds of workers without notice or even time to clear out their desks, current and former employees said this month.”
“The company, which holds diverse interests in mortgage-related securities and retail lending, was once considered a highflier, posting double-digit growth quarter after quarter in recent years.”
“But as things turned south for many housing-related businesses, American Home has offered what one analyst called ‘overly rosy’ earnings predictions.”
The Sydney Morning Herald. “A Sydney-based hedge fund manager that manages $US 2.5 billion has put a limit on withdrawals from two of its funds that invest in risky debt products known as collateralised debt obligations, expressing fears the funds would otherwise not survive.”
“Limits on withdrawals on the two Basis Capital Funds Management funds were imposed after the funds fell during June, by 14 per cent for the BasisYield Alpha Fund, and 9 per cent for the Basis Pac-Rim Opportunity Fund.”
“A newsletter distributed to unit holders said the imposition of withdrawal limits, known as gates, were ‘designed at inception to ensure [the funds'] survival through periods of extreme dislocation such as this.’”
“The newsletter specifically singled out credit ratings agencies’ moves to downgrade their ratings for risky debts, which are being repriced in the wake of large losses stemming from US ’subprime’ lending to householders.”
From Bloomberg. “TCW Group Inc. and GSC Partners created the most collateralized debt obligations that are now at risk of having their credit ratings slashed because they are backed by some of the worst-performing subprime mortgage bonds.”
“TCW of Los Angeles and GSC, a New York-based investment firm, manage 12 CDOs that will likely face ratings cut on a portion of the securities they issued, a report by Bear Stearns Cos.”
“TCW managed $27.6 billion in 29 CDOs containing asset-backed securities as of Dec. 31, according to S&P. Risk Magazine named TCW its 2006 ‘CDO Manager of the Year.’”
“‘Our transactions have a high subprime percentage and we were affected by the agencies’ re-rating of subprime,’ GSC Partners Managing Director Edward Steffelin said in an interview. The firm has ’steered away’ from securities backed by second- lien loans and mortgages to borrowers with good credit scores who decline to give information such as proof of income, he said.”
“Shares of some mortgage lenders fell Wednesday as investors worried that problems in the subprime mortgage market could spread more widely in the industry.”
“‘If it gets worse, the next area to see losses and price declines is the alt-A market,’ said Bose George, an analyst at Keefe, Bruyette & Woods Inc.”
“Rating agencies are likely to review bonds backed alt-A mortgages in the near future, said Scott Valentin, managing director of specialty finance research at Friedman, Billings, Ramsey & Co. ‘It probably will not be as bad as subprime, but there will likely be downgrades’ among alt-A-backed mortgage securities, Valentin said.”
“On Wall Street, where the $800 billion market for mortgage securities backed by subprime loans is coming unhinged, traders are belatedly acknowledging what they see isn’t what they get.”
“Some of the securities have already declined by more than 50 cents on the dollar in the past few months, according to data compiled by Merrill Lynch & Co.”
“One subprime mortgage bond, Structured Asset Investment Loan trust 2006-3 M7, was valued at about 91 cents on the dollar to yield 9.5 percent, according to the securities unit of Wachovia Corp. Wachovia today valued that security at 76 cents on the dollar for a yield of 15.9 percent, said spokeswoman Amy Jones. Merrill Lynch in New York puts the price of the same security at 67 cents to yield 18 percent. ”
“At least a third of hedge funds that invest in asset-backed bonds pick and choose values for their investment that help mask wide swings in performance, according to a survey of 1,000 funds worldwide by Paris-based Riskdata, a risk management firm for money managers.”
“‘If you have five different brokers you will get five different quotes, so if you don’t have an objective valuation process you can choose the quote which for you is the most interesting,’ said Olivier Le Marois, CEO of Riskdata. ‘There’s no consensus on where the market price is.’”
“More than a few investors would like to know what took the New York-based rating companies so long. ‘I track this market every single day and performance has been a disaster now for months,’ said Steven Eisman, who helps manage $6.5 billion at Frontpoint Partners, during a conference call hosted by S&P yesterday. ‘I’d like to understand why you made this move now when you could have done this months ago.’”
From Dow Jones. “Until now, the pricing of risks linked to housing and subprime mortgages remained something of a mystery, as risks remained hidden in the complex world of credit derivatives. But changes in ratings will force a re-pricing of the roughly $800 billion in subprime-mortgage bonds sitting in investment portfolios across the globe.”
“‘Whenever you have such a massive growth in derivatives, as we had with housing, it’s [used] to hide the losses,’ said Matt Smith of Smith Affiliated Capital. ‘Nobody knows the true counterparty risks.’”
“Some market players believe that, with the rating agencies making their moves so late in the game, they’re seeing a replay of the Enron and WorldCom debacles, which played significant parts in popping the 1990s stock-market bubble.”
“The rating agencies, then as now, have come under fire for changing their ratings only after the bad news was already out.”
“‘The credit agencies are always lagging,’ said Smith Affiliated Capital’s Matt Smith. ‘But the main difference between now and 2000 is that you could sell stocks quickly; for the real-estate market, it takes three or four years to unfold.’”
The New York Post. “FDIC Chairman Sheila Bair said she expects a CDO time bomb. ‘We’re going to see more downgrades,’ Bair said, adding that she expects the bad news to ‘creep into higher-rated’ securities.”
“Its going to get worse before it gets better. How much worse, I don’t know,’ Bair said.”
“Federal Reserve Governor Randall Kroszner on Thursday said the central bank is studying whether it can write rules to shield home buyers with blemished credit without choking off lending.”
“Banking supervisors are monitoring whether there may be any interruptions to liquidity in mortgage security markets as a result of turbulence over subprime mortgages, Kroszner said.”
“The market for repackaging subprime loans into mortgage backed securities ’seems to have been maintaining its liquidity reasonably well,’ he said. ‘The main difference is that the pricing has changed dramatically in this market, not only for the lowest rated tranches, but the highest rates tranches,’ he added.”
“The U.S. Securities and Exchange Commission adopted new rules ensuring it can sue hedge funds for misleading investors, following a court ruling that put in doubt the regulator’s authority over the $1.6 trillion industry.”
“The SEC barred hedge funds from lying about investing strategies, performance, a manager’s experience and the risks of putting money in a fund. SEC commissioners unanimously approved the rule at a public meeting in Washington.”
The LA Times. “Members of Congress on Wednesday had a message of caution for the booming, unregulated hedge fund industry: Proceed with care, because lawmakers are increasingly willing to clamp down to ensure integrity in the marketplace.”
“As warning signs, lawmakers cited the ongoing woes involving mortgage-based securities, the recent bailout of two hedge funds by Bear Stearns Cos. and an ill-fated investment by San Diego County’s retirement fund in the Amaranth Advisors hedge fund. Others on the panel expressed unhappiness about the widespread real estate foreclosures and mortgage delinquencies.”
“Rep. Barney Frank told reporters he might introduce legislation this year that would require hedge funds to save various documents, such as trading records and e-mail, that could be of use to law enforcement officials in cases of fraud.”
“Perrie Weiner, a partner with law firm DLA Piper in Los Angeles, termed such a mandate ‘extreme and unjustified’ and said document retention had never been an issue in cases he was familiar with.”
“‘It would create a new and unjustifiable burden on ordinary businesspeople that can only be viewed as a harbinger for an emerging witch hunt of epic proportions,’ he said.”
‘The main difference is that the pricing has changed dramatically in this market, not only for the lowest rated tranches, but the highest rates tranches’
Right. Given formerly inflated housing values, mortgage fraud that pushed loan values in excess of even that, and all the costs associated with forclosure, even the highest tranches are going to take some losses. People accepted nickels above Treasury yields going in, but will be lucky if they don’t end up with a negative return.
The lower tranches will be wiped out.
Interesting how the lower tranches have continually corrected from 95 or so in Dec 2006 to under 50 as of yesterday. I am expecting an echo lagged effect on home prices in bubble markets.
I thought I saw where Bear Sterns only got a bid of 11cents for their worst hedge fund and 85cents fir the best. They are not going to save the worst one. Chris Dodd of Conn., Schumer, NY, Corzine NJ and the rest of the Dem oinkers in the Senate who get millions from wall street aren’t going to kill the golden goose and the public be damned. They will protect, at all costs (with our tax money) the investment bankers and hedge funds. No help for the F’d borrowers, which is as it should be. They were all drinking kool aid and watching MTV when they should have been in school.
Pismoclain,
Corzine, is the governor of New Jersey, hasn’t been in the Senate for years.
Also, “Dem oinkers” protecting hedge funds?? Check your news sources…it is the admin that has opposed any tax increases for hedge fund managers, and did so again yesterday.
Also, in the recent Supreme Court judgement that ruled against individual investors suing Enron for fraud, it was the Admin, specifically, and cueball Paulson, who weighed in as friends of the court,arguing successfully that allowing ordinary folks who were screwed to sue would be “destabilizing”.
I’m no fan of either side, but if you call dems “oinkers” what measure of magnitude do you use for repubs?
Spike I agree, they are all oinkers, however, Corzine made his money at GS as did Paulsen, and put up $56 million of his own when he ran for NJ gov. Looking up Dodd and Schumer ‘reported’ contributions show millions from investment banks and hedges. The MTV , earth firster, and gobal warming idiots are still screwed, which is as it should be. Darwin’s theory is shown to be correct in our lifetime.
when you play big money, little guys loose, not the other way around..
Recall that when most of these things were being packaged and sold, L-T interest rates were low and trending lower, with the 10-year at around 4.5, and people were climbing over themselves reaching for yield to buy the riskiest and longest-dated tranches they could find. Which is in fact why the loan fraud got so out of hand.
The ABX AA just took a huge dive-
http://www.markit.com/information/affiliations/abx
Some of the comments are priceless..
http://blogs.wsj.com/economics/2007/07/10/report-illegal-hispanics-bear-housing-slump-brunt/
Deutsche Bank estimate construction employment should have fallen about 900,000 since early 2006 when in fact it’s only down 150,000. They conclude 500,000 of the unexplained gap is attributable to layoffs of illegal Hispanic workers. They say this means, first, that there is not a surge of job losses waiting to show up in the data. But it also means the job market is not as tight as the low unemployment rate suggests. They say the unemployment rate would be closer to 5% than its current 4.5% if these layoffs were properly accounted for.
Palmetto
Thanks for the post! This explains exactly the situation here in So Cal. The CNBC, Business Hour jokers are so far removed from the man on the street, who can see and feel what the true state of the economy is. Housing ran the economy for the last 5 years and our own business community can’t see it … it takes the Germans to correctly call it.
You’re welcome, Sobay. I’m just glad to see the gamed data starting to look like swiss cheese and to get some factual data for a change. Distortion and deception have been the hallmarks of the bubble. Institutions like Deutsche Bank are not cheerleaders in the US and might have an interest in having the correct figures.
I think this is a reason that the EU are in a tightening phase, while the US lets interest rates stay artificially low. Somehow, we are becoming the economy of Japan…. think yen carry trade being dollar carry trade…
“Failure to pay alimony is a jailable offense…”
“What about loitering and tresspassing?”
Oh yeah? The reason that there is a yen carry trade is that Japan has a high positive savings rate and a trade surplus. They actually have something to lend, and they can lend it out at whatever rate they want.
As for dollars, the US cannot tell the Chinese, Japanese et al what interest rate they can charge to loan the US money. If the Fed tries to cut interest rates they will just stop lending - and that means loss of reserve currency status for the US$, which amounts to the end of superpower status for the US.
They sure are! I didn’t detect any of that “Illegals Are Doing Jobs Americans Won’t Do” rhetoric in them either.
I cover a lot of same-house sales in Northern VA on my blog, which involves looking up hundreds of transactions. Of all of the many short sales and foreclosures that are selling for huge discounts (30-40% off peak prices), I don’t think any were purchased by “Joe Smith” or “Mary Jones”. They all say “Jose” or “Fatima” on the transactions. Occasionally you’ll get a Mohammed or a Nguyn, but that’s rarer. The Washington Post interviewed a person who said “Everybody wants to leave Herndon” because the construction jobs are gone.
Arwen,
so when the bank forecloses or does a short sale, I guess the IRS is out of luck in trying to 1099 these folks for the difference.
And if Jose or Fatima got cash back at the closing, they’re golden.
Thanks Arwen U- never knew the blog existed and just forwarded it to a few friends.
I thought I was the only one who noticed that. I wasn’t sure if it was a sign of gullible immigrants or organized fraud in their part.
Speaking of Mexico, here is the latest on the SPP efforts.
http://www.augustreview.com/news_commentary/north_american_union/public_forums_denied_on_upcoming_spp_summit_2007071270/
“Its going to get worse before it gets better. How much worse, I don’t know,’ Bair said.”
If the bottom were in sight she would have said, “Not much worse.”
It’s gonna get waaaayy worse.
This strikes me as a ‘factual slip’ - saying way more than she meant to, or at the end of a particularly trying day simply saying exactly what she believed. Either way, one gem of a comment from behind the veil.
“Rep. Barney Frank told reporters he might introduce legislation this year that would require hedge funds to save various documents, such as trading records and e-mail, that could be of use to law enforcement officials in cases of fraud.”
“Perrie Weiner, a partner with law firm DLA Piper in Los Angeles, termed such a mandate ‘extreme and unjustified’ and said document retention had never been an issue in cases he was familiar with.”
“‘It would create a new and unjustifiable burden on ordinary businesspeople that can only be viewed as a harbinger for an emerging witch hunt of epic proportions,’ he said.”
“Ordinary businesspeople”. BWAHAHAHAHA! Let the hedgie witch hunt begin!
Yeah, cry me a river you friggen crooks. Document retention right down to phone calls is a piece of cake these days and hardly a burden. You creeps just don’t want EVIDENCE coming back to haunt you.
C’mon Palmetto, doesn’t your heart bleed for the wealthy pandering?? Have mercy on those abused rich folk.
Perrie Weiner (would that be pronounced “Whiner” or “Weener”) must be a real horse’s hindquarters. “Ordinary businesspeople”!! My patootie! I don’t get it. Any business I know of is required to keep some documentation for a certain amount of time. Certainly trading records. Why should hedge funds be any different? I have to keep records.
You know, though, my sis (who has done business with a hedge fund or two) told me that the reason entities like this can get away with it is that many members of the middle class support the breaks that the corporations and wealthy get, because they secretly think one day they just might be in the same bracket, so they want the same breaks to be there for them. Obviously Weiner knows this, so this ridiculous pronouncement is his way of getting his clients to “relate” to the middle income earners, who may ultimately have to judge his clients.
Palmetto-
I’ve often heard that insane reality too. Generally speaking, nobody believes the line “if you just work a little harder, you’ll be rich like me too”…. It was a snowjob started in 1981.
I’m tellin’ ya, my sis laughs like a hyena when she talks about this. Her clients are fully aware of this sentiment. What many middle income earners don’t realize that that both the wealthy parasites (as opposed to wealthy folks who are involved in actual production and deserve their wealth) and the lowlife/bum parasites alike profit at the expense of the middle income earners. In fact, as one poster here has pointed out, the book “Class” written in 1983 by Paul Fussell illustrates this situation perfectly.
I gotta check that out. Thanks.
“It was a snowjob started in 1981.”
No it was a snow job started in 1776. And has continued to grow in the national psyche for 200 years.
Goes back to the Federalist days…Americans would rather protect the possibility of becoming rich, than admit the reality of being poor. That’s a quote, but I can’t remember whose.
“Perhaps not. But don’t forget that most men without property would rather protect the possibility of becoming rich, than face the reality of being poor”.
John Dickinson in 1776 (movie)
with consumer sentiment at its lowest point in quite some time, and the notion that the market does well at these times simply confirms the “haves” and “have-nots” are playing different games..
people who made funny money in the housing bubble are now plugging it back into the stock market, its the same money that sold tech in 01. It does not matter that 07 earnings are priced in, lets look at 08. A voting year, Exec and Leg branches are split… nothing gets done.
Interest rates hold. Though they should move higher. Defeacto lowering as EU tightens.
I honestly believe that alternative energy is bubble-ing…
get on board or buy GineMay…
“nobody believes the line “if you just work a little harder, you’ll be rich like me too”…. ”
No one will probably believe this story but I’ll offer it anyway. Sometime in the mid 80s a couple in their late 50s came into the trust office where I worked. He had worked all his life in an administrative job with the Navy, as a civilian, his wife didn’t have a “career” (typical of that era).
Had several children, put them through college. Oh, and they’d invested in Pioneer and Templeton stock mutual funds religiously through about 30 years.
Had at least $250,000 saved. Blew me away. Around 1985.
Maybe most people can’t do this anymore but don’t believe for a minute that its impossible to have a reasonable life and also accumulate a fair amount of money. Nice, humble, people. It can be done. Over time.
We aren’t talking about the same thing. Saving and investing is what your talking about and it is a good thing. Palmetto and I was talking about the war on wage earners.
saving and investing are for wealth builders..
I hate that comment…I hear it way too much
Witch hunt indeed… consumer and securities fraud class actions and parties in various tiers of the CDO chain all suing each other, coming soon to a courthouse near you…
witch hunt, took the words right outa my mouth
Posted on these 5 homes sometime back
Realtor.com
Visalia Calif.
The original sales price of these homes were $649,000 to $700,000
These are the remaining empty ones that still sit to this day even after 23% price reductions (All listed at $499,000)
MLS numbers;
56278
52682
52685
52687
52688
BONUS: MLS# 59691 Owner occupied $669,000 (must be an included Lamborghini Murcielago in the garage)?
Oops first one should have read
MLS numbers;
52678
A $700,000 house in Visalia should come with 20 acres of walnuts.
LOL
Agreed. $700K? Man…..
if you made 150 to 200k in the bubble.
you are a housing bubble winner.
I personally know only one.
“Some investors are skeptical that Accredited Home Lenders’ purchase by a Texas-based private equity fund will go through, analysts watching the company said Tuesday.”
Don’t tell me there is not some private equity fund out there with sufficient liquidity in hand to snap up LEND?
“At least a third of hedge funds that invest in asset-backed bonds pick and choose values for their investment that help mask wide swings in performance, according to a survey of 1,000 funds worldwide by Paris-based Riskdata, a risk management firm for money managers.”
Are markets really too dumb to see through the mask?
Obviously … YES … early this morning, when the dismal consumer retail news was coming out, the market rose slightly and the headlines on MSN were … “Dow rises slightly on gleaning of better news out of the retail numbers” By the afternoon, there was no mention of the dismal retail news, or it was spun to sound like good news ( i believe that 3 or 4 out of the reporting entities had some kinda’ sorta’ good news … good news was interpreted as ” the news wasn’t as bad as expected!”) I mean - this market is nuts… the market rises on any kind of news - goo or bad - the gov’t has obviously printed SO MUCH MONEY that the market has to rise on any and all news - the money has to go somewhere - it is sick - My personal supposition is that the elimination of M3 and the mass printing of dollars in it’s wake has created a market that is deaf, dumb and blind. Every finance show I watch or listen to is stunned and amazed at the conundrum’s that are happening - and that tells me that the whole system is out of whack - awash in worthless dollars - we have an enormous, unreported inflation of the dollar that will tick until joe-six-pack figues it out. Then it will explode and cause mass pain. While this process is going on, all the finance guys can say is “follow the money” because the money keeps pouring into the markets and creating something out of nothing.
“Federal Reserve Governor Randall Kroszner on Thursday said the central bank is studying whether it can write rules to shield home buyers with blemished credit without choking off lending.”
Why wouldn’t a conservative banker want to shield lenders and investors from home buyers with blemished credit? Has the banking industry been completely stood on its head by the Fed?
because a guy protects his enemy..from a friend?
Textlbook definition for:
“The cow’s out of the barn.”
“The SEC barred hedge funds from lying about investing strategies, performance, a manager’s experience and the risks of putting money in a fund. SEC commissioners unanimously approved the rule at a public meeting in Washington.”
Wonderful, the SEC declared that hedge fund managers are not allowed to do what already was illegal (statutory and common law fraud). Does this mean such managers now have a defense to any fraud complaints based on actions taken prior to the SEC pronouncement?
Please invest in my head-ge fund…
Sincerely,
Icarus Investments, Inc.
http://www.latein-pagina.de/ovid/pic_ovid_8/daedalus_icarus_vs8.jpg
Fitch Sees Rising Shakiness In Commercial Mortgage Arena
By Ryan Chittum and Jennifer S. Forsyth
http://tinyurl.com/26vu5g
…“the imposition of withdrawal limits, known as gates”
Yes, the “gates” are closed… and then…”it went dark”
“…were ‘designed at inception to ensure [the funds’] survival through periods of extreme dislocation such as this.”
Dislocation?… remember, they bought: location, location, location!
get me in..
how hard…
sideways.
Buggs to Daffy..”are ya yuzzin the whole beak?”
http://www.financialsense.com/editorials/willett/2007/0712.html
“WHERE ARE ALL THE HOMEBUILDER BARGAINS?”
Informative write-up on the homebuilders, but the one thing that really caught my eye was:
June 27, 2007: Toll Brothers eyes China home market Reuters, Robert Toll: “We’ll concentrate on the China market a little bit, and then we will explore India and Korea.”
That’s just too funny…..
Good. I’d love to see Toll pull the same shenanigans in China. Didn’t they just execute the head of their food and drug administration for dishonesty?
BTW, if I were king, I’d strip every one of these “corporatists” or “globalistas” of their US Citizenship and exile them to Asia where they can spend the rest of their lives paying their pirated profits to bribe officials to keep them out of jail. And when the money runs out, maybe they can find the true meaning of “explore” in the Black Hole of Calcutta.
Hear hear.
But if you were King, these guys would just try and replace you. Time for a heavy-hand, Your Grace. Show no mercy.
The Down Under way of playing the Blame Game…
Blame it on the..
Up Over
The Sydney Morning Herald. “A Sydney-based hedge fund manager that manages $US 2.5 billion has put a limit on withdrawals from two of its funds that invest in risky debt products known as collateralised debt obligations, expressing fears the funds would otherwise not survive.”
“The newsletter specifically singled out credit ratings agencies’ moves to downgrade their ratings for risky debts, which are being repriced in the wake of large losses stemming from US ’subprime’ lending to householders.”
give uz zee money, Lebowski
next line?>
US$ index bouncing on the 80 line, gold banging it’s head against 670 and DOW going crazy… I’m starting to believe that this Friday the 13th could be a very interesting one indeed.
Something reeks about the stock market today…
Hear those helicopters? They just dumped a bunch of money on the market. ‘I love the smell of napalm in the morning…’
I heard that there is secret financial FEMA agency formed some time ago that is activated in situations like this to placate the masses….I think it’s made up of big banks or big companies or whatever that get loads of breaks from the government in the long term. I wonder if that’s why we see this really bizarre behavior from the market.
bizarre behavior,
the colours man, the colours
(it was the motto of my painting company)
Don’t think so. If the Retail Sales report is ok, the market will continue it’s merry lemming way.
I don’t understand the retail sales euphoria. I thought the Thomson report showed that half the chains were down year-over-year and half the chains were up at or less than price inflation. Doesn’t sound too good to me; unless I misread.
I totally agree with you, but this LBO/share buy back market needs little esle to punch it up. A couple good reports from the Wal-mart’s and Genetech’s and it’s off to the races. However, my gut of guts says watch the hell out.
It might be going up just for the simple reason that RE isn’t a great place to park your cash for now, so what else is there.
Cash is trash. Raging inflation grips the nation.
better get on the market bubble, Im getting sideways into energy.
of course, when priced in Euros to correct for dollar devaluation, the US stock market is not making much progress (but EU markets certainly are racing ahead).
It’s not just hedge funds who are being stupid with money. I won’t post the whole article, but here’s the link: http://online.wsj.com/article/SB118420803042864362.html?mod=home_whats_news_us
‘Margin Debt’ Hits Record
$353 Billion on NYSE
By PETER A. MCKAY
July 12, 2007; Page C2
Investors are borrowing record sums of money to finance trades on the New York Stock Exchange, according to data due out from the Big Board today.
NYSE officials attribute the trend to recent regulatory changes effectively allowing both small and big investors to take on more leverage, or borrowed money, from their brokers. So-called margin debt, a broad measure of leverage, jumped 11% to $353 billion at NYSE in May, up from nearly $318 billion in April.
Something smells funny. Did I just catch a whiff of Eau d’1999?
More like Eau d’ 1929… the margins were a prime culprit.
BTW, who decided that this is the perfect time for loosening margin requirements?
great question, nhz; I don’t remember those regulatory changes being announced with a special gold banner on CNBC like they do every 30 seconds when the Dow moves up.
you cant cap returns, not in any bubble..
you just have to get out of the way before it implodes.
http://www.cnbc.com/id/19726368
“While buybacks are generally seen as buoying share prices in the short run, some who have analyzed the trend suggest shareholders would benefit more from dividend increases and note that debtholders can get penalized.
“Management owns options,” said Jack Ablin, chief investment officer at Harris Private Bank. “Their compensation rises when the share price rises, not when the dividend increases. This reeks of the excesses of the 1990s.”
Thanks for the link. I’ve always been shocked so-called activist shareholders don’t cry foul over this. We could use more activism. I guess it’s hard to get too worked up when your shares are overpriced as it is.
The “activist” shareholder would be swamped in votes by the big funds. They have no incentive to change things.
Here is a case regarding mortgage fraud. This link has mostly to do with sentencing Appeal issues, but the facts are stated and you can see what people who participated in these scams have to look forward to!
http://www.ca6.uscourts.gov/opinions.pdf/07a0259p-06.pdf
They cancelled the original sentence because of government errors, BUT remanded it back for resentencing. Let’s see what happens on the late show!
The New York Post. “FDIC Chairman Sheila Bair said she expects a CDO time bomb. ‘We’re going to see more downgrades,’ Bair said, adding that she expects the bad news to ‘creep into higher-rated’ securities.”
Which ones? What does that mean?
If we can all agree on whom to blame, everything will be ok, ok?
http://www.youtube.com/watch?v=eeJsYWj5vto
“TCW managed $27.6 billion in 29 CDOs containing asset-backed securities as of Dec. 31, according to S&P. Risk Magazine named TCW its 2006 ‘CDO Manager of the Year.’”
Ugly truths come clear when drenched in sunlight…
“TCW Group Inc. and GSC Partners created the most collateralized debt obligations that are now at risk of having their credit ratings slashed because they are backed by some of the worst-performing subprime mortgage bonds.”
I’m guessing that they won’t repeat as CDO Manager of the Year for 2007.
they don’t have too, all the crooks have already made enough money for at least 10 other lives (and even then, they will certainly survive this and surface in another big investment scam in a few years time).
these CDO’s are gonna be toast..
earning 15%?
wait.
“One subprime mortgage bond, Structured Asset Investment Loan trust 2006-3 M7, was valued at about 91 cents on the dollar to yield 9.5 percent, according to the securities unit of Wachovia Corp. Wachovia today valued that security at 76 cents on the dollar for a yield of 15.9 percent, said spokeswoman Amy Jones. Merrill Lynch in New York puts the price of the same security at 67 cents to yield 18 percent. ”
3024 W Palos Verdes Dr, Palos Verdes Estates, 90274
Status: ACT MLS#: P939714 $1,998,000*
List Dt: 01/12/2007 PType: SFR-D Orig Price: $2,468,000
Glad I didn’t buy this one last week before price was reduced.
“Rep. Barney Frank told reporters he might introduce legislation this year that would require hedge funds to save various documents, such as trading records and e-mail, that could be of use to law enforcement officials in cases of fraud.”
Barney (”I love you, you love me”) Frank to the rescue…
so he believes he’ll legislate fiscal responsibility on the part of hedge funds??? “Save” documents???? This is hilarious.
You object? Why?
Seems reasonable that such things should be retained. Good record-keeping is the hallmark of any well-run business…..unless you’re Enron, Arthur Anderson, etc.
Saving electronic messaging should be mandatory. Just look at the way the White House reacted…they purged everything, the littel dogs.
maybe they should also demand to keep a paper trail of where all the nice management fees and bonuses are heading (certainly outside the USA, I guess Cayman Islands or something similar).
“Rep. Barney Frank told reporters he might introduce legislation this year that would require hedge funds to save various documents, such as trading records and e-mail, that could be of use to law enforcement officials in cases of fraud.”
“Perrie Weiner, a partner with law firm DLA Piper in Los Angeles, termed such a mandate ‘extreme and unjustified’ and said document retention had never been an issue in cases he was familiar with.”
“‘It would create a new and unjustifiable burden on ordinary businesspeople that can only be viewed as a harbinger for an emerging witch hunt of epic proportions,’ he said.”
What’s with these stupid attorneys? A witch hunt of epic porportions is what any decent flesh-eating attorney would want.
LET THE LITIGATION BEGIN! ON WITH THE HUNT!!!
‘We don’t need the ROSE Law firm billing records do we, Vince, honey?’
“…would require hedge funds to save various documents, such as trading records and e-mail, that could be of use to law enforcement officials in cases of fraud”
“‘It would create a new and unjustifiable burden on ordinary businesspeople that can only be viewed as a harbinger for an emerging witch hunt of epic proportions,’ he said.”
Bugs: “eh, Daffy… I wouldn’t touch that if I were you.”
Daffy: “why’s that Bugs?”
Bugs: “you might leave duck prints”
Looks like we’re in the Summer of 2004 in Orange County in the stock market. Gotta be in. Everyone else is.
I haven’t been this inactive in years.
I cannot believe this market.There are some real ignorant folks out there buying into this goldilocks economy. They are going to be broke soon. This looks like a massive short sqeeze to me.
It is certainly a good day to be long. I know this can’t last forever, but let me enjoy it while it lasts…
The trick is to know when to get out.
Hey, you were instructed to let me enjoy it!
But yep, you are right…
O/T but interesting. I just got home from a jaunt across town. Looks like sign twirllers are out. Saw a large flat bed truck with a modular pod on the back the size of a billboard. Painted on both side of the pod “Why rent, $500 moves you in, $1395/month, prices starting at $500K” and then it lists the builders development. These houses abut a ghetto, are chopped up inside, have at least a 25% affordable housing mixed into the mix, and if memory serves me right start with a minimum 3000sq.ft. This truck can move about town with its advertizing or parked in a shopping center parking lot or on a street corner. I guess people don’t want to stand all day twirlling a sign.
Look who owns Tracinda………UH OH
=========================================================
Kerkorian, who controls 9.9 percent of GM stock, sent a letter to GM Chairman Rick Wagoner on Friday “in which Tracinda proposed that General Motors’ Board of Directors establish a committee to immediately and fully explore, together with management, a possible opportunity to join the partnership-alliance between Renault, S.A. and Nissan Motor Co., Ltd.,” the filing said.
“Limits on withdrawals on the two Basis Capital Funds Management funds were imposed after the funds fell during June, by 14 per cent for the BasisYield Alpha Fund, and 9 per cent for the Basis Pac-Rim Opportunity Fund.”
This is awesome! You gave us your money and now you cannot have it back. None of it. Well, not until it is almost worthless which is exactly where it is headed.
The financial crime of the century?
Not at all. The hedge funds write it into the initial documents. The terms can’t be voided as unfair or misleading because only sophisticated investors are allowed to buy in. I saw a presentation on this at a conference earlier this year. Actually, I think they sometimes set up circumstances when they require additional contributions.
I absolutely cannot believe the disconnect on Wall Street! These 2 headlines are on the SAME page in the Yahoo Finance section:
AP
Stores Post Modest Sales in June
Thursday July 12, 4:46 pm ET
By Anne D’Innocenzio, AP Business Writer
Stores Post Modest Sales in June, With Shoppers Rattled by Gas Prices, Weak Housing Market
and… Wait for it….
Stocks Soar to New Highs on Retail Sales
Thursday July 12, 4:29 pm ET
By Tim Paradis, AP Business Writer
Stocks Surge Following Retail Sales Reports; S&P and Dow Set New Record Closes
NEW YORK (AP) — Wall Street soared Thursday, propelling the Standard & Poor’s 500 index and Dow Jones industrials to record highs as bright spots among generally sluggish retail sales allowed investors to toss aside concerns about the health of the economy.
The rally, which included the Dow’s biggest one-day gain in more than four years, was perhaps surprising given that there was no extraordinary announcement or other catalyst usually seen with such a huge gain, and that it came before most companies have announced their second-quarter earnings.
HOT DAMN!! We put the IRRATIONAL back in IRRATIONAL EXHUBERANCE!! WOOT!! I’m buyin’ me an i-pod, some diamond-encrusted spinners for my car and an a set of digital steak knives! Honey, where’s my American Express?!?
I posted this else where but it seems pertinent here. I have heard that there is secret FEMA-like organization that is activated under financial situations like this to placate the masses into thinking everything is fine and to go on spending…maybe big bank or companies or whoever the government agrees to give big money back to when the time is right.
You are talking about the PPT, I think (Plunge Protection Team) aka The President’s Working Group on Financial Markets. Give it a google.
“A Sydney-based hedge fund manager that manages $US 2.5 billion has put a limit on withdrawals from two of its funds that invest in risky debt products known as collateralised debt obligations, expressing fears the funds would otherwise not survive.”
Hedge fund survival strategy: Lock the airtight door and let them investers suffocate.
“Open the pod-bay doors, HAL!”
“I’m sorry. I can’t do that, Dave…”
“My God, it’s full of stars!”
them big dogs play rough..