Bits Bucket And Craigslist Finds For July 30, 2007
Please post off-topic ideas, links and Craigslist finds here/
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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I wanted to thank Ben and all the posters for a great weekend topics thread. It was very interesting to get all the points of view on what could or should be done (or not) about the mess created by the housing bubble and its bust.
Just a comment about the posts that made the point that we should do nothing and let everything play out: I agree about no bailouts, further regulation, etc. However, at least in some communities, there happens to be quite a mess to clean up in terms of abandoned homes and properties and “guest workers” and their families who worked in construction during the bubble and are staying put. And there may be other problems generated by the bubble that we will have to do something about, like it or not. Care of the guest workers and handling the abandoned properties is an expense to the taxpayer and changes the communities. Not for the better, either.
For example, there was a story on the local news about how a hospital in Bartow, Florida, has just shut down its ob/gyn unit, which had operated for decades and was a part of the community, where so many of its citizens were born. Now the residents of Bartow have to travel to Lakeland for births. The reason given was that they didn’t have enough doctors for it and the unit wasn’t profitable anymore. Gee, I wonder why?
God I hate it when OB/GYN’s aren’t able to practice their love with women across Bartow.
LOL!
CNBC has wheeled out jim cramer to reassure the sheeple this morning, what a joke. He says we are the most oversold since 9/11. Get out there and buy some stock!!!!!!!!
Got Tinfoil?
These people continue to sacrifice their credibility. Oh wait, he has none. It’s all psychology and many of the sheople fall for it.
CNBC has wheeled out jim cramer to reassure the sheeple this morning, what a joke. He says we are the most oversold since 9/11. Get out there and buy some stock!!!!!!!!
I saw this too, and it was just after someone else showed a chart with the DOW still above its 200 day moving average. Total BS from Kramer. The market is still inflated and not even close to a deal. Just Because the house price has been reduced 5% it does not mean its now undervalued and a great buy. Same thing with this market. We have at least another 5-10% to go, even more if this ends up being the “great correction” of of the credit bubble.
Tell Jim Cramer “The Trend is Your Friend” or “Know When to Hold Them, Know When to Fold Them” or
The circus told me they didn’t have a clown suit big enough for me, but CNBC said I could be a fool without the suit.
Got to switch the channel to “Flip that House”
and make millions.
Late last week Cramer was telling everyone most stocks would take some correction.
Probably a lot of the clientele couldn’t afford to pay or didn’t have insurance, and it’s not like the hospitals can turn them away. I’ve been through Bartow a few times, and I hope i never have to go again.
end welfare especially EMTALA and especially for illegals and hospitals could make some money
The reason that OB/GYN practices are being shut down is because of law suits. The price for malpractice in this field is over the top. You see, every idiot who has a less than perfect birth outcome feels that it MUST be the doctors fault and they are ENTITLED to compensation. If you look at L&D outcomes in the past (prior to the 40,s) you will find that there were alot of women and their babies that did not make it. SO..now we are heading into an era where doctors are not willing to go into practice in this area becaused of their perceived (and real) risk of being sued. Better to bolt on the silicone and stretch out all those sagging chins (as far as the bottom line is concerned) than be in the business of delivering babies.
Wal-Mart is now selling a “Deliver Your Own Baby kits.”
one thing is an OB/GYN pays a ton for insurance. My friend pays $120,000 that is due January 1 every year.
Being an OB is about one of the worst ways to make a living. The workday is 24 hrs a day since pesky babies insist on being born at 3 am. Crazy hormonal preggos freaking out because they’re worried they just read that fish is bad for the fetus and they ate a tuna fish sandwich last week. My OB decided not to have a family not because having a baby is a problem, but being around to raise the baby that is the issue.
Cheese Headcases
Wisconsin reveals the cost of “universal” health care.
http://opinionjournal.com/editorial/feature.html?id=110010374
Employees and businesses would pay for the plan by sharing the cost of a new 14.5% employment tax on wages. Wisconsin businesses would have to compete with out-of-state businesses and foreign rivals while shouldering a 29.8% combined federal-state payroll tax, nearly double the 15.3% payroll tax paid by non-Wisconsin firms for Social Security and Medicare combined.
FWIW, it sounds cheaper than private insurance which most employers provide anyway.
Yes and then we all get to pay when they have to go to the emergency room. Preventive care costs about 30% of emergency care.
flat, I just want you to know I admire your eloquence. LOL
Actually, in a way, I’m not kidding. Wish I could say as much in so few words - the sign of a great writer.
“For example, there was a story on the local news about how a hospital in Bartow, Florida, has just shut down its ob/gyn unit,”
Welcome to Southern California, circa the last 15 years…closed hospital emergency rooms, the need for for and expensive building of more schools (this one will only cost $400 million!:
http://www.latimes.com/news/local/la-me-belmont8jul08,1,7936834.story
Belmont building costs continue to soar
Its original price tag was $45 million. The final tab for the school, now called Vista Hermosa and set to open in 2008, will top $400 million.
And the building of more prisons, at the threat of an “early release program” by the courts if we don’t.
And this is WITHOUT the bubble bursting. Thanks everyone, for wanting cheap lettuce, strawberries, poultry, etc., while passing on the cost of hospitalization, education, and incarceration to the *local* populace of the effected states. Way to go.
We had stories of OB/GYNs leaving MA over 10 years ago. It was the lawsuit/insurance cost. Shortly after having my 2, my Brookline OB/GYN moved to California. His letter was hilarious. He wanted to move to an area where he had younger patients. (I know, babies vs midlife womens issues but still hilarious!)
Two years later when I moved to the Cape my primary care physician soon left the area for the Carolinas. She was a bit “different” in her approach. But she said she couldn’t make a go of things in MA.
“But she said she couldn’t make a go of things in MA”
I’ve been hearing that alot of late. Starting to wonder who’s going to be left in this state besides the wealthy and the welfare types.
My doctor dumped me back in November. I never dreamed that finding a female internist within 10 miles of Boston would be such a headache.
Most of the bubble towns like mine are what I call a grey tooties roll -soft, tender low-wage earners on the outside with hard, brittle, grey-haired boomers on the inside.
It looks yummy until you bite into it and it breaks your teeth.
Nice summery Agrande….
Agree.
California is the “sue me” state. Until that is stopped, we will have doctor flight. That said, there is a surplus of doctors in the LA area? How do I know? My sister is a doctor and did market research prior to selecting her field (among a small range she was interested in) and where to set up a business. LA was simply flooded with doctors. So she moved out of state.
Got a doctor?
Neil
i thought medical malpractice lawsuit’s non-economic damages in california was capped to 250k in 1992 to address these problems. it worked. may not be perfect or ideal.
“capped”
Veering o/t, but so late in the day few if any will notice, whatever happened to politician-caps — term limits?
A doctor friend had mentioned to me that the the mal-practice insurance for OB/GYN and Neurosurgeon is one of the highest and it also the cost of mal-practice insurance is high in Florida
Infection…
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_gilbert&sid=ageDhNv.n1A4
Anyone see the movie Bananas? “…all children under 16 years old are now…16 years old!”
All mortgages above subprime are now…subprime!
And it’s all contained
The only line I remember is: “And the official language is . . . Swedish!”
“Here’s a scorecard of some of the world’s biggest banks, from wherever the shares reached their high for this year compared with closing prices on July 26. Bear Stearns Cos. is down almost 28 percent. Royal Bank of Scotland Group Plc is down 21 percent. Deutsche Bank AG is down 18 percent. JPMorgan Chase & Co. is down 17 percent. Goldman Sachs Group Inc. is down almost 17 percent. Citigroup Inc. is down almost 14 percent. So much for the golden age of finance.”
What! I can’t believe it! I thought these guys were bulletproof!
My guess is that their most important insiders and officers were bulletproof and sold their shares in plenty of time.
‘Once fear grips a leveraged market, the so-called credit fundamentals aren’t worth the paper you print your spreadsheets on. The yield on the benchmark 10-year U.S. Treasury note has declined to about 4.8 percent from as high as 5.3 percent seven weeks ago, as investors seek the warm, comforting embrace of the U.S. debt market.’
Isn’t this the point where helicopter drops are used to pump those treasury yields back up and kick those cowardly savers who are seeking a warm, comforting embrace right in the teeth?
‘While the fundamentals, such as global growth and corporate balance sheets, are at their best for arguably decades, the technicals are as bad as we’ve ever known them and arguably the worst in the era of leveraged finance,” Jim Reid, a London- based credit strategist at Deutsche Bank AG, said in a research note last week. “Never has so much money been thrown at and been levered up in credit and never has there been such a liquid derivatives market to hedge risk.’
What’s the problem with a little leverage so long as business is good?
“…In particular, over a protracted period of good times, capitalist economies tend to move to a financial structure in which there is a large weight to units engaged in speculative and Ponzi finance. Furthermore, if an economy is in an inflationary state, and the authorities attempt to exorcise infla-tion by monetary constraint, then speculative units will become Ponzi units and the net worth of previously Ponzi units will quickly evaporate. Consequently, units with cash flow shortfalls will be forced to try to make positions by selling out position. This is likely to lead to a collapse of asset values.” Hyman Minsky
“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. Purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.”
Andrew Mellon to President Herbert Hoover in 1931
from Wikipedia
“As a conservative Republican and a financier, Mellon was irritated by the manner in which the government’s budget was maintained, with expenses due now and rising rapidly, with income or revenues not keeping pace with those expense increases, and with the lack of savings.”
Mellon sounds like he was a sick sick man. He wouldn’t happened to related to the Scaife’s would he?
Yeah. LOL
What a rotten barrel of apples the Scaifes are.
In Japan they’re having trouble giving it away.
http://news.yahoo.com/s/afp/20070729/lf_afp/lifestylejapancharitymysteryoffbeat_070729023457
The Bank of Japan has been trying to emulate the Fed for years. They are offering zero or near-zero interest rates (currently 0.5%) in a desparate attempt to get Japanese to quit saving and instead spend and borrow more. In other words they have been trying to use credit inflation to escape the long-term stagnation in the economy. That plan has failed miserably.
Now, it looks like they may be resorting to printing paper yen and leaving it for folks to find. It looks like they’ve switched to plan B - currency inflation (Bernanke’s printing press threat) and helicopter drops. Even that doesn’t seem to be working too well. The Japanese are too law-abiding and seem to be turning in most of the money rather than spending it.
This is what I can’t seem to get my brain around: Why can’t the BOJ use the printing press and helicopter drops same as BB?
Maybe it gets down to a philosophical difference?
Japanese citizen: “Save, save, save, save, save…”
U.S. citizen: “Shop, shop, shop, shop, shop…”
GS
The BoJ been trying. But to expand the money supply and trigger credit inflation, you have to have willing borrowers. They can’t even get the average Japanese to quit saving, much less get them to borrow. The only way they could reduce the payoff for savings further woudl be to direct the commercial banks to start charging savers to hold their money. But then money flees the banking system altogether and goes into mattresses.
To a very small attempt, the BoJ has succeeded in driving money out of savings accounts, but it isn’t helping their economy. We have seen a big increase in the individual Japanese participating in the carry trade. So all the BoJ has managed to do is drive some of the savings into overseas bank accounts instead accounts inside Japan. Somehow, I doubt that’s what they intended…
GS: “This is what I can’t seem to get my brain around: Why can’t the BOJ use the printing press and helicopter drops same as BB?”
Deron is right. An important point is that “Printing Money” is a distortion of the language and the reality. Pushing Debt is the correct terminology. What Fed has been doing is allowing banks to push debt even when they are making bad loans. This saved the economy in the short-term but it is very bad long-term.
Jas
Jas — Thanks for your insights. To be clear, I only use the term “printing money” figuratively (to mean pushing bad loans).
The Japanese have a very restrictive immigration policy. People who can’t read, and understand basic issues, don’t make the cut and don’t get to vote. Therefore, Japan has a “shortage” of ignorant people — essentially a “shortage” of folks willing to spend more than they earn minus prudent savings.
“as investers seek the warm, comforting embrace of the US debt market.”
Stucco, as usual, you are right on point. My father passed away last June. Several months later my mother started to get on top of the finances since dad had handled everything up until his sudden death. He had put about $50K in an investment fund recomended by an insurance agent friend that carried a higher than average rate of return. In December my mother submitted the paper work to withdraw the funds and was told she would get her money in a week or two. She got the run around for months and finally got her money in June. She has since gone to cash on her investmnts and spread funds to numerous banks to make sure she does not exceed the $100K FDIC limit.She did not loose any of her money but how about in the future? Uncertainty causes fear.
good god! can’t people get LOSE right any more? no wonder everyone thinks these loans are safe investements, they forgot what LOSE means!!!!
Sad that it takes math teachers to notice, huh?
Warm — IMHO (and there are WAY more qualified posters here than I, to give such advice), you mother has done the right thing. Presumably, she is in CDs or money-market accounts. With CDs, 5.2-5.4% is pretty easy to find for 6-month-1-year certificates. Money-markets in reliable banks seem to be yielding 4.6-4.7%, at least here in Florida. Because she is naive, turning over her assets to a money manager that someone else in your family does not know, respect and has experience with, would seem like a bad idea. All IMHO and I am risk-averse, so she’s unlikely to make a bundle on my advice — I’m more into the preservation-of-capital idea and over time, the Fed eats at that like termites eat wood.
HSBC hurt by exposure to US subprime market
By Maggie Urry
Published: July 30 2007 10:37 | Last updated: July 30 2007 10:37
Half-year profits at HSBC were hit by the bank’s exposure to the US subprime mortgage market and a $236m (£116.5m) charge for fee refunds in its UK retail banking operations.
http://www.ft.com/cms/s/33ce37aa-3e7d-11dc-bfcf-0000779fd2ac.html
No worries, as long as the U.S. stock market keeps bouncing back up off the mat…
Wall St set to bounce on solid earnings
By Michael Mackenzie in New York
Published: July 30 2007 13:58 | Last updated: July 30 2007 13:58
Wall Street stocks were set for a better start on Monday, and while solid earnings from several companies had boosted sentiment, investors were scrutinising weakness in the credit market.
Last week, fears that markets face a credit crunch sparked a sharp slide in US stocks. The S&P 500 index experienced its worst performance since September 2002.
http://www.ft.com/cms/s/111cf81e-3c83-11dc-b067-0000779fd2ac.html
Big news from Germany
IKB (Market leader in long-term corporate lending in Germany (market share: 13.5%) is tumbling.
Problem in US subprime……
Their major shareholder the state owned KfW has to step in
“Nevertheless, towards the end of last week IKB’s creditworthiness was being questioned due to said exposures. There was a risk that this confidence crisis would deteriorate further”
What! It’s NOT contained. It’s contagion:
July 30 (Bloomberg) — The risk of owning corporate bonds surged by a record as losses on U.S. subprime mortgages at Germany’s IKB Deutsche Industriebank AG triggered concerns of global market contagion….
“Subprimemania is spilling into the real economy,” said Jochen Felsenheimer, head of credit derivatives strategy at UniCredit SpA in Munich. “IKB’s statement was an end for those who believed this is a derivatives linked problem only.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4CHnE.bPy6s&refer=home
“It’s pure fear…It’s fear of the unknown, fear of hedge funds unwinding, fear of knock-on effects of the subprime meltdown.”
It’s fear of the level of defaults one might expect with what has gone on, but with a low going-in interest rate, an inadequte cushion, and massive leverage.
Really, normal credit conditions is going to feel like a credit crunch. Got savings?
“…normal credit conditions is going to feel like a credit crunch…”
Nice summary.
Subprime woes claim first German victim
By Ivar Simensen
Published: July 30 2007 09:57 | Last updated: July 30 2007 11:11
IKB Deutsche Industriebank, the German bank for industry, on Monday became one of the biggest European casualties of the fallout in the subprime mortgage market as it ousted its chief executive and issued a profit warning.
http://www.ft.com/cms/s/ff0be020-3e78-11dc-bfcf-0000779fd2ac.html
Some nice Galveston beach houses for sale.
http://louminatti.blogspot.com/2007/07/galveston-beach-houses.html
And an OT for former Houston residents, Marvin Zindler passed away yesterday.
“There was mooooooooooold in the icebox”
How old was Marvin when he passed away Lou? Seems like he must have been close to a 100 years old.
He was 85 and died of pancreatic cancer. Seems to be happening a lot lately. The Fingers Furniture owner died of it a few weeks ago.
Mmmmmmaaarrrvin Zindler….EYE-witness News….!
Thank you, Marvin! You were a true original.
I remember Marvin and that Fingers Furniture guy from my Houston days. Those two guys were household names there.
Any mention of the Chicken Shack in the obits?
Thanks for the update, Lou. My favorite part of his segment was the very end when the other anchors would look at him like he was a total freak. The phrase, “Slime in the ice machine,” will haunt me until I die.
We were done there last week. It was fun to visit, even in the rainy weather. But every time my wife said, “That’s a nice house,” I would chant: Hurricane zone 1, Hurricane zone 1, Hurr…
Those photos of stick houses on stilts look just like Destin, FL, though the latter is more densely-built.
Anecdotal: I was talking to my sis up in Connecticut yesterday. She belongs to a yacht club on the shore of Long Island Sound, used to be a modest, but charming place for old money and upper middle class folks who enjoyed sailing. It has had an influx of nouveau riche members, flush with cash from hedge funds, etc. She told me there’s an atmosphere of nervousness and anxiety at the club these days and that many of the hedgie families seem to have this feeling of doubt as to whether they really deserve the money they got, like maybe it wasn’t come by quite in an honest fashion.
Or maybe They SPENT IT ALL….and the money tree is getting bare
Another source of anxiety for hedgie families: the public outcry over how the fees and commissions are taxed for hedge fund managers. THEY claim it isn’t “income” and shouldn’t be taxed as income. What a bunch of pigs. If anyone ought to be taxed out the wazoo, they should.
And tax them retroactively, too. Parasites.
And furthermore, the Amish tradition of shunning undesirables would be one way to handle the pigs. Not to mention, when they start threatening to move their “fund” offshore, tell ‘em “Don’t let the door hit ya where the good lord split ya”. And don’t come back, either. Big loss, these funds. They don’t add jobs or value to any community anyway, no big whoop.
Amish shunning is NO joke. I worked with a guy 20 years after he was shunned and it still had an impact on him.
The “funds” are off shore. The people are where ever they want to be, mostly New York. The location of the legal entity is irrellevant. And they are offshore largely so foreign investors aren’t stuck being partners in US limited partnerships and having to deal with our tax laws and a few other tax related things. I dealt with all these investment structures way back when (though it was mutual funds, not hedge funds back then). They were created to get around IRS rules that said that you had to charge all investors in a mutual fund for investment advice in proportion to the amount of the investment. No big breaks for rich people. The off shore “hub and spoke” structure got around that.
Isn’t it about time we resume proper taxation on those elements who avoided paying since 1981? Personally, I’m fed up with paying a greater percentage of my income while the Wall Street robber barons and their wealthy corporate ilk duck and weave on their responsibility.
During a recession, wealth returns to its rightful caretakers.
I’m sure the old money people who inherited from their parents never have any doubt about whether they deserve it.
it depends on how honest they are to themselves.. inheriting often leads to doubt and guilt and lots of similar things, some of which are worse.
To paraphrase a quote i cannot find the source for: It’s not yours ’till you’ve paid for it.
Having lived near Aspen for 10 years, I knew a few who inherited money. They all seemed to have an element of “get rid of it as fast as you can” mixed with a not-so-sure form of insufferable elitism.
sudden wealth syndrome (aka affluenza) is pretty common.. i read someplace that about 90% lose everything by various methods within a couple years .. lots of them then commit suicide.
The outcome seems to depend mostly on one’s degree of preparedness.
http://www.bankrate.com/brm/news/pf/20050926a1.asp
“..It took her three years of booze, cocaine and wild living in Miami before she got a grip ..”
Does anyone know if Credit Suisse has updated the famous “ARM reset” chart? The latest version I’ve seen is January 2007, which while useful, likely reflects the prevelance of the 2/28 ARM over any other based on the observation that the value of ARM resets are drop sharply in from December 2008 (two years from the date the chart was likely created) through December 2010 (when the 5 year ARMs start hitting).
Thanks, ig you got a linky to a newer chart, please post it.
What’s to update? the I/O ARM is all but dead. There probably haven’t been many written since Jan 2007, so the resets in 2009-10 aren’t likely to include 2007 vintage 2/28s in signficant numbers.
I suspect a good amount of “modernizing” is required, which is why I asked. You may note that the Credit Suisse chart not limited to the I/O or pay option ARM - it also includes amortizing ARMs.
As a second observation, considering that ARMs of any type constituted over 23% of all PRIME mortgages in 2006, I doubt that the first seven months saw zero originations of ARMs. ARMs of any type were a whopping 62% of Alt-A in 2006; and of the subprime market ARMs of any type made up 91% of all mortgages in 2006. Add in the fact that the conventional wisdom in the first half of 2007 was that the housing market was at a temporary resting point and that Spring 2007 would be the best year ever, and I suspect that ARM use in Q1 and Q2 2007 was similar to 2006.
Countrywide was saying that in its effort to tighten credit, it’s now selling 5/25s. They certainly weren’t issued in the same overwhelming numbers, but the interest rate in 5 years might be like the late ’80s, so all those would come crashing down too.
I’d like to see the new 5/25s and other such nonsense on the graph.
“I suspect a good amount of “modernizing” is required”
Ivy Zelman, one of the analysts that authored the report, is no longer with Credit Suisse. (She’s the one that made a mention of “Kool-Aid drinking” to Bob Toll during a conference call). Hopefully she’s taking time off to be with family, she deserves it.
Yeah, the only question is how many people with options arms have hit the forced reset ahead of schedule because they were Neg-Aming every month.
““ARM reset” chart? The latest version I’ve seen is January 2007″
Actually, wasn’t it published in March? (I’d have to dig up the PDF to know for sure)
The report was published March 12, 2007, but the chart (Exhibit 42 in the report) contains “Note: Data as of January 2007″.
CNBC has been silent on the AHM mess this morning. They appear to be doing their best to get the bulls back in the saddle this morning.
It is also very curious how the AHM mess has only recieved scant coverage in the press (only 2 stories I can find googling it).
CNBC just mentioned AHM, glossing over the details. It is contained, really.
Best short-term contrarian market indicator; scroll to results of survey at bottom:
http://www.thestreet.com/s/weekend-reading/markets/marketfeatures/10370903.html?puc=_tsclsii
Too much bearishness on homebuilders to get any more down action in the short run.
I’m curious to see whether it opens this morning. I’d bet that they pissed off alot of traders whith their after business-after dividend had been added to accounts by brokers poo.
Ahem, trading of AHM is “delayed,” this morning. They screwed over the brokerage firms and IMHO now they’re pushing back.
CNBC appears more adept at ignoring the alphabet soup of subprime (IKB, HSBC, etc.) than the FT seems to be… Luckily for them, American audiences don’t have a global view, or else some might suspect they were trying to hide an elephant under the living room rug.
http://www.ft.com/indepth/subprime
What goes up…
http://www.marketwatch.com/tools/marketsummary/
All is well,
All is well.
July 30, 2007 9:39 A.M.ET
BULLETIN
Welcome signs of stability
Monday’s mood hints at a calmer waters after last week’s selling monsoon. Blue chip Verizon posts no-surprise quarterly results.
More like Welcome signs of stabilization
Headline indexes are curiously flat lining to the opening bell levels…
I think you had the closest call on market action for this morning!
The EuroYen switched 200 points since last night. More than coincidence? Yahoo Financial graph
http://tinyurl.com/2b9f3u
U.S. stocks are holding their ground, while other U.S. assets struggle …
CURRENCIES
Dollar’s back on the defensive
By Wanfeng Zhou, MarketWatch
Last Update: 9:56 AM ET Jul 30, 2007
NEW YORK (MarketWatch) — The dollar dropped against other major currencies early Monday, coming off a two-week high against the euro as many traders bet that the greenback’s rebound last Friday was probably overdone.
“The dollar is under some corrective pressures … and remains softer across the board as markets reassess whether last week’s dollar strength was justified,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman. “Until the ultimate impact of the subprime mess becomes known, markets are going to remain cautious.”
In early New York trading, the euro stood at $1.3682, compared with $1.3642 late Friday. The dollar was quoted at 118.53 yen, compared with 118.79 yen.
http://www.marketwatch.com/news/story/dollar-drops-traders-reassess-last/story.aspx?guid=%7B02B4A772%2D8BE5%2D4889%2DB253%2DB64C9E096388%7D
hoz is crooke……..sorry hoz, covers blown.
Doesn’t CNBC suspect that too much happy talk may eventually inflate its impact? (I note the DJIA is bouncing up and down like a yo-yo I type this…)
July 30, 2007 9:54 A.M.ET
BULLETIN
Shaking off Street doldrums
Monday’s market mood is much improved as U.S. stock indexes enjoy upside opens on the heels of last week’s bruising sell-off.
July 30, 2007
Could American Mortgage (AHM) Go Belly Up?
American Mortgage (AHM) is down 45% in the pre-market to $5.75. The stock has a 52-week high of $36.40.
And, things could get worse. According to The Associated Press “The company said some of its financial backers are worried that the mortgages acting as collateral for their loans have lost too much value, and have demanded their money back.”
The company also says that it is facing margin calls on its portfolio and has suspended its dividend.
Preferred shareholders and firms who are trying to collect on margin debt could liquidate the company if things get worse.
This dog could go to zero.
Douglas A. McIntyre
http://www.247wallst.com/2007/07/could-american-.html
Money Makeover: How to tackle a mountain of debt
They suggested a two-pronged plan: a 12-months-forward-looking spending plan to reduce the need for future borrowing, plus an organized debt payment plan on their costliest $89,000 in credit card debt and medical bills.
they don’t live lavishly. Debbie Hulsey works graveyard shifts and Jon works days so that each can spend more time with the boys and to avoid huge day-care expenses. And while they worry about debt, some 54 percent of what they owe is a mortgage loan, which is buying an asset more apt to grow in value than not.
http://www.kansascity.com/business/moneywise/story/208680-p2.html
Here in NY, I think people are more interested in the “transforming debt into wealth” plan I hear advertized all the time. No I don’t know what it is, I wouldn’t dare try to find out for fear of computer viruses.
i think the plan is you stack your bills in a pile, glue a dollar bill on each side and sell the bundle to a hedge fund.
Just google it — and that John Cumuda (spelling?) guy and you’ll see plenty of info about it. As I recall, there is a lot of heavy-handed sales pressure to buy upgraded coaching/mentoring services. Sounds 100% scammy.
“Transforming Debt into Wealth” is a legitimate scheme.
He’s pretty straighforward about it:
1- Live below your means. Cancel the cable, stop eating out all the time. Get a second job if you can.
2- Get debt-free. Use the extra cash each month from step 1 and pay off all of your debts aggressively. He describes a basic ’snowball’ repayment plan.
3- Once you’re truly debt-free — start saving money.
No scams here, just common-sense advice that many debt slaves have never heard before.
Rick
Is US subprime destined to become a financial “Global Chernobyl” ?
Yeah, I was wondering about that. That oughta make us REALLY beloved around the planet, as if the Middle East debacle wasn’t enough.
Yeah, there was some discussion in one of the threads about our “gift” of CDOs to China. I don’t think any of these countries are going to be too happy about it. From what I’ve seen in the foreign press (not much), there common complaint is the AAA rating give to the toxic sludge.
Subprime contained like Chernobyl??
In relative terms Chernobyl WAS contained in that it it did not reach “CHINA SYNDROME STATUS” The question is still will subprime bore a hole thru the axis of the earth.
Will the FDIC help? In the past 6 years, insured deposits have grown from three trillion to four trillion.
http://www.fdic.gov/about/strategic/report/2006highlight/fin_hi.html#difp
4 trillion may sound like a lot, but the have 50 billion in IOU’s (US Treasuries) in case of an emergency:
http://www.fdic.gov/about/strategic/report/2006highlight/fs_dif.html
I’d like to see mainstream media report on that.
correction:
…but the FDIC has 50 billion….(like that’s going to help)
They also have the future premium stream to serve as borrowing collateral (and a pretty good credit guarantor).
No insurance company has the full underwritten risk held as assets. That would defeat the point of having insurance (the risk of insured event would be 100%–and insurance only works when neither you nor the insurance company can predict the even occuring).
It’s pretty slim capitalization but not that far from other finanicial guarantee companies. For example Ambac guaranteed $500 billion debt with about $6 billion in capital–the capital is most like the $50 billion in treasuries that you bring up. Government agencies don’t generally have the same level of liabilities, as private companies (most of the liabilities are deferred revenue streams created by more complex premium structures). Ambac has $20 billion in assets but $14 billion in liabilities.
It may achieve Chernobyl status in popular myth. The facts will be that it was merely the first area of the credit bubble to burst. The only impact was that it kicked off the inevitable collapse and may have brought it forward a few months.
Investors didn’t quit buying junk bonds only or even primarily because of subprime. It was the crappy terms, the lack of covenant protection and the massive supply of junk to support LBOs that killed the junk market.
Folks don’t want to believe that the end was inevitable so they’ll go looking for a scapegoat. The USA is always a convenient scapegoat - big and strong enough to blame for any problem; yet completely harmless no matter how vicious the propaganda you spew. That makes us a perfect target.
Check out this FB who wants to “order” am appraisal from someone who really knows what his home is worth. Total gem:
http://www.city-data.com/forum/tampa/124728-real-life-stories-recent-sales.html
“Ok, so here’s the question: What are the REAL numbers on selling your home right now? My home is in the $300k-$400k range in New Tampa. I am frustrated by the “quick answers” I am getting about overall trends in the area. Why can’t I get figures on the homes for sale and sold in each specific market niche?
I am getting the impression that it is not the home owners in our bracket themselves that are so much distressed as it is the RE agents. I am getting the impression that the highest end and lowest ends are the worst hit. Am I wrong?
Every RE site I visit harps on about the following: “we have x years experience” “we have X number of listings” “we sell $xxx in gross home sales” ” we lit on x,x,x,x, -getting x number of exposures per listing”
BUT - nobody tells me HOW they will sell my house for the most and the quickest! It seems it’s all about how the market THEMSELVES, rather than your property!
OK, I’ve only interviewed one agent personally so far. I was depressed by the incident. Comps were from homes close by mine, but in not similar neighborhoods (places I would not have looked for present home nearby).
Justification: that is what the mortgage-holder will do when considering the loan. - well, when I refi-d back in ‘03 and got less than I thought my house was worth - I challenged the appraiser! Can’t a good agent recommend the same to every potential buyer? Can’t a good agent have an appraisal ordered for me that SHOWS that my house is not the same as these other houses???
Oh, and something REALLY hurting our current stats is a home that was sold right on our street that the seller took a partial mortgage and the county only recorded the 1st. Now on record with the county is a value reminiscent of 2003!”
Wow - that’s really rich.
What the heck is a “partial mortgage”? By that term I presume that he expects everyone to take out LTV of 100%? Imagine the AUDACITY of someone actually making a large down-payment on a home! And not only that - they bought the house for less than market value!!!!
(I mean “market value”)
I’ve been running into the same attitude, and worse from real estate agents. I get several calls a week, and they’ve gone from cajoling to virtual extortion in trying to get my listing.
The first few said they could get me more by listing with them, than I could selling it myself. I told all they were wrong, and they were. I couldn’t price my home high enough to cover their costs and commissions and still expect to sell the house except to a lunatic.
Agents then resorted to fear tactics. One said agents would refuse to show a house listed for less than 4% to the buyer’s agent. I expressly asked him if this was not in violation of his responsibility to his client and the NAR code of ethics. His answer was “yes, but they still won’t show the house.” I asked about all those agents in town with no income for months, BMW payments due, wouldn’t they rather get some paycheck than none at all? He had no answer.
The worst was the one who sounded like Mafia muscle. He said if I tried getting on the MLS on a flat fee deal and buyer’s agent commission offer, it would not be shown, that all the agents every day go through their listings, pick out the 4% offers and ignore the rest. He flat out insisted I pay a total of 13% fees and commissions or I’d never sell. These people are obviously trying to make up for their loss of income by taking fewer listings, only those with premiums attached for the agent, and working less to keep up their income stream.
I’ve consistently kept my price lower than competing houses. Five showings in the last 10 days, but the only offers coming are contingent on selling their homes, a situation which even the sleaziest of agents admitted they won’t take these days.
I’ve got zero respect for the real estate industry and finally found a profession that exceeds even the prverbial used car salesman for sleaze.
My problem is that, even though I own the house outright and have no debt, I’ve got to sell the place. I’m at a loss what to do now. It seems price, price, price is not the magic key to a home sale in all cases.
Where is your house?
Hellderson, Nevada, near Las Vegas.
“It seems price, price, price is not the magic key to a home sale in all cases.”
A lot of us qualified buyers are out of the pool for a while, sunning ourselves and drinking margaritas…we’ll get back in the pool someday…
seriously underprice everyone go FSBO (trying to emulate flat here)
Steve, as Utah suggested, price your home at least 5% under the next lowest comp. Make sure that the person making offer actually can close escrow. Check out the loan file and credit report and loan approval, just as if you were the seller’s agent. Do these things before you go into escrow so that you dont lose steam in the buyer falls out of escrow due to not qualifying for loan.
Thank you, Chrisusc and tj (below). I am priced 5% below the last comp set end of June. I’m at $294K, last comp was $310K. I keep track of the area, and price at least $5K below anything, even smaller houses. The only other for sale like mine is $309K, so I’ve got a 15K edge on price there. We’ve been discussing at home where to go next, I’m inclined to do another price reduction instead of going with an agent. Agents were wanting $24K to $33K from me, and that’s absurd.
I don’t know specifically about your area, but in my area (Tampa), if you sell a house today you’re very likely to get more than you will get 6 months from now.
Price low and sell the sucker, especially since you don’t owe anything.
Price is *always* the magic key to a home sale, you just haven’t found it yet.
Obviously you know times are bad for housing otherwise you wouldn’t be here. HOWEVER (and it pains me to say this) you still appear to have an unrealistic expectation of what your home is now worth. If you have to sell, then you have to lower the price until it sells… no matter how much it hurts.
Yes, you’re not going to get anything close to what you had hoped, but if you don’t suck it up now you’ll be down that much more in the very near future. You *don’t* want to chase this market down, especially not living in FC central surrounded by 500 (mostly empty) new home developments.
LV’s already a bloodbath. Get out while you still have a few pints.
Try this site: http://www.iggyshouse.com/HowWeDoIt.aspx
“It seems it’s all about how the[y] market THEMSELVES, rather than your property!”
i dunno why this comes as a suprise to a lot of people.. grab any book on salesmanship technique and a phrase something like “it’s all about knowing how to sell yourself” will be somewhere in the first few pages.
You can pay for a fee based appraisal yourself. However an appraisal is only good for the day it’s done. A hurricane could come in tomorrow and your house would only be worth the land minus clean-up.
“Comps were from homes close by mine, but in not similar neighborhoods …”
I’m still mulling this over. Need more coffee!
Translation: he lives a block away from the ghetto.
I actually had this problem once, owned a log house on 25 acres. All the nearby places weren’t log, were smaller or larger lots, etc. Other log houses were in more expensive areas, etc. etc. The appraiser had a hard time, but this was in 1992 and prices weren’t so high, the loan was 20% down, etc., so whatever he did wouldn’t have a huge impact as long as it was ballpark.
This is absolutely shocking! How could this be happening? I can’t believe it! This is not subprime; this is alt-A.
July 30 (Bloomberg) — American Home Mortgage Investment Corp. shares plunged 44 percent after the lender delayed payment of the quarterly dividend and reported “major” writedowns of its loan and security portfolios.
The stock of the Melville, New York-based company fell to $6.03 as of 8:25 a.m. in premarket trading today. On Friday, they closed at $10.47 in New York Stock Exchange composite trading….
The lender specializes in Alt-A mortgages, an alternative for A-rated borrowers who can’t satisfy all the terms for a regular “prime” mortgage.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aAxU_Jt9KSLU&refer=home
I’ve heard Alt-A delinquencies are overtaking subprime delinquencies.
Apparently trading is being halted “for news pending”. Doh.
http://tinyurl.com/28wajv
I guess now that subprime is “contained,” they’re going to “contain” Alt-A also.
Man, they are trying to bury this one. AHM reassured the market last week that Lehman was not pulling their warehouse lines, then at 10:19 Fri. night they decided not to pay the declared dividend due holders of record 7/9/07. Apparently they needed the cash to meet margin calls. They are slashing jobs–no one knows how many–and they had become one of Long Island’s biggest employers. Calculated Risk has been watching this one, because it is Bernanke’s “non-prime” going nuclear. Also, questions whether this stunt is legal…the brokerages paid in the dividend, then apparently had to back it out.
Reuters, Newsday and now Financial Times is on this, but other sources have been quiet all weekend, and I’ve been checking.
Novastar (NFI) is up 264% today! Woohoo!
http://finance.yahoo.com/q?s=NFI
Well - they did have a 4:1 reverse split, making the true value down about 9%. But that’s besides the point.
Ha, the analysts had a target of 14. Guess they were right after all…
http://chicagobusiness.com/cgi-bin/news.pl?id=25838
Housing dip taking toll on Chicago economy
The slumping housing market is going to hamper Chicago’s economy over the next several months, despite a strong job market and increased spending by area businesses.
The local economy is projected to grow at 2.7% in the second half, according to Moody’s Economy.com Inc., little changed from the first six months of 2007 as the fallout from mortgage defaults and declining home sales stymie consumer spending.
For the year, the local economy is expected to expand 2.3%, down from 3.2% in 2006. Economists predict modest growth over the next two years.
Chicago-area home sales and construction have fallen over the last year due to an explosion of defaults on loans to customers with tarnished credit, foreclosures and tighter mortgage lending standards. Combined with more than $3-a-gallon gas prices, consumers are expected to hold back on spending in the second half, economists predict.
“I’ve been in housing for over 30 years. I’ve never seen it go this long and this steep at any point in my career,” says Tracy Cross, president of Schaumburg-based real estate consultancy Tracy Cross & Associates Inc.
Overall, Chicago-area companies added 44,100 jobs in May, after creating 41,000 the previous month. The unemployment rate in the Chicago area is 5.3% as of June, which is higher than the national average of 4.5%.
Business spending, which was tepid during the first part of the year as companies let inventories run down, is propping up the economy in the second half of this year as consumers curtail their purchases.
“Business (investment) is going to be absolutely critical going forward,” says the University of Illinois’ Mr. Hewings.
Overall consumer spending makes up about two-thirds of economic growth and had been a mainstay for the economy until the end of the first quarter.
But the outlook at retailers like Hoffman Estates’ Sears Holdings Corp. isn’t good: Sears warned this month that profit will decline in the second half as sales fall.
The outlook has small businesses anxious as well.
Tiffany Bullock, who recently opened her South Loop shoe boutique House of Sole in May, says she’s had a slow start and is keeping a close eye on inventory.
“I’m still in a break-even cash-flow situation,” Ms. Bullock says. “I’m nervous because I’m the new kid on the block.”
September will make a year that i’ve been here. Why do people here believe that Chicago is bubble/recession proof? I’ve heard this many times, and I even read this one article that was posted on this blog a few days ago (about how nationwide, home prices will have to drop 44% to return to ‘rational’ prices, but in Chicago they should only have to drop 9%) Are there residents in other cities that actually believe that their specific city will not be affected by a nationwide problem, or is this just a Midwest thing? Because, according to the Chicago Business Review (i peruse their articles on a weekly basis) things aren’t looking too good.
Oh no, it’s pretty much everywhere. Here in the Washington DC area, the mythical beast that will prop things up is “defense spending.” In the Pacific Northwest, they believe they “different” in every other way, so why not real estate, too? In Florida, it was “retiring baby boomers,” remember?
Far as I can tell, it’s pretty much the same everywhere at the moment. Nobody’s buying much of anything.
We went out to eat Sat. night because we had a gift certificate for a restaurant (not upscale, but mid scale). We’ve gone there occassionally for years. Even at 5pm we’ve always had to go on a waiting list for at least 30 minutes to an hour. We walked right in and 3 other tables and booths were occupied. We left about 6pm and way over half the restaurant we empty. This never has happened on a Sat. night. Anyone else noticing this where you live.
Nope, I’ve noticed the opposite. The places I go have been getting busier. What I did notice (anecdotally) is that WalMart has been real slow each time I’m there. Could be due to a remodel in progress, however.
Welcome to Chicago!
People here (especially the life long city dwellers) are very protective of this city, maybe because of the “second city” label. It’s a great town but they view it as an elite international city which it is not. Most of the RE bulls here cite Chicago’s affordability compared to CA markets, New York & Miami as a reason we won’t feel the pain. That’s like comparing the price of a Lexus to a Mercedes and coming to the conclusion that everyone can afford a Lexus.
(People here (especially the life long city dwellers) are very protective of this city, maybe because of the “second city” label. It’s a great town but they view it as an elite international city which it is not. )
Perhaps the Olympics will help if it comes.
Has the “Chicago Spire” been scrapped, yet? Do Chicago residents think it will be built?
Has the “Chicago Spire” been scrapped, yet? Do Chicago residents think it will be built?
Funny you ask - construction started this morning.
They’ve been doing site prep for the last month or so. The foundation company they have doing the work down there now is the highest-profile company in the area, and they have their largest caisson drilling machine on the site, as well as a huge movable crane and lot’s of other equipment. This developer definitely intends to complete the project.
If it fails within the next few months, someone will be able to pick up a site with $100 million in improvements and a foundation that can hold anything…
I’m sure housing prices in Chicago aren’t as high as L.A. or S.F., but then neither are incomes. I defy anyone to find even a mid-size city in the USA where home prices are in line with local incomes.
Indianapolis?
Lost Angels, California
Lost Wages, Nevada
According to Realtor reports they are now affordable.
LOL
Columbus, Ohio
Brother in law just bought 1400sf 3/1 in decent area for $98k. A 5000sf 5/5 in the best area of town will set you back about $500k.
Here where I live in NE Ohio a nice 2000sf house will set you back $250,000 and the average income in our county is $26,000. Income is not in line with housing, even though housing is much cheaper here than a lot of places. We make almost 3.5x the average income and I’m not even comfortable with buying a $250,000 house.
“Brother in law just bought 1400sf 3/1 in decent area for $98k. A 5000sf 5/5 in the best area of town will set you back about $500k.”
Where? Not in Chicago.
Fort Wayne, IN
Cleveland, OH
Dayton, OH
Cincinnati, OH
Buffalo, NY
Chicago residents are looking all around them and seeing the carnage (Michigan, Ohio, Indiana). Then they notice it’s not that bad in their own town yet. That plus the arrogance inherent in human nature leads them to believe that “it won’t happen here.”
The industrial economy in Chicago is getting hit nearly as hard as the rest of the Midwest. The main difference is the local economy’s heavy dependence on finance. Chicago is THE regional banking center and most importantly the home of the commodity futures markets. Those won’t go down hard until the stock and bond markets take more damage and it has time to work through the system in the form of layoffs and spending cuts.
Finally, Chicago is unlikely to go as deep as Detroit or Cleveland even then. The local economy has is share of heavy manufacturing, but also has much higher exposure to agriculture - both processing and tranportation. Unless food inflation is tamed soon, that could be some upside for Chicago.
Why do people here believe that Chicago is bubble/recession proof?
Chicago has a lot of high-tech employers, yet during the dot-com bust the local economy was not hit as hard as most cities with similar high-tech employment. Chicago definitely has one of the most diverse economies in the US, which has helped the city thrive while almost all other rust-belt cities have faded during the many economic crisis’ over the last 30 or 40 years. As long as this coming one doesn’t affect all sectors, Chicago will be just fine. Those of us here on this blog know it will affect all sectors, but the MSM has kept most of America believing that everything is contained. That includes most Chicagoans.
I’m very curious to see how sales tax receipts fare in Chicago, especially broken down by area of the city. Anecdotally, I’ve been noticing a lot more people speaking foreign languages in casual conversations while walking around - and carrying tons of shopping bags. I was on Michigan Ave this weekend and it was packed as usual. Yet the sales person at Pottery Barn walked up to us and immediately offered 75% off a rug if we would just please buy one. I assume that tourists aren’t buying things that don’t fit in their suitcases. The tour companies on the Chicago River have all their boats in service on the weekends - I’ve never seen the river this crowded with boats before. I really believe that 2007 is going to set records for tourism revenue, but when the tourist season is over the stark reality will set in - If the whole country goes down, we’ll be sinking too.
Perhaps all that tourism is due to the Dollar tanking. US Citizens spending internally due to the expense of being abroad, and foreigners taking advantage of a “deal”.
Could not happen to a better city. Love Chicago.
New York Trust (NTR) apparently isn’t trading today either. I don’t see any news though. Perhaps being delisted?
Update - apparently trading was halted due to non-payment of a dividend for Q2. They just paid it, so trading resumes. They live another quarter at least.
http://tinyurl.com/2a2euc
Kind of surprised to not see them on the implode-o-meter, being that they’ve closed their mortgage business.
Went into SJ yesterday to pick up my wife from the airport. After that we went by the mall on stevens creek blvd. before heading home. Wow, I could not believe the prices on women and men’s clothing especially since it’s all made overseas on the cheap. Dresses were $150 & up. Some brands of men’s shirts were pegged at $90. Needless to say all we did was eat in the food court which was the most heavily trafficked area. Very few serious shoppers except in the high ‘on sales’ areas which had deep discounts of 40-60% off.
Go to eBay…..get Name Brand items (and new - not used) for ½ price!! (…or less)
Or Marshall’s or Ross.
My older daughter shops at Ross all the time. No decent Ross in this area.
Or better yet, don’t buy clothes. I went for three years without buying anything clothing related, and it was great.
Yes, but your co-workers got tired of reminding you it was NOT a clothing-optional workplace.
Will the recent move by certain govts into the IPO market prove in retrospect to have been a flash-in-the-pan indicator of the peak? On the other hand, isn’t $540m pretty much chump change for the govt of the world’s largest nation (by population)?
Blackstone share slump costs China $540 million
But investment in Blackstone wasn’t just about returns, analysts say
By Chris Oliver, MarketWatch
Last Update: 9:55 AM ET Jul 30, 2007
HONG KONG (MarketWatch) — Blackstone Group L.P.’s slumping share price isn’t likely what Beijing had in mind when it pumped $3 billion into the leveraged buyout firm last month. Since its June debut Blackstone has tumbled 21%, making it the worst-performing initial public offering among deals worth $500 million or more this year.
China, which bought a 10% stake in Blackstone at a 4.5% discount, has seen the value of its investment plunge 18% in 24 trading days. Those losses tally $540 million, averaging about $22.5 million each trading day.
“There are some red faces in Beijing, everybody expected that they had hit the jackpot and the share would skyrocket,” said Francis Lun, general manager at Fulbright Securities in Hong Kong. “I think it was really quite a shock.”
http://www.marketwatch.com/news/story/blackstone-share-slump-costs-china/story.aspx?guid=%7B7A9FCF5E%2DAA87%2D4453%2D996C%2D17CE88BE5C18%7D
Yeah, but just to compound their screwup in Blackstone, they’ve now invested billions in Barclays. Just can’t have a major top unless some foreign buyer with too much money and not enough sense comes in to top-tick the market with trophy buying. Remember Japan and Rockefeller Center?
And Japan and half of Waikiki?
Is the U.S. stock market correction contained? Already over just after it began?
After last week’s drop on Wall Street, investors are quickly adding the word “correction” back to their vocabularies.
The vicious market sell-off, which knocked the Standard & Poor’s 500 index down 4.9% during the week and 6.1% from its record high set July 19, was a reminder of stocks’ risk. Last week, the DJ Wilshire 5000 fell 5.1%, destroying $1 trillion in value, the worst week since the $1.4 trillion lost when the market reopened after 9/11.
The bad week shifted attention from record highs to whether there is even more pain to come as payback for the market’s big run-up this year.
It’s a startling turn of events for investors who have enjoyed the S&P 500’s second-longest run without a “correction,” usually defined as a 10% drop.
But the fact is, much of the market has already suffered what would qualify as a correction — or worse. More than 75% of the stocks in the S&P 1500 index, which includes companies of all sizes, are down at least 10% from their highs. The average drop: 18.5%.
http://www.usatoday.com/money/markets/2007-07-29-correction_N.htm
Buy the dip…
B of A strategist sees sell-off as buying opportunity
McManus ups his allocation to stocks while cutting bonds and keeping cash
By Murray Coleman, MarketWatch
Last Update: 10:56 AM ET Jul 30, 2007
SAN FRANCISCO (MarketWatch) - In the face of recent sell-offs by investors, Bank of America Corp.’s chief U.S. investment strategist is raising his allocations to stocks.
“We are boosting our recommended equity allocation by 5% to 60% in the wake of last week’s stock market drubbing,” Thomas McManus wrote in new research on Monday.
http://www.marketwatch.com/news/story/face-sell-off-b-strategist-boosting/story.aspx?guid=%7B2F865C7F%2DABF4%2D42EE%2D90CD%2D041A21491739%7D
The market is getting uglier, 58% of the stocks are now down.
Didn’t this happen in 2000 too? Indexes stay up, but based on fewer and few large companies, as money moves around the market until there is no place left to go.
Yes, and it has happened in numerous local housing markets in recent years as well (spiraling prices on thinning volumes). One might even say, “The Achilles Heel Of The (Housing) Market Is Volume.”
Look at
UCPIX
UCPIX is a short term tool to park money for a week or two - I generally use it when getting bearish on the market. It is not a Long Term Investment! For long term fund holders, it is a reasonable way to hedge above average market risk.
ProFunds UltraShort Small-Cap Inv (UCPIX)
Forgetting the Major indices, over 50% of the stocks are down today with the financial market stocks getting clobbered. Over 10% of the stocks are setting new yearly lows.
The damage is not contained, perhaps a respite before the next wave of selling, but until there is panic expect a nice drift down.
a levered fund, negatively tracking the russell 2000….
UCPIX
“The investment seeks daily investment results that correspond to twice the inverse of the daily performance of the Russell 2000 index. The fund normally commits at least 80% of assets to financial instruments with economic characteristics that should be inverse to those of the index. It employs leveraged investment techniques in seeking its investment objective. The fund invests assets which are not invested in equity securities or financial instruments in debt instruments or money market instruments. It is nondiversified”
The internals of the market are NASTY. The smaller cap stuff broke down weeks before the Dow and S&P. The Russell 2000 topped in early June, while the S&P Smallcap and Midcap put in their tops a few days later and failed their retests as the Dow and S&P were making new highs.
Even within the large-cap indicies, the rot was showing. On the day the Dow closes above 14k, decliners outnumbered advancers on the NYSE 2:1. On the down days last week, the A/D got as bad as 1:15 and on the up days, there were still more down than up names.
Hedgie has suspended redemptions and is selling his mega yacht and $16.25 million Aspen vacation home. Hat tip to “TwoFaced”. Apologies if previously posted.
http://money.cnn.com/2007/07/30/news/newsmakers/yacht_sale/index.htm?postversion=2007073008
“The consumer has to be an idiot to take on those loans,” he said. “But it has been one of our best-performing investments.”
Considering Mr. Hedgie never extrapolated the numbers to determine what these “idiot loans” would do to his bottom line over time, I guess the consumers weren’t the only idiots in that transaction.
The REALLY big picture for stocks:
http://www.geocities.com/WallStreet/Exchange/9807/Charts/SP500/dj3d2_0403.gif
Excellent! I love self-explanatory graphs…
U.S. history’s secular bear markets show up very clearly:
1835-1857 (22 years duration)
1906-1920 (14 years duration)
1929-1948 (19 years duration)
1966-1982 (16 years duration)
2000-???? (7 years and counting)
Yeah, the chart is 3 years old, but it almost doesn’t matter for this one. Also, I don’t put too much faith in “Prechter’s Forecast”. But Dow 4000 seems very doable within the next few years. We’re currently in the mother of all bull traps.
Just to clarify, that would be 4000 in today’s dollars. Also, I probably should have said “doable within the next decade”, not the next few years, although it could happen quickly as after 1929.
As much as we talk about 1929 here, that graph makes our current situation look more like 1906 than 1929. Perhaps I need to learn more about things that happened before the depression…
Appropos of nothing…I wonder if anyone here knows of a blog that deals with the Austin, TX area?
I have friends that have moved from SoCal to Austin recently, and are looking to buy.
Apparently, there’s ‘less and less inventory’ there, but, as I can only find Realtor ™ sites by Googling (very happy and shiny - ‘bubble, what bubble?”), I wonder if anyone can point me in the direction of a more ‘bearish’ site for the area.
Thanks in advance!
Speedingpullet,
There’s is a poster on the HBB had a link to a Austin Housing discussion board….I checked it out a few months ago, but there were not many postings. BTW, I lived in Austin for about 7 years, and just recently left Austin for DC.
Even under normal circumstances, my advice to your friends would be to wait a year before purchasing a home after a relocation to an un-familiar city….I mean, Austin’s nice, but I do think it’s over-rated, so they may decide later on that it’sn not as nice as they imagined…..but given the fact that the housing market is tanking everywhere, I think your friends would be foolish to “snap up” a house ASAP. I know that the folks in Austin are much like the folks in Chicago or NYC (see above postings)….they’re very chauvanistic and think Austin is the most wonderful place on earth, so they can’t imagine that housing/real estate lose value.
And like posters on this blog have pointed out like a gazillion times, it’s NOT different there than any place else…
Thanks Hondje!
My sentiments exactly - I’ve just emailed them with the HBB link, so hopefully they will read, learn and inwardly digest.
Actually, they’re a pretty canny couple - they just sold their Santa Monica townhouse for double what they bought it for in 2001 - and still priced it well below other ‘wishing prices’ in the area. Not suprising then, that they sold in weeks and made out like bandits.
They are amazed that they could buy a bigger place for about 40% of the price here in SoCal, but I’ve urged them to look at the previous sale price before making any offers, as I’m sure that (even in the cheaper TX market) prices have doubled in the last few years. A 100K place in 2000 that’s going for $300K today may seem like a bargain - from a SoCal-ers point of view - but its still 200% more expensive than it was 7 years ago.
I have a house in Austin– and have found that following the news headlines in the Austin Business Journal online has been helpful–they always mention the quarterly housing sales/inventory/time on market data in a pretty objective fashion and announce development news.
I’ll pass that on - Ta!
I wonder if this marked drop in print RE advertising has anything to do with the sudden shift in coverage from “everything is glorious” to “there may be some problems” (or worse) in the MSM:
http://apnews.excite.com/article/20070730/D8QN0DTO0.html
… “The move does not come as a surprise seeing as almost every economic index is overheating,” said Song Guoqing. a well-known economist with Beijing University.
“However, 0.5 percentage points is not large enough - it can’t even absorb the newly-added foreign exchange reserves,” Song added.
“China’s forex reserves go up by about 30 billion U.S. dollars a month while loans of commercial banks totaled 25 trillion yuan at the end of June,” Song explained, “which means that a 0.5 percentage points rise can only absorb 125 billion yuan a month.” …
…PBOC statistics show that China’s foreign exchange reserve reached 1.33 trillion U.S. dollars at the end of June, up 41.6 percent on the same period last year.
A total of 266.3 billion U.S. dollars were added to the country’s foreign exchange reserve in the first half of 2007, 144 billion U.S. dollars more than a year ago, said the central bank.
The six-month rise is higher than the whole-year rise of 247.3 billion U.S. dollars in 2006. ”
Peoples Daily online July 30, 2007
http://tinyurl.com/27be7t
The Deep Risks of ‘Asset-Light’ Debt
With sub-substandard collateral levels, some debt structures of the private equity buyout boom could come back to haunt investors
“…Despite the new caution concerning debt risk, the loans that were funded using such structures will be around for years to come. Some experts believe that some of them could pose a significant risk of default if the economy slows or veers into recession….
…There’s nothing inherently wrong with this holding company structure, or other forms of asset-light debt, as long as investors have all the facts about what they are buying. In the past, off-balance-sheet debt that has been concealed from investors has led to problems such as Enron….”
Businessweek
http://tinyurl.com/32xrt9
It took them a long time to realize ‘junk debt’ could bring down the ponzi scheme. And the risks remain for years.
Another one bites the dust. I can’t believe it!
July 30 (Bloomberg) — Citadel Investment Group LLC took over the credit holdings of Sowood Capital Management LP, the hedge-fund firm started by former Harvard University endowment manager Jeff Larson.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aDAsbnv52TEs&refer=home
“…In May the CIC paid $3bn for a near-10 per cent stake in Blackstone, the US private equity firm. China Development Bank, which lends money according to government policy, said on Monday it was spending up to €9.8bn on a 7.7 stake in a merged Barclays Bank and ABN Amro, provided the merger is successful.
“It is very hard to estimate how much Chinese corporations will invest abroad in coming years – but it is clear the resource companies and financial firms have ambitions to become global leaders,” said Jing Ulrich, chairman of Chinese equities at JPMorgan. …”
MS. Ulrich said “I don’t expect China to go in for trophy properties. They know the lesson of the Japanese debacle.”
According to today’s estimate China’s Foreign currency reserve is 1.4T (Times), the Japan debacle was devaluing the Yen. China has been purchasing in Africa, South America and just spent 16 Billion in Russia - all on resource companies. A 3B in Blackstone was just to get their feet wet.
AHM is still trying to figure out what went wrong. An update from Bloomberg:
American Home said in a statement it needs a “better understanding” of how it will be affected by weak mortgage markets. The delay may add to investor concern that bad loans in the U.S. have spread beyond subprime borrowers who have the worst credit records. The company’s credibility may be in doubt, and its survival “is not a foregone conclusion,” RBC Capital Markets analyst James Ackor wrote today.
“The writedowns this quarter were pretty significant,” said Bose George, an analyst at KBW Inc. “The $1 billion of cash they started the quarter with has gone down pretty materially.”
It’s so puzzling. I can’t believe it!
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLQDu0lpHv3E&refer=home
I was wondering about this quote from a newspaper story mntioned in another thread.
He said he was told his monthly payments would be $2,600 a month. The day he signed the loan papers, he found out the payments would be $2,900 a month, not including taxes and insurance.
I’ve never had a mortgage, but I’ve heard numerous versions of that line. How often does this happen? What can you do when it happens? Do you lose your deposit if you don’t sign?
You walk while your telling the mortgage broker and the realtor that your attorney will contact them Monday morning to address their fraudulent behavior .
Look up “right of recission”. In MA you have three business days to bail out of a mortgage. I did it once.
If you are talking about losing you deposit you made on the property, yeah, if you don’t complete the sale under the agreed to terms. On the other hand, if you could show you were mislead by the mortgage company you were dealing with you might be able to get out of the transaction all together if you can then show the only financing you could get was, basically, fraudulent.
I wouldn’t want to have to go through that process but, in court, it might be a winner.
Just some anecdotal info on W. Colo - talked to a builder, he has 4 cars, is selling two because things have slowed down here.
A serious peice in SF Chron about the sex slave business, but hidden in it is how one of the girls got that way…blatant unbridled spending:
http://sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/10/08/MNGAULL53D1.DTL
“Money was tight for all the families in her neighborhood, so You Mi never felt deprived. But in 2001, when her family had to struggle to come up with nearly $6,000 to send her to a university closer to the city, she realized her family was poor. At college for the first time, she was surrounded by friends who came from the glittering beach high-rises.
Very sad and disturbing story. Lots of predators in our world…
That sobering story brings new meaning to the term “debt slave.” I can’t help but wonder how many U.S. women in the porn and sex trade “industries” got there thanks to credit card excess?
lose your deposit if you don’t sign? ”
i really doubt it.. or else they could pick any number, like $20,000 a month, and you’d be forced to not sign it and be forced to take a loss.
oops.. that response is to Liz from Boston
855 S ORANGE DR, Los Angeles, CA 90036
List Price: $959,000
Sale History 02/20/2004: $590,000
Subject to bank approval for short pay.
$369k more than purchase price, and still a short sale.
Yahoo: “The Dow Jones industrial average surged more than 100 points.”
I wish the media would use percentages rater than points…that surge is a 0.7% change. Oh well. Using these upswings to slowly back my way to the door, I’m leaving this party starting today…
I put in a work order for a leaky sink at my apartment complex last week. Today I received a call from the office wanting to see how good the service was. Note that I am up for lease renewal, which was sent two months early this year, vs. 2 days last year. They are hurting for tenants. It’s good to finally be in the position of negotiating power.
JL’s blog, OCR.
Has resale home inventory peaked for ‘07?
http://tinyurl.com/lzgbg
Was it GetStucco that was predicting multiple families in SFHs in Cali?
LATimes
Trading places
As the affluent go downtown, the working poor are tripling up to buy homes in the ‘burbs.
http://www.latimes.com/news/opinion/la-op-fulton29jul29,0,2145543.story?coll=la-opinion-center
“…If a $500,000 house requires that a buyer have $100,000 in annual income to qualify for a mortgage, it only makes sense that multiple wage-earners making $20,000 to $30,000 each could join to buy it and settle in. They’re living in overcrowded conditions, but they own and control them. It’s much better — and probably no more expensive — than renting a small apartment that they don’t control in the inner city.
The trend is altering the nature of neighborhoods in Southern California. Urban areas are getting richer, and suburban neighborhoods are becoming more crowded — and with the greater density comes social stress. Already, Oxnard has “bitten the bullet” and allowed residents to pave over part of their front yards for parking…”
“..pave over part of their front yards for parking..”
There’s something intoxicating about watching a nice, long pattern of dominos fall..
“Oxnard has “bitten the bullet” and allowed residents to pave over part of their front yards for parking…”
Another trend predicted on this blog…the Inland Empire will become Little Mexico, and apparently Oxnard is rushing for the title, New Tijuana. This should help crater home values.
“Biting the bullet” is such a perfect term for this event, especially when the imported gangs (MS-13, etc.) start showing up and spraying down their rivals with bullets. Paved over front yards, drunks and druggies staggering around at all hours of the night, gang-bangers shooting it out - life in the New American!
You can hardly escape trashy neighbors in a situation like that. Better to rent. Then wait a few years and buy a place in an area that discourages multiple families from moving in the same dwelling. Guess it would mean a place with few jobs. Got an airplane?
“Already, Oxnard has “bitten the bullet” and allowed residents to pave over part of their front yards for parking…”
Very attractive. I can just see it - cars parked in the front ‘lawn,’ toys strewn here and there, garbage piled 10 feet high on trash day, music blasting, people congregating outside because the inside of the house is packed…
It’s like a 24/7 house party.
Pit bulls running loose
Don’t know if this has been posted yet. But the Briny Breezes deal is done, as predicted.
$510M Briny Breezes deal cancelled
http://www.bizjournals.com/southflorida/stories/2007/07/30/daily6.html
Credit insurance costs soar to record
By Stacy-Marie Ishmael and Gillian Tett in London, and Saskia Scholtes in New York
Published: July 30 2007 20:28 | Last updated: July 30 2007 22:02
The cost of insurance against credit defaults hit record levels on both sides of the Atlantic on Monday amid concerns that some investors were being forced to sell assets to cover losses on subprime mortgages.
Investors rushed to buy contracts that would protect them against corporate credit defaults after it emerged that more European institutions had suffered losses following the crisis in the US subprime mortgage market.
IKB, a German lender specialising in providing credit to smaller companies, and Commerzbank, the country’s second-biggest bank, both warned they would be hit by losses from risky US home loans to borrowers with poor credit histories.
In spite of the heightened risk aversion in credit derivatives markets US stocks rose. The S&P 500 was up 1.2 per cent in late trade, after a sharp tumble on credit market concerns last week. The safe haven of government bonds also gave up some of last week’s gains with the yield on the 10-year bond 5 basis points higher at 4.81 per cent.
http://www.ft.com/cms/s/041c1122-3ed1-11dc-bfcf-0000779fd2ac.html
Credit crisis puts heat on liquidity
By Saskia Scholtes and Michael Mackenzie in New York, Stacy-Marie Ishmael and Paul J Davies in London
Published: July 30 2007 20:38 | Last updated: July 30 2007 20:38
Financial market liquidity can take months to build but just seconds to evaporate, according to an oft-repeated maxim on Wall Street. Credit traders have received a painful reminder of that lesson over the last several days, as a noose tightened around easy corporate lending conditions and strangled trading liquidity.
“It is nothing short of ugly in credit land,” said Alan Ruskin, global strategist at RBS Greenwich Capital.
http://www.ft.com/cms/s/6e1e3310-3ed2-11dc-bfcf-0000779fd2ac.html
The Briny Breeze’s (FL), million dollar trailer park sale was cancelled today.
http://hosted.ap.org/dynamic/stories/F/FL_MILLION_DOLLAR_TRAILERS_FLOL-?SITE=FLTAM&SECTION=US
Sowood cratered, but was “rescued” by Citadel. MGIC is on life support. AHM is still behind closed doors and Indymac reports tomorrow.
Should be a stellar day.
Was it Citadel’s idea to rescue them?
How do you know when a falling knife is cheap in the stormy headwinds of a gathering credit crunch? And how do the helicopter drops get to the sidelines?
Citadel scoops up Sowood Capital
By Anuj Gangahar in New York
Published: July 30 2007 21:51 | Last updated: July 31 2007 00:46
Citadel Investments, the Chicago-based hedge fund run by billionaire Kenneth Griffin, has stepped in to take over the credit portfolio of Sowood Capital, a smaller fund, which has recently run up heavy losses in the credit markets.
The move demonstrates how the world’s largest hedge funds are increasingly active in areas that were previously the preserve of more established investment banks.
It also demonstrates that in spite of recent market turmoil, with fears over the extent of the credit crisis in the US and its potential impact on the wider financial markets, there remains a great deal of money on the sidelines waiting to pounce on cheap assets.
http://www.ft.com/cms/s/d8488074-3edc-11dc-bfcf-0000779fd2ac.html
The Dear GF letter sent out by Sowood today. (Warning PDF)
http://online.wsj.com/public/resources/documents/Sowoodletter-20070730.pdf
This one’s for the Spelling Nazi (house listing in Price, Utah):
New furnace Less then a year old, Have your very own personale office. 5 beedrooms to fit the family. This house was totally remodeled. This house is a must see. We dont exspect to see this house to be on the market long so if your intrusted PLEASE get ahold of us Quick.
Heerz anuther:
“Gorgous 5+ bedroom house. Big anogh for the HOLE family. GREAT Price and even better location. A must see if your looking for a house with room to spare. The yard is very big the pics dont lie. So when your family is ready for a out side party or get together.”
The realtor has a perfectly “normal” English name, doesn’t sound like a non-native type. maybee she furgot to taak speling clas. LOL
This may be listed up above, but this is a sure sign that the worst case (recession in the opinion of Cramer) might really be possible, as described by this blog.
He just said he is going to call for the Fed, Bernake specifically, to cut rates every day, OR ELSE WE WILL HAVE A RECESSION AND the Chinese will sweep in and swoop up the assets of America’s recession.
I’ve been reading this blog long enough to have some idea beyond his pumping to get this, but this is new to me: if the dollar falls and we crash as an economy, how does he think the Chinese will mop up?
To me it reeks of desperation. I’ve made a bit of money off of CNBC bounces but he hasn’t made me MAD MONEY. From Cramer I can gain a (good) car payment off of my play money, but I’ve read enough here to believe I detect a bit of fear in Cramer.
Comments?
Novasold
Off Topic——-The Bancroft family accept pornographer Rupert Murdochs buyout offer. You think the MSM is bad now? Barrons and WSJ is now nothing more than overpriced crap wrap.