A Classic Case Of Irrational Exuberance
Some housing bubble news from Wall Street and Washington. Bloomberg,”Frankfurt Trust stopped withdrawals from a fund after clients removed 20 percent of their money since the end of July amid concern about the U.S. subprime loan debacle. The FT ABS-Plus fund, which includes residential mortgage- backed securities and collateralized debt obligations, halted redemptions on Aug. 3, the Frankfurt-based company said today.”
“‘The situation for the asset-backed securities and CDOs market has gotten much worse in the last few days because of the U.S. real estate crisis,’ making it difficult to secure fair prices, the company said.”
From Reuters. “Moody’s Investors Service on Monday cut its bank financial strength rating on German lender IKB. IKB has become Europe’s highest-profile casualty so far of a crisis in the U.S. subprime mortgage market. To stop IKB from unraveling, German banks have joined together to cover the lender’s potential losses from the subprime crisis.”
From National Mortgage News. “I’ll put it bluntly: if you operate a non-depository mortgage firm (lender or servicer) and don’t have a deep-pocketed parent or hedge fund as a sugar daddy you’re likely to be out of business by year-end, probably sooner.”
“In the 20-plus years that I’ve been covering residential finance I haven’t seen a financial meltdown this swift since the S&L crisis of the mid-to-late 1980s.”
“One subprime executive who closed his shop a few months ago told me, ‘This is a liquidity crunch the likes I have never seen.” Meanwhile, the mudslide is rolling downhill from Wall Street to mortgage bankers, to loan brokers, and then the consumer.”
“Default rates for non-subprime mortgages will jump in the next year as delinquencies that roiled subprime debt become more commonplace among homeowners with better credit, said Friedman Billings Ramsey Group Inc.”
“Late payments of at least 90 days, foreclosures and holdings of seized property among so-called Alt-A mortgages in bonds will probably rise to 3.92 percent in May 2008, from 2.69 percent in May 2007 and 0.89 percent a year earlier, Michael Youngblood, the top mortgage-bond analyst at Friedman Billings wrote.”
“‘Liberal underwriting was not limited to subprime loans,’ said Youngblood. The number of new loans being packaged into bonds rose to a record in 2004 through 2006, increasing the likelihood that defaults will also escalate, Youngblood said.”
The New York Times. “The very innovation that made mortgages so easily available, an assembly line process known on Wall Street as securitization, is creating an obstacle for troubled borrowers. As they try to restructure their loans, they are often thwarted, lawyers say, by strict protections put in place for investors who bought the mortgage pools.”
“‘Securitization led to this explosion of bad loans, and now it is harder to unwind and modify them even where it is in the best interests of both the borrower and the investors,’ Kurt Eggert, an associate professor at the Chapman University School of Law in Orange, Calif., said in an interview. ‘The thing that caused the problem is making it harder to solve the problem.’”
“More than 60 percent of home mortgages made in the United States in 2006 went into securitization trusts. Some $450 billion worth of subprime mortgages, those made to borrowers with weak credit, went into securitizations last year.”
“Fifteen years ago, the last time the housing market ran into stiff trouble, government-sponsored enterprises like Fannie Mae did most of the work pooling and selling mortgage securities. These enterprises readily agree to loan modifications.”
“But not so in the private issues pooled and sold by Wall Street, which has fueled the extraordinary growth in the market.”
“American Home Mortgage Investment Corp. filed for bankruptcy protection, becoming the second- biggest residential lender in the U.S. to close down this year.”
“American Home specialized in mortgages for people who fall just short of top credit scores. ‘Their sources of funding have all dried up,’ said Mark Power, a lawyer advising some of the more than 100,000 creditors. ‘This case is going to be very similar to New Century.’”
“The top five unsecured creditors include units of Deutsche Bank AG, Wilmington Trust Corp., JPMorgan Chase & Co., Countrywide Financial Corp. and Bank of America Corp.”
“American Home, in a statement, warned it was unlikely the value of its assets will be enough to repay creditors or leave any equity value for common shareholders.”
“The company ‘experienced this sudden reversal of its fortunes due to the unanticipated and rather sudden deterioration in the secondary and national real estate markets,’ CEO Strauss said in a prepared statement.”
“The cost to insure the debt of Countrywide Financial Corp., the largest U.S. mortgage lender, and U.S. brokers with exposure to mortgages, including Bear Stearns Cos., surged on Monday.”
“The cost to insure the debt of D.R. Horton, Inc., Lennar Corp. and Toll Brothers Inc. all rose by around 30 basis points to 410 basis points, 261 basis points and 265 basis points respectively, CMA data showed.”
“Swap spreads on KB Homes and Meritage Homes Corp. also were around 40 basis points wider at 545 basis points and 725 basis points, respectively.”
The Wall Street Journal. “Recently, the nation’s largest home builder, D.R. Horton Inc., reported the first quarterly loss in its 15-year history as a public company.”
“Yet, only two years ago, Donald Tomnitz, Horton’s CEO, declared confidently: ‘We can earn our way through any economic cycle, except one like the Great Depression.’ The Great Depression hasn’t hit, but Horton’s earnings have declined more severely than most anyone imagined.”
“One big assumption had to do with their cash flow: The common wisdom among some analysts was that builders would turn into ‘cash machines’ in the event of a housing downturn, because they would pare construction and land buying.”
“In reality, most builders haven’t been able to stockpile as much cash as expected. That is partly because they have had to keep building large housing developments, even though demand dropped off sharply.”
“‘The linchpin to our bullish thesis has been the emergence of land constraints,’ Citigroup analyst Stephen Kim wrote in a bullish March 2006 research report. ‘This will allow the builders to outperform expectations in any given demand scenario.’”
“But as it turns out, some builders still ended up owning too much land. Horton says it has a 5.4-year supply of land. That’s up from a 3.5-to-four-year supply of land when the downturn hit.”
From Business Week. “In November, 2005, Elizabeth and Armando Motto agreed to pay $540,000 for a newly built three-bedroom house in suburban Clarksburg, Md., near Washington, D.C. Rather than send them to a bank, the builder, Beazer Homes USA Inc. offered to provide a mortgage itself in an arrangement of the sort that helped fuel the long housing boom across the country.”
“Beazer, according to the couple, inflated the pair’s earnings in loan-application documents by incorrectly stating they were collecting rental income from the house they were leaving. They now regret it. The Mottos moved to Clarksburg, but they haven’t succeeded in unloading their previous home in Rockville, Md.”
“They have nearly $1 million in mortgage debt on the two dwellings. With $145,000 in family income, Elizabeth says, they are ‘on the brink of foreclosure’ on both houses. ‘We are so broke.’”
The Associated Press. “Lawmakers left Washington for August vacations without passing reforms meant to prevent mortgage-lending abuses like the ones that led to the housing market woes now distressing Wall Street and Main Street.”
“‘We’ve been told by some that, if we do this, we’ll ruin the market,’ said Rep. Barney Frank. ‘I think that, if we do this right, we could help the market.’”
“Rep. Brad Miller…said investors will shy away from buying mortgage securities backed by loans to people with shaky credit until there are ‘reasonable regulations in place to prevent the kinds of loans that consumers can’t possibly repay.’”
“He added: ‘It’s hard to argue that regulation is going to have a devastating effect on the market because the market has already devastated itself.’”
The Dallas Morning News. “There’s a breathless tone to the national fretting about the housing industry’s downturn. It goes something like this: It’ll spread like a virus and leave the U.S. economy on life support.” “Make no mistake, this is a serious time with a lot of people in a lot of pain. But it’s also time to recognize another looming threat: overzealous policymakers making matters worse.”
“”Freddie Mac CEO Richard Syron said he was wary of calls for Freddie Mac and fellow mortgage finance company Fannie Mae to buy loans and securities no longer favored by private investors, the New York Times said. With credit pools drying up ‘there are some loans that are in difficulty,’ the Times quoted Syron as saying in a telephone interview.”
“‘There are other loans that probably should never have been made and providing more liquidity will make that situation worse in the long term,’ Syron told the Times.”
The Daily News. “While testifying before Congress last month Fed Chairman Ben Bernanke…stuck to the opinion that the badness was not spreading to the broader mortgage sector or consumer spending.”
“‘So what can we look for in the Fed’s statement?’ said analyst Greg McBride at Bankrate.com. ‘Expect further backpedaling as it pertains to the housing market. What in January the Fed termed as stabilization, in March became an adjustment, then an ongoing adjustment. Might the term correction that Bernanke uttered before Congress two weeks ago appear in the statement?’”
The St Petersburg Times. “Claudia Vinson Johnson’s savings were decimated as risky mortgage-backed securities in her account were devalued and her investments were sold to meet margin calls. The broker who put her into the high-risk investments: Steven Shrago, her neighbor across the street.”
“‘One day you wake up thinking you have a little bit of financial security and by mid afternoon, you have none,’ she said.”
“Johnson is one of dozens of clients of Brookstreet Securities Corp. who suffered huge losses in June on risky debt securities that were sold to them as safe investments. Brookstreet, which was based in Irvine, Calif., collapsed.”
“To say the least, it’s put a chill in a once neighborly relationship. Shrago, who didn’t respond to attempts to contact him, keeps his blinds closed.”
From ABC News. “Home foreclosures are up 59 percent from last year while loan defaults continue to mount, and that has mortgage lenders zipping up their once generous coffers.”
“‘This was a classic case of irrational exuberance,’ said Alan Murray, the executive editor of the Wall Street Journal. ‘Lenders were giving away way too much money on easy terms. People borrow too much. They bought houses they shouldn’t be buying and now they are paying the price for that.’”
FYI, even though we moved to a new server recently, we had to reboot it this morning. Sorry if some posts got lost in the process.
Clearly a victim of you own success.
Don’t we have a Robert Campbell that posts here once in a while?
MSNBC had a “Dr Robert Campbell from Hofstra University” that says it’s a good time to buy as long as you plan to live in it for 3 yrs or longer. WTF? I thought he was a bear, or maybe this is someone else? If prices are going to go down a bunch more from here why say it is OK to buy? As long as you don’t mind being upside down on the house for several years, by all means, buy! Interesting that he would say that.
should be a different one. The one who posts there is from Sandiego. THis Hofstra University is in NY
Indeed, this is an error. This is no Campbell in my department. Kellner is and posts comments about real estate from time to time.
There is no Campbell…
Damn, I should know better.
Ben, Sedona is still a “solid seller’s market” according to this clown:
http://realtytimes.com/105/JoelGilgoff
Tx, took me a while reading the website to find this gem:
“We are in a solid sellers market. Well priced homes sell instantly with multiple offers on many properties. We have seen rapid appreciation over the past 2 years. If you plan to buy here in Sedona - now is the time!”
Maybe he is pining to become the new president of NAR
I’m trying to figure out when isn’t it a good time to buy according to these clowns? We are quickly learning that real estate does not always go up. I am surprise that someone does not sue him for the blatant lies.
So is Santa Fe if you are under $400k. I know, I see it first hand and I am not a Real estate clerk. Could be both places did not build a lot in the last 5 yrs.
I used to have a fantasy of buying in Santa Fe. It’s never going to happen.
Spent THAT money txchick57 ! You only go round ONCE in this lifetime.
Buy a great big house in Santa Fe, bake some cupcakes and we’ll ALL drop in to feed your squirrels
That is every Texan’s fantasy!
They oil-rich Texans are the ones buying all the really nice places. When I sell my place I will be sure to ad a “y’all” somewhere in the text.
My inlaws have a place in Santa Fe… I think it’s just that the crowd that flocks there for art and food is pretty recession-proof.
“Claudia Vinson Johnson’s savings were decimated as risky mortgage-backed securities in her account were devalued and her investments were sold to meet margin calls. The broker who put her into the high-risk investments: Steven Shrago, her neighbor across the street.To say the least, it’s put a chill in a once neighborly relationship. Shrago, who didn’t respond to attempts to contact him, keeps his blinds closed.”
Nice neighbor, anybody want to guess what she’s going to do to him
If anyone cares to start a pool I am going to go with the following:
She drives her SUV through his home. Seeing she has injured him but he is still alive, she backs out of the house and redirects from her yard punching the SUV (which is about to be repo’d) and with one final push into the house she finishes him off.
Our neighbor bounced a check on my wife. Avoided us for a week. My wife asked me for advice. I told her to confront, be stern, get cash for the amount, plus the returned check fee, plus interest. She did. I am proud.
OT-woman in my office (she works part time) and her advertising exec spouse are getting ready to close on a 950k 2 bedroom coop in
manhattan. i guess he makes major bank because the coop’s need a 20% dp and low debt to income ratio. well anyway she said this morning she needs to start building equity. well what is the almost 200k cash they are supposedly putting down? oh i almost forgot about the $1500 montlies from the building on top of the mortgage
that is over 6k a month for a 1000sq ft place in an older building in a unhip very busy area of the city
i can feel real change change coming in the outer boro areas of nyc
too much invnetory that is unaffordable without bs loans
it is just noty amaater of if but when prices will really spiral down from here. il just keep renting and saving and wait
I don’t understand this at all. How can anyone, after the news this weekend, not want to back out of a RE deal if there is still time?
On the West Side, suddenly there are some last-minute rental to condo conversions popping up in pre-wars… again, why would anyone buy now? There are two huge, outsize new condo buildings just finishing up, not sold, on 92/Broadway, and they just finished knocking down some old brownstones and an apt building on the corner of 86/West End, to put up some massive glass box. The new towers are largely unsold, and the rubble from the teardown is not even cleared yet.
The last time commercial RE crashed in Manhattan in the 90s, developers were left with unrented glass towers, especially around Times Square. Finally, under Guiliani, places like Morgan Stanley were given huge tax breaks to move from Wall St. to headquarters in Times Square, to utilize the empty boxes…and to upgrade Times Square. Not a bailout precisely, but a taxpayer-funded give-away.
“her advertising exec spouse ”
Please, oh please tell me he does not work for IPG.
OT-woman in my office (she works part time) and her advertising exec spouse are getting ready to close on a 950k 2 bedroom coop in
manhattan. i guess he makes major bank because the coop’s need a 20% dp and low debt to income ratio. well anyway she said this morning she needs to start building equity. well what is the almost 200k cash they are supposedly putting down? oh i almost forgot about the $1500 monthlies from the building on top of the mortgage
that is over 6k a month for a 1000sq ft place in an older building in a unhip very busy area of the city
i can feel real change change coming in the outer boro areas of nyc
too much invnetory that is unaffordable without bs loans
it is just noty amaater of if but when prices will really spiral down from here. il just keep renting and saving and wait
I bet they’ll have a hard time getting a jumbo loan since Wells Fargo pull out i.e. raise rate from 6 7/8 to 8%. Let see their PI is only $5576 +$1500 and you are looking at $7076 per month in PITI. I take it that they pull in $21,000/month pre tax!
SPF is on the verge of going DOWN!!!
Home builder implode_O_meter needed!!!
And a contained-O-meter
LOL!
http://calculatedrisk.blogspot.com/2007/08/american-home-mortgage-to-file-for.html
American Home is in the process of filing for bankruptcy, senior vice president Tim Neer told about 200 now-former employees around 10:15 a.m. Friday.
…
Later Friday, it was revealed in a filing that founder and chief executive Michael Strauss had sold off almost 3 million shares of company stock on Wednesday for $1.17 a share. The same day he reaped almost $3.5 million, employees had been told in a conference call to stay positive and keep processing loan applications.
Can you say E-N-R-O-N??
sorry for the double post
It’s ok, double-posting is no big deal and there is no penalty let me give you an example of a real problem:
You could be long SPF from the $49.70 level and crapping yourself when it hit $7.51 this am
LOL, good one.
“To stop IKB from unraveling, German banks have joined together to cover the lender’s potential losses from the subprime crisis.”
Watch out you might get what you’re after
Cool baby strange but not a stranger
I’m an ordinary guy
Burning down the house
Hold tight wait ’til the party’s over
Hold tight we’re in for nasty weather
There has got to be a way
Burning down the house
Here’s your ticket pack your bag; time for jumpin’ overboard
Transportation is here
Close enough but not too far, baby you know where you are
Fightin’ fire with fire
All wet hey you might need a raincoat
Shakedown thieves walking in broad daylight
Three hundred sixty five degrees
Burning down the house
It was once upon a place sometimes I listen to myself
Gonna come in first place
People on their way to work say baby what did you expect
Gonna burst into flame
My house S’out of the ordinary
That’s right Don’t want to hurt nobody
Some things sure can sweep me off my feet
Burning down the house
No visible means of support and you have not seen nothing yet
Everything’s stuck together
I don’t know what you expect staring into the TV set
Fighting fire with fire
Burning down the house
http://www.youtube.com/watch?v=6oVuLJS_Eok
Here’s the CNBC version:
http://www.youtube.com/watch?v=0YNyn1XGyWg
“To stop IKB from unraveling, German banks have joined together to cover the lender’s potential losses from the subprime crisis.”
The German state owned bank KfW gave 8.1 Billion Euros tax money to IKB to prevent a financial crisis in Germany.
Linked in from Drudge on this. Yes, Cramer is an idiot. But, I get a sense, this time, that this isn’t an act.
http://www.youtube.com/watch?v=SWksEJQEYVU
It’s the first time I know of that YouTube disabled comments.
Without an “Up” market Cramer is going to lose his show once people start losing money on his bad advice.
Well, up about 286 today. I’d say he’s got a job until October. Then, if my shirt cuff prediction proves correct, I’m going to have a few sad people at my Halloween party.
Is it too late to short builders and Mort Co’s? This is getting ugly, faster than I thought. Yikes!!
it’s tempting but option volatility has made HB & lender puts reaallly expensive, and I won’t short-sell stock directly (don’t have a margin account and don’t want one). Shoulda gotten in a few months ago on put action, dangit.
“…Shrago, who didn’t respond to attempts to contact him, keeps his blinds closed.”
” …and then it went dark.”
Dastardly Double Devastation Delivered Daily
“He added: ‘It’s hard to argue that regulation is going to have a devastating effect on the market because the market has already devastated itself.’”
Mish said he talked to an insider who says:
“Almost all stated income loans everywhere vanished last Friday.
Almost all 2/28 ARMs vanished last Friday.
While this was eventually expected it was not expected by everyone overnight…
The definition of prime has tightened considerably, everywhere.
Any variance from prime raises the mortgage rate.
Small differences in FICO score now matter (sometimes by a lot).
Every little thing adds up.
90% LTV rates are higher than 85% LTV rates which are higher than 80% LTV rates.
100% LTV rates are very difficult to come for subprime and even Alt-A.
Condos vs. homes matters significantly.
There were 3 rate increases in the last 2 weeks even as 10 year treasury rates rallied.
Second mortgages have nearly vanished - no market.”
If this is true, it has fascinating connotations. Remeber I said I didn’t understand the lenders’ refusal to mark REOs to market, to get rid of them at their then-high values before a crash. I reasoned that the only rational motive for such behavior was that the lenders were trying to get as many people as possible refinanced into fixed rate or interest only loans so that they wouldn’t be foreclosed or the day of reckoning was delayed. This tactic would, if successful, have the effect of delaying and decreasing the severity of a crash. It was also rational economic behavior if the lenders thought they could salvage a certain extra percentage of a very large pool of mortgages when weighed against the potential decrease in the REO inventory value.
Now, since there are no more refi’s available for these folks, it’s time to dance. There’s no more reason for the lenders to hold on to the REOs, and substantial need for capital to defend against margin calls, plus third quarter results are upcoming, so the direction to liquidate should issue very soon. This will absolutely kill the residential real estate market.
In about a week, it will be time to make the lenders all the lowball pitches people have been mentioning. Just make sure you’re low enough!
Still standing by the Election Week prediction…
Third quarter results should be interesting. Will everyone just mark everything to market big time and get it over with, or will they continue holding back as long as possible?
Marking to market is really painful when there are hardly any bidders.
Following from today’s WSJ
“When you have something like this, there’s a debate about where to mark these things,” said Alex Ehrlich, global head of prime brokerage at UBS AG, which has extended credit to some clients that hold such securities. “Nothing’s trading, so you have to exercise great care and caution in where you mark. We’re trying to be pragmatic. When you’re caught up in this situation, you know the market is dysfunctional; you have to come up with reasonableness standards. We try to come up with a theoretically fair value.”
I simply love this disaster. It is so enjoyable to see the greedy suffer.
‘Marking to market is really painful when there are hardly any bidders.’
- I am always amused when I see a car that the owner poured 20k extra into it and totally tricked it out. Guess what, he will almost NEVER recover that money when he sells it because it will sell at what the bonehead buyer will pay (Marked to Market)….not the owners percieved value.
“I am always amused when I see a car that the owner poured 20k extra into it and totally tricked it out. Guess what, he will almost NEVER recover that money when he sells it because it will sell at what the bonehead buyer will pay (Marked to Market)….not the owners percieved value.”
I dont think this is true. I have put probably $15k into my little acura because its a fun hobby. A lot of people treat cars as a hobby. Obviously a lot also treat is as some weird bragging thing. I don’t expect to get much back but I have enjoyed my little car for the last 5 years. Maybe going another 5 years with it if we hit a nice long recession. One thing I don’t understand are all the BMW, luxury cars etc that all drive so slow on the freeway. Did someone forget to tell them the only reason its luxury is because they are generally fast cars and nothing else? I am not impressed by slow expensive cars. That is truly a waist of money. Same as all those little SUV’s that I hit my head in when sitting in them. Yes I can sit in a Lotus Elise and fit fine. Probably similiar to buying such a huge house for no reason other than to show off to people. Oh well.
“Claudia Vinson Johnson’s savings were decimated as risky mortgage-backed securities in her account were devalued and her investments were sold to meet margin calls. The broker who put her into the high-risk investments: Steven Shrago, her neighbor across the street….”
“To say the least, it’s put a chill in a once neighborly relationship. Shrago, who didn’t respond to attempts to contact him, keeps his blinds closed.”
LMAO! Soaked and double dipped. That’s sad.
Oh my. I can’t believe it!
“making it difficult to secure fair prices, the company said.”
HAHAHAHAHAHAHAHAHAHAHAHAHAHA. Get a clue, fair prices are market prices!!
“In the 20-plus years that I’ve been covering residential finance I haven’t seen a financial meltdown this swift since the S&L crisis of the mid-to-late 1980s.”
LMAO!
Guess what boys…this debacle hasn’t even started yet.
The late 80’s bust will be a blip to what’s comin’.
I was around for the late 80’s bust, and believe me that was a dot on the radar compared to the explosion that’s coming. This is going to effect segments of the market that the 80’s didn’t even know existed.
I agree, this is going to a doozie. For those of us waiting with cash in the wings, its about time.
The unemployment that will grow from this bust, will add to the outsourcing, insourcing (H’1B’s), blue collar union bust issues, and the real economy will finally rear its ugly head.
The Unemployment Problem-David Yu
http://www.financialsense.com/fsu/editorials/yu/2007/0806.html
I agree, this is going to a doozie. For those of us waiting with cash in the wings, its about time.
You’ve got to be kidding. This crash is just getting started. It won’t be “about time” for at least 3-5 years, if not longer.
GW~
The level of corruptness and greed this time around just boggles the mind.
The lenders literally gutted the appraisal process!
These are the elements of human behavior that the derivative formula guys all missed in their risk analysis.
“While testifying before Congress last month Fed Chairman Ben Bernanke…stuck to the opinion that the badness was not spreading to the broader mortgage sector or consumer spending.”
See earlier Talking Heads post. The FED might be Speaking in Tongues.
Oh my. I can’t believe it!
Bernanke…stuck to the opinion that the badness was not spreading to the broader mortgage sector or consumer spending.”
“the badness”…is badness a word?
We used to call one of my cousins His Badness but we’re all just a bunch of nitwits and not supposed to know the English language like journalists do.
a year and a half ago, Bernanke denied that housing was in a bubble.
Just another academic fool.
Many of you have probably seen this chart of Housing vs. GDP over the past 60 years. What is interesting is that historically housing is valued at around 95% of GDP, but recently it has climbed to 166% of GDP. In order to return to historical norms home prices would have to fall 35% on average across the country.
If you consider that not all areas will fall by 35% then that means that some of the big cities will probably see 50%+ drops in prices in order for the GDP/Home Valuation to be in line again.
Now, on the way down there is sure to be momentum that will probably cause a 10% overshoot before things start to recover.
In other words a 8 year old town housing in DC that went for $430K in 2005 will be back to around $150K, or the inflation adjusted price of the house when it was new in 1998.
Talk about the effects of Irrational Exuberance!
Okay, I’m being picky, but how did you come up with 35%?
If I take (166-95) / 166, I get 42.77%. I like a decline of 42.77% better.
Chad get out of here with your good math, you might scare someone - 42.7% decline ouch
You’re assuming that the GDP numbers aren’t cooked. They are - because the inflation numbers are cooked. Real GDP’s been negative for the last two quarters, when real inflation is figured in.
“The company ‘experienced this sudden reversal of its fortunes due to the unanticipated and rather sudden deterioration in the secondary and national real estate markets,’ CEO Strauss said in a prepared statement.”
Right….it was sudden and he can’t believe it. You had to have your head stuck waaay waaaay waaay up your behind over the last 9 months not to see this coming. Gimme a break! Sell incredulity elsewhere. You’re in my space.
Nothing was unexpected. Rober Shiller was right, second time in a row.
Mogambo speaks…
http://www.dailyreckoning.com.au/everyone-pays/2007/08/06/#more-1285
I like this one. I like all of his articles. Did anyone attend the syposium in Vancouver to see him?
s/b= symposium
(American Home Mortgage) “warned it was unlikely the value of its assets will be enough to repay creditors or leave any equity value for common shareholders.”
Trading at $0.44, hope springs eternal in the human breast.
Three freebies in 2 weeks.
Classic Phil Esposito move…
Hang around the net, waiting for the scraps~
He shoots, he scores.
In my opinion:
Market volitility = big boys manipulating the market to raise cash to deal with bond losses.
Short the market, then sell and watch it plunge. Sell the shorts, then buy and watch the market soar. repeat.
It is funny watching CNBC and seeing them search for logic. Oh, DOW down 100 on last Tuesday due to AHM. BULL, that was a last Monday story when DOW was up. Rumors of “pressed wrong button”. Talk of “trade imbalance” posted 20 min prior to close. Bunk, bunk, bunk, bunk!!!!
What I’m sensing is pure market manipulation.
Cramer gave a hint of it with his angry tyrade. “wait for the stock to be oversold, then call your buds and organize the buy”. My guess is that with so few “individual investors” the manipulation just isn’t working the way they want.
I see the armies out trying to recruit individual investors, particularly into the options market. About every board I go to there is a thread about how everyone should play options.
Ummmm… no thanks. I’m gonna sit in treasuries for now, thanks.
BTW, what’s wrong with playing options?
OT… A blogger union?
http://biz.yahoo.com/ap/070806/unionized_bloggers.html?.v=2
The Dallas Morning News. “There’s a breathless tone to the national fretting about the housing industry’s downturn. It goes something like this: It’ll spread like a virus and leave the U.S. economy on life support.” “Make no mistake, this is a serious time with a lot of people in a lot of pain. But it’s also time to recognize another looming threat: overzealous policymakers making matters worse.”
Gee, did Ebby Halliday write that or was it Perot, Jr.? Don’t frighten the sheep yet, they have lots of overpriced crap to sell to out of towners!
Did you even read the article? Even if you just read the part that Ben posted you should be able to tell that it sounds more like something people on this blog have been saying about the problems of the feds getting involved, instead of a fluff piece for the RE industry….geesh.
Nah, she read it right.
And are you a realtor, homebuilder, loan officer or developer?
“Make no mistake, this is a serious time with a lot of people in a lot of pain. But it’s also time to recognize another looming threat: overzealous policymakers making matters worse.”
Actually I have nothing to do with the RE industry (nor with the DMN). I’m just astonished by your lack of reading comprehension skills. What part of that article stating “things are bad, but the govt intervening will make things worse” sounds like an advertisement for the RE industry. Sometimes the comments on this blog are just as irrational and illogical as something found on the realtor sites.
Nevermind, you’re the genius that said the DFW area would be the hardest hit area in the country….brilliant analysis.
Mark none of that is warranted. Txchick is a good contributor to this blog and I don’t understand why you find it helpful to come at her with this type of sniping.
Florida, I don’t think she’s phased : ).
OT — a friend at work, who changed careers, is still paying 65K in private, non-fixed rate loans for school, in addition to his 3% fixed loans. His payments went up $100 this month and he makes crap now, although he likes what he is doing now. Just had a baby too.
I was thinking that 40% mortgage payment jumps if rates rose 2% would serve these clowns right, but I forgot about what rising rates will do to everyone who has debt. Yikes. This could get weird…
MrBubble
Those private non-fixed rate student loans are such a scam. What is really sad is that the financial aid people at your friend’s school were probably getting special “gifts” like cruises from the lender and so they were pushing those loans based on kickbacks rather than on what would have been best for the student, ie a fixed loan.
HUH???????
You mean a 2% increase in INTEREST rates doesn’t mean my monthly mortgage payment also goes up by 2% EYE WAZ SKAMMED
Time 2 kall mi kongressman……
Cramer says, don’t panic if homebuilders go under.
http://tinyurl.com/3aklpn
Home building is $35 billion industry = therefore unimportant.
WHAT????? $35 billion. What is he talking? Market cap? REVENUE???
How can construction be the largest industry in so many states with only $35 billion in revenue?
And, existing homes sales runs 6-8x new right? But there were like $1 trillion in transactions for the peak bubble years. Even if every existing home sale was the same price as every new, that is max $350 billion a year in transactions.
HOW oh how, do construction companies account? They should have well over $100 billion (probably $200 billion) in revenue if there were really $1 trillion in transactions in the peak years.
So, what is Cramer talking about with $35 billion?
That accounts for the top publicly traded builders. Once you get past the top 15 builders the sales per builder account for a small fraction of the total and their impact on an individual basis is small. Therefore the top publicly traded builder create an industry worth $35 billion.
On the good Ship Lollypop
It’s a sweet trip to a market top
Where the PPT plays
To better give an illusion to Wall $treet’s hedgefund haze
Lemon-like hedgefunds everywhere
Cross the deck spans nothing but thin air
And there you are
Wondering what will happen to your 401K retirement jar?
Nice one
Puts me in the mood for some Haiku
We will buy a home
When the “badness” spreads
Only if employed
“if you operate a non-depository mortgage firm (lender or servicer) and don’t have a deep-pocketed parent or hedge fund as a sugar daddy you’re likely to be out of business by year-end, probably sooner.””
Would IndyMac and Countrywide fall in the above category ?
Thanks
Just a little crisis management for Bear..
Bear Stearns seeks Wall Street backing
Jimmy Cayne, chief executive of Bear Stearns, has been calling round other Wall Street chiefs asking them not to pull business as he faces a growing crisis of confidence in the bank.
Mr Cayne called Stan O’Neal, chief executive of Merrill Lynch, on Friday to reassure him about Bear Stearns’s financial health and is reportedly asking for a meeting with Chuck Prince, chief executive of Citigroup.
http://www.ft.com/cms/s/d0dc876c-444b-11dc-90ca-0000779fd2ac.html
IKB Faces Takeover Threat from Rescuers….don’t you just hate when that happens…
IKB’s losses in the US subprime mortgage market could lead to the German bank’s takeover by one of the banks that last week had to rescue it, according to senior people in the German banking industry.
IKB last week shocked the market when it warned that its losses had triggered a €3.5bn ($4.8bn) rescue operation by KfW and several private and public banks.
http://www.ft.com/cms/s/36802f3c-438a-11dc-a065-0000779fd2ac.html
I see nervous people
QQ
Jeezums, DOW up almost 300. What planet is that on?
They seem to expect that the FED will save us all!
Seems like a good opportunity to sell short!
It sure is tough telling friends and family to “sell all bank/mortgage/home builder stocks” when every other day they see 200 point reversals… it keeps the hope up!
Bets on the rest of the week?
I think you nailed it with the FED optimism. Don’t they meet in the morning?
No bet until we see what they do. Expect a cave-in if they hold or raise rates.
Oh, come on Brian, just for fun. I like to place my bet after the roulette wheel has stopped, but it doesn’t get me anywhere.
I’d say Fed keeps rates unchanged (though I don’t wish for that), and I fully expect more flip-flopping for the remainder of August, September, and half of October. We might even hit a new high, before a decidedly HUGE drop. I don’t really care if I’m right, I’m all in gold and silver. Scroll back up and read the Mogambo Guru’s latest. He puts it more “eloquently” than I do.
I’m doing a wait and see before re-entering. Lucky for me that I’d moved all my positions to Cash this morning.
Actually, sitting doing nothing trade is pretty relaxing.
I’m trying to figure out the best way to hedge against a bigger dollar slide while I keep cash on the sidelines.
Anyone know of a good short-term international bond fund? I think PIMCO has such a thing, but I’m not sure if there is a better option.
You might look at PLMDX
’m trying to figure out the best way to hedge against a bigger dollar slide while I keep cash on the sidelines.
How about FXF, an ETF that invests solely in the Swiss franc?
would-be geniuses have decided that the problem is contained and stocks are oversold. They’re buying the dips before the DOW’s imminent triumphant return to 14k.
In other words, expect big losses tomorrow.
I have a quick 2 day trip with layovers in Atlanta coming and going.
Think I’ll say I’m might be a potential HOMEBUYER and start a riot in the airport
Flipping still alive and well apparently, in lovely Van Nuys:
http://www.hereinvannuys.com/
Mildly OT. Just overheard a coworker talking to one of her daughters on the phone. She says that her other daughter, living in Denver, has not been making ends meet ever since they transferred there from Dallas a little over a year ago. They bought(!) a house then, and are quickly spiraling out of control. The latest is that this daughter just had her land line phone shut off for non-payment. And these are regular working class people, who both make “decent” money. Probably had good credit at one time, too. Short Qwest?
I have heard this story, and told similar versions, here at HBB for a year now. Qwest will be fine, as they make money on the install fees, and CO is transient enough to keep customer flow high both in and out. They are licking their chops for the next happy couple to move into your coworkers daughter’s house after they turn tail and head back to Texas to repair their credit, and life in general,when/if they can get their house sold. Transfered IN from Texas is somewhat unique to us though.
“They are licking their chops for the next happy couple to move into your coworkers daughter’s house after they turn tail and head back to Texas to repair their credit, and life in general,when/if they can get their house sold.”
What makes you think the flow to TX will keep coming when people can’t sell their original home anymore?
Damn tripped up by another incomplete model again!
“‘This was a classic case of irrational exuberance,’ said Alan Murray, the executive editor of the Wall Street Journal. ‘Lenders were giving away way too much money on easy terms. People borrow too much. They bought houses they shouldn’t be buying and now they are paying the price for that.’”
Who cares about irrational exuberance on the dumb CDO market. So long as the stock market has irrational exuberance, it’s all good!
http://www.marketwatch.com/tools/marketsummary/
P.S. Given that the Fed is meeting this week, I am expecting the stock market to shake off its recent turmoil over the next couple of days.
“Beazer, according to the couple, inflated the pair’s earnings in loan-application documents by incorrectly stating they were collecting rental income from the house they were leaving. They now regret it. The Mottos moved to Clarksburg, but they haven’t succeeded in unloading their previous home in Rockville, Md.”
Correction:
“The couple inflated their own earnings in loan-application documents by incorrectly stating they were collecting rental income from the house they were leaving. They now regret it because they are caught with their pants down and are seeking to protect themselves by claiming to be victims. If they had been successful in their plot, they probably would have done it again and again. The Mottos moved to Clarksburg, but they haven’t succeeded in unloading their previous home in Rockville, Md.”