Bits Bucket And Craigslist Finds For August 7, 2007
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The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Why do they still bother running these ads?
http://louminatti.blogspot.com/2007/08/predatory-lending.html
Yep, These ads are still all over the place. Our local bank is still offering zero down no doc cash back loans. Realtors advertising instant equity. There may be some tightening going on some where but not in our neck of the woods. I guess they now figure that Fannie&Freddy will be able to buy up loans to the sky and on in to outer space, let the good times roll on! A few more trillion here and there won’t matter much.
My coworker said it was impertative I buy a house and quit renting immediately. The fix was in. Fannie and Freddie are going to buy up all the sub prime loans and renegotiate them so everyone can stay in their houses, plus the Fed will lower rates by the end of the year. Party on, Garth.
I tried to suggest people have loans they can not afford, no matter what the interest rate, but he would not listen. And he lives in a neighborhood where 50 of 150 homes are vacant, either foreclosed or soon to be. He paid $515,000 in Sept 2006, for a model that just sold for $382,000. You could not get him off the “real estate always goes up mentallity” unless you hit him with a 2×4.
Fannie and Freddie are going to buy up all the sub prime loans and renegotiate them so everyone can stay in their houses …
Interesting last phase of denial, and it parallels the internet bubble where I heard all sorts of fantasy IBM-will-save-the-day kinds of stories.
A $143,000 hit in less than a year. The majority never save that much in a lifetime. Sartre would have driven the porcelain bus over that.
OK, Frank, Being and Nothingness was over 700 pages, so some of us may not remember the porcelain bus. Please explain.
Nausea, from SparkNotes:
Along with the short story “The Wall” (1939), which details the psychological battles of a prisoner of war facing imminent execution, Nausea is considered an essential example of early Sartrean existentialism. Nausea, Sartre’s earliest substantial work, serves as an introduction to many of the philosophical themes he contemplates in later works, particularly in Being and Nothingness. Nausea also contains many allusions to phenomenology, the study of objects as we consciously experience them, a philosophy that influenced Sartre greatly, particularly in the earlier stages of his career. Today, Nausea endures as one of the most significant works of “philosophical fiction” produced in the twentieth century.
‘the porcelain bus’
Anglo/Irish slang for the toilet. Hence ‘driving the porcelain bus’…throwing up, head down the toilet while holding onto the bowl
Called “commode hugging drunk” in the South.
“praying to the porcelain god”
Aha! I see….
…you’d be “talking to God on the Great White Telephone” in London…
“phenomenology” — to each his/her own.
When I was in college, I was into “pheremonology.”
I have been a huge real estate bear. That said, the fix is in. I posted a link in a thread yesterday that the government is about to allow Fannie to expand the size of its’ portfolio. It’s absolutely a bailout, but whether they are bailing out the banks or flippers is not clear yet. Obviously the hope is that they can do both by keeping credit easy and buoying RE prices but IMO the banks are the main benificiary. This is only an early step in the ongoing monetization/bailout/inflation policy.
A bailout would hamper the free market and minimize the lesson that lenders and homebuyers need to learn in this free market. I did not buy a house because the fundamentals didn’t add up for me, although I found that lenders were willing to lend me much more $ than I was willing to borrow. A bailout would dampen the correction which we all know is needed in this market, not only to get valuations back to fundamentals, but to let the free market find its balance.
The more people that are allowed to “stay in their homes” due to their financial mistakes, the less able that I will be able to reap the rewards of my scrutiny. By the way, allowing buyers to “stay in their homes” doesn’t mean they would otherwise be on the streets - it just means that they would be renting again.
Note to self: follow the masses - if things go bad, you’ll be in trouble will millions of others, and a govt. bailout will be around the corner.
While Fannie may want this, Freddie’s CEO is highly resistant to the idea. Fannie is trying to get the restrictions lifted that were imposed after the multiple accounting scandals. This is the type of leverage they are looking for. But they are in no position to bail out anyone. Since they can’t even tell us what their financial position was at the end of 2006 yet, they could very well be insolvent as it is.
Deron,
I believe Fannie is insolvent; so is the US government. So what? Think of Fannie as a government organ. It doesn’t exist to make a profit but to be a political tool.
Free market; that’s a good one!
Lets assume Fannie and/or Freddie buy the toxic loans. What price are they going to pay? Face value? A 10,20,30% discount?
Lets assume they pay 90% of the loan value that has a 8% yield. Are they going to then reset the interest rate to, say 5% which MIGHT let a borrower stay in their home?
Are they just going to EAT the gigantic hit they’ve just created? Won’t Congress have to budget a subsidy to offset the self-induced loss? Will Congress blithely subsidize a few hundred billion (or more) without much public complaint? Will anyone with any income, net worth, qualify? Any loan size limitation?
And suppose Congress does approve this scenario. Will this prevent people from still walking on the loan? There’s still over 2 million empty units out there. Who thinks prices are going to stabilize (much less increase) for the forseeable future in RE given the supply and demand imbalance?
Would YOU want to pay off a $300,000 loan at 5% vs 8% KNOWING that the value of the property is $250,000?
The point is, people are still going to have an incentive to walk because many will rationally pick taking the hit on their credit rating versus continuing to pay a loan far in excess of the value of their property.
Finally, how would this work out politically? The S&L bailout worked politically because SAVERS were at risk. Savers were/are percieved to be “little people” (mostly). Here its INVESTORS. Which party wants to be the party of bailing out rich investors AND Wall Street?
Maybe someone really clever can come up with a slogan to “save” the greedy fat cats, like “saving the whales” or “saving the children”. Me? I think that’s a tough sales job.
I think saving the morons would be closer.
“Which party wants to be the party of bailing out rich investors AND Wall Street?”
Probably the party that wants to collect the most supersized campaign contributions…
Sounds like he needs it! We don’t need his kind in the gene pool.
“…people have loans they can not afford, no matter what the interest rate.”
That’s an interesting point. In our neck of the woods, median family income (about 45K) would not support the cost of a 30-year mortgage, at ZERO interest, for the amount of the median house price (about 430K). Incredible.
Actually, 0% might just work: the annual payment is $14K, which is 30% of gross. The rest depends on how much taxes are.
However, who will give that kind of money at 0%? Money is created by private banks that look for profits. Others (i.e. Fed) may try to influence them, but 0% renders the whole financial industry irrelevant, for where is the profit?
I agree with one of the posts above - this is a fantasy.
The fix was in. Fannie and Freddie are going to buy up all the sub prime loans and renegotiate them so everyone can stay in their houses, plus the Fed will lower rates by the end of the year. Party on, Garth.
Not only is the “fix” in, it’s an endorsement of the all fraud and corruption which has transpired in the last 4 years resulting in an immense decline in the standard of living for future US generations.
When I saw the stock gains of the FNMA and FHMA yesterday, I wanted to vomit because you knew the bail-out has begun.
Isn’t a drop in price from the $515K he paid to the $382K someone else just paid the financial equivalent of being hit by a 2×4?
That is a lot of money to lose in year just by living in your (the bank’s/the securitizer’s/the toxic waste investor’s) house.
I have a friend that is just as stuck on the “it’s different here” mentality.
Me: “The government will likely destroy the value of a dollar to bring real estate prices down.”
Him: “Prices won’t fall here. It’s a nice place.”
Me: 3x as nice as 5 years ago?
Him: “Well, it’s only fallen 8%”
Me: “And 8% of 600k is?”
Him: “…”
Me: “$48000…so the price of a house is down in 6 months by what you earn in a year.”
Him: “Yes, but they won’t fall any further”
Me: “Why is that?”
Him: “Because its a nice place.”
The guy doesn’t even own a house…stands to inherit a ranch that he won’t even be able to pay the taxes on, so i guess that is his motivation to believe. He’s fairly bright in other ways too…just has a penchant for willful ignorance.
“These ads are still all over the place.” It’s called bait-and-switch. I have no idea what they are going to switch too, but it’s one more fraud on the home buying public from the “scumbags of real estate” A FICO of 620 just last month got you a stated income, no down loan. Just to get a full doc loan today, you need a 680 to get the best rates.
Fannie and Freddie are private corporations, right? Where does a private corporation find a lender to hand over the money to prop up the market in the current tight credit environment? Or does Fannie (which has no balance sheet reporting requirement like all other NYSE-listed firms) have a license to print their own money? I don’t get where their economic dark matter comes from…
“$510,000 buys a mansion in Texas. Not a McMansion, a real mansion. But that isn’t the point of these ads. I think these ads are shameful, preying on folks who are not financially savvy. These ads are seen everywhere. Now that greater fools in the investment banking world have gone on strike and are no longer buying these mortgages, why are they even bothering running the ads?”
That is the $510,000 question! I am wondering if Fannie Mae or Freddie Mac buy these loans, but don’t publicize the activity? Or some other version of economic dark matter is in play? Because, as noted, the Wall Street mortgage securitization machine has lost its appetite for subprime.
No it doesn’t. Unless maybe in Beaumont or Odessa. It doesn’t even buy a McMansion in a decent part of town.
Glad to see you back txchick.
That will buy you a downtown office building in Amarillo!
That is the $510,000 question! I am wondering if Fannie Mae or Freddie Mac buy these loans, but don’t publicize the activity? Or some other version of economic dark matter is in play?
GS, That is exactly what I’m thinking Fannie&Freddie are effectively the Government, forget that sponsored crap. They could raise the mortgage cap buy trillions and never report it. Remember the M-3. The web just keeps getting more and more tangled.
That could explain yesterday’s stock market rally, the big guys know there’s an under the table bailout coming. If so, the bagholders would be those of us who sat this bubble out.
Wuold they buy these loan when people that owns them have dark credit histories. It’s basically junk bond status. The yield would have to be around 15% and sold at huge discounts.
Refi to 30 year loans will not do the trick either. geez crunch some numbers.
Ditech is still advertising a 125% LTV loans on my teevee.
I see di-tech has a new ad on tv saying “people are smart”.How things have changed.
Yeah, pretty ironic to say the least.
I think this is a variant of the old “bait and switch” - keep advertising these type of loans, fully knowing that none of their customers will qualify for them, then try to convince them to go for a more expensive product.
A more complete answer may be that there is normally a timing difference between when the ads are produced and air time/print space purchased versus when the ads run. You always get a per ad discount to advance purchase in bulk. Therefore much of the ad space may have been purchased before specific loan programs were discontinued. That said, if the ads are still generating calls, there would be no reason to pull them. I would think that the ads may now generate even more calls, as potential borrowers are being turned down by their regular mortgage guys for the riskiest of loans.
So Easy…
http://online.wsj.com/article/SB118643226865289581.html?mod=todays_us_page_one
Did anyone else notice a stock market increase yesterday? Because the WSJ was all bear, all the time, except for a C1 article that called yesterday’s stock market increase a “leap of faith.”
The front page article above ties the mortgage mess and other risky investments to the Fed-driven liquidity boom, and quotes a Greenspan staffer as saying the maestro realized there would be a price for it be felt he had no choice.
Also on the front page, jumbo rates on a 30-year are up to 7.5%. Hardly a credit crunch, but indicative of a more normal interest rate for high cost (ie. more volitile) markets along the coasts.
And a column points out something discussed here last week — that the financial models for these mortgages did not include the possibility that housing prices might go down.
The thing about models is, they ultimately rely on data and assumptions. And human history is too short, and human society evolves so fast, that there will never be sufficient data to incorporate all possible outcomes for a given point in time.
Even so, everyone should know that (the NAR median and all its flaws aside) housing prices certainly go down. Anyone aware of comps in long established (as opposed to fast-growing) metros knows this. The buildings depreciate slowly unless they receive massive ongoing reinvestment. The land values (the value of being in a particular place) can soar and plunge and communties evolve. Look at NYC, where 30 years ago properties were abandoned as having no value, but were once and are again extremely valuable. If they “aren’t making any more of it” that just make land price more valuable, because highly developed metros lack the safety valve of expansion that keeps prices in check and prevents them from soaring, and then crashing.
If your frame of reference is five years, I guess, things that change slowly can seem not to change at all.
And a column points out something discussed here last week — that the financial models for these mortgages did not include the possibility that housing prices might go down.
Which tells me another thing that they didn’t look at, the fundamentals, which has been discussed at length on this blog.
Which tells me another thing, that they don’t give a flying f**k about the average mom and pop making the average income in the any town anywhere.
I can’t believe I continue to be surprised by this.
Which is why I won’t really consider that credit has “tightened” (standards, not necessarily rates) until the lenders not only require a downpayment and documentation of income, they also require a reasonable ratio of monthly income to PITI. 6-12 months after that really and truely happens, is the first moments when you might want to look at buying in this market. When no one expects people to make themselves into long term paupers to buy a house.
also, keep in mind that credit and crazy lending in Europe is still surging. Credit markets are global, and as long as the crazy lending is not stopped all over the world, it will return with a vengeance and the current housing problems in the US will be nothing more than a small bump in the road. We need devastating losses for Wall Street and the small speculators, and a total refrain from bailouts to return this market to sanity (not very likely in my opinion).
My Dutch newspaper reports today that a big UK housing organisation is expecting a +40% homeprice INcrease for the UK within the next few years. That is on top of the already stellar appreciation of the last ten years…
nhz
I think that UK organization is about as objective as the NAR was here. We’re already seeing signs that the UK housing market is near exhaustion and the rate increases by the BoE are having an impact. Check that last few months of prices and you’ll see that rate of increase is slowing.
Once they turn south, there’s no going back. Confidence and greed are the only things that hold speculative markets together. Once those are lost, you have today’s US housing market. And affordability in the UK is much worse than most places in the US. I don’t really follow what’s happening on the continent though.
“The thing about models is, they ultimately rely on data and assumptions. And human history is too short, and human society evolves so fast, that there will never be sufficient data to incorporate all possible outcomes for a given point in time.”
Puh-lease! All they needed to do was to go back as far as the early 1990s to see that real estate does not always go up. These guys were relying on the “Law of Small Numbers” as their guiding principle.
“Inference by Believers in the Law of Small Numbers,” Quarterly Journal of Economics 117(3), August 2002, 775-816.
http://elsa.berkeley.edu/~rabin/papers.html
A post from the Roubini blog…………..
Can these figures be correct?
“Just as I predicted, the government will come to the rescue if need be:”
Yes well let´s do the maths then. Here a list of the banks and the liabilities they have for LBOs pending.
http://www.handelsblatt.com/news/Default.aspx?_p=300036&_t=ig_p_text&ig_xmlfile=hb_banken_kredite.xml&ig_page=1
ING Groep 6,805 Billion $ -> 19 deals pending
Unicredit 8,442 Bn $ -> 24 deals pending
….
Deutsche Bank 16,346 Bn -> 19 deals pending
Goldman Sachs 27,849 Bn $ -> 24 deals pending
Citigroup 31,087 Bn $ -> 21 deals pending
Banc of America 32,755 Bn $ -> 24 deals pending
JP Morgan 35,078 Bn $ -> 23 deals pending
And that does not include the Subprime bust neither does it include existing deals done in the last years which have lost a massive amount of value and which are in the books of these dear banks. With the Stock Market just going down, the write off orgy has not even started.
A senator in NY was considering putting up 300 Million $ to bail out subprime borrowers. LOL . He is going to need much more then that … and NY is doing well …”
Good stuff, footie…
Old Panic of ‘07: JP Morgan saves the day
New Panic of ‘07: JP Morgan swims the nakedest
Sounds about right. That doesn’t count other European banks like UBS, SG, CS or most of the bulge bracket firms, especially Morgan Stanley and Merrill.
They’ve got their necks stuck way out there. Is it any wonder they don’t want any more exposure. They don’t want to make loans anymore. They want to be the middleman who sells the risk to someone else. They got caught with inventory so they are the bagholders and they don’t like it. They may actually have to go back into the banking business for a while!
Financial Nakedness Happens
Another wrinkle in the Bear Stearns Hedge Fund issue. This is definitely going to generate more confidence in the brand:
Aug. 7 (Bloomberg) — Bear Stearns Cos.’ decision to liquidate two bankrupt hedge funds in the Cayman Islands instead of New York may limit creditors’ and investors’ ability to get their money back.
While most of their assets are in New York, the funds filed for bankruptcy protection July 31 in a court in the Caymans, where they are incorporated. The bank also used a 2005 bankruptcy law to ask a U.S. judge in Manhattan to block all lawsuits against the funds and protect their U.S. assets during the Caymans proceedings.
http://www.bloomberg.com/apps/news?pid=20601087&sid=awRQv0XawGk0&refer=home
“The bank also used a 2005 bankruptcy law to ask a U.S. judge in Manhattan to block all lawsuits against the funds and protect their U.S. assets during the Caymans proceedings.”
Of course, and great bankruptcy planning. Now the job of the lawyers for the creditors will be to show that this was done with knowledge and intent to evade creditors which of course it was. It’s hard to feel sorry for parties on either side of this debacle. The “investors” demanded outsized returns with no risk (see Barry Ritholtz’s column of last year when he started his hedge fund and got an earful when he started raising money) and the scumbags running the funds didn’t give a shit what they were risking, it wasn’t their money. As far as I’m concerned, if it all went to money heaven and nobody got anything, that would be a just conclusion to this whole thing.
“Of course, and great bankruptcy planning.”
They planned for armageddon and it’s armageddoning!
Well said, Tx.
“Money heaven” — I love it.
– Judge Smales
“You’ll get nothing and like it”
Those guys are toast. I wouldn’t invest my money with anyone with a history of pulling stunts like that.
and of course the Texas connection in the story. Robin Phelan is the bankruptcy section head at Haynes & Boone in Dallas and Westbrook is at UT Law School. We train em well here to screw over the creditors, that’s a proud Texas tradition. Westbrook has co-authored at least one debtor-friendly treatise with Elizabeth Warren, who I think you all know, of “Maxed Out” fame and elsewhere.
They will do what other security houses have done in the past, bring in the Omaha Wizard.
These articles have been posted before, but we shall be seein them for years to come. Local goverments that became addicted to all the revenue generated from property taxes and building fees are starting to feel the pinch:
Housing Market Pounding Fairfax
Slipping Revenue Could Put Shortfall At $120 Million
By Kirstin Downey and Maria Glod
Washington Post Staff Writers
Tuesday, August 7, 2007; Page B01
Fairfax County officials are predicting that the budget shortfall for the coming year could hit $120 million because the slumping real estate market has led to the lowest annual revenue rate increase in 15 years.
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/06/AR2007080601485.html?hpid=moreheadlines
Same old blather..threaten the children in order to force the population to approve new revenue sources.
But, hey, it will all be better now that Freddie and Fannie are going to ride in on their white horses and accept mortgages up to 1 gagzillion dollars.
I called my county commissioner last week and told her that I was happy with the level of service in the county in 2000 and that, in fact, it was better than it is now anyway. So if they wanted to cut back to 2000 levels, that’s more than fine by me. She’s a long time Hillsborough County resident, a small businesswoman and a good financial manager, so she understood. But do her fellow commissioners understand?
We need a moratorium on development. Period. Much of the increased budget went into supporting builders and developers, IMHO.
You are going to get less and less happy.
The biggest cost of local government is the massive, locked in pension and health care benefits for retirees. Like businesses, governments don’t fund these adequately while the workers are delivering the services. They do popular things like cut taxes and raise spending instead.
For fast growing areas like Fairfax that makes government look “efficient” in the short run — they have lots and lots of new, young employees providing services, but relatively few retirees getting paid for nothing.
But as soon as growth slows down and the age distribution of the work force normalizes, spending for retirees grabs a larger and larger share of the budget, taxes soar, and services collapse.
NYC has already survived this, albeit with fewer services and higher taxes than Fairfax, which also has few poor people. The suburbs are in for a big surprise.
The US spends twice what European countries do on health care & ranks well behind them on all measures of health. Local governments can’t fix the national mess.
I’m only familiar with the Massachusetts pension system, which is pretty well funded by payroll contributions. The health bill, though, is completely out of control - something like $2,000,000 over the course of career of a new Boston city employee.
“Gagzillion.” An appropriate unit under the circumstances…
“Gagzillion”………….well I’m going to look that up in my Funk and Wagnall
The funny thing is that I remember reading earlier this year that Fairfax had held back spending increases (other than fixing crap that was overdue to be fixed) because they had learned from the last bubble. Either they weren’t conservative enough, or their statements were a bunch of blather.
I am going to puke if I hear one more a**hole on CNBC talk about how people are losing their homes because of the high fed funds rate (which, historically, is not even that high!). They have been playing up this “Save the poor homeowner” for the past 24 hours on CNBC, and I am SO sick of it.
To save the overextended homeowner is to sacrifice all of us who have been saving and trying to accumulate a good financial position and secure a good price on a home. It punishes the responsible by enabling the irresponsible to stay in thier homes. Is that really what we want?? Do we want to punish those who recognized this craziness for what is was and spent the time saving and suring up their finacial footing to buy a home on good terms??
The war on savers? Sounds like it! Makes me SO mad, get someone on there with the other point of view. There are lots of us out there waiting to buy, and lots of people in McMansions who do not DESERVE to be there/cannot afford the home. Why are we going to artifically prop this up??
Sorry for the excessive puncuation, this just pi**es me off!
fax,email,call write your local reps-you’ld be amazed how little response they get
As a DC person who knows some of these people I can tell you this, if they get no feedback from their constituents this bailout will go through.
Speak up everyone.
Why are we going to artifically prop this up??
An interest rate cut will not magically disappear the excess inventory that has built up.
My bank always has CNBC on during business hours. When I stopped in at lunchtime yesterday, one of the guests was from the US Chamber of Commerce. He said the govt. should butt out and let the market do what it has to do.
An interest rate cut will not magically disappear the excess inventory that has built up.
Indeed, to paraphrase a saying from a previous political era, “It’s the prices, stupid!”
I agree with the first impulse to oppose a bailout, but it’s too big to just say no to without proposing some kind of alternative action.
What Congress should really do is create a foreclosure-management entity. I understand it would be a mess but it’s better than writing $150,000 checks of MY MONEY to every FB in the land. This “fantasy” organization would be in charge of collating all NODs, lis pendens and foreclosures, with the apporpriate creditor contact info to let the real market do its work of liquidating and remarketing. I understand this is a howler, but the fact is the government has to do something, and this is the least offensive intervention.
The problem we’re seeing regarding foreclosures and REOs is twofold:
1. The slicing and dicing of mortgage money makes it near impossible to understand exactly who is servicing the loan. If the creditor is listed as Chase but someone else is servicing, good luck finding a person to either take a short sale offer or give you authority to market the REO.
2. If you do find the company in charge of the loan, they aren’t staffed. WaMu for example, had 10 people in their foreclosure department as of about three weeks ago. Ten, for the whole country.
And they don’t answer the phone or receive faxes directly. I had to fax my REO broker application to a “guy” who assured me he would hand it off to a “guy” in the foreclosure department.
So my point is, there needs to be some sort of coordination at a higher level to sort out this mess. The gubbament is the only entity that can force these banks to answer the phones and provide timely data.
In this case the market is not working efficiently, though it was when prices were going up and all the money was going to the Caymans. This is a function of computerization and working without actual people.
For example, we bought a Dell printer that didn’t work. My charming old-school Dad suggested Dell would send a “guy” to come and look at it.
I laughed, explained there was no cuddly Dell guy in coveralls that was going to get in a brightly colored Sprinter van and pay us a visit to fix the $179 printer. He didn’t believe me — until they sent us three more printers until we got one that worked!
The point is, when things break, the way modern companies work they have no structure, ability or even desire to fix it. This is the problem with the modern mortgage market, that is only now being exposed. Now that it’s broken.
Good post, Frank.
Your insights are right on the money.
Having been around the appraisal biz during the ‘90/’91 bust, and experienced the strategies of FIRREA, et. el., to clean up that mess, I’ve got to say the complexity of this debacle staggers my mind.
The inefficiencies of the foreclosure process in the 90’s bust, WHEN YOU COULD FIND THE NOTEHOLDER was unreal
AND NOW?
At the moment I’m not sure there’s even there’s a solution.
I am handling an issue for a client that may become more and more common. The mortgage holder for his condo dissolved 10 years ago, but never put a conveyance of the mortgage on record. I may be able to negotiate a release from the receiver, but it may not be enough to get mortgage insurance. If I file to clear title, god knows how many vultures will emerge to claim they that, indeed, were conveyed the mortgage. I think the best option may be to sell the interest to someone willing to just rent it out and hold the property until the statute of limitations runs out… in 40 years.
You’ll forgive me if I don’t have faith in government’s ability to make markets more efficient, except through transparency requirements (and even then, SOX makes the case that it isn’t always more efficient to have more information). While I agree with your assessment of the problems, I think that eventually it will be in the interest of the banks and assorted bagholders to make the markets more efficient. Right now, they don’t have the organizational will or desire to liquidate REOs. You can bet that once they gain this desire (and they will, eventually), that things will move much faster.
I’m not a 100% free markets believer. Sometimes, it is necessary to shape markets with regulation to achieve the ends of social policy which may be “uneconomic”. But this doesn’t seem to be one of those cases.
I disagree with the government doing anything. Any bailout of any kind would let people do it all over again. The people that started this mess and the people in this mess need to learn a lesson in economics. The only way we learn is by mistake. These people - banks and mortgage owners - must be allowed to fail.
The Hoover administration “believed it would be unseemly and dangerous for the federal government to provide massive free aid, or “government charity,” and that the best approach to alleviating the crisis was to rely on the strength of Americans to help themselves, aided by privated charitites and state and local relief efforts. Noted historian T. H. Watkins explains:
This was …. the very ethos of a white, Protestant culture, the image that Hoover and his kind held up as the ideal of Americanism. Hard work, honesty, and independence, they believed utterly, had brought this country to the forefront of nations, had built a breed of men who had taken the institutions of the founding fathers and made them the wonder of the world. Anything that might weaken the strenghth of America and was by definition, evil.”…..
But even Hoover had the Reconstruction Finance Corportation “whose mission was to loan moeny to failing banks, railroads, insurance cmpanies, and other big businesses” (in order to put people back to work).
Roosevelt’s opening salvo against the (worldwide) Depression came on March 6, just two days after he had assumed office. Sumoning a special session of congress, the president delivered his proposal fro a national “bank holiday,” in which all banks would close down and show their books to federal inspectors. Based on their assessments, the government would extend emergency aid to those banks that needed it, and only those who finances were sound would be allowed to reopen…..With this one sweeping gesture, the president ended the national banking crisis and restored public confidnece in the country’s banks.”
from Turning Points in World History
“The Great Depression”
from the foreword who’s author is unidentified.
************************
Hmmmmm. I used to think more like Hoover but it didn’t seem to work so good in application, did it?
Lou Dobbs on CBS Morning was urging the Fed to lower to put liquidity back in the market to help his poor “middle class” that he champions. (Well, white, American-born middle class anyway)
Hey Lou, excess liquidity caused this mess, what are you an economic homeopath?
How aboutt helping the middle class by letting houses become affordable again. A-hole!!!
“what are you an economic homeopath?”
Brilliant, LOL! lunch came out thru nose
I figure it’s 50/50 the people that stayed out and saved will get screwed too. Keeping people scrambling under a mountain of debt is an excellent way to control them and make them behave predictably…the dream of any government. True freedom makes people all sassy.
I’m in the process of protecting my savings the only sure way there is: spending it. They can’t take what I ain’t got.
Will probably end up living under a bridge, but I will not participate in this farce any longer. I guess I’m proof that SOME bums become bums by choice. Maybe I’ll even be an upper class bum, with my engineering degree and all.
In 2 or 3 years, I’ll be checking out that year’s crop of refrigerator boxes. Hopefully I’ll buy in right at bottom and make bank on appreciation.
Debt will succeed where religion has failed.
By the time all of our jobs are outsourced or insourced, this will be the option for many, degree or not.
I am going to puke if I hear one more a**hole on CNBC talk about how people are losing their homes because of the high fed funds rate (which, historically, is not even that high!).
We would have literally killed in the 80’s to get the rates that are available today.
Clinton Seeks Aid for At-Risk Homeowners
http://www.forbes.com/feeds/ap/2007/08/07/ap3993195.html
CONCORD, N.H. - Presidential hopeful Hillary Rodham Clinton is calling for penalties on unscrupulous mortgage brokers who engage in predatory lending and a $1 billion federal fund to help homeowners avoid foreclosure.
She also wants an increase in affordable housing options.
Penalties on unscrupulous mortgage brokers, yes. A $1 billion federal fund? NO! Unless Hillary wants to get some of her buddies like Murdoch to ante up for the fund. Or, she can take her campaign $$ and contribute.
That’s our money, folks. Tell this walking excuse for a human being to shove her bailout up her posterior.
“That’s our money, folks. Tell this walking excuse for a human being to shove her bailout up her posterior.”
Take this crap to Fox Opinion…i am here to learn about real estate. Rack up from me another contribution to the DNC. I wish Ben would stop this negative campaigning on a real estate website.
“That’s our money, folks. Tell this walking excuse for a human being to shove her bailout up her posterior.”
Take this crap to Fox Opinion…i am here to learn about real estate. Rack up from me another contribution to the DNC. I wish Ben would stop this negative campaigning on a real estate website.
A bail-out IS part of real estate. Sorry if that offends your love of Billary.
Absolutely agreed, no bail-out, and we need to be calling our gov’t reps and raising a ruckus about this, as posters above were saying. But even if this somehow goes through, $1 Billion isn’t a drop in the bucket. If they plan on handing out let’s say $200,000 checks to FBs, that’s only 5,000 FBs nationwide. This is just stupid election talk.
I agree with penalties but for all those involved throughout the process, from the realtor who has the mortgage broker in their pocket to broker who has the appraiser in his. They are all licensed and should have more regulation. It is obvious that NAR and MBA are not interested in “teaching” their flock a lesson. They rather point fingers. So someone has to do it.
But I do not agree with a bail out. It was for a majority of the ones in trouble, “an investment” gone bad. With investments there are risks, plain and simple. For the ones who got caught up and don’t deserve it. Well it happens.
Would it be unethical to put a broker, realtor, or FB in the same prision cell? These are tough times and tough decisions need to be made.
“I demand the sum… OF 1 BILLION DOLLARS.”
Did she hold her pinky up to the side of her mouth when she called for the relief fund? Next she’ll want frickin’ sharks with frickin’ lasers on their heads!
air quotation fingers on:
LASER
/fingers off
Sorry guys, this is going to be a huge ‘08 prez election issue. We will have to open our big fat mouths to the Beltway hos.
So this is what living in Argentina is like.
Let’s see, Clintons went all cash, Cheney famously sent his money overseas, Bush has an escape ranch in Paraguay, and we, the last remnants of frugal, responsible Americans, might as well be taken out and shot as a example of what happens to those who aren’t with the program.
Spike,
You summed it up well. The study of the Argentina Currency Collapse and the Germany Hyperinflationary Depression, along with the Asain melt down has me thinking some dark stuff is upon us. My co-workers think I need meds. Do I?
No you don’t.
You probably need to stop talking about this stuff to your coworkers though (as have I). They ain’t going to get it. I took the time follow the example of our esteemed leaders to do a wee bit of preparation.
I still feel like I’m staring into the abyss most days, though. Its probably worth noting that even my friends that believe me mentally compartmentalize it away from their daily lives.
I do think a version of Argentina’s collapse is distinctly possible in the US (with the social upheaval & governmental response being far worse).
(with the social upheaval & governmental response being far worse).
180 million guns says your right.
Wait until all those $300.00 Romanian AK-47’s start comin’ out in Miami.
Ahem…well, don’t you think we should maybe ask for more than a billion dollars? I mean, a billion dollars isn’t exactly a lot of money these days.
If it were funded directly by predatory lending penalties and contributed to by its beneficiaries, like FHA is, it doesn’t have to be taxpayer $.
This part was good though: “And she also planned to demand lenders remove early payment penalties attached to some mortgages.”
Does she mean going forward? Because that’s a good idea…, or is she suggesting trying to revise PPP already sold off. Because there’s a good reason lenders stuck folks in 2/28s with 3 year pre-pays and it’s not just because the office got a good laugh out of it. They get a lot of money in the secondary market for pulling that kind of crap, and no one’s going to revise anything, I promise.
Also this: “It’s part of the American ethos that if you can pay off your debts, you should be encouraged to do it,” she said.
haha, she might want to have a chat with cramer about that!
“if you can pay off your debts, you should be encouraged to do it…”
With Congress, including our gal Hil, having voted the bankruptcy reform bill in 2005, FBs will find that they will be more than “encouraged” to cough up.
Responsible business practices used to be part of the “American ethos” as well, but ending the usury laws, encouraging cc banks to pile up and raise rates sky high on a borrower who is a slow-pay on a single account,(the “universal default” mechanism), not holding lenders, whether cc banks, mortgage lenders or the ibanks providing warehouse lines to mortgage brokers, to assume reasonable responsiblity for oversight before making loans, is beyond irresponsible…it is the lever by which this disaster was created.
Skip the disingenuous mumbling about “encourage” and “responsible”…there was nobody on the big money side of this equation who did not know how the game was being played.
I give props to loan sharks here–at least they make no bones about who they are, and they way they make loans, and enforce payment.
This part was good though: “And she also planned to demand lenders remove early payment penalties attached to some mortgages.”
Does she mean going forward? Because that’s a good idea…, or is she suggesting trying to revise PPP already sold off. Because there’s a good reason lenders stuck folks in 2/28s with 3 year pre-pays and it’s not just because the office got a good laugh out of it. They get a lot of money in the secondary market for pulling that kind of crap, and no one’s going to revise anything, I promise.
Pre-payment penalties are already illegal in some states, like North Carolina.
Is she really dumb enough to think $1b is enough to patch up a $100b+ problem? Or does she think the voters are sufficiently dumb to think so?
Gs,
Ben’s blog provides ample examples of American innumeracy…she probably thinks voters are that stupid. Hers probably are.
Trump says bidding on home-builders’ land
By John Spence
Last Update: 2:32 PM ET Aug 6, 2007
BOSTON (MarketWatch) — Real estate developer Donald Trump on Monday said he and other entities are bidding on land that home builders control for “pennies on the dollar.” Now that home prices have pulled back in many areas, some home builders are stuck with land they bought near the housing market’s peak, he said during an interview with business-news channel CNBC. However, Trump added that he didn’t think any “major” home builders would go bankrupt at this point in the housing downturn.
Kara wasn’t “major”? Beazer is next…
billion in revenues a year is chump change compared to the big boys
No Kara is not a major builder. Major is DR Horton, Beazer, KB Home, Centex etc. These are all on the NYSE.
Major Major Major Major
http://en.wikipedia.org/wiki/Major_Major_Major_Major
Cry me a river if they all go bankrupt - I prefer local builders who put houses that fit the area - not the bland, boring, monotonous McCrapMansions the majors are known for building.
…bland, boring, monotonous McCrapMansions…
Too many syllables. May I suggest “McCrapsions”?
Or, perhaps, “McManshCraps”? “McManSh!ts”?
Michael:
I’m right there with you.
I think the backlash against congress will be severe if they do anything that resembles a bailout. Whether homeowner or not, most people I know feel overextended by the tax burden as it is. If voters feel that they are bailing out irresponsible buyers and that Cramer’s buddies get to breath a huge sigh of relief, the backlash will be severe indeed.
I’m done and I’ve had it. This is the one single issue that I know of that crosses party lines. No bail out for irresponsible home investors and hedge funds. I’ve made that clear to my congress people.
It truly is a war on savers. Cramer is whining on about 7 million people losing their homes. I bet there a lot more than that who can’t afford to buy, even with 20% down saved (like most on this board) and continue to save and invest for their older years.
Of course Cramer doesn’t worry about those people which makes me think he has a huge amount to lose personally in this thing. He went way over the line on this. He was calling for a bailout directly last night. He’s clearly not worried about losing viewers and I imagine not just a few were turned off by his rant and rave. Strange.
If this is going to be bad with more forclosures and many average joe & janes losing their homes, then he is out in front of the curve compared to many in MSM.
Be careful. I think we are outnumbered!
Might be better to throw ‘em a bone and get out of the way while they fight over it.
Outnumbered? 40% of homes are owned outright. 30% + rent.
That 40% of homes with no encumbrance is a figure often overlooked. I was thinking about that yesterday and wondering if that group is just sitting silently and waiting for home prices to tank so they can own some more RE outright.
No, that 40% represent my parents, in their late fifties and trying to figure out how they can retire without selling the house that they worked very hard to pay off.
It represents my great aunt who at the age of 82, has owned her house outright for over 30 years, but is now considering selling it because she can’t keep up with the cost increases of taxes/insurance/maintenance/etc.
Of all the people I know who own their house outright, most are over the age of 60. I don’t see them trying to accumulate more housing, rather they are paring down their lifestyles and investments for retirement.
And they vote.
Right Ben. This has nothing to do with the ‘poor homeowners’.
Cramer is whining
The thing that I find most amazing about this whole thing is that last year at this time there was no problem according to these people. No housing bubble, no problem with the ARM’s being pushed and of course there would be no problem with the various mortgage backed securities and if there was any there would NEVER be any real risk to the holders because it was all “figured out”. In fact it is just in the last 3 months that they have slowly had to admit what could no longer be denied. I can recall hearing over and over that there was no sub prime problem than oops there may be some, than more and now even more, would not spread to prime but oops again. Also for much of June and early July they (you know who they are) flat out stated on their various programs that they were sick of talking about it as it was a non issue. SO there was a flat out refussal by these individuals to report the truth. NOW they are on air demanding thet the fed lower rates to fix the carrnage? What is there to fix I ask? You said it was all good. Is this just a cover for them to sink the value of the dollar to protect the carry trade that “they” have bet the bank on?
I’d be willing to bet money his own butt is on the line somehow.
Towards the end of that interview he was really out of it. He was shaking his head and saying, “I’m too old for this, I’m too old for this.” Then yesterday he begged for a bailout.
Something stinks here.
Maybe he was threatened with lawsuits after he told people to bail on their mortgages?
“It truly is a war on savers.”
Maybe in a sort of twisted way the savers are the villans. They are the enablers to the FB. Savers are selfish, self serving and should be punished. Let them be taxed to death. While were at it lets get big oil, business and anyone else that attempts to be productive. Screw the rich (savers).
I don’t see how a bailout can be a political win. If some bank forclosed on an owner’s loan, and the govt did nothing, the owner might be somewhat mad at the govt. But if the govt bought the owners loan, then the govt foreclosed on the owner two years later (as is inevitable), the owner would be a lot madder. And likely never to forget and never to vote for that govt party ever again.
Plus, most of the people who really want the debts off loaded in some bailout can’t vote anyhow (ex. other govts, a few execs in financial companies, foreign investors, etc.). So the bailout doesn’t even buy that many votes initially.
More evidence that the housing meltdown is “contained”
CHICAGO, Aug. 4 — Plenty of companies — the mortgage lender Countrywide Financial, the hardware giant Home Depot and the insulation maker Owens Corning among them — are absorbing the ill effects of the yearlong slump in housing construction and sales.
But few have felt it as forcefully or as suddenly as the USG Corporation, the nation’s largest maker of drywall, the paper-wrapped plaster boards used to build walls in homes and offices.
USG is in the midst of a typically steep decline, tracking the fortunes of its home builder clientèle. If the last two cycles are any guide, USG’s price for 1,000 square feet of drywall could plummet from its high of $188.37 during last year’s third quarter to about $95, even as the volume of drywall USG and its competitors sell also declines steeply.
USG said its drywall price during the second quarter averaged $141.97, a 25 percent drop from the peak. Net income plunged 68 percent as a result to $56 million from $176 million a year earlier.
“Business is tough,” said William C. Foote, chairman and chief executive of USG. “The housing recession is entering the second year of what is likely to be a multiyear downturn.”
http://www.nytimes.com/2007/08/07/business/07usg.html?pagewanted=all
Another one bites it.
“One of the nation’s largest mortgage lenders, Houston-based Aegis Mortgage Corp., stopped taking new loans Monday”
http://www.chron.com/disp/story.mpl/front/5032292.html
Interest rate news from Australia………
Official announment due am Wed 8th August.
Fun……..Fun………Fun.
Rates tipped to rise for ninth time
Tuesday Aug 7 15:33 AEST
Interest rates are tipped to go up for the ninth straight time without a fall, just months out from a federal election.
A stronger-than-expected climb in inflation has convinced economists the Reserve Bank of Australia (RBA) will have to act sooner rather than later.
A potential cash rate increase to 6.50 per cent, from 6.25 per cent.
http://news.ninemsn.com.au/article.aspx?id=283912
Whither the dollar, given that the Fed seems frozen at 5.25% and CBs elsewhere are hiking rates to reign in inflationary pressures?
I expect it to go down especially if the FMNA monetizes the mortgages that private investors don’t want. I would also expect interest rates to go up even if the FED lowers the overnight rate.
Who gives FNMA the money they need to monetize the overbuilt housing stock? Is the Fed talking out of both sides of its mouth?
Lucky you Americans don’t have to worry about inflation
Inflation doesn’t matter. It all goes on the credit card anyway.
Inflation doesn’t matter. It all goes on the credit card anyway.
Former Fed Governor to Street: Don’t expect the Fed to bail you out.
THE FED
Fed highly unlikely to ride to markets’ rescue
Ex-Fed official says FOMC may not even mention recent volatility
By Greg Robb, MarketWatch
Last Update: 12:59 PM ET Aug 6, 2007
WASHINGTON (MarketWatch) — Participants in financial markets shouldn’t get their hopes up that the Federal Reserve will intervene to alleviate the current market turmoil, a former Fed governor says.
“I think it is too early right now to think about any kind of intervention by the Fed,” said Susan Phillips, now the dean of the George Washington University business school in Washington, in a telephone interview.
Phillips said that the financial markets’ volatility is a painful but healthy “reality check” and that this has led to an overdue repricing of risk.
“We’re in the middle of that process,” Phillips said. “The Fed wants the market to find its own right place,” she said.
“We’re seeing some constriction in some of the high-risk markets, but quite frankly, that is probably appropriate,” Phillips said.
http://www.marketwatch.com/News/Story/investors-shouldnt-expect-much-fed/story.aspx?guid=%7B70B9E9E9%2D1107%2D4F6F%2D8B2D%2D98A3D1581F03%7D
I cannot find one Federal Reserve board member that advocates any form of bailout.
IMHO it is because the members (voting and non voting) realize the US does not have the Trillions available to pay for the bailout. This does not mean a bailout will not occur, but any bailout will be political.
I expect to see bailout legislation from New Jersey, Delaware, New York, Illinois, Connecticut and Michigan. California is so dysfunctional that the legislators will not be able to agree on terms of a bailout and as a result no bailout bills will be introduced. I do not expect any legislative initiatives from Florida to have any success.
My reasons for those states attempting to pass bailout legislation is not to help the home owners, it is to help the banks which stand to lose 500B over the next 5 years. Jeremy Grantham (GMO) said that at least one of the major ‘to big to fail’ banks may go under in the next 5 years.
The idea of a ‘bailout’ to help the homeowners is nice chat, the real talk is save the banks, brokerage houses and hedge funds.
This is the 21st century version of the Panic of 1819. I agree that we’ll see states trying to enact some ridiculous laws. Maybe some anti-foreclosure laws staying the process for a couple years or forcing lenders to take less than 100% of the loan.
Because the Fed has usurped the rights of states and private banks to issue money, the states can’t just inflate the problem away.
I wonder whether the Fed has the balls to not re-flate if this thing starts to get ugly, though. Right now, it is mostly idiots losing their homes. I don’t know anyone with a brain who is having financial problems.
That may change if home builders start filing for BK. Or the higher quality mortgage industry firms do the same. Or Wall St starts laying off in droves. Until people start losing their home because they lost their job as opposed to buying too much house and consequently living rent free for a few months, I don’t consider this anything more than a paper crisis that makes good news.
Anti-foreclosure laws of the sort you describe would certainly lead to a depression, as capital investment would disappear. Why lend money if you don’t have the force of law on your side to get it paid back? Maybe we’ll go to Mafia-style private loans…. your monthly payment or your kneecaps, please!
Quick someone issue a subpeona for Rove’s e-mail yesterday to weed out non “Bushies” in the FED!!!!!!!!
You really think this administration wants to pass the reigns to a DEM. They will purge the FED like they did the Justice Dept.
Could someone please help me understand what exactly happened on wall street yesterday? What did I miss over that weekend that cause several financial stocks to be down circa 6% on Friday and up 6% on Monday? “Speculation” that the government might intervene???
I’ve been in\out and or watching the market for 30 years and I can not ever recall a loss such as Friday followed by a gain the following Monday on the eve of a fed rate decision.
If they cut rates at this point 1) it looked like someone knew. 2) It’s gonna look llike they bowed to the pressures of Cramer and the CNBC gang, 3) With a nearly 300 point gain Monday all must be well and no intervention needed. Thoughts?
check the charts, plenty of times this happened
markets don’t drop in a straight line and this was a very fast drop. if you check past charts i don’t think the SP500 ever dropped from a peak to under the 200 day average line so fast. i think it was 2 months on average
we found a level of support at last week’s lows and the 200 day line and it will probably go sideways for a little while. and we need the customary rally back to the 50 day line and then bounce off it on the way down
go to yahoo, pull up the charts of the indexes, on the technical indicators set up the simple moving averages for the 10,50 and 200 day lines, set up the MACD and for volume use a 13 day moving average. then move the slider on the bottom for different time periods and see how things repeat themselves
Thanks dba I’ll check this out
Three words- Dead Cat Bounce.
Some additional mortgage company news …
* HomeBanc Corp., a lender with operations around the Southeast U.S., just announced it will stop originating mortgages. The company said it can’t borrow on its credit facilities and that it could no longer fund loans as of August 6. It said Countrywide will buy up certain retail loan origination assets.
* Late yesterday, mortgage REIT Luminent Mortgage Capital said it would suspend its dividend payments and push back an earnings conference call it had previously scheduled. Lenders are increasing margin calls and/or pulling back on funding the company’s operations. The stock had been halted for most of the day yesterday.
Several days ago, the company’s CEO said: “In my almost 30 years in the U.S. mortgage-backed securities market, I have never before seen the intensity of confusion, uncertainty and outright fear as right now.”
* Another lender, Aegis Mortgage out of Houston, yesterday suspended all mortgage originations as well. The quote from a spokeswoman shows how chaotic the current market environment is: “We’ve just announced that we’re going to have to suspend lending until we get this figured out.”
Some links to various announcements and stories are available here:
http://tinyurl.com/33nozv
There was a segment on the Today show this morning about what someone facing foreclosure can do to try to keep his/her house. The list was mostly the usual stuff (refinance if you have enough equity, if you can’t refinance - talk to the lender to renegotiate the loan, etc.) but one thing they listed I had never heard of before.
It was called a 4-hour sale. They said if you have to sell, this is a very effective (albeit somewhat scary) way to do it. It goes like this - say your house is “worth” $300,000. Price it 20% below that ($240,000) and call local brokers in the area to say you’re holding a 4-hour sale. The way it’s supposed to work is you get several bids in that 4-hour timeframe and you wind up taking the highest one.
Has anyone ever heard of this as being a good way to sell a house?
The single most classic salesman’s technique - create a sense of urgency. People do dumb things when they’re driven by urgency.
Buy now because prices are going up….
There is urgency that your life depends on and then there is herd mentality, gotta get mine so I can be a part of the club urgency.
It’ll be tough to pull off if when the buyer arrives there’s 40 other houses on the street for sale or in foreclosure.
I would think you’d need to get your lender to approve that in advance, sort of like a short sale, assuming you’re mortgage was over 240K.
I would think you’d need to get your lender to approve that in advance, sort of like a short sale, assuming you’re mortgage was over 240K.
The “Real Estate Expert” in that segment was real estate whore Barbara Cocharan. She’s as trustworthy as Lereah.
“Basically I drove up here … and 15 minutes later I owned a house,” said Dane Andrew, winning bidder of the Castro Valley house. “I think I did pretty well.”
more on auctions in todays San Francisco Chronicle
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/08/07/BUNLRE4JA2.DTL&tsp=1
Creating urgency works when there’s liquidity AND buyers available.
How many people are there NOW willing and able to bid on any properties? Especially “under the gun”.
This is just another gimmick like offering a car, plasma TV or a trip. Those didn’t much work and neither will this scheme.
The only bailout I could agree to would go something like this:
Foreclosure.
Auction.
“Do over” for the credit ratings overstretched bone fide homeowners, those who lived there and had put up downpayments, on bubble-era defaults.
Some of the above get to buy homes at auction for prices, and get CONFORMING mortgages, they can afford.
Those who had nothing, and still have nothing, can rent.
Those who speculated because they wanted easy money without working can work like the rest of us.
Firms that participated in the party and paid out big bonuses and stock options can go Chapter 11, and have management cleaned out.
Investors can learn their lesson.
Those who speculated because they wanted easy money without working can work like the rest of us.
And who will say who the speculators are?
NO BAILOUTS and yes I am a DEMOCRAT!
Geez, this is starting to remind me of 1929. If you’ve never read J.K. Galbraith’s book, “The Great Crash: 1929,” I highly recommend it. He wrote it in 1953, and he lays everything out so that any reasonably intelligent reader can follow.
He lays most of the blame for the crash on investment trusts. The big brokerage houses set up investment trusts that bought and held stock. Then they sold shares in the trusts themselves, so you had a double-dip phenomenon: when the underlying shares declined, so did the value of the shares in the trusts that held them.
There was also a great deal of speculation on margin, of course, as most of you probably know.
Does all that remind anyone of mortgage-backed securities, hedge funds and collateralized debt obligations?
Also, the market briefly rallied a few times in October 1929 before hitting the skids for good.
bernanke wrote an interesting article back in November 1987 on 1929
the market crashed but then recovered until the first bank rush in late 1930. that is when a correction/economic slowdown/recession turned into a depression and why FDR started with the banks first and why FDIC was created along with a bunch of regulations for reserve requirements, etc
bernanke wrote an interesting article back in November 1987 on 1929
the market crashed but then recovered until the first bank rush in late 1930. that is when a correction/economic slowdown/recession turned into a depression and why FDR started with the banks first and why FDIC was created along with a bunch of regulations for reserve requirements, etc
So now what, now that there are no reserve requirements?
Does all that remind anyone of mortgage-backed securities, hedge funds and collateralized debt obligations?
“Now we know, now we understand, there are measures will be taken..” - that the presumption, i.e. in 1929 they were “fools, but now we are smart, we’ll fix it… “
Yep, there are many parallels. Financial genius is before the fall.
Stop making sense.
I was just reading about the market volatility preceeding the 24th of Oct ‘29.
“Early in September the stock market reached an all-time high. Two days later there was a break, and in the following weeks a gradual slide. But each time the drop seemed to be getting really bad, support came into the market. Then on the afternoon of October 24, the first hammer-blow smashed down”….
“The break had been one of the wildest in the market’s history, although the losses at the tapping of the three o’clock bell were not particularly large, many having been recouped by an afternoon rally.”….
“But five days later…..Wall Street was in a real panic.”
James D. Horan
The Stock Market Crash
Turning Points’ “The Great Depression”
Nice summary on this
http://www.nytimes.com/imagepages/2007/08/05/weekinreview/20070805_LOAN_GRAPHIC.html
And away they go…
Wall $treet opens slow out of the gate, 60 lengths back
http://www.kcchronicle.com/articles/2007/08/06/business/local/doc46b5446b4a472755294088.txt
“Real-estate agent Rob Buhrow recently performed a market analysis on an Elgin property for a local bank, and every comparable home he turned up was a foreclosure property.”
“I’m like, ‘Oh my God,’ ” Buhrow said. “It makes you think – what’s really going on?”
“Basically I drove up here … and 15 minutes later I owned a house,” said Dane Andrew, winning bidder of the Castro Valley house. “I think I did pretty well.”
news about auctions in today’s San Francisco Chronicle
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/08/07/BUNLRE4JA2.DTL&tsp=1
According to WSJ today, average jumbo rate now at 7.34% for prime fixed rate loans over $417k. The debt pigs are starting to squeel…
I apologize if this has been posted elsewhere:
Cramer Meltdown annotated by iTulip
William Wheaton, an economics professor at the MIT Centre for Real Estate, forecasts that the housing market could drop by an unprecedented 10% to 20% - which, he says, would slow America’s annual economic growth to 1%.
“Investors in the sub-prime market, to be perfectly honest, deserve everything they get,” he says. “If they couldn’t see that these loans were abusive, that the risk cover was pathetic, then they deserve to take a bath.”…
At Bear Stearns, the former Whitewater special prosecutor Robert Fiske is leading an internal inquiry into how its funds got into such disastrous positions. Chief executive Mr Cayne admitted to CNBC that the next 72 hours would be crucial in rebuilding confidence in his firm - but the 73-year-old scorned suggestions of his own departure, saying: “In 2018, I’ll be calling it a day.”…
In the past, analysts coined the phrase the “Greenspan put”, meaning they could bet that if markets turned sour, Mr Greenspan would respond by cutting interest rates, making speculation almost a one-way bet. Mr Bernanke may soon have to decide whether to create a “Bernanke put”. But he may simply judge that a few rich bankers losing money in the financial markets is not his problem.”
Guardian Aug 7, 2007
http://tinyurl.com/32z6av
Good post Hoz .
Does anybody get the feeling that the talking heads ,like Cramer ,want the Feds to rush to judgement and re-spike the punchbowl so the bagholders can attempt to change bagholders to the taxpayers ?
The thoughtful questions of how did we get into this mess to begin with need to be addressed . Do they really think that Fannie/Freddie = taxpayers can bail investors out by making additional bad loans to a bunch of vacant homes that were bought by speculators and gamblers ?
Now that the loan investors are re-pricing risk for loans in general ,in a declining market ,the market is speaking loud and clear that the economy is going into a market downward trend because of tight more expensive money .
The horse is already out of the barn on these bad loans that were made that inflated the home prices Nationwide .I think it needs to come out in the wash that you can’t save a inflated asset that was inflated based on fraud in lending and speculation combined with faulty rating models ,and the under-pricing of risk that went on for so long now . the Myth of “real estate always goes up ” needs to be addressed along with why a entire system could of relied on such a silly notion in pricing risk .This real estate investment myth of “real estate always goes up” that was not challanged by the media ,the investors ,Wall Street ,the borrowers ,or the realtors , during the housing boom was the blind spot along with easy money .
The talking heads keep talking about the poor 7 million borrowers that are going to lose their home . So let the homeowners sue the funder or mortgage broker for giving them a loan they couldn’t afford ,and see how far they get regarding contract law in the court system .
The real truth is that Wall Street wants a re-pike of the bunch-bowl in the form of a Freddie/Fannie bail-out along with cheap money again to get a rally going and a pass the risk to another bagholder play. Nobody other than a pasty government would take on these bad loans now at a cheap rate, because the secondary market got hosed and they aren’t going to put up the bread . Real estate isn’t going to go up ,simple as that ,and the cost of money has to go up accordingly . It’s over .
They should just come out and say that the RE market was inflated by faulty fraudulent lending ,which included the borrowers being in on this mass speculation scheme in housing that was created by the market -makers and it had nothing to do with solid pricing on housing .
Who needs cash for a soda now? You can charge it in a vending machine:
http://tinyurl.com/2d7asa
Does this mean that minimum soda charge will be $1? Can you charge $0.80 on a credit card even?
I was on a road trip this weekend, and saw one of these machines when we stopped for gas in CT. I went inside the mega-conveneince store with the desire to buy a tooth-rotting high-fructose corn syrup drink (everyone has their vices). The cashiered store was charging $1.69 + deposit + tax. I said, “No, thank you! Too expensive for my vice” and went outside to the vending machine aisle. $1.50 (deposit and tax included) and it took the credit card. I bought two. Arbitrage works.
Went out with some friends this weekend. One guy is hell bent on buying a house (or worse, condo) in the area we live, which is suffering a historic downturn. Prices are already down 20% from the peak and I expect them to give back all gains. Regardless, I offered that he should wait. He seemed confused, and this other guy said “man now is the time to buy prices are low and only going up”. The other guy volunteered he had a tough time selling a house in Miami but was aggressive with the price. I don’t want to deflate my buddy’s dreams of owning a home, but I will point him to this blog and just encourage him to read and make up his own opinion based on fundamentals, not emotions.
OT: I looked through the Wall Street indexes this morning. They are really correlated. What would happen if they became uncorrelated? Should they be that correlated? I don’t get it. Why buy Wilshire 3000 when it is correlated to the S&P500 or DJI? Except for the price levels, there appears to be no difference. The risk is identical, and so is the profit.
Roidy
Check the correlations to the FTSE, DAX, Nikkei, Bombay and Sao Paulo. Basically, only Shanghai is not highly correlated and that’s due to currency controls. Inflation of the dollar supply has enabled foreign CBs to to the same in their home markets. Voila! You get a global coordinated stock bubble.
The correlation between the US indices is a result of the derivatives market. e.g. A one point move in the S&P500 is roughly equal to a 7 point move in the DJIA, since many traders will not swing 500 different stocks to make up the S&P basket, they choose a few stocks to represent a trading bias (a different basket for up or down markets). In low volatility, these type of hedges work wonderfully.
The best correlation for the US stock market has been the EuroYen.
EuroYen vs S&P, DJIA, Nasdaq 3 months
http://tinyurl.com/2qsuvh
Hmm, Wall Street just pooped a big one. It seems that the Fed will not lower rates.
Roidy
CLASSIC. craigslist.
In case it gets deleted, I’ll just paste it:
———————————–
Date: 2007-08-06, 7:55PM PDT
Hello Fellow Mortgage Brokers,
Can’t close a mortgage deal because it is a “problem file?”
I can help…
My secret—I know the underwriter PERSONALLY. NO BS.
Do you have a file which has “problems?”
1. Have you submitted a file to have the lender turn it down?
(These are my favorite because I ALWAYS get them done!)
2. Are lenders asking you to go FULL DOC when you can’t?
(I can go full doc on files that do not have the possibility of going full doc)
3. Does your borrower need INCOME?
(I will magically PROVE to the lender your borrower has income when, in reality, they may not have any income)
4. Are lenders asking you to show ASSETS when you can’t?
(I will magically PROVE to the lender your borrower has assets when, in reality, they may not have 1 cent in the bank)
5. Are you a little short on VALUE. Not UNREASONABLY short, but maybe 10% short on value?
(my appraisal guy can bump values 10% because he knows how to structure appraisal reports like no other appraisal company you have seen)
7. Multiple Problem Files (A combination of problems, such as those listed above)
I am here to help! Sometimes we need to have to look at our self in the mirror and ask, “Am I being greedy? Do I really think I can close this file?”
Any deal you can’t close, or are having extreme difficulty with is most likely going to die.
So, lets get realistic… some commission is better than no commission. I will get you that commission. Don’t wait until the client is upset because you have taken 6 months working on their loan- get me the loan before it is too late
I will close your mortgage deal at 30-50% commission (depending on the difficulty of the file.) If you feel that is too much, we can talk about it- no problem.
I do all the work. EVERTHING. You communicate with the client. If you want to, I can communicate with the client while you put your feet up and wait for the difficult file, which you though was dead, to actually fund! No file is too difficult.
However, it is important to note that I cannot fund files which are impossible. Here is an example of an impossible file:
Client A wants to refi his property in which ALL the below problems exist:
- his new LTV, after refinancing is 95%
- his fico is 520
- he has no assets
- he has no income
- he wants cashout
- the loan is 600K
If you continually contact me in regards to impossible files, when you do have a file which is very difficult, but not impossible, I will not wish to help you. So, please understand, I can fund DIFFICULT PROBLEM loans as I described earlier, but not files which are IMPOSSIBLE (as brokers, you understand what I mean.)
Please feel free to email me any scenario at FinanceTreeInc@gmail.com
You can reach me direct at (510) 377-5136.
- CJ Atkinson
Wow… Doesn’t this guy blatantly admit to fraud?
Cramer didn’t get his rate cut!
Fed votes to keep rates stable.
I am begining to like this BB guy. Agree? Disagree?
BTW
Can we expect yet another video meltdown from Cramer?
BB Can’t do a thing with rates. He is trapped at this rate.
Cutting it won’t influence any lender to assume less risk on a mortgage. A cut would negatively impact bond rates.
A raise will make things worse.
The Gov’t has to do an end run to fix this and it will involve passing on the damage to the next generation. No harm no Foul.
No rate cuts puts the pressure on the feeders to clean up their act? Nobody wants to die, but when the guy with the lifesaver stands on deck watching and not making a motion to throw you a line, I bet you try to learn to swim.
Remember, it’s all perception. Fed can’t actually help the market, they can only make things worse by acting. There is still the possibility of a Bernanke Put, so things remain a little calm… people think the emperor still has clothes as long he’s hidden in the carriage and not riding the white horse. This can go on for quite some time.
And when can’t you expect another Cramer meltdown? That’s why they follow him around with TV cameras.
Bernanke to Cramer, investment banks, and hedge funds: “Throw all the trantrums you want…the party is still over!”
BB to Cramer, Realtors, and investment bankers - “Throw all the trantrums you want…the party is still over!”
I’m beginning to like BB for not caving into the special interests. But as many have said already, the Fed is in a box and doesn’t have much way to maneuver.
BB to Cramer, Realtors, and investment bankers - “Throw all the trantrums you want…the party is still over!”
I’m beginning to like BB for not caving into the special interests. But as many have said already, the Fed is in a box and doesn’t have much way to maneuver.
At least you have to give BB the credit for staying the course and not caving in to the immense pressure to become the temporary hero who sparks a massive blowout rally on Wall Street in exchange for more bubble rubble down the road.
Check this on you tube. There are 4 parts.
Roidy
http://www.youtube.com/watch?v=ewT1JmZnJT0
that guy max keiser reminds me of Burt Reynolds on
Celebrity Jeopardy
The mannerisms… pretty funny.
crap.. wrong link.
“Burt Reynolds has changed his name to ‘Turd Ferguson’”…
I know it’s late in the day, but I have to post this one as it’s unbelievable.
Something For Nothing Home Deal
By Elizabeth Razzi
Sunday, August 5, 2007; Page F01
There’s a home-buying deal out there that’s more than too good to be true. It’s too good to talk about in public.
At least the people running the deal don’t want to talk about it, certainly not for publication in the newspaper.
Here’s the pitch: There is an invitation-only group of homeowners who have signed up as partners with an organization called Metro Dream Homes, which has offices in the District. Members buy a house, sometimes for more than the asking price and without a down payment. A condition of the sale is that the seller agree to give back 10 to 15 percent of the sales price to the buyer, who in turn pays it into the coffers of Metro Dream Homes. (What does the seller get? A sale, which can be hard to come by these days.)
Metro Dream Homes says it will invest that cash in various businesses, including automated teller machines, video advertising and other Web-based ventures that are under the umbrella of its parent group, Metropolitan Grapevine, headquartered in Laurel. Then, according to Metro Dream Homes, the profit from these businesses goes to fund the monthly mortgage payments for the homeowners, on an accelerated schedule that pays off the house in five to seven years. The company also says it will make sizable contributions to charity. After five to seven years of payment-free living, the homeowner is supposed to sell or refinance the house, with the homeowner and Metro Dream Homes sharing the equity.
What a deal! You buy a house, maybe with nothing down, take out a mortgage big enough to cover your $50,000 to $70,000 payment to Metro Dream Homes and then live payment-free for five to seven years. You’ve paid nothing. And after a few years, you and Metro Dream Homes split the equity and you live happily ever after.
My translation: The buyer borrows an additional 10-15% to speculate that the home will appreciate 20-30% in 5-7 years, minus the mortgage payments. A fool’s bargain if I ever saw one. I might have to repost this one tomorrow to get more commentary, to see if others have heard of such a thing.
Color me embarrassed for all my repetitive posts. I’ll learn patience yet.
Blogs such as this one are so important because cut loose from self-serving commercial interests, blogsters can learn so much from each other. In the last few yrs, thanks to blogs, I’ve learned how little mfg is done in the U.S. now. I’ve also learned how to question and find information about how to best serve MY needs instead of only those of commercial interests.
As a follow-up to what kind of toothpaste to put into my mouth, I learned from Tom’s of Maine that their product is manufactured solely in the U.S., with U.S. water. From communication with them, my understanding is that except for palm oil (rather difficult to grow palm trees in Maine :)), all ingredients come from the U.S.
I’ve told my friends what I’ve learned about toothpaste products sold in the U.S., and so far, here is what I’ve heard back -
” I will switch to Tom’s of Maine. Darc”
“I’m using up some old Colgate but don’t plan to buy more. Karla”
“No more Colgate for me! Cynthia”
We, the people, CAN make a difference in how corporate America does business. Keep sending friends and acquaintances to this blog!!! AND THANK YOU, BEN. Donation coming today!
Glad you like the toothpaste from Maine, because everything else the state used to produce is long gone from the landscape.
From a frugal Yankee, self-reliant, commodity resource state, to a struggling socialist/welfare morass in one generation.
All the Tom’s toothpaste in the world isn’t going to help this place.
The damage is done.
‘Tis a pity.
Use baking soda to brush your teeth! It cleans your teeth and your breath. I think its like $.15 per pound. This is what my parents and grandparents used. Tooth paste uses this, however with the flavor inhancers and marketing, you end up paying $2.00 (my est.) per tube.
Just thought you might want to know!
PS: just a note, I can not confirm it other than info from my parents experience, however such items as cereals were purchased out of bulk containters. My mother stated the the Sears Catalogue was used in the outhouse in the 1940’s. Bulk grain was purchased in 50lb bags with patterns on the cloth bag. My mother and her sisters used the bags to cut and sew clothing.
Thought you might want to know how things may be in the future.
Thank you!
I expect that we will learn of more companies in the next few weeks that will be saying the same spiel: “We are not exposed” - I find it amusing that it is an Australian Company with assets in the US that said it first.
“Rubicon America Trust said its commercial real estate loan portfolio (ASX: CRE.ax) of 48 loans valued at $US308.9 million ($A361.82 million) has no exposure to the US sub-prime residential sector.
The CRE loan portfolio is secured against 176 commercial properties valued at US$3.3 billion ($A3.87 billion) and located throughout the US including office, industrial, retail and multi-family properties.
“In the course of preparing the half year accounts, as at 30 June 2007 the board of the responsible entity of Rubicon conducted a review of the CRE loan portfolio and determined there was no impairment in the value of the portfolio,” it said.
“In light of the volatility in global credit markets subsequent to 30 June 2007, a further review was undertaken of the CRE loan portfolio.
“Each loan in the portfolio continues to perform and the key debt and real estate parameters remain robust.”
AAPNews
http://tinyurl.com/ypmtdc
Washington Post 2Q Earnings Fall 13 Pct
http://biz.yahoo.com/ap/070803/earns_washington_post.html?.v=7
“Newspaper publishing revenue fell 7 percent to $228 million. Print advertising at the Post fell 13 percent quarter-to-quarter, mirroring a nationwide trend caused by the decline in real-estate ads and the migration of advertising dollars to online sites. The nation’s three largest newspaper chains all reported advertising drops in the quarter ranging from 8 to 11 percent.”
Looks like the REIC teat is running dry…
PAGE ONE
Markets Gyrate
As Fed Finesses
On Interest Rates
By GREG IP
August 8, 2007
With investors seeking a sign that the Federal Reserve might be ready to help contain spreading disarray in financial markets, Fed Chairman Ben Bernanke walked a public fine line yesterday: He acknowledged that credit-market turmoil is darkening the economic outlook, while reiterating that the central bank’s principal worry is inflation.
The Fed statement, issued after its policy committee unanimously voted to hold its target interest rate at 5.25%, was a modification of the Fed’s recent solitary focus on inflation. But the statement was a disappointment to those in financial markets who hoped the Fed would more clearly hint at the possibility of a rate cut in the next few months.
Turmoil in credit and stock markets had prompted Wall Street traders as recently as Monday to place odds of a rate cut in September at 70%. The Fed dashed those expectations, though, and the odds plunged to 25% yesterday, as indicated by futures-contracts pricing.
http://online.wsj.com/article/SB118650838435490620.html?mod=hpp_us_whats_news
Mortgage sector faces further tightening
By David Wighton, Saskia Scholtes and Michael Mackenzie in New York
Published: August 7 2007 21:55 | Last updated: August 7 2007 21:55
Large parts of the stricken US mortgage market are facing further tightening in the supply of credit following the collapse of dozens of lenders and a buyers’ strike by investors in mortgage-backed securities.
Falling Treasury yields in recent weeks have led to lower interest rates on standard mortgages. But for larger and less creditworthy new borrowers loans have become more expensive and harder to obtain.
Some types of borrowers can no longer get a loan from a mainstream lender at any price and the prospect of rate cuts by the Federal Reserve may bring little respite.
Rates on standard fixed-rate mortgages have steadily declined in the past two months with the national average rate on a 30-year loan falling from 6.27 per cent a week ago to 6.22 per cent on Tuesday, Bankrate.com says.
But the picture is very different for mortgages that the lender cannot sell on to Fannie Mae and Freddie Mac, the government-sponsored mortgage giants. Rates on mortgages above Fannie and Freddie’s cap of $417,000 have soared. According to Bankrate.com, the rate on a 30-year “jumbo” was 6.8 per cent, up from 6.6 per cent a week ago. Three months ago it was 6.1 per cent.
http://www.ft.com/cms/s/b152e86e-4522-11dc-82f5-0000779fd2ac.html
S&P could cut ratings on Alt-A loans
By Saskia Scholtes in New York
Published: August 7 2007 20:44 | Last updated: August 7 2007 20:44
Ratings agency Standard & Poor’s on Tuesday said it might cut the credit ratings of more than $900m of so-called “Alt-A” mortgage bonds in another sign that the crisis in the US subprime mortgage market has seeped into other types of home loans.
Alt-A borrowers can get loans with loose terms such as those granted to subprime borrowers, but have better credit scores. For example, Alt-A mortgages are often made to borrowers who put little or no money down on their homes, or present little or no proof of income.
http://www.ft.com/cms/s/2a935ee4-450e-11dc-82f5-0000779fd2ac.html
Scumocrats… I hope the Rebubs point out how this bailout plan will shift the costs of the bubble bailout away from Wall Street and FBs, both of whom willingly participated in the mania, and onto the backs of the beleagured finanically-prudent middle class voters who tried their best to sit it out.
Democrats call for action on mortgage crisis
By Andrew Ward and Stephanie Kirchgaessner in Washington
Published: August 7 2007 20:18 | Last updated: August 8 2007 00:31
Influential Democratic senators on Tuesday called for Fannie Mae and Freddie Mac, the government-sponsored mortgage companies, to be given a bigger role in efforts to stabilise the troubled US mortgage market.
Chris Dodd, chairman of the Senate banking committee, and Chuck Schumer, chairman of the Senate subcommittee on housing, supported the lifting of investment caps on the companies.
Hillary Clinton, the New York senator and Democratic presidential frontrunner, also urged expansion of the mortgage groups.
The comments added to growing hope among investors that Fannie and Freddie would be freed to buy more mortgages from struggling lenders, easing the crisis in the subprime sector.
http://www.ft.com/cms/s/2842ea82-450f-11dc-82f5-0000779fd2ac.html
“Please let Fannie and Freddie buy more mortgages or our investments are going to lose in value. And Mr. Senator you did wish to be a consultant to our Washington DC branch when you retire next year didn’t you?”
This is a reply to GS post above.
With all due respect to my regular-poster colleague Hoz, who dislikes Ambrose Evans-Prichard’s reporting as much as I instead place great faith in it, the following is Ambrose’s latest opinion about the market:
http://tinyurl.com/267s4n
My vote about the outcome is with Ambrose. Hoz — I’ll bet you a lunch, with Melody’s choice of wine — up to $12 a glass.
It would be good to have independent verification of this story, but my sense is that this trade war could get way ugly in a big hurry. I say let the Congress shut their yaps and let HP handle the situation — he is the right man for the job!
China threatens ‘nuclear option’ of dollar sales
By Ambrose Evans-Pritchard
Last Updated: 1:48am BST 08/08/2007
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress. Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China’s “nuclear option” in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
Who is happy to pay those monstrous hedge fund management fees to get a piece of a sector that is beginning to resemble the world’s largest ever batch of popcorn? Luckily the likes of Blackstone, Cerberus and Citadel are waiting in the wings to snap up the popcorn kernels as soon as they explode.
Hedge funds hit critical list worldwide
By Anuj Gangahar in New York
Published: August 7 2007 20:53 | Last updated: August 7 2007 20:53
Hedge funds globally suffered their second-worst week in four years during the final full trading week of July as continuing concerns about the spread of US credit problems took their toll on performance.
The Hedge Fund Research index of investable hedge funds, one of the most widely followed hedge fund performance benchmarks, fell by just over 3 per cent in the week beginning Monday July 23 as global markets fluctuated wildly.
It represented the worst week of performance since the week beginning March 26 this year, when the index fell 3.4 per cent as global stock markets suffered a sudden sharp sell-off.
Jeffrey Larson, founder of Sowood Capital, one fund that collapsed due to the market turmoil, said recently that the pain inflicted during the week of July 23 led to his eventual decision to transfer his fund’s credit portfolio to Chicago’s Citadel Investments.
“Each day brought greater and greater losses,” he said.
http://www.ft.com/cms/s/121f6a80-4511-11dc-82f5-0000779fd2ac.html
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
- That what I posted yesterday in another thread. China may start throw US bonds. Sure, they are tied to dollar but self comes first.
Henry Liu predicted a trade war was coming back in June 2005. http://www.atimes.com/atimes/others/trade-war.html
from “Telegraph”
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/08/07/bcnchina107a.xml