Bits Bucket And Craigslist Finds For August 9, 2007
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Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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Smoke ‘em if you got ‘em; another Tampa furniture store goes up in flames:
http://www.baynews9.com/content/36/2007/8/9/278860.html?title=Huge+fire+destroys+Tampa+furniture+store
No injuries were reported and fire officials are investigating the cause of the fire.
My guess would be that is was a friction fire!
Yesterday my kids asked me why there appeared to be an uptick of fires in our area.
After considering the recent local fires, I felt many seemed linked to drug/mental health issues. One guy snapped earlier this week deciding to skip work so he could set his apt on fire. One of the reasons he offered for doing it is that he felt his neighbors avoided him.
Another loss of life occured when someone was trying to fix a dirt bike on their porch and it exploded. Don’t ask me why there wasn’t time to get the 2 young boys out when the fire started on the porch. These things I never understand.
I suppose we’ll be seeing more accidents as more untrained people feel forced to do their own maintenance.
Well, CarrieAnn, I’d say his neighbors were right in avoiding him.
Oh my. I can’t believe it! They are burning down the house! Sing Mr. Jones. Sing.
http://www.youtube.com/watch?v=4Vh3SmpAcVg
Just their bad luck; the warehouse was located just behind the burned store!
Maybe the skiff and F-650 were parked there as well!
Check out the interactive map with this article. I am wondering if one of those green dots in Texas represents TxChick’s house?
Credit crunch
Published: August 8 2007 16:05 | Last updated: August 9 2007 10:48
The FT’s exclusive interactive map charts how and when many of the financial players affected by the crisis in the US subprime mortgage markets and the consequent turmoil in credit markets worldwide either made their killing or lost their shirts.
(Launch interactive map
Adobe Macromedia LogoThis file requires Macromedia Flash Player 7 or higher)
Winners and losers from the subprime and credit markets turmoil range from risk-hungry hedge funds to safe and boring-looking cash funds for retail investors; from high-street specialist mortgage companies to some of the world’s biggest investment banks; and from ordinary corporate borrowers to highly leveraged private-equity backed buy-out deals.
Since the smart money began using new derivatives indices to bet against the subprime market in earnest near the start of the year, concerns over lending standards have spread from mortgages to corporate debt.
http://www.ft.com/cms/s/bfa568b6-45a3-11dc-b359-0000779fd2ac.html
As far as I’m concerned, a house is a place to live, not to “make a killing”. So is this going to be the excuse now? The new derivatives have torched the subprime market?
Next to be torched: Covenant lite.
BNP Paribas suspends funds after subprime shock
By FT Reporters and agencies
Published: August 9 2007 08:57 | Last updated: August 9 2007 12:21
BNP Paribas became the latest European casualty of the fallout from the meltdown in the US subprime mortgage market after announcing it had suspended three of its funds because of jitters among its investors.
The French bank said in a statement that the decision to suspend Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia funds followed the “complete evaporation” of liquidity.
It said the valuation of the funds would resume as soon as liquidity returned to the market and added that in the continued absence of liquidity, additional information on the envisaged measures would be communicated to investors within a month.
http://www.ft.com/cms/s/9a4cabc4-464d-11dc-a3be-0000779fd2ac.html
‘Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia funds’ = French version of Enhanced Leverage blah blah blah…
Just mark to Markit…
BNP freezes $2.2 billion of funds over subprime
Thu Aug 9, 2007 6:53AM EDT
By Sudip Kar-Gupta and Yann Le Guernigou
PARIS (Reuters) - France’s biggest listed bank, BNP Paribas (BNPP.PA: Quote, Profile, Research), froze 1.6 billion euros ($2.2 billion) worth of funds on Thursday, citing U.S. subprime mortgage sector problems.
The news sent shivers through nervous financial markets. It came as Germany’s Bundesbank met to discuss a rescue package for lender IKB (IKBG.DE: Quote, Profile, Research), which has been hit by the subprime crisis too, and as the European Central Bank said it stood ready to act if needed to ensure smooth functioning of markets.
BNP Paribas, the eurozone’s second biggest bank by market capitalization, said the subprime crisis was preventing it from calculating the value of the asset-backed securities funds and barred investors from redeeming cash from them.
“The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly, regardless of their quality or credit rating,” it said in a statement.
http://www.reuters.com/article/hotStocksNews/idUSWEB612920070809
Here is some more BNP Paribas redemption song from Bloomberg:
Aug. 9 (Bloomberg) — BNP Paribas SA, France’s biggest bank, halted withdrawals from three investment funds because it couldn’t “fairly” value their holdings after concern over U.S. subprime mortgage losses roiled credit markets.
The funds had about 2 billion euros ($2.76 billion) of assets on July 27, including 700 million euros in subprime loans rated AA or higher. The Paris-based bank said today that it will stop calculating the net asset value for the funds, Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aNIJ.UO9Pzxw&refer=home
It’s ARMageddoning. It’s ARMageddoning real good!
Looks like a lovely gap down this a.m. That snapback yesterday afternoon really annoyed me because I was up 30% on yesterday’s put purchases right away and it was cut to 10% by the close. Dr. J on Minyanville says the curbs will probably be triggered. Yeehaw!
Cue Cramer hysteria.
With the ECB and the Fed injecting reserves, Cramer got just what he asked for. They “opened the discount window.” But the market smells panic, of course since deflation is now clearly marked as the real threat. All the inflation posturing was BS at least by the Fed, trying to prop up the dollar. No need to do that as the carry trades unwind rapidly.
Cramer should be careful what he wishes for.
it is very telling that the ECB is providing huge amounts of liquidity today will crazy lending is still as crazy as ever in Europe (or maybe even more crazy than ever), and mortgage rates are near all-time lows in most of Europe. Why worry about a surging money supply and inflation? The ECB pundits only care about supporting the housing/credit/stock market bubbles.
nhz
So much for the credibility of the ECB. Some folks thought that the monetary pillar inherited from the Bundesbank would continue to guide policy. Maybe it would have if Germans were running the darn thing. Instead you’ve got Trichett - a Frenchman.
Deron: sure, Trichet is a burocrat and those are the type of people that run the ECB. With Sarkozy in charge in France there is even more support to solve all problems with the printing presses. The few remaining real German bankers should look for other work … I think the euro is toast, but it will take some time before the market realises that.
Dow down almost 200 in the first 10 minutes! Quite a roller-coaster, this market…
Nothing to see here, please disperse!
We were talking about BNP in the Spanish housing bubble forum…and the consesus is that the next one might be ING, their internet savings account interest have been much higher than most banks in Europe (also in the US). I think ING might have been taking a high risk in the US bond market with their internal hedge funds.
We will see, it is just a rumor or a deduction.
nam: Dutch parent company also has high risks in their home market; together with Aegon they are probably the biggest speculators in the EU RE markets where leverage is even higher than in the US (but don’t worry, Aegon just told us that 99.5% of their US subprime portfolio has a AA or AAA rating so nothing can go wrong …).
OMG! my Dutch pension is in Aegon and Philips pension fund….well I can kiss good bye to Aegon, it was not too much anyway, less than one year contributions. I’m glad I left and sold my pos flat in Holland, I miss my friends but I am sooooo glad I was out by 2004.
“…followed the “complete evaporation” of liquidity.”
“…and then it went dark!”
“After that my guess is that you will never hear from him again. The greatest trick the devil ever pulled was convincing the world he did not exist. And like that… he is gone. “
ECB intervening. Dumping 95 bil Euros into the banking system in a sign of desperation. Might stem the immediate panic but trust in the banking system is broken.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aFJrebey5MPE&refer=worldwide
Anxious Builders,incentives…. The words of the international humanitarian Al Sharpton leap to mind. “Tain’t E-nuff”
http://online.wsj.com/article/SB118661750287092393.html?mod=todays_us_personal_journal
Who gives a plop about incentives? Builders worry (for good reason) that if they lower the price, the people they sold to earlier will get upset. But what does it matter anymore? Either the houses sit, or they sell at a haircut. If I was a builder, I’d just shrug and lower the price. Many builders won’t be in business to get mad at anyway. They’re trying to save a so-called “good name” that won’t exist shortly. So git while the gittin’s good.
I saw a spec McCrapbox on my way to Whole Foods last night in my old ‘hood where until about 2004, nothing ever sold over about 350K. Now there are gigantic houses built on teardown lots on spec priced at 500K to $1M. Selling to who, I have no idea. Anyway, I passed one priced in the 900s with a sign out front that said “Bonus! - $10,000 off!” Wow, 10 gs. Sign me up!
Still building 350K craptacular mini-mansion south of me by a mile and nothing and I MEAN NOTHING is selling.
Pulte put up some 230K townhouses 5 years ago and they are priced now at $179K and 8 of them have been for sale for a year and no takers…..these are going to fall belowe 100K before anymore buys them….and they are building more!!
Washington County in Minnesota.
This sounds scary
ECB Lends Unlimited Cash at 4% as Money Rates Surge (Update1)
Aug. 9 (Bloomberg) — The European Central Bank said it will launch an unlimited fine-tuning operation today to add liquidity at 4 percent after demand for cash in the European money market drove interest rates higher.
“This liquidity providing fine-tuning operation aims to assure orderly conditions in the euro money market,” the ECB said in a statement today. “The ECB intends to allot 100 percent of the bids it receives.”
Earlier today the bank issued a statement saying it “notes that there are tensions in the euro money market notwithstanding the normal supply of aggregate euro liquidity.” The Frankfurt- based bank “is closely monitoring the situation and stands ready to act to assure orderly conditions in the euro money market.”
Money-market traders are reporting a reluctance to lend money after concern over U.S. subprime mortgage losses roiled credit markets. That pushed overnight rates to as high as 4.7 percent today, compared with the ECB’s benchmark refinancing rate of 4 percent.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aCWlglzLiJNo&refer=home
Globalization. How’s that working out for everybody?
Crappy. I want to buy things in Europe and Asia and don’t like the exchange rate ;(
Buy the Yen, for the next 6 months it will be better than gold.
dumb newbie question #46:
can the yen rise if the Japanese continue to save instead of borrow?
Any tips on how to do that (no experience there)? Thanks
Hoz,
Just a follow up on your comment on the Yen, but I think you mentioned last week that you were somewhat bullish on the Swiss Franc, and I would like to get your opinion on which currency is a safer bet?
Just an FYI, but I lived in Indonesia and Korea when both countries were hit by the monetary crisis in the late 1990’s, and I am thinking that it may pay to lessen my exposure to a dollar collapse over the next year.
Thanks in advance for your advice.
All the news reports on, is the Chinese Renminbi (Yuan) being 40% undervalued, however the Yen is 35% undervalued, the Swiss Franc is 25% undervalued.
Since there is at least $1 trillion (US) in short Yens outstanding, it has the greatest chance for a 30% run in 3 months. The Swiss Franc is in the same bind with at least 250B in shorts. IMHO the Euro is the single most over valued currency in the world, the Euro is in a bubble market and could go up in a perceived flight to safety.
I am not a financial genius, neither are 97% of the Hedge fund managers, 99+% of Mutual Fund mangers and 100% of financial advisers. The difference is, I know I am not a financial genius.
So, as opposed to others, I will not recommend a stock or strategy. There is no fool proof strategy. The best funds, the best that they can do is make 1.4% less than what the market does overall. If the managers of these funds were so good at making moneys, why run a fund? What I learned a long time ago is that what is right and comfortable for me, myself and I is not suitable for any and all. When generally bearish on the US markets, I buy a bear mutual fund Profunds Ultra Short (UCPIX) which I have been into for about 3 weeks and will be out of in about 2 more weeks.
My advice is be really cautious about getting long any financial stock including banks. The banks are offering incredibly high 1 year CD rates when nobody is borrowing moneys, Why? The last time this happened was during the S&L crisis of the ’80’s and that turned out wonderfully for the American public.
Thanks, Hoz, I appreciate your response.
Hoz
I’m using the FXY - Rydex Yen ETF. It’s only a small position since I don’t really mess with FX that much. Any comments, good bad or otherwise?
I’ve got half my Roth in FXY. Fun seeing my stock dashboard come up all red except for FXY. . . go, little guy!
been tellin everyone I know to watch the local thrifts, and when a premium is offered on CD’s…..bad,bad news for your friends
jungle_man
We saw that movie here in Texas in the late-1980s. Seeing it again in the Dallas area with several local banks offering 2.0-2.5% above comparable Treasuries. Yuck!
i know i was but a pup in amarillo in the 80’s…
plenty of small timers threw money at the thrits in a percieved abitrage opportunity, which turned out to be correct when the bailout money showed up.
hoz is staring down a minimum 15 % return on that UCPIX, implied cost of 11.75 with todays sell-off…. seems like ripe fruit.
I Was lookin at that, but I wanted a little more bubbly in the market. The psychology is whats drivin this monster.
“Globalization. How’s that working out for everybody?”
Works out just fine for me. I have a couple of 401ks and IRAs and go for DODFX, OGLBX (and the class A version), PRASX, VEIEX, and TEMPX.
If you cannot stand foreign nations getting ahead of the U.S. INVEST IN THEM, BY GOLLY, RAKE IN THE PROFITS AND STOP COMPLAINING!
Hi Bill maybe you could tell me why gold is down double digits today? Also how low does it go before it turns around?
I took a chance and bought DODFX over 2 years ago after Phoenix Bill started harping on it. It was a good move.
The Fed and ECB just threw up huge red DEFLATION flags. In deflation, gold does extremely poorly as the money supply shrinks, so does the relative value of gold. Absolute value remains the same but priced against fewer units of currency. Great hedge against inflation but I think the CBs just told us it’s the wrong crisis.
regarding gold: maybe the powers that be want to scare everyone out of gold before the big inflation game begins in earnest. After all, what should all euro savers do when the euro desintegrates? Contrary to the US, Europe has huge savings accounts. Converting euros to rapidly depreciating US$ or Yens does not sound very attractive.
My guess is that the ECB is dumping gold again today through one of its member banks, like they have done several times before this year when times get rough in the financial markets.
At this time, I would be hesitant about Dodge and Cox, decent returns but pretty heavily weighted in financial stocks (20%+).
The last thing I would be long is financial stocks. Banks are either a decent buy at these prices or the problems are so severe from the credit freeze that banks world wide will be suffering earnings difficulties for a decade.
In a liquidity crunch Gold drops because the banks and investors need to move cash quickly to cover problems in their fiat money investments. Once the panic exhausts gold valuations, people look around and realize throwing good money after bad is a zero sum game and gold becomes desirable again.
Another article on Bloomberg says LIBOR rates have soared in one day. Looks like the “rabbit” credit market will have priced in everything that will happen in the “tortoise” housing market before it happens.
“A reluctance to lend money after concern over U.S. subprime mortgage losses roiled credit markets pushed overnight euro rates to as high as 4.7 percent today, compared with the ECB’s benchmark refinancing rate of 4 percent. The rate for borrowing dollars overnight jumped to 5.86 percent from 5.35 percent yesterday.”
The interbank lending market going tits up is a big and I mean BIG problem. This is how the 98 Russian crisis started about a week before the big crash on August 17th 1998.
Get to cash or get short.
Yes, but this time it’s different. There’s 8 days until August 17th, not 7 like back then.
lol
So maybe they can use THEIR helicopters to trash the euro as fast as we trash the dollar.
no doubt the ECB is trying harder at the moment to trash their currency. The ECB is an even bigger bunch of idiots than the FED gang; they should do something about crazy lending in the EU instead of keeping their pyramid game going and worrying only about the financial health of these speculators.
“Analysts say the authorities stepped in after the interbank markets seized up late last night and early this morning”
“EU officials in Frankfurt said the ECB action was exceptional. “They don’t do this unless something serious is happening,” said one, noting that the tender operation was providing unlimited liquidity.”
Nothing happening here….move along now.
“The European Central Bank said it will launch an unlimited fine-tuning operation today to add liquidity at 4 percent after demand for cash in the European money market drove interest rates higher…”
One way of putting it. I would rather think that it was the lack of supply of cash rather than demand that caused this. In other words, cash simply started to dry up so the borrowing rates shot up. It’s like having a fever. Better tamp it down now before it rises higher and kills the patient. Let’s see what the underlying causes end up being…
So California 12:58AM 4.5 rolling shaker (earthquake). No 911 calls to report injury or damage. Epicenter was NW of Chatsworth. A larger one would have moved this bust along!
Felt that one myself - it woke me up from my slumber on the sofa last night.
Scared the $r@p out of the cats, though, and went on for like, a minute.
Scared me awake in W. Hollywood. Lost precious beauty sleep and need emergency acupuncture to remove negative vibrations, and to keep me from shorting stocks into oblivion.
I’m glad it wasn’t worse. The REIC doesn’t need any scapegoats on which to blame everything that was going to happen anyway.
So Ca’s 1994 quake was downgraded so the banks didn’t have to wave mortgage payments. I worked for a REIT back then, got the inside scoop.
waive - sorry -brain fart
Quick anecdotal from my mortgage broker friends in SW Florida. Many competitors have gone out of business. They have lost about half or so of their own employees. The loans they are doing are requiring MUCH more documentation and stated income loans are gone. They have submitted several loans that have been refused funding. That is to say, the loan docs were good and the qualifications were good but the lenders have just started refusing to fund loans for no specific reason and have returned the documents after underwriting had approved them. They have not ascertained any rhyme or reason to the refusals as some are going through and others are not. Armageddon baby!
Thanks for the post. It seems that unless Ginnie or Fannie can buy the loans, there may be no funding available.
The Maes have a max cap correct? If Jumbos completely dissapear, that is a major event in places like CA. This may be the kick in the pants sellers needed to drop prices. The trickle down would take a while to shake out but, hey, it’s a start.
As an aside, my boss had her neighbor just walk away from their 2 yr old home last week. They didn’t even try to sell it, they were that underwater. They are staying rent free until they get told to leave. wow.
Many California home owners and else where will be doing the same thing especially the higher price homes where the values are falling fast. No government or any other program can come in now and save these home owners who are up side down. Any “new”or revised lone must now have a more true value by the appraiser if he values his license etc and there “is” the problem. No smart home owner would continue to pay, even if he could on a house going down in price. Why? The answer speaks for itself.
this is what a collegue and I were speaking too last evening.
As the mortgage market simply dries up, and the bailouts are drops in a 50 gal barrell, nations talking about “self-preservation” coupled with tarriffs and other assorted isolationism, does this increase the likelyhood of the “black swan, event risk, systemic failure” scenario?
I must say, Ive been a long term bull for quite some time, but after reading this blog for aver a year, I have changed my tune. I now beleive the volatity provides for easy money as pshychology is the driver….and with the tenuous grip on the markets by CB’s….. the end of the rope may be in sight.
Declining liquidity begets declining liquidity and results in declining asset prices accordingly. The way liquidity is imploding one needs to think of a possible discontinuous pricing event in real estate assets coming shortly to your neighbourhood. i.e. a potential and great gap down in prices. If this happens it will only add gasoline to the Bonfire (of the Vanities)……..
Royal Lepage poised to jump into US housing market - says housing corrections only last two years. That’s a relief - everyone can start buying again next year
http://www.reportonbusiness.com/servlet/story/RTGAM.20070808.wroyallepage0808/BNStory/robNews/home
>>That’s a relief - everyone can start buying again next year
Actually, the correction started around the middle of 05, so I guess it is over now.
ARMs up! Now walk this way.
Aug. 9 (Bloomberg) — The British Bankers Association said the overnight lending rate that banks charge each other to borrow in dollars rose to 5.86 percent today from 5.35 percent.
The so-called London interbank offered rate in dollars is the highest since the start of 2001.
The benchmark borrowing rate is rising on concern banks face growing losses on investments linked to U.S. mortgages. The European Central Bank said today it is “closely monitoring the situation and stands ready to act to assure orderly conditions in the euro money market.”
“Liquidity in the market has completely dried up as investors aren’t recycling their money back because of subprime concerns,” said Saher Bin Jung, a trader on the commercial paper desk at Commerzbank AG. “Levels have shot up dramatically since yesterday as issuers are trying to entice investors back.”
Bank of America Corp. and UBS AG said their overnight borrowing costs rose 65 basis points to 6.00 percentage points. Royal Bank of Canada said its costs rose to 6.00 percentage points from 5.37 percentage points. Barclays also said it needs to pay 6.00 percentage points to borrow overnight in dollars, up from 5.38 percentage points yesterday.
http://www.bloomberg.com/apps/news?pid=20601087&sid=ay9vr2nEIjuI&refer=home
Oh boy. It’s ARMageddoning. It’s ARMageddoning real good!
RE: American Banks
“…Public disclosures and position transparency make it virtually impossible for investors to accurately quantify each firm’s credit, market and liquidity exposures within the troubled sector.”
Moody’s August, 2007
in the mean time, savings accounts in the EU still pay 2.4-3.2% maximum. A lousy return for risking your capital …
In 1968, I had a Swiss savings account denominated in Francs, the conversion at the time was 4.23 francs to the dollar, the yield from the account was 1.25%. In 1970, I closed the account converted back to dollars at the rate of 3 francs to the dollar. I would rather have a 1.25% true yield than a 15% yield devaluing by 20% every year.
that is true, but with the euro strongly overvalued relative to most other currencies there is considerable devaluation risk (not even talking about the risk of loss of principal when the euro pact dissolves in the next years).
Keep forgetting you are stuck in Euros! Can’t you go to the Swiss Franc? That is truly undervalued.
Wow, so let’s make some money off this shall we?
I bought back SFK yesterday at around 81 after selling at 90 from the last run up. Also went way long on the Yen. The carry trade has got to come apart sooner or later.
Any other players out there with ideas?
I haven’t posted before but have read for a while. You all are a savvy bunch, and I have gained a lot from being here.
Josh
If you learned something from my “savy-ness” , that would be a first, as my ex-wife would gladly verify . Rock - on, brother !!
http://tinyurl.com/yvz7rz
Seems like the MSM is connecting the “housing troubles? to the rest of the economy. Self-fulfilling prophesy, I know…
As merchants reported sluggish monthly sales results Thursday, the weakest performers included teen merchants Pacific Sunwear of California Inc. and Wet Seal Inc.
“Overall, July sales were negatively impacted by soft mall traffic,” said Ken Perkins, president of RetailMetrics LLC, a research company in Swampscott, Mass. “The consumer is holding up, but certainly feeling the pinch of the housing market and higher gasoline price.”
Safe! Subprime surfacing in the safest of the safe Money Market accounts! Here’s more:
“The subprime tsunami has come to the beach, as it were, to the safest of the safe,” Epstein said. Money Market One is a San Francisco-based broker-dealer of short-term securities.
Commercial paper is bought by money market funds, mutual funds that invest in short-term debt securities and hold money for everything from individual savings to the coffers of Standard & Poor’s 500 companies. The cash from money market accounts is lent to entities such as those owned by American Home and Luminent to buy mortgages, bonds, credit card and trade receivables as well as car loans. Extendible notes allow the issuer to delay repayment for as long as 397 days, the maximum U.S. money market funds may hold.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.98mgnTI5s4&refer=home
Ah yes…back to sewing up that mattress.
Note: This is a double post; posted yesterday in Arizona thread.
For the regular Joe, subprime problems sounds like other people’s problems.
Money Market problems will scare the heck out of everyone.
The WSJ describes how subprime slime ends up in the safest of the safe Money Market accounts:
The fact that mortgage loans could be causing grief in the commercial-paper market underscores how widely Wall Street packaged and then sold this kind of debt among investors. It also helps explain why problems in the subprime market have caused so much worry among investors.
The problems for the asset-backed commercial paper market began earlier this week when three conduit vehicles said they wouldn’t be able to redeem paper coming due and instead would have to extend the maturity of the notes.
One of these vehicles, Broadhollow Funding LLC, encountered problems due to the bankruptcy-court filing of American Home Mortgage Investment Corp., one of the country’s biggest lenders. Broadhollow purchased its mortgage products from AHM, which had created the vehicle, to finance the notes it sold to investors.
http://online.wsj.com/article/SB118661509601392327.html?mod=hps_us_whats_news
Subscription required of course.
This is exactly why you use a Treasury MM fund, not one that holds CP. And be careful. Many funds advertise themselves as “Federal” MM Funds. Those can include Agency paper like GNMA, which is explicitly government guaranteed but some also are carrying paper from Fannie and Freddie which people assume to be guaranteed, but is not.
So what are same treasury mm funds (say from Vanguard or Fidelity)?
It’s not a true money market, but the closest Fidelity fund to a ‘treasury mm’ is probably the Spartan Short-Term Treasury Bond Index Fund - Investor Class.
why the ST instead of the IT? That’s where I parked a portion of my moola in April
Vanguard Treasury MM - VMPXX
I checked the prospectus and it’s all T-bills. You can get the even lower fee Admiral class of shares if you put in a bigger amount.
Avoid the “Federal” MM Fund. 61% Agency paper, mostly Fannie and Freddie, zero T-Bills. Remaining 38% is repos with big banks, largely secured by said agency paper w/ a few t-bills thrown in for laughs. Counterparty risk is high with potential bank problems.
I read the Vanguard prospectus online for VMPXX: “At least 80% of the Funds’ assets will always be invested in U.S.
Treasury securities. The remainder of the Funds’ assets may include securities issued by U.S. governmental agencies such as the GNMA, the Small Business Administration, and the Federal Financing Bank.” Later it goes on to say: “Securities issued by the Government National Mortgage Association
(GNMA), however, are backed by the full faith and credit of the U.S. government.”
That’s not “all T-bills.” But maybe it’s as good.
I usually ignore those “dancing” adds advertising historically low rates. But I noticed when I logged on cnn.com today that the alien is no longer flopping his arms around on my screen. Instead it was a wizard telling me to go back to school.
I hit refresh a number of times, no adds for loans. This maybe nothing, but it maybe something.
Dancing alien still over at weather .com. And Ditech is still on my teevee telling me that people are smart.
Still getting spam about 220K no doc loans caught by my spam filter.
Ditech I figure will just “Die-Dreck” soon enough…maybe take Blackstone and Cerberus or its latest masters with them when the black hole of infinity derivatives collapses.
Will do the happy dance then.
I get spam mail all the time that says my home loan application has been accepted.
Funny, I didn’t know I applied.
Wait till your New Coupon book shows up in the mail.
Maybe that will refresh your memory about “applying”
Tring to be funny watch CNBC and MSM and The President
I noticed on the Ditech ads I saw on TV that they were only offering 6% 30 year loans.
Yeah, but they’re still offering 125% LTV, which is crazy.
I’ve noticed those Ditech ads seem to be increasing seems like every other ad at the moment…
..maybe its just my perception….
…or maybe I’m just an ILLLOOOOOOOOSIONIST…….
That’s why you use weather.gov (NOAA) rather than weather.com. The Weather Channel is a joke.
do you like weather underground?
Hi Philly,
I like the weather underground.
Intelligencer Journal
Published: Aug 08, 2007 12:01 AM EST
LANCASTER COUNTY, Pa. - According to a report released Tuesday by the Lancaster County Association of Realtors, 539 homes sold in July, a 2.4 percent decrease from the 552 homes that sold in July 2006.
“National projections show that the housing market is improving and will likely stabilize in the coming months,” said LCAR President Rich Heslin.
Two things of note here:
1.) The “average home price” is very misleading since it can be easily inflated by sales of a few very expensive homes. The “median house price” (a typical market price where half of the homes sold for more and half sold for less) is the industry standard used by both the National Association of Realtors and the government to provide more relevant results.
2.) What projections anywhere are showing that the housing market is improving? What Kool-Aid is this guy drinking?
From CNBC:
The U.S. Federal Reserve on Thursday said it added $12 billion of temporary reserves to the banking system through 14-day repurchase agreements.
http://www.cnbc.com/id/20195270
I kid you not: It’s ARMageddoning. It’s ARMageddoning real good!
Here’s more from CNBC:
“The investors are like deer in the headlights,” said David Dietz, chief investment strategist at Point View Financial Services. “Those initial hopes going back a couple of months that the subprime crisis could be contained in terms of asset class and geographically are completely off the table. As a result, investors are left scratching their heads.”
http://www.cnbc.com/id/20185535
only 12 billion? they need 10x more to keep up with the ECB printing presses for just today.
Zippity do dah. Down we go! As we should.
Bugs: “Bugs to earthlings, Bugs to earthlings… come in earthlings”
Daffy Duck’s…. DDD index:
Dow
Down
Done!
NYSE Volume: 4,000,000,000 + again today?
Bugs: “eh, could be Daffy…who’s striking the gavel at the closing today Daffy?”
Daffy: “Miss Prissy”
$200000 WOW - Great Model Home Leaseback Deals (in TX) !!!
http://phoenix.craigslist.org/rfs/392745594.html
“Look….EAST. In Texas, your rent can cover your mortgage payment with little or no money down”
Ah, Mr Kaushik Sirkar, Ph.D., I think we have enough POS here in PHX. Although the homes in TX do look like mansions compared to the stuff in AZ. Is that where the term “McMansions” came from?
Funny… I know Mr Sirkar, and he personally owns investment properties in Texas.
Property in Phoenix sells at more than 20x annual rent, so there’s no hope of even covering interest expense, let alone taxes, insurance, maintenance, HOA, etc.
Better yet, buy some REITs and let someone else deal with the tenants. They’re not super bargains, but they’ve dropped enough that some decent ones have recently yielded about as much as Treasuries.
Bill
Bill,
I have no doubt that Mr. Sirkar is an honorable man, I just thought it was interesting that he’d advertise here. We’re in a heap of trouble over here and the J6Pk is just beginning to figure it out.
Lip
Lip
Canadian companies feeling pinch of U.S. mortgage defaults
“The U.S. credit crunch is hurting Canadian companies trying to arrange debt financing and will put a brake on the fast pace of mergers and acquisitions seen so far this year, market watchers say.
Credit markets have tightened dramatically over the last two months as mounting defaults in the U.S. mortgage sector have sent shock waves through global markets. Frightened by the mortgage-market troubles, investors have fled riskier assets.
Canadian companies, including Quebecor Inc. and CanWest Global Communications Inc., have shelved plans for high-yield debt issues in the U.S. because of the turbulence.
Even Canadian firms with superior credit ratings are putting off bond issues until things calm down, said Marc-Andre Gaudreau, vice-president for corporate bonds at Natcan Investment Management Inc. “There’s been an important increase in the cost of financing for companies,” Gaudreau said.
The Wall Street Journal reported this week that U.S. corporate bond issuance was down 77 per cent in July compared to June….”
Edmonton Journal
Aug 9, 2007
http://tinyurl.com/36czzd
So the contagion spreads globally, from the soft economies to the commodity economies. It is getting uglier than it appears.
About time. Maybe this will help mitigate the massive malinvestments going on in many parts of Canada today, especially wrt real estate.
“I have been deeply involved in EU affairs for a decade, and spent five years covering the beast in Brussels. One thing I learned is that EMU experts at the European Commission and the ECB are very worried that the ever-growing divergences between North and South will lead to a systemic crisis for the euro, and may destroy the EU itself. One day, the greater public will find out what the insiders really think. They may be shocked.”
Ambrose Evans-Pritchard’s blogging about the dollar (July 13th entry)
http://tinyurl.com/2vjbj8
yes, the recent divergence in interest rates in Europe and the huge bets that Goldman Sucks is making on a widening gap in interest rates between EU countries is very telling. Add to that the strong dissatisfaction with many EU citizens about the euro and there is a good chance the euro is toast within 2 years.
nhz
Refresh my memory if you will. Isn’t the European Constitution the document that authorized the legal existence of the Euro? And wasn’t that document rejected by voters in several European countries - including France? If that is correct, does the Euro and the ECB legally exist and are the eurozone nations bound to honor any obligations under the agreement? Seem like the mother of all gray areas to me. A total legal and financial clusterf— waiting to happen.
The euro pact is not part of the EU constitution, although the NO vote in France and Netherlands against the new constitution did have dissatisfaction with the euro introduction as one of its causes. Some EU countries are not using the euro currency. Officially the ECB is independent from the politicians, but in reality it is only independent as long as it pleases the kleptocrats in Brussels.
But yes, it is a gray area - officially all euro countries should have the same interest rates but it is clear by now that this doesn’t work and was a foolish idea for countries with huge differences in their economies (mostly differences between the southern and northern member states). It will be interesting to see what happens when e.g. the Spanish national bank goes bust (no longer a remote possibility)
Interesting “Morality” show on public radio:
http://www.wnyc.org/shows/radiolab/
I mention it here because in the “third quarter” of the show they do a story on a woman who goes back to see an elementary teacher she had as a child, to talk about a weeks-long game he had the class play that taught economics. When playing the game as a child, the woman lucked into a key piece of game property and was smart enough to use it to win the game. The fascinating part of the story is how even as a third grader she came up with some amazingly sophisticated methods of screwing over her classmates (including social-pressure induced bubbles, debt slavery, and currency manipulation) and only later recognized the ethical issues with doing things to win just because you can.
To me the story seemed to tie in very well with the current state of the housing market and our economy and how human nature contributes to our problems.
You can listen to it as a stream or download the whole 55MB mp3.
Interesting trend in google search query volume for “short sale”. Lots of other terms you could look up but the growth in the number of searches on this topic is eye-popping. Also interesting to note where the searches are coming from geographically.
google trends link
More about the ECB Helicopter maneuver from Bloomberg:
Aug. 9 (Bloomberg) — The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130.2 billion) to assuage a credit crunch….
“This is an old-fashioned credit crunch,” Chris Low, the chief economist at FTN Financial in New York, said in a report today. “This is not a small thing. A credit crunch, when the short-term credit markets seize up, is extraordinarily serious, almost always the precursor of a significant recession.”
http://www.bloomberg.com/apps/news?pid=20601087&sid=a20G4UBIC35Q&refer=home
Silly me, I still can’t believe it!
I need some serious financial guidance…I have 7 figures in cash reserves split between three accounts…TD Waterhouse, Fidelity and Union Bank of California. All three accounts are well over FDIC limits. What should I do to protect these reserves? This is not risk capital. Thanks.
txchick, can I contact you offline? My e-mail is mbcalt01@cox.net. Thanks.
Please see an asset protection attorney or accountant. I don’t mind giving my general opinion as to the state of things but don’t want the liability of providing financial advice.
hey TXchick
I dont have a 7-figure fin acct but I do have a 6-pack of Pabst just sitting in my bottom shelf.
Drink it now or let it mature ?
Pabst? Is it the “blue ribbon”? Let it mature. Go find yourself a decent beer in the meanwhile.
Mike, if you gotta stay in cash and are worried about FDIC limits, http://www.treasurydirect.gov’s T-bills is where you ought to park your money. You pay no state income tax on your gains with T-bills.
I second http://www.treasurydirect.gov as the risk fee place to park your cash other than in a safe deposit box.
I got my Mom to put all her more liquid investments in Treasury Direct this summer. Prior to Treasury Direct most of her investments (CD’s and Money Market) were at a regional bank.
Mike:
I also have a substantial 7 figure cash account.
What I have done over the years is to split the cash amongst
many banks, making darn sure the account never grows past
the FDIC $100K insurance limit.
I also maintain a rather extensive spreadsheet of interest rates,
FDIC info and rating agency info.
I have created a series of screens to filter out banks that I have
no interest in dealing with. For example I absolutely insist on
a physical branch presense in my local area (Irvine, Ca) so I
can go bang on the formica tabletop to resolve an issue
if I have to. (this has happened a few times).
I also screen using these sites:
http://www2.fdic.gov/idasp/index.asp
(to determine if bank is really FDIC insured and certificate number)
http://www.bauerfinancial.com/btc_ratings.asp
http://www.bankrate.com/brm/safesound/ss_home.asp
(to get an 3rd party opinion about the soundness of your bank)
Also, as others have noted, you can buy treasury bills. Its real easy
to set up an account. I would advise setting up a no cost checking
account at your local large bank to transfer money back and forth
from your treasury account.
http://www.treasurydirect.gov/
Finally, I constantly monitor my accounts, and research alternatives.
(this blog is a gold mine of great advice and expertise that you
just can’t buy anywhere else that I know of)
Does all of this sound like a lot of work? Yes, it is!
Good luck!
you are lucky in the US … I also have substantial savings, but with the 10K/20K FDIC limit in Europe there is no way I can get decent protection for my savings :((
Thanks SO MUCH for these exceptional links!!
Dude just open more CD’s at FDIC insured banks. There are hundreds of them.
The Plunge Protection Team wheels out The President
to calm things down. Forget Recession, this is 1929 Hovver’s “A Chicken in Every Pot”
For all the Doom and Gloom crowed I have encountered over the last 2 years on Ben’s Blog “YOU WERE RIGHT” He come’s 1929.
A subprime in every failed housing plot…
A chicken little in every pot.
The Plunge Protection Team wheels out The President
to calm things down. Forget Recession, this is 1929 Hovver’s “A Chicken in Every Pot”
For all the Doom and Gloom crowed I have encountered over the last 2 years on Ben’s Blog “YOU WERE RIGHT” He come’s 1929.
Was thinking the same thing. Things must be pretty bad in their estimation, otherwise we wouldn’t have had every major money-based Cabinet member and the President himself on tv inthe last two weeks. Sh*t is beginning to hit the fan. Consumer spending down, credit card debt up (to pay the living expenses no doubt). Spillover from toxic loans now in prime lending. Banks teetering on collapse. Soon to be in third inning…keep your powder dry
Bank of Canada reassuring everyone too.
The markets are still up big for the year
WHAT DO THEY SEE?
Those idiots will shill to the last minute. Weren’t all those idiots on the television saying everything is cool. Hell, we just had a Fed meeting on Tuesday and everything was cool and two days later there is a simultanious cash drop in both Europe and America.
The interbank market froze up in Europe today. This is exactly what happened the week before the Russian financial crash.
I am up almost 90% today after that damn bull gave it to me in the azz all day long yesterday. High time for serious payback. Time to get medieval on that damn bull and those shills…
Get short or get to cash.
Mellow yellow down $12 today so far. Looks like someone is trying to raise some cash in a hurry.
Chrisusc
I’m keeping my powder dry AND my Taser batteries charged !
Yep, when the Prez tells us that the economy is fine, and ‘the envy of the world’, you know we’re all ^*ucked…
And, thanks Bill and P’cola for Treasury Direct link - I’m in much the same situation as Mike, and am starting to feel a bit queasy about it.
Listening to the radio this morning - I heard an ad (read as a promo) for some mortgage company’s home equity product. What struck me was the rather down to earth, low key tone (nothing like “the biggest no brainer in the hostory of earth” guy) and, mor importantly, the repitition few times of the idea that you “use your equity to pay off debt”
I wanted to scream: “*&%#$&** - A HELOC IS DEBT !!!”
Granted, it’s MAY be a good idea to swap out 18%+ creditcard debt for a 7 to 10% heloc rate, IF that’s all you use it for. Or, maybe if you really need some home home improvements, and you can readily pay down the 20 to 60K you might take out.
But, otherwise, you’re just going to take on more debt if you end up buying the benz or the boat ot the vacation — and not 6% fixed rate debt, either. Interestingly — and I guess as a sign of the times — they didn’t tout using your home equity to “reward yourself with what you’ve always wanted” in the ad.
I’m always interested in how people use language. Just interesting — and maybe frustrating — to see how they are trying to make a HELOC sound like something you use to reduce debt — when it’s still debt itself. I honestly believe some folks really don’t think they are incurring debt when they unleash all their “equity” — they may realize that they are going to have to make payments on it, but, deep in their hearts, they don’t really think about it as debt.
I’m sure most of you have already drawn similar conclusions, but, it just struck me as worth remarking on.
hi from brainerd MN - AZgolfer is on vacation and golfing everyday. Forsale signs all over the place. Cabins on the lake going for 500k to 800k good luck with that.
Hey have a great time!
We found a 3/2.5 on the 6th hole here for rent for $1675. That’s an insane price. Mr. Gwynster is already looking for new clubs. Wonder how well decent clubs will resale on CL and Ebay?
Toll Brothers’ Revenue Falls 21%
The Wall Street Journal
Posted: 2007-08-09 00:31:14
Toll said its home-building revenue fell 21% and warned mortgage-market turmoil could slow sales even further.
11:43 AM - Toll up $.41!
I guess all this talk of tight credit is good news for the Homebuilders???
Anyone have any thoughts about gold or silver? Do you think that with the turmoil in stocks margin calls will force PM holders to sell?
U2 need Silver and Gold; I give you silver and gold:
http://www.youtube.com/watch?v=dfbRwPi3Ofk
In the shit house a shotgun
Praying hands hold me down
Only the hunter was hunted
In this tin can town
Tin can town
No stars in the black night
Looks like the sky fell down
No sun in the daylight
Looks like it’s chained to the ground
Chained to the ground
The warden said:
“The exit is sold.
If you want a way out,
Silver and gold.”
Lying, shilling, two timing, deceiving…
“The Federal Reserve’s addition of liquidity to the banking system was aimed at helping U.S. banks provide funding to European banks rather than a problem within the U.S. banking system itself.
The Fed added a total of $24 billion of funds to the banking system Thursday, some $9 billion more than analysts had expected. The Fed typically adds or subtracts funds from the banking system on Thursdays in order to keep the financial system running smoothly.
The Fed move was in addition to the $129 billion that Europe’s central bank injected into its banking system after France’s biggest listed bank, BNP Paribas, froze $2.2 billion worth of funds on Thursday, citing U.S. subprime mortgage sector problems.
The BNP news sent shivers through nervous financial markets and caused stocks in Europe and the U.S. to fall sharply, while U.S. Treasurys rallied as investors sought safe havens.”
© 2007 CNBC.com
http://www.cnbc.com/id/20195270
““The complete evaporation of liquidity in certain market segments of the U.S. securitization market has made it impossible to value certain assets fairly regardless of their quality or credit rating,” BNP Paribas said in a statement.”
Anybody else hearing echoes of some FB in South Florida or Inland California here? All they needed to add is something about “not giving our assets away” and it would have been perfect. Same dynamics in every market, human nature is the common denominator.
Market prices near 100% odds of September rate cut: analysts
By Nick Godt
Last Update: 10:22 AM ET Aug 9, 2007
NEW YORK (MarketWatch) — The market is now pricing in nearly 100% odds that the Federal Reserve will cut interest rates by the end of September, analysts at Action Economics said. Following news that French bank BNP Paribas suspended three funds due to a lack of liquitity, Fed fund futures, which price the odds of moves in the central bank’s key rate, rallied amid safe-haven moves, Action Economics said. The result is that the market “now show a 25 basis point rate cut by next month with nearly 100% probability, with another 25 basis cut seen as increasingly likely by the end of the first quarter [of next year],” it said.
So BB is going to flip to the deflation violin after banging the inflation drum for so long?
If BB had a pair, he’d raise it in Sept.
BB is gathering ammunition for his helicopters; a good deflation scare is the best defense for what he is going to do later this year.
–
August 09, 2007; 9:55 A.M. PST
Alan Sinai: “75% Chance of a Recession In 3-12 Months”
He is on CNBC and prefaced by stating the obvious, “expansions don’t go on forever.” He thinks that the process of contraction of liquidity is underway. We all know that it was the free-flowing liquidity that kept the economy and the stock market afloat for the past 5 years.
Jas
So today I received a junk fax from a scummy mortgage company offering a “fixed for 5 years minimum payment” with a rate of 2.6%, for up to 4 million. Woohoo, I’m getting me a mansion.
Well not really. But I thought that I wouldn’t be the only one who would like to let these wastes of perfectly good protein to have a piece of my mind, so here y’all go: 1-866-201-4884. They graciously pay for the call costs
So we have hedge funds freezing withdrawals. Result: investors in other hedge funds withdraw. Now today we have a French bank freezing withdrawals. You can guess the result of that.
So is this the new trend? “Sorry, we don’t know the value of your assets, so for your own protection, you can’t have them.” This is now legitimized politically, and as things progress, it may become legitimized legally in many more cases than we would have believed. “Sorry folks, emergency rules apply now.” Worst case, exchanges even shut down for awhile. May sound absurd, but if that’s the only alternative to admitting everything’s falling apart, it can happen. Like that line in American Beauty: “Never underestimate the power of denial.”
Don’t tell me about the FDIC. We have a 1929 style bank run dead ahead, in everything investment-related. My wild guess: Maybe we get a “central banks will fix it all” rally over the next week or two, but we crash and maybe even go into gridlock, BEFORE October. Just a guess. And of course I would never bet too much on short term predictions in any case. Buy silver for the long term.
We all, sex sells best, go to
http://jane-mott.com/
click on
“Featured Listings”
go on
“virtual tour” for any of the first 5 houses …
… ADULT CONTENT WARNING
THIS SITE CONTAINS EXPLICIT SEXUAL CONTENT INTENDED ONLY FOR ADULTS OVER THE AGE OF 18 IF YOU ARE UNDER THE AGE OF 18 OR DO NOT WANT TO VIEW SEXUAL CONTENT DO NOT CLICK THE ENTER BUTTON. EXIT BY CLICKING THE BACK BUTTON OF YOUR BROWSER OR CLICK THE EXIT BUTTON. IF YOU WISH TO VIEW MATERIAL OF A SEXUAL NATURE CLICK ENTER.
ENTER
EXIT
http://www.freep.com/apps/pbcs.dll/article?AID=/20070808/NEWS05/708080423/1001/NEWS
Dingell’s plan puts pinch on big houses
Climate push ends mortgage tax deduction, adds gas tax
Powerful U.S. Rep. John Dingell revealed Tuesday new details of his plan to cut global warming, including adding a 50-cents-a-gallon tax on gasoline and ending the mortgage tax deduction on what he called “McMansions,” homes larger than 3,000 square feet.
This is one scary looking house..
http://tinyurl.com/ysjqtv
I love the part where they say “If I can not sell by myself I will have to list it with an agent and be forced to raise price to accommodate for the commissions, etc. ”
Good luck with that!
It is pretty unfortunate looking but it isn’t all that scary. I’ve seen much worse.
That is hilarious though. I love the ones here in SD where they tell us if it doesn’t sell they will be forced to rent it out.
This dope has been holding out for his wishing rent of $2450 for well over a year now. Market rent would be $1700 maybe 1800 tops. It does have those shiny new granite counter tops and faux hardwood floors. LOL
http://sandiego.craigslist.org/apa/391581767.html
http://sandiego.craigslist.org/apa/391581767.html
As if the real real estate market isn’t bizarre enough…
http://www.washingtonpost.com/wp-dyn/content/article/2007/08/08/AR2007080802124.html
I remember when I first read about how people were forking over real dollars to purchase “virtual real estate” is when I concluded that we had collectively lost our minds.
Who else but readers on this board would get a kick out of the following Santa Clara, CA real estate listing… “Perfect Location With A Great Price For Someone Who Is Handy Around The House This House Is Priced 50K Below Market Value ..”
http://sanjose.yahoo.idx.prucalnorth.com/details.aspx?firstrecord=110&=&VIP=Yahoo!+IDX&cc=realestate&fclose=n&newhome=n&za=and&searchgeo=Santa+Clara%2c+CA&searchtype=2&propertytype=1%2c2&sort=5&sortacdc=desc
I think for $680,000 (!) I’d want more than a fixer-upper!!
In Santa Clara, CA, someone wants $680,000 for a fixer-upper! The house is being advertised as “Perfect Location With A Great Price For Someone Who Is Handy Around The House This House Is Priced 50K Below Market Value …” http://sanjose.yahoo.idx.prucalpeninsula.com/details.aspx?firstrecord=110&=&VIP=Yahoo!+IDX&cc=realestate&fclose=n&newhome=n&za=and&searchgeo=Santa+Clara%2c+CA&searchtype=2&propertytype=1%2c2&sort=5&sortacdc=desc
It occurred to me…if you can’t sell your house in time to avoid losing it and/or declaring bankruptcy, it’s effectively worth zero.
In Florida, it’s easy to find large clusters of Pulte or Centex that have been on the market for a year or more. (like here http://www.flickr.com/photos/tppllc/998445269/ check it on Zillow).
On a block of identical homes why would anyone pay *anything* for one of them to one of the FBs until the bank decides to auction them off? These homes are effectively worth zero.
We’ve all been funding people’s wild speculation because many spec-u-vesters have been taking advantage of the second-home-mortgage-interest-deduction (though you’re not supposed to use that if you rent out the house.)
I said the same thing about condo’s awhile back. The rent covered the taxes, fees, etc with nothing left over for loan payments. So the loan value of the condo is zero.
Dag-gone-it. Sorry for multiple posts above.
Anyway, here’s something from the unintentional humor dept. Burger King sent out an ad circular stating, “The BK value menu just got spicy!”
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=2076310
Even these guys are worried, what a change from a year ago.
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