This Is Not A Normal Event
Some housing bubble news from Wall Street and Washington. “Countrywide Financial Corp., the largest U.S. mortgage lender, said Thursday that ‘unprecedented’ poor conditions in the secondary-mortgage market are causing it to retain a greater proportion of mortgage loans than it sells.”
“In a filing with the SEC, Countrywide said that while it plans to retain more loans until investor demand improves, it warned that a prolonged period of poor conditions ‘could have an adverse impact on our future earnings and financial condition.’”
The Associated Press. “Countrywide said in an SEC filing late Thursday it has adequate funding liquidity, but added “‘the situation is rapidly evolving and the impact on the company is unknown.’”
“Shares of Washington Mutual Inc. also dropped after the bank said in a filing with the Securities and Exchange Commission late Thursday that disruptions in the mortgage market could affect its liquidity.”
“Washington Mutual said it its filing that deposits decreased by $12.57 billion for the six months ending June 30. The company is now expending billions in financing costs, a business that used to generate cash for the bank, according to the filing.”
“Net cash the company uses in financing activities zoomed to $32.24 billion for the six month period. At the same time, its lenders are apparently demanding repayments.”
From MarketWatch. ” The company in its quarterly financial report said its liquidity ‘may be affected by an inability to access the capital markets or by unforeseen demands on cash’ such as a general market disruption.”
“Washington Mutual said ‘there has been significant volatility in the subprime secondary mortgage market which has spread into markets for all other nonconforming residential mortgages.’”
“American International Group on Thursday told investors the housing market would have to spiral to Depression-era levels before the insurer would be harmed by its exposure to the residential mortgage market.”
“The world’s largest insurer has exposure to subprime loans as a lender, investor in mortgage-backed securities and supplier of mortgage insurance. But AIG characterized its exposure as minimal and said it would take declines of 30 percent to 40 percent in home values to dent the market for mortgages with stronger ratings, where most of its holdings lie.”
“‘We believe that it would take declines in housing values to reach Depression proportions, along with default frequencies never experienced, before our AAA and AA investments would be impaired,’ said Chief Risk Officer Bob Lewis, in a conference call.”
From Bloomberg. “‘We are experiencing home price depreciation almost like never before, with the exception of the Great Depression,’ Countrywide Chief Executive Officer Angelo Mozilo said during a conference call with investors July 24.”
“‘Any company that has products related to home sales is in trouble,’ said James Stratton, CEO of investment firm Stratton Management Co. ‘Instead of a soft landing, it’s a hard landing,’ said Stratton, whose company has $3 billion in assets.”
The Kansas City Star. “Troubled subprime mortgage lender NovaStar Financial reported a second-quarter pretax loss from continuing operations of $124.08 million as waves of bad news continued to pound the storm-tossed credit market.”
“NovaStar cited several factors for its continuing hemorrhage, including an $83.6 million increase in its provision for credit losses as home loan delinquencies and defaults continued to rise.”
“The company also took a hit on its mortgage securities as the value of its mortgage assets declined, requiring nearly $90 million in mark-to-market adjustments in the first half of the year.”
The San Francisco Chronicle. “Nothing illustrates the swift collapse of the home-loan market better than Luminent Mortgage Capital of San Francisco, which is teetering on collapse the week after it assured investors it was fine. Luminent is a real estate investment trust that buys, sells and owns mortgages.”
“So how did Luminent get into trouble? In late 2005, the company made a strategic shift that turned out to be the wrong move at the wrong time. Before that, Luminent avoided credit risk…by investing almost exclusively in mortgages insured by Fannie Mae, Freddie Mac or Ginnie Mae.”
“Things started to unravel in early July, when investors became increasingly worried that problems in the subprime market would spread to Alt-A loans. Things got even worse in late July, when Countrywide Financial said its prime home-equity loans were defaulting at sharply higher rates.”
“Suddenly, prices for mortgages without agency backing started to fall. Buyers headed for the exits, causing values to fall even more, creating a downward spiral.”
“‘I’ve talked to guys that run nonagency mortgage desks. They say they’re throwing the baby, the bathwater, the sinks and the stoves out the window,’ says Andrew Wessel, an analyst with J.P. Morgan.”
From Reuters. “Fears of risky investments in an environment of troubled credit markets cut U.S. speculative-grade debt issuance in July, credit agency Standard & Poor’s said in a report published late on Thursday.”
“The number of U.S. speculative-grade issuances fell to four in July, compared with an average of 38 new speculative-grade issuances per month in the first half of 2007, the agency said.”
“‘Market volatility shut down the issuance pipeline in July 2007 in the U.S. speculative-grade market,’ S&P said. ‘Issuers faced rising risk aversion and a market hesitant to absorb low-grade issuance.’”
“U.S. regulators are scrutinizing the books of Wall Street’s largest investment banks amid questions they are hiding losses from subprime mortgages, people familiar with the inquiry said.”
“Analysts and investors have raised questions whether there are unreported losses from subprime-mortgages and collateralized-debt obligations, or CDOs.”
“Fannie Mae sees ‘no bottom‘ to shrinking US home prices and continued problems with borrowers paying their mortgages until the second half of 2008, the mortgage giant’s CEO Daniel Mudd said today.”
“In the meantime, Mudd said Fannie has asked its regulator, the Office of Federal Housing Enterprise Oversight, to allow it to expand its ability to buy mortgages from US lenders in order to help provide liquidity in the mortgage market.”
“We’d like to be able to buy those mortgages,’ he said in an interview with cable business channel CNBC.”
From Bloomberg. “Federal Reserve Chairman Ben S. Bernanke was wrong. So were U.S. Treasury Secretary Henry Paulson and Merrill Lynch & Co. Chief Executive Officer Stanley O’Neal.”
“The subprime mortgage industry’s problems were contained, they all said. It turns out that the turmoil was contagious.”
“Other types of mortgages are suffering. So are firms and banks that package the debt for investors. The ripples were felt in Europe and Asia, where central banks offered cash to banks amid a credit crunch. And some corporations, from countertop makers to railroads, are blaming the mortgage meltdown and housing slump for earnings that fell short of analysts’ estimates.”
“‘Housing created a lot of ancillary economic activity and jobs, and now we are in the reverse process,’ says Paul Kasriel, chief economist at Northern Trust Corp. in Chicago and a former Fed economist.”
“‘The subprime mess is now spreading to banks,’ says Nariman Behravesh, chief economist at Global Insight Inc. ‘A lot of international banks, especially those in Europe, did invest a lot in the collateralized debt markets, especially the subprime situation here in the U.S., so they’re suffering.’”
“Paulson said June 20 that subprime fallout ‘will not affect the economy overall.’ This week on CNBC, he provided a less definitive assessment, saying that markets have been ‘unsettled largely because of disruption in the subprime space.’”
“‘We’ve had a major correction in that housing sector,’ Paulson said. ‘It will take a while for the impact of that to ripple through the economy as mortgages reset.’”
“‘Most of the market has shut down,’ says Doug Duncan, the Mortgage Bankers Association’s chief economist. ‘This is not a normal event.’”
“Peter Hebert, a broker with Allied Home Mortgage Capital Corp. in Ellicott City, Maryland, says it’s getting tougher to find mortgages for his clients.”
“For one self-employed borrower in Pennsylvania, with a 626 credit score, just above what’s considered subprime, Hebert says he contacted three lenders. Last year, the borrower would have qualified for a 7.99 percent loan, Hebert says. This week, he received one offer for a 10.5 percent loan with a three-year prepayment penalty.”
“‘It would have been cheaper to use a credit card to pay for his house,’ Hebert says.”
“U.S. housing prices will fall this year, the first annual decline since the Great Depression of the 1930s, according to the National Association of Realtors.”
“The inventory of unsold U.S. homes in May was the largest since the realtors group started counting them in 1999. Defaults and foreclosures may increase because about $1 trillion of payments on adjustable-rate mortgages are scheduled to rise this year, hitting a peak in October, according to Credit Suisse.”
Alls I can say is I’m glad we got those new servers.
To Serve Man…
Like many, I have been here for a few years. It is so gratifying to see the news over the last few days. These are issues we discussed a year ago. People who labeled my predictions ‘gloom and doom’ are now watching it on CBS News. Thanks to Ben, and all of you, I sold NYC in December 06 and am renting on the beach in Ormond FL, watching the home prices go down. gordo NYC/FL
Maybe you can buy your old place back at 1/2 price or less in a few years wouldn’t that be kewl?
Like many, I have been here for a few years. It is so gratifying to see the news over the last few days. These are issues we discussed a year ago. People who labeled my predictions ‘gloom and doom’ are now watching it on CBS News.
I was just thinking this the other day. I would have felt I was crazy if it were not for my insightful group here. This blog has been great through all the doubting times.
Bush says no bailout for troubled homeowners:
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/08/09/national/w112030D23.DTL
Hate to say it but I support him in this… the last thing we need is a Clinton coming over and making the taxpayers collectively drop their panties for what is basically a personal screwup.
I believe the majority of people would not support any kind of bailout. None of these people would have been rushing to give back the money had the markey continued climbing, and most in one form or another were involved in pure speculation.
Crikey, I’m with GH. This has got to be the smartest thing “W” has said in 7 years. I’m a diehard “D” but this could change my vote if one of them makes serious on a stupid bailout plan.
Bush says no bailout for troubled homeowners:
I too support Bush on his decision not to bailout troubled homeowners. However, his track record is the poorest I have seen in my lifetime and I am a registered republican, that is a conservative republican.
No bailout to homeowners, but a massive one to the greedy lenders behind this mess. Bailouts are for blue bloods, I guess.
Hear, hear! I don’t think the Repugnant-Ones have the interest of common folk at heart.
Man oh man, I can’t believe it! After nearly 7 years of W I have found something I agree with him on!!!
I’ll bet you are! Good going!
Dude, you’re about to become the center of all of this. Everytime Cramer appears on NBC he should be followed by Ben Jones. Ben, you probably have little-to-no freetime right now, but you should
1. be shopping for a book deal
2. comb through the archives and get the “best of” predictions together
This is an honestly good idea. We may be a few farflung nutballs, but we’ve called this one accurately so far.
Speak for yourself, man. I am not a farflung nutball, and neither are most of the regulars on this blog, who for the most part appear to be intelligent and knowledgeable. I have learned simply tons here, and, more importantly, been amused in the process.
Now excuse me while I go back to gluing more sparkly pink rhinestones onto my pretty tinfoil hat.
“We may be a few farflung nutballs”
Negative, Captain! We are many farflung nutballs!
“I’m surrounded by a$$holes!”
- Lord Dark Helmet
You know Muggy, I am still waiting for the sequel, “Spaceballs 2: The Search For More Money.”
All Along The Wall Street Towers
Cramer: There must be some kind of way out of here
(Said the Joker to the Thief)
There’s too much confusion
I can’t get no relief
Sheeple they drink my wine
Homebuilders dig my earth
Now less consume my wine
None with sufficient net worth
Wall Street: No reason to get excited
(The Thief kindly spoke)
There are many among us
Who feel the market is but a joke
But you and I we’ve been through that
And this is not our fate
So let us talk falsely now
The hour’s getting late
All along the Wall Street Towers
Hillary kept the view
While all the women came and went
Even bare foot servants too!
Inside from a close distance
Her wild cat did growl
But her time was approaching
So she began to howl
Sweet…
Ben, you probably have little-to-no freetime right now, but you should
1. be shopping for a book deal
2. comb through the archives and get the “best of” predictions together
3. Be putting together a documentary. Imagine if it went wide release a la Michael Moore or Morgan Spurlock? Talk about getting the message out to the average Joe.
Ben Jones needs a “radio talk show” with hook ups out to Get Stucco and a few other of the great thinkers on this blog.
I would pay MONEY to listen to a radio show with guests like Aladinsane, Jen Bones, etc
How about just a book of Liareah and company’s quotes? Throw in some Bull sh-t from Crammer while you’re at it.
Titled: “We toldja so.”
All I can say is “KABOOM!!” If you’re not in your “bomb shelters” already, it’s too late.
To those of us addicted to this blog, to be shut out now would be painful.
Also,
the book deal or documentary is right…anyone with contacts should send them along to Ben…the man with the evidence that none of this was a surprise.
“The world’s largest insurer has exposure to subprime loans as a lender, investor in mortgage-backed securities and supplier of mortgage insurance. But AIG characterized its exposure as minimal and said it would take declines of 30 percent to 40 percent in home values to dent the market for mortgages with stronger ratings, where most of its holdings lie.”
30 to 40% declines not attainable in this debacle?
The talking head pundit for AIG will live to eat those words.
“‘We believe that it would take declines in housing values to reach Depression proportions, along with default frequencies never experienced, before our AAA and AA investments would be impaired,’ said Chief Risk Officer Bob Lewis, in a conference call.”
Bob, why the subjunctive mood, as if you’re merely hypothesizing? Did you not get the memo?
Ha!
The first thing I thought of when I read that statement was that everytime some one or another has been quoted on this blog with a similar statement, their ‘thing that could never happen’ always ends up happening and worse than they ever imagined.
–
We will “reach Depression proportions, along with default frequencies never experienced.” Give it a year or two, at the most.
Jas
Agreed.
I know, why does he think 30-40% is extreme?
And during the Great Depression, weren’t home values in negative territory - that is, if you owned one?
Actually, according to Shiller - home prices rose 15% during the Great Depression. See for yourself
Peter Schiff, president of Euro Pacific Capital Inc. and author of “Crash Proof: How to Profit from the Coming Economic Collapse,” has said the problem goes way beyond subprime.
“It’s a mortgage problem,” he said. “Subprime is like a little leak where the underlying problem is the integrity of the dam itself. Most of the mortgages taken out during the past few years will fail.”
Schiff expects huge losses in the housing market with home prices falling by half in some areas, which he said has to affect the overall economy. He said he’d been expecting the financial markets to start taking hits long before this week’s drop.
Hmmm…”home prices falling by half…”
Maybe the AIG crowd might want to tune into this blog.
Schiff for president
Paul/Schiff ‘08
My wife thinks Lorena Bobbit should be appointed Surgeon General.
My wife thinks Lorena Bobbit should be appointed Surgeon General.
Paul/Schiff 08
And Mark Dann for Attorney General.
I would humbly suggest…
Ron Paul for President
Peter Schiff for Treasury Sec
fill out the rest of the cabinet with:
Bill Fleckenstein
Richard Russell
Bill Murphy
Ted Butler
Jim Sinclair
and…
Ben Jones
for ambassador to Iraq, AFTER we pull our boyz out…
David Lereah
ambassador to North Korea
Larry Yun
David Lereah may be better suited for Ambassador to Darfur.
fill out the rest of the cabinet with:
saucers
plates
cups
gravy boat
“I would humbly suggest…
Ron Paul for President
Peter Schiff for Treasury Sec
fill out the rest of the cabinet with:
Bill Fleckenstein
Richard Russell
Bill Murphy
Ted Butler
Jim Sinclair
and…
Ben Jones”
*******
How about Robert Shiller?
Ken Heebner?
And Thornburg - wobbled at times, but came out OK.
Heebner was great a couple years ago when in the WSJ he predicted up to 50% haircuts in some markets; I was puzzled when he recently was quoted as saying only a 20% correction would be seen.
Shiller should definitely be in the list, my bad.
One guy that should be on the list, but at the same time should not, is Kiyosaki. That guy knew what was up two or three years ago, and has a big following, but only recently has he truly popped the red pill to his readers. Kind of too little, too late IMHO.
Kiyosaki wrote an article about 14 months ago telling his loyalists that the housing game was over. He was ridiculed far and wide on Yahoo-Finance where his column appeared. So even though his moment of awakening was much later than the average HBB reader, we can still count him as one of the “good guys”.
“Heebner was great a couple years ago when in the WSJ he predicted up to 50% haircuts in some markets;”
*******
I recall that, but my favorite “Heebner moment” was when he basically ran through this (below) months and months ago and all but gave a prediction.
“The Economy - Housing Busts and Hedge Fund Meltdowns: A Spectator’s Guide”
The New York Times - 8/5/07
http://www.nytimes.com/imagepages/2007/08/05/weekinreview/20070805_LOAN_GRAPHIC.html
Kiyosaki was one of the first people to make me question buying a house 3 years ago. Anyone actually read his books? He always advocated being cash-flow positive, day ONE.
Not sure why he really gets such a bashing here.
If you can buy cashflow positive property TODAY, you should consider it (even with the sure negative appreciation). Of course, you might as well go house hunting on your unicorn to find it.
There’s still plenty of cashflow positive properties in flyover territory.
It truly was a ponzi scheme. And now it’s over.
It is the credit markets; however, enventually we are going to understand that it is the flip side of credit… savings. Individuals, businesses, and government all spend more than they earn. Hello??
Well, it looks as if the markets are taking the latest news in stride. CFC stock hasn’t even touched it’s August 3rd $24.73 low today. I guess people are more optimistic about CFC than they were a week ago.
Well, it’s already been beaten severely and, just like the dotcom meltdown, a few companies will bounce back and be fine (e.g., Ebay, Amazon). The question is how low can it go and will it survive. More people are betting it is a winner.
Fundamentals like energy, pharmaceuticals and guns, will always hold on.
Check the S&W or methanol stocks… also energy stocks from Canada are winners.
This is not 1929 anymore, and the market is too globalized and too many people have a vested interest in stability.
if you like history, you can read about similar sentiments (market is too globalized, too many people with a vested interest in stability) in the run-up to World War 1, as well …
Which is why I’m shorting the &*^! out of it. I think there’s a good chance they’re bankrupt eventually - not soon, but within say 2-4 years. If not then they’ll certainly be hurting a lot worse than now. Best case scenario for them is to be bought by someone.
Guess that’s it. It’s all over, everyone back to bidding up houses and stocks.
CFC was somehow upgraded today to “Underperform” with a target price of $45. Go figure.
Sadly, this thing is far from over. Alt-A and A-paper loans are next.
You can’t remove all ‘risk assessment’ from the mortgage market and expect to fix that with little to no ‘pain’. The fed would have to lower rates 2-3 points so ’save’ many of these overextended borrowers that overpaid for their homes.
I got a l-o-n-g post up.
Stay tuned…
SoCalMtgGuy
http://www.housingbubblecasualty.com
Ben Bernanke: “Sorry, we were just messing with y’all. We’ll recind those last 17 1/4 point interest rate raises. We were just playing with you to see what would happen. LOL”
except after the LOL he said:
kthxbye
“Alt-A and A-paper loans are next.”
Ahh… yes, it may take some time but could become very interesting right here in the Alt-A Bay Area.
SCMG,
Thanks for coming back. What happens when HRC gets elected and we get to listen/look at that for 4 yrs? OMG, finger nails scratching on the blackboard bad.
I’ll see your 100bln and raise 200bln.
poker table, everybody bluffing?
i’m all in
(pushes approx five trillion computer blips towards the middle)
From Ben’s post:
“For one self-employed borrower in Pennsylvania, with a 626 credit score, just above what’s considered subprime, Hebert says he contacted three lenders. Last year, the borrower would have qualified for a 7.99 percent loan, Hebert says. This week, he received one offer for a 10.5 percent loan with a three-year prepayment penalty.”
“‘It would have been cheaper to use a credit card to pay for his house,’ Hebert says.”
To which I say, “Mr. Hebert, work on improving your credit score while continuing to rent and save up money for your down payment.”
I seem to recall that the housing market used to work that way.
I wouldn’t mind paying the 10%, only if the house price drops 80%. Mind you, since mortgage rates are skyrocketing, prices should do the same.
Some talking head on CNBC @ 12:25 crying that even “six figure earning, prime credit buyers” can’t get a jumbo loan right now so the fed MUST lower rates so the entire market doesn’t shut down!
Oy vey, save up your freaking money and have good credit and you’ll get a loan. Now it’s the FED’s job has to save wealthy attorneys (sorry), doctors and business people in Connecticut so the country doesn’t collapse.
No $hit - I saw the same segment….at no point did anyone address the Mastodon in the room, which is the affordability of houses.
Lots of whinging about how hard it is to get a Jumbo loan today, but nary a mention as to the reasons why people needed to get Jumbo loans in the first place.
Oh, and surprise surprise, the ever-lovely David Lereah just made an apearance on CNBC, telling everyone that the housing slump has been hapening since summer 2005 and to expect more pain- funny how his tune has changed..
A jumbo loan of HOW MUCH? A “six figure” income of HOW MUCH? What’s the home worth, and what down payment are they using?
I guarantee you, if someone can qualify on a jumbo loan the same way they were qualified in 2001, a bank would lend to them.
Lower rates have nothing to do with it. Historically speaking, rates are VERY low. Prices are historically high–that’s the problem.
I put this info on bits and buckets, but it was late for that thread and pretty far down so I am going to repost here.
Ben reported that he heard someone say that credit card companies are pulling back their limits or at least that one person had that experience.
When I was a tax associate at a big downtown NYC law firm, I did a lot of securitization deals. Most were car loans. Some were loans for large industrial equipment. And some were credit card receivables. There was some controversy at the time since we weren’t sure the receivables could be considered asset backed (are used shoes really an asset?), and we weren’t sure that it was really the same debt from month to month because it was revolving. Anyway, the department got comfortable with it and we did them. I actually don’t remember the details of how we got comfortable with it. It’s possible no one ever told me.
So, yes, a seize up in the market for securitized debt could affect the availability of credit card debt.
Oddly enough, I don’t remember doing this for mortgages, but it was quite a while ago and other teams may have done those.
how in god’s green earth can credit card debt be considered “asset-backed”?
good luck repossessing J6P’s dinner out with the family, and the trip to disney world.
Just FYI, the asset isn’t the stuff the people bought. It’s the loan itself. In other words, the credit balance on the credit card. I’m not saying whether that’s a good thing or not, but that’s what you’re buying when you buy credit card ABS.
that makes more sense, in a weird financial industry sort of way … the reference to used shoes mis-led me.
Good thing no water in mouth…LMAO
“Anyway, the department got comfortable with it and we did them. I actually don’t remember the details of how we got comfortable with it. It’s possible no one ever told me.”
And there’s nothing wrong with doing any of these kinds of deals - rather it’s the PRICING that gotten out of whack. Just like Buffet found out that he was pricing terrorism risk re-insurance too low, like Lloyds’ found out that they were pricing US weather-related risk too low, and sub-prime and credit-card debt like polly describes ends up getting priced too low - because accepting companies have a tendency to systematically underestimate risk.
There’s an old term almost forgotten - factoring. People used to “factor” accounts receivable and other forms of current (but not immediately liquid) assets, and the factoring companies would just take out a big chunk and collect it themselves, much like a collection agency - this kind of hands-on would certainly help prevent systematic mispricing of risk, especially with something like credit card receivables. People buying other people’s junky debt need to cop a bit of the attitude that lawyers and collection agents have always had.
well gang, have the worldwide federal banks taken their best shot? what happens next week when 3 more hedgies implode? and the week after that? does a bailout stop investors from wanting to pull out their money?
and what do the worldwide feds have up their sleeve when the whole mountain comes tumbling down with the next wave of resets?
anybody else feeling a little damned pissed this morning?
Comment by cereal…”Anybody else feeling a little damned pissed this morning”?
Yep, but not in the least bit surprised. They have their shovels digging wide open now. One hell of a pit their digging. Amazing how fast all that money went poof! Now everybody with eyes should be able to see what’s going on.
their=they’re
and if the bailout fails today, someone has shot their wad.
You’re right the first wad has been shot. More to follow, it’s still like the little boy with his finger in the dike.
and that’s one angry dyke! um, dike. um, never mind.
Guys all this injecting liquidity talk has gotten to us. I feel like a 7th grader with a case of the giggles.
today, it wasn’t really a bailout. They’re loaning out this money with MBS as collateral, since the banks can’t sell it themselves. It’s a good idea if the banks are ultimately still solvent and just facing a very temporary crisis.
I don’t think that’s the case with CFC… too much deferred interest booked as earnings, too much servicing of bad debt. WaMu has the same symptoms. BB will hit a point eventually where he looks around at these banks and remembers Japan.
The Fed declares it will take a 25% equity position in all housing stock in the USA that comes on to the market in the next six months. Financial engineers devise ways to make it happen. Borrowers only need to borrow 75% of the appraised value. Apparently this kind of thing is happening in Europe already.
Are you serious . Are you saying the Feds will fund on a 25% purchase money second T.D. with no money down for the next 6 months ?
Sunday July 29, 2007, The Observer
“The government’s ailing shared ownership scheme has changed for the better, writes Lisa Bachelor”
Fresh hope for first-timers after revamp of loan aid
“Under the new version of the scheme the government will provide an interest-free loan worth up to 17.5 per cent of the value of a property a first-time buyer would like to buy, with the purchaser taking out a mortgage on the rest.”
“The loan does not have to be repaid until the property is sold, at which point the amount repaid will be calculated as 17.5 per cent of the property’s market value at the time of the sale.”
———————
Small-scale versions of this stuff are happening in local jurisdictions here already. Whats to stop the Fed from injecting liquidity on a massive scale? Remember, we have financial engineers on Wall Street who can devise the necessary instruments.
Now all you got to do is hold a gun to the heads of these so called FTB’s to get them to buy. Nothing is going to be done on a “massive scale” until we see demand again. Sentiment has changed nad real estate is becoming our outcast leper - “Stay away….unclean!”
That ought to raise the prices of property by… 17.5%!
And prudent banks will loan you 80% of what isn’t covered by your 17.5% ‘guberment downpayment’.
BINGO!
This is exactly the type of thing that’s going to happen, to “preserve the American Dream”. Except I see it closer to 20% of the value, maximum $200k type of thing. Just like the old housing capital gains tax exemption - once in a lifetime.
So does the prudent saver buy now to take advantage, or wait and risk the program ending in 5 years when things have calmed down? Of course once this is established it probably won’t go away, aka Social Security.
Would any of you refuse to use an up-to-$200K 0% interest loan, while everyone else around you is?
az_owner
There has been a shared equity program in San Diego for some time now that provides about 20% to buy a home. 10 news featured a couple that received 100k from a combination of loan programs to buy a 400k house here.
Is this what people have been referring to as “Helicopter Drops”?
Shared equity… I wonder how they decide who replaces the wax ring when the toilet needs to taken off to run the roto-rooter tool down there.
Andy: Just put in a new toilet. The plastic flange was broken so I bought a steel ring made just for such occasions. It is a good thing. See basic steps at
http://tinyurl.com/3cyo7n
This kind of aid is given to first time buyers already. For CALFHA in certain cities you can get $40k on up to a $400k condo. You just have to pay it back when you sell the condo. This seemed stupid to me already. Now if every first time buyer gets it, thats true everything suddenly jumps up 17.5%. I am beginning to not like where all this fixing stupid problems is going.
WTF?
WOW. No rate cuts anytime soon, just free money. Money for nothing and chicks for gold.
Wow! Money for nothing and chicks for gold! LOL!
i’d rather have GOLD
25%! They must think housing is going to bounce back up. Quick, everyone buy housing before you’re priced out forever!
There’s no stopping the financial ass whooping that’s coming for the masses. The fed can do whatever it wants, but short of depositing a few hundred grand in J6P’s checking account, it’s curtains. The whole charade is finally over with. Look where greed got us. Nice.
Well, BB, either ‘ass whupping’ OR ‘ass whooping’, I’m going to enjoy watching both.
Yer right BB~
All the manipulations in the world don’t mean squat when a “starter” home is still $500k.
“…and what do the worldwide feds have up their sleeve when the whole mountain comes tumbling down with the next wave of resets?”
Exactly. Will the Fed be injecting liquidity every month? Every week? For the next 12-18 months??
If this is really the tip of the iceberg, I think we’re starting to get an indication about how ugly this will get.
Well, whether or not it is the tip of the iceberg, we do know it is just the tip of the ARM resets. Heck, this might just be the tip of a piece of calved ice. . ., hey, isn’t that another iceberg up ahe[splat]
This is what actually frightens me. Everyone’s sh*tting about the current state of the market, and saying “bottom bottom please please bottom”, but we haven’t seen the beginning of the “value” that will be simply erased come December.
I really needed that hearty laugh!! Thanks!!
Going for the 3rd injection
Man I feel like I’m on drugs.
sarcasm (off)
“Paulson said June 20 that subprime fallout ‘will not affect the economy overall.’ This week on CNBC, he provided a less definitive assessment, saying that markets have been ‘unsettled largely because of disruption in the subprime space.’”
It won’t affect the economy overall, my a$$! Just yesterday, I read where the major satelite TV providers are reporting fewer customers, because there are fewer second homeowners. That’s just one example. I’m sure there are myriad more.
I’ve seen a slowdown in AZ since last year.
I’m seeing all kinds of goodies parked on front lawns with FOR SALE signs on them. Mostly trucks but some small boats and toys like ATVs.
Also seeing many more scooters on the road. People liking the gas mileage methinks.
Yeah, scooters abound here on the far north side of Chicago too. Never seen so many here - ever - bring on the next oil crisis and this place might start resembling Bangkok.
need more tuk tuk’s
EdgewaterJohn: till it snows
“Also seeing many more scooters on the road. People liking the gas mileage methinks.”
Yes, lots more scooters and motorcycles. But many riders haven’t the skills needed to handle the bikes. Heading into Portland during rush hour on I-5 last week, a frail woman on an old Honda CB500 cut in front of me at around 70mph, bobbing her head back and forth to the beat on hear headphones. She even took her left hand off the bars, waving it around. What she didn’t realize, is that traffic was stopping ahead. I braked hard in anticipation of what was unfolding. As the car in front of her braked, she quickly changed lanes to the right never even signaling or slowing. I watched in horror as the cars in the right lane braked hard. She realized this much too late, then panicked and locked up her rear brake going into a broadslide, then slamming into the back of a pickup truck, her body flying into the air like a ragdoll. It made me sick to my stomach. Fortunately for her, she was not killed. I’d estimate her speed at impact at around 45-50 mph. The truck was barely creeping along, but its forward motion helped cushion the blow. I’d be surprised if the woman ever rides again.
You tell me… I had to ride a ninja EX250 for 70,000 miles over 3 years back in 2001-2003 to save money.
It was progressive… my second bike was a Ducati SS900. Was rear ended 3 weeks ago by another biker and I am ok as I always rode in full leathers and within my limits.
120,000 miles of successful riding. And I called it quits as I don’t want to push my luck.
Scary how much experience is needed and how progressive you have to be i.e start on a 250cc then higher up gradually.
Those idiots who thing a GSXR1000 is a beginner bike have a death wish.
YES [I] women [/I] driving motorcycles to work
What he really meant to say is that subprime fallout “will not affect my financial buddies overall, because I’ve talked to HeliBen and he’s agreed to pump enough monopoly money into the system to bail them out and reassure the sheeple. I am a corrupt, loathsome individual who has only the best interests of the top 0.1% incomers in mind; the rest of the U.S. be damned.”
See, all of Paulson’s apparently clueless ramblings make sense when properly translated…
In a very narrow semantic sense, he is correct, because the subprime fallout is not the cause of the wider economic issues, although it is widely being blamed for same. It’s just the canary in the mine.
I am beginning to think we need to parse Paulson and Bernanke’s words extremely closely the way people used to do Greenspan’s.
Ben, you should make a Housing Bubble Enigma code cracker plug-in for this blog. You take a comment from Paulson or Bernanke or Yun and type it in, click Submit and out comes as translation.
I don’t believe anything this administration says anymore.
Meaning at one time you did?
Did you believe anything the last one said, or the one before that?
Such as….”I did not have sex with that woman…Ms Lewinski…!”
Meh, I hold to my original position that being in politics should be one of the $rappiest jobs in the world, and that all political positions should be filled by a National Lottery, very similar to the Draft or Jury Service.
Anyone who actively wants to be in politics - on either side of the aisle should be barred, for being insane and thus not responsible for thier actions.
I don’t care who my president screws, as long as it isn’t me.
You should — bad judgment isn’t compartmentalized.
“The smoking gun that could come in the form of a mushroom cloud.”
“Read my lips… No new taxes”
“I am not a crook.”
The truth doesn’t matter… The fools will believe you.
“Paulson said June 20 that subprime fallout ‘will not affect the economy overall.’ This week on CNBC, he provided a less definitive assessment, saying that markets have been ‘unsettled largely because of disruption in the subprime space.’”
Why is it that DENIAL is an acceptable method of governing? Like everything else with this organization from Katrina to Iraq to health care to the economy on Main street, these people refuse to tell the friggin truth. And when it finally gets to the point where they must acknowledge reality, they jump up and say “Hey, look over there…. did you see what they did?”
The sooner we get rid of these lyin’ pukes the better of we’ll be.
Yes, well, you just KNOW something’s up when they trot out the Loser-in-Chief to tell everyone the economy’s going to be just fine, LMAO! I mean, that REALLY came out of left field. As a spokesman for the lying sacks, if he says all is OK, it means we’re in a steaming heap.
Was about this time in August when Nixon resigned.
those were pretty much my thoughts about his comments as well.
He makes a contrary play hit the bullseye every time. If he says black, you can gaurantee it’s white.
“The sooner we get rid of these lyin’ pukes the better off we’ll be.”
Agreed… And I wouldn’t seeing some of them waterboarded for an extended period after this all shakes out. Intentional deception of sheeple should carry consequences.
“And I wouldn’t seeing some of them waterboarded for an extended period after this all shakes out.”
LMAO, Front Range. I once called my CONgresscritter to let her know that little details like violating our own policies, Constitution, Geneva accords, etc. plus illegal immigration plus globalization could affect HER ass just as much if not more than mine. Sometimes it doesn’t dawn on these political ninnies that THEY will be more of a target for international courts of justice than the constituents they are screwing. Of course, I was talking to a staffer, but it was very interesting, even over the phone, to see the dim bulb start to brighten and finally the concept dawned on him in all its glory. I asked if he wanted me and others of her constituents to clamor for her to be turned over the the Hague, or to just stand idly by while it happened, much as SHE is standing idly by while allowing her consituents to be screwed. The guy actually got it. See, that’s what you have to do. Many of our CONgresscritters are so blinded by moneyed interests, lobbyists, political favors, etc. that they can only see in the short term. But in the long run, they are motivated by self-interest just like anyone else and if you can get them to see that the possible consequences of the current status-quo include things like their own private Abu-Graihbs, confiscation of their assets, no due process, ruin of their family members, etc. things look a little different than just the next election cycle to worry about.
THat’s awesome.
That IS awesome.
Of course, we’re not a *signatory* to the ICJ treaty — for good reason, IMO — so the Congresscritter who you harangued isn’t likely to be quaking in his boots.
The line between prosecuting politicians for misconduct (which is essential) and prosecuting politicians for political differences (which is lethal to democracy) is pretty damned fine sometimes.
–
“The sooner we get rid of these lyin’ pukes the better of we’ll be.”
And replace them with another set of “lyin’ pukes?” Sorry, but as much as I agree with your sentiments the peoblem we have is a bad system whereby only the “lyin’ pukes” can have power.
Jas
Paulson is so convincing. When he says it he has the conviction of “Jesus told me so”
If he wasn’t convincing, he would not have gotten his job.
CNBC reported that a MONEY MARKET fund in Europe lost 26% of it’s value due to holding subprime CDO’s. So much for that little safe haven play!
It’s ARMageddoning my friend. It’s ARMageddoning real good!
thats never gonna get old, its starting to remind me of Gary “6% in the bag” Watts.
where is Gary lowWatts lately?
Today we found out that one of JPM’s Institutional MM funds (client’s $) was holding CDO’s that were hiding behind their AAA rating. Almost two years ago we had specifically asked in writing if this mmf had any CDO exposure and were told no. We got a “we’re sorry but” call this morning.
Got MRE’s
It’s my guess that the current equity market jitters are about to end with wild upside, last gasp run to the final top. Lowered oil use, ‘new’ bank-supplied liquidity, and that desperate belief that a long-awaited lower fed funds rate will cure all ills - and we’re off to the races until October. Housing’s impacts are grindingly slow but massive, and the heavy effects are months if not years away.
I kind of tend to agree with you, totl. After all, we can’t have all this turmoil ruining the August vacations of CONgress and all the swells out in the Hahmptons, dahling! So, yes, I kind of agree, this just might be the dress rehearsal for the main event in the fall, right around October, just as you say. Let the bum-elites have their vacations, get the kiddies packed off to school, have their fall charity auctions and events, get their houses in order courtesy of the FED and BANGO! Let the $hit hit the fan. Yep, two months from now sounds about right and, let us use that reprieve to get our own affairs in order as much as we can.
Happy Thanksgiving, folks! Lay in a store of rotten fruit and veggies to welcome the political campaigners flush with cash from Wall Street coffers.
Same here, your scenario seems entirely plausible totl. All the same the thunder’s loader now than I ever would have thought it would have been this early on - and the desparation seems to be oozing from every elitist pore.
I could use a dead feline bounce to get half my 401k out of a Fidelity international fund. Thought I’d be safe till the end of the month, and probably well into September, but the movie’s on fast-forward, it seems.
But the good news from Brooklyn is more are joining the chorus making bubble-popping comments on Brownstoner. Some folks were seeing the end in a 1.3M ask for something on the “not nice” side of Bed-Stuy!
I just borrowed about half of my 401K value out so I can invest it outside the plan. It was in the FDIVX Fidelity Diversified International Fund, which has done very well for me in the past couple of years. Unfortunately, there is nothing even reasonably safe that I could move it to in within the plan. They don’t even have a T-bill money market fund. Why not? I couldn’t get a straight answer from the “HR person”.
Hey Palmetto,
nothing’s contained, those resets are rolling right along in time for October. A serious Fright Night.
It is funny that everyone is screaming for the Fed and Ben to help Joe HomeOwner but the Fed is simply bailing out the banks and lenders with liquidity. Here’s the new mantra for the Fed I just made up:
“If even one bank/lender goes under it is a tragedy that we must address immediately. If a million Joe Homeowners go under, it is just a statistic!”
Anyone want to guess where I got the inspiration for this quote? It says a lot…
Good ol’ Josef “Death is what’s best for the people” Stalin…
Comrade Red Colorado - You are misusing the words of our party secretary. But your class analysis is correct - the proletariat is being oppressed further. Please continue your studies of dialectical materialism.
Oh good, looks like we found the Bag Holders. It’s us the American Tax Payer. Fed buying Mortgage Bonds……/shakes head
http://www.bloomberg.com/apps/news?pid=20601103&sid=aWvmnW7kB4rM&refer=news
“Bring out your Dead”
“I don’t want to go on the cart”
“Oh, stop bein such a baby”
“‘Ere. He says he’s not dead!”
“Yes, he is.”
“I’m not!”
“He isn’t?”
“Well, he will be soon. He’s very ill.”
“I’m getting better!”
“No, you’re not. You’ll be stone dead in a moment.”
Help! I’m bein’ opressed!
I feel happy!
Hey, how about we HBBers creating an “autonomous collective”. It would probably have to be in Antarctica, but I think the conversation alone could keep us warm.
Have I mentioned that I LOVE YOU GUYS?!?!
U.S. federal-funds futures early Friday priced in about a 100% chance that the Federal Reserve will reduce its key lending rate by a half-percentage point to 4.75% by the next policy meeting on Sept. 18.
If this happens it will mean the Federal Reserve is more afraid of a deflationary depression than it is price inflation. It would also send gold/silver prices up.
gold’s up over 10 today, just on these gyrations.
I just heard on KPBS that the finacial markets are buzzing with rumors of an emergency meeting of the Fed (to cut rates).
Oh, I forgot: the meeting is supposed to take place next week if the stockmarket doesn’t stabilize.
They are so nice. I wonder if we could talk them into bailing out losers in casinos? Why should they take huge losses?
That’s what Bill Fleckenstein said the other day; if Fred and Fannie are to become bailout sources for FB’s, then why would a ‘GamblerMac’ not be next, for all those people who got greedy, gambled and lost in more conventional casinos?
I’ll go find the real quote and post it. It was a good one.
I think Fleckenstein is super.
“Quick, let’s meet and sit on our hands.”
Maybe they’re going to get together to collective kiss each other’s asses goodbye.
Galbraith’s book “The Great Crash” (about 1929) is full of tongue-in-cheek humor about this kind of thing. For example, he describes the “no-business meetings” that the powers that be hold in times of crisis, just to keep up the appearance of doing something:
“The fact that no business is transacted at a no-business meeting is normally not a serious cause of embarrassment to those attending.”
They’ll be shocked when it’s an emergency meeting to RAISE rates so they don’t have to keep handing out billions to force the actual rate back down to their ’set’ rate.
Its a dream of mine that the Fed actually comes back with a 6% crackdown on these asshats. The market’s behavior as of late reminds me of a spoiled 4 YO throwing a tantrum because it didn’t get what it wanted (a 25 pt cut).
Does anyone think that by cutting the federal funds rate the credit markets can be saved at this point in time? I believe cutting the fed funds rate will not help the credit market or rescue the housing market from this downward spiral.
Depends how much they cut. If they cut enough to help, they will tank the dollar, which will send long-term (mortgage) rates through the roof. Lose-lose, as they say.
lose-loose
Huh?
“Countrywide said in an SEC filing late Thursday it has adequate funding liquidity, but added “‘the situation is rapidly evolving and the impact on the company is unknown.’”
Oh, there’s liquidity all right! The CEO just sold all those options on the market. Nothing like insider information, huh?
I posted this last night on the California,
I realize this will not be popular, but Mr. Mozillo did say over a year ago
“I’ve never seen a soft-landing in 53 years, so we have a ways to go before this levels out. I have to prepare the company for the worst that can happen.”
I am sorry, I honestly believe that he did everything that was humanly possible.
I do not blame him, any single company can allow and price correctly for a 5% default. We have not even had a 5% default on loans yet! Ergo there is a problem with the risk/modeling programs used by trading houses and hedge funds.
CFC may go under (I do not know), but it shows that the derivative markets (improperly used) destroyed the economy. Greed kills.
As far as Mr. Mozillo selling his stock, he warned everybody over a year ago! I think that was plenty of time for longs to get out. No foul play.
A friend of mine in the mortgage business told me that Countrywide is aggressively going after brokers around the country. Why?.. to get some of their money back that they provided brokers with during the last few years in terms of rebates and broker kick-backs. In the event that the brokers can’t come up with the funds, they are “requesting” that they sign over their companies to Countrywide or face litigation. It seems to be a cheap way to grow the company’s footprint “under the radar” and in light of its “unprecented disruptions” in future profits..
If the companies they sign over are worthless, how is Countrywide going to come out ahead?
Yep. He’s been selling, incrementally, and publicly disclosing, for a long time. Like Rainmayun told us ealrier, if you want to see what someone is doing, watch his hands, not his lips.
What happened to “real estate always goes up”?
>>>
From Bloomberg. “‘We are experiencing home price depreciation almost like never before, with the exception of the Great Depression,’ Countrywide Chief Executive Officer Angelo Mozilo said during a conference call with investors July 24.”
What I really want to know is why this comment from a public meeting back in July is just now becoming news.
this good
http://oldprof.typepad.com/a_dash_of_insight/2007/08/market-observat.html
The Hedge Fund Effect
Some of the best commentary today came from James Altucher, who manages a fund of funds and sees hundreds of hedge fund pitches. He explained on RealMoney, TheStreet.com’s paid site, that many hedge funds borrowed at 5.5% and bought mortgage obligations yielding 6.5%. To get the “holy grail” of hedge fund performance, they leveraged this 12-1 or so and seemed to show consistent strong yields with little volatility. We know this to be true, since this is the environment in which hedge funds like ours have been competing for assets. The leverage method looked good until the fund’s longs went down and the shorts went up. With 12-1 leverage, it takes little to blow out the entire fund.
It was the quest for yield….
On CNBC’s “On the Money” Altucher cited another strategy — put selling. This strategy has worked for years — until today. These funds are also blowing out.
That’s my intuition…this feels more like a sell off to cover excess leverage than a psychology shift by institutions away from stocks. It may even be a good time to buy.
I am long right now. Would get longer if we broke this a.m.’s lows.
Are you serious about being long?
Yep. Made a killing on the downside this time. Ready to ride ‘er back up before shorting again.
Good luck Tx, A brave lady.
I see nothing to change my positions.
Then again I am not a day trader and have learned that I can never time the markets.
I don’t get it . Right now Countrywide has alot of commercials on T.V. right now offering a no cost refinance .
Countrywide, Ditech, and others are desperately trying to refi as many “good” credit risks as possible. They want to avoid the 2, 3, or 5 year payment shocks because they know the defaults will be worse afterwards. If you have bad credit or a hopeless situation they won’t bother.
The ads were purchased months ago Wiz.
The FED cannot and will not cut prices. They will keep doing this. Injecting cash (how do they actually make the money these days - with a touch of a button - oh, lets hit the zero one more time, just in case) and possibly even raising the rates. Why would Gold be inversely related to the rate? In the 80’s rates were soaring, gold was soaring and the Fed was saying not to buy gold and that all is well, right? Actually, I was not here. So they tell me.
Why would Gold be inversely related to the rate? In the 80’s rates were soaring, gold was soaring and the Fed was saying not to buy gold and that all is well, right?
Yes, exactly.
Sorry, that was the 70’s, not the 80’s, as has been pointed out below. My bad.
Man o man. Borrowers and MBS investors all over the world are waking up with Tainted Love. Even CFC, the chief distributor, is holding on to some love, benevolent Tainted Love.
http://www.youtube.com/watch?v=w37thYX6aYM
We all knew it was tainted. Yet, the FBs and bondholders could not get enough.
I liked the Manson version better. Kinda creepy fitting anyway.
None of what I just read is news to me. It is all validation of what I have been saying since 2003 when this insanity took off. I have been telling people this was going to end badly and they looked at me, smiled, patted me on the head and told me to go sit in the corner and shut-up. When I realized people weren’t going to listen, I decided to let itself playout and then remind them from the corner I was told to sit in I was right all along. It’s funny when I do this because now instead of being looked at as the fool I am viewed with a bit of scorn because if I and people like me had kept our mouths shut housing would still be chugging along.
I feel vindicated when even President Bush has to comment on it. When CNBC has an entire section of their broadcast devoted to it I only smirk and say to myself….I told you so……fools!
I feel the same way. This was the most foreseeable unforeseeable event in recent history.
“American International Group on Thursday told investors the housing market would have to spiral to Depression-era levels before the insurer would be harmed by its exposure to the residential mortgage market.”
I just love a good self fulfilling prophecy…
I love it when a plan falls apart.
“Nothing illustrates the swift collapse of the home-loan market better than Luminent Mortgage Capital of San Francisco, which is teetering on collapse the week after it assured investors it was fine. Luminent is a real estate investment trust that buys, sells and owns mortgages.”
Sunlight is the best disinfectant known for nasty urine stains, masquerading as r.e.i.t.’s…
Insider Activity
Over the last 12 Months Mozilo Angelo R has Sold 4,668,999 shares.
Lotta $PF…
Major Disconnect in Subprime
Late last Friday I gave a call to Dave Donhoff at No Bull Mortgage and was wondering about subprime and Alt-A, and how they were affected by these treasury gyrations. Before I go further, let me say that Dave is one of the good guys. He has not had a single returned loan or foreclosure on one of his customers in the last 6 years. Although Dave has not been tracking exactly what I wanted he did offer this:
Almost all stated income loans everywhere vanished last Friday.
Almost all 2/28 ARMs vanished last Friday.
While this was eventually expected it was not expected by everyone overnight.
As we were talking I was fortunate that a representative of major mortgage lender who had a scheduled appointment stopped by to see Dave. That person agreed to talk to me on condition anonymity so I will honor the request. But here is what I found out from that major lending insider.
Subprime rates have risen by as much as 190 basis points at his organization in just the last 2 weeks!
Many other lending institutions have done the same thing.
The definition of prime has tightened considerably, everywhere.
Any variance from prime raises the mortgage rate.
Small differences in FICO score now matter (sometimes by a lot).
Every little thing adds up.
90% LTV rates are higher than 85% LTV rates which are higher than 80% LTV rates.
100% LTV rates are very difficult to come for subprime and even Alt-A.
Condos vs. homes matters significantly.
There were 3 rate increases in the last 2 weeks even as 10 year treasury rates rallied.
Second mortgages have nearly vanished - no market.
2/28 arms - gone.
Someone who is “really clean” but is not prime (but close) and is putting down 20% has had a 70-80 basis point hike in the last 2 weeks.
The bankrate charts might not show it, but in the last two weeks nearly every loan rate went up even as treasuries rallied significantly. The primest of prime was perhaps flat.
A 190 basis point hike in two weeks was so shocking that I asked for a repeat. “90?” I asked. “No. that’s 190 basis points” came the reply. For those not familiar with the term basis points, 100 basis points is a 1% rise in the loan rate. For example, 190 basis points would send a mortgage loan from 7% to 8.9%. The bigger the loan the bigger the increase in monthly payments (ouch!)
Virtually any subprime borrower whose arm is due to reset later this year or early next year and has not yet rolled over the loan is obviously in deep trouble regardless of what the Fed does or does not do. Not only is the teaser rate itself going to rise dramatically because of the rising treasury rates, the risk component has risen as much as 190 basis points in addition to that.
Furthermore, anyone in a stated income loan, anyone with a second mortgage, anyone in a pay option arm, or anyone in a 2/28 is now locked out of all those options. (Please see Locked Out for more on what’s happening through the eyes of Bankrate.com). And finally, as Dave Donhoff put it to me, “Many buyers are discovering there is a difference between quoted rates and actual availability of funding at those rates”.
Wow! Thanks for the information.
http://forum.brokeroutpost.com/loans/forum/2/152007.htm
WOW, these guys are doom and gloomers : )…
They are calling Bush and Bernanke idiots and begging for a bailout.
NO BAILOUTS! These people signed their fate, now let them live it! I do not want any of my tax dollars going to help a fool from facing their folly.
hilarious link off the broker forum:
http://www.savetheamericanhome.com/the_solution
I hate this idea that “Americans” are losing their homes. As if patriots are losing their homes, or as if the problem pertains to “our people”.
Bullshit. Stupid idiots are losing their stupid investments.
I’m an American. I’m not losing my home. Nor am I in any financial danger. In fact, the biggest financial danger that confronts *me* is a bailout of the stupid idiots.
So screw the “American home”. Let ‘em all rent. And if their credit rating goes to shit, well THAT’S WHAT CREDIT RATINGS ARE FOR! Why on earth should these fb’s have a good credit rating? What kind of fantasy land are we living in when everyone deserves a nice house and also deserves to have their debts forgiven and their credit rating protected. This is insanity.
If these fb’s are in danger of losing their homes — tough shit. I’m not. If their finances are in danger — tough shit. Mine aren’t.
I’ve been paying RENT for years because it was the RESPONSIBLE thing to do. And I don’t feel like bailing out irresponsible idiots.
I would take this up one step and start investigating the fraud for everyone involved. Especially those who claimed to make a certain amount of money and not paying taxes on it. They could fund the bailout with this money.
EXCELLENT post, well-thought-out. THANKS.
from moniker gc46: “There are one trillon dollars in ARMs, that are going adjustable in the next few months. Predicting 40 million foreclosers, because people will not be able to qualify for loans.”
Wow. Now that’s what I call a housing bear!
Wow, everyone will be priced out of the market. No one will sell homes, no banks will lend money, everyone will go out of business because everyone will be too stubborn to DROP THE PRICE OF THEIR HOME.
I guess I should upgrade my tinfoil hat…it’s not thick enough to keep up with these folks.
My 2 cents (probably worth one now) is that the FED cannot and will not lower rates. I was not here during the 80’s but people tell me rates were high, gold was high and the Fed was yapping the whole time not buy metals.
On another thought, I see a couple of people thinking that the collapse is still months away. Well, when people on this blog throw in the towel, then we know it is imminent. I just gave up on the stock market 2 days ago - got tired of the unreasonable hoopla. Same thing happened to me with the dotcom bubble. As soon as I gave in and bought a stock (on the advice of an investor many times my age and with millions and successful bets all the time pretty much) the whole thing collapsed! So I just judge it by my barometer. As soon as I get tired of waiting for what I think should happen, it happens. I think there are many like us. So I know how to time things now.
clarifying - gave up waiting for the stock market to go down or to show some kind of reason.
‘As soon as you gave in and bought a stock…the whole thing collapsed’.
Maybe you’re just bad luck.
Quickly–go buy some Countrywide, to see if they completely crater.
I think Countrywide does not need my help this time around.
I was there in the ’80’s - interest rates peaked in 81 or 82 and went way down the rest of the decade. Gold collapsed in ‘80 and stayed there for decades. Anyone yapping about not buying gold in the 80’s was very giving very good advice.
Interesting. What people probably meant: “yapping about not buying gold” while rates were in the process of going up (I guess prior to peaking). What am I trying to say is that high interest rates and high gold prices are not mutually exclusive. Was it not the case at some point? Now, trying to time the top when it comes, will be another story. No need to worry about that yet. Just to repeat the peak of gold after calculating for inflation would put us into the thousands for gold (I do not know exactly, always hated calculators), and as we know things always overshoot, and as we know these are long trends and markets (somewhere around 15-20 years). These 2 days are just blips like others have said.
Interesting story on CNBC right now.
Monday - Wednesday up market was a well organized short-squeeze by some major players. The crash in the French hedge fund on Wednesday night, drove down the markets, killed the short squeeze, and it killing the big players.
My guess, this may be the Quant funds we’ve been hearing about taking big losses?????
Anyway, they are doing EVERYTHING they can to get the market back up to Wednesday levels to unwind thier long positions they took or they are dead. However, with more and more bad news, all they are getting is people selling into the rally, giving them more and more losses.
Holy crap this could come apart FAST!!!
Wait & see who can’t close out their positions this afternoon. Rumors of lots of insolvencies are floating around. Some of the big boys must be at risk for the Fed to inject $35B today.
Correction: The Fed has now intervened a third time today for a total of $38B.
And here we go… In spite of what Bush said yesterday, the Fed is stepping in.
http://www.sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/08/10/financial/f063447D66.DTL&tsp=1
There goes the neighborhood. Literally.
I wonder if “Lil’ Bush” will do an episode on this.
I noticed that Provident funding jumbo mortgage is up to 8.375%. Last Friday it was 7.75% and the Friday before that it was 6.625%. Wow, that’s quite an increase inside of two weeks. Interestingly (and not surprisingly) is that the 30 fixed rates for conforming loans haven’t budged at all. If anything, they’ve gotten better for the borrower over the last two weeks. I think we’re seeing the line in the sand being drawn - this won’t be a total collapse but it will be a swift reversion to sound and traditional lending practices. That sounds easy enough, but the fallout on the economy is incomprehensible to most Americans. Houses supported by noncorming loans will be complete writeoffs, just like their MBSs are now complete write-offs. Houses that are withing conforming loans will no doubt be negatively affected by the nonconforming loan implosion, however I think there will be some sort of bottom for conforming loan houses in aggregate dollar terms because of the resulting currency hyperinflation. The only thing I see the Fed doing to handle the nonconforming houses that banks end up getting back will be to take the houses as “collateral” just like they took the junk MBSs last night as “collateral” last night. Look for widespread price deflation in everything that depended upon credit for its price (house, cars, etc.) but look for inflation in our currency not seen since the days of the Continental Congress. Maybe M3 was eliminated because our present day supercomputers can’t count that high???
Does this mean in the future we’ll have McMansion surplus stores like we had Army Surplus stores in the 50s, 60s, and 70s.
“I hear they’re making wonderful stuff out of granite countertops over in the States. Shoes of all things too.”
How about $5,000 P-51 Mustangs ten years after VE day???? Sure that would be about $150K in today’s dollars, but that’s still 1/20th of the current resale price.
Maybe $80,000 in today’s money. Reasonable though for what you’re getting. I’d buy one if I had the cash, unfortunately I pissed it away on a Hummer, NOT!
“I noticed that Provident funding jumbo mortgage is up to 8.375%. Last Friday it was 7.75% and the Friday before that it was 6.625%. Wow, that’s quite an increase inside of two weeks. Interestingly (and not surprisingly) is that the 30 fixed rates for conforming loans haven’t budged at all.”
********
And perhaps this is why many more Californians will pay higher rates for mortgages and most of… say Utah (except Park City and the benches in SLC) and the Midwest (exceptions, of course), will not.
Your point leads to the next issue - the repricing of the actual collateral. What is a $hit-box in Inglewood worth today? Next week? Next year? I know that five years ago it was going for about $200k and last year it was going for approx $600k. But with a total credit crunch in the nonconforming markets, what will it be worth? What will the OC properties be worth? I see a domino trickle down from the top markets to the lowest of markets. From Malibu to Compton, look out below.
Quote of the day via CNBC talking head ” trader here on the floor says today is just a blip”.
I certainly would like to see his radar screen, because mine shows more than just one blip.
Yeah, just a blip alright. The following kind of announcement from one of the world’s largest banks happens all the time…NOT!!!
Changes to Credit Policy and Pricing
Due to current market conditions, CitiMortgage is making the following credit policy and pricing changes.
Effective Saturday, August 11, 2007
The following programs and process types will be discontinued*:
» Alt-A Non-Agency NINA
» Alt-A Non-Agency NIVA
» Expanded Stated
» Expanded Bank Statement (Indiana, Michigan and Ohio only)
» Home-On-Time program
The following process type changes will be implemented*:
» Alt-A Non-Agency SISA restricted to:
- Occupancy: Primary residence
- Maximum CLTV: 80%
- Minimum FICO: 700
» Alt-A Non-Agency SIVA Reserves change:
- Increased to 6 months PITI
» Expanded Full Doc:
- Minimum FICO: 640 (Indiana, Michigan and Ohio only)
* Existing pipeline will be honored.
Effective Monday, August 13, 2007
The following Combo FRHEL FICO and CLTV restrictions will be implemented:
» Full Doc loan with CLTV > 94.99% minimum FICO: 720
» SIVA Maximum CLTV: 89.99%
» Verified Income Doc Process CLTV: 94.99%
- Ohio, Indiana, Michigan, Arizona, Nevada, California and Florida only
The following Pricing changes will be implemented:
» Home Possible Mortgage:
- Price deterioration of additional 100 basis points
- Subordinate financing price adjustment changes: see rate sheet
» CitiMortgage Homebuyer Options: Price deterioration of additional 100 basis points
» Non-Agency Alt-A and Jumbo SISA ARMs Condo and Multi-unit price adjustments: see pages 5 & 6 of
rate sheet
» Agency Alt-A NINA, NIVA, SIVA: Price deterioration of additional 100 basis points
See Wholesale Lending Guide for complete policies and parameters. See rate sheet for current pricing.
Contact your Account Executive for more information.
broker.citimortgage.com
» Verified Income Doc Process CLTV: 94.99%
- Ohio, Indiana, Michigan, Arizona, Nevada, California and Florida only
Why not make everyone in all states verify income? Or am I misunderstanding something?
Question (kind of rhetorical)- How exactly do they make money now? Long ago they minted, then they printed, now what? “I think I will type one more zero on the computer screen, just to make sure we have enough?” Come on, no one actually printed 200 billion in the last few hours, did they?
What? Do you mean to say you haven’t seen the billion dollar bill yet? Do a search on ebay for one. They say they aren’t real, but I don’t know. :0
So that is what that green paper was! The number one in the front must have been hard to see - I only saw many zeros, so I assumed that the bill was worthless and did not bid on it on ebay. I will go back on put a watch on the auction, just in case someone who has been in hibernation actually makes a bid for it. I will outbid them, just to keep them entertained!
The billion dollar bill has partial side portrait of Alan Greenspan on it.
They just enter it on their computer. When you take a loan you “create” money. When you pay it off you “destroy” your principle and the lender keeps the interest. They risk “nothing” (unless you default) in which case the bank has to eat the loss. But they make so much money by earning interest on money they “create” out of nothing that it doesn’t really matter with normal default rates or when the housing market (collateral) is going up!
Markets, cash outs and hedge funds ate up those three dumps by the Fed of created out of the air funny money and the Dow is still plunging like a rock at 2:30 (down 120 points). Seems almost 60 billion quatloos were created today with nothing to show for it.
Way to go Fed…shows you how freakin’ impotent to control events you are now. PPT boys can’t do any sluggin’ or get around the bases either.
Should be obvious to anyone now that most notes and assets are worth less today than the days and months before. Time to mark it to the markets. Maybe get 5 cents on the dollar.
Mark to market?
Hey!
All you hedgies and banker Pig Men:
“How’s your model lookin’ today?!”
My phone is ringing off the hook. Homebanc is defunct and rumor has it that Option 1 and Delta are next to go down.
Mortgage’s are only being written for people who are AAA conforming. What is going to happen when $50 billion in mortgage resets occur in October? How are the banged up people going to refinance?
How is it that the people on Housing Bubble Blog knew what was going to happen for over a year and now finally Wall St. and Fed are waking up?….why?…because the masses do not control the government anymore. We are subjected to spin control media constantly.
I think this is a national question….why does our economy operate on a artifical boom/bust cycle and why is Wall Street alway getting away with hurting the average American? This cycle is going to be more painful than the .com bubble burtsting. This problem is literally going to hit everyone in the home. I think we already are in a recession and lowering rates is a real bad move.
Time to invest in cigs, booze and entertainment.
CW
How are the banged up people going to refinance?
They aren’t. We really are staring eyeball to eyeball with a home mortgage / credit meltdown. Of course, I personally believe that the guvment will screw us all one last time with a credit boost/rate cut. But it won’t help. Millions of FB’s are toast and we’re all out of butter.
This is just my opinion, but the masses have never truly controlled the government. Truly a republic the size of the United States is an unwieldy beast that has been only been controlled through Federalism with the reigns held by a not so inconspicous ruling elite. Hell our leaders are laughable when they state that we live in a Democracy! When state governments matter again in terms of financial independence from the federal teat, that is when I see the political process being shaped by the masses occuring again. That implies the removing lamprey of Wall Street off of the ass of DC. And that’s going to be one hell of a painful operation! JMHO.
Actually, we’re supposed to be living in a constitutionally limited republic, that hasn’t happened for awhile though. As far as democracy, yes we have that for sure, two wolves and a lamb voting on what’s for dinner. That’s what all this monetary debasement is all about, wealth redistribution through fiat currency. Bush threatening to make the world safe for democracy is akin to the threat of the soviet union spreading communism. They’re one in the same; no individual rights.
Hear, hear. The definition of a democracy is a place where 51% of the people can vote themselves the right to give the other 49% wedgies. Tyranny doesn’t stop being tyranny just because lots of people like it. A properly consensual government not only makes its decisions by the fiction of consent that is what a majority vote is, but also restrains itself from making impositions on people, even if they are in the minority, to which nobody would every actually consent.
Time to invest in cigs, booze and entertainment.
Check out VICEX
Time to invest in cigs, booze and entertainment.
These are the things that even the poor do not give up. They can’t buy bread and milk, but they have enough money for cigs and booze.
–
“‘We are experiencing home price depreciation almost like never before, with the exception of the Great Depression,’ Countrywide Chief Executive Officer Angelo Mozilo said during a conference call with investors July 24.”
Say hello to the Greater Depression, Senor Mozilo. You keep saying that all this is good for Countrywide, but we shall see in another year as to what you think then.
Jas
Why can’t CD rates seem to punch thru 5%
Dang, I’ve noticed that too. I’m also thinking of converting at least one CD into a Treasury.
Because saving is not our patriotic duty?
BTW - Bridgeview Bank in Chicago mailed me an offer for a 10% CD. You have to open a direct deposit checking - and fund the CD with at 2.5k but not more than 5k. It’s only good for a 9 mos. term I think.
If you want a CD over 5%, see Corus bank (just do not rely on collecting the interest)
Just read in the Dallas Business Journal (a real rah rah rag)
“Commercial foreclosure postings in North Texas through August have reached their highest level in 13 years as the downturn in the housing market clouds the broader real estate picture.”
WHAT?????? I thought this was all nothing but a bunch of beer guzzling $5/hour hillbilly strawberry pickers with 500K loans causing this!
Could some one explain to me about the FED injecting 24 billion $ in to the financial markets. Is that some kind of bail out or in other words is it free money given to mortgage companies. Is this our hard earned tax money??? I am not very clear how this works ???
Cramer and Kuntlow have friends at Fed so when stockmarket needs money they ask Fed for help sort of like when as children might ask their parents for a few dollars.
Here is what I wrote my wife this morning…. I think this is how it works.
Let’s say it is 2006.
My SIL has suck credit and can’t get a mortgage for under 11% from a bank.
I have great credit and can get a loan for 5%.
My relatives are irked that the Fed dropped interest rates, and they’re making 3% in CDs.
So… I borrow $5K from each of 9 relatives.
I use this as a down payment to refi my SIL $240K house for $200K at 5%. Keeping $5K on hand to float payments and such.
I then “sell” the house to her for the $240K at 8%.
I’m paying 200K x .05 = $10K a year interest to the bank.
I’m charging SIL 240K x .08 = $19.2K a year to SIL.
So my relatives are making $9.2K a year on their $45K.
I charge them 2% on the $45K and 6% of the “profits”, so my fees are $1.5K a year for doing nothing.
My relatives are clearing, after fees, close to 20%!
BUT, the whole thing is based on being able to resell my SIL house for $240K should she stop making payments.
Now, one of my relatives sees the huge foreclosures rats, and that foreclosed homes can’t be sold for what is owed on them. The suddenly wake up and realize prices are way to high, and they are way over leveraged, and they want out. The relatives start asking for money back… I try to find other people to buy shares of my SIL house, but no one wants them. I pay out the $5K, but then there is simply no more money in the account.
Now, let’s say the bank had the ability to margin call the house. If I ever dropped below 10% equity, they can demand I repay the loan. They say the house is now down to $200K and I have no equity, so I have to give them $20K to restore the 10% equity or they will take the house.
Crap, what do I do???? Investors want money. Banks want money. I got no money.
Now,
Replace me with hedge fund.
Replace my relatives with rich people, insurance companies, 401K managers, pension funds, etc!
Replace my SIL with generic sub-prime borrower.
Multiply by hundreds of millions.
Now, add in that the money the bank loaned me, it had borrowed from another bank, which it had borrowed from another bank… etc.
What’ve we’ve been seeing is a cascade avalanche in margin calls. One bank can’t get money from the hedge funds, so it gets hit with a margin call. It asks people that borrowed from it for its money back. This causes that money to ask its customers for money back. It asks the hedge funds for the money back…. No one can get paid because no one can get cash.
So, the central banks step in and lend the banks money to pay each other back, in hopes once everyone has paid each other back, they’ll be able to pay the central banks back.
The Fed injected $24 billion yesterday and another $35 billion today. European Central Bank has injected $200 billion + over the last two days. However, the central banks have to take collateral on the loans. But the banks don’t have any collateral except…. Yep, the Mortgage Backed Securities (MBS) that have dropped in value.
Everything SHOULD be okay, as long as all the banks have enough money to pay back the central banks after the all the loans are unwound.
If they don’t, then the bank goes insolvent, funds are locked, FDIC gets called in to clean it up. The Fed will get the MBSs. They eat the losses and since the Fed has the authority to print money to cover its losses, it leaves the “injection” in the markets. Also, once the FDIC money runs out cleaning up the bank bankruptcies, the U.S. Treasury injects more money. This is more cash in the system.
If housing gets too bad, the call for Freddie and Fannie to buy more loans will increase, and since they are U.S. Treasury backed, foreclosures in loans they hold is even more cash going into the economy.
More cash in the system causes inflation. Gold is jumping in price today on the assumption inflation is coming.
Definitely watching an historic even here.
The cash injections by the Fed are holding up stocks and keeping the banks from totally shutting down, but at what cost?
Oh, and as I typed this, the Fed announced another cash injection to keep the banks from shutting down due to conference calls. No word on how much this one is… And gold jumps in price again.
Darrell is the man! Even a six-year old can see your point!
Thank you thank you thank you.
In concur. Darrell is the man!
Excellent post that I would like to re-use with your permission. But I think the original question was also about where this liquidity injection cash is coming from. Tax-payers?
The short answer is no, the long answer is yes. The cash is fiat anyway, so they just fiat some more and inject as a loan with low rates. That cash isn’t coming from the Federal Treasury, so it’s not tax-payer money. But since it inherently increases the amount of currency in circulation, that is $ supply up, prices respond. As a result we get pure inflation. Probably slowly, though, as it will take a little while for $200B to wiggle through all the banks and actually get spent on products. Which is again to the bank’s advantage. The person who gets all the benefit from counterfeit money is the first person to spend it.
That’s not entirely true (about inflation). The money was already created for those MBS by the people who went into debt against them. Since then, prices have fallen and homeowners have defaulted, and this is an act destroying that inflation… shrinking the money supply. When the Fed steps in, takes the MBS as collateral in exchange for cash, the inflation that produced the MBS is already in the system. By exchanging it for cash the Fed is just ensuring that the money isn’t destroyed by defaults.
I think it explains the Fed’s unending stated concern about inflation– they knew a whole GDP-full of money has been created despite tightening efforts. With 100million people getting checks for $100,000 it usually leads to a little tiny uptick in prices. By keeping rates up (relatively speaking), they don’t mind a little spurt that realizes inflation they’ve already planned for.
That’s my read at least. And why the dollar and the 10yr were not much moved (except against yen, but that’s a different issue).
I have no formal training in economics and am learning as best I can. I’d appreciate if someone can explain a couple of things to me:
When the Fed injects “liquidity” into the markets, as it did today, what money are they using to do so? Is this a loan that the banks have to repay, or can it become permanent? Is it magic money that the Fed has just created, or does it come from the U.S. taxpayer (Ie: is this a taxpayer funded bailout - directly or indirectly).
Finally, I assume that such a move would hurt the dollar. What other negative consequences would result from the Fed’s actions today?
This is from today’s Bit Buckets post:
“Comment by tuxedo_junction
2007-08-10 09:33:10
Actually the Fed is not buying the MBS-PCs. They’re being taken as collateral for very short-term loans. It’s a repurchase agreement transaction which is simply collateralized lending. On the borrower’s side the transaction is called a reverse repurchase agreement and it is accounted for as a borrowing, not a sale. It becomes a sale only if the borrower defaults and the lender takes the securities to satisfy the debt.”
One “negative” consequence is lower confidence, or perhaps reduced overconfidence.
The appetite for risk in financial markets (among other areas) has been voracious for years - this will slow it down.
Note the below was my comment:
“One ‘negative’ consequence is lower confidence, or perhaps reduced overconfidence.
The appetite for risk in financial markets (among other areas) has been voracious for years - this will slow it down.”
Shiller on CNBC right now .
I wonder, are any of those talking heads doubting him now?
He tore both of them a new one, didn’t he. If anyone watching was not a believer in the possibility of a depression before seeing him, they sure were believers after watching him.
Here is a HomeBanc bankruptcy link.
http://www.msnbc.msn.com/id/20215459/
Damn. Is it time to say “I told you so” yet? All these “professionals” couldn’t see the writing the the wall until they put their nose on it and there is no turning back?
The fix is in!
Just watched black helecopters fly over my office…
No cause for alarm. That was just me and several members of the PPT breach team.
Got MRE’s
The Dow Jones Industrial Average ($INDU : Dow Jones Industrial Average
News , chart , profile , more
Last: 13,146.55-124.13-0.94%
2:54pm 08/10/2007
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$INDU13,146.55, -124.13, -0.9%) was 106 points lower at 13,2217, with 21 of its 30 components still in the red.
Ya think?
We should be down 500 points. LOL
Credit card credit crunch, via Newsweek.
http://www.msnbc.msn.com/id/20201030/site/newsweek/
Damn, with the housing focus we haven’t talked out this. “Resetting” interest rates on credit card debt. It could happen to all of it. It could happen immediately.
So much for using the cards to pay the mortgage one cannot afford.
THE escape hatch IS STUCK
For customers who need access to credit but get knocked out of the prime credit-card market due to tightening standards, the only alternative to meet their expenses may be the subprime credit- card market, says Ellen Cannon, assistant managing editor at the financial research group Bankrate.com. And that could put them even deeper into trouble, she says. “What happens with the subprimes is that they’ll give you a $200 credit limit and then they charge you $59 initiation fee and an annual fee of $45. So by signing up, you can be $150 in the hole and your interest rate is 32 percent. It’s highway robbery.”
SUPRIME CREDIT CARD DEBT!!! Ha!
People that take these things are perhaps even stupider than those who got the toxic mortgages … Of course, if they are in a position to need this, we have already established that they are financially stupid, so I guess it makes sense.
What’s in your wallet????? Swithch to a fixed rate….. te he he he… A fixed rate they can change to variable rate any time they want.
The Shoddiest Export
For years, Americans have been able to pay for enormous trade deficits by exchanging IOU’s for imported consumer goods. Unfortunately for foreign creditors, a substantial percentage of those IOU’s have recently taken the form of mortgaged backed securities.
Sporting higher yields than Treasury bonds, investment grade ratings from reputable agencies, and juicy commissions for the investment banks that packaged them, these structured mortgage bonds have quickly become America’s greatest export. Ironically, amid all the recent hoopla about defective Chinese exports, America has proved that when it comes to flooding the world with shoddy merchandise, nobody beats the good old USA.
http://www.europac.net/newspop.asp?id=9538&from=home
“Fannie Mae sees ‘no bottom‘ to shrinking US home prices and continued problems with borrowers paying their mortgages until the second half of 2008, the mortgage giant’s CEO Daniel Mudd said today.”
“Fannie Syndrome”?
“Freddie Syndrome”
2 Mile Island has a major leak
FYI - i called a couple realtors here in ohio and they say everything is fine, sales are up over last year.
if we all called a couple i wonder what the concesus would be.
A good friend of mine is a realtor and she usually made 75-100k a year even in the bad times of the 80’s ad 90’s. She said she has closed 5 deals this year. Even if they were large, which in NE Ohio is doubtful that more than one is an expensive house, I bet she hasn’t made $20k yet, and it’s Aug. Come Sept the market is usually semi-dead for the rest of the year.
http://news.yahoo.com/photo/070810/photos_bs/2007_08_10t095134_450×371_us_usa_markets_fedops;_ylt=Al.mgXY9ntTSiA9vVGwFJuub.HQA
What he is thinking: This is not the right texture for my sensitive behind, but it will have to do…
Hm, the link did not work. Click here and click on the picture to see it bigger.
http://news.yahoo.com/s/nm/20070810/bs_nm/usa_markets_fedops_dc_4;_ylt=Ap5jpwTSem3ucaWjbU1tRkgE1vAI
Outstanding! Once again.
Russ Winter (MoFos = hedgies and their quant trading strategies):
“Dark Alley MoFos Bloodied By Deep Knife Wound
Friday, August 10th, 2007 at 8:29 A
… I believe both MoFos, and until about a month ago Wile E Coyotes (private equity capital), have been dominating market action this year. Wile E Coyotes were turned back about at the point of the initial market peak on July 19. But MoFos until this week have stayed very active. In fact I have been incredulous and astonished to observe trading action in the last several weeks as MoFos would drive indexes sharply higher right in the face of the rapidly collapsing credit conditions that we have been keenly aware of for many months. Now we are getting clues as to why that was happening, and it is just as I’ve long suspected, right out of bad science fiction. Read this article carefully word by word, don’t just scan:
“`If the conditions change, the models don’t work as planned,’’ said Luis Rodriguez, head of risk management for New York-based Manhattan Family Office LLC, which invests money on behalf of an undisclosed wealthy family. Hedge funds’ quantitative, or “quant,’’ models have been confounded by wider credit spreads stemming from losses in the subprime loan market.”
In otherwords these MoFo quant models are clueless about real shifts going on around them beyond say Sigma 1 or 2 events. As such MoFos behave in a highly unstable, erratic manner, like an ancient drugged Berserker (who wore bear pelts by the way) attacking you straight on.”
Russ: http://wallstreetexaminer.com/blogs/winter/?p=978
Article he quotes from:
“Highbridge, Goldman `Quant’ Hedge Funds Lose Money (Update1)
By Katherine Burton and Jenny Strasburg
Aug. 9 (Bloomberg) — Hedge funds that use mathematical models to drive investment decisions, including those run by Highbridge Capital Management LLC, Goldman Sachs Group Inc. and Tykhe Capital LLC, are losing money in August.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=arsD8QnMC6zw
Feh. We’ve been saying that for months right here.
It seems strange to me that people would only go by a model when we don’t have real Artificial Intelligence yet. Isn’t there any actual human brain thinking going on when investing?
I’m watching CNBC and just saw a guest expert on the floor (sorry, missed his name) essentially chastising Maria Bartiromo and Dylan Ratigan for being repeatedly WRONG about the extent of the subprime fiasco. Very awkward and great television!
That was Shiller!!!!
Thanks, I don’t always connect the faces…
Anyway, that was great.
Maria Bartiromo can’t be wrong because she gets inside info straight from Bernanke. Those eyes make everything ok.
Pop quiz, who is Maria Bartiromo married to?
Got MRE’s
Okay, I looked.
Jonathan Steinberg, Founder and Chief Executive Officer of Individual Investor Group, a financial services company in Manhattan.
Having now read her Wikipedia entry, I’ve moved beyond “skeptical.”
For extra credit, who is Jonathan Steinberg’s father and what is he famous for?
I think I just saw her movie recently: “Memoirs Of A Wall Street Geisha”
Half hour to go… Dow tryng to rally to let the big bouys out of the long positions the took in the early week short squeeze. I highly doubt they’ll be able to do it, but…
We’ll see. Could be up 200 or down 400 in the next 25 minutes….
Wait… are the banks borrowing money to manipulate the markets to unwind thier positions???? I assumed the cash injections were to meet margin calls. What if they want money to try to get out from under their short squeeze gone wrong?!?!?
Double down. Get out or lose twice as much…. Fed money that will stay in the system if/when the big boys go insolvant, where it will stimulate inflation.
Crap. I don’t know if I want them to be able to get out or not. Sucks no matter what happens!!!!
Everybody wearing their tinfoil? Ok good.
This is it - this is how the Amero is going to be born. Fed leaves interest rates on the US dollar at 5.25 or raises up to 6, etc, to keep foreign money flowing into the treasury.
All US mortgage debt is converted from dollars to Ameros (parity for now), and US homedebtors are able to borrow Ameros at 3% or less, pay back their mortgage loans with them, and get out of the hole. As the dollar and the Amero drift apart, oil will cost $70 in dollars or $100 in Ameros. Pretty soon you’ll ONLY be able to borrow money in Ameros, and the fed gov will pay its workers in them, with most US corporations to follow. The former US dollar remains a world reserve currency (renamed the UN oil reserve note?) and the USA invites Canada and Mexico to exchange into Ameros too. After a while the Amero settles to a 2:1 ratio to the Euro, or maybe 3:1 (BMWs will start at 100,000 Ameros). Oh yeah, US citizens are also forced to convert all dollar cash holdings into Ameros, through 90% taxes on dollar-denominated investment gains.
Trouble is az_owner, most banks and a lot of central cities will be smoking rubble after the money riots, food riots, gasoline riots, et al, after such a churlish move by shadowy forces of the Chef Boyardee Conspiracy. Also, there is 200 million firearms in this country. They make a heck of racket when collectively p.o.-ed or snookered.
Tin foil indeed.
You ascribe too much power to UN, Fed and U.s. govt. which can’t get anything right or done on time.
More likely just a gradual debauchment of paper all fiat monies until people demand real money (metals) or goods.
This is age out fooling with currency and interest and has always ended with a dead currency. Nothing new here.
“This is age out fooling with currency and interest and has always ended with a dead currency. Nothing new here.”
also failed republics and revolutions…
Stocks end the day mostly unchanged. Any surprises over the weekend? We’ll see.
Bigger problem for U.S. Markets is that Asia and Europe open first. They’ll likely be wagging our tails on Monday.
Agreed. I look at Asian markets usually at 9pm Sundays. I look at gold a little earlier. http://www.kitco.com
The PPT does it again. Masterfully done.
“Banks push MBS on Fed for liquidity boost”
The Federal Reserve bailed out the banks.
They gave every bank an opportunity to get out of illiquid MBS crap at par through repo agreements.
“Banks reaching for the Federal Reserve’s liquidity lifeline Friday offered only “agency” mortgage-backed securities as collateral, reflecting what could be increasing disfavor for these investments.
In its biggest such move by the Fed since the days after Sept. 11, 2001, the central bank on Friday pumped $38 billion in cash into the banking system via three-day loans known as repurchase agreements or repos.
As guarantee for repayment, banks could have also offered as collateral U.S. Treasuries or corporate agency debt of the government-chartered housing finance companies Fannie Mae and Freddie Mac….”
Reuters
http://tinyurl.com/2rk5d3
Uh duh, “Here Mr. Federal Reserve Chairman, let me give you my good debt and I’ll keep these MBS notes. Just kidding - you take these MBS Bonds.” Solvency for weeks for some banks.
Here’s my favorite quote of the day, from the blog of a big-time economist at NYU: “While the Fed and the ECB had no option today but to provide massive liquidity in the presence of a most severe liquidity crunch and run, they should not delude themselves that this liquidity injections can resolve the deep insolvency problems of many overstretched borrowers: households, financial institutions, corporations. . .bail out of insolvent borrowers - however necessary and unavoidable during a liquidity panic- will not work; it will only postpone and exacerbate the eventual and unavoidable insolvencies.” http://www.rgemonitor.com/blog/roubini/209779