We’ve Definitely Entered The Scary Zone Of The Unknown
It’s Friday desk clearing time for this blogger. “Until a few weeks ago, life on Wall Street was as good as it gets. But after a market upheaval that has hit like a bad case of whiplash, the fear on the Street is that the good times are coming to an abrupt halt. At the Bubble Lounge, a champagne bar in the trendy Tribeca neighborhood that caters to the Wall Street set, business has held up recently.”
“‘I haven’t seen anyone come in crying because they lost a job or are upset,’ co-owner Emmanuelle Chiche said. A prolonged Wall Street downturn, however, would be a different story. ‘That would not be fun,’ Chiche said. ‘That would be a problem.’”
“Tightened lending standards stemming from the subprime crisis likely mean fewer buyers, pushing down home prices. Eugene Choi and Rich Bouchner, owners of Commodore Mortgage Group, say they’ve had to scramble to get loans for clients in the New York area that didn’t meet the traditional criteria.”
“One was a waitress who made decent money at a high end restaurant, but couldn’t prove it because so much of her pay was in cash tips. Another was a young lawyer, making nearly $200,000 in the city but who didn’t have the money saved for the down payment on a $800,000 Manhattan condo.”
‘”A lot of people who should have qualified for credit are getting squeezed out of the market,’ said Bouchner. ‘Our lenders are turning off the spigot so quickly, these loans might not be here tomorrow.’”
“Peter Paul, known by some as the father of the residential mortgages market that bridges the gap between subprime and prime, is ‘hunkering down’ as he watches the market he helped create dry up.”
“The credit pullback ‘is happening quite fast and every day it’s a little bit more,’ Paul said. ‘There’s no appetite for any degree of risk.’”
“‘”People pushed the envelope a little bit, and nothing happened, so that became standard,’ Paul said. ‘Even if you don’t want to (loosen standards), you’re dragged kicking and screaming at least close to the flames.’”
“A month has passed since Washington introduced licensing exams for some aspiring new mortgage brokers, and more than half of those taking one of the key tests have flunked. Studying for the exam should be fairly easy. All of the possible questions are posted in a study guide on the department’s website, along with the answers.”
“‘We thought, ‘why don’t we just give them the questions, and that will help them learn,’ said Deborah Bortner, director of consumer services at the state Department of Financial Institutions.”
“One possible reason for the failure rates: Some test-takers believe they don’t need to study. Another reason: Test takers are required to compute annualized percentage rates and other math equations, and ‘many of them just didn’t bring a calculator,’ Bortner said.”
“What’s happening in the housing market, a financial bust of epic proportions, clearly isn’t just staying there any longer. Once mortgage defaults began to rise, however, lenders and investors began to wonder what they had wrought.”
“It isn’t as if credit suddenly isn’t available, period. Go ahead, use your MasterCard; chances are no one will stop you. But we’ve definitely entered the scary zone of the unknown: How many of your neighbors won’t be able to make their mortgage payments in the next year?”
“As mortgage funding dries up, Fannie Mae and Freddie Mac are calling on regulators to loosen restrictions on their business so they can fill the breach.”
“‘There’s going to be a shutdown in the housing market. And Fannie Mae and Freddie Mac are not going to be able to bail it out, nor should they,’ said Bill Fleckenstein, president of Fleckenstein Capital. ‘If Fannie Mae and Freddie or somebody bails out the housing market, then you tell me why we don’t start up Gambler Mae so that any lottery ticket owner, any football bettor, any guy at the track, any stock operator who loses money can get bailed out, too.’”
“Sales volumes were down in July for the second month in a row as interest rates reached double figures – their highest level since the 1990s. ‘The boom has definitely ended,’ Bank of New Zealand economist Tony Alexander said.”
“Christchurch homeowner Mark Harris has had his Lyttelton villa on the market for eight months, and only yesterday accepted an offer close to the asking price. Harris said he was surprised at the time it had taken to sell.”
“‘We probably would’ve had the place sold a number of times if we had been prepared to drop our price,’ he said. ‘But we held out, I think the person is actually getting a very good deal.’”
“The apartment-to-condo conversion market in South Florida represents a ‘perfect storm’ of wildcat investment. In some cases, entire projects went to speculators. They demanded more, so converters bought apartment complexes at record prices.”
“According to (analyst) Jack McCabe, fewer than 11,000 new condos were built and absorbed in the period from 1995 to 2005, but that currently there are nearly 20,000 condo units due to become available before the end of 2008, many of them from apartment conversions. ‘There’s currently a 31-month supply of condos and townhomes in the MLS,’ he said, ‘and (that) doesn’t count the FSBOs.’”
“‘Miami-Dade County is the poster child for the condo bubble, and a microcosm for what’ll happen in markets throughout the country. During boom-and-bust cycles when speculation runs rampant, many markets share the same variables that create artificial appreciation and future blood in the street,’ he said.
“How could they have known better? McCabe points to ancillary data: ‘You hear people say, ‘1,000 people a day are moving to Florida.’ We’re finding it’s a myth because the public school systems in South Florida are smaller than five years ago. And the moving van companies all say they have more households leaving Florida than moving in.’”
“Greetings, fellow real-estate speculators. How ya’ feeling about your gamble on the real estate market these days? Who, me? Not us, you protest.”
“Ah, but indeed it is a major motivation, and those who claim to have no participation in real-estate speculation doth protest too much. We are all real-estate speculators to some degree. What we’re quibbling about is how much of a degree.”
“The tricky part of this analysis is that we’re all real-estate speculators, whether the plan is to hold the property and the loan for one, three, 10 or 30 years. Buying a home is a bet that the returns on doing so, in financial, practical or psychological terms, will be greater than renting.”
“For the moment, what we are stuck with is a system that relies on astuteness and judgment on the part of all making speculative decisions. In the current case of the housing and mortgage industries, such reliance has proved to be, literally and figuratively, a bad bet.”
A historic week for the housing bubble, to be sure! My thanks to those who support this blog. Please check back this weekend for news, your market observations and topics.
This weekend will be a good weekend to cruise open homes. I bet the fear is palpable.
“I bet the fear is palpable”
Nope…so many ordinary people have no clue what is going on…maybe glance at a CNN news story, or get a glimpse of a newspaper headline. At most, a tinge of worry. If you want to see *real* fear, wait six months to a year.
I agree. I’ve talked to so many people who think it’s a great time to buy just because there’s so many houses on the market. No one seems to notice they’re overpriced.
I get told it’s a great time to buy in the midwest too, where the houses are still overpriced, the jobs have gone away, and the foreclosures are up up up. Apparently it’s always a great time to buy…great when prices are going up, great when prices are going down, great when jobs are drying up, just nuts.
I, too, agree. I post on a Disney board and only the wannabe sellers are starting to get a clue . . . starting to.
Which Disney board?
DisBoards.
Yep, my colleagues have some vague notion that there was turbulence on wall street and that the housing market has “slowed.” But until a relative or neighbor loses their home or their 401K drops by 40%, it probably won’t hit home.
Or until THEY lose their home or their 401K. Or until Bigfoot comes by and hits them with a 2X4 with ‘Trees R Us, Greed is Bad’ written on it.
Maybe then they’ll get it.
Truly, I was so happy today. I could hardly even work, I was so interested and kept flipping around looking at all the developments, and at this blog.
I need a nap.
What 401K? They cashed that out to buy the home.
I have already talked to one person today that mentioned he was glad the “correction was over” and the FED took care of it.
I did not respond, no reason. This is really the way the guy on the street sees the world. I got a boo-boo no worries, kiss it and make it better.
Can someone remind me which Democratic candidates have hinted that maybe a bailout is a good idea so I know whom *not* to vote for?! I’m getting worried now that if Bush says no bailouts then there will inevitably be multiple Dems who say yes bailouts as a way of currying cheap favor among flippers, for instance.
I recalled that Chris Dodd was making a lot of noise for a while, but he’s essentially irrelevant at this point…
has Clinton or Obama or Edwards for instance spoken? (sorry if this has already been addressed)
Both Clinton and Obama have some vogue saying to bail out the distressed homeowner to help the people. Republican Ron Paul criticized the Fed on today’s money injection.
yeah.. the Whitewater Queen is gonna save us..
Who else would know better how the system is scammed, who deserves fed bailouts and who is to blame for all this..
Memories are short. Go for it, Hillary.
Comment by joeyinCalif Please leave personal attacks out of this Real Estate Blog. Time for me to make another donation to the DNC
thanks for that info…I saw that Hilary has specified something about earmarking a billion for ‘helping’ people in this regard, haven’t seen Obama’s position, and have heard that John Edwards wanted to see increased oversight or even regulation (gasp) of mortgage lenders but I didn’t see him talking about bailout money. I just don’t want official bailout money to be part of the picture, for sure.
Yeah, david cee, the only money I’ve given so far was to the Edwards campaign, and it was part of that flood he got after Elizabeth took Coulter to task for making personal attacks.
cheers all!
I was with someone today who bless her just got foreclosed on and declared bankruptcy. And she was apparently on the phone with a mortgage specialist who was helping her with a credit report issue and with whom she hung up saying I can’t wait to buy a house next year. And when I said as we listened to the radio about the infusion of new money and the credit thing and the nastiness in the mortgage market that this has been crazy, I don’t see why people need to feel like they need to buy a house if they can’t really afford it, this ‘ownership’ society where you’re made to feel like you’re only half-human if you rent is nuts, agreed. But then said yeah, well, my goal is to save up a couple thousand dollars and then buy again a year from now.
and apparently someone’s happy to lend to her too.
I had been thinking that even if the Fed lowers rates, or pumps out more money for banks to do it with, that there’s no way we can see a ‘rebound’ because how are these loans gonnna get written again. But perhaps if there’s some quick money to be made, people will try for it and still make those loans?! There’s gotta be greater transparency for the secondary market or why would they trust the mortgage slimeballs again? Will they need to burned in a second wave?! So very very strange…
I don’t see why people need to feel like they need to buy a house if they can’t really afford it, this ‘ownership’ society where you’re made to feel like you’re only half-human if you rent is nuts,
It’s a lemming mentality…and everybody knows where lemmings end up.
Over the cliff and dead on the rocks below.
Yeah, guy at work said “they” won’t let the housing market crash. What is the Fed going to do? Hold a gun to every head and force people to go deeper in debt or buy toxic securities?
housing is crashing, not only does the FED know that, they are not going to do anything other than continue to pump up liquidity, and they are gonna do it stealth style just like today. The only thing thats gonna even make an effort as the impending implosion is precisely whats happening, inflation.
On an aside, once the genie is out of the bottle the market if gonna go higher because thats what inflation does, higher prices for everything.
They said the FED basically lent money and took mortgages as collateral. Question: What discount did they demand on the collateral? Were they letting the hapless mortgage holders use the full value of the mortgage as collateral?
he was glad the “correction was over”
$600 billion of mortgage rate resets scheduled for next year.
And the FED pumped in how much over the last 2 days- $30bil?
Like stickin’ a finger in a crack in Hoover dam.
I just thought of the TV ad where the inspector sticks his chewing gum in the leaking crack in the dam and says,’That’ll do’.I read some where that the resets would be 500 bil the first 6 mos of the year. A Case-Shiller graph from the HBB ? Help me out guys and gals.
Agreed. I just had lunch today with someone who said (and I’m not kidding) “But do you really think there’s a bubble in housing? It always goes up.”
He’s looking to buy right now.
So give it another few months. The first inning just ended.
Sadly you are right … just clueless out there.
Trying to explain what has been happening to some
people who are actually buying today is like talking
to worst kind of idiot one can meet. They just dont
understand! The real scary part … many are in their
30s.
I totally agree. The average homeowner, who is not yet in trouble on their mortgage, has no clue. Believe me, we have alot of uninformed idiots out there in this country. I actually met a marketing director for a major Reno, Nevada casino who had no clue who Barack Obama is and the man was here in Reno about 2 months ago at a park about 2 blocks from her casino and over 4,000 people were in attendance.
Related to the comment in this post where the guy tells people to go ahead and use their credit cards to come up with the down to buy the house, well, I was wondering why I am being besieged in the past 5 days with credit line extensions and new offers from the major credit card companies telling me about my new fortune in being able to buy a house, blah, blah, blah. Sick jerks.
I love the smell of fear in the morning.
Actually, I’m not getting up in the morning. I’m going to lie in my bed dreaming happily of this carnage, because I think it’s just getting warmed up. What, is the Fed going to keep chucking billions into this giant raging bonfire? Yeah, that’ll work great.
They believe in throwing money at the problem.
Well, it’s not going to work. Not any more than catching a stray developer and ritualistically sacrificing them in the ruined wetlands makes the frogs come back.
Still…it’s certainly worth a try, right? ‘If at first you don’t succeed, try, try again’, and all that.
Anyway, it’s not like you’ve lost much. An extra developer, a billion bucks…there’s always plenty more.
Until there isn’t.
Yes and the problem is that it is OUR money.
Some news from the remote Pacific Coast.
For the next two weekends there will be a grand event held up here. 200 homes will be open for your viewing pleasure between Crescent City Ca. and Gold Beach Or. If you come up for the event you should have no problem with lodging as most of the motels & rv parks have vacancys in the peak of tourist season.
http://www.chetcofcu.org/asp/products/product_3_1.asp
Don’t forget to check out the black Hummer H2 for sale as you come into Brookings. I smell trouble in paradise
See you at the party.
All I see is overpriced retail….where’s the foreclosures?
The FED ppicks up 40 billion dollars worth of Mortgage Bonds or MBS. From what I hear they lent the money to help banks, hedge funds etc meet Margin calls. They supposedly have to pay it back in a few days. Here is the problem. If the market continues to tank, what does the FED do? They are creating money out of thin air. So are other banks to keep this global meltdown from collapsing and cosing currencies to widen too much. Eventually it will all unwind and we will have ARMageddon.
Look at the Market. Down, Up, Down, Up, Down, Up. There were violent swings.
30 minutes left to go, the DOW is down almost 200 points. They have to do something quick because people can’t go all weekend thinking there is trouble. Stocks surge ahead and close only down 30 points. Saved by the bell.
I type so fast LOL.. Cosing should be causing.
A few other typos too. Sorry!
No soup for you!!
“Look at the Market. Down, Up, Down, Up, Down, Up. There were violent swings.”
It’s like a plane’s wing, on the verge of stalling due to high angle of attack…a lot of shaking and turbulence before it actually loses lift completely.
This whipsawing makes me believe that we are close to a “state change”. Maybe not quite yet, but it’s coming.
Volatility occurs with *uncertainty*, and it is often followed by up OR down movements. The period of 2002-2003 was extremely volatile in the stock market, but turned out to be a fantastic time to buy stock (when panic set in).
If the current cash infusions work then the market will continue on its merry way and we’ll all live with more inflation. If not, then we’ll have a recession of unknown severity.
Think early 80’s, or worse.
You mean prior to Greenspan?
Yeah, 1980 BG.
Think early 80’s, or worse.
Man those were ugly times…a 21% prime and 16% 30-year fixed rate mortgages.
These chucks today haven’t a clue.
Those who forget history are doomed to repeat it.
What if the FED’s infusion of money does not work?
You get hyperinflation with a slowing economy. People will use dollars to burn to keep warm in the winter.
The Saudi’s, Russians, and Venezualans will go hungry because they can’t sell their oil and end up sitting on it.
The Chinese unemployment rate skyrockets and they get stuck sittin on poisonous dog food and led toys and cars that crumple like a harmonica. Desperate, they give this away to their population thereby taking care of their population problem. They won’t need a one child policy because the people will be sterile from all the lead and melamine along with other poisons.
Those of us in Phoenix don’t need to heat our homes thanks to wobal glarming
Tom, Come on, this isn’t some third world country. Do you really think you’re going to go hungry? In this country?
Sorry folks, its the end of the week and I think I need another drink
I was being melodramatic. We can always eat corn.
if we eat the corn, what are the cars gonna eat?
“this isn’t some third world country. Do you really think you’re going to go hungry? In this country?”
Just got through watching the Friday evening local political punditry show on PBS (Tampa area). An editorial writer from the Bradenton Herald was saying that the Manatee County Food Bank is just about empty and making appeals for donations. Then he mentioned people getting laid off from construction.
Now, I’m not there at the food bank to see exactly who is coming in for food, but if it is anything like one of the local charities around here that distributes baskets on a regular basis, a large part, no, make that main part, of the clientele is illegals. Working the system, getting the welfare payments for their anchor babies, and going from charity to charity outlet to get their food. Oh, you’ll love this one: the do-gooding charity ladies found out the illegals are particular about what they eat, so the baskets always have rice and beans and tamales and taco wraps and such.
I think a little food might be available for American citizens who really need it if it wasn’t being vultured up around here by illegals used to getting by on some combination of welfare, under the table jobs, selling crap by the side of the road and charity. Interesting now that the men are being laid off from construction, the food banks are inundated.
Cars will run off poo. Corn doesn’t digest you know
From PBS’s NPR
“Some 38 million people in America are considered “food insecure” — they have trouble finding the money to keep food on the table. NPR profiles families who have faced hunger in three different settings: rural, suburban and urban America.”
It would not surprise me if it gets worse.
As to whether or not the US is a third world:
“New York remains the most expensive city in North America but drops five places to position 15 (score 100). Other North American cities have dropped more steeply and only New York and Los Angeles (position 42, score 87.1) rank in the top 50 cities.”
or
Why the United States has fallen
The United States falls from the top position it held in this Index for 21 years in a row, to take sixth place this year. Although its score hasn’t dropped dramatically (its final score last year was 86, compared with 82 this year), a few points are worth making.
Its economic performance over the past year has slowed slightly, and this is reflected in our Index (it gets an Economy score of 90 this year, compared with its 92 rating last year). According to the OECD (www.oecd.org), “with the gradual withdrawal of monetary and fiscal stimulus and much higher oil prices, growth has slowed slightly as output has approached capacity limits and inflation pressures have begun to build. Although the impact of Hurricane Katrina is still subject to substantial uncertainty, prospects for a soft landing are good. Nonetheless, policy action in some areas would be helpful in unwinding imbalances that have emerged and sustaining favorable economic performance.”
More than the current economic uncertainties, though, it is the ongoing and increasing infringements of personal freedoms in this country that account primarily for its fall from first place in our Index. While other First World countries receive the top score of 100 in our Freedom category, the U.S. gets but 92 points.
The United States remains, inarguably, the world’s most convenient place to live. But, we argue, and our Survey this year maintains, that convenience is not the most important factor in determining any country’s quality of life.
Healthy living-where you’ll live the longest
1. Andorra 83.5
2. Japan 81.6
3. Sweden 80.1
4. Hong Kong 79.9
5. Iceland 79.8
6. Cayman Islands 79.7
7. Canada 79.3
8. Spain 79.3
9. Australia 79.2
10. Israel 79.2
11. Martinique 79.1
12. Switzerland 79.1
13. France 79.0
14. Faroe Islands 78.9
15. Macau 78.9
16. Norway 78.9
17. Aruba 78.8
18. Belgium 78.8
19. Italy 78.7
20. Austria 78.5
Source: The Economist Pocket World in Figures, 2005.
What, no bread? Let them eat Soylent Green
“food insecure”
God please shoot me now!!! BTW, you know why you’ll live so long in Sweden? Cause boredom doesn’t kill you raidly! Trust me, 2 years of living there taught me lots about boredom. It also taught me that it sucks to stand in line 2 hours for a prescription to be filled.
raidly=rapidly
Sydney is a fun 1st world city and 5 more years of partying than in the US.
(They probably checked Melbourne for these stats - life styles of the dead)
U-Haul rate from Andorra to the USA: $14,892
U-Haul rate from the USA to Andorra: $63
I’m poor. I drive a cheap Beamer. I only have 10 credit cards. My stock broker is poor. Both my maids are poor and the butler is poor too. I only have 5 bedrooms in my house. The price of Rugala at Whole Foods is stretching my budget. I can barely afford the imported cheeses anymore. My television is only 52″. I think we’re entering a depression or something because I wasn’t able to afford a new boat this year. What’s this country coming to????
(In the year two-thousand)… you will be driving to Andorra in a car that runs on Soylent Oil.
Oh… a state change is coming. It will be like an aircraft stall… a quick plummet. The only question is will the pilot stupidly pull the nose up prolonging the fall? Or will they put the nose down and pull up at a still fairly high altitude? I’m betting the former.
Got popcorn?
Neil
You know what, in a strange confluence of synchronicity, only last week a small plane fell right out of the sky and spang onto the one and only road serving the peninsula where I live. I was online when it hit, and the power winked out, and I thought it must be a developer somewhere and was going to go out and kill them, but then it turns out it was only just a restored ‘De Haviland Chipmunk’ falling out of the sky, right onto the power lines, where it bobbed up and down like a stray earring, disrupting my ability to access this blog.
Also, my ice-cream melted ’cause the power was out. Super mad.
But my point is:
–Who names an aircraft after a chipmunk? I would fling myself out of the sky, too, just from simple embarrassment. How hard is it to be named ‘Fiery Blaze of Doom’, or something? Chipmunk? ChipMUNK?!
– The two people in this squished aircraft had a scratched forehead and a boo-boo on their hand. I have no response to this. Am I glad? Am I not? I mean–melted icecream. Super mad. There should be consequences.
–I want a big boom, and I bet I get one. Not of the ‘Chipmunk’, but of the metaphorical aircraft that Popcorn Neil wonders about.
And I say, ‘give me popcorn’. And some new icecream.
Popcorn flavored ice cream… Yum… with popcorn chunks.
YUM, time for a pregnancy test….
Oh wait… I’m a guy…
That sounds barfy, Tom. And they are two very different things. Popcorn. And THEN icecream, in a separate dish, away from the popcorn bowl.
But, along with beer, they are the breakfast of champions.
I mix leftover beer, popcorn, and ice cream in a blender. That’s my breakfast.
SMOOTHIESSSSSS
My sugar levels are all over the place. Much more volatile and at much more frequent intervals than the stock market. Good thing I’m not diabetic.
Although, beware, beer and ice cream at the same time can lead to the mother of all stomach aches.
I know this because I tried it. Once and never again….
But aren’t those called Beer Floats? With pop corn floating on top?
Where does the chipmunk fit into this? Blended or on the rocks?
Crispy fried and crumbled over a nice vanilla bean ice cream.
Or, maybe as a memorable bar snack?
Maybe the chipmunk is supervising Bigfoot as he blends the beer, ice cream, and popcorn in a pleasing and delicious way.
It’s a new culinary presentation, called ‘…
What should it be called? ‘The Bernanke Boom’? Hmmm. I’m coming up with nothing.
THIS should be the weekend topic of discussion on this blog. A good name for this delicious and nourishing bar snack/healthful breakfast food.
How about “Big Housing Mess”
Sure. Nice and simple, followed by copious vomit. Very apt. I like it.
Hmm you got me thinking. How about “Regurgitated Diarrhea”?
It’s our flavor of the week.
Ok… I’ve had too many glasses of wine : )
My favorite was Stack of Squirrels, followed by Prairie Dog Pate with Recycled Raven Sauce. $1.29
The Road Kill Cafe
http://tinyurl.com/yonu2a
See, the banks holding these things hope that by Monday, everyone will come to their senses and the mortgages will be worth their face value. After all, this is just a short term problem. The houses won’t fall in value. The people will pay their 800,000 mortgages on their 400,000 dollar houses. That’s a slam dunk.
You raise an interesting point. In the past, the mortgage was based on the value of the house at the beginning of the loan period. Now, they seem to be based on the expected value sometime in the future. I’m sure that the $400,000 house with the $800,000 mortgage will be worth $800,000 someday - maybe 2025 or so. This was all unintentional of course, but maybe this is how FBs will spin it to themselves.
The way this works is the Fed lends enough money short term in order to keep the Fed Funds rate at the 5.25% they have targeted. The only variation is that this time they took mortgage backed securities as collateral. This is supposed to signal that this stuff (all agency issued stuff) is fine and has no problems. There is a lot of nonsense around about Fed actions…
May be a repost, but the Lonestar acquisition of LEND looks to be DOA….LEND is trading down about 45% after hours:
From Lonestar today
Item 4. Terms of the Transaction
The information set forth in the section of the Offer to Purchase entitled “Terms of the Offer” is hereby amended and supplemented as follows:
On August 10, 2007, Lone Star informed the Chairman of the Special Committee of the Board of Directors of the Company that, in light of the drastic deterioration in the financial and operational condition of the Company, among other things, as of today, the Company would fail to satisfy the conditions to the closing of the tender offer. Accordingly, Purchaser does not expect to be accepting Shares tendered as of the end of the current offer period ending at 12:00 midnight, New York City time, on August 14, 2007.
Herb Greenburg had a column about 10 months ago talking about how lend was a good short…it was at $52/share….
Another one bites the dust.
Damn. I was inches away from buying puts on that sucker.
You’re preaching to the choir. Fortunately I got distracted by the phone, because I would be hating life right now.
Wow, up 45% at the close and then drops 45% after hours. I wonder what the Farallon Hedge Fund geniuses think about the $230 million loan now. Or did they already unload their share of this carrion to their fellow vultures at Lone Star?
Can you say that Hedge Fund is going down? Oh, and Lone Star still bought 1/3 the shares at $16 something. Can you say OUCH!?
You cannot see all the cards Farallon is holding. If you could see the whole deck, opinions might be different. LEND (if one had crappy positions) was a decent hedge stock. My assumption is that Farallon was not a “naked” long.
I am probably wrong on my assumption “that Farallon was not a “naked” long.”
Accredited disputes Lone Star assertion
“…
“Accredited… intends to hold Lone Star to its obligations and to hold it fully responsible for any damages caused by its failure to satisfy those obligations,” Accredited said in a statement….
Reuters
http://tinyurl.com/yp9kd2
I’m of the opinion that Wall Street is run by stupid jocks (So many brokers were sports people in college). The ones we call “successful” are just the lucky ones that made it through the “luck filter”. From all the bone headed moves I’m seeing lately I can’t believe there is much intelligence at work. They never knew what they were doing! It was all dumb luck. I listen to these anal-ists talking about leverage, P/E, earnings, profits yap yap yap. They always have an explanation WHY something happened, AFTER it happened. If they really understood how it all worked they’d know the reasons AHEAD of the event, they’d be rich beyond imagination, like BIFF in Back to the Future II. They don’t. They’re just loud mouthed goof balls.
Things are getting interesting. A lot of new developments on wall st.
This is the week of change.
Yes, the Dominos begin to fall. Can the FED stop it from falling? We shall see. Either way, they will have to sacrifice the dollar.
I don’t think they will, that brings up a whole new set of issues, carry trade, etc.
Well they keep pumping dollars into the system. Today it was $38 billion over 3 injections. The first was $19 Billion. That is why you saw the market down, up, down, and up, down, and finally up. PPT at work. The FED is part of that.
Publically, they are fighting inflation, behind the scenes, they are worried as hell.
I’m sure the CEO of Blackstone is calling his college roommate, George W Bush, begging him to do something.
you mean the W that said the economy was strong and went on vacation?
This looks like the makings of a “depression” ….feds pumping money into a dead horse. Remembering the history books, the feds did the same thing in 1929 and the market crashed a few days later.
We can all thank go ol alan for this one.
Does anyone have a link to the fed pumping circa 1929?
If you can tolerate the painful background: http://us.history.wisc.edu/hist102/lectures/lecture18.html
The actual lead up to the Stock Market Crash of 1929:
http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929
Look near the end of bits bucket today. I read it and it’s facinating.
Thank you and Fancy Pants for the link. It was very entertaining. I didn’t realize the sharp drop in rates in an attempt to “protect Europe.”
One learns something new every day.
Of course I re-read the 1925-1926 story on Florida. Why does it seem familiar and fresh… Hmmm…
Got popcorn?
Neil
Chapter 12 was very good as well.
No way.
Peter Paul is the guy’s name who is the founder or father of the residential mortgages market that bridges the gap between subprime and prime. It doesn’t get any better.
I am thinking “Rob Peter to pay Paul”. Is it just me?
Never trust a folk singer with two first names.
How ’bout a wannabe president from Texas?
He robs from himself to pay himself? That pretty much decribes everyone who’s done a cash-out refi in the past five years.
This will not end well. The laws of economics have been violated for too long. They can be bent so much, but when they are broken, the consequences are no different than breaking the law of gravity.
I hope that people will realize, and help to educate others, on what caused this mess. It wasn’t immigration, subprime, Asian savings glut, etc. It was allowing a central body to plan the production and distribution of goods and services. The creation of the Fed, and their subsequent policies, caused it, and will only make things worse in the long term. By worse, I mean dismantling the principles of a constitutional republic. If it is the creation of another socialist order, then it will certainly be very successful. It depends on what people want.
Mencken: “On some great and glorious day the plain folks of the land will reach their heart’s desire at last, and the White House will be adorned by a downright moron.”
Well, I’ll be! Dreams do come true!
Send Ben’s URL to all your friends and family and tell them to read it!
Peter Paul is the guy’s name who is the founder or father of the residential mortgages market that bridges the gap between subprime and prime. It doesn’t get any better.
I am thinking “Rob Peter to pay Paul”. Is it just me?
“One was a waitress who made decent money at a high end restaurant, but couldn’t prove it because so much of her pay was in cash tips.”
=========
1. Did the waitress declare all of her tip income? If so, she should have had 1040s showing taxes paid.
She’s only been working there for three weeks (?) Or she hasn’t filed taxes since being smuggled into New York from southwestern Moldova
Ah, flip side of income tax evasion. No documents when you need ‘em.
Just friggen classic, this speaks volumes for this industry and falls right into place with what we thought of them.
“A month has passed since Washington introduced licensing exams for some aspiring new mortgage brokers, and more than half of those taking one of the key tests have flunked. Studying for the exam should be fairly easy. All of the possible questions are posted in a study guide on the department’s website, along with the answers.”
You just can’t make this stuff up…freaking morons filled with and fueled by greeeeed.
Patricio,
I don’t think any of us were surprised. Recall, the test required some MATH! Thus, the current passing rate surprises me (its high for those brokers)!
And you don’t know how hard it was to resist posting in REALTOR ™ GRAMMAR!!!
Got popcorn?
Neil
you missed the best bit:
“Another reason: Test takers are required to compute annualized percentage rates and other math equations, and ‘many of them just didn’t bring a calculator,’ Bortner said.”
Back in the day, when I used to teach basic numeracy in community college, I had one rule - during the first semester - you were not allowed to use a calculator.
HUGE wailing and gnashing of teeth, especailly from the younger ones, used to doing simple addition on calculators all thier lives.
By about week 5, they’d got the point - all you need is pencil and paper to do this stuff. People learnt how to do it before the invention of calculators, and they’ll be able to do it again once the EMP bombs have wiped all electronics off the face of the earth.
But, then again, this is baby Realors(tm) we’re talking about here - if they can walk and chew gum at the same time, then they’re head and shoulders above the rest of the pack.
Why do I think that this was a multiple choice exam too. This means that on even the ones that they didn’t know they had a 25% chance of getting the answer right. Sad…
I wonder how that H&R block sale of Option 1 is going? They haven’t closed yet and I would say there has been a “material adverse change” since the announcement of the sale to Cerebus. Puts anyone?
story out on OCregister dot com website … may not go through.
bye bye H&R Block
Some one will end up buying the tax prep business and the name.
Yea… someone will buy the name and a few of the non-mortgage business lines. From the BK estate!
Got popcorn?
Neil
Actually, the dirty little secret is that H&R Block is not really a tax business. It’s a cash advance business, but with much better fees. Probably why they morphed into subprime mortgages.
they also had issues with the IRS back in the day, now the returns are squeaky clean.
Home Depot can’t sell their Whole Sale materials business LOL.
Meanwhile, Nardelli has hundreds of millions and he will screw over Chrysler the same way.
DO NOT BUY A CHRYSLER IF YOU EXPECT TO USE THE WARRANTY. With Nardelli cutting, they are likely to say, No Warranty. Who needs that? The cars are built to last.
Didn’t they just announce a lifetime powertrain warranty (original owner only).
Yes and comercials for the local dealer her are borderline fraudulent. They keep screeming over and over “lifetime warranty”, “life time warranty”, and only once do they mention “powertrain”. A clear attempt to deceive suckers into thinking the whole car is warranteed for life.
Chrysler is just out with a “lifetime warranty” bumper to bumper. As long as you own the car… It is not transferable, they are already gasping for air this is their hail Mary.
This just came out on Accredited Home Lenders: Symbol LEND
5:51PM Accredited Home Lenders delays 10-Q; co anticipates a net loss of $40-60 mln in Q2 (LEND)
Stock down big after hours. Looks like theyre running out of money.
So much for the run-up today.
oops, didnt see the story posted above, sorry for the duplicate post…
Wait a minute? isn’t that the lender that is being acquired or they are making an acquistion at 3:30 they were up big after the feds gave the green light on the acquisiton. Or am I thinking of someone else?
you are correct.
You are right. But Lone Star said, we don’t want to buy them. They are forfeiting and walking away.
LEND said without the merger or buyout, they are BK. The stock is essentially worthless.
Ahh ok, I just caught your post above….all I can say is WOW. Somebody just took a huge bath.
In the case of OC… I have a picture of a crazy man warning about the flood. (And no, I didn’t bother with the latest “Almighty” movie…)
Got popcorn?
Neil
BZH just reported that they aren’t filing.
This is the Beazer that said everyting was fine last week.
The Eurpean Central Bank poured in another EUR 61 bln (US $ 84 bln) today, after EUR 95 bln (US $ 130 bln) yesterday. It was the largest amount since 9/11.
They have a bigger housing bubble than the US. I saw a place in London when I was over there back in May and they wanted 4 grand a month for a dump about 30 minutes outside of London (by tube). This was near Heathrow Airport.
Don’t forget this: http://www.youtube.com/watch?v=aMBgSfQI49E
Have a great weekend guys!
I’ve decided to change my moniker on this blog to “PrimeIsContained”.
That will be the next point where they try to draw the line in the sand, after it becomes clear to everyone that Alt-A is toast and Prime is in trouble.
What is a “primel”, and how many of them are contained?
And what kind of moniker is this? A spider moniker? A rhesus moniker?
A “primel” is a type of Joshua Tree.
Got popcorn?
Neil
Yeah, man, be clear with your primates.
“A month has passed since Washington introduced licensing exams for some aspiring new mortgage brokers, and more than half of those taking one of the key tests have flunked.”
Verbal Section (30 Minutes)
Questions 16-25 — Analogies
16. MORTGAGE : PAYMENT : :
(A) aggrandizement : Serin
(B) itch : whore
(C) Lehreah : MacNeil
(D) psychosis : Mozilo
(E) Jain : Jas
Darn I missed Question #700.
What is Angel Mozillo’s nickname:
A ) Godzillo
B ) King Kongzillo
C ) MyAssIsOnFireZillo
D ) Orangzillo
You forgot:
E ) Tangelo
I was thinking PumpNDumpo
With that fake tan it should be Orangelo.
LOL!
Technique: find a bridge between the two words. Replicate the bridge in the answer choices. “Mortgage” [let's see, requires, induces, leads to, is a type of, yeah, that's it] is a TYPE of “payment.” Wait a minute, I think you got “Lehreah” and “itch” mixed up. Or, wait a minute, it could be LEADS TO and it’s (b).
JB - I’m thinking there’s a pretty decent happy hour going on down there in the backwoods in Utah. . .
All I can say is…LOOK OUT BELOW!!!
Maria “private jet” Bartoromo said that inflation is fine. People need to be buying stocks because of solid fundamentals.
Yeah, if you’re making her bank.
CITIGROUP loses 500 billion dollars in its credit business in recent weeks.
I also heard credit card debt is racking up. Credit card companies, including Capital One, are considering jacking up rates. Nice way to stick it to the man when he is down!
This will just make the credit market that much worse. Even if the FED cuts rates, it bails out the banks, not the borrowers. It will enable the banks survivability but not the common man.
I say let them feel the pain. That is the only way they will learn.
Another guy said Goldman Sachs I would not buy. Maria interrupted and said, “I didn’t say buy Goldman, I said buy quality companies” LOL!
And Mean Ole Slim just keeps paying that balance down to zero every month. Sorry, but I just can’t seem to carry a balance on my credit card. Must be that frugality I got from both of my parents.
“CITIGROUP loses 500 billion dollars in its credit business in recent weeks.”
Do you have a link to a story on this? I would love to see more details on CIT losses. The stock certainly didn’t show much panic today.
Citigroup has $500 mln credit business loss - FT
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-08-10T234241Z_01_N10147895_RTRIDST_0_CITIGROUP-LOSSES.XML
OOPS MILLION LOL!
Goto finance.yahoo.com and type in C
Phew! For a second I thought Tom had just brought down our economy.
Everybody put back down your guns and nooses, it looks like this ol’ clunker will make it another day, after all.
I wouldn’t bring it down. We know the FED would just pump $500 Billion in liquidity on Monday and all would be fine.
How do you know they didn’t??? Would they really tell us???
OT: do you think it’s too late to patent my tinfoil-hat noose-attachment?
Go for it. You might make it on Big Idea with Donny Deutch!
He’d have to promise to demonstrate it for the audience (all three of them).
Just a late thought, since this was “structured credit” aka business loans, what are the chances that Citi did not bundle it off and sell as a CLO to some hedge funds? Based on GM’s debt of $30B having $300B in derivatives written against it, what is the likelihood of $50B in derivatives being written against this small $500M loan? How many fund managers thinking they were out of trouble got hit with this news tonight? Reprice risk again? Just a few thoughts I have.
BREAKING NEWS
FED just said they will provide liquidity and reserves as needed to keep markets fluid.
TRANSLATION = INFLATION. The war on savers continues.
What is the best way to get rid of the housing bubble? Pump the market full of liquidity or cash so that your house adjusted for inflation is worth 50% of what it was. It still might be $800,000. But heck, it will help out the suckers.
This is precisely good for precious metals. Also for stocks.
Yep. Housing is toast, lots of lenders are toast, hedge funds are toast, home builders are toast, but stocks in general may be just fine.
actually Im fairly thrilled with my PM position, and I have all the tin foil hat nutjobs on this very blog to thank.
good on ya’
FED added $87.5 billion to the system this week. WOW!
Why can’t the FED just give our Federal Gov’t $9 trillion to pay off our national debt?
Time to bail out the US TAX PAYER!
Oh these bastards are bound and determined to run us completely into the ground. The average folk will be burnt beyond recognition. They won’t see it until, it’s way to late!
Relax, they’re loans! The have to be paid back. The Fed is not “printing money”. Yes, they are providing cash, but in the form of short term (3 day) loans. This is not unusual, nor systemically inflationary.
Sorry, the Federal Reserve allowed the banks to supply MBS paper to be repaid with like in kind which can mean US Treasury Bonds.
But when it needs to be paid back, what happens? Oh, here is another 3 day loan. It goes on indefinitely.
A few Billion here, a few billion there. No one will care. It’s only paper.
errr, isn’t a mortgage a loan?
Cramer told me a few days ago that it’s not so bad to refuse to pay those back.
Might not be that easy. Central banks across the world holding US debt will not be too amused to see the true worth of their holdings cut in half. Dumping should begin very soon.
In case anyone has been curious about what ever happened to SeattleEric, whose blog disappeared after his several flips flopped, I did a search and found this latest from him. He’s a fine case-study in mania-deflation:
17. seattleeric - July 30, 2007
I’m so thrilled to have become a footnote to the flipper craze, a cautionary tale, and an example of someone who ‘flamed out’. I feel like an answer to a trivia question. LOL.
I sent the Tim an authorized epilogue to my story, which he plans to post as a final epitaph to my rise and fall. Hopefully I’ll be able to finally rest in peace.
I don’t think about Real Estate much anymore (or rather, so it seems…it’s probably an average interest, but much less so than before). In comparison to the go-go days where I was consumed with it, I feel like Don Corleone tending to his tomatoes in peace, only periodically hearing about ‘the business’ from Michael.
When people ask me about the Seattle market right now, I sidestep the question. I don’t know which way it is going? Who knows? Tim maybe right and the economy will crash and therefore buying is a bad deal. Ardell’s view of the world seems rational as well, a very individualist approach where consumers in the right financial position can buy without much concern about any macro economic hits.
What I do say, is that long term, Seattle and Washington State will continue to thrive. As water becomes more valuable than gold in the Southwest, and states in the southern latitudes have more hurricanes (Southeast, Gulf Coast), and hotter temperatures (Southwest/SoCal), the Pacific Northwest will be the new Southwest.
I hope that everyone gets to own a home in his lifetime. For Ardell’s readers, this may be tomorrow. For the Tim and his readers, I hope they can one day close shop and tell each other - ‘ok, prices are low enough..let’s buy!’.
The sun is falling below the Olympics as I finish this post, and so soon will the persona of Seattle Eric disappear at last.
Wasn’t Seattle Eric a Microsoft millionaire? I doubt he’s hurting too much, even now.
Yeah, I don’t think he’s hurting. Ht’s just expressing quite well the change in psychology when a mania stops being a mania…
‘Martin is among the hundreds of thousands of borrowers saddled with “option” adjustable rate mortgages, risky loans that dangled bargain-basement introductory payments and also let borrowers defer a portion of interest payments until later years.’
The dumb toad bought three houses as a makeup artist. Why the hell does the press continue to use these idiots as examples of those who will be hurt…or maybe it is good that they do becuase they garner no sympathy
AP
High-Risk Mortgages Become Toxic Mess
Friday August 10, 6:34 pm ET
By Michael Liedtke, AP Business Writer
AP Centerpiece: High-Risk Mortgages Turning Into Toxic Mess for Lenders, Borrowers
SAN FRANCISCO (AP) — When Linda Martin refinanced the mortgages on three different houses nearly three years ago, she thought the lower monthly payments would help her save more money for retirement.
ADVERTISEMENT
Instead, the Lakewood, Colo. skin-care specialist is sinking in financial quicksand amid a widening mortgage morass that’s pulling down home prices and threatening to drag the U.S. economy into a recession.
“I’m hanging on by a thread, not knowing whether I am going to be living in a car in six months,” said Martin, who declined to reveal her age.
Martin is among the hundreds of thousands of borrowers saddled with “option” adjustable rate mortgages, risky loans that dangled bargain-basement introductory payments and also let borrowers defer a portion of interest payments until later years.
Well she should sell 2 of her houses that greedy pig.
Skin care specialist?! Do they pull down big six figure incomes these days? How the hell did she get three houses?
great to see that we are approaching traditional lending standards again. the Fed can only plug this growing leak for so long. when they give up we should be all the way back to ‘mortgages only being granted to people with 700+ FICO scores and 20% down payment (in cash) with very little revolving debt’. just like the old days, the way it should be. everyone else can keep renting until they meet the guidelines, is that too simple?
But but but…
Traditional lending standards mean J6P cannot buy his McMansion and then HELOC out to buy 5 pickup trucks (keeping them all)! NOOOO!
Oh, I just found out one of my coworkers just did the above. Big home, big driveway, big Trucks. It didn’t surprise me he’s put up three of the trucks for sale this month (sold one). Woo hoo! The power of easy credit.
Got popcorn?
Neil
Hey man that is American way. Buy the stuff you do not need with the money you do not have.
Every time I see a big SUV with those tacky, expensive rims, all I can think is HELOC! HELOC! HELOC! I just can’t imagine anyone paying for useless, shiny rims with money they had to earn.
Maybe they should use that name for a new model of SUV. I can just see it - the Chevy Heloc.
Funny you should mention that….we had dinner last night with an old friend from London, who is over in L.A on a work trip.
He’s never been to the US before, and when we were waiting to pick up the car after dinner, he looked around the car park and said ‘all the cars here have really shiny chrome wheels, what’s up with that?”
Short diatribe follwed, by me, about L.A being the land of style over substance, and the joys of HELOC SUVs.
Dear brakth …. “great to see that we are approaching traditional lending standards again” I don’t think we are approaching to “traditional standards” we are finally approaching to the edn of the “fake economy” created by American “Genius”, Great Economist Mr. Greeeeenspiiin, who was playing with markets in order to please Mr. Presidents and people who really own Stock markets… . Now came another “Genius” Mr. Bernanke who is trying to prolong the process of dying on dead body. U.S. dollar is dead, the money that you had is worth its 1/3 for several years .Mr. Bernanke pumping money to revive the dead body. I think he needs all those trillion dollars to those banks that spend for those mortgage loans for last several years.
Sorry,should be “I think he needs to pump all those trillion dollars to… “
great to see that we are approaching traditional lending standards again
It’s bigger than that.
The ATM HELOC train has stopped because of crashing values.
And HELOC borrowing is the only thing that’s been holdin’ the economy up for the last decade.
Toot! Toot!
OT I know, but I just saw the giraffe-dress woman whose name I now finally know, Erin Burnett, on Chris Matthews’ Hardball, where she was on to talk about the roiled markets and house values and such. He asked about how much more value might be lost say in places like CA where everything is ‘ritzy’ (they really need to stop letting him doing anything but politics, and even so…), and she said that the people she just spoke to said it might take another 15 to 20% before that stops depreciating. He asked what about the 25 year olds just starting out, new wife, etc, what are they doing, living at home, what? (how about bloody renting?!) And she said you know Chris there has been a recent uptick by a couple percentage points in the last years of the %age of people who own homes, and that demographic has been a big part of that, but call it crazy, I know in this country we’ve come to think of owning a home as a right, but maybe some people just really shouldn’t be owning homes! (you go Erin!). So, in the middle of this serious dicussion, and she’s got a pleasant expression on her face but she’s not flirting with the camera like the maria chick or anything, Chris says, “Can you move your face closer to the camera?” Erin says “huh?” Chris repeats. She says “what, am I sitting too close?” and He says “just could you put your face closer?” so she obliges and puts on a fun hmm…I guess I’m edging in to hear a secret or he’s going to ask me to tell one or something, and she’s got a ’secrets’ expression on and he just says “nah, i’m just messing with you. You’re a knockout”. wtf?!
Sorry I missed that moment. He’s a smarmy bugger. And CNBC = Mad Men.
I saw that as well…. how creepy was that?
I don’t know if people saw the Joe Namath/Suzy Kolber “I wanna kiss you”– and it wasn’t that bad, but it was in the same ballpark of creepiness.
Sad. Yes that girl is very attractive. She’s also a professional and should be treated as such.
Matthews should be ashamed. Believe it or not, as of 10:00 p.m. CST it was on MSNBC’s hardball website unedited.
I saw this as well and could not believe it. It was awkward, inappropriate and creepy–and made Chris appear to be nothing more than a dirty old man. I think it deserves an on-air apology from Chris and MSNBC. I really felt sorry for Erin.
I agree…anybody have a contact email addy where comments in support of Erin could be sent? I presume Matthews’ website has a commentary page…it was so wrong. She handled it really well, but gee with Cramer blaming his screeching on the patterning of her dress (giraffe) and Matthews seeming to ask her to help him act out his (being generous with him) flirtation fantasies on air, leaving us with his evaluation that she is a ‘knockout’ (which she is, but it’s not a reality-tv show or showbiz tonight they’re broadcasting) instead of thanks for your input, this has got to have been a tough week for her.
BEAZER DELAYS FILING!
Suckers who rushed the stock to $16. Eat @%*^!!!
BZH is way down after hours.
They forgot how to count! lol
WSJ reporting accounting issues at Beazer.
Wow, looks like those guys at Citadel are REALLY smart. They took a 5%+ position in BZH July 24 according to the 13G filing. Average price had to be $17 or higher, most likely above $20. Another episode of “the smartest guys in the room.”
Wondering how many loans failing lenders made loans in your county? Go to this site, scroll down to the bottom, and select your state. On the next page, select your county. At the bottom of the county page should be a link for a list of 2005 lenders by loan volume.
http://www.allmortgagedetail.com/
If this doesn’t work for you, try googling “allmortgagedetail.com” and the name of your county.
they’ve had to scramble to get loans for clients in the New York area that didn’t meet the traditional criteria.”
“One was a waitress who made decent money at a high end restaurant, but couldn’t prove it because so much of her pay was in cash tips.
Poor baby couldn’t defraud the IRS and get a loan at the same time…. my heart weeps.
Question:
Were her tips left on the restaurant table or the nightstand?
Mama don’t let your babies grow up to be Realtors
Don’t let ‘em be 8×10 glossy stars and drive prices up
Make ‘em be bloggers and equity refugees and such
Mama don’t let your babies grow up to be Realtors
They’ll never sell homes and open houses now, are so alone
Even priced below competitively priced abodes…
Don’t blame it all on the realtors. How bout the Fed?
the FED. nope.
the blame lies squarely on the shoulders of INDIVIDUALS acting in colusion following a dream wrapped around a lie told by the same INDIVIDUALS who thought they were rich.
Turns out, acting in an irrational manner will, faster than most other methods, destroy the life you are living.
Don’t blame it all on the realtors. How bout the Fed?
Well you know, the FED should have been regulating Realtors, Brokers, Lenders. THE FED SOLVES ALL PROBLEMS. LOL
There was a hostage situation and they called in the FED. They convinced the guy that he wasn’t upside down on his mortgage and that they would be pumping more liquidity in the system. Not to worry.
‘”A lot of people who should have qualified for credit are getting squeezed out of the market,’ said Bouchner. ‘Our lenders are turning off the spigot so quickly, these loans might not be here tomorrow.’”
Let me re-phrase this: A lot of people who should never have qualified for credit are now getting squeezed out of the market.
And I love the example of the guy making $200K and who couldn’t save anything for a downpayment on his $800K condo. Excuse me??!! Someone who can’t save a dime has no business getting a mortgage for hundreds of thousands of dollars.
so far, the stock market seems able to adjust to the carnage in the lending sector.. which is a relief since it looks like i can’t get out for a couple weeks or so.
Renaissance was hurting as of Aug 8. Manager Simons earned 1.7 Billion last year (compensation for himself). “Renaissance is a pioneer in the use of mathematical models that rapidly trade stocks in a strategy that is backed by debt, or leverage.”
————————————————-
Renaissance Hedge Fund Down 7 Percent
By REUTERS
Published: August 10, 2007
NEW YORK (Reuters) - The Renaissance Institutional Equities Fund, a $26 billion-plus hedge fund managed by mathematician James Simons, is down “in the order of 7 percent” for the year through Aug. 8, according to a letter the fund sent to investors Thursday.
Renaissance, one of the largest “quantitative” hedge funds, told investors that it has “not had good luck during these last few days.” It said it has been “caught in what appears to be a large wave of de-leveraging on the part of quantitative long-short hedge funds.”
Simons’ success in his other fund, Medallion, has made him among the highest paid managers in the $1.7 trillion industry, taking home an estimated $1.7 billion in 2006.
Question: how much of his own money does Mr. Simons have in these funds?
Probably Very Little, its da feez… da feez!
Between the two funds mentioned, something like $6-7B.
I follow a lot of these funds for work now. Renaissance was actually down a bit more than that for August going into Thursday, more like 9%. Bloomberg is reporting the correct number.
If you’re running a quant fund, luck should not be an excuse for failure to perform. James has gotta be a smart guy considering what he has done but if I were an investor and I hear a schmuck that has my money blame his failure on luck, I would have a fit. If luck is factor in your quant fund James, I might as well take all my cash to Vegas and put it on black!
“the subprime crisis likely mean fewer buyers”
Love it, more dumb buyers out of the market.
This week feels just like at the party when the piñata has been cracked and a couple of pieces of candy have come out. Just a bit longer and things will be gushing.
This great week is being topped off with the Blue Angels at the Hillsboro Airshow this weekend!! That should keep the buyers on the sidelines this weekend.
Just heard on CNBC.
The FED made 3 injections today at $38 Billion. That is the Plunge Protection Team at work. That is why you saw 3 downs followed by 3 ups. The first injection was $19 Billion.
WOW on Fast Money they are slamming the FED and Hank Paulson LOL.
They said, why don’t they just let the selloff happen? No one helped me on the trading floor on a bad day. It’s funny they are long on MBS.
“hello, this is Ben Bernanke, I am coming to repo your home.”
When can I find the REO list from the FED?
This guy is arguing that the FED has strict guidelines and only buys AAA paper. What they do not know is they think it is AAA paper, but it is toxic!
Tom, It was a bailout for the banks. By allowing the banks to tender their MBS paper for three day repos to be replaced by like in kind means the banks got solvent. Like in kind is US Treasury Bonds.
Hoz? Can you post some links / background on this statement? If the Fed is really going to take MBS and return UST this is enormous.
http://tinyurl.com/349s7j
Reuters
Hoz, the linked story doesn’t say that. Got anything else?
Absolutely flabbergasted that they would write a repo with MBS as collateral. Wonder if they would take a personal check? LOL.
The banks must either be out of Treasuries to repo or they are already pledged as collateral elsewhere. That’s how close to the edge of the cliff the banking system is.
I think it is that they could get rid of their MBS holdings before the SEC inspects them next week. Now the MBS gets replaced with US T Bonds.
We all own houses now.
Can you remember how much they did on Sept. 17, 2001? I think they cut rates before the market opened. None of it mattered. It was an avalanche.
Yes, it’s like it had almost the opposite effect. People buy on the rumors and sell on the news.
Just wait till the news or sh*t hits the fan next week. Hedge funds have to report July’s numbers on Wed.
HFs don’t “have” to report anything on Wednesday. They don’t even need to *publish* July numbers.
What is a concern is that many funds have quarterly redemptions with 45 days’ notice… which means this week, technically Thursday.
I’ve been just lurking so long I can’t even remember the last time I posted. Had to chime in and make sure you’ve seen this though…my favorite Cramer video to date:
“Cramer: Don’t Panic if Homebuilders Go Under”
I’m having trouble posting the exact video but that’s the title at Cramer on Demand at http://videoplayer.thestreet.com
Donald Trump is crying like a baby. I think they need to throw Donald out of his house.
LOL the squatters strategy from Fast Money based on what the Donald said.
1 ) Don’t leave your house even in default.
2 ) If you get a margin call, go to another broker
3 ) If you’re light on top, comb over and smile.
I understand that there will be inflation if the fed cuts rates by 1% which is what many of the talking heads are saying they will do by Friday of next week.
If they do, can this really save the housing market or the hedgies?
I can’t see how it would help the housing market as people still can’t afford homes by traditional standards. No chance of appreciation in the near future so say they lower rates, is that really going to help?
your comments just made me recall one of the bits of wisdom coming from all the talking heads maybe 6 months ago, when appreciation was just starting to finally, mysteriously, fail to materialize somehow (huh? isn’t that akin to gravity ending?!)…
that sure, you can have large quick moves in things like tech stocks, but people always need to live in homes, the values of people’s homes can’t change that fast, and there are only so many with a constantly increasing population to boot! and an ever-increasing pool of riches as well! so, not to worry, housing only goes up, at worst it can maybe slow in its appreciation.
So, say all those loans were made to people who couldn’t afford to pay them. And then of course the people down the pyramid from them also can’t pay them, ‘cept more so, much more so in some markets. Is the idea that now everyone refi’s into a 6% 30 year, *everyone*, and all is well? I just don’t get how one can play both sides of that coin…that housing can never be unstable because it all moves like molasses on the one side and that infusing a couple billion into the banks or letting them lower rates some will fix everything, confidence included, licketedysplit!
But then I don’t have an MBA.
If the private Federal Reserve was given the authority by Congress to regulate unfair lending practices, what happened? If the Fed’s mission is to smooth out economic cycles and keep inflation in check, why did we just have a historic inflationary run-up(bubble) in housing prices? Why is the Fed so secretive and non-transparent? They don’t even report how much money they are printing now. Who are the major shareholders in the large banks that the Fed services?
Bernanke admitted that the Fed engineered the Great Depression. They also engineered the latest real estate bubble that’s headed for deflation. Who’s making the Big Money in timing these created cycles? It’s time to analyze the Fed and find out who’s making all the profits in interest charged in printing money for the Government Debt that taxpayers pay taxes to pay off.
I think this is pretty cheery news…makes me happy anyways.
Goldman’s Global Alpha Falls 26% in 2007, People Say (Update3)
“Goldman Sachs Group Inc.’s $8 billion Global Alpha hedge fund has fallen 26 percent so far this year, a decline that may prompt more investors to withdraw their money, according to people familiar with the fund.
Goldman’s largest hedge fund, managed by Mark Carhart and Raymond Iwanowsk, has dropped almost 40 percent since July 31, 2006, said the people, who declined to be named because the fund is private. The Standard & Poor’s 500 Index of the biggest U.S. stocks has returned 16 percent during the same period.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPuB5px_P6dc&refer=home
WOW!
http://tinyurl.com/2ulhdj
“I think(pray) I may have 3-4 months worth of work at my current current job in the mortgage industry but I NEED TO PAY OFF ALL CONSUMER DEBT AND WALK AWAY FRON THE HOUSE.
How long does it take for the bank to evict me, once I stop paying????
There’s just no way I can refinance because I’m also losing my job and my house is now 200,000 dollars underwater, but I have 15,000 in consumer debt (2 CCs and 1 car).
Do I have to report this loss on my taxes??
THANKS.”
If you read her comments below you’ll find some additional information about her:
1) She was making 20k per month as a broker until her industry collapsed.
2) She has 2 kids.
3) Her house is worth 750k which she refi’d for 100% financing.
What a retard.
Another friend of mine owns 6 homes. Pulled equity out of one to plop down on others. Oh, she is also a mortgage broker and the market has literally dried up on her too! She is hurting.
like the ex-playboy bunny broker on the real OC houswives show
I bet owning those extra homes for her kids aint looking so smart right now
Typical of the idiots in that field (at least in the last 4 to 5 years). She/He works in the industry but has no clue about tax/credit/bk implications of owning and losing a home, but they are a mortgage expert. Couldn’t happen to anyone more deserving. LMAO
The responses are priceless for example:
“Killing yourself would be the best option. Then your kids might end up be raised by someone with brains.”
Ya gotta love it…
Question for Hilary Clinton: I lost a bunch of money on the stock market last week. Can I also get bailed out? I mean, as long as government is going to absolve us of our own stupid investments, I mean why should stupid homeowners get all the free dough?
EXACTLY why their won’t be any bailout.
There’ll be a dozen fires burning brightly before they can even get around to containing the first one. You can’t do a bailout when everyone’s a victim.
“1,000 people a day are moving to Florida” Yeah, that’s true. Problem is that about 2000 are moving away.
Yep, look at the UHAUL indexes.
A UHAUL from FL to South Carolina is $1200. The same UHAUL the other way, $200.
Ron Shuffield, president of Esslinger-Wooten-Maxwell Realtors says that “South Florida is working off of a totally new economic model than any of us have ever experienced in the past.” He predicts that a limited supply of land coupled with demand from baby boomers and foreigners will prolong the boom indefinitely.
South Florida is going to be working off that totally new economic model for a looooooong time.
Hi, Ron!
Check out MLS D1178564, fresh from ZipRealty:
Price Reduced: 07/31/07 — $595,000 to $495,000
Price Reduced: 08/03/07 — $495,000 to $395,000
Price Reduced: 08/09/07 — $395,000 to $349,000
Now that’s what I call a MOTIVATED seller!
The $495 probably needs to go to $395.
If the Fed is planning on keeping this market alive by injecting capital into it then:
a) He’s not really helping the economy, he’s helping the investor class.
b) Gold and Silver are not just going into orbit, they’re going to leave the bloody solar system.
“If the Fed is planning on keeping this market alive by injecting capital into it then:” ?????
It looks to me as though the Fed may be in a state of panic, which has led it to fold its post-FOMC meeting hand at a record pace.
Stay the course, Ben! Don’t roll over so easy…
AFX News Limited
Markets see Fed liquidity move signalling earlier rate cut UPDATE
08.10.07, 11:23 AM ET
WASHINGTON (Thomson Financial) - Financial markets now see the Fed cutting rates much sooner than they earlier had and many analysts think the central bank may be forced to do an emergency rate cut.
http://www.forbes.com/markets/feeds/afx/2007/08/10/afx4008338.html
Ben-
You really need to change the wording on your Paypal button from “donation” to “tuition”.
I’m not even joking.
Just because I’m bored I looked into my old neighborhood that I spoke of a couple of weeks ago in a weekend post here.
Northern Virginia 20164. Prices are plumetting there. My TH sold for 350 in October of 2005. Similar unit now prices 100k or more less. That’s a 30% drop.
Holy shit. It’s foreclosure land out there now. I don’t know if they are leading the pack and other more desirable areas will follow but I can’t imagine how low these homes will go in the end.
30%!! And some people in this country are dancing around saying prices will only drop 10% and that is causing the average homeowner heartburn?
novasold
In my old neighborhood in NoVA (20152), last year a townhouse sold for $430k. Twelve months later, two neighbors sold identical units for $375k. Two months after that, a neighbor sold for $330k.
So, a $100k loss in 14 months. The foreclosure rate for the area doesn’t look good on Yahoo Foreclosures, but not nearly as bad as Herndon or Manassas. Those areas light up like a Christmas tree.
Actually, I’ve been tracking 4 areas on Yahoo Foreclosures since April 30th. Across the board, the number of listings has increased 175% (give or take some noise) since April 30th. The locations I’m tracking are South Riding (20152), Fairfax (22030), Oakton (22124), and Alexandria. That’s from inside the beltway to the exurbs.
Has no one posted this yet?!
OFHEO say “NO” to Fannie! Party in the streets!
I just Busted Up … HUM BABY!
Let the blood run in the street… Monday morning!
From the link:
Lockhart has said the cap will only be removed after Fannie Mae returns to timely reporting of its financial statements and makes other improvements in its internal controls. Fannie Mae has not yet filed timely reports, though Lockhart has said the company is making progress.
I picture a spoiled kid being disciplined.
I applaud them actually holding the line. Time for those quarterly statements!
This is an interesting tidbit.
Got popcorn?
Neil
Y’all caught Cramer basically encouraging people to blame 7 million people losing their homes in the months to come on Lockhart, for demanding piddly little things like filing timely reports after a period of awful institution-wide problems?
From an earlier thread:
“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.”
From the linked article:
As of June, Fannie Mae held $722 billion in its mortgage portfolio. A 10% increase would have allowed the company to hold close to $800 billion. Fannie Mae’s portfolio peaked in size in October 2004, when it held $913 billion.
Even the modest increase for FM won’t dent the adjustible mortgages.
Wow!
Sorry to reply to myself, but also, how will the fed injection into the market help the banks sell mortgages now given that there will be no FM/Fed bailout of mortgages?
Seems to me like the fed just lost a shitload of money in the form of those short term/liquidity loans.
Those that are more financially savvy may correct me here b/c I’m not, I admit it.
In politics the worst news is usually saved for after 6 p.m. on Fridays hoping that J6P won’t pay attention it and it will die off except amongst the politically active.
Someone else made the point that most people although worried, are not paying attention to the bobs and weaves in the financial news that is going on right now; so, if this means a real massive sell off on Monday, the only ones who will really lose everything are those that are Cramerites who are building that basket of buy low stocks when the big players are planning their exit to the extent they already haven’t gotten out.
Like I said, I’m not the most financially literate person, but this seems big to me.
The FED must keep the rate in which it lends to banks at 5.25%. Most banks lend to each other at slightly above rate.
If you notice you would see that the fed rate jumped to 6% yesterday. Hence the FED must inject money into the system in order to get the rate back to 5.25%.
Email Chris Dodd. Google His Website. Telling him a bailout is wrong. They need to FIX the problems first. These companies need to feel the pain and know there will not be a federal bailout.
Minutes before Ofheo’s announcement, Senate Banking Committee Chairman Christopher Dodd, D-Conn., issued a statement saying the Bush administration should rethink its decision on limiting the portfolios held by Fannie Mae and Freddie Mac.
“The President needs to immediately reconsider his ill-advised position that he won’t even consider the possibility of easing GSE credit caps, provided it is done in a safe and sound manner by regulators, until there is statutory reform,” Dodd said. “I believe that both can be done and the administration shouldn’t use that as an excuse for doing nothing.”
If you want to tell Senator Chris Dodd how you feel, his contact information is here.
http://dodd.senate.gov/index.php?q=node/3128&cat=Opinion
Property owners trying to sell in the SF Bay Area are so F*cK3d right now. Loans above 417K are way more expensive now, and that only gets you 2/3 of the way there to anything close to livable here. So, that basically means buyers have to cough up 200K in order to avoid the higher interest on the jumbos. SCR3W3D!!!
The ‘Unknown’?? We’ve only ‘Known’ about it for 5 years….
There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don’t know. But there are also unknown unknowns. There are things we don’t know we don’t know.
–Donald Rumsfeld–
Unknown unknowns = Paulson’s and Bernanke’s subprime black swan surprise.
Paulson and Ben know the truth and they are not surprised at all. Problem is that they can not speak the truth, because if they do then it would cause a panic, and they do not want that.
In honor of the fact that everything Professor Bear predicted here a couple of years ago has pretty much come to pass, I am henceforth changing my handle back to Professor Bear this weekend.
Sayonara,
Get Stucco
Groucho we hardly knew you!
PB sounds like something that gets stuck in my gums.
Hoz — Professor Bear’s former tenure predates your tenure on this blog
Heck, we’re only in the “credit crunch” stage. All of our best predictions are still pending!
So far, so good…
Test
I was going to say today Professor Bear that you have had many posts warning that it’s likely the Feds would try to inflate out of this mess . It looks like a strong lending in the direction of your warnings .What do you think , if you care to comment of course .
“Eugene Choi and Rich Bouchner, owners of Commodore Mortgage Group, say they’ve had to scramble to get loans for clients in the New York area that didn’t meet the traditional criteria.”
“…Another was a young lawyer, making nearly $200,000 in the city but who didn’t have the money saved for the down payment on a $800,000 Manhattan condo.”
They make $200K and don’t have money saved for a DP?! Imagine how much debt they had. Probably a big loan on a Mercedes, tens of thousands on credit cards. This person probably shouldn’t be buying more than $400K worth of home.
Dude probably has $100K+ in student loans from law school and undergrad. Just paying those off will cut into how much you can save from take-home. And $400K will only get you a tiny walk-up in a shitty and/or inconvenient section of town (including the outer boroughs).
All of which probably further underscores that even with $200K/yr. income he shouldn’t be buying anything in this market.
The market had no choice. When I bought my first house (1990) I paid 20,000 for a 3 bedroom 2 bath stucco in Canyon, Texas and had to fight for a loan even though my wife and I made 35,000 yearly combined with no debt load. 4 years later ( 1994) sold that house moved to Vegas bought 1800sqft. 3 bed 1 bath stucco built in 54 for 70,000 went through 4 lenders because we had 6000 in debt and I had a 36,000 income as sole provider. We were told we barely qualified because we were getting the max of our earnings at double of our yearly income. Sold that house in 2003 (nice profit) to someone who flipped it in 60 days for 210,000 to some rube who thought it would go up more (It has been in foreclosure twice). Sad part is there are some young people out there who are going to lose the house because they have 50% of their yearly income going to house payments. I have been renting for the last three years due to work bouncing me to New Mexico and Oklahoma. I will be buying in Vegas in 1 or 2 years when the prices are back down to around 90 dollars a square foot. The price will go there. The demand is gone and the new generations credit is shot with the predatory lending that has occurred. Also when the illegals are taken out of that market and the foreign investors who were grabbing every thing up to make an easy buck have been soaked and are crying for 50 cents for every dollar they invested. People who are looking to buy houses to actually live in will have affordable housing again. It really is an old Vegas saying “greedy will make you needy”.
Heck, Vegas will go to $50/sf.
When it stablizes on $50/sf, I may have to consider purchasing a 1500sf party pad.
The subprime tsunami has washed away the curtain hiding the globalized PPT from view… These CBs are behaving like a cartel in a state of panic about now.
Central banks leap in to add liquidity
By Eoin Callan in Washington and Jamie Chisholm in London
Published: August 10 2007 20:12 | Last updated: August 10 2007 20:12
The message from central banks to investors only four days ago was: “Trust us. We’ve got it all under control.” But since then, the tightness in credit markets has developed into a blockage in the overnight flow of money between financial institutions in Europe, the US and Asia.
Central banks have been forced to inject massive doses of liquidity in excess of $100bn into overnight lending markets, in an effort to ensure that the interest rates they set are reflected in real-time borrowing.
http://www.ft.com/cms/s/b733f80a-476a-11dc-9096-0000779fd2ac.html
Hey GS……….is this your new site?
ooop’s
http://www.extratasty.com/profile/9985/professor_bear
“The tricky part of this analysis is that we’re all real-estate speculators, whether the plan is to hold the property and the loan for one, three, 10 or 30 years. Buying a home is a bet that the returns on doing so, in financial, practical or psychological terms, will be greater than renting.”
I guess you can argue that I’m shorting real estate by renting, which if you squint hard enough might be a form of speculation.
I knew there were problems in the mortgage markets. But I was wrong as to the extent of the problems. One word sums is all: WOW!!!!!
Wow is right . It was kinda funny today because I thought I heard one of the talking heads on one of the business shows mention popcorn .
Now we get to reap the bitter harvest of a protracted period of official denial. Subprime is not looking very contained these days.
Ben–Read and excerpt this report by CEPR–the folks who decide when a recession happens. You’ll enjoy it.
http://www.cepr.net/documents/publications/meltdown_2007_08.pdf
“CEPR–the folks who decide when a recession happens.”
Nope — wrong acronym. The folks who decide when a recession happens are the NBER.
http://www.nber.org/cycles.html/
This may not just be the end of the housing bubble. It may be the end of credit as a way of life which implies, it’s the end of American culture as we know it.
This last week was like a pin prick! Just wait until Los Angeles house prices crash. It’s going to wipe out the country.
I too agree that there needs to be a correction within the mortgage industry. With 11+ yrs experience, I’ve know what the mortgage banking and Wall Street influence has on congress/senate.
Look at the money paper trail, we are going to look into who gets elected and who funds their campaign.
I have a hard time believing that nobody saw this coming. There are some real smart people on Wall Street and money talks in Washington.
We don’t think there should be a welfare type bailout of any sort, where unknowing consumers get a free pass - if thats the case, I’m going to stop paying my mortgage too. However, if the Feds can stimulate the economy with a ‘temporary’ rate reduction, for maybe 6 months - we see this to be about the best answer. We know there is good/bad with this but the good outweighs the bad and the bad maybe be a recession NOBODY wants.