Bits Bucket And Craigslist Finds For August 12, 2007
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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I have a question. The SEC is said to be looking into Goldman Sachs and JP Morgan this weekend for accounting problems regarding mortgage exposure. I’m wondering: will the results of said investigations be made public by the SEC, or will they keep it quiet to prevent panic?
In other words, will we have to rely on leaked info to find out?
– Judge Smales
“You’ll get nothing and like it”
Let me put it this way. Do you expect a sudden burst of honesty from the SEC, Goldman Sachs and JP Morgan?
It is gaining speed in New York. The talk around my office has changed. And I am rubbing it in many noses. No, it may not be the thing to do in some people’s eyes but people need to have reality pounded in. I am just hoping that my employer is smart enough to make it through this. Every time I rub it in they get a little smarter and a little more cautious.
Looking forward to absorbing the atmosphere in NYC this week (I’m teaching for work in Brooklyn Monday and Tuesday and attending on Wednesday).
I doubt I will be able to discern a real difference, but I’ll let you know if it feels different to a person who left in early 2005. We get great reports from our NYC residents, but it can be a different persepctive when you leave for long periods of time.
See everyone in a week unless I log on from brother’s place.
This may be the start of a long overdue change in perception. The bubbly NYTimes grudging admits prices are way too high!
$4 Mil for a fr!ckin APARTMENT ???
Cracks May Appear In Manhattan Apartment Market
NEW YORK (Reuters) - At the end of July, Deanna Kory had a bidding war on her hands. Three potential buyers were vying for a luxury apartment the Manhattan real estate broker was selling for a client at a $4 million asking price.
On July 27, the end of a week when the Standard & Poor’s 500 stock index suffer its worst one-week percentage drop since 2002, she called the winning bidder with the good news. The next day he withdrew his bid for the Upper West Side home.
There is no sign of a downturn in sales figures for now, but Kory’s experience may be an early sign of weakness in the robust Manhattan market that could be vulnerable to struggling stock markets, hedge fun losses and newly cautious lenders.
Manhattan is among the few U.S. real estate markets to remain buoyant. Elsewhere, demand for homes has slackened, numbers of homes for sale have swelled, and in an increasing number of markets, prices have declined.
Fat Wall Street bonuses handed out at the beginning of this year, a relatively strong New York economy, and foreign buying fueled by a weaker dollar, have driven Manhattan apartment prices higher. In the second quarter, the median price of a Manhattan apartment rose 1.7 percent to a record $895,000.
http://www.nytimes.com/2007/08/12/realestate/12cov.html?_r=1&oref=slogin
i’m sure you saw the current nytimes article (in real estate section) about the slew of new manhattan high-luxury rental condos commanding monthly rents of up to $6,000 for 1 bedrooms and up to $11,000 for 2-bedrooms.
obviously these over-the-top supershacks were built for sale — and now converted to rentals, the rental market remaining at an all-time tight supply of under 1% vacancy.
naturally, the articles never hints at the midstream change in plans of the developers. and in all truth, sales apparently remain quite strong in manhattan.
for how much longer? maybe not much.
when the financial panic ultimately translates into thousands of wall street layoffs, things may change. fast.
Nothing damaging would ever be made public. The SEC and Wall Street are have Hotel New Hampshire type of relationship.
Nothing matters except for the preservation of the System.
lots o tlak about the “System.”tm
Steve203 on the Motley Fool boards has some interesting thoughts on this, which I haven’t seen elsewhere. Is it a coincidence that the Fed suddenly took MBSs as collateral for repos, at exactly the time when certain big banks may not want certain MBSs on their balance sheet (because of the SEC inquiry)? Or, even if MBS holdings can’t be hidden this way, maybe this allows said banks to do a mark-to-Fed-pricing, saying “Hey, the Fed says these are worth 99 cents on the dollar, so who’s to say they’re worth any less?” I’m no expert on this stuff, but I thought the idea was worth passing along.
I had a similar thought. If the fed, or for that matter anyone, were to purchase even a few BMS, doesn’t that at least establish a price? It seems to me what happened with Paribas is that they couldn’t even establish a price. If a price cannot be established you can’t allow redemptions. How do you mark to market when there is no market?
It seems to me, that the fed purchasing even a modest number of MBS sort of greases the skids, thus preventing the market from seizing.
“will the results of said investigations (1) be made public by the SEC, or (2) will they keep it quiet to prevent panic?”
(2). As demonstrated by the Enron debacle, it is absolutely essential
to successful crony capitalism pump-and-dump operations to hide bad news as long as possible from view, or else a company risks losing the faith of its bagholders, er, I mean, investers.
“In the words of US economist Mark Zandi, without adequate information the regulators’ job is “harder than a blind man trying to mount an elephant; they don’t even know where the tusks are”. The usual argument against greater transparency is that financiers know what they are doing; as the current confusion in the markets indicates, that is not always true.”
Guardian UK Aug 12, 2007
That’s the thing about “lightly regulated” hedge funds. Light regulation and transparency don’t mix. By the time anyone knows where all the sumpprime bodies are hidden, it will be too late for investers to get out alive.
How does one reprime a sumpprime pump?
“How does one reprime a sumpprime pump?”
Step 1: Flush out the sewage that is clogging the pipes…
For a bail out to take place before a proper investigation on the causes of the current meltdown would be wrong .
The powers that be are going to find out that the housing boom was the biggest crime wave in recent history .
“The powers that be are going to find out that the housing boom was the biggest crime wave in recent history .”
All the more reason to rush into a bailout, as a desperation measure to keep all the elephants hidden under the rug (including an epidemic of white collar crime in the lending business).
“The SEC is said to be looking into Goldman Sachs and JP Morgan this weekend”
SEC, JP Morgan, GS: One big happy family
Didn’t Judge Smales also say, “The world still needs ditch diggers.”
Well, that may be what some of these stuck house flippers end up doing.
Judge Smales to his caddy Danny (who might not be able to afford college):
“Well, the world needs ditch diggers, too!”
I’m still blown away be yesterday’s link to the D&C article about foreclosures in Rochester, NY. Some of those houses were purchased for less than $40k, and even though taxes are high, you have to be waaaaay subprime to lose a house that cheap. You could literally work minimum wage and still make ends meet. When I think of the bubble I think of Florida cracker boxes going from $80k to $350k in 3 years.
Who would have thought the 33K house that sold for $38k was bubbly? I guess we are learning that there are real estate hucksters in every level of the game. Not surprising…
from the look of things lately, making ends meet seems to have little to do with income level.
Well said.
Buying in bulk can lead to complications.
This is the answer re: Rochester. Flippers and specuvestors there, too. These flippers likely own property in Florida as well.
I didn’t see this article posted any place yesterday. This is what we’ve all been waiting for.
http://money.cnn.com/2007/08/10/real_estate/mortgage_rates/index.htm
Graiver said to expect to pay a down payment of at least 10 percent, and have a FICO credit score of 620 or higher in order to get a rate between 6.2 and 7.5 percent. Perhaps 90 percent of home buyers qualify for that prime rate, although if you want a rate below 7 percent you probably need a FICO score above 660.
Bwahahahaha. Which one of these losers has 10% down money? I know I do and I won’t part with any of it until prices come WAYYYYY down.
man.. Things are getting tougher everyday.
I wouldn’t part with any amount of cash towards a DP until prices stop falling.. otherwise may as well toss it in the toilet.
Hey - Is there any word if mortgage companies are still offering the 80/20 loans. These are the most common here in Texas. Loosing these loans would kill the Austin housing market.
Yes, losing the ability to buy with no money down would also kill my market (Palm Beach). A starter home in this area is 300-400K (worth about 200K), not many people are going to be able to come to the table with 60-80K to buy a home. Thankfully, I can, but I don’t want to buy until I am sure that all the “no money down” and low FICO/high DTI are gone. Once that happens, the market will correct very quickly back to affordability.
According to my friend that is a mortgage broker in Dallas, the 80/20 days are gone and you have to pay PMI if you have less than 20% down.
In Eastern WA, 80/20 appear to be completely gone. YOu can still buy with less than 20% down, but need PMI. Does PMI still cost just 0.5-1% ? With the high default rates, I would assume that PMI rates would be going up. Still, 1% of the loan would kill the deal in many bubbly areas… an extra $4k/year in payments for a $400k loan.
Oh, gawd, ya mean 20 something couples can’t get their McMansions anymore? Ya mean they’ll actually have to start out with (gulp) a little starter home? Oh, say it isn’t so!
A little starter home in San Diego is about $450k right now.
A year from now will be $215,000 where it belongs .No more buying a house for investment!
Don’t worry about this downpayment nonesense. The Congress will come back from their summer recess ready to pass measures that allow FNM, FRE and the FHA to step up to the plate and (1) help IBs holding toxic loans to pass the trash on to the U.S. taxpayer’s bill, and (2) help create more FBs by repriming the 100%-financed sumpprime lending pump.
http://idioms.thefreedictionary.com/prime+the+pump
It’s Sunday fun day. Let’s start it off.
“You might be a real estate agent if ______________________.”
Your boobs cost more than your education.
You might be a real estate agent if by day you’re looking for a buyer for a property in which by night you are part of the cleaning crew.
You might be a real estate agent if the priest comes out of the confessional after hearing someone’s sins just to see “who in the hell that was.”
That’s pretty good…
Real estate always goes up
“You might be a real estate agent if ______________________.”
The Guvernator asks you “to maybe taking some time and cleeen zee puwel.”
Used car salesmen call you “snarky”.
You gave up a seventy-thousand dollar a year job so you could make some “big” money.
If you are parking your Mercedes at a different listed REO address each night in order to outsmart the repo man.
NYCB, it’s rude to start off with a joke we can’t possibly top
You are also a regular video poster to youporn and brag about it.
Roidy
you can make more money at your old job…waiting tables.
You go from:
McMansion to McShanty
You go from McMansion to McDonalds…
(please pay at the 1st window, because we don’t trust the ex Realtor at the 2nd window)
Has anyone here been watching FOX? I caught Cavuto and then the WSJ Report and they’re delusional! CNBC is overly bullish, but FOX is just nuts. Anyone else still think this thing is “contained”?
Cavuto is on crack. Wayne Rodgers gets it. Dagen McDowell gets it. Steve Forbes yesterday was speaking as if he had founded this blog. It was amazing. He was filled with common sense and Cavuto was $hitting in his britches. Some of the others are just completely clueless, especially tools like Dennis Kneale.
Yeah, all these guys who are “gettin’ it” now, where were they before? Not gettin’ any?
That’s funny, b/c Cavuto lives in Mendham, NJ and Forbes lives in Bedminster, NJ. Both of those uber-wealthy towns haven’t been affected much by the bust (yet), but they’re mostly old money.
They have a point in that the market drop is partially psychological, but their propaganda won’t change things.
Yeah, let’s discuss the bull—t myth that the high-end will be unscathed. We will get to see how much the high end is panicking on August 15th when word of hedge fund redemptions comes out. The high end is losing money by the billions right now, in their sure thing bets on the financial wizards and their blackbox trading desks. The high-end is going to get squeezed just like the rest of us. Maybe even worse, due to their high-end arrogance. “Sorry, little Brittany, but there is no trust fund. We lost it to the Overly Leveraged High Credit Black Ops International Global Equity Quant Sophistication Valued Fund.”
I think high-end and Manhattan will start to fall during bonus time. (Coincidently, just about the same time ARM resets peak).
Yep, and speaking of Jersey, at least those stereotypical big burly guys will have plenty of job opportunities, either as bar bouncers, or working the private security/bodyguard detail for those of Da Boyz who have any spare cash.
And now jumbos are gone and even a studio here is jumbo. Did I write that correctly? And the number of high-end developments that are going up is amazing. Everything in NYC is high end. Let’s do a cursory run through of just some of them I know and see every day.
- 59 John Street
- 45 John Street
- DistrictNY
- Be@william
- 145 Hudson
- 200 Hudson
- Park Ave. and 37th Street
- The William Beaver House (you have to like that one)
- 25 Broad Street
- Rector Place
And anybody that was in this city on Wednesday got a reminder of how awful the infrstructure in this city is. I live 3 miles from work, and due to gross incompetence on the part of the MTA it took me over 2 1/2 hours to get in to work. That is the city in which you are spending $800,000 for a 1-bedroom condo. Good luck with that one. I hope you have Plan B. Didn’t think so…..
The high end will most definitely lose and lose bigtime…
In fact, it’s kinda weird…
Usually the hoi polloi is the customary 1st recipient of bad news financially, and wealth is relatively protected.
Not so now, meet a fictional couple I just made up
Bob and Betty Bitchin’ from Bedminster, NJ just lost $33 Million, on a hedgefund…
And I don’t know if you’ve noticed?
Investors in recently busted hedgefunds have received exactly Bupkis, Zero, Zilch.
A wipeout, if you will.
Escape from New York Part II.
I’ve got my plan. I wonder how many others on this island do. Being a bitter renter with savings, I can leave any time I want.
What’s that saying? “Once you live in Manhattan you can’t stay in Manhattan but you can’t leave it either…” or something like that.
You may have a plan, but plan on this: everything is weird after NYC. At least it is for me and all of my friends that left; nothing is as ridiculous or annoying while simultaneously exciting and adventurous.
Every other place is uncomfortably sane and banal.
Where are you originally from?
I have already had those conversations with my wife and friends. I don’t know what it would now be like if I left this place. Every time I step foot off this island I feel like I am being pulled back. But if I have to leave it for my own well being, then I will leave it.
Oh, I didn’t see that last part. Minnesota.
Say it with me now: Repartment! You can see that between the lines of the Times’s RE section today: Ooooh looky at all the great luxury RENTALS out there.
What will be amusing is when all these condos revert to rentals, how much of a glut there will be. Rental prices will bump up, then start to come quickly back down.
Just as there aren’t enough rich people to contain a bubble housing market, there will not be nearly enough to support all the luxury rentals destined to be offered. (Plus I have a feeling Wall St. is gonna lose some jobs pretty soon)
You should see the looks I get when I tell them that rents in this city will drop. You would think I just peed on an electric fence.
Rector Place? That sounds like a place where people go to to get reamed out.
Got 10% down?
NYCBoy, I am with you crying in the wilderness. It’s amazing how short-term memory impairs city dwellers.
We had repartmenting in the 80s, along with blight, squatters and abandoned buildings. In some neighborhoods this scene is already beginning to play out.
This last week of roil makes me even more convinced NYC will go through a slump again, especially because it has overbuilt “luxury” housing so drastically. And the bloom is really going to explode off the rose a few years from now, when all this crap-built “luxury” housing starts to fall apart.
But for now, what will stop this mkt cold is jumbo loans at high interest rates. NYC is going to be toast.
Muggy:
You may have a plan, but plan on this: everything is weird after NYC. At least it is for me and all of my friends that left; nothing is as ridiculous or annoying while simultaneously exciting and adventurous.
So true. I miss it more each year I’m gone. I left in 2000. The thing I miss most about NY is that in my experience people tell you exactly what they feel, for better or worse, and that’s something I can deal with. It reminds me of when I first started to get gray hair, and attorney I was working with came right out and said, “you know, that’s what hair dye is for.” Really none of her business but that blunt honesty is something I have not experienced here in DC.
Right before I left NYC for the last couple of years I lived on the north shore of SI. Believe it or not it was a great commute and I loved the italian restaurants, shops and bakeries. It was also pretty easy to get into the city on weekends and enjoy all that it had to offer. When the Yankees were coming back from 3 back in the World Series, I was waiting at the ferry one morning and the entire place errupted into, “Let’s go Yankees, clap, clap, clap-clap-clap” you know the cheer. This continued all the way across to Manhattan. It was awesome whether you like the Yanks or not. NYC has an odd, loose unity that I haven’t experience anywhere else.
I suppose the grass is always greener but I DO miss NYC.
San Francisco has some of that unity too. You really see it come out at Bay-To-Breakers, Halloween, etc. Though we’re not going to have an official Halloween celebration this year because some pathetic gangsters from the east bay decided to have a gun fight there last year.
By “Holloween Celebration” you aren’t, by chance, referring to the “Exotic Erotic Holloween Ball” are you? It would be criminal to do away with that!
The Bay to Breakers is fun as well but the holloween ball used to be great!
“Minnesota.”
You’re in for it.
Nova, I go back about 2x a year. There are things I miss terribly. Mostly being around people and being able to walk or take mass transit everywhere. I also liked the fact that I was surrounded by so many talented and exceptional people.
But, every time I go back I see people running around like crazy and I just remember how much struggle is involved with getting anything done in NYC, wealthy or not.
Coincidentally, one of the main reasons I left was because of housing (too much, too little, too crappy…).
Also, I now think NYC is toast like everywhere else.
Day After Tomorrow II: The Ice Age that Froze Liquidity
Yes, Jonathan Miller the often quoted expert of Manhattan real estate appraisal firm Miller Samuel, indicated a week or two ago, that the market had peaked. The credit markets as they are adjusting, would not finance today, a healthy percentage of the deals done in 2005 and 2006. With that kind of fall off in demand, we are in for a major price correction. New York City has a lot of problems that may grow worse in a recession. But I own outright a modest apartment, with a view of the Hudson, and quick access to Riverside Park, public transit and essential shopping. I guess I will experience the downturn and hope for the best. I love the opportunity to live in a dynamic city and not be dependent on an automobile.
Who on earth really cares what Cavuto or any other “news reader” on any network has to say? They are there to read whats in from of them, and over time they start to believe they are far more important than they are. Would you base your financial investments on something Katie Couric or Matt Landau had to say? I sure hope not.
My favorite is the fake district attorney on law & order, that peddles investment advice on a tv commercial…
What about the fake district atttorney on law & order, who wants to be president?
Oh well, I guess he did also play the captain of an aircraft carrier in Red October too. And maybe was a senator..
But he’ll always be a fake DA on lame TV.
You are right of course but how many others are still buying what they have to say. When you see rational and well thoght arguments on why this is going to be disastrous like on this site and then have co-workes and freinds who have bought recently it makes me upset, pissed off and sad. It is not only the people who have bought it is also those who have not changed their lifestyle. Almost everyone in my normal circle (I am definitly on the fringe) has got a false sense of security from owning an overpriced asset that they believe will provide for their security in the future.
mi spillin is a freeking disaasta
hey, 3 wrong outta 109 ain’t bad!!
Hint ! go Firefox !!! built in dictionary / spelling correction ! IE is sooo 20th century
I learned to spell in grammar school! What century is THAT?
last
Anyone watch Bloomberg on Friday? They seemed to have a relatively realistic slant on the current “liquidity crisis”. Came close to calling Paulson out for his “contained” comment and allowed the talking heads to opine without knee jerk platitudes in response.
Bloomberg TV (and radio for that matter) is the only outfit that doesn’t outwardly appear to be shilling for their masters. I don’t know if BTV is national or not but Cablevision carries it on channel 105.
Talk of tougher lending standards appears to be just that . Here in Massachusetts the risky mortgage machine keeps humming along. GMAC 7/1 ARM, no interest, nothing down, 700k jumbo as recently as last Thursday.
Two theories for this behavior:
1) Lenders believe a bailout is imminent .
2) Lenders are in so deep that at this point what difference does it make.
Off topic
Next failed hedge, Cerberus proud owners of GMAC, Aozora and the Bob Nardelli led
Chrysler…
http://tinyurl.com/29exdw
3) Some lenders are slow learners.
I forsee Herculean $ized difficulties ahead…
http://www.beastcoins.com/Topical/Hercules/Gibraltar-Herc-Cerberus.jpg
All lenders are not funded the same. Some lenders are more diversified and have deeper pockets than others.
Are you sure about that? GMAC’s trash mortgage unit is homecomings, and I’m pretty sure they cut way back on programs and jacked up rates. Killed a bunch of deals dead. Like everybody last week.
The $38 Billion the fed loaned out, on a 72 hour basis… on Friday?
I don’t know about you, but the last time I had to come up with that much, over the weekend…
It was a bit of a scramble
So you are obviously selling gold in the face of the Feds coming to the rescue in this situation?
you wanna give the goldbugs a heart attack? Sunday’s spose to be a day of rest.
May be the first Monday the market drops instead of bouncing back from Friday drops.
Look, this was tried in 1929. The bankers of the time tried to stabilize the stock markets through a huge stock buying frenzy. It was a sham since they really didn’t buy that much stock anyway! It didn’t work. This won’t work either. The FED is trying to catch a falling knife along with all the international banks. This may quell things for now. It is summer and it is usually rather quiet at this time. Wait until November. If things are not going bad by then, then they never will. The FED’s actions will of worked. I doubt it.
Roidy
but was the GLOBAL bank trying to stave off, the 1929 crash was US born and bred. This is GLOBAL. If Europe goes down, so goes the US, so goes the Asia.
The “System” is not goin down. Its just gettin back to whatever regular is supposed to be.
In L.A. and New York the leadoff hitter has just dug in to the batter’s box and started to scratch his balls. “Batter up!”
Hey NYCityBoy……..your above little gem from yesterdays thread has had me laughing for 10 hours.
Well I guess this bubble does have it’s funny side
I’m glad I could be there for you.
–
Misery is the best breeder of humor I know.
Jas
I guess people in stable businesses are worriedabout this mess to post messages to their employees.
To: Edison International Employees
Yesterday I wrote to you about our strong performance year to date and favorable outlook for Edison International. While our stock was up on the good news in the morning, later in the day we were caught up in the broader market turmoil. As a result our stock, along with the broader market and other utility companies, ended sharply lower.
You may have read some of the media stories about the sub-prime mortgage market worries. Most market experts believe this is causing the stock market’s current uncertainty and volatility. Some investors, especially hedge funds that are heavily leveraged, have to raise cash to cover losses elsewhere. That means selling stocks such as ours as well as other companies in industries unrelated to lending and housing, and creating sharp stock price movements. For example, since July 1 alone, our stock has increased in price by a dollar or more per share on five days and also fallen by the same amount on five days. This is very unusual volatility, but not related to the long-term value of our stock.
As you know, ours is a long-term focused business. We build, own, and operate very large distribution, transmission, and generation facilities and work hard to provide the highest level of service to our customers. Short-term movements in our stock price do not influence at all how we manage the business. Our focus continues to be on implementing our strategic initiatives and achieving our operating and service goals. Success in these areas provides the foundation for increasing the value of our company over the long term. As long as we each do what we know best how to do in operating our business, going the extra mile for excellence, and continuing to improve and strengthen the business, the value of our company will reflect that good work over longer periods of time.
John Bryson
In an unrelated news story, John Bryson has been nominated as a finalist for “Corporate Tool of the Year”. Congratulations Mr. Bryson.
“As long as we each do what we know best how to do in operating our business, going the extra mile for excellence, and continuing to improve and strengthen the business, the value of our company will reflect that good work over longer periods of time.”
What’s wrong with that? Isn’t Edison a utility? If so, I’m thinking this guy has the right idea, reminding his employees that the true value of the company is not reflected on Wall Street, but in quality of a product or service.
It would be good to see more companies engaged in providing a useful product or service take this attitude. Yes, I know it is old-fashioned, but in an age where Wall Street is nothing more than a rigged casino, the value of a company should not be determined by Wall Street, but by Main Street.
Anybody that’s ever worked in corporate America knows that guys that toss around phrases like “going the extra mile for excellence” are usually the guys that deserve to be de-pantsed, shaven bald and tossed into a briar patch, covered with honey. Excuse me if I am just a little too cynical about corporate America. As a veteran of that cesspool I don’t trust any of them.
yup, same crap when I worked for IBM - trying to get the worker bees to work harder and not ask Q’s, all in the name of “excellence”…
Agreed. These are the same guys that wouldn’t think twice about cutting low-level and mid-level labor in place of cutting their own executive-level compensation, when times are slow.
but without insight like theirs, we wouldn’t be able to refocus our goals, come together as a team, and take it to the next level.
I worked at a R&D site in Colorado, headqtrs in Boston, about 10 of us (s/w enginnering) all self-directed, we came up with the product, developed, tested, and implemented it - all Hdqtrs did was sell it and buy us champaign when we’d pass beta. no boss, mgmt by democracy, coolest place I ever worked.
Main Street will also decide which quality business and services will charge higher prices.
The Sam Insull of the 1920’s ?
“As long as we each do what we know best how to do in operating our business,..”
a subliminal message that will cushion the blow of impending pink slips .. how thoughtful.
You, know I wouldn’t have thought of Dupont as being hugely involved in housing, but didn’t they miss earnings because they make the chemicals that tint house paint?
Slightly related is still related.
That blurb sounds like a plea for employees not to dump all the company stock out of their 401K’s.
Once word gets out to the public about whats in their 401k’s, imagine us in a collective panic…
Mututal Funds being junior mints, to the Hedgefund’s Extra Large popcorn
Please be seated, the show is about to begin
aladinsane:
It appears that we share both the view on precious metals as an investment and the proper snack to purchase at the movies.
great! lol
Paul
Dupont makes Tyvek.
Sales of which are waaay down as new construction slows to a screeching halt.
Hint:
Tyvek tape is one of the three greatest inventions in the history of mankind. And Tyvek sheeting over a two-bedroom washer/dryer box makes an EXCELLENT emergency/shantytown shelter. Buy lots now while prices are low, low, LOW!
Per the Law of Unintended Consequences, Dupont’s fortunes may be looking up after all….
I work for Edison and thought that email was interesting as well. I’ve never seen anything like it in the 8 years I’ve been there. Edison is big on the feel-good messages.
FYI…Edison International is the corporate parent of SCE (regulated utility) and EMG (unregulated interests)
In case you haven’t seen them, itulip has a great collection of bubble videos in the top left corner. When you mouse over, a carousel of videos appear.
“It would be a buyers’ market, if there were buyers.”
http://www.jsonline.com/story/index.aspx?id=645633
Part four in a series:
“Easy Realty loan no solution for mother of 6
After the closing, Candace Bey was left with a dilapidated McKees Rocks home and $58,000 in mortgages that she couldn’t afford.”
Stupid stupid stupid buyer.
Apparently a stupid business owner, too:
http://www.easyrealtysolutions.com/index_buy.php?p=Truth
Here is the link to the newspaper article.
http://www.postgazette.com/pg/07224/808593-85.stm
So let me get this straight, Ms Bey collects disability and welfare for the children. So what does the husband do, besides live off her welfare checks.
Sometimes these people never change no matter how many programs are out there. I helped a woman with 3 kids, all to the same guy, but he never married her. He also had kids to 3 other women, some he married, some he didn’t. I convinced her to leave him, since he was abusive. She worked in home health care, got medicaid for herself and the kids to cover medical and dental, got $400 in food stamps a month. We found her a trailer to rent that she could afford. This all took 5 months and she was there 2 weeks before she left to go back to him in NC. He couldn’t come to Ohio because he was wanted on an outstanding theft warrant. I’d say 95% of the time you just can’t change people no matter how much help they’re given. The 3 of us who took this project on thought maybe we could turn the tide and not have 3 more (her children) grow up and go into the welfare system. It’s no wonder this country is sinking. For tax paying family with 2 or 3 kids, there’s a welfare collecting family with 6 or 8 kids.
By the way she did come back to Ohio but he kept the kids. She called me and said she had to take care of herself first before she could take care of the kids. She left them with this bipolar nutcase. I told her good luck and wished her well. There won’t be any help from any of us again, she’ll either make it on her own or drown.
I helped a woman with 3 kids, all to the same guy, but he never married her. He also had kids to 3 other women, some he married, some he didn’t. I
The genetic pool of this country is f*cked.
Sounds like the opening credits of “Idiocracy.”
Sigh
A post from me from last night…
I wouldn’t even know where to begin ranting on this one…
http://tinyurl.com/2csts3
I was offline and didn’t get to reply to Hoz’s reply, so….
Hoz’s reply from last night…
Comment by Hoz
2007-08-11 17:02:56
LOL
Pen about which part:
That opportunities are better in Brazil?
That Framingham businesses are going to close because of emigration?
that nobody is there to paint the ceilings?
Hoz asked about which part I wouldn’t know where to start..
All of it! Mostly though from the good ridance perspective. Hopefully, these carpetbaggers will take the rest of the send money home crowd with them.
I am not against imigration, but I am only for legal immigration by those that want to establish themselves here permanently and want to assimilate. That includes leaving the soccer ball in the trunk when you go to the mall, doctor’s office, church, etc. Also, it means not having the flag of the country from which you came on your house, car, clothing, etc. If you love it so much, go back then.
“Mostly though from the good ridance perspective. Hopefully, these carpetbaggers will take the rest of the send money home crowd with them.”
Testify, Pen! They can also take their anchor babies and all those bleeding hearts who supported their efforts to vulture the US. Along with the housing bubble, we had an immigration bubble. Maybe one of the good effects of the bust will be an immigration bust. After all, as the story illustrates, they were just here for the beer.
Pen, I am sorry if I upset you. Please forgive me. Where I live the undocumented immigrants are from Illinois. I would just like to see sobriety tests done on every boater on Saturdays and Sundays.
LOL!!
Sorry Pen, forgive me. Please. I did not mean to get you upset.
more LOL - you sound so sincere…
I am! Pen is cool and I certainly did not mean to offend her.
I’m laughing cause I didn’t think Pen sounded very offended. Hope not.
Hoz, love your posts.
obviously you have not done this much before, but I fell into the same trap of “feeling” when starting out here, but I you get to know the posters……its all good all the time..
cept for housing of course, which, I might add I did whilst reading here. 150k 4bdrm 2 bth, 15 yr fixed, pmt = 899.99
and, bought gold, and made money going long, and short……my short cherry got popped here.
I feel so naughty.
Around where I live they like to take their soccer balls to the tennis courts when people are trying to play tennis. Wide open huge grass fields available for them, but they choose to harass the “YANKEES”. If I was a cop I would arrest ‘em and ship ‘em back.
Got 10% down?
In Charlotte, they like riding their bicycles in grocery stores.
Saw it myself.
“International dairy prices increased 46% between November 2006 and April 2007, with milk powder prices increasing even faster, according to the Food and Agriculture Organization.”
http://www.usatoday.com/money/industries/food/2007-08-10-milk_N.htm
But Microsoft dropped the price of an XBox 360 by $50 dollars, so inflation is still under control.
I like my XBox 360 medium rare with a side salad of floppy disks and computer memory.
floppy disk? Viagra
well yeah.. corn is a big part of a cow’s diet.. and we can’t be wasting valuable corn on cows when we need it to cool global warming with ethanol..
Just remember that $6 a gallon milk is a small price to pay to save Mother Earth from imminent destruction.
Environment: Renewable energy has been rammed down our throats for so long that it’s now widely accepted as a viable alternative. But a self-identified green scholar believes renewables violate nature
http://www.ibdeditorials.com/IBDArticles.aspx?id=270428275645833&kw=windmills
It would take a wind farm more than 475 square miles in size, for instance, to generate the same amount of electrical power that a single 1,000-megawatt nuclear plant would produce.
Biomass is even worse — chewing up three to 10 times as much space as wind power. “Increased use of biomass fuel in any form is criminal,” says Ausubel. “Humans must spare land for nature.”
France, for one example, wised up way back in the early ’70s .. now about 80% of their electricity is nuclear generated.. and they export some too… However it was a decision based mostly on economics, and was thus able to overcome opponents protests.
But we in the USA aint anywhere near ready, and thanks to many decades of incessant propaganda by a wide spectrum of self-interest groups, from energy producers to environmentalists, just the mention of nuclear causes mass hysteria.
come out to colorado and utah and see the places where toxic waste from uranium mills and mines has leached into the water and where nothing grows and where those that live downwind have thousands of times the natural incidences of various cancers, etc. etc. and then tell me humans are ready for nuclear anything. BTW if you live in Lost Wages or S. calif. you’re drinking some of that toxic waste from the mill in Moab, Utah on the Colo. River. Google it if you doubt.
im not really up for a game of dueling google links..
but tell me this. If France can do it, why can’t we?
they must be smarter than the rest of the world…
“come out to colorado and utah and see the places where toxic waste from uranium mills and mines has leached into the water and where nothing grows and where those that live downwind have thousands of times the natural incidences of various cancers…”
According to the the total cancer rate for the U.S. is 460 per 100,000. A cancer rate 2,000 times that would be 920,000 per 100,000, which would mean that the average person in the population would develop cancer 9.2 times per year. I find that a bit difficult to believe - especially since Utah and Colorado have some of the lowest cancer rates in the nation according to NCI statistics.
BTW, live in Utah.
Ooops, my post above should read:
“According to the National Cancer Institute the total cancer rate for the U.S. is…”
all I can say is, talk to the folks in Monticello, Utah, where leukemia is sky high and a mill sits a wind’s breath away. lots of other towns the same, numerous books and studies done, Google “downwinders.” The stats for a state don’t necessarily reflect such places, as they get lost in the bigger numbers.
But when you fire off “thousands of times the natural incidences” you’ve lost your credibility. Some towns have remarkably high rates of leukemia which appear to be related to uranium - slightly different. People on this blog can multiply.
I’m not exaggerating, in some places, it is that high.
OK, I’ll bite. “Thousands” can be interpreted as 2000 or more. Name me a place and a type of cancer in Colorado or Utah in which the incidence is at least 2000 X the national average.
Monticello, Utah, leukemia
like I said before, Google “downwinders” for more, it’s not the only place.
444 of the 1,800 people in Monticello have lukemia?
One of every 4 people??
yup, it’s true, some of em just don’t know it yet
“It would take a wind farm more than 475 square miles in size, for instance, to generate the same amount of electrical power that a single 1,000-megawatt nuclear plant would produce.”
One should really include the acreage necessary to store the ensuing nuclear waste when they do these comparisons.
store it in a hole in the earth..
btw, you ever hear of a natural nuclear reaction? Evidently, Mother Earth builds her own nuclear power plants..
http://en.wikipedia.org/wiki/Natural_nuclear_fission_reactor
And just how much acreage is required to store nuclear waste? I wanna see some numbers.
Tell you what, I’d bet it’s a hell of a lot LESS than we’ve been led to believe by environmentalist groups.
Where does France store its waste….a country the size of Texas?
Evironmentalism has alrady been hijacked by the establishment. The more ink the subject gets the more I know someone’s getting rich off of it. Besides, in an effort to be “green” it looks a lot of folks are buying stuff they otherwise would never have bought anyway. The next bubble I see around me - scooters - they’re everywhere this summer.
Yeah, I know a lot of people are getting rich off the “green” movement. Take my company, for example…SCE (SoCal utility)…we have all these major inititatives going on from building more renewable power generation (and the transmission lines that go with it) as well as new “SmartMeters” that will replace all the old ones that will help people conserve energy. Plus, you have to hire more people. I think having more green energy in a company’s portfolio is important for the environment, but our company is definitely making money in the process. Eventually the ratepayers foot the bill.
FYI–nuclear energy has been making a comeback in the U.S. recently…it has gotten a bad rap over the years…the number of permits filed with NERC to build more plants has increased…I think the first new nuclear plant (an addition to an existing facility) that will be built since the 80’s somewhere on the east coast. I think what we will see in the future is that the nation utilities will start developing more diverse energy sources, to lessen the dependence on coal. We actually shut down a big coal plant (Mohave Generating Station) just recently.
Sorry for the long post. Kind of an interesting subject.
Especially here in Chicago, edgewater john. Ridiculous and way over the top, isn’t it?
I’ve noticed lately, tho, that all these ‘Fight Global Warming’ stooges hanging out on coffee house corners are being ignored by everyone who happens to pass by. No one is giving them the time of day anymore.
I guess there’s a limit to such proselytization.
Maybe the high end fund managers are going to get the “Nicky Santoro” treatment…
http://www.moviesoundscentral.com/sounds/coma.wav
Your link redirects here, which makes it rather hard to get your point…
http://moviesoundscentral.com/index.html
Grubner,
(From Friday’s Wall Street thread)
Would Bartiromo’s father-in-law be named Saul by any chance?
“Who on earth really cares what Cavuto or any other “news reader” on any network has to say? They are there to read whats in from of them, and over time they start to believe they are far more important than they are. Would you base your financial investments on something Katie Couric or Matt Landau had to say? I sure hope not.”
But a lot of people do.
One of today’s CNBC.com stories is “Finding Bargains Amid the Carnage in Stocks”. Stocks were up 15% in the first half of the year, then have slipped about half that much.
I’m sorry, but giving back half of this year’s stupid runup is NOT carnage.
However, just using the word has a strong psycological effect on a vast number of people, making them think that now is the time to buy stocks.
Not any different from that stupid wrench on Today show telling everybody that now is the perfect time to buy a house.
“I’m sorry, but giving back half of this year’s stupid runup is NOT carnage.”
–
People should be checking 401ks this weekend. They will notice that a money market fund/stable value fund (provided it wasn’t investing in subprime CDOs like AXA’s German fixed income fund) has likely outperformed all other funds for the year. I’d say that’s “carnage” given most funds were up anywhere from 10-20% just two weeks ago. Remember this is only the beginning of this crisis. We are in the 2nd or 3rd inning of a 9 inning game.
called uncle money bags this weekend. his comment “we’re already in the depression Bubba.”
also, if your checking your 401k, your worried about something that you should not worry about.
unless you cashing in cause you need the money to feed to your FC. Seriously, the ones who are not in over their heads, will be rewarded, while those who lived a lie of percieved riches will suffer.
“also, if your checking your 401k, your worried about something that you should not worry about.”
–
This is what MSM was saying before the tank in 2000-2002. Turned out they were selling their own shares while leaving the rest of America as the bagholders.
Why oh why with crumbling infrastructure stuck in like mid 20th century freezout and ticky tacky condos in nycity going for 800k can we all not see this profound disconnect? What is it going to take to see that if we all just pitched in we could make our cities, our energy technologies and our family farms sing into the 21 st century. Where is the ‘common good’? In the hearts of many.
Common good? There is no such thing when “Diversity” is preached as the most beneficial aspect of society. At one time Unity=Strength, but in the bizarro world of today only seperate groups can have Unity unto themselves. Uniting all these groups through the act of embracing diversity in my mind is still a non-sequiter. To me there are only two possible outcomes for a society that embraces diversity either through organic change or imposed change: Voluntary segregation followed by violent pacification ala Yugoslavia under Tito, or voluntary assimilation into the exisiting dominant paradigm ala when in Rome. Alas these are transitory states of being anyway, and not conducive to long term stability and creation of a common culture. Thus my thesis still remains that diversity will always lead to disharmony and instability but the path taken to such an end will be variable.
Orwell is laughing is dead ass off right now.
Don’t biofuels consume almost as much energy to produce as they provide? Seems like just another idea to continue to live like there is no tomorrow. This is just the start of a decline and the speed of it cannot be determined. Planning for the worst and just hoping for the best might work, but doubtful, it is going to be so much worse that most cannot even imagine worse than not having the paper delivered on time, and the kids not making soccer practice, no trips home for thanksgiving, little things like that. But it is going to be much, much worse than most can even imagine or comprehend. I think that buying any house, or real estate won’t be mentioned in less than five years time, survival will be on the agenda in big red letters. Of course, I could be wrong, but that is the direction I feel it is going, and I am planning on that scenario.
depending on the numbers one plugs into the equations and who one chooses to believe, ethanol consumes an equal amount or far greater amount of energy than it provides .. plus there’s the water thing.
ethanol was pushed through by the agricultural lobby .. other than them and a few pork-providers and recievers, nobody will profit from it.
well, maybe trucking will profit since it HAS TO BE TRUCKED ALL OVER THE FREAKIN COUNTRY!
jeeze.. lost my cool for a sec.. sorry.
amen on ethanol as a huge fiasco
It’s an even bigger fiasco, as the price of corn has risen substantially and the peasants down Mexico way, that eat corn tortillas for a large part of their diet, are getting a little bit rebellious, as many are going hungry, and handling one Civil War, 10,000 miles away is a bitch, imagine another one on our southern border?
Mix in the fact that Mexico’s ATM’ish oilfield, is down production-wise, around 40%, from this time, last year…
Peak Tortilla
So it only makes sense that GM was the one to go whole hog on it.
Yes we can’t send it through pipelines it corrodes the pipe and any rubber rings….Maybe we can ship Al Gore to china, think of all the good he can do there……(no i didn’t vote for either)
Ethanol requires 3 to 5 gallons of pure water for each gallon of ethanol produced. Many areas like Neb. Kan. etc. that would like to have an ethanol plant are already under water restrictions. The aquifier is already tapped to the max.
Admittedly I don’t know much about the ethanol alternative energy topic. But even if does cost more labor/input-energy to produce than say Saudi-oil, isn’t it better in the long run that we produce what we consume. So what if it takes a little more work? Are we factoring the cost of all the middle-east wars that we are fighting, and all the puppet regimes that we are propping-up, into the cost per barrel of oil?
May I make a humble suggestion?
We need to start from scratch, before will started using oil on a large scale as an energy source.
Look at how we lived our lives prior to oil and with conservation in mind, where can we successful use oil from a priority standpoint.
No. one use of oil-US Military
No. Two use of oil-US Autos (Auto manufactures defeated public transportation in LA in the 40s-50s)
Knock these out or significantly reduce these components and suspect we will go a long ways to conserving oil.
Restructure work around our residences as employees-This may take some time.
Unless you think we have unlimited oil or that we can totally survive the way things are on alternative fuel sources, don’t you think we should start planning this now or will we have to rely on science fiction author’s to provide us with their vision.
I just think that we as a society need to start planning for the loss of oil as an energy source, since some of the solutions may take years
Bostonian if ethanol costs more energy to produce than you get out of it, then it does not work. Why oil has been so easy, it has in the past needed relativley little energy to produce one barrel of oil compared to what energy is released when it is used. Depends on whose number you use whether ethanol is viable. I really do not know at this point but I am not optimistic. One of the main things about the housing bubble is that we built so many communities with a very long commute. I am not sure if they will be viable also.
The other important feature of oil is its high energy density. This is a critical parameter for vehicles. Burning oil in a fixed power plant is an immoral waste.
Don’t forget all of the water & oil based fertilizer that is required to produce the corn in the first place.
My grandfather said if farmers could make their own ethanol within a closed system they would have done so during WWII and sold their gas rations for $$$.
Evidently, every farm had a still back then.
How about starting with the simple thinks folks? Like jacking up CAFE standards and doing it AGRESSIVELY. Of course the “free-market” screech monkeys would have a meltdown but most of them couldn’t define a free market if you asked them.
OK, let’s say a 1000mpg.
I’m waiting for your design.
Can’t do it? I thought so.
Oh, I forgot this part.
Screech Monkey.
China’s mortgage quality worse than U.S.: academic
Reuters
Sun Aug 12, 2007 4:20AM EDT
———————————-
“The quality of housing loans are much worse than the subprime loans in the United States,” Yi was quoted as saying by the South China Morning Post.
“At least there has been a credit check system (in the United States) but in China anyone can borrow money to buy a house.”
“China’s property market has been booming thanks to a hunger among a fast-growing middle class for new apartments, but the government has been wary of rampant speculation in major cities, particularly Shanghai.”
Yes. Turns out most of the subprime CDOs were repackaged and sold to Europe, Asia and South American funds. The thing you have to wonder at this point, is when the rest of world figures this out, will they take a can of whoop ass out on the dollar ? The fallout hasn’t even begun because the Shanghai Index is near an all time high.
A friend that travels to Shanghai a lot told me last summer, about the multitudes of empty brand new chic flats he saw there…
He told me that nobody could really afford them~
“It seems the US crisis has developed to a stage that is far more serious than expected,” Dong Yuping, an economist with the Institute of Finance and Banking of the Chinese Academy of Social Sciences (CASS), said.
Dong said the crisis may not be ultimately stopped until next year and He Fan, from the Institute of World Economics and Politics under the CASS, said it may evolve into the most serious turmoil since the 1997 Asian financial crisis.
Some Chinese companies may have bought the subprime mortgages in the US, which will cause losses, He said.
Bank of China and China Construction Bank, two of the country’s “big four” commercial banks, have admitted to being affected by the US crisis. Bank of China said its losses could be several million US dollars….”
Aug 11, 2007
China Daily
“the crisis may not be ultimately stopped until next year” and “Bank of China said its losses could be several million US dollars”. “The A-share Shanghai Composite Index edged down on Friday only by 4.7 points, or 0.1 percent after recovering from mid-session slump.”
also
“The Chinese mainland’s foreign trade reached US$1.17 trillion, up 24.4 percent, in the first seven months of 2007, according to customs sources.
The European Union remained its largest partner with a trade volume of US$190.1 billion, a growth of 28.5 percent over the same period of last year, followed by the United States with US$167 billion, up 17.5 percent, and Japan with US$130 billion, up 15.2 percent.”
China does not need to buy from the US, China has not been a large buyer of MBS and China thinks the “credit crunch” will not abate until next year.
Where’s Neil? I need some popcorn!
hoz, you still believe the Yen is a winner? Japan stepped in with liquidity as did all others.
Any question in your mind about percieved redemptions in UCPIX?
Yes, but I suspect the “collection” system is slightly different in China. Firing squads have a strange tendency of keeping delinquencies low.
“At least there has been a credit check system (in the United States) but in China anyone can borrow money to buy a house.”
… but Casey can buy 10?
The big problem for China is all the mortgage tricks they can learn from the US due to the news coverage. A quantum leap of fraud sophistication is available.
We could have an old-fashioned run on the banks come Monday.
“August 9, 2007 (LPAC)–A senior European banking source reports that the interbank money market closed down this morning for two to three hours, for the first time ever. Rumors had spread that the German Bundesbank was holding an emergency meeting because of a collapse of a major German bank, believed to be Westdeutsches Landesbank, one of the largest in Germany. The Bundesbank then released a statement saying that the meeting was to discuss the IKB banking crisis.
The source said that a Westdeutsches Landesbank failure would have collapsed the entire global financial system. The source underlined that this ongoing crisis is far worse then anything he has witnessed.
The next threat to the banking system in Germany, which will have obvious global ramifications, is what is called Asset Backed Commissioned Paper. Banks issue these to customers such as hedge funds and other banks, which, theoretically, can draw on them in case of emergency. The problem is that banks have been issuing far more then they should have. The deadline for the hedge funds and other customers to draw on these ABC-Ps is between August 13 and 15. If their customers rush to draw on them, this will be unsustainable for the banks. “
i think that’s kinda old news.. since last Thursday there have been several major cash injections to keep things in the banking industry moving along..
“…cash injections…”
I am still rather unclear on the nature of these helicopter drops. Are they loans that have to be repaid, or taxpayer-funded giveaways to Wall Street, in light of the fact that what is good for investment bankers’ bonuses is good for America?
From what I can tell, these are loans that have to be repaid this week on Tuesday or Wednesday.
i think i got it figured out but only in a superficial way..
A bank has some limited amount of value. Some of that value is in cash, some in Treasuries, and some in mortgages (MBS) and some in other stuff..
Now lets say MBSs start defaulting badly. Some toxic waste is mixed in with the good securities and their true value is now unknown.
The banks do not want to trade these things among themselves because the value is unknown..
Lets say that fully half of a bank’s liquidity is tied up in MBSs. Since these cannot be used to trade, half of that bank’s potential business must cease. If all the banks are in the same situation, half of ALL banking transactions stop.
In steps the Fed.
They provide short term liquidity to the banks by exchanging cash for the MBSs and hold the MBS as collateral for this short term loan.
The banks can now do business as usual and the economy continues to roll along.
Meanwhile the banks tighten their lending practices, plug the holes and get healthy again. This might take a while. The banks have to build reserves and buy back the bad MBSs..
Eventually the bad MBS with unknown value will be purged from the system.. Their real value will eventually be pegged and they can then be discounted, no doubt.. and sold to investors..
“They provide short term liquidity to the banks by exchanging cash for the MBSs and hold the MBS as collateral for this short term loan.”
If nobody knows what this collateral is worth (because banks are afraid to discover the price by selling it), how does the Fed determine the amount they are able to lend on this collateral? Doesn’t this game plan expose the Fed to the risk of catching a falling bad MBS knife (not that there’s anything wrong with that)?
“This might take a while.”
Now there’s an understatement. This is what the Japanese did and 17 years later they’re still writing them off and they’re still in recession.
professor
“If nobody knows what this collateral is worth (because banks are afraid to discover the price by selling it), how does the Fed determine the amount they are able to lend on this collateral? ”
i havent really researched it, but have seen no reference to exactly how much the fed fronted the banks for the MBS .. i’ll guess it was 100% of face value of that small portion that needed to be traded to keep the wheels turning.
The MBS total in the system is about 2 Trillion dollars worth. Nothing near this was involved.
diemos .. “This might take a while.”
Everything involved with real estate happens slowly, but since the securities are just paper, these things could unwind fairly soom, imo.. someone will make a decision and type a number.
As far as the properties behind them are concerned, well.. we’re already looking at years of inventory..
and as far as an economy recovering from a recession, whatever leadership we end up with can influence the recovery greatly, speeding it up or slowing it down.
But as far as the mighty USA goes, there need be no similarity to Japan’s recovery unless we choose it, imo.
“The source said that a Westdeutsches Landesbank failure would have collapsed the entire global financial system.”
Would one of our financial savvies please explain how this would work???
Seems simple to me. The hedge funds have been given a window to draw money until Wednesday. The banks better have enough liquidity to provide until then. If not, expect more central bank drops to avert a banking crisis.
global inflation. when everyone gets in lockstep. Nothings changed. When one acts differently, say raising rates, and allowing the credit to pop, will reap HUGE rewards.
Since there is a lot of NYC talk in this thread:
On July 27, the end of a week when the Standard & Poor’s 500 stock index suffer its worst one-week percentage drop since 2002, she called the winning bidder with the good news. The next day he withdrew his bid for the Upper West Side home.
There is no sign of a downturn in sales figures for now, but Kory’s experience may be an early sign of weakness in the robust Manhattan market that could be vulnerable to struggling stock markets, hedge fun losses and newly cautious lenders.
“I guess he called his mortgage person and found it wasn’t going to be as easy as he thought for him to get what he wanted. He got nervous and decided not to proceed,” said Kory, senior vice president of the Corcoran Group.
I hope I’m doing this tinyurl href thingie right.
Regarding the article: I’m having a hard time getting all boo-hoo over worried hedge fund managers.
She also suspects he may have feared his bonus was going to be hurt by the market’s slide. The bidder, like much of her clientele, works in the financial industry.
Amigos - We are going to need a thread just for Santa Ana. Endrogados??
One street’s subprime struggle
Sunday, August 12, 2007
By JOHN GITTELSOHN and RONALD CAMPBELL
THE ORANGE COUNTY REGISTER
———————————
“Subprime loans ignited a frenzy of deal-making on West Camile Street. From 2000 through 2006, 14 of the 48 homes changed hands, some repeatedly. The owners of those 14 homes and three others piled up 79 mortgages from 48 lenders.”
“In December 2004, Ada Duque, a native of Mexico City and single mother of two who works in a printing plant, bought 927 W. Camile St. with two loans totaling $425,000 – 100 percent financing. She refinanced in January 2006 with a $460,000 subprime loan from American Mortgage ExpressFinancial. She said she pays about $2,500 a month.”
“Property records show Duque’s negative-amortization loan allows the principal to grow to up to $529,000 with an interest rate cap of 9.95 percent. That would raise her monthly mortgage to $4,800, nearly double her current payments.”
“A year ago, Angelita Medina Albarran, 47, a garment worker at St. John Knits, took out two loans from Fremont Investment & Loan to cover the entire $600,000 purchase price for 919 W. Camile St., a 1,450-square-foot bungalow. Her five grown children help pay the mortgage – $4,000 a month and scheduled to rise in May.”
Perhaps I’m all wrong here, but even $2,500 is a fairly large sum for a single mother to pay for housing. IMHO, this person (and most working-class people) should have housing costs that total no more than $1,400-$1,700, at most.
Help wanted on Wall Street: WE NEED SMALL INVESTOR BAGHOLDERS TO STICK AROUND WHILE THE BOYZ UNLOAD THEIR DEVALUED PAPER ASSETS!
Experts: Small investors should weather market
By Eileen Alt Powell
ASSOCIATED PRESS
August 12, 2007
NEW YORK – The stock markets may be in turmoil, but small investors don’t need to be.
Financial markets worldwide have been in turmoil, but experts recommend that most investors stay calm and not overreact to what’s happening on Wall Street.
Financial experts suggest that Americans – most of whom have market exposure mainly through their company-sponsored retirement accounts – should stay calm and not overreact to what’s happening on Wall Street.
“The best move right now is to do nothing,” said Liz Ann Sonders, chief investment strategist for the Charles Schwab Corp. in San Francisco. “Individual investors should step back until things settle down.”
http://www.signonsandiego.com/uniontrib/20070812/news_1b12money.html
Question for anyone who remembers: Was similar advice doled out through the MSM during the Y2K tech stock collapse?
Yup, and the talking heads repeat it with each leg down ….
I remember making more than 75k in 2000. You just had to take it off the table after the big shiny ball fell in Nyawk.
Chip Diller: Remain calm, all is well
http://en.wikipedia.org/wiki/Six_Degrees_of_Kevin_Bacon
Where is Bill in Phoenix? I keep waiting for him to jump in hear and advise everyone to remain calm, buy the dip and stay the course with the dollar cost averaging plan, but he appears to be missing in action.
hearhere (absent minded professor’s brain is on strike…)nah, he was here yest., his usual codgedy self, he’s probably spending the day in his money bin counting it all ala Uncle Scrooge - LOL. The REAL question is, where the H-E-doublehockeysticks is Get Stucco????
Alas GS changes his handle back to PB. Groucho, we hardly knew you.
IMHO, he should keep “GetStucco”…a classic housing bubble moniker. What if “LVLandlord” had changed her name to “Princess Tuti Fruti”? It just wouldn’t have been the same.
And I still think that “AuctionHeaven in ‘07″ should have kept his/her name, or just shortened it to “AuctionHeaven”.
I agree with you Arrogrande. “GetStucco” has evolved as a major brand with a huge amount of accumulated goodwill. Pity to abandon it.
professor, you there? you reading this? no ivory tower for GS…
Remain calm, buy the dip, stay the course with dollar cost averaging.
There you go!
This week on my investing action: Monday I roll over $10,400 CD from a 5% to a 5.1% CD; Pay $1200 on a credit card bill; Add another $300 to my Vanguard Prime Money Market Account, buy a $1000 ten year note (Thursday), buy a $1000 three month T-bill, and order another $1000 T-bill for the next week.
Happy days!
LOL!! Glad you didn’t get sucked under in that money bin, Bill.
LMAO!!
Apply directly to the forehead! Apply directly to the forehead! Apply directly to the forehead!
Good on ya Bill.
Good going! With all those “dollars” you’re “saving up”, you’ll probably be able to afford a postage stamp next year!
didnt everyone buy the forever stamp, or am I just an idiot?
bill is buying all the right stuff…..no short term volatility.
vozworth, I’m 48. If I was 21, I would have 3 months living expenses in a money market account and all my net worth would be in stock mutual funds and I’d have some in individual stocks.
I’m a contract engineer and my income is very unstable - has been so since the year 2000. So it makes it very important that I have far more than 3 months of living expenses in cash equivalents.
The best deal is to have most of my non-retirement part of my portfolio into government securities, while my retirement part is 100% stock mutual funds.
So for personal reasons, my risk tolerance is very low. But it is darned foolish to have anything but equities in my 401ks and IRAs since I don’t intend to access them for another 20 years.
At this point I can live 6 or 7 years with my same standard of living on my government securities and precious metals bullion without a job. I can stretch that out if I go from my 2 bedroom apartment to a one bedroom in Tucson.
My buddies laugh because they think I invest like a retiree. But I’ve seen colleagues unemployed for 5 months or more. The higher the income, the more unstable the income.
I am bearish in real estate for the next 5 years. I’m bearish on the U.S. economy for a few years. Yes, we could have the depression. But we were warned about this for 30 years or more! In 31 years the Vanguard 500 index fund annual rate of return has been 12%.
Am I right? Am I wrong? I don’t know. I do know that I’m not going to end up 100% right, nor will I end up 100% wrong. Could Aladinsane be 100% right by being 100% precious metals? Or could P’cola Popper be right by being 100% in cash? I’d hate to be one of them.
Why does everyone put their CDs and other fixed incomes in after-tax, and mutual funds in pre-tax?
Taxes are a lot higher on interest income than on dividends or capital gains. I have a bulk of my cash holdings in my 401(k), the high dividend + high growth holdings in Roth IRA and growth or dividend plays in after tax funds. That way I don’t get stiffed by IRS.
Is there any problem with my strategy?
““The best move right now is to do nothing,” said Liz Ann Sonders, chief investment strategist for the Charles Schwab Corp. in San Francisco. “Individual investors should step back until things settle down.””
To hell with that “Deer in the Headlights” advice. I’ve moved all my close relatives out of stocks and anything possibly tainted with RMBS and into either cash or US Treasuries.
I’ve even given a few the “P’cola Put” in that I would cover any interest rate differential between their money market accounts and three month US Treasuries if this thing doens’t go down the tubes in the next six months.
wow, your relatives are lucky - will you adopt me?
LA Times.
Foreclosures hurt home prices
Major lenders are repossessing SoCal homes faster than they can sell them.
http://tinyurl.com/3c47sg
ive found a new business this weekend, my bank has a new real estate branch……..classic small town stuff.
That’s weird, my post disappeared. From the LA Times.
Foreclosures hurt home prices
Major lenders are repossessing SoCal homes faster than they can sell them.
http://tinyurl.com/34c7sg
Housing bull sweetness in the LA Times…call it from on high, brother LA TImes! :
“Major lenders are repossessing homes in Southern California much faster than they can sell them, a development that could set off a downward spiral of price cuts and more foreclosures.
Post got cut off…
“The pace is glacial. While it normally takes a few weeks or even months to prepare a foreclosed house for resale, agents say homes are remaining in foreclosure longer than they would otherwise because their prices are too high and lenders have been unwilling to reduce them.
In Apple Valley, according to the First American data, lenders foreclosed on 95 homes in the second quarter but only sold eight. In Palmdale, they repossessed 228 and sold 31. Pomona had 66 foreclosures but only 10 sales.
To move their growing inventories, lenders solicit local agents to do what they call broker price opinions. These involve the agent’s physically examining the home, getting an estimate to clean up any damage, checking to see what similar homes in the neighborhood have recently sold for and suggesting a price.
Thanks to globalization, requests for BPOs can come from the other side of the world. Ocwen Financial Corp., a Florida mortgage company that is trying to sell 753 foreclosed homes in California, has outsourced its BPO review office to India.”
Ooops, that should be “housing BEAR sweetness”…
Heh heh…I thought that’s what you meant
From that article…
“Foreclosures are not tracked by any U.S. or California government agency.” - and -
“Other major lenders, including GMAC Mortgage and Washington Mutual, declined to release their foreclosure numbers.”
In other words - they no longer acknowledge the concept of failure.
Here’s another one.
One house’s trip: the boom and bust
http://tinyurl.com/2cxm5q
link no workie :-/
Try this…
http://tinyurl.com/2exn5q
way to go, you stupid twats: burn through $300,000 in MEW and have nothing to show for it at the end. it’s the American way.
NO BAIL-OUTs.
They BOUGHT another house before the foreclosure. So their credit is shot, but why does that matter since they might have no need for their credit score in the near future? Why do I even try to be financially responsible?
That was the smart thing to do. Buy before it lose the home. It is a course many will take until the lenders start making a issue of it..
Round One: Wall Street and the subprime
Round Two: Dumping the inventory of foreclosed homes…and the dumping will be big enough to swing prices big time!
This is fun! Try finding foreclosures in your zip code! SoCal residents only.
http://tinyurl.com/ysvcak
Very nice find!
Wow. What a surprise…NOT!
One street’s subprime struggle
Foreclosures and forced sales mar a Santa Ana street after years of subprime lending
http://tinyurl.com/2k5452
LA Times has really been building up steam…in Central Coastal Cali, the local paper has (mostly) been printing “that’s interesting, but it can’t happen here” articles, even though we are probably down (price change wise) than LA. I just don’t get it.
Sorry if repost -
One street’s subprime struggle
OC Register
Sunday, August 12, 2007
Foreclosures and forced sales mar a Santa Ana street after years of subprime lending.
—————————-
“Subprime loans ignited a frenzy of deal-making on West Camile Street. From 2000 through 2006, 14 of the 48 homes changed hands, some repeatedly. The owners of those 14 homes and three others piled up 79 mortgages from 48 lenders.”
A comment on the “inflation” that some people seem to believe might keep housing prices high in nominal terms:
Yes, increasing the money supply (aka “helicopter drops”) will increase inflation…a greater supply of US $s chasing the same supply of goods and services, means that each US $ is worth less.
HOWEVER, to keep housing prices at high nominal levels, you need the *buyers* to be able to *afford* them. That means that you not only need money supply inflation, but you also need that inflation to work it’s way into WAGE inflation. Has that been happening? In this age of globalization (e.g. even pricing of houses has been outsourced, see the LA times article about Broker Price Opinions for REOs being done in India), there are massive pressures for wages to stay the same or even go DOWN.
Look at it this way…even with a “historically tight” job market, wages have barely budged for Joe Sixpack and Nancy Pinot Nior in recent years. Without WAGE INFLATION, “academic” inflation doesn’t really effect house prices.
Evidence that Bernanke wet his pants and overreacted when responding to his first major crisis on Friday. Turns out the flood of “liquidity” sent the overnight Fed Funds Rate on Friday down to 1%!!
NEW YORK, Aug 10 (Reuters)
“Fed funds traded at about 1.00 percent late on Friday, dropping below the Federal Reserve’s 5.25 percent target rate for overnight lending among banks after the central bank made hefty injections to the banking system earlier in the day.
The late-day move took place after the Fed added $38 billion of temporary reserves to the banking system on Friday in three repo operations.
“The Fed oversupplied liquidity to the system and so it drove down the rate of interest on federal funds,” said Joseph DiCenso, fixed income strategist with Lehman Brothers in New York.
Most likely this is going to bounce back on Monday closer to the fed funds target of 5.25 percent,” he said.
A bond strategist at another bank in New York said the rate move took place in thin trading ahead of settlement of the fed funds market later in the session.”
“There’s a lot of supply and not a lot of demand. For the people who want to park their cash over the weekend, they want to earn something, so they are willing to accept lower and lower bids,” said Thomas Higgins, chief economist at Payden & Rygel in Los Angeles.
“Come Monday it’ll normalized.”
Late on Thursday, fed funds had traded around 5.50 percent.
Reuters
http://tinyurl.com/2amc9f
IMHO, the actions by the Federal Reserve Thursday and Friday were to remove illiquid MBS bonds from primary banks holdings. Fed Fund rates dropping to 1% supports this opinion.
Do you think they are doing the old “switch-a-roo” i.e. investment banks give AAA MBS securities on Thursday and Friday and get back AAA US Treasuries on Monday in a “like for like” exchange?
Yes
Am I correct in understanding the “switch-a-roo” implicitly sticks future generations of U.S. taxpayers with the tab, due to “replacing” toxic MBS with U.S. Treasurys? After all, the Treasurys are just a loan to Uncle Sam, which eventually needs to be repaid with (taxpayer-funded) coupon payments…
“Mr. Professor Bear, can you please let GetStucco come out and play? We promise not to go over to Bill’s and watch CNBC. We just want to count the For Sale signs near Ben’s place.”
The Federal Reserve loaned the primary banks cash in exchange for bonds at par. This was done with 3 day “repos”, the banks place the bonds as security with the Fed. The Federal Reserve then gives the bank bonds back, but the Federal Reserve returns US T Bonds in exchange for the cash. In Thursday and Fridays case the Federal Reserve allowed the 21 primary banks to tender agency MBS bonds (at par). The only bonds tendered to the Federal Reserve were agency MBS bonds. The banks will receive back US T Bonds.
as did ECB and Japan….these are lockstep moves.
this is GLOBAL INFLATION. Short term interest bearing is the only safe place, So,raise the rate and discount the swap? Give the MBS, CDO’s less than they paid, punish the lender and bank?
“…as did ECB and Japan….these are lockstep moves.”
I hope so. Any student of cartels know that eventually, lockstep moves give way to a Nash reversion to “every man for himself.” When that happens, watch out below!
Reuters
Cracks may appear in Manhattan apartment market
Sunday August 12, 10:10 am ET
By Ilaina Jonas
http://biz.yahoo.com/rb/070812/manhattanapartments.html?.v=3
” At the end of July, Deanna Kory had a bidding war on her hands. Three potential buyers were vying for a luxury apartment the Manhattan real estate broker was selling for a client at a $4 million asking price.
On July 27, the end of a week when the Standard & Poor’s 500 stock index suffer its worst one-week percentage drop since 2002, she called the winning bidder with the good news. The next day he withdrew his bid for the Upper West Side home.”
…
“But real estate experts said it will take more than a couple of weeks of financial instability to put the brakes on Manhattan real estate”
…
“”Some of these hedge fund people have made so much money, they’re not looking to sell their homes,” Ogilvy said. “If they have to cut back… they don’t use their jets.”
Manhattan has another layer of protection: co-op boards. About two thirds of all the non-rental residential units in Manhattan are co-operative apartments.”
“Our houses are such unwieldy property that we are often imprisoned rather than housed by them.”
Henry David Thoreau
RE: the recent three Fed three-day repurchase agreement (”repos”):
Loan to banks: US dollars.
Collateral : Mortgage backed securities.
Expiration: Three days.
Ending event: Fed gets back US Dollars, banks get back MBSs.
So, the obvious questions (that have also been asked by others here in the last two days):
1. What was the ratio of US dollars to collateral…the “loan-to-value” ratio, if you will. And how was the collateral priced, considering it was the lack of market value (very low demand) that supposedly caused everything to seize up in the first place. Were the MBSs priced at face/par value? Was the loan one dollar for each dollar of par value? Was there any “discount” because of perceived risk in taking this junk as collateral?
2. What *exactly* happens in three days if/when the banks say “we just don’t have the money”? How possible/likely is this, and has it ever happened and been documented before?
3. Will there be any way to find out if the banks eventually say “we just don’t have the money”? How transparent is the process?
Good questions all.
I’d like to know ratios on the housing side, which I’ve mentioned in other threads. For example, how many of those now in foreclosure have two or more properties in foreclosure? How many are not U.S. citizens?
Eudemon, did you get a chance to read the articles from the FDIC and the Federal Reserve?
A good question on the US citizen side, I would be curious to see how many non residents took the moneys and high tailed it back to wherever.
No, Hoz, I didn’t get that chance. I missed said articles. Were there links included somewhere on this board?
Thanks in advance.
A comment…actual foreclosure numbers and REO numbers will be understated for the foreseeable future, as banks (and everyone else) don’t have the infrastructure to process the huge wave of defaults happening now, or the even larger waves coming down the pipes. Foreclosure numbers will lag those actually in default for a long time, until the banks et al can bulk up their REO departments. (If you are looking for a growth industry, look no further).
From Forbes.com:
FRANKFURT (Thomson Financial) - Troubled German bank IKB Deutsche Industriebank AG’s exposure to the risky US home loans sector is greater than previously thought, according to a pre-released excerpt of an article in weekly Der Spiegel to be published Monday.
IBK and its affiliates or associates invested a total 7.8 bln eur in the US mortgage sector, more than twice the 3.5 bln sum considered likely by financial experts, Der Spiegel said.
http://www.forbes.com/markets/feeds/afx/2007/08/12/afx4011311.html
The dollar has a few more lives it seems. The PPT is worldwide. Looks as though China is talking nice about the dollar. Just a few words like these can drop the gold price by $20 per ounce:
http://biz.yahoo.com/ap/070812/china_foreign_reserves.html?.v=5
China Seeks to Dampen US Dollar Rumors
Sunday August 12, 3:10 am ET
China’s Central Bank Says US Dollars Are Important Part of Reserves, State Media Reports
BEIJING (AP) — China sought Sunday to dampen speculation it will conduct a massive sell-off of U.S. dollar holdings, with a central bank official saying the dollar remains a mainstay of its foreign exchange reserves.
In an interview carried by the government’s Xinhua News Agency, an unnamed official with the People’s Bank of China said U.S. dollars and government bonds are “an important part of China’s foreign reserve investments.”
China’s $1.3 trillion in foreign exchange reserves are the largest in the world and are believed to be comprised largely of dollar assets, potentially giving Beijing enormous sway over the dollar’s value and currency markets worldwide.
A report in the British newspaper The Daily Telegraph this past week that quoted Chinese government economists as saying China would dump its dollar holdings in the event of a trade war with Washington added to jitters in stock markets already unnerved by volatility in U.S. share markets.
Xinhua said the central banker’s remarks were intended to counter unspecified reports in Western media that China “is threatening to carry out a sell-off of U.S. dollars.”
The Xinhua report was prominently posted on the central government’s main Web site, in a further sign Beijing hoped the statement would underscore its commitment to hold U.S. dollar assets and calm investors.
“China is a responsible investor in international financial markets, and our country’s foreign exchange reserves are managed with the operational goals of safety, liquidity and profit,” Xinhua quoted the central bank official as saying.
The People’s Bank does not disclose the composition of the foreign exchange reserves, which have swelled in recent years as China’s exports surged and investors poured money into the country to profit from an economy now in its fourth straight year of double-digit growth.
But the reserves have become a political issue both within China and between Beijing and Washington. As the dollar has fallen in value, the People’s Bank has come under pressure to diversify its holdings to maintain the value of the reserves and improve returns.
Washington has pointed to China’s growing reserves as proof that the Chinese currency is undervalued, making Chinese exports cheap, putting American manufacturers at a disadvantage and compounding a hefty U.S. trade deficit. Several U.S. senators have renewed calls in recent weeks to punish Beijing if it does not let the currency, the yuan, rise in value.
————————————————
And the chicken littles scream against globalism and the corporate-military complex when they could instead be at least profiting from it all by buying stock!!!! Good golly!
Welcome back, Bill. Is it time to buy the dip yet tomorrow?
P.S. Cluck cluck!
“But if after a long steady rise a stock turns and gradually begins to go down, with only occasionally small rallies, it is obvious that the line of least resistance has changed from upward to downward. Such being the case why should anyone ask for explanations? There are probably very good reasons why it should go down….A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does damage to the pocketbook and to the soul. ”
Jesse Livermore
I have plenty of cash reserves in my brokerages (40% cash) and I remain watchful. When it comes to mutual funds, T-bills, savings bonds, municipal bonds, and modern precious metals bullion coins, I don’t look at the prices. I buy some amount in each of those asset classes.
However, I am sensitive to the value of individual stocks. I have to look at the company from many different angles. For a stock mutual fund I merely look at expense ratio, turnover rate (if outside my retirement plans), asset class, and history (if not an index fund - My only non-index funds outside retirement are VWESX and DODFX).
That said, I’m watching DNA for any indication on its downward trend being reversed. It could go below $60. Currently the trading range looks to be $60 to $83, but downward. Fall is the best time for market timers to get into biotechs, I heard.
You obviously need to go back and re-read your Sun Tzu.
China is a major player in the global monetary policy game currently in full swing called Beggar thy neighbor’s currency. They have a very active printing press over there, and lots of the paper money was used to buy U.S. MBS and Treasurys. More recently, they jumped on board the private equity gravy train by purchasing an ownership stake in Blackstone. Just out of curiosity, is there a precedent for a Communist government owning a major stake in a private American company?
Economics focus
The mandarins of money
Aug 9th 2007
From The Economist print edition
Central banks in the rich world no longer determine global monetary conditions
EXACTLY 30 years ago, in August 1977, The Economist published an article by Alan Greenspan, the former chairman of America’s Federal Reserve, who was then a private-sector economist. It listed five economic “don’ts”. One of these was: “Don’t allow money-supply growth to spiral out of hand.” Yet that is exactly what central bankers have done in recent years. The bubble in credit markets that now seems to be bursting and the frothiness of so many asset prices was encouraged by loose monetary policies which pumped liquidity into financial markets.
…
A decade or so ago, speedy monetary growth in emerging economies was of little concern to the central banks of the developed world: a monetary deluge in Brazil, say, simply caused hyperinflation there. But today these economies play a larger role in the world economy and cross-border financial flows are much bigger. Inflation remains low, so the liquidity pumped out by central banks is flowing somewhere else, namely into global financial markets. For instance, huge purchases of Treasury bonds by these central banks have reduced bond yields, and so spurred excessive borrowing in America.
The policies of the People’s Bank of China (PBOC) or the Bank of Russia are likely to have an increasing impact on developed economies in future as capital controls are reduced and markets become more integrated. This prospect becomes more alarming when one considers that, unlike the Fed and the ECB, most central banks in emerging economies are not independent, and thus free to set interest rates in the best long-term interest of the economy. They are still firmly under the thumb of politicians.
…
http://economist.com/finance/displaystory.cfm?story_id=9621595
Yeah, it’s kind of wierd for a “communist government” to be the owner of the US of A. Strange things have happened the last 20 years. The Berlin Wall was torn down. Who would have thought that would have happened in their lifetime? The world is one big corporate/mixed economic system of global trade.
Profit from it or be owned.
B.i.P.,
I love your Tom Clancy’ish way of describing your finances to a less than adoring audience…
Do tell~
Give B.i.P. a break — this blog needs some heterogeneity.
On the other hand, the Chicken Little namecalling is not in the spirit of the blog. Most who post here follow the unwritten rule of appealing to rational argument backed by whatever factual support we can find in the MSM. Namecalling signals insecurity in one’s position.
Cool. Continue buying shiny metal. I admit I like to hear the sound of “clink, clink,” myself.
I guess I do not understand the mindset of you all who laugh at people who put all their money into POS houses, and in turn you guys invest only in gold, or only in money market funds.
Isn’t this the same type of extremism that bit the FB’s in the a$$?
Just puzzled.
I do not mind if he talks about his finances, the problem is his attitude that may influence less knowledgeable investors to swallow his BS. Recommending a specific stock to buy is no better than a Realtor saying now is a great time to buy a house. When the short term tax rates were 50%+, there was a reason to “buy and hold”, but with short term tax rates the lowest in 70 years. Take losses and profits.
I remember 2 years ago on this blog how owners of houses were afraid to sell because of taxes. Not to worry now, they don’t have any profits to pay taxes on.
Ditto BIP with his stocks, “when you make a trade, you should have a clear target where to sell if the market moves against you. And you must obey your rules! Never sustain a loss of more than 10% of your capital.”
And perhaps John Bogle (BIP’s mentor) is correct that the “market returns to the mean”. The “mean” on the NYSE is ~ a 50% drop at current prices.
Hey even my mentor, Jack Bogle, is opposed to series I bonds. So I don’t agree with everything he says. No one’s word is gospel. But I’m still looking for your article in the next issue of Barron’s, or Kiplinger’s…
You could go back to 1977 Forbe’s .
Hi Bill - don’t worry you aren’t alone on this blog. I’m diversified too although my housing money is safely in cash. I remember how Japan was going to take over America in the 80’s and 90’s, and how the world was going to end with the Nasdaq meltdown, and how 9/11 meant a new paradigm of anti-globalization. Nope, no longer try to predict what’s going to happen where. Just avoid the bubbles and stay diversified. And I really like your posts BiP!
LOL, youse guys.
It’s almost as though you’re sitting on my reading porch sipping G&T’s and shooting the Summer Sunday afternoon sheish wid me. Thank you, Ben, for this forum! Here’s one for all of you…(hic.)
bill and hoz, love the posts.
I even enjoy professor stucco.
hot dog, that’s it - prof stucco!!
Thanks San Diego Bear and Vozworth.
Reading posts (in both directions of the scroll bar at this point) I like to reissue this URL (very timely):
http://www.chrisperruna.com/2006/07/14/crisis-authors-feed-on-peoples-fears/
So I’m wondering when the large groups of books of doom will reappear. Taking San Diego Bear’s cue, there were lots of doomsday predictions in the late 90s because of Y2k. Further back, we were told that Japan was going to overtake us. Furtherback, we were supposed to go into hyperinflation and then into a depression. Look at that link! Doug Casey predicted an oncoming depression in 1980. The guy is a radical libertarian and I owe him respect for that, but he still posts the same views. Eventually he could be right. We had a few depressions before, we could have them in the future.
I was 21 when I read Doug Casey’s “Crisis Investing.” Probably had a net worth of $200 back then. Was I alarmed? Yes. But I knew I was able-bodied and could do all sorts of jobs if I needed to. I could save money and had years of investing and saving ahead of me (if I only read Bogle instead of Casey!).
I point to Vanguard.com’s articles on beginning investing and 401ks / IRAs to every young person who asks me investing advice.
I know of some posters on this blog who never would point to books and periodicals of professional financial planners when someone asks them investment advice!
They downplay conventional investment advice - FREE advice by the HR of large corporations especially in regard to 401ks! - merely because it’s conventional. Sheesh!
I could learn to like that - Prof Stucco - Cognac with a dash of Groucho.
Since Hoz has conniptions about less knowledgeable people following my advice, I totally agree with him! Yes totally! Don’t take my advice and certainly do not take Hoz’s advice. Study from the experts in personal finance. Take a class from your community college. Read a few periodicals for awhile: Forbes, Fortune, Money, Kiplinger’s, Smart Money. I read some of those magazines for 5 years before investing. Above all, if you are a young person, go to your company’s HR and learn about the 401k benefits.
You will find that most of that advice is the same advice I recommend (not Hoz’s): Dollar cost average into stock mutual funds, go for low expense mutual funds, diversify, diversify, and diversify.
Hoz cannot and WILL NOT say the same thing. He will say HIS advice is the right way. Above all, he will CERTAINLY NOT advise you to study the periodicals, read the literature, or listen to your company’s retirement planning seminars.
Touche, Hoz.
Actually you said the first thing I agree with on! “Study from the experts in personal finance. Take a class from your community college. Read a few periodicals for awhile…” I agree every broker and adviser will tell you to dollar cost average, that is why they are brokers and advisers (aka stock Realtors). And obviously you have not done your own homework, you cannot even read a quarterly report and then you recommend a purchase. Trying to sell your losers?
Mathematical Illusion: Why Dollar-Cost Averaging Does Not Work
by John G. Greenhut, Ph.D.
Executive Summary
* In spite of the weight of evidence provided in academic literature against the strategy of dollar-cost averaging, DCA continues to be practiced by investors and recommended by financial advisors.
* Beyond its psychological appeal, the popularity of the approach can be said to stem from simple illustrations that show DCA resulting in greater stock holdings across a stock market cycle than is achieved by a one-time, lump-sum investment. Alternatively presented, the average cost per share purchased under DCA is demonstrated, by example, to be less than the average price of stock over its cycle.
* This paper challenges that illustration. It shows that variations in stock prices should not follow the mathematical pattern assumed in the examples. In fact, the price movement should follow a particular mathematical form that yields the same number of shares purchased, whether by DCA or lump-sum investing.
* Absent any benefit from stock price volatility in reducing average cost, the performance of DCA rests on the trend in stock prices, with DCA outperforming in downward markets and lump sum outperforming in upward markets. Since the latter case is the norm over time, customary empirical findings in the finance literature of underperformance by DCA are explained.
* The theory in this paper is confirmed by examining a broad sample of stocks, contrasted over the high-growth trend in the second half of the 1990s against the general market malaise over the following half-decade. In the absence of this trend, DCA and lump sum provide equivalent results.
http://tinyurl.com/lnnsx
Why don’t you read, instead of passing out your BS.
I may have been touche’d, but you were torched.
I’ve seen articles on “why dollar cost averaging does not work.” But I put it into practice and it worked for me. I have no bit of singe on me.
Most people are not financial experts. They are preoccupied in other professions. Dollar cost averaging is superior to other forms of investing precisely because people like myself do not have time to spend hours a day analysing companies. Now you’re going to tell people that they should not put their money in 401ks. You have to dollar cost average in 401ks. You also get matching contributions as a plus. I’ve been doing this for 18 years. The mathematics does not add up?
If dollar cost averaging is bad, why don’t the HR departments at corporations offer another investing style in your 401k? Why wouldn’t most of the financial advisors suggest a different investing style.
Your arguments are on the edge of a cliff. Just like a conspiracy theory type of person’s arguments.
Occam’s razor is one analogy I like. The simplist solution is the straw that can balance on the edge of a razor blade. All other ones don’t balance. I’m saying if there was a far better way than dollar cost averaging to invest, DCA would be very unpopular.
Hey BS You wrote “You will find that most of that advice is the same advice I recommend (not Hoz’s): Dollar cost average into stock mutual funds, go for low expense mutual funds, diversify, diversify, and diversify.”
AND IT IS NOT TRUE most literature is on how poorly DCA performs.
And now you claim, “I’ve seen articles on “why dollar cost averaging does not work.” But I put it into practice and it worked for me.” That is fine if it works for you. But not once did you suggest that DCA is inferior to other forms of investing. “* In spite of the weight of evidence provided in academic literature against the strategy of dollar-cost averaging, DCA continues to be practiced by investors and recommended by financial advisors.” You spread lies. You were torched. You are just to slow to realize it
So stop spreading lies.
In every case that I write about what I am doing, I write “what is suitable for me, myself and I is not suitable for any or all investors.” Where is your disclaimer?
So now you can move to Sedona and change your handle to Bill in Sedona so we can all just call you BS for short.
Okay, dollar cost averaging is not suitable for all investors. It is suitable for the millions of people who are in 401ks and IRAs and fully employed in the non-finance world - school teachers, college professors, engineers, nurses, scientists. For those ridiculous few who do daytrading, then yes, dollar cost averaging is NOT the way to go. For those ridiculous few who successfully time the market, dollar cost averaging is NOT the way to go. I suppose Hoz is in one of those categories. He can successfully time the market. What an Einstein he must be. Oh, he is not a billionaire?
Global central bank bailout follows ten years of regulatory failure
This video starts off with Jim Cramer back-peddling on his ranting appeal to the Fed to bail out his hedge fund pals, posturing that his motive was to save Joe Sixpack from a second Great Depression. (See the original video “Why I Took the Fed to Task on ‘Stop Trading’” here.)
http://itulip.com/forums/showthread.php?p=13661#post13661
Welcome to the new dirigisme economy.
Here’s an early admirer of dirigisme…
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power.”
Benito Mussolini
Thank you for sending me off to Merriam-Webster online…
Main Entry: di·ri·gisme
Pronunciation: di-ri-’zhi-z&m, dE-rE-’zhEs-m&
Function: noun
Etymology: French, from diriger to direct (from Latin dirigere) + -isme -ism
: economic planning and control by the state
Welcome to my department of redundancy department. LOL
More from Germany:
FRANKFURT, Aug 12 (Reuters) - Deutsche Postbank (DPBGn.DE: Quote, Profile , Research) has taken onto its own books 600 million euros ($821.8 million) in exposure to two investment vehicles run by hard-hit German peer IKB (IKBG.DE: Quote, Profile , Research), Postbank said at the weekend….
Other German banks drawn into the uproar include Deutsche Bank (DBKGn.DE: Quote, Profile , Research) and Commerzbank (CBKG.DE: Quote, Profile , Research), which are listed among the creditors of U.S. mortgage group HomeBanc Corp (HMBN.PK: Quote, Profile , Research) that filed for Chapter 11 bankruptcy protection last week….
Germany became an epicentre of the turmoil when IKB, a lender to small and medium-sized companies, ran into trouble with its investments in U.S. subprime assets….
http://today.reuters.com/news/articleinvesting.aspx?type=bondsNews&storyID=2007-08-12T131654Z_01_L12292110_RTRIDST_0_POSTBANK-SUBPRIME.XML&pageNumber=1&imageid=&cap=&sz=13&WTModLoc=InvArt-C1-ArticlePage1
Even more from Germany:
FRANKFURT, Aug 12 (Reuters) - Central bankers in Europe held talks with bank supervisors and top financial executives over the weekend to assess the dangers from risky U.S. mortgage debt to the financial system, industry sources said….
What is gnawing at investors and traders is not knowing the size of overall credit losses linked to U.S. subprime mortgages that is buried in banks and funds — and not knowing who holds the risk. This has caused money-market traders to hoard cash and investors to dump riskier assets, especially European stocks which erased all their gains for the year by Friday.
Until more information is available on the scale of exposure to complex debt derivatives created in the U.S. subprime market and sold worldwide, analysts said it will be hard to restore a lasting investor calm….
http://www.reuters.com/article/bondsNews/idUSB32834420070812?sp=true
“FRANKFURT, Aug 12 (Reuters) - Central bankers in Europe held talks with bank supervisors and top financial executives over the weekend to assess the dangers from risky U.S. mortgage debt to the financial system, industry sources said….”
Who else thinks the DJIA will shoot up like a rocket — over 100 pts up on the opening bell first thing tomorrow?
all are blaiming US?……we aint the only bubble.
jackasses.
I do! The flood gates for the “carry trade” were opend full spigot.
De-Nihilists…
One hedge fund manager said: “Nobody is happy with their credit position and everyone wants to de-risk and de-leverage. And it is global. The market has gone freaky”
http://www.ft.com/cms/s/030ba626-48f9-11dc-b326-0000779fd2ac.html
“Iz not fair!”
“Fair?! Who’s the f–in’ nihilists around here, you f–in’ crybabies!”
US loan crisis set to claim fresh victims
Sunday Aug 12, 2007
Guardian
“…With banks and hedge funds scrambling to tot up their exposure to shaky sub-prime loans, analysts warned this weekend that there was worse to come.
‘You get the sense that it’s not about to end in the next couple of days,’ said economist Matthew Sharratt, of Bank of America. ‘These sub-prime mortgages are turning out to be approaching worthless, and what we have seen is the surfacing of these losses.’ Until the uncertainty was over, he said, equities would remain vulnerable. ‘It’s really all about sentiment.’
Tim Scholefield, head of equities at Barings, said: ‘It would be amazing if we got through the next couple of weeks without more bad news.’ One Wall Street insider said: ‘The dyke has now been breached and there are leaks springing up all over the place.’
With credit conditions tightening sharply, a backlog of debt-backed takeover deals is also vulnerable. Banks backing the £10.4bn bid for Sainsbury, for instance, are understood to be re-considering pledges made to Delta Two, the Qatari-backed investment fund.
Fancy financial instruments have allowed sub-prime loans to be chopped up and distributed throughout the market. Regulators each side of the Atlantic are scrutinising the books of banks and other lenders for undisclosed losses.
In London, the Financial Services Authority is in constant touch with leading institutions, assessing the extent of their exposure to asset-backed securities. In recent months the FSA has been urging banks to ’stress test’ their portfolios. It is ‘reasonably comfortable’ that the London markets are robust enough to withstand further volatility.
The FSA believes that while the emergence of complicated financial instruments makes it harder to pinpoint precisely where the risk is, it believes that it is widely dispersed, so making it is less likely that a large-scale institution could be vulnerable to collapse.”
http://tinyurl.com/38mh2z
I am happy the U.S. is able to expatriate its sumpprime pain to so many other rich countries. This will limit the risk that wealthy investers with deep pockets will come in and snap up U.S. real estate at rock bottom prices.
Wall Street’s cargo cult is praying fervently for helicopter drops to save them from their own financial excesses. I applaud the CIC’s efforts to let them swim in their own subprime vomit. And I find it very perverse that it is primarily D-ratic politicos (Clinton, Dodd, Schumer) who are working hard behind the scenes to bail out Wall Street. We live in interesting times.
Markets Look to Fed’s Aid In Growing Credit Storm
By Greg Ip, Deborah Solomon and David Wessel
Word Count: 1,367 | Companies Featured in This Article: Merrill Lynch, Kraft Foods, International Business Machines, Bear Stearns, IKB Deutsche Industriebank
For now, it’s up to the Fed.
Growing strains in credit markets and volatility in stock markets have prompted Wall Street to look to the U.S. government for a rescue. But President George W. Bush’s administration has rejected one tangible step — expanding Fannie Mae and Freddie Mac’s power to buy mortgages. Instead, Mr. Bush and U.S. Treasury Secretary Henry Paulson have sought to bolster confidence by emphasizing the fundamental strength of the global economy. The Treasury has activated a telephone tree to keep tabs on financial institutions.
http://online.wsj.com/article/SB118695042791895347.html?mod=hpp_us_whats_news
The WSJ is squarely on target with this Op-Ed piece. I hope the Fed’s leadership is paying close attention.
I also hope the Fed steps aside and allows the D-rats (Dodd, Clinton, Schumer) to pursue their ongoing efforts to encourage more low-income folks buy homes they cannot afford, thereby setting themselves up for future foreclosure, in the interest of bailing out Wall Street. And I also hope the R-can presidential candidates are bright enough to recognize this potential wedge issue (as W apparently already has).
REVIEW & OUTLOOK
The Bernanke Call — II
August 11, 2007; Page A8
Financial markets were roiled again yesterday, with the Federal Reserve and other central banks stepping in to bolster liquidity in the wake of the subprime credit seizure. Serving as lender of last resort in these conditions is the proper function of central banks. But going further — with an emergency rate cut, as some in the market seem to be anticipating or hoping for — carries the risk of introducing even greater moral hazard into the financial system.
…
The biggest risks in the present market conditions may yet prove to political, rather than economic or financial. Senators Chris Dodd and Chuck Schumer have joined Fannie Mae and Freddie Mac’s calls to lift their borrowing and loan limits, a move that would likely kill attempts to reform the scandal-plagued mortgage giants. The ubiquitous Mr. Schumer has also been pushing for lending “reforms” that would reduce access to credit to those most in need, while Senator Hillary Clinton has proposed a $1 billion federal bailout fund for homeowners at risk of default and foreclosure.
Talk about moral hazard. No one wants to see someone lose his home to foreclosure. But many of those most at risk bought their homes with little or no money down, and so have very little at stake economically. Bringing in the feds to bail them out would send precisely the wrong message — that risky or overly aggressive borrowing will be rewarded by the government rather than punished in the marketplace. To the extent that bad loans were made, the market needs to clear, not be propped up by federal-aid programs.
The past couple of weeks, and especially the past few days, have been ugly — as the bursting of a credit bubble of this magnitude always is. The pain probably isn’t over. But if policy makers and central bankers can contain the damage and avoid making the problem worse, this too will pass. With the current market turmoil, Mr. Bernanke faces his first big test as Chairman of the Federal Reserve. The biggest favor he could do for himself and the markets is not to give in to the temptation to do favors for Wall Street or anyone else, and to remain focused on his price-stability mandate.
The U.S. and world economies continue to grow, and, short of a genuine solvency crisis, inflation should remain the Fed’s chief concern. To that end, whatever short-term liquidity is needed now to keep the markets orderly deserves to be withdrawn when conditions normalize. Letting the markets know that there is no Bernanke Put will also help bring the markets’ risk appetites back into line.
http://online.wsj.com/article/SB118678676632794634.html?mod=opinion_main_review_and_outlooks
I live in So California and there are a couple of “for sale” signs on each block in our housing tract. It’s almost scary to see how many homes are on the market and how many will go into foreclosures.
House prices need to go way down before buyers will even look at them. Buyers are smart, they will wait at this point. Sellers are stuck, but they will have to give to foreclosure or sell at a much reduced price and suffer the loss. No choice.
yahoo news has an article - it’s hitting the MSM (finally)
So many factors and so little time…those that are off the grid…willl they fare better then others?
No timing this albotrose…no wonder so many protest the G-8…er G-7.
Shaking my head and there’s no koolaid or aspirin. Darn.
Not particularly spiritual…don’t see a prayer in sight.
Yet I pray in vein.
Looking to get off the grid…as if it would help?
Best blog in the world. Thank you Ben.
P.S. How can I contribute? I tried the “contribute” button, and it bleeped on me…computer literate…thinking maybe to much traffic? (feel free to e-mail)
Respectfully,
Leigh
Contrarian Chronicles 8/13/2007 12:01 ET
Credit problems are too big for the feds to fix
Wall Street is hoping for a bailout of the reckless mortgage sector that violates the whole concept of capitalism. It won’t work, because there’s too much mess to clean up.
By Bill Fleckenstein
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/CreditProblemsAreTooBigForTheFedsToFix.aspx?page=all
Got SIVs (structured investment vehicles)?
From FT.com:
These have proliferated in recent years and control assets worth hundreds of billions of dollars. Depending on whether they are fully rated by credit rating agencies and on how strictly they have to conform to certain rules, they are known as SIVs, SIV-lites, or conduits.
They are typically quite opaque, invest in complex securities and often do not need to be displayed on a bank’s balance sheet.
It seems they have played a key role in last week’s liquidity crunch….
In the case of a blip in the market, SIVs and conduits are supported by liquidity facilities from highly rated, mainstream banks. This means banks must step in to provide finance if the SIV cannot raise commercial paper in the normal way, unless the SIVs’ assets suffer significant ratings downgrades. Typically, the credit line provided by the sponsoring bank and a group of others in a syndicate must cover 100 per cent of outstanding commercial paper.
These funding lines have rarely been drawn in recent years, because liquidity has been abundant in the ABCP market as almost everywhere else in the financial world. As recently as mid-June, the European commercial paper market was seeing records levels of issuance.
However, what sparked last week’s turmoil – and the dramatic intervention by central banks – was a pernicious chain of events. As it became apparent this summer that the US subprime problems were worsening and infecting a broader range of structured products, some investors in the ABCP market started to worry about whether SIVs were also sitting on losses.
The rush to sell structured products by hedge funds facing redemptions and other investors meant those market values that could be ascertained were being marked down heavily. As a result, by mid-July some investors decided to stop buying ABCP paper from SIVs suspected of subprime exposure.
The German bank IKB was an early victim. Like many local peers, it had a conduit – called Rhineland Funding – which had expanded rapidly and had almost €20bn ($27.3bn, £13.5bn) worth of outstanding commercial paper in the markets in July. In mid-July, ABCP investors refused to roll over some of these notes.
Rhineland asked IKB to provide a credit line, as the rules of SIVs require. But it appears the German bank did not have enough cash to meet this request and was unable to liquidate enough assets to plug the gap. This threatened to trigger IKB’s collapse, until KFW, the state-owned German bank, stepped in and offeredan €8bn credit facility.
German officials hoped this action would stop growing panic in the sector. But it may have had the reverse effect: investors started to shun almost all commercial paper issued by SIVs.
“This is an environment where there has been a big loss in confidence and nobody is distinguishing between apples and oranges,” notes Mr McAdie.
By early August, the problems in the ABCP market had become so serious that some European banks were preparing for additional calls on credit lines to SIVs. But the banks are also grappling with a backlog of unsold leveraged loans, which is placing additional pressure on their balance sheets.
So early this month some European banks – and a few US institutions as well – quietly started trying to raise new credit lines themselves. That, however, triggered additional alarm, as rumours spread about the potential losses at SIVs – on top of problems in other corners of the financial world.
Consequently, by the middle of last week, some banks started shutting credit lines to a sweeping list of institutions. “Commercial paper is now being funded on an overnight basis. The banks will not roll paper for three months,” says Dominic Konstam, head of interest rate strategy for Credit Suisse.
And while it seems that European financial institutions were particular victims of this credit squeeze, the problems – perhaps ironically – were extreme in US markets, since SIVs typically raise a large proportion of their finance in dollars. One banker admitted last week: “The attitude is ‘Don’t show me anything east of a [New York] 212 area code’. If you lend to [those banks] it could be a career-ending experience….”
http://www.ft.com/cms/s/8eebf016-48fd-11dc-b326-0000779fd2ac.html
More from FT.com:
Central banks are expected to continue intervening in the money markets on Monday in an effort to unblock the financial system after last week’s turmoil….
Billions in dollar-denominated borrowing by European banks comes due in the next few days amid fears that US banks are unwilling to extend short-term credit to some of their European counterparts perceived to be vulnerable to the market turmoil….
The Fed is likely to be sympathetic to an ECB request for a currency swap since it would be seen as a helpful way of dealing with pressure on the overnight federal funds rate caused by European banks’ thirst for dollars. It would be the first such arrangement between the world’s two biggest central banks since 2001….
http://www.ft.com/cms/s/f5124170-4910-11dc-b326-0000779fd2ac.html
They already are intervening in Japan and Korea. Stocks are a little higher most of the gain is in metals - so Australia is going higher. “Investors will want to look at the European and U.S. markets for further clues on trade, as the recent equity selloff originated from overseas and the market lacks domestic trading factors.” (Shinko Securities)
Monday, Aug 13,2007
“China’s economic indicators may have entered the danger zone, forcing the central bank to continue tightening steps to prevent the economy from overheating, a senior central bank official said in remarks published on Monday.
“Economic growth is overly fast and it has been so continuously,” Zhang Tao, vice head of the international department at the People’s Bank of China, the central bank, said in remarks published in the official China Securities Journal.
He noted the rapid rise of GDP, fixed-asset investment, inflation and lending, saying they “may have entered a dangerous zone.”….
http://tinyurl.com/2gdyqc
Reuters NZ
I have read ‘concerned’ , ‘worried’ and numerous other similar euphemisms; I have not seen in print “danger zone”. Maybe nothing, but it has been a fun ride. I’m out.
More about SIVs and conduits from Barrons.com:
Even though the Dow Jones Industrial Average plunged nearly 400 points Thursday amid a deepening liquidity crisis, the Great Unwind of the global credit pyramid still has further to go….
In that, it appears some of the problem lies with asset-backed commercial paper “conduits” and so-called structured investment vehicles. These ABCP conduits and SIVs are used to fund the purchase of assets such as trade receivables, auto loans, credit cards, whole mortgage loans, as well as securities such as corporate debt, residential mortgage-backed securities and CDOs, according to a Bear Stearns report.
The ABCP conduits and the SIVs then are able to issue high-grade commercial paper to finance these assets, which are less the prime quality. ABCP now comprises over half the $2 trillion-plus commercial paper market, up from 20% in 1998, according to MacroMavens’ Stephanie Pomboy. And, money market funds own 27% of all CP outstanding, she also notes.
According to the Bear report, some $38 billion-$43 billion RMBS and CDOs could be liquidated from ABCP conduits. Got that? In other words, a load of these assets is backing ABCP and may have to be sold into a less than receptive market.
Fears of large and wholesale liquidations may be behind the big price drops in triple-A mortgage securities, the firm notes. The worst case may be discounted and these securities may be attractive, the Bear report concludes.
http://online.barrons.com/article/SB118669187848093406.html?mod=b_hpp_9_0002_b_online_exclusives_weekend
Posted this article earlier but it must have been eaten by the spam program. It describes fully the role of SIVs in last weeks credit market turmoil.
From FT.com:
In a corner of the market few people knew existed, regulators are scrambling to understand what is happening in structured investment vehicles (SIVs), a breed of often huge, mainly bank-run, programmes designed to profit from the difference between short-term borrowing rates and longer-term returns from structured product investments.
These have proliferated in recent years and control assets worth hundreds of billions of dollars. Depending on whether they are fully rated by credit rating agencies and on how strictly they have to conform to certain rules, they are known as SIVs, SIV-lites, or conduits.
They are typically quite opaque, invest in complex securities and often do not need to be displayed on a bank’s balance sheet.
It seems they have played a key role in last week’s liquidity crunch….
http://www.ft.com/cms/s/8eebf016-48fd-11dc-b326-0000779fd2ac.html
Anyone think we’ll see a Dow 6500 soon?